Exhibit 2.1
CAPITAL STOCK EXCHANGE AGREEMENT
THIS AGREEMENT is made as of this 22nd day of April, 2004, by and among
TALRAM CORPORATION, a Delaware corporation ("TALRAM"), and RHOHAN HOLDINGS,
LIMITED, a British Virgin Islands Corporation ("RHOHAN"), and DOUBLE UNITY
INVESTMENTS LIMITED, a British Virgin Islands Corporation ("DOUBLE UNITY").
Certain capitalized and other terms used in this Agreement are defined in Annex
A hereto and are used herein with the meanings ascribed to them therein.
WHEREAS, RHOHAN currently has 50,000 shares of its $1.00 par value
common stock authorized, of which 100 shares are outstanding which collectively
represent all of RHOHAN's issued and outstanding capital stock (the "RHOHAN
Stock"); and
WHEREAS, DOUBLE UNITY is the only holder of the RHOHAN Stock; and
WHEREAS, TALRAM and DOUBLE UNITY believe that it is desirable and in
their mutual best interests that TALRAM acquire 100% of the issued and
outstanding RHOHAN Stock for an aggregate consideration consisting of TALRAM's
$.01 par value per share common stock (the "Common Stock") on the terms and
conditions set forth herein, making RHOHAN a wholly owned subsidiary of TALRAM;
and
WHEREAS, it the intention of the Parties that: (i) TALRAM shall acquire
100% of the RHOHAN Stock in exchange solely for the amount of common shares of
TALRAM set forth herein; (ii) said exchange of shares shall qualify as a
tax-free reorganization under Section 368(a)(1)(B) of the Code; and (iii) said
exchange shall qualify as a transaction in securities exempt from registration
or qualification under the Securities Act of 1933, as amended and in effect on
the date of this Agreement (the "1933 Act"), and under the applicable securities
laws of the British Virgin Islands;
NOW, THEREFORE, in consideration of the foregoing and the following
mutual covenants and agreements, TALRAM, RHOHAN and DOUBLE UNITY (collectively
the "Parties") agree as follows:
ARTICLE I
THE TRANSACTION
1.1 The Transaction. On the Closing Date, and at the Closing Time, as
defined herein, subject in all instances to each of the terms, conditions,
provisions and limitations contained in this Agreement:
1.1.1 the RHOHAN Common Holders shall exchange all of their shares of
the RHOHAN Common Stock with TALRAM for 8,590,910 shares of Common Stock (the
"Consideration") to be issued to DOUBLE UNITY or its permitted designee(s).
1.1.2 TALRAM's name shall be changed to China Autoparts, Inc.
1.1.3 The Board or Directors of Talram shall appoint DOUBLE UNITY's
designees to TALRAM's Board of Directors and shall then resign from the Board of
Directors.
1.1.4 TALRAM and DOUBLE UNITY shall enter into the Registration Rights
Agreement annexed hereto as Exhibit 1.1.4.
The events set forth in the foregoing Sections 1.1.1 through 1.1.4 shall be
referred to herein as the "Transaction").
1.2 Exchange of the RHOHAN Stock. Subject to the terms of this Agreement
and in reliance on the representations and warranties of TALRAM, DOUBLE UNITY
shall exchange, sell, assign, and transfer to TALRAM at the closing of this
Agreement (the "Closing"), free and clear of all liens and encumbrances, and
TALRAM, subject to the terms of the Agreement and upon the basis of the
covenants, warranties and representations of RHOHAN and DOUBLE UNITY set forth
herein, shall accept from them at the Closing, all shares of the RHOHAN Stock
issued and outstanding as of the Closing.
1.3 Consideration. Subject to the terms of this Agreement and in reliance
on the representations and warranties of RHOHAN and DOUBLE UNITY, TALRAM shall
deliver to DOUBLE UNITY, at the Closing, the Consideration, free and clear of
all liens and encumbrances, which DOUBLE UNITY shall accept based upon the
covenants, warranties and representations of TALRAM set forth herein..
1.4 Tax Treatment. The exchange described herein is intended to comply with
Section 368(a)(1)(B) of the Code, and all applicable regulations thereunder. In
order to ensure compliance with said provisions, the Parties agree to take
whatever steps may be necessary, including, but not limited to, the amendment of
this Agreement.
1.5 Closing. The Closing hereunder shall take place at the offices of Guzov
Ofsink, LLC, 600 Madison Avenue, 22nd Floor, New York, New York 10022, or at
such other place as the Parties may agree upon, on a date to be set by the
Parties. The date and time on which the closing occurs shall be the Closing Date
and Closing Time, respectively.
1.6 Parties to the Agreement and Transaction. To the extent that any
provision of this Agreement calls for agreement by TALRAM as a party hereto,
such provision shall mean TALRAM as it exists prior to the Closing. To the
extent that provisions of this Agreement refer to TALRAM after the Closing, the
reference shall also be to China Autoparts, Inc., as successor to TALRAM.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TALRAM
Where a representation contained in this Agreement is qualified by the
phrase "to the best of a party's knowledge" (or words of similar import), such
expression means that, after having conducted a reasonable due diligence review,
the Party believes the statement to be true, accurate, and complete in all
material respects. Except as otherwise indicated in the Schedules annexed hereto
(which Schedules shall be arranged in paragraphs corresponding to the numbered
and letter paragraphs contained herein and which have been previously provided
to RHOHAN and DOUBLE UNITY), TALRAM represents and warrants to RHOHAN and DOUBLE
UNITY, as follows:
2.1 Organization and Qualification. TALRAM is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to carry on
its business as it is now being conducted.
2.2 Capitalization. The capitalization of TALRAM as of the date of this
Agreement consists of:
2.2.1 Common Stock. 20,000,000 shares of authorized common stock,
$.0001 par value per share, of which a maximum of 500,000 shares are issued and
outstanding;
2.2.2 Preferred Stock. 1,000,000 shares of authorized preferred stock,
$.0001 par value per share, none of which are outstanding
2.2.3 Warrants and Options. TALRAM currently has no options and
warrants outstanding.
Other than as set forth above, TALRAM has no other capital stock authorized for
issuance or outstanding. As of the date of this Agreement all shares of TALRAM
common stock outstanding were validly issued, fully paid, and nonassessable. In
addition, no shares of Common Stock are held in the TALRAM treasury, and no
shares are reserved for issuance, nor were there outstanding any options,
warrants, convertible instruments or other rights, agreements or commitments to
acquire Common Stock of TALRAM.
2.3 Due Authorization. This Agreement has been duly and validly executed
and delivered by TALRAM and constitutes a valid and binding Agreement of TALRAM
enforceable in accordance with its terms. TALRAM has all requisite corporate
power and authority to enter into this Agreement and to carry out the
Transaction and its doing so has been duly and sufficiently authorized by its
Board of Directors and shareholders.
