EXECUTION COPY
SECURITIES PURCHASE
AGREEMENT
DATED AS OF JANUARY 30, 2006
AMONG
STRONG TECHNICAL INC.
FALCON LINK INVESTMENT LIMITED
AND
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
PAGE
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ARTICLE I Purchase and Sale of Preferred Stock and Warrants.............................................1
Section 1.1 Purchase and Sale of Preferred Stock and Warrants......................................1
Section 1.2 The Closing............................................................................1
Section 1.3 Conversion Shares and Warrant Shares...................................................2
ARTICLE II Representations and Warranties................................................................2
Section 2.1 Representations and Warranties Relating to the Company.................................2
Section 2.2 Representations and Warranties Relating to Falcon.....................................13
Section 2.3 Representations and Warranties of the Purchasers......................................20
ARTICLE III Covenants....................................................................................22
Section 3.1 Consummation of the Exchange..........................................................22
Section 3.2 Disclosure of Transactions and Other Material Information.............................22
Section 3.3 Registration under Exchange Act.......................................................23
Section 3.4 Inspection Rights.....................................................................23
Section 3.5 Compliance with Laws..................................................................23
Section 3.6 Keeping of Records and Books of Account...............................................24
Section 3.7 Other Agreements......................................................................24
Section 3.8 Reservation of Shares.................................................................24
Section 3.9 Non-public Information................................................................24
Section 3.10 Nasdaq or Exchange Listing............................................................24
Section 3.11 Subsequent Registrations..............................................................24
Section 3.12 Make Good Escrow Shares...............................................................24
Section 3.13 New York City Agency..................................................................24
ARTICLE IV Conditions...................................................................................25
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Shares and Warrants.............................................25
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Shares and Warrants.........................................25
ARTICLE V Certificate Legend...........................................................................28
Section 5.1 Legend................................................................................28
ARTICLE VI Termination..................................................................................29
Section 6.1 Termination of Obligations to Effect Closing..........................................29
Section 6.2 Effect of Termination.................................................................30
ARTICLE VII Indemnification..............................................................................30
Section 7.1 General Indemnity.....................................................................30
Section 7.2 Indemnification Procedure.............................................................30
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TABLE OF CONTENTS
(continued)
PAGE
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ARTICLE VIII Miscellaneous................................................................................31
Section 8.1 Fees and Expenses.....................................................................31
Section 8.2 Specific Enforcement; Consent to Jurisdiction.........................................32
Section 8.3 Entire Agreement; Amendment...........................................................32
Section 8.4 Notices...............................................................................33
Section 8.5 Waivers...............................................................................34
Section 8.6 Headings..............................................................................34
Section 8.7 Successors and Assigns................................................................34
Section 8.8 No Third Party Beneficiaries..........................................................34
Section 8.9 Governing Law.........................................................................34
Section 8.10 Survival..............................................................................34
Section 8.11 Counterparts..........................................................................35
Section 8.12 Publicity.............................................................................35
Section 8.13 Severability..........................................................................35
Section 8.14 Further Assurances....................................................................35
Section 8.15 Independent Nature of Purchaser's Obligations and Rights..............................35
Section 8.16 Consent to Jurisdiction and Service of Process........................................36
Section 8.17 Notification Under Certification of Designation.......................................37
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT this ("AGREEMENT"), dated as of
January 30, 2006, by and among Strong Technical Inc., a Delaware corporation
(the "COMPANY"), Falcon Link Investment Limited, a corporation formed under the
laws of the British Virgin Islands ("FALCON"), and the entities listed on
EXHIBIT A hereto (each a "PURCHASER" and collectively, the "PURCHASERS"), for
the purchase and sale to the Purchasers of shares of the Company's Series A
Convertible Preferred Stock, par value $.001 per share (the "PREFERRED STOCK"),
and warrants to purchase shares of the Company's common stock, par value $.001
per share (the "COMMON STOCK").
The parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS
Section 1.1 PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS. Upon the
following terms and conditions, the Company shall issue and sell to the
Purchasers, and the Purchasers shall, severally and not jointly, purchase from
the Company, an aggregate of 6,900,000 shares of Preferred Stock (the "SHARES")
and warrants to purchase an aggregate of 121,954,050 shares of Common Stock, in
substantially the form attached hereto as EXHIBIT B (the "WARRANTS"). The Shares
and the Warrants shall be sold as units consisting of two shares of Preferred
Stock and one Warrant at a price per unit of $8.00, for an aggregate purchase
price of $27,600,000 (the "PURCHASE PRICE"). The Company and the Purchasers are
executing and delivering this Agreement in accordance with and in reliance upon
the exemption from securities registration afforded by Section 4(2) of the U.S.
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "SECURITIES ACT"), including Regulation D ("REGULATION D"),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder. The Preferred Stock shall have such powers, preferences
and rights, and the qualifications, limitations or restrictions thereof, as set
forth in the Certificate of Designation of Rights and Preferences of Series A
Preferred Stock attached hereto as EXHIBIT D (the "CERTIFICATE OF
DESIGNATIONS"), subject to the applicable terms and conditions of this Agreement
and the Registration Rights Agreement (as defined below).
Section 1.2 THE CLOSING. The Company agrees to issue and sell to the
Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the number of
Shares and Warrants set forth opposite their respective names on EXHIBIT A. The
closing of the purchase and sale of the Shares and Warrants to be acquired by
the Purchasers from the Company under this Agreement (the "Closing") shall take
place (i) at the offices of Pryor Cashman Sherman & Flynn LLP located at 410
Park Avenue, New York, New York 10022 at 10:00 a.m., New York time, on or before
January 30, 2006, PROVIDED, that all of the conditions set forth in Article IV
hereof and applicable to the Closing shall have been fulfilled or waived in
accordance herewith, or (ii) at such other time and place or on such other date
as the Purchasers and the Company may agree (the "CLOSING DATE").
Section 1.3 CONVERSION SHARES AND WARRANT SHARES. The Company has
authorized and reserved and covenants to continue to reserve, free of preemptive
rights and other similar contractual rights of stockholders, out of its
authorized but unissued Common Stock or its Common Stock held in treasury, a
number of shares of Common Stock equal to the aggregate number of shares of
Common Stock necessary to effect the conversion of the Shares and the exercise
of the Warrants. The Company shall, from time to time, in accordance with the
Delaware General Corporation Law, increase the authorized amount of its Common
Stock if at any time the authorized amount of its Common Stock remaining
unissued shall not be sufficient to permit the conversion of all Shares at the
time outstanding, subject, however, to stockholder approval. If any shares of
Common Stock required to be reserved for issuance upon conversion of the Shares
or exercise of the Warrants hereunder require registration with or approval of
any governmental authority under any federal or state law before the shares may
be issued, the Company will cause the shares to be so registered and approved.
All shares of Common Stock delivered upon conversion of the Shares or exercise
of the Warrants shall, upon delivery, be duly authorized and validly issued,
fully paid and nonassessable, free from all taxes, liens and charges with
respect to the issue thereof. Any shares of Common Stock issuable upon
conversion of the Shares (and such shares when issued) are herein referred to as
the "CONVERSION SHARES". Any shares of Common Stock issuable upon exercise of
the Warrants (and such shares when issued) are herein referred to as the
"WARRANT SHARES". The Shares, the Conversion Shares, the Warrants and the
Warrant Shares are sometimes collectively referred to herein as the
"SECURITIES".
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY. In
order to induce the Purchasers to enter into this Agreement and to purchase the
Shares and the Warrants, the Company and Falcon hereby jointly and severally
make the following representations and warranties to the Purchasers:
(a) ORGANIZATION, GOOD STANDING AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any Subsidiaries (as defined in
Section 2.1(g)) or own securities of any kind in any other entity. The Company
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except for any
jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, "MATERIAL ADVERSE EFFECT" means any adverse effect on the business,
operations, assets, prospects or financial condition of the
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Company or, following consummation of the Exchange (as defined in Section 3.1),
the Company and its Subsidiaries, taken as a whole, and which is material to
such entity or other entities controlling or controlled by such entity or the
Company or which is likely to materially hinder the performance by the Company,
Falcon or any Subsidiary of its obligations hereunder and under the other
Transaction Documents (as defined in Section 2.1(b) hereof) and the Exchange
Documents (as defined in Section 2.1(b) hereof).
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement, the Warrants, and the other agreements and
documents contemplated hereby and thereby and executed by the Company or to
which the Company is a party (collectively, the "TRANSACTION DOCUMENTS"), and to
issue and sell the Shares and the Warrants in accordance with the terms hereof.
The Company has the requisite corporate power and authority to enter into and
perform its obligations under the Share Exchange Agreement dated as of January
30, 2006 (the "EXCHANGE AGREEMENT") between the Company, Falcon and the
stockholders of Falcon and the other agreements and documents contemplated
thereby and executed by the Company or to which the Company is party
(collectively, the "EXCHANGE DOCUMENTS"). The execution, delivery and
performance of the Transaction Documents and the Exchange Documents by the
Company and the consummation by the Company of the transactions contemplated
thereby have been duly and validly authorized by all necessary corporate action,
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required. This Agreement and the Exchange Agreement has been
duly executed and delivered by the Company. The other Transaction Documents and
Exchange Documents will have been duly executed and delivered by the Company at
the Closing. Each of the Transaction Documents and the Exchange Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor's rights and remedies or by equitable principles or remedies of
general application.
(c) CAPITALIZATION. The authorized capital stock of the
Company and the shares thereof issued and outstanding as of January 30, 2006,
after giving effect to the shares of capital stock to be issued in the Exchange,
are set forth on SCHEDULE 2.1(c) hereto. All of the outstanding shares of the
Company's Common Stock and any other security of the Company have been duly and
validly authorized and, to the extent applicable, are validly issued, fully paid
and non-assessable. Except as set forth on SCHEDULE 2.1(c) hereto, no shares of
Common Stock or any other security of the Company are entitled to preemptive
rights or registration rights and there are no outstanding options, warrants,
scrip, rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company. Furthermore, except as set forth on SCHEDULE 2.1(c) hereto
or in any Commission Documents (as defined in Section 2.1(f) below) and except
for the Transaction Documents and the Exchange Documents, there are no
contracts, commitments, understandings, or arrangements by which the Company is
or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except as provided on SCHEDULE 2.1(c) hereto and except as
disclosed in any Commission Documents, the Company is not a party to or bound by
any agreement or understanding granting registration or anti-dilution rights to
any person with respect to any of its equity or debt securities. Except as set
forth on SCHEDULE 2.1(c) or in any Commission
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Documents, the Company is not a party to, and it has no knowledge of, any
agreement or understanding restricting the voting or transfer of any shares of
the capital stock of the Company. Except as set forth on SCHEDULE 2.1(c) hereto
or disclosed or in any Commission Documents, the offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued prior to the Closing complied with all applicable federal and state
securities laws, and to the best knowledge of the Company, no holder of such
securities has a right of rescission or has made or threatened to make a claim
for rescission or damages with respect thereto which could have a Material
Adverse Effect. The Company has furnished or made available to the Purchasers
true and correct copies of the Company's Certificate of Incorporation as in
effect on the date hereof (the "CERTIFICATE"), and the Company's Bylaws as in
effect on the date hereof (the "BYLAWS").
