SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT Dated as of October 20, 2006 among DOLCE VENTURES INC. and THE PURCHASERS LISTED ON EXHIBIT A
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT
Dated
as of October 20, 2006
among
DOLCE
VENTURES INC.
and
THE
PURCHASERS LISTED ON EXHIBIT A
TABLE
OF CONTENTS
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PAGE
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ARTICLE
I Purchase and Sale of Preferred Stock
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3
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|
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Section
1.1
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Purchase
and Sale of Stock and Warrants
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3
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Section
1.2
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Regulation
D
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1
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Section
1.3
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Conversion
Shares
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1
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Section
1.4
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Closing
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2
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Section
1.5
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Share
Exchange Transaction
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2
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ARTICLE
II Representations and Warranties
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5
|
|
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Section
2.1
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Representations
and Warranties of the Company
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5
|
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Section
2.2
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Representations
and Warranties of the Purchasers
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15
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ARTICLE
III Covenants
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18
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Section
3.1
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Securities
Compliance
|
18
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|
Section
3.2
|
Registration
and Listing
|
18
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Section
3.3
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Compliance
with Laws
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19
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Section
3.4
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Keeping
of Records and Books of Account
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19
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Section
3.5
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Reporting
Requirements
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19
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Section
3.6
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Amendments
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19
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|
Section
3.7
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Other
Agreements.
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17
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|
Section
3.8
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Use
of Proceeds
|
18
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|
Section
3.9
|
Reservation
of Shares
|
18
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|
Section
3.10
|
Transfer
Agent Instructions
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20
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Section
3.11
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Disposition
of Assets
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18
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Section
3.12
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Reporting
Status
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19
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Section
3.13
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Disclosure
of Transaction
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19
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|
Section
3.14
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Disclosure
of Material Information
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19
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|
Section
3.15
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Pledge
of Securities
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19
|
|
Section
3.16
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Form
SB-2 Eligibility
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19
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|
Section
3.17
|
Board
Observer Rights
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20
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|
Section
3.18
|
DTC
|
20
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Section
3.19
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Investor
and Public Relations
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20
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Section
3.20
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Lock-Up
Agreement
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20
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Section
3.21
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Revenue
Targets
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20
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Section
3.22
|
Adjustments
for Issuance of Additional Shares
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21
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Section
3.23
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Subsequent
Financings
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21
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ARTICLE
IV Conditions
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24
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|
|
Section
4.1
|
Conditions
Precedent to the Obligation of the Company to Sell the
Shares
|
24
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|
Section
4.2
|
Conditions
Precedent to the Obligation of the Purchasers to Purchase the
Shares
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25
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ARTICLE
V Stock Certificate Legend
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27
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|
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Section
5.1
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Legend
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27
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ARTICLE
VI Indemnification
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29
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|
|
Section
6.1
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General
Indemnity
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29
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|
Section
6.2
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Indemnification
Procedure
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29
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ARTICLE
VII Miscellaneous
|
30
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|
|
Section
7.1
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Fees
and Expenses
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30
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|
Section
7.2
|
Specific
Enforcement, Consent to Jurisdiction.
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30
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Section
7.3
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Entire
Agreement; Amendment
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31
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Section
7.4
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Notices
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31
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Section
7.5
|
Waivers
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32
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|
Section
7.6
|
Headings
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29
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Section
7.7
|
Successors
and Assigns
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29
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|
Section
7.8
|
No
Third Party Beneficiaries
|
32
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|
Section
7.9
|
Governing
Law
|
32
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|
Section
7.10
|
Survival
|
32
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|
Section
7.11
|
Counterparts
|
32
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Section
7.12
|
Publicity
|
32
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Section
7.13
|
Severability
|
33
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Section
7.14
|
Further
Assurances
|
33
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This
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”)
is
dated as of October 20, 2006 by and among Dolce Ventures, Inc., a Utah
corporation (the “Company”),
and
each of the Purchasers of shares of Series B Convertible Preferred Stock of
the
Company whose names are set forth on Exhibit
A
hereto
(individually, a “Purchaser”
and
collectively, the “Purchasers”).
The
parties hereto agree as follows:
ARTICLE
I
Purchase
and Sale of Preferred Stock
Section
1.1 Purchase
and Sale of Stock and Warrants.
Subject
to the terms and conditions hereof and in consideration of and in express
reliance upon the representations, warranties, covenants, terms and conditions
of this Agreement, the Company agrees to issue and sell, for an aggregate
purchase price of $ 2,404,800 (the “Purchase
Price”),
to
the Purchasers, and the Purchasers, severally but not jointly, agree to
purchase:
(i) the
number of shares of the Company’s Series B Convertible Preferred Stock, par
value $.001 per share and a purchase price of $2.74 per share (the “Preferred
Shares”),
convertible into shares of the Company’s common stock, par value $.001 per share
(the “Common
Stock”),
in
the amounts set forth opposite such Purchaser’s name on Exhibit
A
hereto.
The designation, rights, preferences and other terms and provisions of the
Series B Convertible Preferred Stock are set forth in the Certificate of
Designations of the Relative Rights and Preferences of the Series B Convertible
Preferred Stock attached hereto as Exhibit
B,
as
amended or corrected from time to time hereafter (the “Certificate
of Designations”),
(ii) Series
A
Warrants, in substantially the form attached hereto as Exhibit
C-1
(the
“Series
A Warrants”),
to
purchase the number of shares of Common Stock equal to one hundred percent
(100%) of the number of Preferred Shares purchased by each Purchaser pursuant
to
the terms of this Agreement, as set forth opposite such Purchaser’s name on
Exhibit
A
hereto,
and
(iii) Series
B
Warrants, in substantially the form attached hereto as Exhibit
C-2
(the
“Series
B Warrants”),
to
purchase the number of shares of Common Stock equal to fifty percent (50%)
of
the number of Preferred Shares purchased by each Purchaser pursuant to the
terms
of this Agreement, as set forth opposite such Purchaser’s name on Exhibit
A
hereto.