2.4 Absence of Breach; No Consents. The execution, delivery, and
performance of this Agreement, and the performance by TALRAM of its obligations
hereunder, do not, nor will with the giving of notice or passage of time or
both:
2.4.1 conflict with or result in a breach of any of the provisions of
the Articles of Incorporation or Bylaws of TALRAM;
2.4.2 contravene any law, ordinance, rule, or regulation of any State
or Commonwealth or political subdivision of either or of the United States, or
contravene any order, writ, judgment, injunction, decree, determination, or
award of any court or other authority having jurisdiction, or cause the
suspension or revocation of any authorization, consent, approval, or license,
presently in effect, which affects or binds, TALRAM, except in any such case
where such contravention will not have a Material Adverse Effect;
2.4.3 conflict with, result in termination of, contravene, constitute a
default under, give to others any rights of termination or cancellation of, or
accelerate the performance required by or maturity of, result in the creation of
any lien or loss of any rights, or result in a material breach of, or default
under, any material indenture, loan, credit agreement, mortgage, deed of trust,
note, bond, franchise, lease, contract or any other agreement or instrument
binding upon TALRAM, or to which TALRAM is subject; or
2.4.4 require the authorization, consent, approval, or license of, or
the submission of any notice, report or other filing with, any third party,
including any governmental agency.
2.5 Securities and Exchange Commission Filings. All reports filed by TALRAM
with the SEC pursuant to the Exchange Act and any amendments thereto:
2.5.1 to the best of TALRAM's knowledge, fully comply with the
requirements of Section 13(a) or 15(d) of the Exchange Act;
2.5.2 to the best of TALRAM's knowledge, as to the financial statements
contained in such reports, present fairly, in all material respects, the
financial condition and results of operations of TALRAM as of the respective
dates or for the respective periods set forth therein;
2.5.3 to the best of TALRAM's knowledge, do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading as of the date of filing (and, if amended or
superseded, then on the date of such filing); and
2.5.4 to the best of TALRAM's knowledge, as to the financial statements
contained in such reports, were prepared in accordance with U.S. GAAP, except
that unaudited interim financial statements are subject to normal year-end audit
adjustments, none of which will be material, and do not contain footnotes.
2.6 No Undisclosed Liabilities. TALRAM does not have any Liabilities which
are not adequately reflected or reserved against on the face of its December 31,
2003 balance sheet and the footnotes thereto, except Liabilities (a) incurred
since the date of such balance sheet in the ordinary course of business and
consistent with past practice; (b) which are of a nature that would not be
required to be disclosed on its balance sheet or the footnotes thereto in
conformity with GAAP; or (c) which individually or in the aggregate would not
have a Material Adverse Effect.
2.7 No Material Adverse Change. Since the date of TALRAM's December 31,
2003 balance sheet, other than as contemplated or caused by this Agreement,
there has not been:
2.7.1 any Material Adverse Change in the business or condition
(financial or otherwise) of TALRAM.
2.7.2 any entry into any material commitment, contract, agreement, or
transaction (including, without limitation, any material borrowing or capital
expenditure) of, or involving, TALRAM other than this Agreement;
2.7.3 any redemption, repurchase, or other acquisition for value of its
capital stock by TALRAM, or any issuance of capital stock of TALRAM or of
securities convertible into or rights to acquire any such capital stock or any
dividend or distribution declared, set aside, or paid on capital stock of
TALRAM;
2.7.4 any grant, or commitment to grant, any bonus, commission or other
form of incentive compensation or increase or commitment to increase the
compensation or fees payable to or in respect to any of TALRAM's employees,
directors, officers, sales representatives, independent contractors, agents,
consultants or Affiliates;
2.7.5 any loans to any Person;
2.7.6 any failure to maintain its financial records in accordance with
past practice;
2.7.7 any declared, made, set aside or payment of any dividend,
distribution, or payment on, or any purchase or redemption of, any shares of any
class of TALRAM capital stock;
2.7.8 any amendment to the certificate of incorporation or bylaws of
TALRAM;
2.7.9 any material change (for book or Tax purposes) in any method of
accounting or accounting practices; or
2.7.10 any settlement of any litigation, claim or proceeding to which
TALRAM is a party.
2.8 Taxes.
2.8.1 TALRAM has filed all Tax Returns, as defined below, which they
are required to file under all applicable laws and has paid all Taxes due and
owing by it.
2.9 Litigation.
2.9.1 To the best of the knowledge of TALRAM, no investigation or
review by any governmental entity with respect to TALRAM is pending or
threatened, nor has any governmental entity indicated to TALRAM an intention to
conduct the same, and
2.9.2 there is no action, suit, or proceeding pending or, to the best
knowledge of TALRAM, threatened against or affecting TALRAM at law or in equity,
or before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
2.10 Employee Benefit Plans and Related Matters; ERISA. TALRAM does not
maintain or contribute to any Pension Plan, Welfare Plan or "employee benefit
plan", as such term is defined in section 3(3) of ERISA
2.11 Valid Issuance of Stock.
2.14.1 The Consideration, when issued as provided in this Agreement,
will be duly authorized, validly issued, fully paid and non-assessable.
2.14.2 Based in part on the representations made by DOUBLE UNITY in
Article 3 hereof and in the Investment Letters attached as Schedule 2.11 hereto
(the "Investment Letters"), the offer and sale of the Consideration solely to
DOUBLE UNITY in accordance with this Agreement will be exempt from the
registration and prospectus delivery requirements of the 1933 Act.
2.12 Disclosure. To the best of TALRAM's knowledge, no representation,
warranty or statement by TALRAM in this Agreement, or in any exhibit, schedule,
statement or certificate furnished to RHOHAN or DOUBLE UNITY pursuant to this
Agreement, when read as a whole, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements made
herein, in light of the circumstances under which they were made, not
misleading.
2.13 Securities Laws. Since at least July 1, 1999, (a) TALRAM has complied
in all material respects with applicable federal and state securities laws,
rules and regulations as such laws, rules and regulations apply to TALRAM and
its securities; and (b) all shares of capital stock of TALRAM have been issued
in accordance with applicable federal and state securities laws, rules and
regulations. There are no stop orders in effect with respect to any of TALRAM's
securities. All of TALRAM's outstanding securities are validly issued,
fully-paid and are non-assessable.
2.14 Investment Company Act. TALRAM is not an investment company under the
Investment Company Act of 1940, as amended.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RHOHAN AND DOUBLE UNITY
Except as otherwise indicated in the Schedules (which Schedules shall
be arranged in paragraphs corresponding to the numbered and letter paragraphs
contained herein and which have previously been provided to TALRAM) annexed
hereto, RHOHAN and DOUBLE UNITY, jointly and severally, represent and warrant to
TALRAM as follows:
3.1 Organization and Qualification. RHOHAN and DOUBLE UNITY are
corporations duly organized, validly existing and in good standing under the
laws of the British Virgin Islands and have the requisite corporate power and
authority to carry on their business as it is now being conducted. RHOHAN and
its Subsidiaries are duly qualified to do business, and are in good standing, in
each jurisdiction where the character of the properties owned or leased by it,
or the nature of its activities, is such that qualification as a foreign
corporation in that jurisdiction is required by law.
3.2 Due Authorization. This Agreement has been duly and validly executed
and delivered by RHOHAN and DOUBLE UNITY and constitutes a valid and binding
Agreement enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to or affecting creditors generally. RHOHAN and DOUBLE UNITY have all
requisite corporate power and authority to enter into this Agreement and to
carry out the Transaction contemplated hereby, and its doing so has been duly
and sufficiently authorized by all necessary corporate or other action of RHOHAN
and DOUBLE UNITY.
