Exhibit 10.1
STOCK PURCHASE AND SUBSCRIPTION AGREEMENT
STOCK PURCHASE AND SUBSCRIPTION AGREEMENT, dated June 22, 2006,
among WONDER AUTO LIMITED, a British Virgin Islands corporation (the
"Company"), EMPOWER CENTURY LIMITED, a British Virgin Islands corporation
(the "Stockholder") and the purchasers listed on Annex I hereto (each a
"Purchaser" and collectively, the "Purchasers").
BACKGROUND
The Company desires to sell 45.277236 of its ordinary shares (the
"Company Shares") to the Purchasers in order to raise $12,000,000 in the
aggregate and the Stockholder, who is the holder of 61% of the outstanding
capital stock of the Company, desires to sell 30.184824 of the ordinary
shares (the "Stockholder Shares" and together with the Company Shares, the
"Shares") held by the Stockholder to the Purchasers for an aggregate
consideration of $8,000,000. Each Purchaser desires to acquire the number
of ordinary shares specified opposite such Purchaser's respective name on
Annex I hereto from the Company and the Stockholder.
Immediately following the closing of the offering contemplated
hereby (the "Offering"), the Shares shall be exchanged for shares of the
common stock (the "Public Company Shares") of a US domiciled company that
is obligated to file periodic reports with the US Securities and Exchange
Commission (the "Commission") and whose shares are eligible for quotation
on the NASD Over-the Counter Bulletin Board (the "Public Company") upon
the closing of a share exchange transaction (the "Exchange Transaction")
among the Company, the stockholders of the Company (including the
Purchasers, who will then be stockholders of the Company) and the Public
Company pursuant to a Share Exchange Agreement in substantially the form
attached hereto as Exhibit A (the "Exchange Agreement"). Upon consummation
of the Exchange Transaction, it is anticipated that Purchasers in the
Offering will own 27.13% of the issued and outstanding common stock of the
Public Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein
contained and with the intent to be legally bound, the parties hereto,
hereby agree as follows:
1. Purchase and Sale.
1.1 Purchase and Sale of Company Shares. The Company shall sell to each
Purchaser and each Purchaser shall acquire from the Company the number of
Company Shares specified opposite each Purchaser's name on Annex I to this
Agreement.
1.2 Purchase and Sale of Stockholder Shares. The Stockholder shall sell to
each Purchaser and each Purchaser shall acquire from the Stockholder the number
of Stockholder Shares specified opposite each Purchaser's name on Annex I to
this Agreement.
2. Purchase Price.
2.1 General. The gross purchase price (the "Purchase Price") for the
Company Shares and the Stockholder Shares, in the aggregate, is Twenty Million
Dollars ($20,000,000) payable as specified in this Section 2 subject to the
other terms and conditions of this Agreement. The portion of the Purchase Price
applicable to the Company Shares is Twelve Million Dollars ($12,000,000) and the
portion of the Purchase Price applicable to the Stockholder Shares is Eight
Million Dollars ($8,000,000). The Shares are being sold at a price equal to
$265,033.85 per Share.
(a) Payment at Closing. At the Closing, each Purchaser shall pay to
the Company and to the Stockholder the portion of the Purchase Price
payable to the Company and the Stockholder by such Purchaser as set forth
opposite such Purchaser's name on Annex I, by wire transfer of immediately
available funds in United States Dollars to:
Thelen Reid & Priest, LLP - Attorney
Special Account (Non-Interest Bearing)
Account # 53505184
ABA # 021-000-089
SWIFT CODE: Citi US33
Citibank, N.A.
Citicorp Center
153 East 53rd Street
New York, New York 10043
Client Name: Wonder Auto Limited
Attorney Name: Louis A. Bevilacqua, Esq.
2.2 Escrow Arrangement; Closing. The Purchase Price and certificates
representing the Shares will be held in escrow pending the closing of the
Offering. The Purchaser understands that it will not earn interest on any funds
held in escrow. Attached as Exhibit B hereto is the form of Escrow Agreement
(the "Escrow Agreement") that will govern the maintenance of the Purchase Price
and the Shares until the sooner of the closing of the Offering or the expiration
thereof. The Closing Date of the Offering is referred to as the "Closing Date."
The Closing shall occur on or before July 15, 2006. The Company shall have the
right to a one time 45 day extension of the Closing Date upon receipt of the
written consent of all Purchasers to the Offering. If the Offering is not closed
by said date the Purchase Price then in escrow shall be returned to the
Purchasers and the certificates representing the Shares shall be cancelled. The
Closing shall be deemed to have occurred upon the satisfaction of each of the
conditions set forth in Section 4 below and in the following sequence: (a)
confirmation from the Escrow Agent, as identified in the Escrow Agreement, that
$20,000,000 is on deposit; (b) participation by each of the Purchasers in the
Exchange Transaction; and (c) the Public Company files a registration statement
on a suitable form (the "Registration Statement") with the Commission to
register the Public Company Shares held by the Purchasers to the Offering. The
Purchase Price will not be released to either the Company or the Public Company
until such time as each of the forgoing has been completed. Certificates
representing Public Company Shares will be issued in the name of each such
Purchaser, and the name of such Purchaser will be registered on the stock
transfer books of the Public Company as the record owner of Public Company
Shares. As of the filing date of the Registration Statement, the Public Company
will promptly thereafter deliver to each Purchaser a stock certificate for the
Public Company Shares to which it is entitled.
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2.3 Binding Agreement. The Purchaser agrees to be bound hereby upon
execution and delivery to the Company and the Stockholder of the signature page
to this Agreement and receipt from the Company and the Stockholder of a duly
executed signature page to this Agreement, which may be delivered by faxing to
the Purchaser the signature page to this Agreement that has been executed by the
Company and the Stockholder.
3. Offering Materials
Purchaser represents and warrants that it is in receipt of, and that it
has carefully read, the following items:
(a) The audited consolidated financial statements of the Company and
its subsidiaries, for the fiscal years ended December 31, 2005, 2004 and
2003 (the "Financial Statements");
(b) The Exchange Agreement;
(c) The Escrow Agreement;
(d) The Escrow Agreement relating to the "Make Good" arrangement
described in Section 11.11 below (the "Make Good Escrow Agreement"); and
(e) A draft of the Registration Statement.
The documents listed in this Section 3 shall be referred to herein as the
"Disclosure Documents."
4. Conditions to Purchaser's Obligations.
4.1 The obligation of each Purchaser to close the transaction contemplated
by this Agreement (the "Transaction") is subject to the satisfaction on or prior
to the Closing Date of the following conditions set forth in Sections 4.2
through 4.11 hereof.
4.2 The Company shall have executed this Agreement.
4.3 The Board of Directors of the Company shall have adopted resolutions
consistent with Section 5.1(d) below.
4.4 Each Purchaser shall have received copies of all documents and
information which it may have reasonably requested in connection with the
Offering.
