CUSIP No. 24688L102
CUSIP No. 24688L102
Dated:
March 4, 2008
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/s/
David Gelbaum
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David
Gelbaum, Co-Trustee of The Quercus Trust
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/s/
David Gelbaum, Attorney-In-Fact for Monica Chavez
Gelbaum
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Monica
Chavez Gelbaum, Co-Trustee of The Quercus Trust
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/s/
David Gelbaum
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The
Quercus Trust, David Gelbaum, Co-Trustee of The Quercus
Trust
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Exhibit B
SECURITIES PURCHASE
AGREEMENT
This
Securities Purchase Agreement (this
“Agreement”
) is
dated as of February 25, 2008, by and among China Solar & Clean Energy
Solutions, Inc., a Nevada corporation (collectively with its predecessors, the
“Company”
), and
the investors listed on the Schedule of Buyers attached hereto as
Annex A
and
identified on the signature pages hereto (each, an
“Investor”
and
collectively, the
“Investors”
).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
thereunder, the Company desires to issue and sell to each Investor, and each
Investor, severally and not jointly, desires to purchase from the Company
certain securities of the Company, as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investors agree as
follows:
ARTICLE
1.
DEFINITIONS
1.1.
Definitions
. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:
“2008
Annual Report
”
means
the
Annual Report of the Company for the fiscal year ending December 31, 2008, as
filed with the Commission on Form 10-K (or such other form appropriate for such
purpose as promulgated by the Commission).
“2008
Guaranteed
ATNI”
has
the meaning set forth in Section 4.11.
“2008 Make Good Shares”
has the
meaning set forth in Section 4.11.
“2009
Annual Report
”
means
the
Annual Report of the Company for the fiscal year ending December 31, 2009, as
filed with the Commission on Form 10-K (or such other form appropriate for such
purpose as promulgated by the Commission).
“2009
Guaranteed
ATNI”
has
the meaning set forth in Section 4.11.
“2009 Make Good Shares”
has the
meaning set forth in Section 4.11.
“Action”
means
any 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.
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144.
“Business Day”
means
any day except Saturday, Sunday and any day which is a federal legal holiday or
a day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
“
Buy-In
” has the
meaning set forth in Section 4.1(c).
“Closing”
means
the closing of the purchase and sale of the Shares pursuant to Article
II.
“Closing Date”
means
the Business Day on which all of the conditions set forth in Sections 5.1 and
5.2 hereof are satisfied, or such other date as the parties may
agree.
“Commission”
means
the Securities and Exchange Commission.
“Common Stock”
means
the common stock of the Company, par value $0.001 per share, and any securities
into which such common stock may hereafter be reclassified.
“Common Stock
Equivalents”
means
any securities of the Company or any Subsidiary which entitle the holder thereof
to acquire Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.
“Company Counsel”
means
Guzov Ofsink, LLC.
“Company
Deliverables”
has the
meaning set forth in Section 2.2(a).
“Disclosure
Materials”
has the
meaning set forth in Section 3.1(h).
“Effective Date”
means
the date that the Registration Statement required by Section 2(a) of the
Registration Rights Agreement is first declared effective by the
Commission.
"Escrow Agreement"
means
the Escrow Agreement, dated as of the date hereof, between the Company and the
escrow agent (the
“Escrow Agent”
) set
forth therein, in the form of
Exhibit A
hereto.
“Evaluation Date”
has the
meaning set forth in Section 3.1(s).
“Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“GAAP”
means
U.S. generally accepted accounting principles.
“Intellectual Property
Rights”
has the
meaning set forth in Section 3.1(p).
“
Intellectual Property Rights
Licensing Agreements
”
has the
meaning set forth in Section 3.1(p).
“Investment
Amount”
means,
with respect to each Investor, the Investment Amount indicated on such
Investor’s signature page to this Agreement.
“Investor
Deliverables”
has the
meaning set forth in Section 2.2(b).
“Investor Party”
has the
meaning set forth in Section 4.7.
“Lien”
means
any lien, charge, encumbrance, security interest, right of first refusal or
other restrictions of any kind.
“Losses”
has the
meaning set forth in Section 4.7.
“Make Good Escrow Agreement”
means the
Make Good Escrow Agreement, dated as of the date hereof, among the Company, the
escrow agent identified therein (the
“Make Good Escrow
Agent”
) and the
Investors, in the form of
Exhibit C
hereto.
“Material Adverse
Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (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 any Transaction Document.
“
Money Laundering
Laws
” has the
meaning set forth in Section 3.1(ee).
“New York Courts”
means
the state and federal courts sitting in the City of New York, Borough of
Manhattan.
“OFAC”
has the
meaning set forth in Section 3.1(dd).
“Outside Date”
means
the thirtieth (30
th
)
calendar day following the date of this Agreement;
provided
, that if
such day should fall on a day that is not a Business Day, the Outside Date shall
be deemed the next day that is a Business Day.
"Per Share Purchase
Price"
equals
$2.40.
“Person”
means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“
PRC
” means
the People’s Republic of China, not including Taiwan, Hong Kong and
Macau.
“Proceeding”
means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Registration Rights
Agreement”
means
the Registration Rights Agreement, dated as of the date of this Agreement, among
the Company and the Investors, in the form of
Exhibit B
hereto.
“Registration
Statement”
means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Investors of the
Shares.
“Rule 144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule.
“SEC Reports”
has the
meaning set forth in Section 3.1(h).
“Securities”
has the
meaning set forth in Section 4.1(c).
“Securities Act”
means
the Securities Act of 1933, as amended.
“
Share Delivery
Date
” has the
meaning set forth in Section 4.1(c).
“Shares”
means
the shares of Common Stock issued or issuable to the Investors pursuant to this
Agreement.
“Short Sales”
include,
without limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated
brokers.
“Subsidiary”
means,
as to the Company, any “subsidiary” as defined in Rule 1-02(x) of the Regulation
S-X promulgated by the Commission under the Exchange Act.
“Trading Day”
means
(i) a day on which the Common Stock is traded on a Trading Market (other than
the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading
Market (other than the OTC Bulletin Board), a day on which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin Board, or
(iii) if the Common Stock is not quoted on any Trading Market, a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
“Trading Market”
means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global 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.
“Transaction
Documents”
means
this Agreement, the Registration Rights Agreement, the Escrow Agreement, the
Make Good Escrow Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
ARTICLE
2.
PURCHASE
AND SALE
2.1.
Closing
. Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, the Shares representing
such Investor’s Investment Amount. The Closing shall take place at the offices
of Winston & Strawn LLP, 200 Park Avenue, New York, NY 10166 on the Closing
Date or at such other location or time as the parties may agree.
2.2.
Closing
Deliveries
. (a
)
At the
Closing, the Company shall deliver or cause to be delivered to each Investor the
following (the
“Company
Deliverables”
):
(i)
a
certificate evidencing a number of Shares equal to such Investor’s Investment
Amount divided by the Per Share Purchase Price, registered in the name of such
Investor; and
(ii)
the legal
opinion of Company Counsel, in agreed form, addressed to the
Investors.
(b)
By the
Closing, each Investor shall deliver or cause to be delivered the agreements
specified in Section 5.2(d), each duly signed by such Investor (collectively,
the “
Investor
Deliverables”
).
(c)
Within
one Business Day following the date of this Agreement, each Investor shall cause
to be delivered to the Escrow Agent, its Investment Amount, in United States
dollars and in immediately available funds, by wire transfer to an account
designated in writing by the Company for such purpose in accordance with the
terms of the Escrow Agreement.
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES
3.1.
Representations and
Warranties of the Company
. The
Company hereby makes the following representations and warranties to each
Investor:
(a)
Subsidiaries
. The
Company has no direct or indirect Subsidiaries other than as specified in the
SEC Reports. Except as disclosed in
Schedule
3.1(a)
, 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.
(b)
Organization and
Qualification
. The
Company and each Subsidiary are duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. The Company
and each Subsidiary are duly qualified to conduct its respective businesses and
are in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(c)
Authorization;
Enforcement
. The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company or any Subsidiary in connection therewith.
Each Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application.
(d)
No
Conflicts
. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby do
not and will not (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) except as set forth in
Schedule
3.1(d)(ii)
,
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse
Effect.
(e)
Filings, Consents and
Approvals
. Except
as set forth in
Schedule
3.1(e)
, neither
the Company nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any United States or PRC 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 the Transaction Documents,
other than (i) the filing with the Commission of one or more Registration
Statements in accordance with the requirements of the Registration Rights
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 4.5
hereof and (v) those that have been made or obtained prior to the date of this
Agreement.
(f)
Issuance of the
Shares
. The
Shares have been duly authorized and, when issued and paid for in accordance
with the Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. The Company has reserved from its
duly authorized capital stock the shares of Common Stock issuable pursuant to
this Agreement in order to issue the Shares, the 2008 Make Good Shares and the
2009 Make Good Shares.
(g)
Capitalization
. The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company, and all shares of Common Stock reserved for issuance under
the Company’s various option and incentive plans, is specified in
Schedule
3.1(g)
. Except
as specified in
Schedule
3.1(g)
, 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 the
Transaction Documents. Except as specified in
Schedule
3.1(g)
, 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 Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Shares will not, immediately or with the passage of
time, obligate the Company to issue shares of Common Stock or other securities
to any Person (other than the Investors) 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. Except for the private placement disclosed in
the Current Report on Form 8-K filed by the Company on June 19, 2007 (the
"
June 2007
Financing
"), or as
set forth in
Schedule
3.1(g)
, during
the twelve months preceding the date hereof neither the Company nor any
Subsidiary has issued any capital stock in a private placement transaction in
the PRC, including, without limitation, in a transaction commonly referred to in
the PRC as a “1 ½ transaction.”
(h)
SEC Reports; Financial
Statements
. Except
as set forth in
Schedule
3.1(h)
, the
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the twelve months preceding the date hereof (or such shorter period as the
Company was required by law to file such reports) (the foregoing materials being
collectively referred to herein as the
“SEC Reports”
and,
together with the Schedules to this Agreement (if any), the
“Disclosure
Materials”
) on a
timely basis or has timely filed a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i)
Press
Releases
. The
press releases disseminated by the Company during the twelve months preceding
the date of this Agreement taken as a whole do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made and when made, not
misleading.
(j)
Material
Changes
. Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports, (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) neither the Company nor
any Subsidiary has incurred any liabilities (direct, indirect, 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 GAAP or required to be disclosed in filings made with the
Commission, (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 Company
or Subsidiary officer, director or Affiliate, except pursuant to existing
Company stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
(k)
Litigation
. There
is no Action which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Shares or (ii) except
as specifically disclosed in the SEC Reports, 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 of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty, except as specifically disclosed in the SEC Reports. There has
not been, and to the knowledge of the Company, there is not pending any
investigation by the Commission involving the Company or any current or former
director or officer of the Company (in his or her capacity as such). The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(l)
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 or any
Subsidiary.
(m)
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. The Company is in compliance with all effective
requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.
(n)
Regulatory
Permits
. The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate United States and PRC federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses
as described in the SEC Reports, 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.
(o)
Title to
Assets
. The
Company and the Subsidiaries have valid land use rights for all real property
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.
(p)
Patents and
Trademarks
.
Schedule
3.1(p)
sets forth all of the patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that the Company and its Subsidiaries owns or has the rights to use
(collectively, the
“Intellectual Property
Rights”
).