(iv) Series
J
Warrants, in substantially the form attached hereto as Exhibit
C-3
(the
“Series
J Warrants”),
to
purchase the number of shares of Common Stock equal to one hundred percent
(100%) of the number of Preferred Shares purchased by each Purchaser pursuant
to
the terms of this Agreement, as set forth opposite such Purchaser’s name on
Exhibit
A
hereto,
(v) Series
C
Warrants, in substantially the form attached hereto as Exhibit
C-4
(the
“Series
C Warrants”),
to
purchase the number of shares of Common Stock equal to one hundred percent
(100%) of the number of Preferred Shares purchased by each Purchaser pursuant
to
the terms of this Agreement, as set forth opposite such Purchaser’s name on
Exhibit
A
hereto,
and
(vi) Series
D
Warrants, in substantially the form attached hereto as Exhibit
C-5
(the
“Series
D Warrants”
and,
together with the Series A Warrants, the Series B Warrants, the Series J
Warrants and the Series C Warrants, the “Warrants”),
to
purchase the number of shares of Common Stock equal to fifty percent (50%)
of
the number of Preferred Shares purchased by each Purchaser pursuant to the
terms
of this Agreement, as set forth opposite such Purchaser’s name on Exhibit
A
hereto.
(b) Each
of
the Series A, Series B, Series C and Series D Warrants shall expire five (5)
years following the Closing Date (as defined in Section 1.3 below). The Series
J
Warrant shall expire one (1) year following the Closing Date. Each of the
Warrants shall have an exercise price per share equal to the Warrant Price
(as
defined in the applicable Warrant).
Section
1.2 Regulation
D.
The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“Commission”)
under
the Securities Act of 1933, as amended (the “Securities
Act”)
or
Section 4(2) of the Securities Act.
Section
1.3 Conversion
Shares.
The
Company has authorized and has reserved and covenants to continue to reserve,
free of preemptive rights and other similar contractual rights of stockholders,
such number of shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all of the Preferred Shares and exercise of the
Warrants then outstanding. Any shares of Common Stock issuable upon conversion
of the Preferred Shares and exercise of the Warrants (and such shares when
issued) are herein referred to as the “Conversion
Shares”
and
the
"Warrant
Shares",
respectively. The Preferred Shares, the Conversion Shares and the Warrant Shares
are sometimes collectively referred to as the “Shares”.
Section
1.4 Closing.
The
closing of the purchase and sale of the Preferred Shares and the Warrants to
be
acquired by the Purchasers from the Company under this Agreement shall take
place at the time and place as mutually agreed to by the parties hereto;
provided,
that
all of the conditions set forth in Article IV hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith (the
"Closing
Date").
The
Purchasers acknowledge and agree that the Company may consummate the sale of
additional Preferred Shares and Warrants to other purchasers, on terms
substantially similar to the terms of this Agreement and the other Transaction
Documents (as defined in Section 2.1(b) hereof), which closing(s) shall occur
no
later than October 20, 2006, for an aggregate purchase price of up to
$11,123,200 and a per share purchase price of $2.74 (an “Additional
Series B Financing”).
Subject to the terms and conditions of this Agreement, at the Closing the
Company shall deliver or cause to be delivered to each Purchaser (x) a
certificate for the number of Preferred Shares set forth opposite the name
of
such Purchaser on Exhibit
A
hereto,
(y) its Warrants to purchase such number of shares of Common Stock as is set
forth opposite the name of such Purchaser on Exhibit
A
attached
hereto and (z) any other documents required to be delivered pursuant to Article
IV hereof. At the Closing, unless otherwise instructed by the Company, each
Purchaser shall deliver its Purchase Price by wire transfer to the following
account:
Beneficiary
Bank: HSBC, Hong Kong
SWIFT
Address: HSBC HKHH HKH
▇▇▇▇▇▇▇▇▇▇▇'S
NAME: Gas Investment China Co Ltd
BENEFICIARY'S
A/C No: 110-735479-838(USD)
Bank
Address: ▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
ARTICLE
II
Representations
and Warranties
Section
2.1 Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchasers, as of the date hereof
and the Closing Date (except as set forth on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein),
as follows:
(a) Organization,
Good Standing and Power.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Utah and has the requisite corporate
power to own, lease and operate its properties and assets and to conduct its
business as it is now being conducted. The Company does not have any
subsidiaries except as set forth in the Company’s Form 10-KSB for the year ended
December 31, 2005, including the accompanying financial statements (the
“Form
10-KSB”),
or in
the Company’s Form 10-QSB for the fiscal quarters ended June 30, 2006, March 31,
2006 and September 30, 2005 (collectively, the “Form
10-QSB”),
or on
Schedule
2.1(g)
hereto.
Except as set forth on Schedule 2.1(a), the Company and each such subsidiary
is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect (as defined in Section 2.1(c) hereof) on the
Company’s financial condition.
(b) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement in the form attached
hereto as Exhibit
D
(the
“Registration
Rights Agreement”),
the
Lock-Up Agreement (as defined in Section 3.20 hereof) in the form attached
hereto as Exhibit
H,
the
Irrevocable Transfer Agent Instructions (as defined in Section 3.10), the
Certificate of Designation, and the Warrants (collectively, the “Transaction
Documents”)
and to
issue and sell the Shares and the Warrants in accordance with the terms hereof.
The execution, delivery and performance of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby
and
thereby have been duly and validly authorized by all necessary corporate action,
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required. This Agreement has been duly executed and delivered
by the Company. The other Transaction Documents will have been duly executed
and
delivered by the Company at the Closing. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.
(c) Capitalization.
The
authorized capital stock of the Company and the shares thereof currently issued
and outstanding as of the date hereof are set forth on Schedule
2.1(c)
hereto.