3.3 Capitalization. RHOHAN is authorized by its Charter to issue 50,000
shares of $1.00 par value per share common stock, of which 100 shares are
outstanding and held solely by DOUBLE UNITY
Other than as set forth above, RHOHAN does not have any authority to issue any
other capital stock or other security. There are no outstanding options,
contracts, commitments, warrants, preemptive rights, agreements or any rights of
any character affecting or relating in any manner to the issuance of any RHOHAN
capital stock or other securities or entitling any person or entity to acquire
RHOHAN capital stock or other securities of RHOHAN, and no authorization
therefor has been given. There are no outstanding contractual or other rights or
obligations to or of RHOHAN, DOUBLE UNITY or any other Person to repurchase
redeem or otherwise acquire any outstanding shares or other equity interest of
RHOHAN or restricting the ability to vote or transfer such shares or other
equity interest.
3.4 RHOHAN Stock Ownership. DOUBLE UNITY has good, absolute, and marketable
title to their RHOHAN Stock. DOUBLE UNITY has the complete and unrestricted
right, power and authority to sell, transfer and assign their RHOHAN Stock
pursuant to this Agreement. The delivery of the RHOHAN Stock to TALRAM as herein
contemplated will vest in TALRAM good, absolute and marketable title to all of
the issued and outstanding shares of the RHOHAN Stock, free and clear of all
liens, claims, encumbrances, and restrictions of every kind, except those
restrictions imposed by applicable securities laws.
3.5 Subsidiaries. RHOHAN has no Subsidiaries nor owns any securities of or
equity interest in any Person, except that RHOHAN owns a 100% interest in
Chengdu Tonglin Casting Industrial Co., Ltd., a corporation formed under the
laws of the People's Republic of China as a limited liability company and
existing as a wholly owned foreign enterprise ("Tonglin").
3.6 Absence of Breach; No Consents. The execution, delivery, and
performance of this Agreement, and the performance by RHOHAN and DOUBLE UNITY of
their obligations hereunder, do not nor will with the giving of notice or
passage of time or both:
3.6.1 conflict with or result in a breach of any of the provisions of
RHOHAN's Charter or By-Laws;
3.6.2 contravene any law, ordinance, rule, or regulation, or contravene
any order, writ, judgment, injunction, decree, determination, or award of any
court or other authority having jurisdiction, or cause the suspension or
revocation of any authorization, consent, approval, or license, presently in
effect, which affects or binds, RHOHAN or DOUBLE UNITY or any of its or their
material properties, except in any such case where such contravention will not
have a Material Adverse Effect;
3.6.3 conflict with, result in termination of, contravene, constitute a
default under, give to others any rights of termination or cancellation of, or
accelerate the performance required by or maturity of, result in the creation of
any lien or loss of any rights, or result in a material breach of or default
under any material indenture, loan, credit agreement, mortgage, deed of trust,
note, bond, franchise, lease, contract or any other agreement or instrument
binding upon RHOHAN or, Tonglin or to which the property or business of RHOHAN
or Tonglin is subject; or
3.6.4 require the authorization, consent, approval, or license of, or
the submission of any notice, report or other filing with, any third party,
including any governmental agency.
3.7 Taxes. RHOHAN and its Subsidiaries have filed all Tax Returns which they are
required to file under all applicable laws and have paid all Taxes due in
accordance with applicable laws and/or directives of applicable taxing
authorities.
3.8 Litigation.
3.8.1 No investigation or review by any governmental entity with
respect to RHOHAN or any of its Subsidiaries is pending or, to the best of the
knowledge of RHOHAN, threatened, nor has any governmental entity indicated to
RHOHAN or a Subsidiary an intention to conduct the same, and there is no action,
suit, or proceeding pending or, to the best of the knowledge of RHOHAN,
threatened against or affecting RHOHAN or any Subsidiary at law or in equity, or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
3.9 Investment Representations.
3.9.1 Acquisition for Own Account. The Consideration to be received by
DOUBLE UNITY hereunder, will be acquired for investment for its own account, not
as a nominee or agent, and not with a view to the public resale or distribution
thereof, and neither DOUBLE UNITY nor its shareholders have any present
intention of selling, granting any participation in, or otherwise distributing
the same.
3.9.2 Non-US Person. No offer to enter into this Agreement has been
made by TALRAM to RHOHAN or DOUBLE UNITY in the United States. At the times of
the offer and execution of this Agreement, RHOHAN, DOUBLE UNITY and each of its
shareholders, were domiciled and resided outside the United States.
3.9.3 Restricted Securities. DOUBLE UNITY understand the Consideration,
is characterized as "restricted securities" under the 1933 Act inasmuch as they
are being acquired from TALRAM in a transaction not involving a public offering
and that under the 1933 Act and applicable regulations thereunder. Such
securities may be resold without registration under the 1933 Act only in certain
limited circumstances. In this connection, DOUBLE UNITY represents that it is
familiar with Rule 144 promulgated under the 1933 Act, and understand the resale
limitations imposed thereby and by the 1933 Act.
3.9.4 Legend. DOUBLE UNITY understand that the certificates
representing Consideration, when delivered to DOUBLE UNITY, may have appropriate
orders restricting transfer placed against them on the records of the transfer
agent for such securities, and may have placed upon them the following, or
similar legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT
BE TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
THE TRANSFEROR FIRST SATISFIES THE ISSUER THAT THE PROPOSED TRANSFER,
IN THE MANNER PROPOSED, DOES NOT VIOLATE THE REGISTRATION REQUIREMENTS
OF SAID ACT.
DOUBLE UNITY agrees not to attempt any transfer of any such securities without
first complying with the substance of said legend, and agrees that an opinion of
counsel, a no-action letter of the SEC, or equivalent evidence may be required
for removal of the legend.
3.9.5 Additional Representations. DOUBLE UNITY acknowledges that the
Consideration has not been registered under the 1933 Act and that such
securities may not be resold unless it is subsequently registered or an
exemption form such registration is available. In addition, DOUBLE UNITY
acknowledges that (a) it has been granted the opportunity to ask questions of,
and receive answers from, representatives of TALRAM concerning TALRAM and the
terms and conditions of the acquisition of the Consideration and to obtain any
additional information it deems necessary; (b) its knowledge and experience in
financial business matters is such that it is capable of evaluating the merits
and risks of the investment in the Consideration; and (c) it has carefully
reviewed the terms and provisions of this Agreement and has evaluated the
restrictions and obligations contained herein.
3.10 Title to Property and Related Matters. With the exception of Tonglin's
Plant 5 and the land which it is on, RHOHAN and its Subsidiaries have good and
marketable title to, or has legally sufficient rights to use, all of their
properties, assets, rights, claims and contracts of every kind, character and
description owned or held by RHOHAN and its Subsidiaries, whether real, personal
or mixed, tangible or intangible, of any kind or character, free and clear of
any liens or encumbrances. RHOHAN and its Subsidiaries have maintained all
assets material to their business in good repair, working order and operating
condition, subject only to wear and tear, and all such assets are adequate and
suitable for the purposes for which they are presently being used and they
conform in all material respects with applicable law. Such assets constitute all
of the properties and assets necessary for the conduct of, or otherwise material
to, the business of RHOHAN and its Subsidiaries.
3.11 Disclosure. To the best of RHOHAN's and DOUBLE UNITY's knowledge, no
representation, warranty or statement by them in this Agreement, or in any
exhibit, schedule, statement or certificate furnished to TALRAM pursuant to this
Agreement, when read as a whole, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements made
herein, in light of the circumstances under which they were made, not
misleading.