(d) ISSUANCE OF SECURITIES. The Shares and the Warrants to be
issued at the Closing have been duly authorized by all necessary corporate
action and, when paid for or issued in accordance with the terms hereof, the
Shares shall be validly issued and outstanding, fully paid and nonassessable and
free and clear of all liens, encumbrances and rights of first refusal of any
kind and the holders shall be entitled to all rights accorded to a holder of
Preferred Stock. The Shares have the relative rights, powers and privileges set
forth in the Certificate of Designations. When the Conversion Shares are issued
in accordance with the terms of the Preferred Stock, such shares will be duly
authorized by all necessary corporate action and validly issued and outstanding,
fully paid and nonassessable, free and clear of all liens, encumbrances and
rights of first refusal of any kind and the holders shall be entitled to all
rights accorded to a holder of Common Stock. When the Warrant Shares are issued
and paid for in accordance with the terms of the Warrants, such shares will be
duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal of any kind and the holders shall be
entitled to all rights accorded to a holder of Common Stock.
(e) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents and the Exchange Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) violate any provision of the Certificate or Bylaws or
any Subsidiary's comparable charter documents, (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or obligation to
which the Company is a party or by which the Company's properties or assets are
bound, (iii) create or impose a lien, mortgage, security interest, charge or
encumbrance of any nature on any property or asset of the Company or any of its
Subsidiaries under any agreement or any commitment to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound or by
which any of their respective properties or assets are bound (in each case,
after giving effect to the Exchange), or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any Subsidiary or by which any property or asset of the
Company or any Subsidiary is bound or affected (in each case, after giving
effect to the Exchange), except, in the case of (i) above and in all cases other
than violations pursuant to clause (iv) (with respect to federal and
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state securities laws) above, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations, which
singularly or in the aggregate, do not and will not have a Material Adverse
Effect. The Company is not required under federal, state, foreign or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Exchange Documents
or the Transaction Documents or issue and sell the Shares, the Conversion
Shares, the Warrants or the Warrant Shares in accordance with the terms hereof
or thereof (other than any filings which may be required to be made by the
Company with the Securities and Exchange Commission (the "COMMISSION") or state
securities administrators subsequent to the Closing, or any registration
statement which may be filed pursuant hereto or thereto).
(f) COMMISSION DOCUMENTS; COMMISSION FILINGS; FINANCIAL
STATEMENTS. The Common Stock is not currently registered pursuant to Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), but the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Commission
pursuant to the reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a) or 15(d) of the Exchange Act, including, but not
limited to, current reports on Form 8-K (and all of the foregoing, including
filings incorporated by reference therein, filed prior to the date hereof being
referred to herein as the "COMMISSION DOCUMENTS"). At the time of its filing,
the Company's Form 10-QSB for the fiscal quarter ended December 31, 2005 (the
"FORM 10-Q") complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and the Form 10-Q did not contain any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. At the time of its
filing, the Company's Form 10-KSB for the fiscal year ended June 30, 2005 (the
"FORM 10-K") complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and the Form 10-K did not contain any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the
Commission Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
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(g) SUBSIDIARIES. SCHEDULE 2.1(g) hereto sets forth each
Subsidiary of the Company after giving effect to the Exchange, showing the
jurisdiction of its incorporation or organization and showing the percentage of
each person's ownership of the outstanding stock or other interests of such
Subsidiary. For the purposes of this Agreement, "SUBSIDIARY" shall mean, with
respect to any corporation or other entity, any corporation or other entity of
which at least a majority of the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by such corporation or other entity and/or any of its other
Subsidiaries. All of the outstanding shares of capital stock of each such
Subsidiary have been duly authorized and validly issued, and are fully paid and
nonassessable. There are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any such
Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any such Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any such Subsidiary or any convertible securities, rights,
warrants or options of the type described in the preceding sentence except as
set forth on SCHEDULE 2.1(g) hereto. Except as set forth on SCHEDULE 2.1(g)
hereto, neither the Company nor any Subsidiary is party to, nor has any
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of any Subsidiary.
(h) NO MATERIAL ADVERSE CHANGE. Since December 31, 2005, no
event or condition has occurred which has had or could reasonably be expected to
have a Material Adverse Effect.
(i) NO UNDISCLOSED LIABILITIES. The Company has no
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those set forth on the balance sheet included in the Form 10-Q or incurred in
the ordinary course of the Company's business since December 31, 2005, and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since December 31,
2005, except as disclosed in the Commission Documents, no event or circumstance
has occurred or exists with respect to the Company or its business, properties,
prospects, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.
(k) INDEBTEDNESS. Except as disclosed in the Commission
Documents, as of the date hereof, there is no outstanding secured and unsecured
Indebtedness of the Company, or Indebtedness for which the Company has
commitments. For the purposes of this Agreement, "INDEBTEDNESS" shall mean (i)
any liabilities for borrowed money in excess of $100,000 (other than trade
accounts payable incurred in the ordinary course of business), (ii) all
guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others in excess of $100,000, whether or not the same are or
should be reflected in the Company's balance sheet (or
6
the notes thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business, and (iii) the present value of any lease payments in excess of
$100,000 due under leases required to be capitalized in accordance with GAAP.
Except as disclosed in any Commission Documents, the Company is not in default
with respect to any Indebtedness.
(l) TITLE TO ASSETS. The Company has good and marketable title
to all of its real and personal property, if any, free and clear of any
mortgages, pledges, charges, liens, security interests or other encumbrances of
any nature whatsoever, except for those disclosed in any Commission Documents or
such that, individually or in the aggregate, do not have a Material Adverse
Effect.
(m) ACTIONS PENDING. There is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or other
proceeding pending or, to the knowledge of the Company, threatened against the
Company which questions the validity of this Agreement or any of the other
Transaction Documents or any of the Exchange Documents or any of the
transactions contemplated hereby or thereby or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or involving the Company
or any of its properties or assets, which individually or in the aggregate,
would have a Material Adverse Effect. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any officers or directors
of the Company in their capacities as such, which, individually or in the
aggregate, would have a Material Adverse Effect.
(n) COMPLIANCE WITH LAW. The business of the Company has been
and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as
set forth in the Commission Documents or such that, individually or in the
aggregate, the noncompliance therewith would not have a Material Adverse Effect.
The Company has all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) TAXES. The Company has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company for all current taxes and other charges
to which the Company is subject and which are not currently due and payable.
None of the federal income tax returns of the Company has been audited by the
Internal Revenue Service. The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company for
any period, nor of any basis for any such assessment, adjustment or contingency.
7
(p) CERTAIN FEES. The Company has not employed any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
(q) DISCLOSURE. To the best of the Company's knowledge,
neither this Agreement nor any other documents, certificates or instruments
furnished to the Purchasers by or on behalf of the Company in connection with
the transactions contemplated by this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
(r) INTELLECTUAL PROPERTY. SCHEDULE 2.1(r) contains a complete
and correct list of all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations, and all rights with
respect to the foregoing held by the Company (collectively, the "PROPRIETARY
RIGHTS"). The Company owns or possesses all the Proprietary Rights which are
necessary for the conduct of its business as now conducted without any conflict
with the rights of others. As of the date of this Agreement, the Company has not
received any written notice that any Proprietary Rights have been declared
unenforceable or otherwise invalid by any court or governmental agency, and
there is, to the knowledge of the Company, no material existing infringement,
misuse or misappropriation of any Proprietary Rights by others that could have a
Material Adverse Effect. The Company has not received any written notice
alleging that the operation of the business of the Company infringes in any
material respect upon the intellectual property rights of others.
(s) ENVIRONMENTAL COMPLIANCE. Except as disclosed in the
Commission Documents, the Company has obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any U.S. Environmental Laws. The Company has no
permits, licenses and other authorizations issued under any U.S. Environmental
Laws. "U.S. ENVIRONMENTAL LAWS" shall mean all U.S. Federal or state laws
applicable to the Company relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. The Company has
all necessary governmental approvals required under all U.S. Environmental Laws
and used in its business, except for such instances as would not individually or
in the aggregate have a Material Adverse Effect. The Company is also in
compliance with all other limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed under all
Environmental
8
Laws where non-compliance could have a Material Adverse Effect. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect or as disclosed in the Commission Documents, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company that violate or may violate any
Environmental Law after the Closing or that may give rise to any Environmental
Liabilities, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation (i) under any U.S. Environmental
Law, or (ii) based on or related to the manufacture, processing, distribution,
use, treatment, storage (including, without limitation, underground storage
tanks), disposal, transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance. "ENVIRONMENTAL LIABILITIES" means
all liabilities of a person (whether such liabilities are owed by such person to
governmental authorities, third parties or otherwise) currently in existence or
arising hereafter and which arise under or relate to any U.S. Environmental Law.
(t) BOOKS AND RECORDS; INTERNAL ACCOUNTING CONTROLS. The
books, records and documents of the Company accurately reflect in all material
respects the information relating to the business of the Company, the location
and collection of their assets, and the nature of all transactions giving rise
to the obligations or accounts receivable of the Company. The Company maintains
a system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate actions are taken with respect to any differences.
(u) MATERIAL AGREEMENTS. Except for the Transaction Documents,
the Exchange Documents or as disclosed in the Commission Documents, or those
that are included as exhibits to the Commission Documents, the Company is not a
party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission if the Company were registering securities under the
Securities Act (collectively, "MATERIAL AGREEMENTS"). Except as set forth in the
Commission Documents, the Company has in all material respects performed all the
obligations required to be performed by the Company to date under the foregoing
agreements, has received no notice of default and, to the best of the Company's
knowledge, is not in default under any Material Agreement now in effect, the
result of which could cause a Material Adverse Effect. No written or oral
contract, instrument, agreement (other than the Certificate of Designation with
respect to the Preferred Stock, this Agreement or any other Transaction
Document(s)), commitment, obligation (other than any obligation imposed by state
law), plan or arrangement of the Company limits or shall limit the payment of
dividends on its Common Stock.