All of the outstanding shares of the Common Stock and the Preferred Shares
have
been duly and validly authorized. Except as pursuant to or permitted under
the
transactions, agreements or documents described in the Company’s Current Report
on Form 8-K (the “Initial Form 8-K”) filed with the Commission on September 13,
2006 and the amendments to such agreements or documents (collectively, the
“Initial Transaction Documents”), no shares of Common Stock are entitled to
preemptive rights or registration rights. Except as pursuant to or permitted
under the Initial Transaction Documents, there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares
of
capital stock of the Company. Except for the Initial Transaction Documents,
there are no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of the capital
stock of the Company or options, securities or rights convertible into shares
of
capital stock of the Company. Except for the Initial Transaction Documents,
the
Company is not a party to any agreement granting registration or anti-dilution
rights to any person with respect to any of its equity or debt securities.
Except for the Initial Transaction Documents, the Company is not a party to,
and
it has no knowledge of, any agreement restricting the voting or transfer of
any
shares of the capital stock of the Company. The offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued prior to the Closing complied with all applicable Federal and state
securities laws, and, except as pursuant to or permitted under the Initial
Transaction Documents, no stockholder has a right of rescission or claim for
damages with respect thereto which would have a Material Adverse Effect (as
defined below). The Company has furnished or made available to the Purchasers
true and correct copies of the Company’s Articles of Incorporation as in effect
on the date hereof (the “Articles”),
and
the Company’s Bylaws as in effect on the date hereof (the “Bylaws”).
For
the purposes of this Agreement, “Material
Adverse Effect”
means
any material adverse effect on the business, operations, properties, prospects,
or financial condition of the Company and its subsidiaries and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its obligations under this
Agreement in any material respect.
(d) Issuance
of Shares.
The
Preferred Shares and the Warrants to be issued at the Closing have been duly
authorized by all necessary corporate action and the Preferred Shares, when
paid
for or issued in accordance with the terms hereof, shall be validly issued
and
outstanding, fully paid and nonassessable and entitled to the rights and
preferences set forth in the Certificate of Designation. When the Conversion
Shares and the Warrant Shares are issued in accordance with the terms of the
Certificate of Designations and the Warrants, respectively, such shares will
be
duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, and the holders shall be entitled
to
all rights accorded to a holder of Common Stock.
(e) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated herein
and
therein do not and will not (i) violate any provision of the Company’s Articles
or Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party or by which
it or its properties or assets are bound, (iii) create or impose a lien,
mortgage, security interest, charge or encumbrance of any nature on any property
of the Company under any agreement or any commitment to which the Company is
a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to
the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries are bound or affected, except, in all cases
other than violations pursuant to clauses (i) and (iv) above, for such
conflicts, defaults, terminations, amendments, accelerations, cancellations
and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in
the
aggregate do not and will not have a Material Adverse Effect. The Company is
not
required under Federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with,
any
court or governmental agency in order for it to execute, deliver or perform
any
of its obligations under the Transaction Documents, or issue and sell the Shares
and the Warrants in accordance with the terms hereof or thereof (other than
any
filings which may be required to be made by the Company with the Commission
or
state securities administrators subsequent to the Closing, any registration
statement which may be filed pursuant hereto, and the Certificate of
Designation); provided
that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchasers herein.
(f) Commission
Documents, Financial Statements.
The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended the “Exchange
Act”),
and
the Company has timely filed all reports, schedules, forms, statements and
other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant
to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
“Commission
Documents”).
The
Company has delivered or made available to each of the Purchasers at the request
of such Purchaser true and complete copies of the Commission Documents. The
Company has not provided to the Purchasers any material non-public information
or other information which, according to applicable law, rule or regulation,
was
required to have been disclosed publicly by the Company but which has not been
so disclosed, other than with respect to the transactions contemplated by this
Agreement. At the times of their respective filings, the Form 10-KSB and the
Form 10-QSB complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and, as of their respective dates, none of the
Form 10-KSB and the Form 10-QSB 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 Commission Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance
with
United States generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as may
be
otherwise indicated in such financial statements or the notes thereto or (ii)
in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in
all
material respects the financial position of the Company and its subsidiaries
as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(g) Subsidiaries.
Schedule
2.1(g)
hereto
sets forth each subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of the Company’s
ownership. For the purposes of this Agreement, “subsidiary”
shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. All of the outstanding shares of capital
stock of each subsidiary directly and indirectly held by the Company have been
duly authorized and validly issued, and are fully paid and nonassessable. Other
than as contemplated by the Transaction Documents and the Initial Transaction
Documents there are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
subsidiary for the purchase or acquisition of any shares of capital stock of
any
subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Other
than as contemplated by the Transaction Documents and the Initial Transaction
Documents, neither the Company nor any subsidiary is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of the capital stock of any subsidiary or any convertible securities,
rights, warrants or options of the type described in the preceding sentence.
Other than the Initial Transaction Documents, neither the Company nor any
subsidiary is party to, nor has any knowledge of, any agreement restricting
the
voting or transfer of any shares of the capital stock of any
subsidiary.
(h) No
Material Adverse Change.
Since
December 31, 2005, the Company has not experienced or suffered any Material
Adverse Effect that has not been disclosed to the Purchasers.
(i) No
Undisclosed Liabilities.
Neither
the Company nor any of its subsidiaries has any liabilities, obligations, claims
or losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) other than those incurred in the ordinary
course of the Company’s or its subsidiaries respective businesses since December
31, 2005 and which, individually or in the aggregate, do not or would not have
a
Material Adverse Effect on the Company or its subsidiaries.
(j) No
Undisclosed Events or Circumstances.
To the
Company’s knowledge, no event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness.
The
Form 10-KSB, Form 10-QSB and the financials statements of Beijing Zhong Ran
Wei
Ye Gas Co., Ltd. (“Beijing
Gas”)
for
the six months ended June 30, 2006 and the fiscal years ended December 31,
2005
and 2004, sets forth as of the dates and periods indicated on such form and
financial statements, all outstanding secured and unsecured Indebtedness of
the
Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course
of
business), (b) all guaranties, endorsements and other contingent obligations
in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection
or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $25,000 due under leases required
to be
capitalized in accordance with GAAP. Except as set forth on Schedule
2.1(k),
neither
the Company nor any subsidiary is in default with respect to any
Indebtedness.