The Intellectual Property Rights constitute all of the patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary for use by the
Company and its Subsidiaries in connection with their respective businesses as
described in the SEC Reports. Neither the Company nor any of its Subsidiaries
has received a written or oral notice that the Intellectual Property Rights used
by any of them violates or infringes upon the rights of any Person. Except as
set forth in
Schedule
3.1(p)
,
all such Intellectual Property Rights are enforceable and to the knowledge of
the Company and its Subsidiaries, there is no existing infringement by another
Person of any of the Intellectual Property Rights. To the knowledge of the
Company and its Subsidiaries, no former or current employee, no former or
current consultant, and no third-party joint developer of the Company or its
Subsidiaries has any Intellectual Property Rights made, developed, conceived,
created or written by the aforesaid employee, consultant or third-party joint
developer during the period of his or her retention by, or joint venture with,
such Company or Subsidiary which can be asserted against any of the Company or
any such Subsidiary.
The
Intellectual Property Rights and the owner thereof or agreement through which
they are licensed to any of
the
Company or its Subsidiaries
are set
forth on
Schedule
3.1(p)
. By the
Closing, the Company shall have entered into agreements by which it is granted
irrevocable, exclusive, royalty-free licenses on all Intellectual Property
Rights that are registered to or owned by any Person other than the Company or
its predecessor. Such agreements together with the agreements referenced in
Schedule
3.1(p)
are
collectively the “
Intellectual Property Rights
Licensing Agreements
.” The
Company
and its Subsidiaries
will
take such action as may be required, including making
and maintaining the filings set forth in
Schedule
3.1(p)
and
shall cause any such transfers of Intellectual Property Rights to the
Company to be granted as is required in order for the Company to become the
registered owner (in its current name) of all such Intellectual Property Rights
(including, without limitation, the entering into of any Intellectual Property
Rights Licensing Agreements as may be necessary and the filing and maintaining
of any information with the relevant PRC authority which relate to the change of
name for those Intellectual Property Rights currently in the name of an entity
other than the Company).
(q)
Insurance
. Except
as disclosed in
Schedule
3.1(q)
, 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.
(r)
Transactions With Affiliates
and Employees
. Except
as set forth in the SEC Reports, 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.
(s)
Internal Accounting
Controls
. The
Company and the Subsidiaries 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 GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate 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 certifying officers by others within those
entities, particularly during the period in which the Company’s Form 10-KSB or
10-QSB, as the case may be, is being prepared. The Company’s certifying officers
have evaluated the effectiveness of the Company’s controls and procedures in
accordance with Item 307 of Regulation S-B under the Exchange Act for the
Company’s most recently ended fiscal quarter or fiscal year-end (such date, the
“Evaluation Date”
). The
Company presented in its most recently filed Form 10-KSB or Form 10-QSB the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 308(c) of
Regulation S-B under the Exchange Act) or, to the Company’s knowledge, in other
factors that could significantly affect the Company’s internal
controls.
(t)
Solvency
. Based
on the financial condition of the Company as of the Closing Date (and assuming
that the Closing 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).
(u)
Certain
Fees
. Except
as described in
Schedule
3.1(u)
, 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 Investors shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to written agreements executed by such
Investor which fees or commissions shall be the sole responsibility of such
Investor) 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.
(v)
Certain Registration
Matters
.
Assuming the accuracy of the Investors’ representations and warranties set forth
in Section 3.2(b)-(e), no registration under the Securities Act is required for
the offer and sale of the Shares by the Company to the Investors under the
Transaction Documents. The Company is eligible to register its Common Stock for
resale by the Investors under Form S-1 promulgated under the Securities Act.
Except as set forth on
Schedule
3.1(v)
, the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
(w)
Listing and Maintenance
Requirements
. Except
as specified in the SEC Reports, the Company has not, in the two years preceding
the date hereof, received notice from any Trading Market to the effect that the
Company is not in compliance with the listing or maintenance requirements
thereof. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the
Trading Market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Shares under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the Common
Stock is currently listed or quoted, and no approval of the shareholders of the
Company thereunder is required for the Company to issue and deliver to the
Investors the Shares contemplated by Transaction Documents.
(x)
Investment
Company
. The
Company is not, and is not an Affiliate of, and immediately following the
Closing will not have become, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.
(y)
Application of Takeover
Protections
. The
Company has taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Articles of Incorporation (or similar charter documents) or
the laws of its state of incorporation that is or could become applicable to the
Investors as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company’s issuance of the Shares and the
Investors’ ownership of the Shares.
(z)
No Additional
Agreements
. The
Company does not have any agreement or understanding with any Investor with
respect to the transactions contemplated by the Transaction Documents other than
as specified in the Transaction Documents.
(aa)
Consultation with
Auditors
. The
Company has consulted its independent auditors concerning the accounting
treatment of the transactions contemplated by the Transaction Documents, and in
connection therewith has furnished such auditors complete copies of the
Transaction Documents.
(bb)
Foreign Corrupt Practices
Act
. Neither
the Company nor any Subsidiary, nor to the knowledge of the Company, any agent
or other person acting on behalf of any of the Company or any Subsidiary, has,
directly or indirectly, (i) used any funds, or will use any proceeds from the
sale of the Shares, for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made
any unlawful payment to foreign or domestic government officials or employees or
to any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company or any
Subsidiary (or made by any Person acting on their behalf of which the Company is
aware) which is in violation of law, or (iv) has violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder.
(cc)
PFIC
. Neither
the Company nor any Subsidiary is or intends to become a “passive foreign
investment company” within the meaning of Section 1297 of the U.S. Internal
Revenue Code of 1986, as amended.
(dd)
OFAC
. Neither
the Company nor any Subsidiary nor, to the knowledge of the Company, any
director, officer, agent, employee, Affiliate or Person acting on behalf of the
Company or any Subsidiary is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“
OFAC
”); and
the Company will not directly or indirectly use the proceeds of the sale of the
Shares, or lend, contribute or otherwise make available such proceeds to any
Subsidiary, joint venture partner or other Person or entity, towards any sales
or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country
sanctioned by OFAC or for the purpose of financing the activities of any Person
currently subject to any U.S. sanctions administered by OFAC.
(ee)
Money Laundering
Laws
. The
operations of each of the Company and any Subsidiary are and have been conducted
at all times in compliance with the money laundering statutes of applicable
jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any
applicable governmental agency (collectively, the “
Money Laundering
Laws
”) and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company and/or any Subsidiary
with respect to the Money Laundering Laws is pending or, to the best knowledge
of the Company, threatened.
(ff)
Additional PRC
Representations and Warranties
.
(i)
All
material consents, approvals, authorizations or licenses requisite under PRC law
for the due and proper establishment and operation of the
Company
and the Subsidiaries
have
been duly obtained from the relevant PRC governmental authorities and are in
full force and effect.
(ii)
All
filings and registrations with the PRC governmental authorities required in
respect of the Company and the Subsidiaries and their operations including,
without limitation, the registration with the Ministry of Commerce, the State
Administration of Industry and Commerce, the State Administration for Foreign
Exchange, tax bureau and customs authorities have been duly completed in
accordance with the relevant PRC rules and regulations, except where, the
failure to complete such filings and registrations does not, and would not,
individually or in the aggregate, have a Material Adverse Effect.
(iii)
The
Company and the Subsidiaries have complied with all relevant PRC laws and
regulations regarding the contribution and payment of its registered share
capital, the payment schedule of which has been approved by the relevant PRC
governmental authorities. There are no outstanding rights of, or commitments
made by the Company or any Subsidiary to sell any of their respective equity
interests.
(iv)
Neither
the Company nor any Subsidiary is in receipt of any letter or notice from any
relevant PRC governmental authority notifying it of the revocation, or otherwise
questioning the validity, of any licenses or qualifications issued to it or any
subsidy granted to it by any PRC governmental authority for non-compliance with
the terms thereof or with applicable PRC laws, or the need for compliance or
remedial actions in respect of the activities carried out by the Company or such
Subsidiary, except such revocation as does not, and would not, individually or
in the aggregate, have a Material Adverse Effect.
(v)
The
Company and the Subsidiaries have conducted their respective business activities
within their permitted scope of business or have otherwise operated their
respective businesses in compliance with all relevant legal requirements and
with all requisite licenses and approvals granted by competent PRC governmental
authorities other than such non-compliance that do not, and would not,
individually or in the aggregate, have a Material Adverse Effect. As to
licenses, approvals and government grants and concessions requisite or material
for the conduct of any part of the Company or any Subsidiaries’ business which
is subject to periodic renewal, neither the Company nor such Subsidiary has any
knowledge of any grounds on which such requisite renewals will not be granted by
the relevant PRC governmental authorities.
(vi)
With
regard to employment and staff or labor, the Company and the Subsidiaries have
complied with all applicable PRC laws and regulations in all material respects,
including without limitation, laws and regulations pertaining to welfare funds,
social benefits, medical benefits, insurance, retirement benefits, pensions or
the like, other than such non-compliance that do not, and would not,
individually or in the aggregate, have a Material Adverse Effect.
(gg)
Independent
Board
. The
Company has a Board of Directors consisting of at least five members, the
majority of which are independent directors, as defined by the rules of the
Nasdaq Stock Market.
(hh)
Compliance with June 2007
Financing
. Except
as set forth on
Schedule
3.1(hh)
, the
Company is in compliance with all covenants and provisions set forth in the
documents governing the June 2007 Financing.
(ii)
Disclosure
. The
Company confirms that neither it nor any Person acting on its behalf has
provided any Investor or its respective agents or counsel with any information
that the Company believes constitutes material, non-public information
concerning the Company, the Subsidiaries or their respective businesses, except
insofar as the existence and terms of the proposed transactions contemplated
hereunder may constitute such information. The Company understands and confirms
that the Investors will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company. All disclosure provided to
the Investors regarding the Company, the Subsidiaries or their respective
businesses 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 and any business plan or investor presentation provided by the
Company or any Person acting on the Company's behalf) 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.
3.2.
Representations and
Warranties of the Investors
. Each
Investor hereby, for itself and for no other Investor, represents and warrants
to the Company as follows:
(a)
Organization;
Authority
. Such
Investor is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and otherwise
to carry out its obligations thereunder. The execution, delivery and performance
by such Investor of the transactions contemplated by this Agreement has been
duly authorized by all necessary corporate or, if such Investor is not a
corporation, such partnership, limited liability company or other applicable
like action, on the part of such Investor. Each of this Agreement and the
Registration Rights Agreement has been duly executed by such Investor, and when
delivered by such Investor in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Investor, enforceable against
it in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(b)
Investment
Intent
. Such
Investor is acquiring the Shares as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Shares or any part thereof, without prejudice, however, to such Investor’s right
at all times to sell or otherwise dispose of all or any part of such Shares in
compliance with applicable federal and state securities laws. Subject to the
immediately preceding sentence, nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Shares for any period of
time. Such Investor is acquiring the Shares hereunder in the ordinary course of
its business. Such Investor does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the
Shares.
(c)
Investor
Status
. At the
time such Investor was offered the Shares, it was, and at the date hereof it is,
an “accredited investor” as defined in Rule 501(a) under the Securities Act.
Such Investor is not a registered broker-dealer under Section 15 of the Exchange
Act.