(v) TRANSACTIONS WITH AFFILIATES. There are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions between (i) the Company or any of its customers
or suppliers, on the one hand, and (ii) on the other hand, any officer,
employee, consultant or director of the Company, or any
9
person owning any capital stock of the Company or any member of the immediate
family of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant,
director or stockholder.
(w) SECURITIES ACT OF 1933. Assuming the accuracy and
completeness of the representations, warranties and covenants of the Purchasers
contained herein, the Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the Shares, the Conversion Shares, the Warrants and the Warrant Shares
hereunder, and no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers under this
Agreement. Neither the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy any of the
Securities, or similar securities to, or solicit offers with respect thereto
from, or enter into any preliminary conversations or negotiations relating
thereto with, any person, or has taken or will take any action so as to require
registration of the issuance and sale of any of the Securities under the
registration provisions of the Securities Act and applicable state securities
laws. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of any of the Securities. The Company is
eligible to register the resale of its Common Stock for resale by the Purchasers
under Form S-1 promulgated under the Securities Act. Except as set forth on
SCHEDULE 2.1(w) hereto, the Company has not granted or agreed to grant to any
person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
(x) GOVERNMENTAL APPROVALS. Except for the filing of any
notice prior or subsequent to the Closing that may be required under applicable
state and/or federal securities laws (which if required, shall be filed on a
timely basis), no authorization, consent, approval, license, exemption of,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for, or in connection with, the execution or delivery of this
Agreement and the other Transaction Documents or the Exchange Documents, the
issuance of the Shares and the Warrants, or, except as set forth in this
Agreement or any other Transaction Document, for the performance by the Company
of its obligations under the Transaction Documents or the Exchange Documents.
(y) EMPLOYEES. The Company has no employees.
(z) ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in
the Commission Documents, since December 31, 2005, the Company has not:
(i) issued any stock, bonds or other corporate securities
or any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) except current liabilities
incurred in the ordinary course of business which are comparable in
nature and amount to the current liabilities incurred in the ordinary
course of business during the comparable portion of its prior fiscal
year, as adjusted to reflect the current nature and volume of the
Company's business;
10
(iii) discharged or satisfied any material lien or
encumbrance or paid a material amount of any obligation or liability
(absolute or contingent), other than current liabilities paid in the
ordinary course of business;
(iv) declared or made any payment or distribution of cash
or other property to stockholders with respect to its stock, or
purchased or redeemed, or made any agreements so to purchase or
redeem, any shares of its capital stock;
(v) sold, assigned or transferred any other tangible
assets, or canceled any debts or claims, except in the ordinary course
of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible
assets or intellectual property rights, which sale, assignment or
transfer has had a Material Adverse Effect, or disclosed any
proprietary confidential information to any person except in the
ordinary course of business or to the Purchasers or their
representatives;
(vii) suffered any substantial losses or waived any
rights of material value, whether or not in the ordinary course of
business, or suffered the loss of any material amount of prospective
business;
(viii) made any changes in employee compensation except
in the ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor
that aggregate in excess of $25,000;
(x) entered into any other transaction other than in the
ordinary course of business, or entered into any other material
transaction, whether or not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess
of $25,000; (xii) suffered any material damage, destruction or
casualty loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their
employment; or
(xiv) entered into an agreement, written or otherwise, to
take any of the foregoing actions.
11
(aa) USE OF PROCEEDS. Except as set forth on SCHEDULE 2.1(AA),
the proceeds from the sale of the Shares and the Warrants will be used by the
Company and its Subsidiaries for working capital purposes and, except as set
forth on SCHEDULE 2.1(AA), shall not be used to repay any outstanding
Indebtedness or any loans to any officer, director, affiliate or insider of the
Company or any Subsidiary (after giving effect to the Exchange).
(bb) PUBLIC UTILITY HOLDING COMPANY ACT AND INVESTMENT COMPANY
ACT STATUS. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing and
after giving effect to the Exchange will not be, an "investment company" or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(cc) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company which is
or would cause a Material Adverse Effect. The execution and delivery of this
Agreement and the issue and sale of the Shares and the Warrants will not involve
any transaction which is subject to the prohibitions of Section 406 of ERISA or
in connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"); provided that, if any
Purchaser, or any person or entity that owns a beneficial interest in any
Purchaser, is an "employee pension benefit plan" (within the meaning of Section
3(2) of ERISA) with respect to which the Company is a "party in interest"
(within the meaning of Section 3(14) of ERISA), the requirements of Sections
407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section
2.1(cc), the term "PLAN" shall mean an "employee pension benefit plan" (as
defined in Section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any
Subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any Subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(dd) PRESS RELEASES. The press releases, if any, disseminated
by the Company during the twelve months preceding the date of this Agreement,
taken as a whole, do not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made and when made, not misleading.
(ee) SOLVENCY. Based on the financial condition of the Company
as of the Closing Date (and assuming that the Closing and the consummation of
the Exchange shall have occurred), (i) the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect of
the Company's existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted, and as proposed to be conducted, including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof, and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or
12
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
(ff) LISTING AND MAINTENANCE REQUIREMENTS. Except as specified
in the Commission Documents, the Company has not, in the two years preceding the
date hereof, received notice from any trading market to the effect that the
Company is not in compliance with the listing or maintenance requirements
thereof. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the
trading market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Securities under this Agreement does not contravene the
rules and regulations of the trading market on which the Common Stock is
currently listed or quoted.
(gg) APPLICATION OF TAKEOVER PROTECTIONS. The Company has
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's Certificate of Incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under this Agreement, including, without
limitation, the Company's issuance of the Securities and the Purchasers'
ownership of the Securities.
(hh) NO ADDITIONAL AGREEMENTS. The Company does not have any
agreement or understanding with any Purchaser with respect to the transactions
contemplated by this Agreement other than as specified in this Agreement.
Section 2.2 REPRESENTATIONS AND WARRANTIES RELATING TO FALCON. In order
to induce the Purchasers to enter into this Agreement and to purchase the Shares
and Warrants, the Company and Falcon hereby jointly and severally make the
following representations and warranties to the Purchasers:
(a) ORGANIZATION, GOOD STANDING AND POWER. Falcon is a
corporation duly incorporated, validly existing and in good standing under the
laws of the British Virgin Islands and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. Falcon and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect.
(b) AUTHORIZATION; ENFORCEMENT. Falcon has the requisite
corporate power and authority to enter into and perform this Agreement and the
Exchange Agreement. The execution, delivery and performance of this Agreement
and the Exchange Agreement by Falcon and the consummation by Falcon of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action, and no further consent or authorization of Falcon or
13
its Board of Directors or stockholders is required. Each of this Agreement and
the Exchange Agreement has been duly executed and delivered by Falcon. Each of
this Agreement and the Exchange Agreement constitutes a valid and binding
obligation of Falcon enforceable against Falcon in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by equitable principles or remedies of general
application.
(c) NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Exchange Agreement by Falcon and the consummation by
Falcon of the transactions contemplated hereby and thereby, including the
Exchange, do not and will not (i) violate any provision of the charter or bylaws
of Falcon or any Subsidiary's comparable charter documents, (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which Falcon or any of its Subsidiaries is a party or by which Falcon or any
of its Subsidiaries' respective properties or assets are bound, (iii) create or
impose a lien, mortgage, security interest, charge or encumbrance of any nature
on any property or asset of Falcon or any of its Subsidiaries under any
agreement or any commitment to which Falcon or any of its Subsidiaries is a
party or by which Falcon or any of its Subsidiaries is bound or by which any of
their respective properties or assets are bound, or (iv) result in a violation
of any federal, state, local or foreign statute, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations)
applicable to Falcon or any of its Subsidiaries or by which any property or
asset of Falcon or any of its Subsidiaries is bound or affected, except, in all
cases other than violations pursuant to clause (iv) (with respect to federal and
state securities laws) above, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of Falcon and its Subsidiaries is not being conducted in violation of any laws,
ordinances or regulations of any governmental entity, except for possible
violations which, singularly or in the aggregate, do not and will not have a
Material Adverse Effect. Neither Falcon nor any of its Subsidiaries is required
under federal, state, foreign or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver, perform any of
its obligations under the this Agreement or the Exchange Agreement or consummate
the Exchange.
(d) FINANCIAL STATEMENTS. As of their respective dates, the
financial statements of Henan Zhongpin Food Share Co., Ltd. annexed hereto as
Exhibit G (the "FALCON FINANCIAL STATEMENTS") comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission. Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial position
of Henan Zhongpin Food Share Co., Ltd. as of the dates thereof and the results
of operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
14
(e) SUBSIDIARIES. SCHEDULE 2.2(e) hereto sets forth each
Subsidiary of Falcon, showing the jurisdiction of its incorporation or
organization and showing the percentage of each person's ownership of the
outstanding stock or other interests of such Subsidiary. All of the outstanding
shares of capital stock of each Subsidiary have been duly authorized and validly
issued, and are fully paid and nonassessable. There are no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon any Subsidiary for the purchase or acquisition of
any shares of capital stock of any Subsidiary or any other securities
convertible into, exchangeable for or evidencing the rights to subscribe for any
shares of such capital stock. Neither Falcon nor any Subsidiary is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of the capital stock of any Subsidiary or any convertible
securities, rights, warrants or options of the type described in the preceding
sentence. Neither Falcon nor any Subsidiary is party to, nor has any knowledge
of, any agreement restricting the voting or transfer of any shares of the
capital stock of any Subsidiary.
(f) NO MATERIAL ADVERSE CHANGE. Since September 30, 2005, no
event or condition has occurred with respect to Falcon and/or its Subsidiaries
which has had or could reasonably be expected to have a Material Adverse Effect,
except as disclosed on SCHEDULE 2.2(f) hereto.
(g) NO UNDISCLOSED LIABILITIES. Except as disclosed on
SCHEDULE 2.2(g) hereto, neither Falcon nor any of its Subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those set forth on the balance sheet as of September 30, 2005 included in the
Falcon Financial Statements or incurred in the ordinary course of Falcon's or
its Subsidiaries respective businesses since September 30, 2005, and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect on Falcon or its Subsidiaries.
(h) INDEBTEDNESS. SCHEDULE 2.1(k) hereto sets forth as of the
date hereof all outstanding secured and unsecured Indebtedness of Falcon or any
Subsidiary of Falcon, or for which Falcon or any Subsidiary of Falcon has
commitments, which Indebtedness is not disclosed in the Falcon Financial
Statements. Neither Falcon nor any Subsidiary of Falcon is in default with
respect to any Indebtedness.