(l) Title
to Assets.
Each of
the Company and the subsidiaries has good and marketable title to, or valid
leasehold interest in, free and clear of all mortgages, pledges, charges, liens,
security interests or other encumbrances, all properties and assets (i)
purportedly owned or used by them as reflected in the Form 10-KSB, or (ii)
or
necessary for the conduct of their business as currently conducted, except
for
those disclosed in the Form 10-KSB or such that, individually or in the
aggregate, do not cause a Material Adverse Effect.
(m) Actions
Pending.
There
is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or any other proceeding pending or, to the knowledge
of
the Company, threatened against the Company or any subsidiary which questions
the validity of this Agreement or any of the other Transaction Documents or
the
transactions contemplated hereby or thereby or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees
of
any court, arbitrator or governmental or regulatory body against the Company
or
any subsidiary or any executive officers or directors of the Company or
subsidiary in their capacities as such.
(n) Compliance
with Law.
The
business of the Company and the subsidiaries has been and is presently being
conducted in accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except for such
noncompliance that, individually or in the aggregate, would not cause a Material
Adverse Effect. Except as set forth on Schedule 2.1(n), the Company and each
of
its subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental
or
regulatory authorizations and approvals, individually or in the aggregate,
could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes.
The
Company and each of the subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has
paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected
in
the financial statements of the Company and the subsidiaries for all current
taxes and other charges to which the Company or any subsidiary is subject and
which are not currently due and payable. None of the federal income tax returns
of the Company or any subsidiary have been audited by the Internal Revenue
Service. Except as may result from the transactions contemplated under the
Transaction Documents and the Initial Transaction Documents, the Company has
no
knowledge of any additional assessments, adjustments or contingent tax liability
(whether federal or state) of any nature whatsoever, whether pending or
threatened against the Company or any subsidiary for any period, nor of any
basis for any such assessment, adjustment or contingency.
(p) Certain
Fees.
Except
as described in the Initial Form 8-K and set forth on Schedule
2.1(p)
hereto,
no brokers, finders or financial advisory fees or commissions will be payable
by
the Company or any subsidiary or any Purchaser with respect to the transactions
contemplated by this Agreement.
(q) Disclosure.
Except
as set forth on Schedule
2.1(q)
hereto,
neither this Agreement or the Schedules hereto nor any other documents,
certificates or instruments furnished to the Purchasers by or on behalf of
the
Company or any subsidiary in connection with the transactions contemplated
by
this Agreement contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made herein or
therein, in the light of the circumstances under which they were made herein
or
therein, not false or misleading.
(r) Operation
of Business.
The
Company and each of the subsidiaries owns or possesses all patents, trademarks,
domain names (whether or not registered) and any patentable improvements or
copyrightable derivative works thereof, websites and intellectual property
rights relating thereto, service marks, trade names, copyrights, licenses and
authorizations as set forth in the Form 10-KSB, and all rights with respect
to
the foregoing, which are necessary for the conduct of its business as now
conducted without any conflict with the rights of others, except where the
failure to so own or possess would not have a Material Adverse
Effect.
(s) Environmental
Compliance.
Since
their inception, neither the Company, nor any of its subsidiaries have been,
in
violation of any applicable law relating to the environment or occupational
health and safety, where such violation would have a material adverse effect
on
the business or financial condition of any of the Company and its Subsidiaries.
Each of Company and its Subsidiaries has operated all facilities and properties
owned, leased or operated by it in material compliance with the Environmental
Laws. As used herein, “Environmental
Laws”
means
all applicable laws governing, regulating or otherwise affecting the
environment, health or safety.
(t) Books
and Record Internal Accounting Controls.
The
books and records of the Company and its subsidiaries accurately reflect in
all
material respects the information relating to the business of the Company and
the subsidiaries, the location and collection of their assets, and the nature
of
all transactions giving rise to the obligations or accounts receivable of the
Company or any subsidiary. The Company and each of its subsidiaries maintain
a
system of internal accounting controls sufficient, in the judgment of the
Company, to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions is taken with respect to any differences.
(u) Material
Agreements.
The
Company and each of its subsidiaries has in all material respects performed
all
the obligations required to be performed by them to date under any written
or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement (a copy of which would be required to be filed with the Commission
as an exhibit to a registration statement on Form S-3 or applicable form if
the
Company or any subsidiary were registering securities under the Securities
Act),
have received no notice of default and are not in default under any such
agreement now in effect, the result of which could cause a Material Adverse
Effect. Except as restricted under applicable laws and regulations, the
incorporation documents, certificates of designations, the Initial Transaction
Documents, or the Transaction Documents, no written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement of the
Company or of any subsidiary limits or shall limit the payment of dividends
on
the Preferred Shares, the Company’s other preferred stock, if any, or its Common
Stock.
(v) Transactions
with Affiliates.
Except
as set forth in the Commission Documents and the Initial Form 8-K and the
Initial Transaction Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company or any subsidiary on the one
hand, and (b) on the other hand, any officer, employee, consultant or director
of the Company, or any of its subsidiaries, or any person owning any capital
stock of the Company or any subsidiary or any member of the immediate family
of
such officer, employee, consultant, director or stockholder or any corporation
or other entity controlled by such officer, employee, consultant, director
or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder.
(w) Securities
Act of 1933.
Based
in material part upon the representations herein of the Purchasers, the Company
has complied and will comply with all applicable federal and state securities
laws in connection with the offer, issuance and sale of the Shares and the
Warrants hereunder. Neither the Company nor anyone acting on its behalf,
directly or indirectly, has or will sell, offer to sell or solicit offers to
buy
any of the Shares, the Warrants or similar securities to, or solicit offers
with
respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person, or has taken or will take any
action so as to bring the issuance and sale of any of the Shares and the
Warrants in violation of the registration provisions of the Securities Act
and
applicable state securities laws. Neither the Company nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of any of the Shares
and the Warrants.