(d)
General
Solicitation
. Such
Investor is not purchasing the Shares as a result of any advertisement, article,
notice or other communication regarding the Shares published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general
advertisement.
(e)
Access to
Information
. Such
Investor acknowledges that it has reviewed the Disclosure Materials and has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Shares and the merits and risks of
investing in the Shares; (ii) access to information about the Company and the
Subsidiaries and their respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Investor or its representatives or counsel
shall modify, amend or affect such Investor’s right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction
Documents.
(f)
Certain Trading
Activities
. Such
Investor has not directly or indirectly, nor has any Person acting on behalf of
or pursuant to any understanding with such Investor, engaged in any transactions
in the securities of the Company (including, without limitations, any Short
Sales involving the Company’s securities) since the earlier to occur of (1) the
time that such Investor was first contacted by the Company or Roth Capital
Partners, LLC regarding an investment in the Company and (2) the 30
th
day
prior to the date of this Agreement. Such Investor covenants that neither it nor
any Person acting on its behalf or pursuant to any understanding with it will
engage in any transactions in the securities of the Company (including Short
Sales) prior to the time that the transactions contemplated by this Agreement
are publicly disclosed.
(g)
Independent Investment
Decision
. Such
Investor has independently evaluated the merits of its decision to purchase
Shares pursuant to the Transaction Documents, and such Investor confirms that it
has not relied on the advice of any other Investor’s business and/or legal
counsel in making such decision. Such Investor has not relied on the business or
legal advice of Roth Capital Partners, LLC or any of its agents, counsel or
Affiliates in making its investment decision hereunder, and confirms that none
of such Persons has made any representations or warranties to such Investor in
connection with the transactions contemplated by the Transaction
Documents.
The
Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE
4.
OTHER
AGREEMENTS OF THE PARTIES
4.1. (a)
Shares
may only be disposed of in compliance with state and federal securities laws. In
connection with any transfer of the Shares other than pursuant to an effective
registration statement, to the Company, to an Affiliate of an Investor or in
connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to provide to the Company 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 transfer does
not require registration of such transferred Shares under the Securities
Act.
(b)
Certificates
evidencing Securities (as defined in Section 4.1(c)) will contain the following
legend, until such time as they are not required under Section
4.1(c):
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT SECURED BY SUCH SECURITIES.
The
Company acknowledges and agrees that an Investor may from time to time pledge,
and/or grant a security interest in some or all of the Securities pursuant to a
bona fide margin agreement in connection with a bona fide margin account and, if
required under the terms of such agreement or account, such Investor may
transfer pledged or secured Shares to the pledgees or secured parties. Such a
pledge or transfer would not be subject to approval or consent of the Company
and no legal opinion of legal counsel to the pledgee, secured party or pledgor
shall be required in connection with the pledge, but such legal opinion may be
required in connection with a subsequent transfer following default by the
Investor transferee of the pledge. No notice shall be required of such pledge.
At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer thereof including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of selling stockholders thereunder. Except
as otherwise provided in Section 4.1(c), any Securities subject to a pledge or
security interest as contemplated by this Section 4.1(b) shall continue to bear
the legend set forth in this Section 4.1(b) and be subject to the restrictions
on transfer set forth in Section 4.1(a).
(c)
Certificates
evidencing Shares and Make Good Shares, if ever Make Good Shares are due to be
delivered pursuant to the Transaction Documents (collectively with the Shares,
the
“Securities”
), shall
not contain any legend (including the legend set forth in Section 4.1(b)): (i)
following a sale or transfer of such Securities pursuant to an effective
registration statement, or (ii) following a sale or transfer of such Securities
pursuant to Rule 144 (assuming the transferee is not an Affiliate of the
Company), or (iii) while such Securities are eligible for sale by the selling
Investor without volume restrictions under Rule 144. The Company agrees that
following the Effective Date or such other time as legends are no longer
required to be set forth on certificates representing Securities under this
Section 4.1(c), it will, no longer than three Trading Days following the
delivery by an Investor to the Company or the Transfer Agent of a certificate
representing such Securities containing a restrictive legend, deliver or cause
to be delivered to such investor Securities which are free of all restrictive
and other legends. If the Company is then eligible, certificates for Securities
subject to legend removal hereunder shall be transmitted by the Transfer Agent
to an Investor by crediting the prime brokerage account of such Investor with
the Depository Trust Company System as directed by such Investor. If an Investor
shall make a sale or transfer of Securities 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 the
applicable Securities 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 Securities delivery being the
“Share Delivery
Date”
) and (1)
the Company shall fail to deliver or cause to be delivered to such Investor a
certificate representing such Securities that is free from all restrictive or
other legends by the third Trading Day following the Share Delivery Date and (2)
following such third Trading Day after the Share Delivery Date and prior to the
time such Securities are received free from restrictive legends, the Investor,
or any third party on behalf of such Investor, purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Investor of such Securities (a
"Buy-In"
), then,
in addition to any other rights available to the Investor under the Transaction
Documents and applicable law, the Company shall pay in cash to the Investor (for
costs incurred either directly by such Investor 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 Investor as a result of the sale to which such Buy-In relates.
The Investor shall provide the Company written notice indicating the amounts
payable to the Investor in respect of the Buy-In. 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
.
4.2.
Furnishing of
Information
. As long
as any Investor owns any Securities, 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 Investor owns Securities, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Investors and make publicly available in accordance with Rule
144(c) such information as is required for the Investors to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell the Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.3.
Integration
. 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 Investors, 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 securities to
the Investors.
4.4.
Subsequent
Registrations
. Other
than pursuant to the Registration Rights Agreement and as set forth on Schedule
4.4, prior to the first to occur of (a) the Effective Date of a Registration
Statement resulting in all Registrable Securities (as defined in the
Registration Rights Agreement) being registered for resale pursuant to one or
more effective Registration Statements or (b) such time as all Registrable
Securities may be sold by the Investors without volume restrictions pursuant to
Rule 144, the Company may not file any registration statement (other than on
Form S-8) with the Commission with respect to any securities of the
Company.
4.5.
Securities Laws Disclosure;
Publicity
. By 9:00
a.m. (New York City time) on the Trading Day following the execution of this
Agreement, and by 9:00 a.m. (New York City time) on the Trading Day following
the Closing Date, the Company shall issue press releases disclosing the
transactions contemplated hereby and the Closing. On the Trading Day following
the execution of this Agreement the Company will file a Current Report on Form
8-K disclosing the material terms of the Transaction Documents (and attach as
exhibits thereto the Transaction Documents), and on the Trading Day following
the Closing Date the Company will file an additional Current Report on Form 8-K
to disclose the Closing. In addition, the Company will make such other filings
and notices in the manner and time required by the Commission and the Trading
Market on which the Common Stock is listed. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Investor, or include the
name of any Investor in any filing with the Commission (other than a
Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the Exchange
Act) or any regulatory agency or Trading Market, without the prior written
consent of such Investor, except to the extent such disclosure is required by
law or Trading Market regulations.
4.6.
Limitation on Issuance of
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.
4.7.
Indemnification of
Investors
. In
addition to the indemnity provided in the Registration Rights Agreement, the
Company will indemnify and hold the Investors and their directors, officers,
shareholders, partners, employees and agents (each, an
“Investor 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 Investor 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
Investor 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. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 4.7 shall be the same as those set forth in
Section 5 of the Registration Rights Agreement.
4.8.
Non-Public
Information
. The
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide any Investor or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Investor shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that each Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
4.9.
Listing of
Shares
. The
Company agrees, (i) if the Company applies to have the Common Stock traded on
any other Trading Market, it will include in such application the Shares, and
will take such other action as is necessary or desirable to cause the 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 its
Common Stock 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.
4.10.
Use of
Proceeds
. The
Company will use the net proceeds from the sale of the Shares hereunder 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.
4.11.
Make Good Shares
.
(a)
The
Company agrees that in the event that the After Tax Net Income (as defined
below) reported in the 2008 Annual Report is less than $4,800,000 (the
“2008 Guaranteed
ATNI”
), the
Company will transfer to each Investor on a pro-rata basis (determined by
dividing each Investor’s Investment Amount by the aggregate of all Investment
Amounts delivered to the Company by the Investors hereunder) for no
consideration other than their respective Investment Amounts paid to the Company
at Closing, the 2008 Make Good Shares. The
“2008 Make Good
Shares”
means
1,000,000 shares of Common Stock (as equitably adjusted for any stock splits,
stock combinations, stock dividends or similar transactions) required to be
deposited with the Make Good Escrow Agent pursuant to the Make Good Escrow
Agreement.
In the
event that the After Tax Net Income reported in the 2009 Annual Report is less
than $8,000,000 (the
“2009 Guaranteed
ATNI”
), the
Company will transfer to each Investor on a pro-rata basis (determined by
dividing each Investor’s Investment Amount by the aggregate of all Investment
Amounts delivered to the Company by the Investors hereunder) for no
consideration other than their respective Investment Amounts paid to the Company
at Closing, the 2009 Make Good Shares. The
“2009 Make Good
Shares”
means
1,000,000 shares of Common Stock (as equitably adjusted for any stock splits,
stock combinations, stock dividends or similar transactions) required to be
deposited with the Make Good Escrow Agent pursuant to the Make Good Escrow
Agreement. In the event that the After Tax Net Income reported in the 2008
Annual Report is equal to or greater than the 2008 Guaranteed ATNI, no transfer
of the 2008 Make Good Shares shall be required by the Company to the Investors
and such 2008 Make Good Shares be returned to the Company in accordance with the
Make Good Escrow Agreement. In the event that the After Tax Net Income reported
in the 2009 Annual Report is equal to or greater than the 2009 Guaranteed ATNI,
no transfer of the 2009 Make Good Shares shall be required by the Company to the
Investors and such 2009 Make Good Shares shall be returned to the Company in
accordance with the Make Good Escrow Agreement.
(b)
Any
required transfer of 2008 Make Good Shares or 2009 Make Good Shares shall be
made to the Investors or the Company, as applicable, within 10 Business Days
after the date which the 2008 Annual Report or 2009 Annual Report, as
applicable, is filed.
(c)
Notwithstanding
anything to the contrary contained herein, in determining whether the Company
has achieved either the 2008 Guaranteed ATNI or 2009 Guaranteed ATNI, the
Company may disregard any compensation charge or expense required to be
recognized by the Company under GAAP resulting from the release of the 2008 Make
Good Shares or 2009 Make Good Shares (as relevant) to the Company if and to the
extent such charge or expense is specified in the Company’s independent
auditor’s report for the relevant year, as filed with the Commission. In
determining whether the Company has achieved either the 2008 Guaranteed ATNI or
2009 Guaranteed ATNI (as the case may be), any liquidated damages payable
pursuant to the Transaction Documents shall not be included as expenses of the
Company. If prior to the third anniversary of the filing of either of the 2008
Annual Report or the 2009 Annual Report (as the case may be), the Company or
their auditors report or recognize that the financial statements contained in
such report are subject to amendment or restatement such that the Company would
recognize or report adjusted After Tax Net Income of less than either of the
2008 Guarantee ATNI or the 2009 Guaranteed ATNI (as the case may be), then
notwithstanding any prior return of 2008 Make Good Shares or 2009 Make Good
Shares to the Company, the Company will, within 10 Business Days following the
earlier of the filing of such amendment or restatement or recognition, deliver
the relevant 2008 Make Good Shares or 2009 Make Good Shares to the Investors.