(i) TITLE TO ASSETS. Each of Falcon and its Subsidiaries has
and, after giving effect to the Exchange will continue to have, good and
marketable title to all of its real and personal property, free and clear of any
mortgages, pledges, charges, liens, security interests or other encumbrances of
any nature whatsoever, except for those indicated on SCHEDULE 2.2(i) hereto or
such that, individually or in the aggregate, do not have a Material Adverse
Effect. All material leases of Falcon and each of its Subsidiaries are valid and
subsisting and in full force and effect.
15
(j) ACTIONS PENDING. There is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or other
proceeding pending or, to the knowledge of Falcon, threatened against Falcon or
any of its Subsidiaries which questions the validity of this Agreement or any of
the other Transaction Documents, any of the Exchange Documents or any of the
transactions contemplated hereby or thereby or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of Falcon, threatened against or involving Falcon, any
Subsidiary of Falcon or any of their respective properties or assets, which
individually or in the aggregate, would have a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against Falcon or any
Subsidiary of Falcon or any officers or directors of Falcon or any Subsidiary of
Falcon in their capacities as such, which individually, or in the aggregate,
would have a Material Adverse Effect.
(k) COMPLIANCE WITH LAW. The business of Falcon and its
Subsidiaries has been and is presently being conducted in accordance with all
applicable governmental laws, rules, regulations and ordinances, except as set
forth on SCHEDULE 2.2(k) hereto or such that, individually or in the aggregate,
the noncompliance therewith would not have a Material Adverse Effect. Falcon and
each of its Subsidiaries have all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(l) TAXES. Except as set forth on SCHEDULE 2.2(l) hereto,
Falcon and each of its Subsidiaries has accurately prepared and filed all
governmental and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of Falcon and its Subsidiaries for all current taxes
and other charges to which Falcon or any Subsidiary is subject and which are not
currently due and payable. Falcon has no knowledge of any additional
assessments, adjustments or contingent tax liability of any nature whatsoever,
whether pending or threatened against Falcon or any Subsidiary for any period,
nor of any basis for any such assessment, adjustment or contingency.
(m) CERTAIN FEES. Except as set forth on SCHEDULE 2.1(p)
hereto, Falcon has not employed any broker or finder or incurred any liability
for any brokerage or investment banking fees, commissions, finders' structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents.
(n) DISCLOSURE. To the best of Falcon's knowledge, neither
this Agreement nor any Exchange Document nor any other documents, certificates
or instruments furnished to the Purchasers by or on behalf of Falcon or any
Subsidiary in connection with the transactions contemplated by this Agreement or
the Exchange Agreement contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements made herein
or therein, in the light of the circumstances under which they were made herein
or therein, not misleading.
16
(o) INTELLECTUAL PROPERTY. SCHEDULE 2.1(r) contains a complete
and correct list of all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations, and all rights with
respect to the foregoing held by Falcon or any of its Subsidiaries
(collectively, the "FALCON PROPRIETARY RIGHTS"). Falcon and each of its
Subsidiaries owns or possesses and, after giving effect to the Exchange will
continue to own or possess, all the Falcon Proprietary Rights which are
necessary for the conduct of its business as now conducted without any conflict
with the rights of others. Except as disclosed on SCHEDULE 2.2(o) hereto, (i) as
of the date of this Agreement, neither Falcon nor any of its Subsidiaries has
received any written notice that any Falcon Proprietary Rights have been
declared unenforceable or otherwise invalid by any court or governmental agency
or will become unenforceable or otherwise invalid as a result of the Exchange,
and (ii) as of the date of this Agreement, there is, to the knowledge of the
Company, no material existing infringement, misuse or misappropriation of any
Falcon Proprietary Rights by others that could have a Material Adverse Effect.
Neither Falcon nor any of its Subsidiaries has received any written notice
alleging that the operation of the business of Falcon or any of its Subsidiaries
infringes in any material respect upon the intellectual property rights of
others.
(p) ENVIRONMENTAL COMPLIANCE. Except as disclosed on SCHEDULE
2.2(p) hereto, Falcon and each of its Subsidiaries have obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Falcon Environmental Laws for the
operation of their respective businesses as currently conducted and for the
consummation of the Exchange. SCHEDULE 2.2(p) hereto sets forth all material
permits, licenses and other authorizations issued under any Falcon Environmental
Laws to Falcon or its Subsidiaries. "FALCON ENVIRONMENTAL LAWS" shall mean all
governmental laws applicable to Falcon or any of its Subsidiaries relating to
the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except as set forth on SCHEDULE 2.2(p) hereto, Falcon has,
and after giving effect to the Exchange will continue to have, all necessary
governmental approvals required under all Falcon Environmental Laws and used in
its business or in the business of any of its Subsidiaries, except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect. Falcon and each of its Subsidiaries are also in compliance with all
other limitations, restrictions, conditions, standards, requirements, schedules
and timetables required or imposed under all Falcon Environmental Laws where
non-compliance could have a Material Adverse Effect. Except for such instances
as would not individually or in the aggregate have a Material Adverse Effect,
there are no past or present events, conditions, circumstances, incidents,
actions or omissions
17
relating to or in any way affecting Falcon or its Subsidiaries that violate or
may violate any Falcon Environmental Law after the Closing or that may give rise
to any Environmental Liabilities, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation (i) under any
Falcon Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including, without
limitation, underground storage tanks), disposal, transport or handling, or the
emission, discharge, release or threatened release of any hazardous substance.
"FALCON ENVIRONMENTAL LIABILITIES" means all liabilities of a person (whether
such liabilities are owed by such person to governmental authorities, third
parties or otherwise) currently in existence or arising hereafter and which
arise under or relate to any Falcon Environmental Law.
(q) BOOKS AND RECORDS; INTERNAL ACCOUNTING CONTROLS. The
books, records and documents of Falcon and its Subsidiaries accurately reflect
in all material respects the information relating to the business of Falcon and
its Subsidiaries, the location and collection of their assets, and the nature of
all transactions giving rise to the obligations or accounts receivable of Falcon
or its Subsidiary of Falcon. Falcon and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Falcon's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate actions are taken with respect to any differences.
(r) MATERIAL AGREEMENTS. Except for the Transaction Documents,
the Exchange Documents or as set forth on SCHEDULE 2.2(r) hereto, neither Falcon
nor any Subsidiary of Falcon is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission if Falcon or any
Subsidiary of Falcon were registering securities under the Securities Act
(collectively, "FALCON MATERIAL AGREEMENTS"). Except as set forth on SCHEDULE
2.2(r) hereto, Falcon and each Subsidiary of Falcon has in all material respects
performed all the obligations required to be performed by them to date under the
foregoing agreements, have received no notice of default and, to the best of
Falcon's and the Company's knowledge, are not now, and after giving effect to
the Exchange will not be, in default under any Falcon Material Agreement now in
effect, the result of which could cause a Material Adverse Effect.
(s) TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 2.2(s) hereto, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing
transactions between (i) Falcon, any Subsidiary of Falcon or any of their
respective its customers or suppliers, on the one hand, and (ii) on the other
hand, any officer, employee, consultant or director of Falcon, or any of its
Subsidiaries, or any person owning any capital stock of Falcon or any Subsidiary
of Falcon or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder.
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(t) EMPLOYEES. Neither Falcon nor any Subsidiary of Falcon has
any collective bargaining arrangements or agreements covering any of its
employees. Neither Falcon nor any Subsidiary of Falcon has, and after giving
effect to the Exchange will not have, any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by Falcon or such Subsidiary. Since
September 30, 2005, no officer, consultant or key employee of Falcon or any
Subsidiary of Falcon whose termination, either individually or in the aggregate,
could have a Material Adverse Effect, has terminated or, to the knowledge of
Falcon, has any present intention of terminating his or her employment or
engagement with Falcon or any Subsidiary of Falcon.
(u) ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on
SCHEDULE 2.2(u) hereto, since September 30, 2005, neither Falcon nor any
Subsidiary has:
(i) issued any stock, bonds or other corporate securities
or any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) except current liabilities
incurred in the ordinary course of business which are comparable in
nature and amount to the current liabilities incurred in the ordinary
course of business during the comparable portion of its prior fiscal
year, as adjusted to reflect the current nature and volume of Falcon's
or such Subsidiary's business;
(iii) discharged or satisfied any material lien or
encumbrance or paid a material amount of any obligation or liability
(absolute or contingent), other than current liabilities paid in the
ordinary course of business;
(iv) declared or made any payment or distribution of cash
or other property to stockholders with respect to its stock, or
purchased or redeemed, or made any agreements so to purchase or
redeem, any shares of its capital stock;
(v) sold, assigned or transferred any other tangible
assets, or canceled any debts or claims, except in the ordinary course
of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible
assets or intellectual property rights, which sale, assignment or
transfer has had a Material Adverse Effect, or disclosed any
proprietary confidential information to any person except in the
ordinary course of business or to the Purchasers or their
representatives;
(vii) suffered any substantial losses or waived any
rights of material value, whether or not in the ordinary course of
business, or suffered the loss of any material amount of prospective
business;
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(viii) made any changes in employee compensation except
in the ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor
that aggregate in excess of $25,000;
(x) entered into any other transaction other than in the
ordinary course of business, or entered into any other material
transaction, whether or not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess
of $25,000;
(xii) suffered any material damage, destruction or
casualty loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their
employment; or
(xiv) entered into an agreement, written or otherwise, to
take any of the foregoing actions.
(v) PRESS RELEASES. The press releases, if any, disseminated
by Falcon during the twelve months preceding the date of this Agreement, taken
as a whole, do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made and when made, not misleading.
(w) NO ADDITIONAL AGREEMENTS. Falcon does not have any
agreement or understanding with any Purchaser with respect to the transactions
contemplated by this Agreement other than as specified in this Agreement. Other
than the Exchange Documents, true and complete copies of which have been
provided to the Purchasers, Falcon does not have any agreement or understanding
with the Company or any other person or entity with respect to the Exchange or
the transactions contemplated thereby.
Section 2.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each of
the Purchasers hereby severally and not jointly makes the following
representations and warranties to the Company with respect solely to itself and
not with respect to any other Purchaser:
(a) ORGANIZATION AND STANDING OF THE PURCHASERS. If such
Purchaser is an entity, such Purchaser is a corporation, limited liability
company or partnership duly incorporated or organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization.
(b) AUTHORIZATION AND POWER. Such Purchaser has the requisite
corporate, limited liability company or partnership power to enter into and
perform this Agreement, the Registration Rights Agreement and the other
agreements and documents contemplated hereby
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and thereby and executed by the Purchaser or to which the Purchaser is party
(collectively, the "PURCHASER TRANSACTION DOCUMENTS") and to purchase the Shares
and Warrants being sold to it hereunder. The execution, delivery and performance
of the Purchaser Transaction Documents by such Purchaser and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
necessary corporate, limited liability company or partnership action, and no
further consent or authorization of such Purchaser or its Board of Directors,
stockholders, members, managers or partners, as the case may be, is required.