3.12 Liabilities. RHOHAN does not have any Liabilities, except (a) to the
extent reflected in, or reserved against on the face of its December 31, 2003
balance sheet and (b) for Liabilities that have been incurred after December 31,
2003 in the ordinary course of business consistent with past practices.
3.13 Absence of Certain Changes. There has not been, since December 31, 2003
any Material Adverse Change with respect to the business, assets, results of
operations, prospects or condition (financial or otherwise) of RHOHAN.
ARTICLE IV
TALRAM'S COVENANTS
4.1 Affirmative Covenants. Subject to the terms and conditions hereunder,
from the date hereof through the Closing Date, TALRAM shall use its reasonable
efforts to take every action reasonably required in order to satisfy the
conditions to closing set forth in this Agreement and otherwise to ensure the
prompt and expedient consummation of the Transaction, and will exert all
reasonable efforts to cause the Transaction to be consummated, provided in all
instances that the representations and warranties of RHOHAN and DOUBLE UNITY in
this Agreement are and remain true and accurate and that the covenants and
agreements of RHOHAN and DOUBLE UNITY in this Agreement are honored.
4.2 Access and Information. TALRAM shall afford to RHOHAN and DOUBLE UNITY,
and their accountants, counsel and other representatives, reasonable access
during normal business hours throughout the period prior to the Closing to all
of TALRAM's properties, books, contracts, commitments, records (including, but
not limited to, tax returns), and personnel, and, during such period, TALRAM
shall furnish promptly to RHOHAN:
4.2.1 internal monthly financial statements when and as available, and
4.2.2 all other information concerning its or any of its Subsidiaries'
business, properties, and personnel as RHOHAN or its Shareholders may reasonably
request.
4.3 No Solicitation. From the date of the execution of this Agreement to
(a) the Closing or (b) the termination of this Agreement in accordance with
Article VIII, TALRAM, and those acting on behalf of any of them will not, and
TALRAM will use its best efforts to cause its officers, employees, agents, and
representatives (including any investment banker or finder) not, directly or
indirectly, to solicit, encourage, or initiate any discussions with, or
negotiate or otherwise deal with, or provide any information to, any person or
entity other than RHOHAN and DOUBLE UNITY and RHOHAN's officers, employees, and
agents, concerning any merger, acquisition of TALRAM, or similar transaction
involving the TALRAM or any sale of any of its capital stock.
4.4 Conduct of Business Pending the Transaction. TALRAM covenants and
agrees with RHOHAN and DOUBLE UNITY that, prior to the consummation of the
Transaction or the termination of this Agreement pursuant to its terms, unless
RHOHAN and DOUBLE UNITY shall otherwise consent in writing, which consent shall
not be unreasonably withheld or delayed, and except as otherwise contemplated by
this Agreement, TALRAM will comply with each of the following:
4.4.1 its business shall be conducted only in the ordinary and usual
course;
4.4.2 it shall not (a) amend its Articles of Incorporation or Bylaws,
or (b) split, combine, or reclassify any of its outstanding securities or
declare, set aside, or pay any dividend or other distribution on or make or
agree or commit to make any exchange for or redemption of any such securities
payable in cash, stock, or property;
4.4.3 it shall not (a) issue or agree to issue any additional shares
of, or rights of any kind to acquire any shares of its capital stock of any
class, except issuances pursuant to the exercise of stock options, warrants or
convertible securities outstanding on the date of this Agreement, or (b) enter
into any contract, agreement, commitment, or arrangement with respect to any of
the foregoing;
4.4.4 it shall not create, incur, or assume any long-term or short-term
indebtedness for money borrowed or make any capital expenditures or commitment
for capital expenditures, other than in the ordinary course of business and
other than the Management Buyout;
4.4.5 it shall not (a) adopt, enter into, or amend any bonus,
profit-sharing, compensation, stock option, warrant, pension, retirement,
deferred compensation, employment, severance, termination, or other employee
benefit plan, agreement, trust fund, or arrangement for the benefit or welfare
of any officer, director or employee, or (b) agree to any material (in relation
to historical compensation) increase in the compensation payable or to become
payable to, or any increase in the contractual term of employment of, any
officer, director, or employee;
4.4.6 it shall not enter into, any material contract, agreement,
commitment, or understanding binding TALRAM, other than in the ordinary course
of business and consistent with past practices;
4.4.7 it will not hold any meetings of its Board of Directors, or any
committee thereof, or of its stockholders, without inviting a representative
selected by RHOHAN to attend the same;
4.4.8 it will continue properly and promptly to file when due all
federal, state, local, foreign, and other tax returns, reports, and declarations
required to be filed by it, and will pay, or make full and adequate provision
for the payment of, all taxes and governmental charges due from or payable by
it;
4.4.9 it will continue to properly and promptly file when due all
reports due to be filed with the SEC pursuant to Sections 13 or 15 of the
Exchange Act;
4.4.10 it will comply with all laws and regulations applicable to it
and its operations; and
4.4.11 it will maintain in full force and effect its insurance coverage
presently in effect.
4.5 Cooperation. TALRAM will use its reasonable efforts to cooperate with
RHOHAN and DOUBLE UNITY and their counsel, accountants and agents in carrying
out the transactions contemplated by this Agreement and in delivering all
documents and instruments deemed reasonably necessary or useful by RHOHAN or
DOUBLE UNITY.
4.6 Expenses. Except as set forth herein, whether or not the Transaction is
consummated, all costs and expenses incurred by TALRAM in connection with this
Agreement and the Transaction contemplated hereby shall be paid by TALRAM.
4.7 Publicity. Prior to the Closing any written public statements by TALRAM
pertaining to this Agreement or the Transaction shall be submitted to RHOHAN for
review and approval prior to release by TALRAM, and shall be released only in a
form approved by RHOHAN.
ARTICLE V
COVENANTS OF RHOHAN AND DOUBLE UNITY
5.1 Affirmative Covenants. From the date hereof through the Closing Date,
RHOHAN and DOUBLE UNITY will take every action reasonably required of it to
satisfy the conditions to closing set forth in this Agreement and otherwise to
ensure the prompt and expedient consummation of the Transaction, and will exert
all reasonable efforts to cause the Transaction to be consummated, provided in
all instances that the representations and warranties of TALRAM in this
Agreement are and remain true and accurate and that the covenants and agreements
of TALRAM in this Agreement are honored.
5.2 Access and Information. RHOHAN and DOUBLE UNITY shall afford to
TALRAM and to TALRAM's accountants, counsel and other representatives reasonable
access during normal business hours throughout the period prior to the Closing
to all of RHOHAN's properties, books, contracts, commitments, records
(including, but not limited to, tax returns), and personnel
5.3 Cooperation. RHOHAN and DOUBLE UNITY will cooperate with TALRAM and its
counsel, accountants and agents in every way in carrying out the transactions
contemplated by this Agreement and in delivering all documents and instruments
deemed reasonably necessary or useful by TALRAM. Without limiting the generality
of the foregoing, RHOHAN and DOUBLE UNITY agree to cooperate fully with TALRAM
and its authorized representatives and to execute and deliver or cause to be
executed and delivered at all reasonable times and places such additional
instruments and documents as TALRAM may reasonably request for purposes of
carrying out the intent and purpose of this Agreement, including without
limitation, in connection with the preparation and filing of any filings
required under any Federal, state, county, local or municipal law relating to
the Transaction contemplated herein.