“After Tax Net
Income”
shall
mean the Company’s income after taxes for the fiscal year ending December 31,
2008 or December 31, 2009 (as the case may be) in each case determined in
accordance with GAAP as reported in the 2008 Annual Report or 2009 Annual Report
(as the case may be).
(d)
The
Company shall notify the Investors as soon as the 2008 Make Good Shares and 2009
Make Good Shares have been deposited with the Make Good Escrow Agent. The
Company understands and agrees that the Investors’ right to receive 2008 and
2009 Make Good Shares pursuant to this Section 4.11 and the Make Good Escrow
Agreement shall continue to run to the benefit of each Investor even if such
Investor shall have transferred or sold all or any portion of its Shares, and
that each Investor shall have the right to assign its rights to receive all or
any such shares of Common Stock to other Persons in conjunction with negotiated
sales or transfers of any of its Shares. The Company represents and warrants
that it has carefully considered and understands its obligations and rights
under this Section 4.11 and the Make Good Escrow Agreement, and in furtherance
thereof (x) has consulted with its legal and other advisors with respect thereto
and (y) hereby forever waives and agrees that it may not assert any equitable
defenses in any Proceeding involving the Make Good Shares.
(e)
The
Company covenants and agrees that upon any transfer of 2008 Make Good Shares or
2009 Make Good Shares to the Investors in accordance with the Make Good Escrow
Agreement, the Company shall promptly instruct its transfer agent to reissue
such 2008 Make Good Shares or 2009 Make Good Shares in the applicable Investor’s
name and deliver the same as directed by such Investor.
(f)
If any
term or provision of this Section 4.11 contradicts or conflicts with any term or
provision of the Make Good Escrow Agreement, the terms of the Make Good Escrow
Agreement shall control.
4.12.
Chief Financial
Officer
. Within 45 days of the Closing Date, the Company will hire a new
full-time chief financial officer who is fluent in English and an expert in (x)
GAAP and (y) auditing procedures and compliance for United States public
companies. Following the hiring of such Qualified CFO, the Company will timely
file a Current Report on Form 8-K disclosing the information required by Item
5.02 of Form 8-K.
ARTICLE
5.
CONDITIONS
PRECEDENT TO CLOSING
5.1.
Conditions Precedent to the
Obligations of the Investors to Purchase Shares
. The
obligation of each Investor to acquire Shares at the Closing is subject to the
satisfaction or waiver by such Investor, at or before the Closing, of each of
the following conditions:
(a)
Representations and
Warranties
. The
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date when made and as of the Closing
as though made on and as of such date;
(b)
Performance
. The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the
Closing;
(c)
No
Injunction
. No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction Documents;
(d)
Adverse
Changes
. Since
the date of execution of this Agreement, no event or series of events shall have
occurred that reasonably could have or result in a Material Adverse
Effect;
(e)
No Suspensions of Trading in
Common Stock; Listing
. Trading
in the Common Stock shall not have been suspended by the Commission or any
Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
a Trading Market;
(f)
Company
Agreements
. The
Company shall have delivered:
(i)
The
Closing Escrow Agreement, duly executed by the Company and the Escrow Agent;
(ii)
The Make
Good Escrow Agreement, duly executed by the Company and the Make Good Escrow
Agent; and
(iii)
The
Registration Rights Agreement, duly executed by the Company.
(g)
Company
Deliverables
. The
Company shall have delivered the Company Deliverables in accordance with Section
2.2(a);
(h)
Deposit of Make Good
Shares
. The
Company shall have deposited 2,000,000 shares of Common Stock (as equitably
adjusted for any stock splits, stock combinations, stock dividends or similar
transactions) into escrow in accordance with the Make Good Escrow Agreement
along with bank signature stamped stock powers executed in blank (or such other
signed instrument of transfer acceptable to the Company’s transfer agent);
and
(i)
Termination
. This
Agreement shall not have been terminated as to such Investor in accordance with
Section 6.5.
5.2.
Conditions Precedent to the
Obligations of the Company to sell Shares
. The
obligation of the Company to sell Shares at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:
(a)
Representations and
Warranties
. The
representations and warranties of each Investor contained herein shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made on and as of such date;
(b)
Performance
. Each
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing;
(c)
No
Injunction
. No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by the Transaction Documents;
(d)
Investor
Deliverables
. Each
Investor shall have delivered the Registration Rights Agreement, the Closing
Escrow Agreement and the Make Good Escrow Agreement, each duly executed by such
Investor; and
(e)
Termination
. This
Agreement shall not have been terminated as to such Investor in accordance with
Section 6.5.
ARTICLE
6.
MISCELLANEOUS
6.1.
Fees and
Expenses
. Each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of the
Transaction Documents. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Shares.
6.2.
Entire
Agreement
. The
Transaction Documents, together with the Exhibits and Schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements, understandings, discussions and
representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.
6.3.
Notices
. Any and
all notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile (provided the sender receives a machine-generated
confirmation of successful transmission) at the facsimile number specified in
this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section on
a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (c) the Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If
to the Company:
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China
Solar & Clean Energy Solutions, Inc.
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Building
3 No. 28, Feng Tai North Road, Beijing
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People’s
Republic of China 100071
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Attn:
Chief Executive Officer
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Facsimile:
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With
a copy to:
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Guzov
Ofsink, LLC
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600
Madison Avenue, 14
th
Floor
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New
York, NY 10022
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Facsimile:
(212) 688-7273
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Attn.:
Darren L. Ofsink, Esq.
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If
to an Investor:
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To
the address set forth under such Investor’s name on the signature pages
hereof;
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or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.
6.4.
Amendments; Waivers; No
Additional Consideration
. No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company and the Investors holding a majority of the
Shares. 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 Investor to amend or
consent to a waiver or modification of any provision of any Transaction Document
unless the same consideration is also offered to all Investors who then hold
Shares. Without the written consent or the affirmative vote of each Investor
affected thereby, an amendment or waiver under this Section 6.4 may not waive or
amend any Transaction Document the effect of which would be to permit the
Company to (1) name any Investor as an underwriter in a Registration Statement
without such Investor’s specific written consent thereto, or (2) not include any
Registrable Securities (as defined in the Registration Rights Agreement) of an
Investor in a Registration Statement due to their refusal to be named as an
underwriter therein, in each case, other than in accordance with Article 2 of
the Registration Rights Agreement.
6.5.
Termination
. This
Agreement may be terminated prior to Closing:
(a)
by
written agreement of the Investors and the Company, a copy of which shall be
provided to the Escrow Agent; and
(b)
by the
Company or an Investor (as to itself but no other Investor) upon written notice
to the other and to the Escrow Agent, if the Closing shall not have taken place
by 6:30 p.m. Eastern time on the Outside Date;
provided
, that
the right to terminate this Agreement under this Section 6.5(b) shall not
be available to any Person whose failure to comply with its obligations under
this Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such time.
In the
event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Investors. Upon a termination in accordance with this
Section 6.5, the Company and the terminating Investor(s) shall not have any
further obligation or liability (including as arising from such termination) to
the other and no Investor will have any liability to any other Investor under
the Transaction Documents as a result therefrom.
6.6.
Construction
. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction
Documents.
6.7.
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 Investors. Any Investor may assign any or all of its rights under
this Agreement to any Person to whom such Investor 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
“Investors.”
6.8.
No Third-Party
Beneficiaries
. 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 as otherwise set forth
in Section 4.7 (as to each Investor Party) and that Roth Capital Partners, LLC
is a third party beneficiary of the Company's representations and warranties
contained herein.
6.9.
Governing
Law
. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the New York Courts. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any such New York Court, or
that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence a Proceeding to enforce any provisions of
a Transaction Document, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such Proceeding.
6.10.
Survival
. The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Shares.
6.11.
Execution
. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
6.12.
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.
6.13.
Rescission and Withdrawal
Right
.
Notwithstanding anything to the contrary contained in (and without limiting any
similar provisions of) the Transaction Documents, whenever any Investor
exercises a right, election, demand or option under a Transaction Document and
the Company does not timely perform its related obligations within the periods
therein provided, then such Investor may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
6.14.
Replacement of
Shares
. If any
certificate or instrument evidencing any Shares is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Shares. If a
replacement certificate or instrument evidencing any Shares is requested due to
a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
6.15.
Remedies
. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Investors and the Company will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be
adequate.
6.16.
Payment Set
Aside
. To the
extent that the Company makes a payment or payments to any Investor pursuant to
any Transaction Document or an Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
6.17.
Independent Nature of
Investors’ Obligations and Rights
. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Shares pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Shares or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
6.18.
Limitation of
Liability
.
Notwithstanding anything herein to the contrary, the Company acknowledges and
agrees that the liability of an Investor arising directly or indirectly, under
any Transaction Document of any and every nature whatsoever shall be satisfied
solely out of the assets of such Investor, and that no trustee, officer, other
investment vehicle or any other Affiliate of such Investor or any investor,
shareholder or holder of shares of beneficial interest of such a Investor shall
be personally liable for any liabilities of such Investor.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
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CHINA SOLAR & CLEAN ENERGY
SOLUTIONS, INC.
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By:
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Name:
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Title
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOR INVESTORS FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
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NAME OF
INVESTOR
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By:
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Name:
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Title
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Investment Amount: $
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Tax ID
No.:
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ADDRESS FOR
NOTICE
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c/o:
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Street:
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City/State/Zip:
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Attention:
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Tel:
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Fax:
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DELIVERY
INSTRUCTIONS
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(if different from above)
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c/o:
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Street:
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City/State/Zip:
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Attention:
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Tel:
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Annex A
SCHEDULE OF
BUYERS
(1)
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(2)
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Buyer
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Address and
Facsimile
Number
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Disclosure Schedules to the
Securities Purchase Agreement, dated as of February_, 2008 (the “Agreement”), by
and between China Solar & Clean Energy, Inc., a Nevada corporation (the
“Company”), and the investors listed on the Schedule of Buyers attached hereto
as
Annex
A
and identified on the signature
pages hereto (each, an “Investor” and collectively, the
“Investors”).
All
capitalized terms used but not defined herein shall have the meanings as defined
in the Agreement, unless otherwise provided herein.
This
Disclosure Schedule shall be construed with and be deemed as an integral part of
the Agreement to the same extent as if the same had been set forth in their
entirety therein. This Disclosure Schedule is intended only to qualify and limit
the representations and warranties of the Company in the Agreement and shall not
be deemed to expand in any way the scope or effect of any such representations
and warranties.
The
Disclosure Schedule indicates the section and, if applicable, the subsection of
the Agreement to which it relates, but shall also qualify such other sections or
subsections in the Agreement provided the disclosure is in sufficient detail to
enable a reasonable person to identify such other section or subsection to which
such information is responsive.
Headings
have been inserted in the sections of this Disclosure Schedule for convenience
of reference only and shall to no extent have the effect of amending or changing
the express language of the corresponding sections in the
Agreement.
Where the
terms of a contract, lease, or agreement have been summarized or described in
this Disclosure Schedule, such summary or description does not purport to be a
complete statement of the material terms of such contract, lease, agreement or
other disclosure item but is a sufficient statement of the matters required to
be disclosed in such description.