This Agreement has been duly authorized, executed and delivered by such
Purchaser. Each of the Purchaser Transaction Documents constitutes, or shall
constitute when executed and delivered, valid and binding obligations of such
Purchaser enforceable against it Purchaser in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by equitable principles or remedies of general
application.
(c) ACQUISITION FOR INVESTMENT. Such Purchaser is purchasing
the Shares and acquiring the Warrants solely for its own account for the purpose
of investment and not with a view to or for sale in connection with any
distribution thereof. Such Purchaser does not have a present intention to sell
any of the Securities, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Securities to or
through any person or entity; PROVIDED, HOWEVER, that by making the
representations herein and subject to Section 2.2(e) below, such Purchaser does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of any of the Securities at any time in
accordance with federal and state securities laws applicable to such disposition
provided that the Company receives an opinion of its counsel to the effect that
such disposition complies with such laws. Such Purchaser acknowledges that it
(i) has such knowledge and experience in financial and business matters such
that such Purchaser is capable of evaluating the merits and risks of its
investment in the Company, (ii) is able to bear the financial risks associated
with an investment in the Securities, and (iii) has been given full access to
such records of the Company and the Subsidiaries and to the officers of the
Company and the Subsidiaries as it has deemed necessary or appropriate to
conduct its due diligence investigation.
(d) RULE 144. Such Purchaser understands that the Securities
must be held indefinitely unless such Securities are registered under the
Securities Act or an exemption from registration is available. Such Purchaser
acknowledges that it is familiar with Rule 144 of the rules and regulations of
the Commission, as amended, promulgated pursuant to the Securities Act ("RULE
144"), and that such Purchaser has been advised that Rule 144 permits resales
only under certain circumstances. Such Purchaser understands that to the extent
that Rule 144 is not available, such Purchaser will be unable to sell any
Securities without either registration under the Securities Act or the existence
of another exemption from such registration requirement, provided that the
Company receives an opinion of its counsel to the effect that such sale is
exempt from such registration requirement.
(e) GENERAL. Such Purchaser understands that the Securities
are being offered and sold in reliance on a transactional exemption from the
registration requirements of federal and state securities laws and the Company
is relying upon the truth, accuracy and completeness
21
of the representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein and in the other Purchaser
Transaction Documents in order to determine the applicability of such exemptions
and the suitability of such Purchaser to acquire the Securities. Such Purchaser
understands that no United States federal or state agency or any government or
governmental agency has passed upon or made any recommendation or endorsement
with respect to any of the Securities.
(f) OPPORTUNITIES FOR ADDITIONAL INFORMATION. Such Purchaser
acknowledges that such Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company, and to the extent deemed necessary by such Purchaser in light of such
Purchaser's personal knowledge of the Company's affairs, such Purchaser has
asked such questions and received answers to the full satisfaction of such
Purchaser, and such Purchaser desires to invest in the Company. No investigation
conducted by such Purchaser shall limit or otherwise affect its right to rely
upon the representations and warranties of the Company and Falcon contained
herein.
(g) NO GENERAL SOLICITATION. Such Purchaser acknowledges that
the Securities were not offered to such Purchaser by means of any form of
general or public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which such Purchaser was invited by any of the foregoing means of
communications.
(h) ACCREDITED INVESTOR. Such Purchaser is an accredited
investor (as defined in Rule 501 of Regulation D), and such Purchaser has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Securities. Such Purchaser
acknowledges that an investment in the Securities is speculative and involves a
high degree of risk.
ARTICLE III
COVENANTS
The Company and Falcon, on the one hand, and each Purchaser, as to
itself only, hereby covenant with one another as follows, which covenants are
for the benefit of each respective covenantee and its respective permitted
assignees.
Section 3.1 CONSUMMATION OF THE EXCHANGE. Prior to the Closing, the
Company and Falcon shall take all required action to consummate the transactions
contemplated by the Exchange Agreement (the "EXCHANGE") in accordance with the
terms of the Exchange Agreement and the other Exchange Documents, and neither
the Company nor Falcon shall waive any of the covenants of the parties under the
Exchange Documents or any conditions to the consummation of the Exchange without
the prior written consent of the Purchasers.
Section 3.2 DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION.
On or before 9:00 a.m., New York City time, on the business day immediately
following the Closing Date,
22
the Company shall issue a press release, and on or before 5:30 p.m., New York
City time, on the business day immediately following the Closing Date, the
Company shall file a Current Report on Form 8-K with the Commission describing
the terms of the transactions contemplated by the Exchange Agreement and the
Transaction Documents and including as exhibits to such Current Report on Form
8-K, the Exchange Agreement, this Agreement, the Certification of Designations,
the Warrants and the Registration Rights Agreement, and the schedules hereto and
thereto in the form required by the Exchange Act (including all attachments, the
"8-K FILING"). The Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, employees and agents
not to, provide any Purchaser with any material, nonpublic information regarding
the Company or any of its Subsidiaries from and after the filing of the 8-K
Filing with the Commission without the express prior written consent of such
Purchaser. Neither the Company nor any Purchaser shall issue any press releases
or any other public statements with respect to the transactions contemplated
hereby; PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Purchasers, to make any press release or other public disclosure
with respect to such transactions (i) in substantial conformity with the 8-K
Filing and contemporaneously therewith, and (ii) as is required by applicable
law and regulations (provided that in the case of clause (i) above, the
Purchasers shall be consulted by the Company (although the consent of the
Purchasers shall not be required) in connection with any such press release or
other public disclosure prior to its release).
Section 3.3 REGISTRATION UNDER EXCHANGE ACT. The Company will use its
commercially reasonable efforts to cause its Common Stock to be registered under
Section 12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, will comply with all
requirements related to any registration statement filed pursuant to this
Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or the Securities Act, except as
permitted herein.
Section 3.4 INSPECTION RIGHTS. The Company shall permit, during normal
business hours and upon reasonable request and reasonable notice, a Purchaser
and its representatives, so long as such Purchaser shall be obligated hereunder
to purchase the Shares or shall beneficially own the Shares or Conversion
Shares, or shall own Warrant Shares or the Warrants which, in the aggregate,
represent more than two percent (2%) of the total combined voting power of all
voting securities then outstanding, to examine and make reasonable copies of and
extracts from the records and books of account of, and visit and inspect, during
the term of the Warrants, the properties, assets, operations and business of the
Company and any Subsidiary, and to discuss the affairs, finances and accounts of
the Company and any Subsidiary with any of its officers, consultants, directors,
and key employees.
Section 3.5 COMPLIANCE WITH LAWS. The Company shall comply, and cause
each Subsidiary to comply, with all applicable laws, rules, regulations and
orders, the noncompliance with which could have a Material Adverse Effect.
23
Section 3.6 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep and cause each Subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied.
Section 3.7 OTHER AGREEMENTS. The Company shall not enter into any
agreement containing any provision that would violate the terms of, conflict
with, or cause a default under, any material term of any Transaction Document.
Section 3.8 RESERVATION OF SHARES. So long as the Shares or Warrants
remain outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, the maximum number of
shares of Common Stock to effect the conversion of the Shares and the exercise
of the Warrants.
Section 3.9 NON-PUBLIC INFORMATION. Neither the Company nor any of its
officers or agents shall disclose any material non-public information about the
Company to any Purchaser without the express prior written consent of such
Purchaser.
Section 3.10 NASDAQ OR EXCHANGE LISTING. The Company shall use its
commercially reasonable efforts to file an application for listing its Common
Stock on the Nasdaq National Market, the Nasdaq Capital Market or a national
securities exchange within 90 days of the Closing Date and to cause such
applications to be approved in a timely manner thereafter.
Section 3.11 SUBSEQUENT REGISTRATIONS. Other than pursuant to the
registration statement filed in connection with the transactions contemplated by
this Agreement, prior to the date that such registration statement is declared
effective by the Commission, the Company shall not file any registration
statement (other than on Form S-8) under the Securities Act with the Commission
with respect to any securities of the Company.
Section 3.12 MAKE GOOD ESCROW SHARES. On the Closing Date, the Company
shall cause certain stockholders of the Company to enter into an escrow
agreement in the form of EXHIBIT H hereto and to deposit with the escrow agent
thereunder the Escrow Deposit (as defined in such escrow agreement).
Section 3.13 NEW YORK CITY AGENCY. During the 30-day period immediately
following the Closing Date, the Company shall establish, and so long as any of
the Shares or the Warrants are outstanding, the Company shall maintain, an
office or agency (which shall be located in the Borough of Manhattan in The City
of New York) where (i) Shares may be presented for conversion into shares of
Common Stock, (ii) Warrants may be presented for exercise and (iii) notices and
demands to or upon the Company or Falcon in respect of the Securities, this
Agreement or any of the Transaction Documents may be served. The Company shall
promptly notify the Purchasers of the name and address of any such agent and of
the appointment of any additional or substitute agent.
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ARTICLE IV
CONDITIONS
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
CLOSE AND TO SELL THE SHARES AND WARRANTS. The obligation hereunder of the
Company to close and issue and sell the Shares and the Warrants to the
Purchasers on the Closing Date is subject to the satisfaction or waiver, at or
before the Closing, of the conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) ACCURACY OF THE PURCHASERS' REPRESENTATIONS AND
WARRANTIES. The representations and warranties of each Purchaser contained in
the Purchaser Transaction Documents shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made at
that time, except for representations and warranties that are expressly made as
of a particular date, which shall be true and correct in all material respects
as of such date.
(b) PERFORMANCE BY THE PURCHASERS. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing Date.
(c) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) DELIVERY OF PURCHASE PRICE. The Purchase Price for the
Shares and Warrants shall have been delivered to Law Debenture Trust Company of
New York, as escrow agent, and shall be subject to release to the Company at the
Closing pursuant to the terms and conditions of an escrow agreement in the form
of EXHIBIT H attached hereto.
(e) DELIVERY OF PURCHASER TRANSACTION DOCUMENTS. The Purchaser
Transaction Documents shall have been duly executed and delivered by the
Purchasers to the Company.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
CLOSE AND TO PURCHASE THE SHARES AND WARRANTS. The obligation hereunder of the
Purchasers to purchase the Shares and Warrants and consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver, at or
before the Closing, of each of the conditions set forth below. These conditions
are for the Purchasers' sole benefit and may be waived by any Purchaser, as to
itself only, at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S AND FALCON'S REPRESENTATIONS AND
WARRANTIES. Each of the representations and warranties of the Company and Falcon
in this Agreement and in each of the Transaction Documents and Exchange
Documents shall be true and correct in all material respects as of the Closing
Date, except for representations and warranties that are expressly made as of a
particular date, which shall be true and correct in all material respects as of
such date.