(x) Governmental
Approvals.
Except
for the filing of any notice prior or subsequent to the Closing Date that may
be
required under applicable state and/or Federal securities laws (which if
required, shall be filed on a timely basis) of the United States and/or
applicable laws of the People’s Republic of China, including, without
limitation, the filing of a Form D, a current report on Form 8-K, a registration
statement or statements pursuant to the Registration Rights Agreement, and
the
filing of the Certificate of Designation with the Secretary of State for the
State of Utah, no authorization, consent, approval, license, exemption of,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for, or in connection with, the execution or delivery of the Preferred
Shares and the Warrants, or for the performance by the Company of its
obligations under the Transaction Documents.
(y) Employees;
Labor Relations.
Neither
the Company nor any subsidiary has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth on Schedule
2.1(y)
hereto
and as disclosed in the Commission Documents. Except as set forth on
Schedule
2.1(y)
hereto
and as disclosed in the Commission Documents, neither the Company nor any
subsidiary has any employment contract, agreement regarding proprietary
information, non-competition agreement, non-solicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary required to be disclosed
in the Commission Documents that is not so disclosed. Since December 31, 2005,
no officer, consultant or key employee of the Company or any subsidiary whose
termination, either individually or in the aggregate, would be reasonably likely
to have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any subsidiary. Except
as
could not reasonably be expected to have a Material Adverse Effect, (i) neither
the Company nor any of its Subsidiaries is engaged in any unfair labor practice,
(ii) there is no strike, labor dispute, slowdown or stoppage pending or, to
the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries, and (iii) neither the Company nor any of its Subsidiaries is
a
party to any collective bargaining agreement or contract.
(z) Absence
of Certain Developments.
Except
as may be disclosed in the Commission Documents, since December 31, 2005,
neither the Company nor any subsidiary has:
(i) issued
any stock, bonds or other corporate securities or any rights, options or
warrants with respect thereto;
(ii) borrowed
any amount or incurred or become subject to any liabilities (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of
its
prior fiscal year, as adjusted to reflect the current nature and volume of
the
Company’s or such subsidiary’s business;
(iii) discharged
or satisfied any lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business;
(iv) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements
so
to purchase or redeem, any shares of its capital stock;
(v) sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, except in the ordinary course of business;
(vi) sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights, or
disclosed any proprietary confidential information to any person except to
customers in the ordinary course of business or to the Purchasers or their
representatives;
(vii) suffered
any substantial losses or waived any rights of material value, whether or not
in
the ordinary course of business, or suffered the loss of any material amount
of
prospective business;
(viii) made
any
changes in employee compensation except in the ordinary course of business
and
consistent with past practices;
(ix) made
capital expenditures or commitments therefor that aggregate in excess of
$100,000;
(x) entered
into any other transaction other than in the ordinary course of business, or
entered into any other material transaction, whether or not in the ordinary
course of business;
(xi) made
charitable contributions or pledges in excess of $25,000;
(xii) suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;
(xiii) experienced
any material problems with labor or management in connection with the terms
and
conditions of their employment;
(xiv) effected
any two or more events of the foregoing kind which in the aggregate would be
material to the Company or its subsidiaries; or
(xv) entered
into an agreement, written or otherwise, to take any of the foregoing
actions.
(aa) Public
Utility Holding Company Act and Investment Company Act Status.
The
Company is not a “holding company” or a “public utility company” as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended.
The
Company is not, and as a result of and immediately upon the Closing will not
be,
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
(bb) ERISA.
No
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan (as defined below) by the Company or any of its subsidiaries
which is or would be materially adverse to the Company and its subsidiaries.
The
execution and delivery of this Agreement and the issuance and sale of the
Preferred Shares will not involve any transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could
be
imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as
amended, provided that, if any of the Purchasers, or any person or entity that
owns a beneficial interest in any of the Purchasers, is an “employee pension
benefit plan” (within the meaning of Section 3(2) of ERISA) with respect to
which the Company is a “party in interest” (within the meaning of Section 3(14)
of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(ac), the term “Plan”
shall
mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which
is or has been established or maintained, or to which contributions are or
have
been made, by the Company or any subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any subsidiary, is
under common control, as described in Section 414(b) or (c) of the
Code.
(cc) Dilutive
Effect.
The
Company understands and acknowledges that its obligation to issue Conversion
Shares upon conversion of the Preferred Shares in accordance with this Agreement
and the Certificate of Designation and its obligations to issue the Warrant
Shares upon the exercise of the Warrants in accordance with this Agreement,
the
Warrants, and the Initial Transaction Documents, is, in each case, absolute
and
unconditional regardless of the dilutive effect that such issuance may have
on
the ownership interest of other
stockholders of the Company.
(dd) No
Integrated Offering.
Other
than as pursuant to the Initial Transaction Documents, neither the Company,
nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any
offers to buy any security under circumstances that would cause the offering
of
the Shares pursuant to this Agreement to be integrated with prior offerings
by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Shares pursuant to Rule 506 under the Securities Act, or any
applicable exchange-related stockholder approval provisions, nor will the
Company or any of its affiliates or subsidiaries take any action or steps that
would cause the offering of the Shares to be integrated with other
offerings.
The
Company does not have any registration statement pending before the Commission
or currently under the Commission’s review and since February
1, 2006, the Company has not offered or sold any of its equity securities or
debt securities convertible into shares of Common Stock other than as pursuant
to the Initial Transaction Documents.
(ee) ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act.
The
Company is in compliance with the applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act of 2002 (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act”),
and
the rules and regulations promulgated thereunder, that are effective, and
intends to comply with other applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act,
and the rules and regulations promulgated thereunder, upon the effectiveness
of
such provisions.