4.5 The Exchange Transaction shall have been simultaneously consummated
and the Exchange Agreement shall include a provision pursuant to which the
Public Company expressly assumes those obligations included in this Agreement
that are to be performed by the Public Company.
4.6 The Registration Statement shall have been filed with the SEC which
filing shall not be made until each of the other conditions set forth in this
Section 4 shall have been and continue to be satisfied. It being further
acknowledged that the effectiveness of the Registration Statement shall be
maintained until the earlier of the second anniversary of the declaration of its
effectiveness by the SEC or the date all the shares of common stock registered
therein have been sold.
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4.7 The representations and warranties of the Company and the Stockholder
shall be true and correct on and as of the Closing Date as though made on and as
of such date.
4.8 If so requested by Purchaser, the Company shall have delivered to the
custodian for the Purchaser duly executed certificate(s), registered in the name
of Purchaser's nominee, representing the Public Company Shares.
4.9 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 that prohibits the
consummation of any of the transactions contemplated by this Agreement.
4.10 Since December 31, 2005, no event or series of events shall have
occurred that reasonably could have or result in any of (i) a material and
adverse effect on the legality, validity or enforceability of this Agreement and
the transactions contemplated hereby, (ii) a material and adverse effect on the
results of operations, assets, prospects, business or condition (financial or
otherwise) of the Company and its subsidiaries, taken as a whole, or (iii) an
adverse impairment to the Company's or the Stockholder's ability to perform on a
timely basis its obligations under this Agreement.
4.11 Counsel to the Company shall have delivered to each Purchaser a legal
opinion in a form reasonably acceptable to each Purchaser.
5. Representations and Warranties of the Company.
5.1 The Company represents and warrants to each Purchaser that, at the
date of this Agreement and as of the Closing Date:
(a) Due Organization and Good Standing. The Company and each
of its subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of their jurisdiction
of incorporation, with all requisite corporate power and authority
to carry on the business in which they are engaged and to own the
properties they own, and the Company has all requisite power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The Company and each of its
subsidiaries are duly qualified and licensed to do business and are
in good standing in all jurisdictions where the nature of their
business makes such qualification necessary, except where the
failure to be qualified or licensed would not have a Material
Adverse Effect. The ownership by the Company of its subsidiaries
that are located in the People's Republic of China complies with all
applicable laws of the People's Republic of China. For purposes of
this Agreement, "Material Adverse Effect" means any of (i) a
material and adverse effect on the legality, validity or
enforceability of this Agreement, (ii) a material and adverse effect
on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the
subsidiaries, taken as a whole or (iii) an adverse impairment to the
Company's ability to perform on a timely basis its obligations under
this Agreement.
(b) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding (including any partial proceeding such as a
deposition) or investigation pending or threatened in writing
against or affecting the Company, any subsidiary or any of their
respective properties before or by any court, arbitrator,
governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock
exchange or trading facility ("Action") which (i) adversely affects
or challenges the legality, validity or enforceability of any of
this Agreement or the Shares or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any subsidiary, nor any director or officer
thereof (in his or her capacity as such), is or has been the subject
of any Action involving a claim or violation of or liability under
federal or state securities laws or a claim of breach of fiduciary
duty.
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(c) Financial Statements. The audited financial statements of
the Company as of December 31, 2005 and 2004, including the notes
contained therein, fairly present the financial position of the
Company at the respective dates thereof and the results of its
operations for the periods purported to be covered thereby. Such
financial statements have been prepared in conformity with generally
accepted accounting principles consistently applied with prior
periods subject to any comments and notes contained therein. Since
the date of the audited financial statements for the year ended
December 31, 2005, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A)
trade payables, accrued expenses and other liabilities incurred in
the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's
financial statements pursuant to generally accepted accounting
principles, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock,
and (v) the Company has not issued any equity securities to any
officer, director or affiliate, except pursuant to existing Company
stock option plans.
(d) Authorization. The Company, by appropriate and required
corporate action, has, or will have prior to the date hereof, duly
authorized the execution of this Agreement and duly effected the
issuance of the Company Shares. The Company Shares are not subject
to preemptive or other rights of any stockholders of the Company and
when issued in accordance with the terms of this Agreement, the
Company Shares will be validly issued, fully paid and non-assessable
and free and clear of all pledges, liens and encumbrances. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder. The
Company has reserved from its duly authorized capital stock the
ordinary shares of capital stock issuable pursuant to this Agreement
in order to issue the Company Shares.
(e) No Conflicts. Performance of this Agreement and compliance
with the provisions hereof will not violate any provision of any
applicable law or of the charter documents of the Company, or of any
of its subsidiaries, and, will not conflict with or result in any
breach of any of the terms, conditions or provisions of, or
constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon, any of the properties or
assets of the Company, or of any of its subsidiaries, pursuant to
the terms of any indenture. The Company is not in default under any
provision of its organizational documents or under any provision of
any agreement or other instrument to which it is a party or by which
it is bound or of any law, governmental order, rule or regulation so
as to affect adversely in any material manner its business or assets
or its condition, financial or otherwise.
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(f) Disclosure. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions
contemplated hereby, furnished by or on behalf of the Company
(including the Company's representations and warranties set forth in
this Agreement) are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
(g) Binding Obligation. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms.
(h) Investment Company. The Company is not now, and after the
sale of the Company Shares under this Agreement and under all other
agreements and the application of the net proceeds from the sale of
the Company Shares will not be, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(i) Securities Act Exemption. Subject to the accuracy of the
Purchasers' representations and warranties in Section 7 of this
Agreement, the offer, sale, and issuance of the Shares in conformity
with the terms of this Agreement constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of
1933, as amended (the "Securities Act") and from the registration or
qualification requirements of the laws of any applicable state.
(j) No Public Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that
would require registration under the Securities Act of the issuance
of the Shares to the Purchaser.
(k) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company, and
all shares of capital stock reserved for issuance under the
Company's various option and incentive plans, is specified in
Schedule 5.1(k). No securities of the Company are entitled to
preemptive or similar rights, and no person has any right of first
refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by this
Agreement. There are no outstanding options, warrants, scrip rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into
or exchangeable for, or giving any person any right to subscribe for
or acquire, any shares of capital stock of the Company, or
contracts, commitments, understandings or arrangements by which the
Company or any subsidiary is or may become bound to issue additional
shares of capital stock, or securities or rights convertible or
exchangeable into shares of capital stock of the Company. The issue
and sale of the Company Shares by the Company or the sale of the
Stockholder Shares by the Stockholder will not, immediately or with
the passage of time, obligate the Company to issue shares of capital
stock of the Company or other securities to any person (other than
the Purchasers) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or
reset price under such securities.
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(l) Subsidiaries. The Company has no direct or indirect
subsidiaries other than as specified in the Disclosure Documents.
Except as disclosed in Schedule 5.1(l), the Company owns, directly
or indirectly, all of the capital stock of each subsidiary free and
clear of any and all liens, and all the issued and outstanding
shares of capital stock of each subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar
rights.