5.4 Expenses. Except as set forth herein, whether or not the Transaction is
consummated, all costs and expenses incurred by RHOHAN and DOUBLE UNITY in
connection with this Agreement and the Transaction shall be paid by them.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Obligation of RHOHAN and DOUBLE UNITY. The obligation of
RHOHAN and DOUBLE UNITY to effect the Transaction shall be subject to the
fulfillment at or prior to the Closing of the following conditions, unless
RHOHAN and DOUBLE UNITY shall waive such fulfillment:
6.1.1 This Agreement and the transactions contemplated hereby shall
have received all approvals, consents, authorizations, and waivers from
governmental and other regulatory agencies and other third parties (including
lenders, holders of debt securities, and lessors) required to consummate the
Transaction;
6.1.2 There shall not be in effect a preliminary or permanent
injunction or other order by any federal or state court which prohibits the
consummation of the Transaction;
6.1.3 TALRAM shall have performed in all material respects each of its
agreements and obligations contained in this Agreement and required to be
performed on or prior to the Closing and shall have complied with all material
requirements, rules, and regulations of all regulatory authorities having
jurisdiction relating to the Transaction;
6.1.4 No material adverse change shall, in the reasonable judgment of
RHOHAN and DOUBLE UNITY, have taken place in the business or condition
(financial or otherwise) of TALRAM;
6.1.5 The representations and warranties of TALRAM set forth in this
Agreement shall be true in all material respects as of the date of this
Agreement and, except in such respects as, in the reasonable judgment of RHOHAN
and DOUBLE UNITY, do not materially and adversely affect the business or
condition (financial or otherwise) of TALRAM, as of the Closing Time as if made
as of such time;
6.1.6 The number of shares of Common Stock of TALRAM issued and
outstanding shall not be more than 500,000;
6.1.7 TALRAM shall have delivered to RHOHAN the written resignations of
all of its Officers and Directors;
6.1.8 TALRAM shall have entered into a Registration Rights Agreement
with DOUBLE UNITY in the form annexed hereto as Exhibit 1.1.4;
6.2 Conditions to Obligation of TALRAM. The obligation of TALRAM to
effect the Transaction shall be subject to the fulfillment at or prior to the
Closing of the following conditions, unless the TALRAM shall waive such
fulfillment:
6.2.1 This Agreement and the Transaction shall have received all
approvals, consents, authorizations, and waivers from governmental and other
regulatory agencies and other third parties (including lenders, holders of debt
securities, lessors, and stockholders) required by law to consummate the
Transaction;
6.2.2 There shall not be in effect a preliminary or permanent
injunction or other order by any federal or state authority which prohibits the
consummation of the Transaction.
6.2.3 RHOHAN and DOUBLE UNITY shall have performed in all material
respects their agreements and obligations contained in this Agreement required
to be performed on or prior to the Closing;
6.2.4 No material adverse change shall, in the reasonable judgment of
TALRAM, have taken place in the business or condition (financial or otherwise)
of RHOHAN, other than those that result from the changes permitted by, and
transactions contemplated by, this Agreement;
6.2.5 The representations and warranties of RHOHAN and DOUBLE UNITY set
forth in this Agreement shall be true in all material respects as of the date of
this Agreement and, except in such respects as, in the reasonable judgment of
TALRAM, do not materially and adversely affect the business or condition
(financial or otherwise) of RHOHAN, as of the Closing Date as if made as of such
time;
ARTICLE VII
MEETING OF STOCKHOLDERS
7.1 Meeting of Stockholders. TALRAM agrees that, as soon as practicable
after the execution of this Agreement, it will use its reasonable efforts to
obtain the approval of its stockholders of the Transaction contemplated herein.
ARTICLE XIII
TERMINATION, AMENDMENT, WAIVER
8.1 Termination. This Agreement and the Transaction may be terminated at
any time prior to the Closing, whether before or
after any approval by stockholders:
8.1.1 By mutual consent of TALRAM, RHOHAN and DOUBLE UNITY;
8.1.2 By RHOHAN and DOUBLE UNITY, upon written notice to TALRAM, if the
conditions set forth in Section 6.1 were not, or cannot reasonably be, satisfied
on or before May 1, 2004 unless the failure of any such condition is the result
of the material breach of this Agreement by RHOHAN or DOUBLE UNITY;
8.1.3 Effect of Termination. If this Agreement is terminated pursuant
to this Section 8.1, such termination shall be without liability of any Party,
or any shareholder, member, partner, director, officer, employee, agent,
consultant or representative of such Party, to any other Parties to this
Agreement.
8.2 Amendment. This Agreement may be amended in a writing signed by the
Parties hereto at any time.
8.3 Waiver. At any time prior to the Closing Date, any Party, and in the
case of TALRAM or RHOHAN by action taken by their respective Boards of
Directors, may:
8.3.1 extend the time for the performance of any of the obligations or
other acts of the other Parties hereto;
8.3.2 waive any inaccuracies in the representations and warranties of
the other Parties contained herein or in any document delivered pursuant hereto;
or
8.3.3 waive compliance by the other Parties with any of the agreements
or conditions contained herein.
Any agreement on the part of a Party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such Party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Arbitration. In the event that there shall be a dispute, controversy or
claim arising out of, relating to or in connection with this Agreement, the
Transaction, any document referred to herein or related to the subject matter
hereof, the Parties agrees that such dispute shall be submitted to binding
arbitration in New York City, under the auspices of, and pursuant to the rules
of, the American Arbitration Association as then in effect, or such other
procedures as the Parties may agree to at the time, before a tribunal of three
arbitrators, one of which shall be selected by each of the Parties to the
dispute and the third of which shall be selected by the two arbitrators so
selected. Any award issued as a result of such arbitration shall be final and
binding between the Parties, and shall be enforceable by any court having
jurisdiction over the Party against whom enforcement is sought.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, faxed, mailed by
registered or certified mail (return receipt requested) or delivered by
independent next business day delivery service to the Parties at the following
addresses (or at such other address for a Party as shall be specified by like
notice given at least five (5) business days prior thereto:
If to TALRAM:
TALRAM CORPORATION
c/o L.R. Investment Holdings, Ltd.
c/o Harney Westwood & Riegels
Craigmuir Chambers
P.O. Box 71, Road Town
Tortola
British Virgin Islands
If to RHOHAN or DOUBLE UNITY:
Rhohan Holdings Limited
Mr. Li Yun Gao, Chairman
C/O 4009 Gloucester Tower
The Landmark
11 Pedder Street
Central Hong Kong
With a copy to:
Darren Ofsink, Esq.
Guzov Ofsink, LLC
600 Madison Avenue, 22nd Floor
New York, New York 10022
Facsimile: 212-688-7273
Any such notice or communication shall be deemed to have been given (a) if by
personal delivery, on the day after such delivery; (b) if by certified or
registered mail, on the fifth day after the mailing thereof; (c) if by next-day
or overnight deliver, on the day delivered; or (d) if by fax, on the next day
following the day on which such fax was sent, provided that a copy is also sent
by certified or registered mail.