25
(b) PERFORMANCE BY THE COMPANY AND FALCON. Each of the Company
and Falcon shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement or the
Exchange Agreement to be performed, satisfied or complied with by the Company or
Falcon, as the case may be, at or prior to the Closing Date.
(c) NO SUSPENSION, ETC. Trading in the Company's Common Stock
shall not have been suspended by the Commission (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets
("BLOOMBERG") shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by Bloomberg,
nor shall a banking moratorium have been declared either by the United States or
New York State authorities, nor shall there have occurred any national or
international calamity or crisis of such magnitude in its effect on any
financial market which, in each case, in the reasonable judgment of any
Purchaser, makes it impracticable or inadvisable for it to purchase its Shares
and Warrants.
(d) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Exchange Documents, this Agreement or the other Transaction
Documents.
(e) NO PROCEEDINGS OR LITIGATION. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company or Falcon or any Subsidiary, or any of the
officers, directors or affiliates of the Company or Falcon or any Subsidiary
thereof, seeking to restrain, prevent or change the Exchange or the transactions
contemplated by the Exchange Documents, this Agreement or the other Transaction
Documents, or seeking damages in connection with the Exchange or such
transactions.
(f) OPINION OF COUNSEL, ETC. The Purchasers shall have
received an opinion of U.S. counsel to the Company, dated the Closing Date,
substantially in the form of EXHIBIT C-1 hereto, an opinion of Chinese counsel
to the Company, dated the Closing Date, substantially in the form of EXHIBIT C-2
hereto and such other certificates and documents as the Purchasers or their
counsel shall reasonably require incident to the Closing.
(g) WARRANTS AND SHARES. The Company shall have delivered to
the Purchasers the originally executed Warrants (in such denominations as each
Purchaser may request but in no event in denominations of less than 100) and
shall have delivered certificates representing the Shares (in such denominations
as each Purchaser may request) being acquired by the Purchasers at the Closing.
26
(h) RESOLUTIONS. The Board of Directors of the Company shall
have adopted resolutions consistent with Section 2.1(b) hereof in a form
reasonably acceptable to the Purchasers (the "RESOLUTIONS").
(i) CERTIFICATE OF DESIGNATIONS. As of the Closing Date, the
Company shall have filed with the Delaware Secretary of State the Certificate of
Designations authorizing the Preferred Stock in substantially the form of
EXHIBIT D attached hereto and such Certificate of Designations shall have become
effective.
(j) RESERVATION OF SHARES. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Preferred Stock, solely
for the purpose of effecting the issuance of the Shares, a number of shares of
Preferred Stock equal to the aggregate number of the Shares. As of the Closing
Date, the Company shall have reserved out of its authorized and unissued Common
Stock, solely for the purpose of effecting the conversion of the Shares and the
exercise of the Warrants, a number of shares of Common Stock equal to the number
of Conversion Shares and the number of Warrant Shares issuable upon conversion
of the Preferred Stock and the exercise of the Warrants, respectively, assuming
the Warrants are exercised and the Shares are converted on the Closing Date
(assuming the Warrants are fully exercisable and the Shares fully convertible on
such date regardless of any limitation on the timing or amount of such exercise
or conversion).
(k) SECRETARY'S CERTIFICATE. The Company shall have delivered
to the Purchasers a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions, (ii) the Certificate, (iii) the Bylaws, each as in effect
at the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
(l) OFFICER'S CERTIFICATE. On the Closing Date, the Company
shall have delivered to the Purchasers a certificate of an executive officer of
the Company, dated as of the Closing Date, confirming the accuracy of the
Company's representations, warranties and covenants contained herein and in each
of the other Transaction Documents as of the Closing Date and confirming the
compliance by the Company with the conditions precedent set forth in this
Section 4.2 as of the Closing Date.
(m) FEES AND EXPENSES. As of the Closing Date, all fees and
expenses required to be paid by the Company in connection with the transactions
contemplated by this Agreement shall have been, or authorized to be, paid by the
Company.
(n) REGISTRATION RIGHTS AGREEMENT. As of the Closing Date, the
parties shall have entered into the Registration Rights Agreement in the form of
EXHIBIT E attached hereto.
(o) MAKE GOOD SHARE ESCROW AGREEMENT. As of the Closing Date,
the parties shall have entered into an escrow agreement in the form of EXHIBIT F
hereto and the escrow agent shall have acknowledged receipt of the Escrow
Deposit (as defined in such Escrow Agreement).
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(p) CONSUMMATION OF EXCHANGE. As of the Closing Date, the
Company and Falcon shall have effected the Exchange in accordance with the terms
of the Exchange Agreement and shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Exchange Agreement to be performed, satisfied or complied with by the
Company or Falcon at or prior to the Closing Date.
(q) CONSENT TO JURISDICTION. The Purchasers shall have
received from each Subsidiary of the Company (following consummation of the
Exchange) other than Falcon a consent to jurisdiction in the form of EXHIBIT I
hereto.
(r) LOCK-UP AGREEMENTS. The Purchasers shall have received
from the Company and each of Xianfu Zhu, Baoke Ben, Chaoyang Liu, Qinghe Wang,
Shuichi Si and Juanjuan Wang a letter agreement in the form of EXHIBIT J hereto.
(s) MATERIAL ADVERSE EFFECT. No event or condition shall have
occurred which has had or could reasonably be expected to have a Material
Adverse Effect.
ARTICLE V
CERTIFICATE LEGEND
Section 5.1 LEGEND. Each certificate representing the Shares, the
Conversion Shares, the Warrants and the Warrant Shares shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required by applicable state securities or "blue sky"
laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION
OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
Each certificate representing any Shares shall also be stamped or
otherwise imprinted with a legend substantially in the following form:
THE COMPANY WILL FURNISH TO EACH HOLDER OF ITS SERIES A CONVERTIBLE
PREFERRED STOCK WHO SO REQUESTS WITHOUT CHARGE A COPY OF THE
CERTIFICATE OF DESIGNATION SETTING FORTH THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF SUCH STOCK AND ANY OTHER CLASS OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
28
Upon the earlier of (i) registration for resale pursuant to the
Registration Rights Agreement or (ii) Rule 144(k) becoming available the Company
shall (A) deliver to the transfer agent for the Common Stock (the "Transfer
Agent") irrevocable instructions that the Transfer Agent shall reissue a
certificate representing shares of Common Stock without legends upon receipt by
such Transfer Agent of the legended certificates for such shares, together with
either (1) a customary representation by the Purchaser that Rule 144(k) applies
to the shares of Common Stock represented thereby or (2) a statement by the
Purchaser that such Purchaser has sold the shares of Common Stock represented
thereby in accordance with the Plan of Distribution contained in the
Registration Statement, and (B) cause its counsel to deliver to the Transfer
Agent one or more blanket opinions to the effect that the removal of such
legends in such circumstances may be effected under the Securities Act. From and
after the earlier of such dates, upon any Purchaser's written request, the
Company shall promptly cause certificates evidencing the Purchaser's Securities
to be replaced with certificates which do not bear such restrictive legends, and
Warrant Shares subsequently issued upon due exercise of the Warrants shall not
bear such restrictive legends provided the provisions of either clause (i) or
clause (ii) above, as applicable, are satisfied with respect to such Warrant
Shares. When the Company is required to cause unlegended certificates to replace
previously issued legended certificates, if unlegended certificates are not
delivered to an Purchaser within three (3) Business Days of submission by that
Purchaser of legended certificate(s) to the Transfer Agent as provided above (or
to the Company, in the case of the Warrants), the Company shall be liable to the
Purchaser for liquidated damages in an amount equal to 1.5% of the aggregate
purchase price of the Securities evidenced by such certificate(s) for each
thirty (30) day period (or portion thereof) beyond such three (3) Business Day
that the unlegended certificates have not been so delivered.
ARTICLE VI
TERMINATION
Section 6.1 TERMINATION OF OBLIGATIONS TO EFFECT CLOSING.
(a) The obligations of the Company, on the one hand, and the
Purchasers, on the other hand, to effect the Closing shall terminate as follows:
(i) Upon the mutual written consent of the Company and
the Purchasers;
(ii) By the Company if any of the conditions set forth in
Section 4.1 shall have become incapable of fulfillment, and shall not
have been waived by the Company;
(iii) By a Purchaser (with respect to itself only) if any
of the conditions set forth in Section 4.2. shall have become
incapable of fulfillment, and shall not have been waived by such
Purchaser; or
29
(iv) By either the Company or any Purchaser (with respect
to itself only) if the Closing has not occurred on or prior to
February 3, 2006;
provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party's seeking to
terminate its obligation to effect the Closing.
Section 6.2 EFFECT OF TERMINATION. In the event of termination by the
Company or any Purchaser, written notice thereof shall forthwith be given to the
other parties and the other Purchasers shall have the right to terminate their
obligations to effect the Closing upon written notice to the Company and the
other Purchasers. If this Agreement is terminated as provided in Section 6.1
herein, this Agreement shall become void and of no further force and effect,
except for Sections 8.1 and 8.2, and Article VII herein. Nothing in this Section
6.2 shall be deemed to release the Company, Falcon or any Purchaser from any
liability for any breach under this Agreement or the other Transaction
Documents, or to impair the rights of the Company or such Purchaser to compel
specific performance by any other party of its obligations under this Agreement
or the other Transaction Documents.
ARTICLE VII
INDEMNIFICATION
Section 7.1 GENERAL INDEMNITY. The Company and Falcon jointly and
severally agree to indemnify and hold harmless each Purchaser (and its
respective directors, officers, employees, affiliates, agents, successors and
assigns) from and against any and all losses, liabilities, deficiencies, costs,
damages and expenses (including, without limitation, reasonable attorneys' fees,
charges and disbursements) incurred by each Purchaser or any such person as a
result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Company or Falcon herein. The Purchasers severally but not
jointly agree to indemnify and hold harmless the Company and its directors,
officers, employees, affiliates, agent, successors and assigns from and against
any and all losses, liabilities, deficiencies, costs, damages and expenses
(including, without limitation, reasonable attorneys' fees, charges and
disbursements) incurred by the Company or any such person as a result of any
inaccuracy in or breach of the representations, warranties or covenants made by
the Purchasers herein.