(m) No Consents. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other person in
connection with the execution, delivery and performance by the
Company of this Agreement, other than (i) the filing with the SEC of
one or more Registration Statements in accordance with the
requirements of the Exchange Agreement, (ii) filings required by
state securities laws, (iii) the filing of a Notice of Sale of
Securities on Form D with the Commission under Regulation D of the
Securities Act, (iv) the filings required in accordance with Section
11.2 and (v) those that have been made or obtained prior to the date
of this Agreement.
(n) Insurance. The Company and the subsidiaries are insured by
insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the
businesses in which the Company and the subsidiaries are engaged.
The Company has no reason to believe that it will not be able to
renew its and the subsidiaries' existing insurance coverage as and
when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business on
terms consistent with market for the Company's and such
subsidiaries' respective lines of business.
(o) Internal Controls. The Company and the subsidiaries of the
Company maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with United States generally
accepted accounting principles 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 action is taken with
respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the
Company, including its subsidiaries, is made known to the principal
executive officer and principal financial officer of the Company.
The Company's principal executive officer and principal financial
officer have evaluated the effectiveness of the Company's controls
and procedures in accordance with Item 307 of Regulation S-K under
the Exchange Act for the Company's most recently ended fiscal
quarter or fiscal year-end (such date, the "Evaluation Date").
(p) Registration Rights. Except as specified in Schedule
5.1(p), 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 SEC or any other
governmental authority that have not been satisfied.
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(q) Anti-Takeover Provisions. 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 Shares
and the Purchasers' ownership of the Shares.
(r) No Agreements with Purchasers. 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.
(s) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company.
(t) Compliance. Neither the Company nor any subsidiary (i) is
in default under or in violation of (and no event has occurred that
has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any subsidiary under),
nor has the Company or any subsidiary received notice of a claim
that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection,
occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.
(u) Regulatory Permits. The Company and the subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses, except where the
failure to possess such permits could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect, and neither the Company nor any subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such permits.
(v) Title to Assets. The Company and its subsidiaries have all
necessary use rights under the laws of the People's Republic of
China to all real property used by them that is material to their
respective businesses and good and marketable title in all personal
property owned by them that is material to their respective
businesses, in each case free and clear of all liens, except for
liens as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made
of such property by the Company and the subsidiaries. Any real
property and facilities held under lease by the Company and the
subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the subsidiaries are in
compliance, except as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse
Effect.
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(w) Patents and Trademarks. The Company and the subsidiaries
have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or
material for use in connection with their respective businesses and
which the failure to so have could, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect (collectively, the "Intellectual Property Rights").
Neither the Company nor any subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any
subsidiary violates or infringes upon the rights of any Person. To
the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another
person of any of the Intellectual Property Rights.
(x) Transactions With Affiliates and Employees. None of the
officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party
to any transaction with the Company or any subsidiary (other than
for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner.
(y) Solvency. Based on the financial condition of the Company
as of the Closing Date (and assuming that the Offering 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 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).
(z) Certain Fees. Except as described in Section 10.6 hereof,
no brokerage or finder's fees or commissions are or will be payable
by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other person
with respect to the transactions contemplated by this Agreement. The
Purchasers shall have no obligation with respect to any fees or with
respect to any claims (other than such fees or commissions owed by a
Purchaser pursuant to written agreements executed by such Purchaser
which fees or commissions shall be the sole responsibility of such
Purchaser) made by or on behalf of other persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
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5.2 Indemnification. The Company will indemnify and hold the Purchasers
and their directors, officers, shareholders, partners, employees and agents
(each, a "Purchaser Party") harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys'
fees and costs of investigation (collectively, "Losses") that any such Purchaser
Party may suffer or incur as a result of or relating to any misrepresentation,
breach or inaccuracy of any representation, warranty, covenant or agreement made
by the Company in any Transaction Document. In addition to the indemnity
contained herein, the Company will reimburse each Purchaser Party for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred.
6. Representations and Warranties of the Stockholder.
6.1 The Stockholder represents and warrants to each Purchaser that, at the
date of this Agreement and as of the Closing Date:
(a) Ownership of Stockholder Shares. The Stockholder owns the
Stockholder Shares of record and beneficially, free and clear of all
liens, claims, charges, security interests, and encumbrances of any
kind whatsoever. The Stockholder has sole control over the
Stockholder Shares or sole discretionary authority over any account
in which they are held.
(b) No Options or Similar Rights with Respect to Stockholder
Shares. The Stockholder has, since acquiring the Stockholder Shares,
never granted to any person an option or right to purchase or
otherwise acquire the Stockholder Shares, by contract of sale or
otherwise, nor had any "short position in" as to the Stockholder
Shares. The Stockholder has never effected nor attempted to effect
any distribution or public offering of the Stockholder Shares.
(c) Authority. The Stockholder has full right, power and
authority to execute, deliver and perform this Agreement and to
carry out the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Stockholder and
constitutes a valid, binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms
(except as such enforceability may be limited by laws affecting
creditor's rights generally).
(d) No Consents. No consent, approval, authorization or order
of, or any filing or declaration with, any court or governmental
agency or body, trustee or other person is required in connection
with the consummation by the Stockholder of the transactions on its
part contemplated by this Agreement, except (i) filings as may be
required under Sections 13(d) and 16(a) of the Exchange Act, and
(ii) those that have been made or obtained prior to the date of this
Agreement.
(e) No Conflicts. The execution, delivery and performance by
the Stockholder of this Agreement to which it is a party and the
consummation of the transactions contemplated thereby do not and
will not result in a breach or violation of, or constitute a default
under (with or without notice or lapse of time), any stockholders
agreement, voting trust agreement, trust or other fiduciary
agreement, pledge registration rights agreement or other agreement
or instrument to which the Stockholder or any of its properties are
bound or affected, and will not violate or conflict with any
judgment, decree or order of any court or other governmental agency
or any law, rule or regulation applicable to the Stockholder.
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(f) Certain Registration Matters. Assuming the accuracy of the
Purchasers' representations and warranties set forth herein, no
registration under the Securities Act is required for the offer and
sale of the Stockholder Shares to the Purchasers hereunder.
(g) Certain Fees. Except as described in Schedule 6.1(g), no
brokerage or finder's fees or commissions are or will be payable by
the Stockholders to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other person
with respect to the transactions contemplated by this Agreement. The
Purchasers shall have no obligation with respect to any fees or with
respect to any claims (other than such fees or commissions owed by a
Purchaser pursuant to written agreements executed by such Investor
which fees or commissions shall be the sole responsibility of such
Purchaser) made by or on behalf of other persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
(h) No Additional Agreements. Such Stockholder does not have
any agreement or understanding with any Purchaser or with the
Company with respect to the transactions contemplated by this
Agreement other than as specified in this Agreement.