(ff) Independent
Nature of Purchasers.
The
Company acknowledges that the obligations of each Purchaser under the
Transaction Documents are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under the Transaction
Documents. The Company acknowledges that the decision of each Purchaser to
purchase securities pursuant to this Agreement has been made by such Purchaser
independently of any other purchase and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any Purchaser (or any other person) relating to or arising from
any
such information, materials, statements or opinions. The Company acknowledges
that nothing contained herein, or in any Transaction Document, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Purchaser 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 Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for one of the
Purchasers and such counsel does not represent all of the Purchasers but only
such Purchaser and the other Purchasers have retained their own individual
counsel with respect to the transactions contemplated hereby. The Company
acknowledges that it has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because
it
was required or requested to do so by the Purchasers.
(gg) Transfer
Agent.
The
name, address, telephone number, fax number, contact person and email address
of
the Company’s current transfer agent is set forth on Schedule
2.1(gg)
hereto.
Section
2.2 Representations
and Warranties of the Purchasers.
Each of
the Purchasers hereby makes the following representations and warranties to
the
Company with respect solely to itself and not with respect to any other
Purchaser:
(a) Organization
and Standing of the Purchasers.
If the
Purchaser is an entity, such Purchaser is a corporation or partnership duly
incorporated or organized, validly existing and in good standing under the
laws
of the jurisdiction of its incorporation or organization.
(b) Authorization
and Power.
Each
Purchaser has the requisite power and authority to enter into and perform this
Agreement and each of the other Transaction Documents to which such Purchaser
is
a party, and to purchase the Preferred Shares and Warrants being sold to it
hereunder. The execution, delivery and performance of this Agreement and each
of
the other Transaction Documents to which such Purchaser is a party, by such
Purchaser and the consummation by it of the transactions contemplated hereby
and
thereby have been duly authorized by all necessary corporate or partnership
action, and no further consent or authorization of such Purchaser or its Board
of Directors, stockholders, or partners, as the case may be, is required. Each
of the Transaction Documents to which such Purchaser is a party has been duly
authorized, executed and delivered by such Purchaser and constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with the terms
thereof.
(c) No
Conflicts.
The
execution, delivery and performance of this Agreement and each of the other
Transaction Documents to which such Purchaser is a party and the consummation
by
such Purchaser of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Purchaser’s charter
documents or bylaws or other organizational documents or (ii) conflict with,
or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Purchaser is a party or by which its
properties or assets are bound, or result in a violation of any law, rule,
or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have
a
material adverse effect on such Purchaser). Such Purchaser is not required
to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or each of the
other Transaction Documents to which such Purchaser is a party or to purchase
the Preferred Shares or acquire the Warrants in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
such Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Acquisition
for Investment.
Each
Purchaser is acquiring the Preferred Shares and the Warrants solely for its
own
account for the purpose of investment and not with a view to or for sale in
connection with distribution. Each Purchaser does not have a present intention
to sell the Preferred Shares or the Warrants, nor a present arrangement (whether
or not legally binding) or intention to effect any distribution of the Preferred
Shares or the Warrants to or through any person or entity; provided,
however,
that by
making the representations herein and subject to Section 2.2(h) below, such
Purchaser does not agree to hold the Shares or the Warrants for any minimum
or
other specific term and reserves the right to dispose of the Shares or the
Warrants at any time in accordance with Federal and state securities laws
applicable to such disposition. Each Purchaser acknowledges that it is able
to
bear the financial risks associated with an investment in the Preferred Shares
and the Warrants and that it has been given full access to such records of
the
Company and the subsidiaries and to the officers of the Company and the
subsidiaries and received such information as it has deemed necessary or
appropriate to conduct its due diligence investigation and has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company’s stage of development so as to be able to evaluate the
risks and merits of its investment in the Company. Each Purchaser further
acknowledges that such Purchaser understands the risks of investing in companies
domiciled and/or which operate primarily in the People’s Republic of China and
that the purchase of the Shares and Warrants involves substantial
risks.
(e) Status
of Purchasers.
Such
Purchaser is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act. Such Purchaser is not required to be registered as
a
broker-dealer under Section 15 of the Exchange Act and such Purchaser is not
a
broker-dealer.
(f) Disclosure
of Information.
Each
Purchaser hereby specifically acknowledges that such Purchaser has been provided
a copy of the document attached hereto as Exhibit
G
(the
“Disclosure
Document”),
and
has reviewed and fully understands the information contained in the Disclosure
Document, including, without limitation, the risks associated in making an
investment in the Company and its business. Each Purchaser acknowledges that
such Purchaser has had full access to all the information it considers necessary
or appropriate to make an informed investment decision with respect to the
Shares and Warrants to be purchased under this Agreement. Each Purchaser further
acknowledges that such Purchaser has had the opportunity to ask questions of
and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company and each of its subsidiaries, and to the extent deemed necessary in
light of such Purchaser’s personal knowledge of the affairs of the Company and
each of its subsidiaries, such Purchaser has asked such questions and received
answers to the full satisfaction of such Purchaser, and such Purchaser desires
to invest in the Company. In making the decision to invest in the Company and
its business, each Purchaser hereby specifically acknowledges that such
Purchaser relied solely on the Disclosure Document and has not relied on any
oral representation made by the Company, or any subsidiary or any officer,
director, employee or agent of any of them.
(g) No
General Solicitation.
Each
Purchaser acknowledges that the Preferred Shares and the Warrants were not
offered to such Purchaser by means of any form of general or public solicitation
or general advertising, or publicly disseminated advertisements or sales
literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which
such
Purchaser was invited by any of the foregoing means of
communications.
(h) Rule
144.
Such
Purchaser understands that the Shares must be held indefinitely unless such
Shares are registered under the Securities Act or an exemption from registration
is available. Such Purchaser acknowledges that such Purchaser is familiar with
Rule 144 of the rules and regulations of the Commission, as amended, promulgated
pursuant to the Securities Act (“Rule
144”),
and
that such person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(i) No
Registration.