10.3 Interpretation. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.4 Miscellaneous. This Agreement:
10.4.1 constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, between the Parties, with
respect to the subject matter hereof, except as specifically provided otherwise
or referred to herein, so that no such external or separate agreements relating
to the subject matter of this Agreement shall have any effect or be binding,
unless the same is referred to specifically in this Agreement or is executed by
the Parties after the date hereof;
10.4.2 is not intended to confer upon any other person, other than to
the Parties hereto and their respective heirs, successors and permitted assigns,
any rights or remedies hereunder;
10.4.3 shall not be assigned by operation of law or otherwise;
10.4.4 shall be governed in all respects, including validity,
interpretation and effect, by the internal laws of the State of New York,
without regard to the principles of conflict of laws thereof, provided, the
corporate laws of the State of Delaware shall govern all issues concerning the
relative rights of TALRAM and its stockholders; and
10.4.5 shall be binding upon and shall inure to the benefit of the
Parties hereto and their respective successors, assigns, heirs and legal
representatives;
10.5 Counterparts. This Agreement may be executed in two or more
counterparts which together shall constitute a single agreement.
10.6 Severability. If any provision, including any phrase, sentence, clause,
section or subsection, of this Agreement is invalid, inoperative or
unenforceable for any reason, such provision shall be valid and enforceable to
the fullest extent permitted by law and such circumstances shall not have the
effect of rendering such provision in question invalid, inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision herein contained invalid, inoperative or unenforceable to any extent
whatsoever.
10.7 Confidentiality. All information furnished by the Parties in connection
with the Transaction contemplated hereby shall be used solely for the purpose of
evaluating the Transaction and shall be treated as the sole property of the
Party delivering the information until consummation of the Transaction and
shall, in all respects, be subject to the Confidentiality Agreement previously
entered into between the Parties.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be signed on the date first written above by their respective officers
thereunto duly authorized.
TALRAM CORPORATION RHOHAN HOLDINGS, LTD.
By:______________________ By:__________________________
Joel Schonfeld Li Yun Gao
President Chairman
DOUBLE UNITY INVESTMENTS LIMITED
By:________________________
Li Yun Gao
Chairman
ANNEX A
"1933 Act" means the Securities Act of 1933, as amended, as of the Closing Date.
"Affiliate" of a Person means a Person that directly, or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with the first Person. "Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management policies of a Person, whether
through the ownership of voting securities, by contract, as trustee or executor,
or otherwise.
"Closing" is defined in Section 1.2.
"Closing Date" is defined in Section 1.5.
"Closing Time" is defined in Section 1.5.
"Code" means the Internal Revenue Code of 1986, as amended, and related rules
and regulations thereunder.
"Common Stock" is defined in the recitals to this Agreement.
"Consideration" is defined in Section 1.3.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means United States generally accepted accounting principles
"RHOHAN Stock" is defined in the recitals to this Agreement.
"IRS" means the Internal Revenue Service.
"Liabilities" means obligations, whether known or unknown, contingent or
absolute, recorded on its books or not, arising or resulting in any way from
facts, events, agreements, obligations or occurrences that existed or transpired
at a prior point in time, or resulted from the passage of time.
"Material Adverse Effect" or "Material Adverse Change" means with respect to any
Person, any event, change, circumstance or effect that is or is reasonably
likely to be materially adverse to (a) the business, financial condition or
results of operations of such Person and its Subsidiaries taken as a whole; or
(b) the ability of such entity to consummate the Transaction contemplated by
this Agreement.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means each corporation or other Person in which a Person owns or
controls, directly or indirectly, capital stock or other equity interests
representing more than 50% of the outstanding voting stock or other equity
interests.
"Tax" or "Taxes" means federal, state, county, local, foreign or other income,
gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, estimated and other taxes of any
kind whatsoever (including, without limitation, deficiencies, penalties,
additions to tax and interest attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with respect to
Taxes, including any schedules attached thereto and including any amendment
thereof.
"Transaction" is defined in Section 1.1.
Exhibit 1.1.4
Form of Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of April 22, 2004, by and among TALRAM CORPORATION, a Delaware
corporation (the "Company") and DOUBLE UNITY INVESTMENTS LIMITED (the "DOUBLE
UNITY").
WHEREAS, the Company and DOUBLE UNITY are parties to a Capital Stock
Exchange Agreement dated April 22, 2004 (the "Exchange Agreement"); and
WHEREAS, The Exchange Agreement provides that DOUBLE UNITY shall be
granted registration rights as more fully set forth herein.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
1.1 Form S-3. The term "Form S-3" mean such forms under the Securities
Act as are in effect on the date hereof, such other forms available to a
registrant similar to the Company or any successor registration forms under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
1.2 Holder. The term "Holder" means DOUBLE UNITY or any person or
entity which received common stock, pursuant to the Exchange Agreement that have
not been sold to the public or pursuant to Rule 144 promulgated under the
Securities Act, or any assignee of record of such Registrable Securities to whom
rights under such Sections have been duly assigned in accordance with this
Agreement.
1.3 Ordinary Shares. The term "Ordinary Shares" means shares of the
$.0001 par value per share common stock of the Company.
1.4 Registration Expenses. The term "Registration Expenses" means all
expenses incurred by the Company in complying with this Agreement, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company) and the expenses of Underwriters
customarily paid by similarly situated companies in connection with underwritten
offerings of equity securities to the public, excluding any such fees,
commissions and underwriting discounts based on the proceeds of sales of
Registrable Securities by selling Holders. With respect to expenses incurred in
connection with this Agreement, "Registration Expenses" shall include reasonable
fees and disbursements of a single special counsel for the Holders.
1.5 Registrable Securities. The term "Registrable Securities" means (1)
all Ordinary Shares of the Company issued pursuant to the Exchange Agreement to
any of the Holders or (2) a dividend or other distribution with respect to, or
in exchange for or in replacement of, all such Ordinary Shares described in
clause (1) of this subsection; excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which rights under this
Agreement are not assigned in accordance with this Agreement or any Registrable
Securities sold to the public or sold pursuant to Rule 144 promulgated under the
Securities Act.
1.5.1 Registrable Securities Then Outstanding. The number of
shares of "Registrable Securities then outstanding" shall mean the number of
Ordinary Shares which are Registrable Securities and are then issued and
outstanding.
1.5.1.1 Registration. The terms "register," "registration" and
"registered" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
1.5.1.2 Registration Statement. The term "Registration
Statement" means any registration statement under the Securities Act for
purposes of effecting a public offering of securities of the Company
1.6 SEC. The term "SEC" shall mean the Securities and Exchange
Commission.
1.7 Securities Act. The term "Securities Act" means the Securities
Act of 1933, as amended as of the date of this Agreement.
1.8 Underwriter. The term "Underwriter" shall mean a dealer, as
defined under the Securities Act,, which has agreed to offer the Company's
securities to the public.
1.8.1 Managing Underwriter. The term "Managing Underwriter"
shall mean the Underwriter or Underwriters in an Underwriting which have primary
responsibility for the Underwriting.
1.9 Underwriting. The term "Underwriting" shall mean a
registration in which the Company's securities are either sold to an Underwriter
for reoffering to the public or sold to the public by an Underwriter.
2. Demand Registration.
2.1 Request by Holders. If the Company shall receive, at any time
after the date of this Agreement, a written request from the Holders of at least
thirty three percent (33%) of the Registrable Securities then outstanding that
the Company file a Registration Statement, covering the registration of
Registrable Securities, then the Company shall, within twenty (20) days after
the receipt of such written request, give written notice of such request
("Request Notice") to all Holders, and effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities which
Holders request to be registered and included in such registration by written
notice given by such Holders to the Company within twenty (20) days after
receipt of the Request Notice, subject only to the limitations of this
Agreement; provided that the Registrable Securities requested by all Holders to
be registered pursuant to such request must either (i) be at least thirty three
percent (33%) of all Registrable Securities then outstanding or (ii) have an
anticipated aggregate public offering price (before any underwriting discounts
and commissions) of not less than $1,000,000.