6.2 Indemnification. The Stockholder will indemnify and hold the Purchaser
Parties harmless from any and all Losses that any such Purchaser Party may
suffer or incur as a result of or relating to any misrepresentation, breach or
inaccuracy of any representation, warranty, covenant or agreement made by the
Stockholder in any Transaction Document. In addition to the indemnity contained
herein, the Stockholder will reimburse each Purchaser Party for its reasonable
legal and other expenses (including the cost of any investigation, preparation
and travel in connection therewith) incurred in connection therewith, as such
expenses are incurred.
7. Transfer and Registration Rights.
7.1 Purchaser acknowledges that it is acquiring the Shares for its own
account and for the purpose of investment and not with a view to any
distribution or resale thereof within the meaning of the Securities Act and any
applicable state or other securities laws ("State Acts"), except in a
transaction which is in compliance with the Securities Act or pursuant to an
exemption therefrom. Purchaser further agrees that, except in connection with
the Exchange Transaction, it will not sell, assign, transfer or otherwise
dispose of any of the Shares in violation of the Securities Act or state blue
sky laws and acknowledges that, in taking unregistered Shares, it must continue
to bear economic risk in regard to its investment for an indefinite period of
time because of the fact that such securities have not been registered under the
Securities Act or state blue sky laws and further realizes that such securities
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available. Subject to the foregoing, nothing
contained herein shall be deemed a representation or warranty by such Purchaser
to hold the Shares for any period of time.
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8. Closing.
8.1 The closing of the Offering shall take place at such time and at such
place as the Company shall determine, provided that the Closing shall occur no
later than July 15, 2006, unless otherwise extended pursuant to the terms of
this Agreement. If the closing of the sale of Shares to Purchaser has not
occurred within the time frame provided in the previous sentence, then Purchaser
may terminate this Agreement by giving written notice to the Company.
9. Purchaser Representations. Purchaser hereby represents, warrants and
acknowledges and agrees with the Company as follows:
9.1 Information. Purchaser has been furnished with and has carefully read
the Disclosure Documents as set forth in Section 3 hereto and is familiar with
the terms of the Offering. With respect to individual or partnership tax and
other economic considerations involved in this investment, Purchaser is not
relying on the Company (or any agent or representative of any of the Company).
Purchaser has carefully considered and has, to the extent Purchaser believes
such discussion necessary, discussed with Purchaser's legal, tax, accounting and
financial advisers the suitability of an investment in the Shares for
Purchaser's particular tax and financial situation.
9.2 Opportunity to Inspect. Purchaser has had an opportunity to inspect
relevant documents relating to the organization and operations of the Company.
Purchaser acknowledges that all documents, records and books pertaining to this
investment which Purchaser has requested have been made available for inspection
by Purchaser and Purchaser's attorney, accountant or other adviser(s).
9.3 Opportunity to Inquire. Purchaser and/or Purchaser's advisor(s)
has/have had a reasonable opportunity to ask questions of and receive answers
and to request additional relevant information from a person or persons acting
on behalf of the Company concerning the Offering.
9.4 No Advertising or General Solicitation. Purchaser is not purchasing
the Shares as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar.
9.5 Accredited Investor. Purchaser is an "accredited investor," within the
meaning of Rule 501(a) of Regulation D under the Securities Act ("Regulation
D"). Purchaser, by reason of Purchaser's business or financial experience or the
business or financial experience of Purchaser's professional advisers who are
unaffiliated with and who are not compensated by the Company or any affiliate,
directly or indirectly, can be reasonably assumed to have the capacity to
protect Purchaser's own interests in connection with the transaction. Purchaser
further acknowledges that he has read the written materials provided by the
Company.
9.6 No Need for Liquidity. Purchaser has adequate means of providing for
Purchaser's current financial needs and contingencies, is able to bear the
substantial economic risks of an investment in the Shares for an indefinite
period of time, has no need for liquidity in such investment and, at the present
time, could afford a complete loss of such investment.
9.7 Sophistication. Purchaser has such knowledge and experience in
financial, tax and business matters so as to enable Purchaser to use the
information made available to Purchaser in connection with the Offering to
evaluate the merits and risks of an investment in the Shares and to make an
informed investment decision with respect thereto.
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9.8 Risks Relating to Purchase of Shares. Purchaser recognizes that
investment in the Shares involves substantial risks. Purchaser further
recognizes that no Federal or state agencies have passed upon this offering of
the Shares or made any finding or determination as to the fairness of this
investment.
9.9 Legend. Purchaser acknowledges that each certificate representing the
Public Company Shares shall contain a legend substantially in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH
REGISTRATION, PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN
OPINION OF COUNSEL (WHICH OPINION IS REASONABLY SATISFACTORY TO THE
COMPANY) CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION. THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT SECURED BY SUCH SECURITIES TO THE EXTENT PERMITTED BY
APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
9.10 Authority. If this Agreement is executed and delivered on behalf of a
partnership, corporation, trust or estate: (i) such partnership, corporation,
trust or estate has the full legal right and power and all authority and
approval required (a) to execute and deliver, or authorize execution and
delivery of, this Agreement and all other instruments executed and delivered by
or on behalf of such partnership, corporation, trust or estate in connection
with the purchase of the Shares, and (b) to purchase and hold such Shares; (ii)
the signature of the party signing on behalf of such partnership, corporation,
trust or estate is binding upon such partnership, corporation, trust or estate;
and (iii) such partnership, corporation or trust has not been formed for the
specific purpose of acquiring the Shares, unless each beneficial owner of such
entity is qualified as an "accredited investor" within the meaning of Regulation
D and has submitted information substantiating such individual qualification.
9.11 Retirement Plan. If Purchaser is a retirement plan or is investing on
behalf of a retirement plan, Purchaser acknowledges that investment in the
Shares poses risks in addition to those associated with other investments,
including the inability to use losses generated by an investment in the Shares
to offset taxable income.
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9.12 Patriot Act; etc. The Purchaser is not, nor is it acting as an agent,
representative, intermediary or nominee for, a person identified on the list of
blocked persons maintained by the Office of Foreign Assets Control, U.S.
Department of Treasury. In addition, the Purchaser has complied with all
applicable U.S. laws, regulations, directives, and executive orders relating to
anti-money laundering , including but not limited to the following laws: (1) the
Sharing and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56; and (2)
Executive Order 13224 (Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit, or Support Terrorism) of September 23,
2001. Any resale of Shares by the Purchaser to transferees shall not violate the
statutes mentioned in this representation.
10. Understandings.
Purchaser understands, acknowledges and agrees with the Company as
follows:
10.1 Irrevocable Nature. Purchaser hereby acknowledges and agrees that
upon execution of this Agreement by the Purchaser, the Company and the
Stockholder, the Purchaser's obligation to purchase the Shares is irrevocable,
and, except as required by law or as permitted under Section 8.1 above,
Purchaser is not entitled to cancel, terminate or revoke this Agreement or any
agreements of Purchaser hereunder and that this Agreement and such other
agreements shall survive the death or disability of Purchaser and shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors, legal representatives and
permitted assigns. If Purchaser is more than one person, the obligations of
Purchaser hereunder shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be deemed
to be made by and be binding upon each such person and his or her heirs,
executors, administrators, successors, legal representatives and permitted
assigns.