SCHEDULE 3.1(a)
Corporate
Structure
The
following diagram sets forth our current corporate structure:
SCHEDULE 3.1(d)(ii)
June 2007 Private
Placement
Reference
is made to the Current Report on Form 8-K filed on June 19, 2007 for a
description of the private financing completed on June13, 2007 and the
transaction documents pertaining thereto.
As
described in that 8-K, under the Securities Purchase Agreement dated June 13,
2007 between the Company, Barron Partners, LP and the other investors (the
“
June 07
SPA
”) the
Company cannot enter into any transaction that have any reset features that
could result in additional shares being issued. In addition, each investor in
that transaction has the right to participate pro rata in any financing within
eighteen months subsequent to the closing. Accordingly, the consent of those
investors is required for this transaction.
Under the
Registration Rights Agreement dated as of June 13, 2007, by and among the
Company and the investors (the “
June 07 Registration Rights
Agreement
”), the
Company was required to prepare and file a registration statement covering the
sale of covering the sale of all of the “registrable securities” as defined
therein. On February 7, 2008 a registration statement with respect to certain of
the “registrable securities” was declared effective. The Company is required to
file additional registration statements to register the remaining “registrable
securities” on the earliest date permissible under SEC guidelines. The Company
is not permitted to file any registration statement with respect to other
securities if the effect thereof would be to impair the ability of the investors
to have registered the maximum number of “registrable securities” which are
permitted based on SEC Guidance. In addition, under the terms of the June 07
Registration Rights Agreement, the investors have certain piggyback registration
rights with respect to any other registration statements. Accordingly the
consent of those investors is required.
Under the
June 07 Registration Rights Agreement “
Registrable
Securities
” is
defined to mean and include the Shares issuable upon conversion of the Series A
Preferred Stock and upon exercise of the Warrants issued pursuant to the June 07
SPA. As to any particular Registrable Securities, such securities cease to be
Registrable Securities when (a) they have been effectively registered under the
1933 Act and disposed of in accordance with the registration statement covering
them, or (b) they are or may be freely traded without registration pursuant to
Rule 144, or (c) …
Rights under Trenwith Placement Agent
Agreement
Reference
is made to that certain Agreement, dated as of March 21, 2007 (the “Trenwith
Agreement
”
), by and
among Trenwith Securities, LLC (“Trenwith”) and the Company.
Under the
terms of the Trenwith Agreement, Trenwith was granted certain rights (including,
without limitation, the right to act as placement agent in connection with a
subsequent private placement of the Company’s securities within a period of 24
months after the closing of the June 2007 financing). Trenwith believes that it
had the right to act as placement agent with respect to this offering but the
Company has disputed that right.
SCHEDULE
3.1(e)
See
SCHEDULE 3.1(d)(ii)
SCHEDULE
3.1(g)
Authorized
capital
China Solar & Clean Energy
Solutions, Inc.
|
|
Capitalization
|
|
|
|
|
|
|
|
|
|
Authorized
Common Shares (par $.001)
|
|
|
66,666,667
|
|
|
|
|
|
|
|
Authorized
Preferred Shares (par $.001)
|
|
|
25,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Common Shares as of Feb. 9, 2008
|
|
|
|
|
|
6,255,290
|
|
|
|
|
Preferred
Shares as of Feb.9, 2008 (1)
|
|
|
|
|
|
1,774,194
|
|
|
|
|
Outstanding
Warrants as of Feb.9. 0028
|
|
|
|
|
|
5,505,559
|
|
|
|
|
Outstanding
Options as of Feb. 9, 2008
|
|
|
|
|
|
0
|
|
|
|
|
Any
Other Securities
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully
diluted shares
|
|
|
|
|
|
13,535,043
|
|
|
|
|
Plus
acquisition shares
|
|
|
|
|
|
919,705
|
|
|
|
|
Total
|
|
|
|
|
|
14,454,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
(1): the Preferred Shares excludes 900,000 shares of preferred escrowed by
Tri-state
|
Total
outstanding Series A Preferred Shares as of Feb.9, 2008
|
|
|
|
1,774,194
|
|
We are
authorized to issue 66,666,667 shares of common stock, par value $.001 per share
and 25,000,000 shares of preferred stock, par value $.001 per share, of which
3,500,000 shares have been designated as Series A Preferred Stock.
Series A Preferred Stock Outstanding:
Class A Warrants and Class B Warrants:
On
June 13, 2007 we raised $2,750,000 in a private placement
providing
for the sale to the investors for an aggregate purchase price of $2,750,000 (or
$1.55 per share) of
(i)
|
1,774,194
shares of Series A Preferred Stock (with each share convertible into one
(1) share of common stock, subject to
adjustment)
|
(ii)
|
five
year class A warrants to purchase 1,774,194 shares of common stock at an
exercise price $1.90 per share (subject to adjustment), and
|
(iii)
|
five
year class B warrants to purchase an additional 1,774,194 shares of Common
Stock at an exercise price of $2.40 per share (subject to adjustment).
|
Additional
shares of Series A Preferred Stock (not to exceed 900,000) are required to be
delivered to the investors in the event that we fail to achieve “pre tax income”
targets for of $3,000,000 the fiscal year ended December 31, 2007 and $5,500,000
for the fiscal year ended December 31, 2008.
Trenwith
Warrants:
Under the
placement agent agreement between the Company and Trenwith Securities LLC, the
Company paid Trenwith a transaction fee of $165,000 at the closing of the June
07 transaction and issued Trenwith five year warrants to purchase 106,452 shares
of common stock with an exercise price of $1.71 per share. Trenwith had also
been issued on execution of the placement agreement five year warrants to
purchase 75,000 shares of common stock with an exercise price of $2.90. Under
the terms of the placement agent agreement if any additional transaction is
completed between the Company and the June investors within 12 months of the
closing Trenwith is entitled to receive an additional fee equal to 4% of the
aggregate consideration paid by the investors.
HCI Warrants:
Pursuant
to a consulting agreement entered on July 23, 2007 between the Company and
Hayden Communications International, Inc. (“HCI”), an investor relations firm
owned by Matt Hayden we are required to pay HCI $8,500 per month and HCI was
issued 175,000 warrants at an exercise price of $2.40, half of which vest on
January 23, 2008 and the other half vests on July 23, 2008.
See
SCHEDULE 3.1(d)(ii) for a description of rights of first refusal.
Other Outstanding Warrants:
In
connection with a private placement completed on March 31, 2005 we issued
warrants to purchase 1,825,719 shares of Common stock. The warrants have an
effective exercise price of $3.01.
There are
no outstanding options.
SCHEDULE
3.1(h)
8-K:
On May
18, 2007 Deli Solar (Beijing) entered into an agreement with Tianjin Municipal
Ji County State-owned Assets Administration Commission (the “SAAC”) to purchase
51% of the equity in Tianjin Huaneng Group Energy Equipment Co., Ltd. (“Tianjin
Huaneng”) for a purchase price of RMB24,100,000 (approximately $3,149,147). The
transaction closed on July 1, 2007. In connection with this transaction we were
required to file an 8-K under Item 2.10 disclosing the closing within 4 business
days of the transaction. We filed an 8-K disclosing this transaction on
September 14, 2007.
SCHEDULE
3.1(p)
INTELLECTUAL
PROPERTY
Trademarks
Deli
Solar (Bazhou) is the holder of the following trademarks registered with the
Trademark Offices of the PRC National Industrial and Commerce Administrative
Bureau (the “PRC Trademark Offices”):
|
|
|
|
|
|
|
Trademark
|
|
Authorized
Scope
|
|
Valid
Term
|
|
Certificate
Number
|
|
|
|
|
|
|
|
Deli
Solar
|
|
Boiler
(Space Heating Utility);
|
|
03/14/2003
|
|
to
1978396
|
|
|
Solar
Hot Water Utility;
|
|
03/13/2013
|
|
|
|
|
Solar
Stove and Solar Energy
|
|
|
|
|
|
|
Collection
Heater
|
|
|
|
|
|
|
|
|
|
|
|
Du
Deli
|
|
The
same as the above
|
|
01/28/2003
|
|
to
1978532
|
|
|
|
|
01/27/2013
|
|
|
|
|
|
|
|
|
|
De
Yu
|
|
Solar
Energy Collection Heat
|
|
07/28/1998
|
|
to
1195609
|
|
|
and
Boiler (Not machine accessory)
|
|
07/27/2008
|
|
|
|
|
|
|
|
|
|
Aili
Solar (to replace our brand "Ailiyang")
|
|
Approved,
pending the trademark certificate delivery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
registered trademark is protected for a term of ten years, renewable for another
term of ten years under
the
trademark law of the PRC, so long as an application for renewal is submitted to
the PRC Trademark Offices within six months prior to the expiration of the
initial term.
We
submitted our trademark application on "Aili yang" in April 2007. We anticipate
that the PRC trademark offices will issue the notice later this year.
Patents.
Currently,
none of our products or technology is patented.
Domain names.
We own
and operate a website under the internet domain name
http://www.deli-group.com
.
Traffic to our other internet domain names www.delisolar.com and
www.AiLiYang.com are directed to that website.
SCHEDULE
3.1(q)
We
currently do not carry any product liability or other similar insurance, nor do
we have property insurance covering our plants, manufacturing equipment and
office buildings. While product liability lawsuits in the PRC are rare and we
have never experienced significant failures of its products, we cannot assure
you that we would not face liability in the event of any failure of any of its
products.
SCHEDULE
3.1(u)
We have
entered into a placement agreement Roth Capital under which we are required to
pay certain brokerage fees with respect to this transaction.
See also
Schedule 3.1(d) (ii).
SCHEDULE
3.1(v)
Under the
Registration Rights Agreement dated as of 13
th
day of
June, 2007, by and among the Company and the investors (the “
June 07 Registration Rights
Agreement
”), the
Company was required to prepare and file a registration statement covering the
sale of covering the sale of all of the “registrable securities” as defined
therein. On February 7, 2008 a registration statement with respect to certain of
the “registrable securities” was declared effective. The Company is required to
file additional registration statements to register the remaining “registrable
securities” on the earliest date permissible under SEC guidelines. The Company
is not permitted to file any registration statement with respect to other
securities if the effect thereof would be to impair the ability of the investors
to have registered the maximum number of “registrable securities” which are
permitted based on SEC Guidance. In addition, under the terms of the June 07
Registration Rights Agreement, the investors have certain piggyback registration
rights with respect to any other registration statements. Accordingly the
consent of those investors is required.
Under the
June 07 Registration Rights Agreement “
Registrable
Securities
” is
defined to mean and include the Shares issuable upon conversion of the Series A
Preferred Stock and upon exercise of the Warrants issued pursuant to the June 07
SPA. As to any particular Registrable Securities, such securities cease to be
Registrable Securities when (a) they have been effectively registered under the
1933 Act and disposed of in accordance with the registration statement covering
them, (b) they are or may be freely traded without registration pursuant to Rule
144, or (c) they have been otherwise transferred and new certificates for them
not bearing a restrictive legend have been issued by the Company and the Company
shall not have “stop transfer” instructions against them.