Other
than as contemplated herein and in the Registration Rights Agreement, such
Purchaser understands that the Conversion Shares and the Warrants Shares have
not been registered under the Securities Act or any state securities laws.
Such
Purchaser understands that the Shares are being offered and sold in reliance
on
a transactional exemption from the registration requirement of Federal and
state
securities laws and the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings
of
such Purchaser set forth herein in order to determine the applicability of
such
exemptions and the suitability of such Purchaser to acquire the
Shares.
(j) Independent
Investment.
Except
as may be disclosed in any filings with the Commission by the Purchasers under
Section 13 and/or Section 16 of the Exchange Act, no Purchaser has agreed to
act
with any other Purchaser for the purpose of acquiring, holding, voting or
disposing of the Shares purchased hereunder for purposes of Section 13(d) under
the Exchange Act, and each Purchaser is acting independently with respect to
its
investment in the Shares.
ARTICLE
III
Covenants
The
Company covenants with each of the Purchasers as follows, which covenants are
for the benefit of the Purchasers and their permitted assignees (as defined
herein).
Section
3.1 Securities
Compliance.
The
Company shall notify the Commission in accordance with their rules and
regulations, of the transactions contemplated by any of the Transaction
Documents, including filing a Form D with respect to the Preferred Shares,
Warrants, Conversion Shares and Warrant Shares as required under Regulation
D,
filing of a current report on Form 8-K, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law,
rule
and regulation, for the legal and valid issuance of the Preferred Shares, the
Warrants, the Conversion Shares and the Warrant Shares to the Purchasers or
subsequent holders.
Section
3.2 Registration
and Listing.
The
Company shall cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, to comply in all respects with its reporting
and filing obligations under the Exchange Act, to comply with all requirements
related to any registration statement filed pursuant to this Agreement, and
to
not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend
such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The
Company will take all action necessary to continue the quotation of its Common
Stock on the OTC
Bulletin Board or other exchange or market on which the Common Stock is trading.
Subject to the terms of the Transaction Documents, the Company further covenants
that it will take such further action as the Purchasers may reasonably request,
all to the extent required from time to time to enable the Purchasers to sell
the Shares without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 promulgated under the Securities Act.
Upon the request of the Purchasers, the Company shall deliver to the Purchasers
a written certification of a duly authorized officer as to whether it has
complied with such requirements.
Section
3.3 Compliance
with Laws.
The
Company shall comply, and cause each subsidiary to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which could have a
Material Adverse Effect.
Section
3.4 Keeping
of Records and Books of Account.
The
Company shall keep and cause each subsidiary to keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company
and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section
3.5 Reporting
Requirements.
If the
Commission ceases making periodic reports filed under the Exchange Act available
via the Internet, then at a Purchaser’s request the Company shall furnish the
following to such Purchaser so long as such Purchaser shall be obligated
hereunder to purchase the Preferred Shares or shall beneficially own any
Shares:
(a) Quarterly
Reports filed with the Commission on Form 10-QSB as soon as practical after
the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission;
(b) Annual
Reports filed with the Commission on Form 10-KSB as soon as practical after
the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission; and
(c) Copies
of
all notices and information, including without limitation notices and proxy
statements in connection with any meetings, that are provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices
or
information to such holders of Common Stock.
Section
3.6 Amendments.
The
Company shall not amend or waive any provision of the Articles or Bylaws of
the
Company in any way that would adversely affect the liquidation preferences,
dividends rights, conversion rights, voting rights or redemption rights of
the
Preferred Shares; provided,
however,
that
while the Preferred Shares are outstanding, any creation and issuance of another
series of Junior Stock (as defined in the Certificate of Designation) or any
other class or series of equity securities which by its terms shall rank on
parity with the Preferred Shares shall not be deemed to materially and adversely
affect such rights, preferences or privileges.
Section
3.7 Other
Agreements.
The
Company shall not enter into any agreement in which the terms of such agreement
would restrict or impair the right or ability to perform of the Company or
any
subsidiary under any Transaction Document.
Section
3.8 Use
of
Proceeds.
The
net
proceeds from the sale of the Shares hereunder and any cash exercise of the
Warrants issued hereunder shall be used by the Company for capital expenditures
on tangible assets and gas distribution rights and land rights and not to redeem
any Common Stock or securities convertible, exercisable or exchangeable into
Common Stock or to settle any outstanding litigation. The proceeds of the sale
of the Shares hereunder shall be used as set forth on Schedule
3.8
hereto.
Section
3.9 Reservation
of Shares.
So long
as any of the Preferred Shares or Warrants remain outstanding, the Company
shall
take all action necessary to at all times have authorized, and reserved for
the
purpose of issuance, such number of shares of Common Stock as sufficient to
provide for the issuance of the Conversion Shares and the Warrant
Shares.
Section
3.10 Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates, registered in the name of
each
Purchaser or its respective nominee(s), for the Conversion Shares and the
Warrant Shares in such amounts as specified from time to time by each Purchaser
to the Company upon conversion of the Preferred Shares or exercise of the
Warrants in the form of Exhibit
E
attached
hereto (the “Irrevocable
Transfer Agent Instructions”).
Prior
to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to
in this Section 3.10 will be given by the Company to its transfer agent and
that
the Shares shall otherwise be freely transferable on the books and records
of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. If a Purchaser provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a public sale,
assignment or transfer of the Shares may be made without registration
under the Securities Act or the Purchaser provides the Company with reasonable
assurances that the Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date
that
can then be immediately sold, the Company shall permit the transfer, and, in
the
case of the Conversion Shares and the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Purchaser and without any restrictive legend.
The Company acknowledges that a breach by it of its obligations under this
Section 3.10 will cause irreparable harm to the Purchasers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 3.10 will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Section
3.10, that the Purchasers shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss
and without any bond or other security being required.