10.2 No Determination as to Fairness. No federal or state agency has made
any findings or determination as to the fairness of the terms of this Offering
for investment, nor any recommendations or endorsement of the Shares.
10.3 Exemption. The Offering is intended to be exempt from registration
under the Securities Act by virtue of Section 4(2) of the Securities Act and the
provisions of Rule 506 of Regulation D thereunder, which is in part dependent
upon the truth, completeness and accuracy of the statements made by Purchaser
herein.
10.4 Legend. Certificates evidencing the Shares shall not contain any
legend (including the legend set forth in Section 9.9): (i) while a registration
statement covering the resale of such Shares in effective under the Securities
Act, or (ii) following a sale or transfer of such Shares pursuant to an
effective registration statement (including the Registration Statement, as
defined above), or (iii) following a sale or transfer of such Shares pursuant to
Rule 144 under the Securities Act as evidenced by an opinion of counsel selected
by transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Shares under the securities Act (assuming the
transferor is not an Affiliate of the Company), or (iv) while such Shares are
eligible for sale under Rule 144(k) and the transferor has provided the Company
with an opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the company, to the effect
that such Shares are eligible for sale under Rule 144(k). The Company may not
make any notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this Section.
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10.5 Transferee Suitability. It is understood that in order not to
jeopardize the Offering's exempt status under Section 4(2) of the Securities Act
and Regulation D, any transferee may, at a minimum, be required to fulfill the
investor suitability requirements thereunder.
10.6 Brokers and Finders. No person or entity acting on behalf, or under
the authority, of Purchaser is or will be entitled to any broker's, finder's or
similar fee or commission in connection with the transactions contemplated by
this Agreement. The Purchaser acknowledges and agrees, however, that Sterne Agee
& Leach, Inc. and Global Hunter Securities are acting as the Placement Agents
for this private placement and will receive a cash fee that is equal to seven
percent (7%) of the total amount raised, such fee being payable by the Company.
10.7 Confidential Nature of Information. Purchaser acknowledges that the
information furnished in this Agreement by the Company to Purchaser or its
advisers in connection with the Offering, is confidential and nonpublic and
agrees that all such written information which is material and not yet publicly
disseminated by the Company shall be kept in confidence by Purchaser and neither
used by Purchaser for Purchaser's personal benefit (other than in connection
with this Agreement), nor disclosed to any third party, except Purchaser's legal
and other advisers who shall be advised of the confidential nature of such
information, for any reason; provided, however, that this obligation shall not
apply to any such information that (i) is part of the public knowledge or
literature and readily accessible at the date hereof, (ii) becomes a part of the
public knowledge or literature and readily accessible by publication (except as
a result of a breach of this provision) or (iii) is received from third parties
(except third parties who, to the knowledge of the Purchaser, disclose such
information in violation of any confidentiality agreements or obligations,
including, without limitation, any subscription agreement entered into with the
Company). The Company represents and warrants to the Purchasers that following
the filing of the Form 8-K pursuant to Section 11.2 herein, the Purchaser will
not be in possession of any non-public information with respect to the Company.
10.8 Survival. The representations, warranties and agreements of Purchaser
and the Company contained herein and in any other writing delivered in
connection with the Offering shall be true and correct in all material respects
on and as of the Closing Date as if made on and as of the date the Company
executes this Agreement and shall survive the execution and delivery of this
Agreement and the purchase of the Shares.
10.9 NO RECOMMENDATION. IN MAKING AN INVESTMENT DECISION, PURCHASER MUST
RELY ON ITS OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THE SHARES HAVE NOT BEEN RECOMMENDED BY
ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
11. Covenants.
11.1 Prohibition on Certain Equity Financings. The Company agrees that
neither it nor the Public Company shall undertake any other financings (other
than acquisitions utilizing capital stock of the Company or the Public Company,
it being understood that the shares issuable in such transaction shall not be
registered until the Registration Statement (as that term is defined below) is
deemed effective by the SEC) involving Equity Common Shares (as defined below)
on terms more favorable than those in the Offering until thirty (30) days after
the effectiveness of the Registration Statement covering all of the Public
Company Shares, without the prior written approval of the holders of a majority
of the Public Company Shares. The Company and the Public Company may complete a
financing on terms that are equivalent or less favorable than those in the
Offering at their discretion; however, the Company acknowledges that the Equity
Common Shares sold in such an offering can not be registered for resale until
after the date the Registration Statement is declared effective by the SEC. The
term "Equity Common Shares" as used herein shall mean all capital stock of the
Company or the Public Company, plus all rights, warrants, options, convertible
preferred shares, indebtedness, exchangeable securities or other rights,
exercisable for or convertible into, directly or indirectly, capital stock of
the Company or the Public Company. Notwithstanding the above, "Equity Common
Shares" shall not include any common shares of the Public Company issued
pursuant to any incentive or stock option plan of the Public Company approved by
the shareholders or the board of directors of the Public Company.
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11.2 Filing of Offering Documents. The Company shall file all required
documents related to the Offering as exhibits to the Current Report on form 8-K
to be filed with the SEC by the Public Company on the business day following the
Closing Date.
11.3 Press Release. Immediately following the Closing, but no later than
9:30am Eastern Time on the business day following the Closing Date, the Company
shall issue a press release, in a form suitable to the Purchasers, disclosing
the material terms of the Offering.
11.4 Exchange Act Compliance. As long as any Purchaser owns the Shares,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Shares, if the Company is not required to file reports pursuant
to such laws, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Shares under Rule 144. The Company further covenants that
it will take such further action as any holder of Shares may reasonably request,
all to the extent required from time to time to enable such person to sell the
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144.
11.5 No Integrated Offerings. The Company shall not, and shall use its
best efforts to ensure that no affiliate of the Company shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Shares in a manner that would require the registration
under the Securities Act of the sale of the Shares to the Purchasers, or that
would be integrated with the offer or sale of the Shares for purposes of the
rules and regulations of any Trading Market in a manner that would require
stockholder approval of the sale of the Shares to the Purchasers. For purposes
hereof, "Trading Market" shall mean whichever of the New York Stock Exchange,
the American Stock Exchange, the NASDAQ National Market, the NASDAQ Capital
Market or OTC Bulletin Board on which the Common Stock is listed or quoted for
trading on the date in question.
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11.6 Prohibition on Filing Registration Statements. Other than pursuant to
the Registration Statement or as required under the Make Good Escrow Agreements,
prior to the date the Registration Statement is declared effective by the SEC,
the Company may not file any registration statement (other than on Form S-8)
with the SEC with respect to any securities of the Company.
11.7 Future Priced Securities. During the six months following the Closing
Date, the Company shall not issue any "Future Priced Securities" as such term is
described by NASD IM-4350-1.