SCHEDULE
3.1(hh),
Under the
terms of the Securities Purchase Agreement, prior to July 13, 2007, we were
required to increase the size of our Board of Directors to five or seven and
cause the appointment of a majority of the board to be “independent directors,”
as defined by the rules of the Nasdaq Stock Market. We did not comply with
obligation until November 1, 2007. Under the terms of the Securities Purchase
Agreement we are required to pay the investors liquidated damages equal to one
percent (1%) per month of the purchase price of the then outstanding shares of
Series A Preferred Stock, in cash or in Series A Preferred Stock, at the option
of the investors, based on the number of days that such obligation is not met
beyond certain grace periods. Accordingly through November 1, 2007 we were
delinquent by 110 days in meeting this obligation. In addition, under the terms
of the securities purchase agreement, we were required, prior to August 12,2007
to appoint (i) an audit committee comprised solely of not less than three
independent directors and a (ii) compensation committee comprised of not less
than three directors, a majority of whom are independent directors. Our audit
and compensation currently each consists of two members both of whom are
independent. Accordingly, we are delinquent in our obligation. However, under
the terms of the securities purchase agreement no liquidated damages are
required to be paid for this breach during any period for which liquidated
damages are payable for failing to have an independent board. Accordingly,
damages began to accrue for breach of this provision on November 1, 2007. As of
January 15, 2008 we were delinquent by 76 days in meeting this obligation and we
are required to pay investors a total of approximately $68,750.Accordingly, we
are required to pay the investors a total of approximately
$167,750.
Under the
terms of the registration rights agreement we are required, among other things,
to use our commercially reasonable best efforts to have a registration declared
relating to the June 2007 transaction effective by January 10, 2008. The
registration statement was declared effective on February 7, 2007. As a result
of our failure to meet this schedule we are required to pay liquidated damages,
which are payable through the issuance of additional shares of Series A
Preferred Stock at the rate of 17,742 shares of Series A Preferred Stock per
month.
SCHEDULE
4.4.
See
SCHEDULE 3.1(v).
Exhibit C
REGISTRATION RIGHTS
AGREEMENT
This
Registration Rights Agreement (this
"Agreement"
) is made
and entered into as of February 25, 2008, by and among China Solar & Clean
Energy Solutions, Inc., a Nevada corporation (the
"Company"
), and
the investors signatory hereto (each a
"Investor"
and
collectively, the
"Investors"
).
This
Agreement is made in connection with the Securities Purchase Agreement, dated as
of the date hereof among the Company and the Investors (the
"Purchase
Agreement"
).
The
Company and the Investors hereby agree as follows:
1.
Definitions
.
Capitalized terms used and not otherwise defined herein that are defined in the
Purchase Agreement will have the respective meanings given such terms in the
Purchase Agreement. As used in this Agreement, the following terms have the
respective meanings set forth in this Section 1:
“2008 Delivery
Date”
means
the date on which the 2008 Make Good Shares are required to be delivered to the
Investors pursuant to the Make Good Escrow Agreement.
“2009 Delivery
Date”
means
the date on which the 2009 Make Good Shares are required to be delivered to the
Investors pursuant to the Make Good Escrow Agreement.
“Advice”
has the
meaning set forth in Section 6(d).
"
Commission
Comments
"
means
written comment
s
pertaining
solely to Rule 415
which
are received by the Company from the Commission to a filed Registration
Statement, a copy of which shall have been provided by the Company to the
Holders, which either (i) requires the Company to limit the number of
Registrable Securities which may be included therein to a number which is less
than the number sought to be included thereon as filed with the Commission or
(ii) requires the Company to either exclude Registrable Securities held by
specified Holders or deem such Holders to be underwriters with respect to
Registrable Securities they seek to include in such Registration
Statement.
“
Cut Back Shares
” has the
meaning set forth in Section 2(b).
"Effective Date"
means,
as to a Registration Statement, the date on which such Registration Statement is
first declared effective by the Commission.
“Effectiveness
Date”
means
(a) with respect to the initial Registration Statement required to be filed
pursuant to Section 2(a), the earlier of: (i) the 150
th
day
following the Closing Date and (ii) the fifth Trading Day following the date on
which the Company is notified by the Commission that the initial Registration
Statement will not be reviewed or is no longer subject to further review and
comments; (b) with respect to any additional Registration Statements required to
be filed pursuant to Section 2(a), the earlier of: (i) the 90
th
day
following the applicable Filing Date for such additional Registration
Statement(s) and (ii) the fifth Trading Day following the date on which the
Company is notified by the Commission that such additional Registration
Statement(s) will not be reviewed or is no longer subject to further review; (c)
with respect to any additional Registration Statements required to be filed
solely due to SEC Restrictions, the earlier of: (i) the 90
th
day
following the applicable Restriction Termination Date and (ii) the fifth Trading
Day following the date on which the Company is notified by the Commission that
such Registration Statement will not be reviewed or is no longer subject to
further review and comments; (d) with respect to a Registration Statement
required to be filed under Section 2(c), the earlier of: (i) the 60
th
day
following the date on which the Company becomes eligible to utilize Form S-3 to
register the resale of Common Stock;
provided
, that,
if the Commission reviews and has written comments to such filed Registration
Statement that would require the filing of a pre-effective amendment thereto
with the Commission, then the Effectiveness Date under this clause (d)(i) shall
be the 90
th
day
following the date on which the Company becomes eligible to utilize Form S-3 to
register the resale of Common Stock, and (ii) the fifth Trading Day following
the date on which the Company is notified by the Commission that the
Registration Statement will not be reviewed or is no longer subject to further
review and comments; (e) with respect to a Registration Statement required to be
filed under Section 2(d), the earlier of: (i) the 90
th
day
following the 2008 Delivery Date;
provided
, that,
if the Commission reviews and has written comments to such filed Registration
Statement that would require the filing of a pre-effective amendment thereto
with the Commission, then the Effectiveness Date under this clause (e)(i) shall
be the 120
th
day
following the 2008 Delivery Date, and (ii) the fifth Trading Day following the
date on which the Company is notified by the Commission that the Registration
Statement will not be reviewed or is no longer subject to further review and
comments and (f) with respect to a Registration Statement required to be filed
under Section 2(e), the earlier of: (i) the 90
th
day
following the 2009 Delivery Date;
provided
, that,
if the Commission reviews and has written comments to such filed Registration
Statement that would require the filing of a pre-effective amendment thereto
with the Commission, then the Effectiveness Date under this clause (f)(i) shall
be the 120
th
day
following the 2009 Delivery Date, and (ii) the fifth Trading Day following the
date on which the Company is notified by the Commission that the Registration
Statement will not be reviewed or is no longer subject to further review and
comments.
"Effectiveness
Period"
means,
as to any Registration Statement required to be filed pursuant to this
Agreement, the period commencing on the Effective Date of such Registration
Statement and ending on the earliest to occur of (a) the second anniversary of
such Effective Date, (b) such time as all of the Registrable Securities covered
by such Registration Statement have been publicly sold by the Holders of the
Registrable Securities included therein, or (c) such time as all of the
Registrable Securities covered by such Registration Statement may be sold by the
Holders without volume restrictions pursuant to Rule 144, in each case 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.
"Exchange Act"
means
the Securities Exchange Act of 1934, as amended.
"Filing Date"
means
(a) with respect to the initial Registration Statement required to be filed
pursuant to Section 2(a), the 45
th
day
following the Closing Date; (b) with respect to any additional Registration
Statements required to be filed pursuant to Section 2(a), the 15
th
day
following the Effective Date for the last Registration Statement filed pursuant
to this Agreement under Section 2(a); (c) with respect to any additional
Registration Statements required to be filed due to SEC Restrictions, the
15
th
day
following the applicable Restriction Termination Date; (d) with respect to a
Registration Statement required to be filed under Section 2(c), the
30
th
day
following the date on which the Company becomes eligible to utilize Form S-3 to
register the resale of Common Stock, (e) with respect to the Registration
Statement required to be filed under Section 2(d), the 45
th
day
following the 2008 Delivery Date (provided that if the Company is then eligible
to utilize Form S-3 to register the resale of Common Stock, the Filing Date
under this clause (e) shall be 30 days following the 2008 Delivery
Date)
and
(f)
with
respect to the Registration Statement required to be filed under Section 2(f),
the 45
th
day
following the 2009 Delivery Date (provided that if the Company is then eligible
to utilize Form S-3 to register the resale of Common Stock, the Filing Date
under this clause (f) shall be 30 days following the 2009 Delivery
Date).
"Holder"
or
"Holders"
means
the holder or holders, as the case may be, from time to time of Registrable
Securities.
“Indemnified
Party”
has the
meaning set forth in Section 5(c).
“Indemnifying
Party”
has the
meaning set forth in Section 5(c).
“Losses”
has the
meaning set forth in Section 5(a).
“New York Courts”
means
the state and federal courts sitting in the City of New York, Borough of
Manhattan.
"Proceeding"
means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement, and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Registrable
Securities”
means:
(i) the Shares, (ii) the 2008 Make Good Shares, (iii) the 2009 Make Good Shares,
(iv) any shares of Common Stock issuable upon exercise of warrants issued to any
placement agent as compensation in connection with the financing that is the
subject of the Purchase Agreement (
"Placement Agent Warrant
Shares"
) and (v)
any securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event, or any price adjustment as a
result of such stock splits, reverse stock splits or similar events with respect
to any of the securities referenced in (i)-(iv) above;
provided
,
however, that any such securities which may be sold without volume restrictions
pursuant to Rule 144 shall cease to be “Registrable Securities.”
"Registration
Statement"
means
the initial registration statement required to be filed in accordance with
Section 2(a) and any additional registration statements required to be filed
under this Agreement, including in each case the Prospectus, amendments and
supplements to such registration statements or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference therein.
“
Restriction Termination
Date
” has the
meaning set forth in Section 2(b).
"Rule 144"
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule.
"Rule 415"
means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule.
"Rule 424"
means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule.
“
SEC Restrictions
” has the
meaning set forth in Section 2(b).
"Securities Act"
means
the Securities Act of 1933, as amended.
"Shares"
means
the shares of Common Stock issued or issuable to the Investors pursuant to the
Purchase Agreement.
2.
Registration
.
(a)
On or
prior to the applicable Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of all Registrable
Securities (other than in the case of the initial Registration Statement to be
filed under this Section 2(a), the 2008 Make Good Shares and the 2009 Make Good
Shares) not already covered by an existing and effective Registration Statement
for an offering to be made on a continuous basis pursuant to Rule 415. Each
Registration Statement required to be filed under this Agreement shall be filed
on Form S-1 (or on such other form appropriate for such purpose) and contain
(except if otherwise required pursuant to written comments received from the
Commission upon a review of such Registration Statement, other than as to the
characterization of any Holder as an underwriter, which shall not occur without
such Holder’s written consent) the "Plan of Distribution" attached hereto as
Annex A
. The
Company shall cause each Registration Statement required to be filed under this
Agreement to be declared effective under the Securities Act as
soon as
possible but, in any event, no later than its Effectiveness Date, and shall use
its reasonable best efforts to keep each such Registration Statement
continuously effective during its entire Effectiveness Period. By 5:00 p.m. (New
York City time) on the Business Day immediately following the Effective Date of
each Registration Statement, the Company shall file with the Commission in
accordance with Rule 424 under the Securities Act the final prospectus to be
used in connection with sales pursuant to such Registration Statement (whether
or not such filing is technically required under such Rule). If for any reason
other than due solely to SEC Restrictions, a Registration Statement is effective
but not all outstanding Registrable Securities are registered for resale
pursuant thereto, then the Company shall prepare and file by the applicable
Filing Date an additional Registration Statement to register the resale of all
such unregistered Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415.