Section 7.2 INDEMNIFICATION PROCEDURE. Any party entitled to
indemnification under this Article VII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; PROVIDED, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
30
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect to such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify such person in writing of the indemnifying party's election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VII to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, which
consent may not be unreasonably withheld, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. If
the indemnifying party fails or refuses to promptly assume the defense of any
such claim, proceeding or action, then the indemnification required by this
Article VII shall be made by periodic payments of the amount thereof during the
course of investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred, so long as the indemnified party
irrevocably agrees to refund such moneys if it is ultimately determined by a
court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (a) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (b) any liabilities the indemnifying party
may be subject to pursuant to applicable law.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. In addition,
the Company shall pay all reasonable fees and expenses incurred by each
Purchaser in connection with any amendments, modifications or waivers of this
Agreement or any of the other Transaction Documents or incurred in connection
with the enforcement of this Agreement and any of the other Transaction
Documents, including, without limitation, all reasonable attorneys' fees,
disbursements and expenses.
31
Section 8.2 SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION.
(a) The Company, Falcon and the Purchasers acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement or the other Transaction Documents were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement or
the other Transaction Documents and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
(b) The Company, Falcon and each Purchaser (i) hereby
irrevocably submit to the exclusive jurisdiction of the United States District
Court for the Southern District of New York and the courts of the State of New
York located in New York County, for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement or any of the other
Transaction Documents or the transactions contemplated hereby or thereby, and
(ii) hereby waive, and agree not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
each such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. The Company, Falcon and each Purchaser consent to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 8.2 shall affect or limit any right to serve
process in any other manner permitted by law. The Company, Falcon and the
Purchasers hereby agree that the prevailing party in any suit, action or
proceeding arising out of or relating to the Shares, this Agreement, the
Registration Rights Agreement or the Warrants, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party. EACH OF
THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION
WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.
Section 8.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the
Transaction Documents, the Exchange Documents and the Purchaser Transaction
Documents, including the schedules and Exhibits hereto and thereto, set forth
the entire understanding and agreement of the parties with respect to the
matters covered hereby and, except as specifically set forth herein or in any of
the Transaction Documents, the Exchange Documents or Purchaser Transaction
Documents, none of the Company, Falcon or any Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
This Agreement, the Exchange Documents, the Transaction Documents, the Exchange
Documents and the Purchaser Transaction Documents supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the Company, Falcon and the Purchasers
and their permitted assigns owning of record at least a majority in interest of
the then-outstanding Securities issuable hereunder, and no provision hereof may
be waived other than by
32
a written instrument signed by the party against whom enforcement of any such
waiver is sought. No amendment to this Agreement shall be effective to the
extent that it applies to less than all of the holders of the Shares then
outstanding or violates any provision of the Delaware General Corporation Law.
No consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties to the
Transaction Documents or holders of Shares, as the case may be.
Section 8.4 NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be deemed given and received (a) upon hand delivery or delivery by
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received), or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to Falcon or the
Company: Strong Technical Inc.
c/o Henan Zhongpin Food Share Co., Ltd.
21 Changshe Road
Changge City, Henan Province
The People's Republic of China
Attention: Chief Executive Officer
Telecopier: 011 (86) 0374-6227818
Telephone: 011 (86) 0374-6226366
with copies (which copies
shall not constitute notice
to Falcon or the Company)
to: DeHeng Chen Chan, LLC
225 Broadway, Suite 19010
New York, New York 10007
Attention: Wesley J. Paul, Esq.
Telecopier: (212) 608-9050
Telephone: (212) 608-6500
33
and to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Eric M. Hellige, Esq.
Telecopier: (212) 798-6380
Telephone: (212) 326-0846
If to any Purchaser:
At the address of such Purchaser set forth
on EXHIBIT A to this Agreement.
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party or parties hereto in accordance with the provisions of this Section
8.4.
Section 8.5 WAIVERS. No waiver by any party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 8.6 HEADINGS. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. After the Closing, the assignment by a party to this Agreement of any
rights hereunder shall not affect the obligations of such party under this
Agreement.
Section 8.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person (other than indemnified parties, as contemplated
by Article VII).
Section 8.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 8.10 SURVIVAL. The representations and warranties of the
Company and Falcon contained in Sections 2.1(o), 2.1(s), 2.2(l) and 2.2(p) shall
survive until the expiration of the applicable statutes of limitations, and
those contained in Article II, with the exception of Sections 2.1(o), 2.1(s),
2.2(l) and 2.2(p), shall survive the execution and delivery hereof and the
Closing until the date two (2) years from the Closing Date, and the agreements
and covenants set forth in Articles I, III, V, VII and VIII of this Agreement
shall survive the execution and delivery hereof and the Closing hereunder.
34
Section 8.11 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.
Section 8.12 PUBLICITY. Each of the Company and Falcon agrees that it
will not disclose, and will not include in any public announcement, the names of
the Purchasers without the consent of the Purchasers in accordance with Section
8.3, which consent shall not be unreasonably withheld or delayed, or unless and
until such disclosure is required by law, rule or applicable regulation, and
then only to the extent of such requirement; provided, however, that nothing in
this Section 8.12 shall prohibit the inclusion of the name of any Purchaser in
the Registration Statement or in any exhibits to filings made with the
Commission in respect to the transactions contemplated by this Agreement in
accordance with the Company's periodic filing requirements under the Exchange
Act.
Section 8.13 SEVERABILITY. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 8.14 FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of any party hereto, each other party hereto shall
execute and deliver such instruments, documents and other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this and the other Transaction Documents.
Section 8.15 INDEPENDENT NATURE OF PURCHASER'S OBLIGATIONS AND RIGHTS.
The obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under this Agreement. The decision of each Purchaser to purchase
Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, property, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company which may have been made or given by any
other Purchaser or by any agent or employee of any other Purchaser. Nothing
contained herein, and no action taken by any Purchaser pursuant thereto, shall
be deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Investors
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by this Agreement. Each Purchaser acknowledges
that no other Purchaser has acted as agent for such Purchaser in connection with
making its
35
investment hereunder and that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no other
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Investor to be jointed as an additional party in any proceeding for such
purpose. The Company has elected to provide all Purchasers with the same terms
and form of this Agreement for the convenience of the Company.
Section 8.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. (a) Each
of the Company and Falcon consents to the non-exclusive jurisdiction of the
federal and state courts sitting in the Borough of Manhattan, The City of New
York, United States, and any appellate court from any thereof, and waives any
immunity from the jurisdiction of such courts over any suit, action or
proceeding that may be brought in connection with this Agreement or any of the
other Transaction Documents. Each of the Company and Falcon irrevocably waives,
to the fullest extent permitted by law, any objection to any suit, action, or
proceeding that may be brought in connection with this Agreement or any of the
other Transaction Documents in such courts whether on the grounds of venue,
residence or domicile or on the ground that any such suit, action or proceeding
has been brought in an inconvenient forum. Each of the Company and Falcon agrees
that the final judgment in any such suit, action or proceeding brought in such
court shall be conclusive and binding upon the Company or Falcon, as the case
may be, and may be enforced in any court to the jurisdiction of which the
Company or Falcon, as the case may be, is subject by a suit upon such judgment;
PROVIDED that service of process is effected upon the Company or Falcon, as the
case may be, in the manner provided by this Agreement. Notwithstanding the
foregoing, any suit, action or proceeding brought in connection with this
Agreement or any of the other Transaction Documents may be instituted in any
other court of competent jurisdiction.
(b) Each of the Company and Falcon agrees that service of all
writs, process and summonses in any suit, action or proceeding brought in
connection with this Agreement or any of the other Transaction Documents against
the Company or Falcon in any court of the State of New York or any United States
federal court sitting in the Borough of Manhattan, New York City, New York,
United States, may be made upon DeHeng Chen Chan LLC at 225 Broadway, Suite
19010, New York, New York 10007, whom each of the Company or Falcon irrevocably
appoints as its authorized agent for service of process. Each of the Company and
Falcon represents and warrants that DeHeng Chen Chan LLC has agreed to act as
the Company's and Falcons' agent for service of process. Each of the Company and
Falcon agrees that such appointment shall be irrevocable so long as any of the
Securities remain outstanding or until the irrevocable appointment by the
Company and Falcon of a successor in The City of New York as its authorized
agent for such purpose and the acceptance of such appointment by such successor.
Each of the Company and Falcon further agrees to take any and all action,
including the filing of any and all documents and instructions, that may be
necessary to continue such appointment in full force and effect as aforesaid. If
DeHeng Chen Chan LLC shall cease to act as the Company's or Falcon's agent for
service of process, the Company or Falcon, as the case may be, shall appoint
without delay another such agent and provide prompt written notice to the
Purchasers of such appointment. With respect to any such action in any court of
the State of
36
New York or any United States federal court in the Borough of Manhattan, New
York City, service of process upon DeHeng Chen Chan LLC, as the authorized agent
of the Company or Falcon, as the case may be, for service of process, and
written notice of such service to the Company or Falcon, as the case may be,
shall be deemed, in every respect, effective service of process upon the Company
or Falcon, as the case may be.
(c) Nothing in this Section 8.16 shall affect the right of any
party to serve legal process in any other manner permitted by law or affect the
right of any party to bring any action or proceeding against any other party or
its property in the courts of other jurisdictions.
Section 8.17 NOTIFICATION UNDER CERTIFICATION OF DESIGNATION. Each of
Special Situations Private Equity Fund, L.P., Special Situations Fund II QP,
L.P. and Special Situations Fund III, L.P. hereby notifies the Company (and the
Secretary of the Company) that such person irrevocably elects not to have the
provisions of Subsection E.5(i) of the Certificate of Designations apply to any
Shares owned or acquired by such person hereunder, and the Company hereby
acknowledges receipt of such notification and confirms that such notification is
sufficient under such Subsection and that no additional action is required by
any of such persons to opt out of the restrictions set forth in such Subsection.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
STRONG TECHNICAL INC.
By:_____________________________________
Name:
Title:
FALCON LINK INVESTMENT LIMITED
By:_____________________________________
Name:
Title:
AMARANTH GLOBAL EQUITIES MASTER FUND LIMITED
By:_____________________________
Name:
Title:
37
ATLAS CAPITAL MASTER FUND LP
By:_____________________________
Name:
Title:
ATLAS CAPITAL (Q.P.), LP
By:_____________________________
Name:
Title:
ATLAS CAPITAL OFFSHORE EXEMPT FUND, LTD.
By:_____________________________
Name:
Title:
BFS US SPECIAL OPPORTUNITIES TRUST PLC
By: _____________________________
Name:
Title:
CRESTVIEW CAPITAL MASTER LLC
By:_____________________________
Name:
Title:
D.H. VERMOEGENSVERWALTUNG -
UND BETEILIGUNGSGESELLSCHAFT MBH
By:_____________________________
Name:
Title:
38
JAYHAWK CHINA FUND (CAYMAN), LTD.