11.8 Material Non-Public Information. The Company covenants and agrees
that neither it nor any other person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
11.9 Listing of Public Company Shares. The Company agrees, (i) if the
Company applies to have the Public Company Shares traded on any other Trading
Market, it will include in such application the Public Company Shares then held
by the Purchasers, and will take such other action as is necessary or desirable
to cause the Public Company Shares to be listed on such other Trading Market as
promptly as possible, and (ii) it will take all action reasonably necessary to
continue the listing and trading of the Public Company Shares on a Trading
Market and will comply in all material respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.
11.10 Use of Proceeds. The net proceeds from the sale of the Shares
hereunder will be used for working capital purposes and not for the satisfaction
of any portion of the Company's debt (other than payment of trade payables and
accrued expenses in the ordinary course of the Company's business and consistent
with prior practices), or to redeem any Common Stock or Common Stock
equivalents.
11.11 Make Good Escrow Arrangement. The Stockholder and Choice Inspire
Limited, the only other stockholder of the Company, shall escrow 1,347,644
shares, to be equitably adjusted for stock splits, stock dividends and similar
adjustments (the "Make Good Shares") of the Public Company's common stock, that
these stockholders will receive as a result of the Exchange Transaction,
representing 13.77% of the Public Company's issued and outstanding common
capital stock immediately following the closing of the Exchange Transaction (the
"Make Good Pool"). The Company covenants that it would attain the following
financial performance thresholds (the "Performance Thresholds"): $8,140,000
million of Net Income ("NI") for the fiscal year ("FY06") ending December 31,
2006 (the "2006 Threshold") and $12,713,760 of NI for the fiscal year ("FYO7")
ending December 31, 2007 (the "2007 Threshold"). The Company shall provide the
Purchaser Representative (as defined hereinafter) with (a) its audited financial
statements, prepared in accordance with US GAAP, on or before March 31, 2007 so
as to allow the Purchaser Representative the opportunity to evaluate whether the
2006 Threshold was attained and (b) its audited financial statements, prepared
in accordance with U.S. GAAP, on or before March 31, 2008 so as to allow the
Subscriber Representative the opportunity to evaluate whether the 2007 Threshold
was attained. If the 2006 Threshold is not achieved, one-half of the Make Good
Shares will be distributed on a pro rata basis to the Purchasers of this
Offering. If the 2007 Threshold is not achieved, the second-half of the Make
Good Shares can be distributed on a pro rata basis to the Purchasers of this
Offering. Notwithstanding anything to the contrary herein, only those Purchasers
who remain stockholders of the Public Company at the time that the Make Good
Shares become deliverable hereunder, shall be entitled to their pro rata portion
of the Make Good Shares. If required, the appropriate number of Make Good Shares
will be delivered to the Purchasers in the Offering within ten (10) business
days of the date the audit report for the applicable period is filed with the
SEC. The Purchaser hereby appoints Sterne Agee & Leach, Inc. to act as the
Purchaser Representative (the "Purchase Representative") in connection with the
Make Good Escrow Agreement entered into with the Stockholders for the purpose of
effectuating this provision. The Purchaser Representative's sole responsibility
shall be to review the financial statements of the Public Company to determine
whether any make Good Shares should be distributed.
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11.12 Penalty for Failure to Deliver Certificates. If a Purchaser shall
make a sale or transfer of Shares either (x) pursuant to Rule 144 or (y)
pursuant to a registration statement and in each case shall have delivered to
the Company or the Company's transfer agent the certificate representing Shares
containing a restrictive legend which are the subject of such sale or transfer
and a representation letter in customary form (the date of such sale or transfer
and Share delivery being the "Share Delivery Date") and (1) the Company shall
fail to deliver or cause to be delivered to such Purchaser a certificate
representing such Shares that is free from all restrictive or other legends by
the third business day following the Share Delivery Date and (2) following such
third business day after the Share Delivery Date and prior to the time such
Shares are received free from restrictive legends, the Purchaser, or any third
party on behalf of such Purchaser, purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Purchaser of such Shares (a "Buy-In"), then the Company shall pay in cash to the
Purchaser (for costs incurred either directly by such Purchaser or on behalf of
a third party) the amount by which the total purchase price paid for Common
Stock as a result of the Buy-In (including brokerage commissions, if any) exceed
the proceeds received by such Purchaser as a result of the sale to which such
Buy-In relates. The Purchaser shall provide the Company written notice
indicating the amounts payable to the Purchaser in respect of the Buy-In.
11.13 Registration Procedures. At its expense, the Public Company will:
(a) Keep the Registration Statement effective until the
earlier of (i) three years and (ii) such time that all Public
Company Shares received by the Purchasers in the Exchange
Transaction and covered by such Registration Statement have been
sold or may be sold without volume restrictions pursuant to Rule
144(k) (the "Effectiveness Period") as determined by the counsel to
the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent and the
affected holders of such Shares ("Holders");
(b) After the date that the Registration Statement is declared
effective by the Commission, without regard for the reason
thereunder or efforts therefore, the Company covenants not to allow
such Registration Statement to cease, for any reason, to be
effective and available to the Purchasers at any time prior to the
expiration of its Effectiveness Period as to all Public Company
Shares which it is required to cover for more than an aggregate of
30 Trading Days (which need not be consecutive);
(c) Prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in
connection with the Registration Statement as may be necessary to
comply with the provisions of the Securities Act with respect to a
disposition of all securities covered by such Registration
Statement;
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(d) Furnish to such Purchaser and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed
with the Commission or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto
in both electronic and print format, and (ii) such number of copies
of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto, and such other documents as each
Purchaser may reasonably request in order to facilitate the
disposition of the Public Company Shares owned by such Purchaser;
(e) Notify each Purchaser 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 or incomplete in light of
the circumstances then existing, and at the request of such
Purchaser, prepare and furnish to it a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to such Purchaser, 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 or
incomplete in light of the circumstances then existing;
(f) Use its commercially reasonable efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain
the withdrawal of such order at the earliest possible moment and to
notify each Purchaser (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the
resolution thereof;
(g) Cause all Public Company Shares received by the Purchasers
in the Exchange Transaction to be listed or included for quotation
on a Trading Market on which the Common Stock of the Public Company
is then listed, traded or included for quotation;
(h) Provide a transfer agent and registrar for all Public
Company Shares and CUSIP number for all such Public Company Shares,
in each case not later than the effective date of such registration;
(i) Make available for inspection by the Purchasers, any
underwriter participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by
the Purchasers or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company and
cause the Company's officers and directors to supply all information
reasonably requested by Purchaser, any underwriter, attorney or
accountant in connection with such Registration Statement. Provided,
however, that the Public Company shall not provide information to
the Purchasers to the extent it constitutes material, non-public
information;
(j) Furnish to each Purchaser or its counsel a copy of all
documents filed with and all correspondence from or to the
Commission in connection with any such registration. Provided,
however, that the Public Company shall not provide information to
the Purchasers to the extent it constitutes material, non-public
information;
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(k) Take all other reasonable actions necessary to expedite
and facilitate disposition by each Purchaser of the Public Company
Shares pursuant to the Registration Statement.