(b)
Notwithstanding
anything to the contrary contained in this Section 2, if the Company receives
Commission Comments, and following discussions with and responses to the
Commission in which the Company uses its reasonable best efforts and time to
cause as many Registrable Securities
(other
than the
2008
Make Good Shares and
2009
Make Good Shares, unless the
2008
Delivery Date or
2009
Delivery Date, as the case may be, shall have occurred)
for as
many Holders as possible to be included in the Registration Statement filed
pursuant to Section 2(a) without characterizing any Holder as an underwriter
(and in such regard uses its reasonable best efforts to cause the Commission to
permit the affected Holders or their respective counsel to participate in
Commission conversations on such issue together with Company Counsel, and timely
conveys relevant information concerning such issue with the affected Holders or
their respective counsel), the Company is unable to cause the inclusion of all
Registrable Securities, then the Company may, following not less than three (3)
Trading Days prior written notice to the Holders (i) remove from the
Registration Statement such Registrable Securities (the “
Cut Back Shares
”) and/or
(ii) agree to such restrictions and limitations on the registration and resale
of the Registrable Securities, in each case as the Commission may require in
order for the Commission to allow such Registration Statement to become
effective;
provided
, that in
no event may the Company name any Holder as an underwriter without such Holder’s
prior written consent (collectively, the “
SEC Restrictions
”).
Unless the SEC Restrictions otherwise require, any cut-back imposed pursuant to
this Section 2(b) shall be allocated among the Registrable Securities of the
Holders on a pro rata basis. No liquidated damages under Section 2(f) shall
accrue on or as to any Cut Back Shares, and the required Effectiveness Date for
such Registration Statement will be tolled, until such time as the Company is
able to effect the registration of the Cut Back Shares in accordance with any
SEC Restrictions (such date, the “
Restriction Termination
Date
”). From
and after the Restriction Termination Date, all provisions of this Section 2
(including, without limitation, the liquidated damages provisions, subject to
tolling as provided above) shall again be applicable to the Cut Back Shares
(which, for avoidance of doubt, retain their character as “Registrable
Securities”) so that the Company will be required to file with and cause to be
declared effective by the Commission such additional Registration Statements in
the time frames set forth herein as necessary to ultimately cause to be covered
by effective Registration Statements all Registrable Securities (if such
Registrable Securities cannot at such time be resold by the Holders thereof
without volume limitations pursuant to Rule 144).
(c)
Promptly
following any date on which the Company becomes eligible to use a registration
statement on Form S-3 to register Registrable Securities for resale, the Company
shall file a Registration Statement on Form S-3 covering all such Registrable
Securities (or a post-effective amendment on Form S-3 to the then effective
Registration Statement) and shall cause such Registration Statement to be filed
by the Filing Date for such Registration Statement and declared effective under
the Securities Act as soon as possible thereafter, but in any event prior to the
Effectiveness Date therefor.
Such
Registration Statement shall contain (except if otherwise required pursuant to
written comments received from the Commission upon a review of such Registration
Statement, other than as to the characterization of any Holder as an
underwriter, which shall not occur without such Holder’s consent) the “Plan of
Distribution” attached hereto as
Annex A
. The
Company shall use its reasonable best efforts to keep such Registration
Statement continuously effective under the Securities Act during the entire
Effectiveness Period. By 5:00 p.m. (New York City time) on the Business Day
immediately following the Effective Date of such Registration Statement, the
Company shall file with the Commission in accordance with Rule 424 under the
Securities Act the final prospectus to be used in connection with sales pursuant
to such Registration Statement (whether or not such filing is technically
required under such Rule).
(d)
On or
prior to its Filing Date, the Company shall prepare and file with the Commission
a Registration Statement covering the resale of the 2008 Make Good Shares on
Form S-3 if the Company is then eligible to utilize such Form (or on such other
form appropriate for such purpose) and shall cause such Registration Statement
to be filed by the Filing Date for such Registration Statement and declared
effective under the Securities Act as soon as possible thereafter, but in any
event prior to the Effectiveness Date therefor. Such Registration Statement
shall contain (except if otherwise required pursuant to written comments
received from the Commission upon a review of such Registration Statement, other
than as to the characterization of any Holder as an underwriter, which shall not
occur without such Holder’s consent) the “Plan of Distribution” attached hereto
as
Annex A
. The
Company shall use its reasonable best efforts to keep such Registration
Statement continuously effective under the Securities Act during the entire
Effectiveness Period which is applicable to it. By 5:00 p.m. (New York City
time) on the Business Day immediately following the Effective Date of such
Registration Statement, the Company shall file with the Commission in accordance
with Rule 424 under the Securities Act the final prospectus to be used in
connection with sales pursuant to such Registration Statement (whether or not
such filing is technically required under such Rule).
(e)
On or
prior to its Filing Date, the Company shall prepare and file with the Commission
a Registration Statement covering the resale of the 2009 Make Good Shares on
Form S-3 if the Company is then eligible to utilize such Form (or on such other
form appropriate for such purpose) and shall cause such Registration Statement
to be filed by the Filing Date for such Registration Statement and declared
effective under the Securities Act as soon as possible thereafter, but in any
event prior to the Effectiveness Date therefor. Such Registration Statement
shall contain (except if otherwise required pursuant to written comments
received from the Commission upon a review of such Registration Statement, other
than as to the characterization of any Holder as an underwriter, which shall not
occur without such Holder’s consent) the “Plan of Distribution” attached hereto
as
Annex A
. The
Company shall use its reasonable best efforts to keep such Registration
Statement continuously effective under the Securities Act during the entire
Effectiveness Period which is applicable to it. By 5:00 p.m. (New York City
time) on the Business Day immediately following the Effective Date of such
Registration Statement, the Company shall file with the Commission in accordance
with Rule 424 under the Securities Act the final prospectus to be used in
connection with sales pursuant to such Registration Statement (whether or not
such filing is technically required under such Rule).
(f)
If: (i) a
Registration Statement is not filed on or prior to its Filing Date covering the
Registrable Securities required under this Agreement
to be
included therein (if the Company files a Registration Statement without
affording the Holders the opportunity to review and comment on the same as
required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (i)), or (ii) a Registration Statement is not declared
effective by the Commission on or prior to its required Effectiveness Date or if
by the Business Day immediately following the Effective Date, the Company shall
not have filed a “final” prospectus for the Registration Statement with the
Commission under Rule 424(b) in accordance with the terms hereof (whether or not
such a prospectus is technically required by such Rule), or (iii) after its
Effective Date, without regard for the reason thereunder or efforts therefor,
such Registration Statement ceases for any reason to be effective and available
to the Holders as to all Registrable Securities to which it is required to cover
at any time prior to the expiration of its Effectiveness Period for more than an
aggregate of 30 Trading Days (which need not be consecutive) (any such failure
or breach being referred to as an
"Event,"
and for
purposes of clauses (i) or (ii) the date on which such Event occurs, or for
purposes of clause (iii) the date which such 30 Trading Day-period is exceeded,
being referred to as
"Event Date"
), then
in addition to any other rights the Holders may have hereunder or under
applicable law, on each such Event Date and on each monthly anniversary of each
such Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as partial liquidated damages and not as a penalty, equal to
1.0% of the aggregate Investment Amount paid by such Holder for Shares pursuant
to the Purchase Agreement.
The parties agree that (1) the
Company will not be liable for liquidated damages under this Agreement with
respect to any (i) warrants issued to any placement agent as compensation in
connection with the financing that is the subject of the Purchase Agreement or
(ii) Placement Agent Warrant Shares and (2) in no event will the Company be
liable for liquidated damages under this Agreement in excess of 1.0% of the
aggregate Investment Amount of the Holders in any single month and the maximum
aggregate liquidated damages payable to a Holder under this Agreement shall be
ten percent (10%) of the aggregate Investment Amount paid by such Holder
pursuant to the Purchase Agreement
. The
partial liquidated damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of an Event (except
in the case of the first Event Date), and shall cease to accrue (unless earlier
cured) upon the expiration of the Effectiveness Period.
(g)
Each
Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as
Annex B
(a
“Selling Holder
Questionnaire”
). The
Company shall not be required to include the Registrable Securities of a Holder
in a Registration Statement and shall not be required to pay any liquidated or
other damages under Section 2(f) to any Holder who fails to furnish to the
Company a fully completed Selling Holder Questionnaire at least two Trading Days
prior to the Filing Date (subject to the requirements set forth in Section
3(a)).
3.
Registration
Procedures
.
In
connection with the Company's registration obligations hereunder, the Company
shall:
(a)
Not less
than four Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, the Company shall
furnish to each Holder copies of the “Selling Stockholders” section of such
document, the “Plan of Distribution” and any risk factor contained in such
document that addresses specifically this transaction or the Selling
Stockholders, as proposed to be filed, which documents will be subject to the
review of such Holder. The Company shall not file a Registration Statement, any
Prospectus or any amendments or supplements thereto in which the “Selling
Stockholder” section thereof differs from the disclosure received from a Holder
in its Selling Holder Questionnaire (as amended or supplemented). The Company
shall not file a Registration Statement, any Prospectus or any amendments or
supplements thereto in which it (i) characterizes any Holder as an
underwriter, (ii) excludes a particular Holder due to such Holder refusing
to be named as an underwriter, or (iii) reduces the number of Registrable
Securities being registered on behalf of a Holder except pursuant to, in the
case of subsection (iii), the Commission Comments, without, in each case, such
Holder’s express written authorization.
(b)
(i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously
effective as to the applicable Registrable Securities for its Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible to any comments received from the Commission with respect to
each Registration Statement or any amendment thereto and, as promptly as
reasonably possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to such Registration
Statement that would not result in the disclosure to the Holders of material and
non-public information concerning the Company; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the Registration Statement(s) and the disposition of all Registrable
Securities covered by each Registration Statement.
(c)
Notify
the Holders as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than three Trading Days prior to such filing and, in the case of
(v) below, not less than three Trading Days prior to the financial statements in
any Registration Statement becoming ineligible for inclusion therein) and (if
requested by any such Person) confirm such notice in writing no later than one
Trading Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the Holders
that pertain to the Holders as a Selling Stockholder or to the Plan of
Distribution, but not information which the Company believes would constitute
material and non-public information); and (C) with respect to each Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state governmental
authority for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
(d)
Use its
reasonable best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e)
Furnish
to each Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto and all exhibits to the extent requested by
such Person (including those previously furnished) promptly after the filing of
such documents with the Commission.
(f)
Promptly
deliver to each Holder, without charge, as many copies of each Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(g)
Prior to
any public offering of Registrable Securities, register or qualify such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of all jurisdictions within the United States as any Holder may request, to keep
each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement(s).
(h)
Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to the Registration Statement(s), which certificates shall be free, to
the extent permitted by the Purchase Agreement, of all restrictive legends, and
to enable such Registrable Securities to be in such denominations and registered
in such names as any such Holders may request.
(i)
Upon the
occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the affected Registration Statements or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, no Registration Statement nor any Prospectus will
contain 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, in
light of the circumstances under which they were made, not
misleading.
4.
Registration
Expenses
. All
fees and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with any
Trading Market on which the Common Stock is then listed for trading, and (B) in
compliance with applicable state securities or Blue Sky laws), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5.