By: _____________________________
Name:
Title:
PINNACLE CHINA FUND, L.P.
By:_____________________________
Name:
Title:
RENAISSANCE US GROWTH INVESTMENT TRUST PLC
By:_____________________________
Name:
Title:
__________________________________
MICHAEL ROSS
SANDOR CAPITAL MATER FUND, LP
By:_____________________________
Name:
Title:
SOUTHWELL PARTNERS, LP
By:_____________________________
Name:
Title:
39
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
By:_____________________________
Name:
Title:
SPECIAL SITUATIONS FUND III QP, L.P.
By:_____________________________
Name:
Title:
SPECIAL SITUATIONS FUND III, L.P.
By:_____________________________
Name:
Title:
SRB GREENWAY OFFSHORE OPERATING FUND, L.P.
By:_____________________________
Name:
Title:
SRB GREENWAY CAPITAL, L.P.
By:_____________________________
Name:
Title:
SRB GREENWAY CAPITAL (QP), L.P.
By:_____________________________
Name:
Title:
40
VISION OPPORTUNITY MASTER FUND, LTD.
By:_____________________________
Name:
Title:
WS OPPORTUNITY FUND INTERNATIONAL, LTD.
By:_____________________________
Name:
Title:
WS OPPORTUNITY FUND, L.P.
By:_____________________________
Name:
Title:
WS OPPORTUNITY FUND (QP), L.P.
By:_____________________________
Name:
Title:
41
EXHIBIT A
LIST OF PURCHASERS
NUMBER OF DOLLAR
NAMES AND ADDRESSES OF NUMBER OF SHARES WARRANTS AMOUNT
PURCHASERS PURCHASED PURCHASED OF INVESTMENT
---------- --------- --------- -------------
Pinnacle China Fund, L.P. 1,500,000 26,511,750 $6,000,000
4965 Preston Park Blvd
Suite 240
Plano, TX 75093
Amaranth Global Equities Master Fund Limited 250,000 4,418,625 $1,000,000
c/o Dundee Leeds Management Services (Cayman) Ltd.
Waterfront Centre
28 N. Church St, 2nd Fl
George Town, Grand Cayman
Cayman Islands, British West Indies
Atlas Capital Master Fund LP 283,750 5,015,139 $1,135,000
c/o Admiral Administration
Admiral Financial Center, 5th Floor
90 Fort Street
Box 32021
SMB
Grand Cayman, Cayman Islands
Atlas Capital (Q.P.), L.P. 172,000 3,040,014 $688,000
100 Crescent Court
Suite 880
Dallas, TX 75201
Atlas Capital Offshore Exempt Fund, Ltd. 44,250 782,097 $177,000
c/o Admiral Administration
Admiral Financial Center, 5th Floor
90 Fort Street
Box 32021
SMB
Grand Cayman, Cayman Islands
BFS US Special Opportunities Trust PLC 250,000 4,418,625 $1,000,000
Front National Bank
100 W. Houston Street
San Antonio, TX 78205
Attn: Henri Domingues T-8
Crestview Capital Master LLC 250,000 4,418,625 $1,000,000
95 Revere Drive, Suite A
Northbrook IL 60062
A-1
NUMBER OF DOLLAR
NAMES AND ADDRESSES OF NUMBER OF SHARES WARRANTS AMOUNT
PURCHASERS PURCHASED PURCHASED OF INVESTMENT
---------- --------- --------- -------------
D.H. Vermoegensverwaltung - und 1,250,000 22,093,125 $5,000,000
Beteiligungsgesellschaft mbH
Op de Loh 7
25337 Elmshorn
Germany
Jayhawk China Fund (Cayman), Ltd. 500,000 8,837,250 $2,000,000
c/o Genesis Fund Service Limited
8201 Mission Road, Suite 110
Prairie Village, KS 66208
Renaissance US Growth Investment Trust PLC 250,000 4,418,625 $1,000,000
Front National Bank
100 W. Houston Street
San Antonio, TX 78205
Attn: Henri Domingues T-8
Dallas, TX 75206
Michael P. Ross 75,000 1,325,588 $300,000
300 Central Park West, Apt. 15-C2
New York, New York 10024
Sandor Capital Master Fund, LP 125,000 2,209,313 $500,000
2828 Routh Street
Suite 500
Dallas, TX 75201
Southwell Partners, LP 437,500 7,732,594 $1,750,000
1901 North Akard Street
Dallas, TX 75201
Special Situations Private Equity Fund, L.P. 214,500 3,791,180 $858,000
527 Madison Avenue, Suite 2600
New York, NY 10022
Special Situations Fund III QP, L.P. 492,750 8,709,110 $1,971,000
527 Madison Avenue, Suite 2600
New York, NY 10022
Special Situations Fund III, L.P. 42,750 755,585 $171,000
527 Madison Avenue, Suite 2600
New York, NY 10022
SRB Greenway Offshore Operating Fund, L.P. 6,674 117,960 $26,700
300 Crescent Court, Suite 1111
Dallas, TX 75201
Attn: Joe Worsham
A-2
NUMBER OF DOLLAR
NAMES AND ADDRESSES OF NUMBER OF SHARES WARRANTS AMOUNT
PURCHASERS PURCHASED PURCHASED OF INVESTMENT
---------- --------- --------- -------------
SRB Greenway Capital, L.P. 13,326 235,530 $53,300
300 Crescent Court, Suite 1111
Dallas, TX 75201
Attn: Joe Worsham
SRB Greenway Capital (QP), L.P. 105,000 1,855,823 $420,000
300 Crescent Court, Suite 1111
Dallas, TX 75201
Attn: Joe Worsham
Vision Opportunity Master Fund, Ltd. 450,000 7,953,525 $1,800,000
317 Madison Avenue, Suite 1220
New York, NY 10017
WS Opportunity Fund International, Ltd. 95,000 1,679,078 $380,000
300 Crescent Court, Suite 1111
Dallas, TX 75201
Attn: Joe Worsham
WS Opportunity Fund, L.P. 55,000 972,098 $220,000
300 Crescent Court, Suite 1111
Dallas, TX 75201
Attn: Joe Worsham
WS Opportunity Fund (QP), L.P. 37,500 662,794 $150,000
300 Crescent Court, Suite 1111
Dallas, TX 75201
Attn: Joe Worsham
A-3
EXHIBIT B
FORM OF WARRANT
B-1
EXHIBIT C
FORM OF OPINION
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under (i) the Transaction Documents and to
issue the Shares, the Conversion Shares, the Warrants and the Warrant Shares and
(ii) the Exchange Documents and to consummate the Exchange. The execution,
delivery and performance of each of the Transaction Documents and the Exchange
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors is required. Each of the Transaction Documents and the
Exchange Documents have been duly executed and delivered, and the Shares and the
Warrants have been duly executed, issued and delivered by the Company and each
of the Transaction Documents and the Exchange Documents constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its respective terms. The Shares, the Warrants, the Conversion
Shares and the Warrant Shares are not subject to any preemptive rights under the
Certificate or the Bylaws or any Material Agreement (as defined below).
3. The Shares have been duly authorized and, when delivered against
payment in full as provided in the Purchase Agreement, will be validly issued,
fully paid and nonassessable and will have the relative rights, powers and
preferences set forth in the Certificate of Designations. The Conversion Shares,
have been duly authorized and reserved for issuance, and, when delivered upon
conversion of the Shares, will be validly issued, fully paid and nonassessable.
The Warrant Shares, have been duly authorized and reserved for issuance, and,
when delivered upon exercise or against payment in full as provided in the
Warrants, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the Exchange Documents and the issuance
of the Shares, the Conversion Shares, the Warrants and the Warrant Shares and
the consummation of the Exchange do not (a) violate any provision of the
Certificate or Bylaws, (b) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the Company or any
Subsidiary is bound or to which any of the assets or properties of the Company
or any Subsidiary are subject (in each case after giving effect to the Exchange)
and identified as a material agreement in the officer's certificate attached
hereto (collectively, the "Material Agreements"), (c) create or impose a lien,
charge or encumbrance on any property of the
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Company under any Material Agreement, or (d) result in a violation of any
Federal, state, local or foreign statute, rule, regulation, order, judgment,
injunction or decree (including Federal and state securities laws and
regulations) applicable to the Company or any Subsidiary or by which any
property or asset of the Company or any Subsidiary is bound or affected (in each
case after giving effect to the Exchange), except, in all cases other than
violations pursuant to clauses (a) and (d) above, for such conflicts, default,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
5. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority or any other Person on the part of the
Company is required under Federal, state or local law, rule or regulation or
under the terms of any Material Agreement in connection with the valid
execution, delivery and performance of the Transaction Documents or the Exchange
Documents, the consummation of the Exchange or the offer, sale or issuance of
the Shares, the Conversion Shares, the Warrants or the Warrant Shares other than
filings as may be required by applicable Federal and state securities laws and
regulations.
6. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company or any Subsidiary (after
giving effect to the Exchange) which questions the validity of any of the
Transaction Documents or the Exchange Documents or the transactions contemplated
thereby or any action taken or to be taken pursuant thereto. There is no action,
suit, claim, investigation or proceeding pending, or to our knowledge,
threatened, against or involving the Company or any Subsidiary (after giving
effect to the Exchange) or any of their respective properties or assets and
which, if adversely determined, is reasonably likely to result in a Material
Adverse Effect. There are no outstanding orders, judgments, injunctions, awards
or decrees of any court, arbitrator or governmental or regulatory body against
the Company or any Subsidiary or any officers or directors of the Company or any
Subsidiary (in each case after giving effect to the Exchange) in their
capacities as such.
7. The offer, issuance and sale of the Shares and the Warrants and the
offer, issuance and sale of the Conversion Shares and the Warrant Shares
pursuant to the Agreement and the Warrants, as applicable, are exempt from the
registration requirements of the Securities Act of 1933, as amended.
8. The Company is not, and as a result of and immediately upon Closing
and after giving effect to the Exchange will not be, an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
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EXHIBIT D
FORM OF CERTIFICATE OF DESIGNATIONS
D-1
EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
E-1
EXHIBIT F
FORM OF MAKE GOOD SHARE ESCROW AGREEMENT
F-1
EXHIBIT G
FINANCIAL STATEMENTS
G-1
EXHIBIT H
FORM OF PURCHASE PRICE ESCROW AGREEMENT
H-1
EXHIBIT I
FORM OF CONSENTS TO JURISDICTION
I-1
EXHIBIT J
FORM OF LOCK-UP AGREEMENT
J-1