11.14 Indemnification and Contribution.
(a) To the fullest extent permitted by law, the Public Company
will, and hereby does, indemnify, hold harmless and defend each
Purchaser who holds Public Company Shares, the directors, officers,
partners, employees, agents, representatives of, and each person, if
any, who controls any Purchaser within the meaning of the Securities
Act or the Exchange Act (each, an "Indemnified Person"), against any
losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys' fees, amounts paid in settlement or
expenses, joint or several (collectively, "Claims"), incurred in
investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the Commission, whether pending or
threatened, whether or not an Indemnified Person is or may be a
party thereto (collectively, "Indemnified Damages"), to which any of
them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or
any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which
Public Company Shares are offered, or the omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Public Company
files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not
misleading, (iii) any violation or alleged violation by the Public
Company of the Securities Act, the Exchange Act, any other law,
including, without limitation, any state securities law, or any rule
or regulation thereunder, in each case relating to the offer or sale
of the Public Company Shares pursuant to a Registration Statement or
(iv) any material violation by the Public Company of this Agreement
(the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations"). The Public Company shall reimburse the
Indemnified Persons for any legal fees or other expenses incurred by
them in connection with investigating or defending any such Claim as
such fees or expenses are incurred; provided, however, that the
indemnity agreement contained in this 11.14(a) shall not apply to
amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Public Company,
which consent shall not be unreasonably withheld. Notwithstanding
anything to the contrary contained herein, the indemnification
agreement contained in this Section11.14(a): (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon information furnished in
writing to the Company or the Public Company by such Indemnified
Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement
thereto; (ii) shall not be available to the extent such Claim is
based on a failure of a Purchaser to deliver or to cause to be
delivered the prospectus made available by the Public Company, if
such prospectus was timely made available by the Public Company; and
(iii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the
Public Company, which consent shall not be unreasonably withheld.
Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Indemnified Person and
shall survive the transfer of the Public Company Shares by the
Purchasers.
20
(b) Each Purchaser agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the
same manner as is set forth in Section11.14(a), the Company, the
Public Company, each of their respective directors, each of their
respective officers who signs the Registration Statement, and each
Person, if any, who controls the Company or the Public Company
within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim or Indemnified Damages to
which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim or Indemnified
Damages 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 written information furnished to the Public Company or
the Company by such Purchaser expressly for use in connection with
such Registration Statement; and, such Purchaser will reimburse any
legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 11.14(b)
shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such
Purchaser, which consent shall not be unreasonably withheld;
provided, further, however, that the Purchaser shall be liable under
this Section11.14(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the proceeds to such Investor as a result
of the sale of Public Company Shares. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of
the Public Company Shares by the Purchasers.
(c) The foregoing indemnity agreements contained in
Sections11.14(a) and 11.14(b) 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 Commission at the time the Registration Statement in
question becomes effective or in the amended prospectus filed with
the Commission pursuant to Rule 424(b) promulgated under the
Securities Act (the "Final Prospectus"), such indemnity agreements
shall not inure to the benefit of any Indemnified Party if a copy of
the Final Prospectus was furnished in a timely manner to the
Indemnified Party and was not furnished to the person asserting the
Indemnified Damages at or prior to the time such action is required
by the Securities Act.
(d) Promptly after receipt by an Indemnified Party under this
Section11.14 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under
this Section 11.14, 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 control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the
Indemnified Party (or, if there is more than one Indemnified Party,
a majority in interest of the Indemnified 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, in the reasonable opinion of counsel
retained by the Indemnified Party, the representation by such
counsel of the Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between
such Indemnified Party and any other party represented by such
counsel in such proceeding. 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. No indemnifying party
shall be liable for any settlement of any action, claim or
proceeding effected without its written consent; provided, however,
that the indemnifying party shall not unreasonably withhold, delay
or condition its consent. No indemnifying party shall, without the
consent of the Indemnified Party, consent to entry of any judgment
or enter into any settlement or other compromise 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. Following
indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party with
respect to all third parties, firms or corporations relating to the
matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Party under
this Section 11.14, except to the extent that the indemnifying party
is materially prejudiced in its ability to defend such action.
21
(e) If the indemnification provided for in this Section 11.14
is unavailable to or insufficient to hold harmless an Indemnified
Party under subsection (a) or (b) hereof in respect of any Claim or
Indemnified Damages, then each indemnifying party shall contribute
to the amount paid or payable by such Indemnified Party as a result
of such Claim or Indemnified Damages in such proportion as is
appropriate to reflect the relative fault of the Public Company on
the one hand and the Purchaser on the other in connection with the
statements or omissions or other matters which resulted in such
Claim or Indemnified Damages, as well as any other relevant
equitable considerations. The relative fault shall be determined by
reference to, among other things, in the case of an untrue
statement, whether the untrue statement relates to information
supplied by the Company or the Public Company on the one hand or a
Purchaser on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
untrue statement. The Public Company and the Purchasers agree that
it would not be just and equitable if contribution pursuant to this
Section 11.14(e) were determined by pro rata allocation (even if all
Purchasers were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the
equitable considerations referred to above in this Section 11.14(e).
The amount paid or payable by an Indemnified Party as a result of
the Claims or Indemnified Damages referred to above in this Section
11.14(e) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 11.14(e), no Purchaser shall be
required to contribute any amount in excess of the amount of
proceeds received by the Purchaser from the sale of the Public
Company Shares. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Contribution (together with any
indemnification or other obligations under this Agreement) by any
Purchaser (including any Indemnified Party associated with such
Purchaser) shall be limited in amount to the amount of proceeds
received by such Purchaser from the sale of the Public Company
Shares.
22
12. Miscellaneous.
12.1 Notices. Except as set forth elsewhere herein, any notice or demand
to be given or served in connection herewith shall be deemed to be sufficiently
given or served for all purposes by being sent as registered or certified mail,
return receipt requested, postage prepaid, in the case of the Company, addressed
to it at the address set forth below:
Wonder Auto Limited
No. 56 Lingxi Street
Taihe District
Jinzhou City, Liaoning
People's Republic of China, 121013
and in the case of Purchaser to the address set forth on the Signature
Page hereto
12.2 Governing Law. This Agreement shall be enforced, governed and
construed in accordance with the laws of the State of New York without giving
effect to choice of laws principles or conflict of laws provisions thereof.
12.3 Jurisdiction. The parties hereby irrevocably consent and submit to
the jurisdiction of the state and federal courts located in the State of New
York for all purposes. Purchaser hereby waives, and agrees not to assert against
the Company, or any successor assignee thereof, by way of motion, as a defense,
or otherwise, in any such suit, action or proceeding, (i) any claim that the
Purchaser is not personally subject to the jurisdiction of the above-named
courts, and (ii) to the extent permitted by applicable law, any claim that such
proceeding relating to the enforcement of an award is in an inconvenient forum
or that the venue of any such proceeding is improper or that this Agreement may
not be enforced or that judgment may not be entered in any such courts.