2.2 Underwriting. If the Holders initiating the registration
request under this Section 2 (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
then they shall so advise the Company as a part of their request made pursuant
to this Section 2 and the Company shall include such information in the written
notice referred to in subsection 2.1. In such event, the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an Underwriting agreement in
customary form with the Managing Underwriter or Underwriters selected for such
underwriting by the Holders holding more than fifty percent (50%) of the
Registrable Securities to be underwritten; provided that any such Underwriting
agreement shall not impair the indemnification rights of the Holders granted
under this Agreement; and provided further, that the representations and
warranties given by, and the other agreement on the part of, the Company to and
for the benefit of the Underwriter(s) shall also be made to and for the benefit
of the Holders; and provided further, that the Company shall ensure that no
Underwriter(s) requires any Holder to make any representations or warranties to,
or agreements with, any Underwriter(s) in a Registration other than customary
representations, warranties and agreements relating to such Holder's free and
unencumbered title to the Registrable Securities and authority to enter into the
underwriting agreement. Notwithstanding any other provision of this Section 2,
if the Underwriter(s) advise(s) the Company in writing that marketing factors
require a limitation of the number of securities to be underwritten then the
Company shall so advise all Holders of Registrable Securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting shall be reduced
as required by the Underwriter(s) and the Company will include in such
registration (i) first, the maximum number of Registrable Securities requested
to be included therein, pro rata among the respective Holders thereof on the
basis of the amount of Registrable Securities requested to be included in such
registration by each such Holder, and (ii) second, the maximum amount of other
securities requested to be included therein (including any by the Company), pro
rata among the holders of such other securities on the basis of the number of
shares requested to be included in such registration by each such holder. Any
Registrable Securities excluded and withdrawn from such underwriting shall be
withdrawn from the registration. For any Holder that is a partnership or
corporation, the partners, retired partners and shareholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such "Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "Holder," as defined in this
sentence.
2.3 Maximum Number of Demand Registrations. The Company is
obligated to effect only two (2) such registrations pursuant to this Section 2.
2.4 Deferral. Notwithstanding the foregoing, if the Company shall
furnish to the Holders requesting the filing of a Registration Statement
pursuant to this Section 2, a certificate signed by the President or Chief
Executive Officer of the Company stating that in the good faith judgment of the
board of directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Registration Statement to be filed and it
is therefore essential to defer the filing of such Registration Statement, then
the Company shall have the right to defer such filing for a period of not more
than sixty (60) days after receipt of the request of the Initiating Holders;
provided, however, that the Company may not utilize this right more than once in
any twelve (12) month period; and provided further, that during such sixty (60)
day period the Company shall not file a registration statement with respect to
the public offering of securities of the Company or any other selling
shareholder.
2.5 Expenses. All Registration Expenses incurred in connection
with a registration pursuant to this Agreement, shall be borne by the Company.
Each Holder participating in a registration pursuant to this Agreement shall
bear such Holder's proportionate share (based on the total number of shares sold
in such registration other than for the account of the Company) of all
discounts, commissions or other amounts payable to Underwriters in connection
with such offering.
3. Piggyback Registrations.
3.1 Notice by Company. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to filing any
Registration Statement (including, but not limited to, Registration Statements
relating to secondary offerings of securities of the Company, but excluding
Registration Statements relating to any employee benefit plan or a corporate
reorganization) and will afford each such Holder an opportunity to include in
such Registration Statement all or any part of the Registrable Securities then
held by such Holder. Each Holder desiring to include in any such Registration
Statement all or any part of the Registrable Securities held by such Holder
shall, within twenty (20) days after receipt of the above-described notice from
the Company, so notify the Company in writing, and in such notice shall inform
the Company of the number of Registrable Securities such Holder wishes to
include in such Registration Statement. The Company thereupon will use its best
efforts as a part of its filing of such Registration Statement to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holder, to the extent required
to permit the disposition of the Registrable Securities so to be registered. If
a Holder decides not to include all of its Registrable Securities in any
Registration Statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent Registration Statement or Registration Statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
3.2 Underwriting. If a Registration Statement under which the
Company gives notice under this Section 3 is for an underwritten offering, then
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the Managing Underwriter or Underwriter(s) selected for such underwriting;
provided that any such underwriting agreement shall not impair the
indemnification rights of the Holders granted under this Agreement; and provided
further, that the representations and warranties given by, and the other
agreements on the part of, the Company to and for the benefit of the
Underwriter(s) shall also be made to and for the benefit of the Investor; and
provided further, that the Company shall ensure that no Underwriter(s) requires
any Holder to make any representations or warranties to, or agreements with, any
Underwriter(s) in a Registration other than customary representations,
warranties and agreements relating to such Holder's title to the Registrable
Securities and authority to enter into the underwriting agreement.
Notwithstanding any other provision of this Agreement, if the Managing
Underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the Managing
Underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to the
Company, and second, to each of the Holders requesting inclusion of their
Registrable Securities in such Registration Statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Holder. If
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
Underwriter, delivered at least twenty (20) days prior to the effective date of
the Registration Statement. Any Registrable Securities excluded or withdrawn
from such underwriting shall be excluded and withdrawn from the registration.
For any Holder that is a partnership or corporation, the partners, retired
partners and shareholders of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "Holder," and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
3.3 Expenses. All Registration Expenses incurred in connection
with a registration pursuant to this Section 3 shall be borne by the Company.
4. Registration on Form S-3. With respect to all Registration Statements
filed pursuant to this Agreement, the Company shall use its best efforts to
qualify for registration on Form S-3 any comparable or successor form or forms.
5. Obligations of the Company. Whenever required to effect the
Registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
5.1 Prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use reasonable, diligent efforts to
cause such Registration Statement to become effective, and, upon the request of
the Holders of more than fifty percent (50%) of the Registrable Securities
registered thereunder, keep such Registration Statement effective for up to one
hundred eighty (180) days or, if earlier, until the Holder or Holders have
completed the distribution related thereto.
5.2 Prepare and file with the SEC such amendments and supplements
to such Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement.
5.3 Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act and such other documents as they may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by them that
are included in such registration.
5.4 Otherwise use its best efforts to comply with the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
any other applicable rules and regulations of the SEC, and make available to the
securities holders; as soon as reasonably practicable, an earning statement
covering the period of at least twelve (12) months after the effective date of
such Registration Statement, which earning statement shall satisfy Section 10(a)
of the Securities Act.
5.5 Use reasonable, diligent efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders.
5.6 In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the Managing Underwriter(s) of such offering.
5.7 Notify each Holder of Registrable Securities covered by such
Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of each Holder prepare and furnish to such Holder a
reasonable number of copies of a supplement to or amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing.
5.8 Furnish, at the request of any Holder requesting registration
of Registrable Securities, on the date that such Registrable Securities are
delivered to the Underwriters for sale, if such securities are being sold
through Underwriters, or, if such securities are not being sold through
Underwriters, on the date that the Registration Statement with respect to such
securities becomes effective, (1) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to Underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the Underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (2) a "comfort"
letter dated as of such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to Underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the Underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
5.9 Use its best efforts to list such Registrable Securities on
each securities exchange on which any equity security of the Company is then
listed, if such securities are already so listed, or, if the Company does not
have a class of equity securities listed on a United States securities exchange,
apply for qualification and use its best efforts to qualify Registrable
Securities being registered for inclusion on the National Market System/NASD or
the American Stock Exchange.
6. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be reasonably required by the Company to
timely effect the registration of their Registrable Securities.
7. Delay of Registration. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Agreement.
8. Indemnification. In the event any Registrable Securities are included
in a Registration Statement under this Agreement:
8.1 By the Company. To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the partners, officers, directors
and control persons of each Holder, any Underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or Underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or any
other securities or other law of any jurisdiction, common law or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, "Violations" and, individually, a
"Violation"):
8.1.1 any untrue statement or alleged untrue statement of a
material fact contained in or incorporated by reference in any Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto or any document incorporated by
reference therein;
8.1.2 the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or
8.1.3 any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, or any other securities or other law of any
jurisdiction, common law or otherwise, or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any such other laws, in connection
with the offering covered by such Registration Statement; and the Company will
reimburse each such Holder, partner, officer or director, Underwriter or
controlling person for any legal or other expenses reasonably incurred by them,
as incurred, in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 8 shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, partner, officer, director, Underwriter or
controlling person of such Holder. Notwithstanding the foregoing, the Company
shall not be required to indemnify or hold harmless any Holder insofar as any
Violation arises out of or is based on information furnished in writing to the
Company by or on behalf of that Holder
8.2 By Selling Holders. To the extent permitted by law, each
selling Holder, severally and not jointly, will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act, any Underwriter and any other Holder selling
securities under such Registration Statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such director, officer, controlling person, Underwriter or other such Holder,
partner or director, officer or controlling person of such other Holder may
become subject under the Securities Act, the Exchange Act or any other
securities or other law of any jurisdiction, common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, Underwriter or other Holder, partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 8.2
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld.
8.3 Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of its
liability to the indemnified party under this Section 8 only if and to the
extent it is prejudicial to its ability to defend such action, and the omission
to so deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 8. In no event shall any indemnity under this Section 8 exceed the
net proceeds received by such Holder in the registered offering out of which
such violation arises.
8.4 Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and the Holders are subject to the condition that,
insofar as they relate to any Violation made in a preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the SEC at the
time the Registration Statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
8.5. Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act, in any case in which
either (1) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to Section
8 but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that Section 8 provides for
indemnification in such case, or (2) contribution under the Securities Act may
be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under Section 8;
then, and in each such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such Holder is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
Registration Statement bears to the public offering price of all securities
offered by and sold under such Registration Statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
that, in any such case, (A) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such Registration Statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
8.6 Survival; Release. The obligations of the Company and Holders
under this Section 8 shall survive the completion of any offering of Registrable
Securities in a Registration Statement, and otherwise. No indemnifying party, in
the defense of any such claim or litigation, shall, except with the consent of
each indemnified party, consent to entry of any judgment or enter into any
settlement which admits fault on behalf of the indemnified party or which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
9. Termination of the Company's Obligations. The Company shall have no
obligations pursuant to this Agreement with respect to (a) any request or
requests for registration made by any Holder pursuant to Section 2 or 3 of this
Agreement on a date more than ten (10) years after the date of this Agreement or
(b) any Registrable Securities proposed to be sold by a Holder in a registration
pursuant to this Agreement if, in the opinion of counsel to the Company, all
such Registrable Securities proposed to be sold by a Holder may be sold without
registration under the Securities Act pursuant to Rule 144(k) under the
Securities Act.
10. Rule 144 Reporting. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
10.1 commencing on the date of this Agreement, make and keep public
information available, as those terms are understood and defined in SEC Rule 144
or any similar or analogous rule promulgated under the Securities Act, at all
times after the effective date of the first registration filed by the Company
for an offering of its securities to the general public;
10.2. File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
10.3 So long as a Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject
to such reporting requirements); a copy of the most recent annual or quarterly
report of the Company; and such other reports and documents as a Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
11. General Provisions
11.1 Notices. Any and all notices required or permitted to be given
to a party pursuant to the provisions of this Agreement will be in writing and
will be effective and deemed to provide such party sufficient notice under this
Agreement on the earliest of the following: (i) at the time of personal
delivery, if delivery is in person; (ii) at the time of transmission by
facsimile, addressed to the other party at its facsimile number specified herein
(or hereafter modified by subsequent notice to the parties hereto), with
confirmation of receipt made by both telephone and printed confirmation sheet
verifying successful transmission of the facsimile; (iii) one (1) business day
after deposit with an express overnight courier for deliveries within a country,
or three (3) business days after such deposit for international deliveries or
(iv) three (3) business days after deposit in mail by certified mail (return
receipt requested) or equivalent for deliveries within a country.
All notices for international delivery will be sent by facsimile or by
express courier. All notices not delivered personally or by facsimile will be
sent with postage and/or other charges prepaid and properly addressed to the
party to be notified at the address or facsimile number indicated for such
party:
in the case of the Company, at
TALRAM CORPORATION
c/o L.R. Investment Holdings, Ltd.
c/o Harney Westwood & Riegels
Craigmuir Chambers
P.O. Box 71, Road Town
Tortola
British Virgin Islands
If to RHOHAN or DOUBLE UNITY:
Rhohan Holdings Limited
Mr. Li Yun Gao, Chairman
C/O 4009 Gloucester Tower
11 Pedder Street
Central Hong Kong
or at such other address or facsimile number as such other party may designate
by giving ten (10) days advance written notice by one of the indicated means of
notice herein to the other party hereto. Notices by facsimile shall be machine
verified as received.
Any party hereto (and such party's permitted assigns) may by notice so
given change its address for future notices hereunder. Notice shall conclusively
be deemed to have been given in the manner set forth above.
11.2 Entire Agreement. This Agreement constitutes and contains the
entire agreement and understanding of the parties with respect to the subject
matter hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting
the subject matter hereof.
11.3 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed exclusively in accordance with the internal laws of the State of
New York, without giving effect to any choice of law rule that would cause the
application of the laws of any jurisdiction other than the internal laws of the
State of New York to the rights and duties of the parties. The parties hereto
consent to the non-exclusive jurisdiction of any New York State or Federal court
sitting in the City of New York and any appellate court from any thereof in any
action or proceeding arising out of or relating to this Agreement.
11.4 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
11.5 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
11.6 Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
11.7 Successors And Assigns. The provisions of this Agreement shall
inure to the benefit of, and shall be binding upon, the successors and permitted
assigns of the parties hereto, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement.
11.8 Captions. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
11.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11.10 Costs And Attorneys' Fees. In the event that any action, suit
or other proceeding is instituted by any party hereto against any other party
hereto concerning or arising out of this Agreement or any transaction
contemplated hereunder, the prevailing party shall recover all of such party's
costs and attorneys' fees incurred in each such action, suit or other
proceeding, including any and all appeals or petitions therefrom.
11.11 Adjustments for Share Splits, Etc. Wherever in this Agreement
there is a reference to a specific number of Ordinary Shares or preferred shares
of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or share dividend of such class or series of shares,
the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class or series of shares by such subdivision,
combination or share dividend.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
TALRAM CORPORATION
By:______________________
DOUBLE UNITY INVESTMENTS LIMITED
By:________________________