Indemnification
.
(a)
Indemnification by the
Company
. The
Company shall, notwithstanding any termination of this Agreement, indemnify and
hold harmless each Holder, the officers, directors, agents, investment advisors,
partners, members and employees of each of them, each Person who controls any
such Holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable costs of preparation and reasonable
attorneys' fees) and expenses (collectively, "
Losses
"), as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in any Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (2) in the case of an occurrence of
an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder
of an outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of an Advice or an amended or supplemented Prospectus,
but only if and to the extent that following the receipt of the Advice or the
amended or supplemented Prospectus the misstatement or omission giving rise to
such Loss would have been corrected. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.
(b)
Indemnification by
Holders
. Each
Holder shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents or employees of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses, as incurred, arising solely out of or based solely
upon: (x) such Holder's failure to comply with the prospectus delivery
requirements of the Securities Act or (y) any untrue statement of a material
fact contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the
extent, but only to the extent that, (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement (it
being understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or such form of Prospectus or in any amendment or supplement
thereto or (2) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
an Advice or an amended or supplemented Prospectus, but only if and to the
extent that following the receipt of the Advice or the amended or supplemented
Prospectus the misstatement or omission giving rise to such Loss would have been
corrected. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c)
Conduct of Indemnification
Proceedings
. If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an "
Indemnified Party
"), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought
(the "
Indemnifying Party
") in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying
Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees
and expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d)
Contribution
. If a
claim for indemnification under Section 5(a) or 5(b) is unavailable to an
Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
6.
Miscellaneous
.
(a)
Remedies
. In the
event of a breach by the Company or by a Holder, of any of their obligations
under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b)
No Piggyback on
Registrations
. Except
as set forth on
Schedule
3.1(v)
to the
Purchase Agreement, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the
Company in a Registration Statement other than the Registrable Securities, and
the Company shall not during the Effectiveness Period enter into any agreement
providing any such right to any of its security holders.
(c)
Compliance
. Each
Holder covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.
(d)
Discontinued
Disposition
. Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the kind
described in Section 3(c), such Holder will forthwith discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement or until it is advised in writing (the
"Advice"
) by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
(e)
Piggy-Back
Registrations
. Except
as set forth on
Schedule
3.1(e)
to the
Purchase Agreement, if at any time during the Effectiveness Period there is not
an effective Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen calendar days after receipt of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.
(f)
Amendments and
Waivers
. The
provisions of this Agreement, including the provisions of this Section 6(f), may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the same shall be in writing
and signed by the Company and the Holders of no less than a majority in interest
of the then outstanding Registrable Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of certain Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates;
provided
, further
that no amendment or waiver to any provision of this Agreement relating to
naming any Holder or requiring the naming of any Holder as an underwriter may be
effected in any manner without such Holder’s prior written consent. Section 2(a)
may not be amended or waived except by written consent of each Holder affected
by such amendment or waiver.
(g)
Notices
. Any and
all notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile (provided the sender receives a machine-generated
confirmation of successful transmission) at the facsimile number specified in
this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section on
a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (c) the Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If
to the Company:
|
China
Solar & Clean Energy Solutions, Inc.
|
|
Building
3 No. 28, Feng Tai North Road, Beijing
|
|
People’s
Republic of China 100071
|
|
Attn:
Chief Executive Officer
|
|
Facsimile:
|
|
|
With
a copy to:
|
Guzov
Ofsink, LLC
|
|
600
Madison Avenue, 14
th
Floor
|
|
New
York, NY 10022
|
|
Facsimile:
(212) 688-7273
|
|
Attn.:
Darren L. Ofsink, Esq.
|
|
|
If
to a Investor:
|
To
the address set forth under such Investor's name on the signature pages
hereto.
|
|
|
If
to any other Person who is then the registered Holder:
|
|
|
|
To
the address of such Holder as it appears in the stoc
k
transfer books of
the Company
|
or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.
(h)
Successors and
Assigns
. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the benefit of each
Holder. The Company may not assign its rights or obligations hereunder without
the prior written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.
(i)
Execution and
Counterparts
. This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j)
Governing
Law
. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement (whether brought against a party hereto or its
respective Affiliates, employees or agents) will be commenced in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, any claim that it is not personally subject to the jurisdiction
of any New York Court, or that such Proceeding has been commenced in an improper
or inconvenient forum. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such Proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
Proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of this Agreement, then the prevailing party in such Proceeding shall
be reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.
(k)
Cumulative
Remedies
. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
(l)
Severability
. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(m)
Headings
. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
(n)
Independent Nature of
Investors' Obligations and Rights
. The
obligations of each Investor under this Agreement are several and not joint with
the obligations of each other Investor, and no Investor shall be responsible in
any way for the performance of the obligations of any other Investor under this
Agreement. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement or any other Transaction Document. Each Investor
acknowledges that no other Investor will be acting as agent of such Investor in
enforcing its rights under this Agreement. Each Investor shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Investor to be joined as an additional party in any Proceeding for such
purpose. The Company acknowledges that each of the Investors has been provided
with the same Registration Rights Agreement for the purpose of closing a
transaction with multiple Investors and not because it was required or requested
to do so by any Investor.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES TO FOLLOW]
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as
of the date first written above.
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|
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CHINA SOLAR & CLEAN ENERGY
SOLUTIONS, INC.
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|
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By:
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Name:
|
|
Title
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES OF INVESTORS TO FOLLOW]
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as
of the date first written above.
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|
|
NAME OF INVESTING
ENTITY
|
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By:
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Name:
|
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Title
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ADDRESS FOR
NOTICE
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c/o:
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|
Street:
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City/State/Zip:
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Attention:
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Tel:
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Fax:
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Email:
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Annex
A
Plan of
Distribution
The
Selling Stockholders and any of their pledgees, donees, transferees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility on
which the shares are traded or quoted or in private transactions. These sales
may be at fixed or negotiated prices. The Selling Stockholders may use any one
or more of the following methods when selling shares:
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits Investors;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
to
cover short sales made after the date that this Registration Statement is
declared effective by the Commission;
|
·
|
broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
·
|
a
combination of any such methods of sale;
and
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
Selling Stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of Common Stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.
Upon the
Company being notified in writing by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of Common
Stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such the shares of Common Stock were sold, (iv)the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the transaction. In addition,
upon the Company being notified in writing by a Selling Stockholder that a donee
or pledgee intends to sell more than 500 shares of Common Stock, a supplement to
this prospectus will be filed if then required in accordance with applicable
securities law.
The
Selling Stockholders also may transfer the shares of Common Stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this
prospectus.
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, that can be attributed to the sale of
Securities will be paid by the Selling Stockholder and/or the purchasers. Each
Selling Stockholder has represented and warranted to the Company that it
acquired the securities subject to this Registration Statement in the ordinary
course of such Selling Stockholder’s business and, at the time of its purchase
of such securities such Selling Stockholder had no agreements or understandings,
directly or indirectly, with any person to distribute any such securities.
The
Company has advised each Selling Stockholder that it may not use shares
registered on this Registration Statement to cover short sales of Common Stock
made prior to the date on which this Registration Statement shall have been
declared effective by the Commission. If a Selling Stockholder uses this
prospectus for any sale of the Common Stock, it will be subject to the
prospectus delivery requirements of the Securities Act. The Selling Stockholders
will be responsible to comply with the applicable provisions of the Securities
Act and Exchange Act, and the rules and regulations thereunder promulgated,
including, without limitation, Regulation M, as applicable to such Selling
Stockholders in connection with resales of their respective shares under this
Registration Statement.
The
Company is required to pay all fees and expenses incident to the registration of
the shares, but the Company will not receive any proceeds from the sale of the
Common Stock. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
Annex
B
CHINA SOLAR & CLEAN ENERGY
SOLUTIONS, INC.
Selling Securityholder Notice and
Questionnaire
The
undersigned beneficial owner of common stock (the
“Common Stock”
), of
China Solar & Clean Energy Solutions, Inc., a Nevada corporation (the
“Company”
),
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the
“Commission”
) a
Registration Statement for the registration and resale of the Registrable
Securities, in accordance with the terms of the Registration Rights Agreement,
dated as of February [ ], 2008 (the
“Registration Rights
Agreement”
), among
the Company and the Investors named therein. A copy of the Registration Rights
Agreement is available from the Company upon request at the address set forth
below. All capitalized terms used and not otherwise defined herein shall have
the meanings ascribed thereto in the Registration Rights Agreement.
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1.
Name.
|
(a)
|
Full
Legal Name of Selling Securityholder
|
|
|
|
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(b)
|
Full
Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are
held:
|
|
|
|
|
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|
|
(c)
|
Full
Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose
of the securities covered by the questionnaire):
|
|
|
|
2. Address for Notices to Selling
Securityholder:
Telephone:
|
|
Fax:
|
|
Contact
Person:
|
|
|
3. Beneficial Ownership of
Registrable Securities:
|
|
Type
and Principal Amount of Registrable Securities beneficially
owned:
|
|
|
|
|
|
|
|
|
|
4. Broker-Dealer
Status:
|
(a)
|
Are
you a broker-dealer?
|
Yes
¨
No
¨
|
Note:
|
If
yes, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
|
(b)
|
Are
you an affiliate of a
broker-dealer?
|
Yes
¨
No
¨
|
(c)
|
If
you are an affiliate of a broker-dealer, do you certify that you bought
the Registrable Securities in the ordinary course of business, and at the
time of the purchase of the Registrable Securities to be resold, you had
no agreements or understandings, directly or indirectly, with any person
to distribute the Registrable
Securities?
|
Yes
¨
No
¨
|
Note:
|
If
no, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration
Statement.
|
5. Beneficial Ownership of Other
Securities of the Company Owned by the Selling
Securityholder.
Except as set forth below in this
Item 5, the undersigned is not the beneficial or registered owner of any
securities of the Company other than the Registrable Securities listed above in
Item 3.
|
|
Type
and Amount of Other Securities beneficially owned by the Selling
Securityholder:
|
|
|
|
|
|
|
|
|
|
6. Relationships with the
Company:
|
Except as set
forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or has had
any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.
|
|
|
|
|
State any exceptions here:
|
|
|
|
|
7.
The
Company has advised each Selling Stockholder that it may not use shares
registered on the Registration Statement to cover short sales of Common Stock
made prior to the date on which the Registration Statement is declared effective
by the Commission, in accordance with 1997 Securities and Exchange Commission
Manual of Publicly Available Telephone Interpretations Section A.65. If a
Selling Stockholder uses the prospectus for any sale of the Common Stock, it
will be subject to the prospectus delivery requirements of the Securities Act.
The Selling Stockholders will be responsible to comply with the applicable
provisions of the Securities Act and Exchange Act, and the rules and regulations
thereunder promulgated, including, without limitation, Regulation M, as
applicable to such Selling Stockholders in connection with resales of their
respective shares under the Registration Statement.
The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
and prior to the Effective Date for the Registration Statement.
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
and Questionnaire to be executed and delivered either in person or by its duly
authorized agent.
PLEASE FAX A COPY OF THE COMPLETED
AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT
MAIL, TO:
Guzov
Ofsink, LLC
600
Madison Avenue, 14
th
Floor
New York,
NY 10022
Facsimile:
(212) 688-7273
Attn.:
Darren L. Ofsink, Esq.
C-24