12.4 Attorney's Fees. In any action, proceeding or counterclaim brought to
enforce any of the provisions of this Agreement or to recover damages, costs and
expenses in connection with any breach of the Agreement, the prevailing party,
as determined by the finder of fact, shall be entitled to be reimbursed by the
opposing party for all of the prevailing party's reasonable outside attorneys'
fees, costs and other out-of-pocket expenses incurred in connection with such
action, proceeding or counterclaim.
23
12.5 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
herein. The Company acknowledges that all material facts upon which it has
relied in forming its decision to enter into this Agreement are expressly set
forth herein and further acknowledges that the Purchaser has not made any
representations, express or implied, which are not expressly set forth herein.
This Agreement supercedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
12.6 Publicity. The Company shall not issue any public statement or press
release, or otherwise disclose in any manner the identity of the Purchaser or
that Purchaser has purchased the Shares, without the prior written consent of
the Purchaser, except as may be required by applicable law; provided, however,
that the Company may disclose such information in the Registration Statement
filed with the SEC.
12.7 Amendment. No provision of this Agreement may be waived or amended
except in a written instrument signed by the Company and the Purchasers holding
a majority of the Shares provided that those provisions that require all
Purchasers to consent requires 100% to amend. No waiver 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 subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. No consideration shall be
offered or paid to any Purchaser to amend or consent to a waiver or modification
of any provision of this Agreement unless the same consideration is also offered
to all Purchasers who then hold Shares.
12.8 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
any or all of its rights under this Agreement to any person to whom such
Purchaser assigns or transfers any Shares, provided such transferee agrees in
writing to be bound, with respect to the transferred Shares, by the provisions
hereof that apply to the "Purchasers." This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person (except an indemnified party pursuant to Section 4.2
herein).
12.9 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
12.10 Nature of Obligations. 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 Shares pursuant to this Agreement has been made by such
Purchaser independently 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 Purchasers 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 investment hereunder and that no Purchaser will be acting as agent of such
Purchaser in connection with monitoring its investment in the Shares or
enforcing its rights under this Agreement. 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 Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that each of the Purchasers has been provided
with the same Agreement for the purpose of closing a transaction with multiple
Purchasers and not because it was required or requested to do so by any
Purchaser.
24
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Stock Purchase and
Subscription Agreement as of the date first set forth above.
THE COMPANY: THE STOCKHOLDER:
WONDER AUTO LIMITED EMPOWER CENTURY LIMITED
By: By:
--------------------------- ---------------------------
Name: Qingjie Zhao Name: Qingjie Zhao
Title: CEO and Chairman Title:
THE PURCHASERS:
For Individuals:
---------------------------
Print Name Above
---------------------------
Sign Name Above
For Entities:
---------------------------
Print Name Above
By:
------------------------------
Name:
Title:
ADDRESS:
---------------------------
---------------------------
---------------------------
TAX ID NUMBER:
---------------------------
TOTAL NUMBER OF SHARES PURCHASED
------------------
TOTAL COST OF SHARES PURCHASED, AT $265,033.85 PER SHARE, IS $ .
------------------
ANNEX I
NUMBER OF COMPANY PURCHASE PRICE FOR NUMBER OF STOCKHOLDER
NAME OF PURCHASER SHARES PURCHASED COMPANY SHARES SHARES PURCHASED
Atlas Allocation Fund, L.P. 2.263862 $600,000 1.509241
Gerald Bolfing 0.226386 $60,000 0.150924
Daniel O. Conwill IV 1.131931 $300,000 0.754621
Gary C. Evans 2.263862 $600,000 1.509241
William W. Gay 0.113193 $30,000 0.075462
Harold E. Gear 0.113193 $30,000 0.075462
Matthew Hayden 0.452772 $120,000 0.301848
Jayhawk China Fund (Cayman) Ltd. 6.791585 $1,800,000 4.527724
David Kenkel 0.113193 $30,000 0.075462
Michael R. Kindred and Mary A. 0.226386 $60,000 0.150924
Kubes-Kindred, Joint Tenants
Glenn A. Little 0.226386 $60,000 0.150924
Pinnacle China Fund, L.P. 16.526191 $4,380,000 11.017461
Dean C. Pisani 0.113193 $30,000 0.075462
Carolyn Prahl 0.226386 $60,000 0.150924
Precept Capital Master Fund, G.P. 1.131931 $300,000 0.754621
Sandor Capital Master Fund, L.P. 2.263862 $600,000 1.509241
Sterling Research & Management LLC 0.679159 $180,000 0.452772
Michael K. Studer 0.113193 $30,000 0.075462
US Special Opportunities Trust PLC 1.697896 $450,000 1.131931
Renaissance US Growth Investment Trust PLC 1.697896 $450,000 1.131931
Premier RENN US Emerging Growth Fund Limited 1.131931 $300,000 0.754621
John H. Trescot Jr. 0.113193 $30,000 0.075462
Westpark Capital, L.P. 4.527724 $1,200,000 3.018482
Whitebox Intermarket Partners, LP 1.131931 $300,000 0.754621
TOTALS 45.277236 $12,000,000 30.184824
AGGREGATE PORTION
OF PURCHASE PRICE
PURCHASE PRICE FOR PAYABLE BY
NAME OF PURCHASER STOCKHOLDER SHARES PURCHASER
Atlas Allocation Fund, L.P. $400,000 $1,000,000
Gerald Bolfing $40,000 $100,000
Daniel O. Conwill IV $200,000 $500,000
Gary C. Evans $400,000 $1,000,000
William W. Gay $20,000 $50,000
Harold E. Gear $20,000 $50,000
Matthew Hayden $80,000 $200,000
Jayhawk China Fund (Cayman) Ltd. $1,200,000 $3,000,000
David Kenkel $20,000 $50,000
Michael R. Kindred and Mary A. $40,000 $100,000
Kubes-Kindred, Joint Tenants
Glenn A. Little $40,000 $100,000
Pinnacle China Fund, L.P. $2,920,000 $7,300,000
Dean C. Pisani $20,000 $50,000
Carolyn Prahl $40,000 $100,000
Precept Capital Master Fund, G.P. $200,000 $500,000
Sandor Capital Master Fund, L.P. $400,000 $1,000,000
Sterling Research & Management LLC $120,000 $300,000
Michael K. Studer $20,000 $50,000
US Special Opportunities Trust PLC $300,000 $750,000
Renaissance US Growth Investment Trust PLC $300,000 $750,000
Premier RENN US Emerging Growth Fund Limited $200,000 $500,000
John H. Trescot Jr. $20,000 $50,000
Westpark Capital, L.P. $800,000 $2,000,000
Whitebox Intermarket Partners, LP $200,000 $500,000
TOTALS $8,000,000 $20,000,000