Section
3.11 Disposition
of Assets.
So long
as the Preferred Shares remain outstanding, neither the Company nor any
subsidiary shall sell, transfer or otherwise dispose of any of its properties,
assets and rights including, without limitation, its software and intellectual
property, to any person except for sales to customers in the ordinary course
of
business or with the prior written consent of the holders of a majority of
the
Preferred Shares then outstanding.
Section
3.12 Reporting
Status. So
long
as a Purchaser beneficially owns any of the Shares, the Company shall timely
file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or
the
rules and regulations thereunder would permit such termination.
Section
3.13 Disclosure
of Transaction.
The
Company shall file with the Commission a Current Report on Form 8-K (the
“Form
8-K”)
describing the material terms of the transactions contemplated hereby (and
attaching as exhibits thereto this Agreement, the Registration Rights Agreement,
the Certificate of Designation, the Lock-Up Agreement, the form of each series
of Warrant) as soon as practicable following the Closing Date but in no event
more than four (4) Trading Day following such Closing Date, which Press Release
and Form 8-K shall be subject to prior review and comment by the Purchasers.
"Trading
Day"
means
any day during which the OTC Bulletin Board (or other principal exchange on
which the Common Stock is traded) shall be open for trading.
Section
3.14 Disclosure
of Material Information.
The
Company covenants and agrees that neither it nor any other person acting on
its
behalf has provided or will provide any Purchaser or its agents or counsel
with
any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The
Company understands and confirms that each Purchaser shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.
Section
3.15 Pledge
of Securities.
The
Company acknowledges and agrees that the Shares may be pledged by a Purchaser
in
connection with a bona fide
margin
agreement or other loan or financing arrangement that is secured by the Common
Stock. The pledge of Common Stock shall not be deemed to be a transfer, sale
or
assignment of the Common Stock hereunder, and no Purchaser effecting a pledge
of
Common Stock shall be required to provide the Company with any notice thereof
or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document; provided that a Purchaser and its pledgee shall
be
required to comply with the provisions of Article V hereof in order to effect
a
sale, transfer or assignment of Common Stock to such pledgee. At the Purchasers'
expense, the Company hereby agrees to execute and deliver such documentation
as
a pledgee of the Common Stock may reasonably request in connection with a pledge
of the Common Stock to such pledgee by a Purchaser.
Section
3.16 Form
SB-2 Eligibility.
The
Company currently meets the "registrant eligibility" and transaction
requirements set forth in the general instructions to Form SB-2 applicable
to
"resale" registrations on Form SB-2 and the Company shall file all reports
required to be filed by the Company with the Commission in a timely
manner.
Section
3.17 Intentionally
left blank.
Section
3.18 DTC.
Not
later than the effective date of the Registration Statement (as defined in
the
Registration Rights Agreement), the Company shall cause its Common Stock to
be
eligible for transfer with its transfer agent pursuant to the Depository Trust
Company Automated Securities Transfer Program.
Section
3.19 Intentionally
left blank.
Section
3.20 Lock-Up
Agreement.
The
persons listed on Schedule
3.20
attached
hereto shall be subject to the terms and provisions of a lock-up agreement
in
substantially the form of Exhibit
H
hereto
(the “Lock-Up
Agreement”),
which
shall provide the manner in which such persons may sell, transfer or dispose
of
their shares of Common Stock.
Section
3.21 Revenue
Targets.
The
Company shall establish an adjustment escrow account (the “Adjustment
Account”)
in its
name in which the Company shall deposit 2,353,518 shares of Common Stock to
be
issued to the Purchasers, along with each other purchaser of Series B
Convertible Preferred Stock in an Additional Series B Financing (collectively,
the “Series
B Purchasers”),
as
adjustment shares (the “Adjustment
Shares”)
with
respect to the Company’s audited earnings after taxes. The Adjustment Account
shall be managed by a third party law firm acting as escrow agent for such
purpose. In the event that (A) the Company’s earnings after taxes for its 2006
fiscal year is less than $5,795,000 or (B) (i) if, by the end of its 2007 fiscal
year the Company has raised not less than $20,000,000 through the exercise
of
warrants or through an equity or debt offering (the “Capital
Condition”),
the
Company’s earnings after taxes for its 2007 fiscal year is less than $9,120,000
or (ii) if the Capital Condition has not been met, the Company’s earnings after
taxes for its 2007 fiscal year is less than $7,900,000, the Company shall issue
or cause to be issued from the Adjustment Account in each instance 1,176,756
Adjustment Shares; provided,
however,
that if
by the end of its 2007 fiscal year the Company has met the Capital Condition
by
procuring not less then $20,000,000 in debt financing, the Company shall issue
or cause to be issued one-half of the Adjustment Shares that would otherwise
be
due. The
Adjustment Shares shall be issued to the
Series B Purchasers in proportion to their purchases of the Preferred Shares
promptly following public disclosure that such revenue target has not been
achieved. In
addition, if the Company shall determine to proceed with the preparation and
filing of a registration statement under the Securities Act in connection with
the proposed offer and sale of any of its securities by it or any of its
security holders (other than a registration statement on Form ▇-▇, ▇-▇ or
other limited purpose form), then the Company will cause all Adjustment Shares
issued pursuant to this Section 3.21 to be included in such registration
statement, all to the extent requisite to permit the resale by the Series B
Purchasers of such Adjustment Shares.
Section
3.22 Adjustments
for Issuance of Additional Shares of Common Stock.
In the
event the Company, shall, at any time within two (2) years following the date
hereof, issue or sell any additional shares of Common Stock (“Additional
Shares of Common Stock”),
at a
price per share less than $2.74 or without consideration, then the Conversion
Rate (as defined in the Certificate of Designation) will be adjusted so that
the
number of shares of Common Stock issuable upon such conversion of the Preferred
Shares shall be increased in proportion to such increase in outstanding shares
of Common Stock and to ensure the Series B Purchasers, in the aggregate,
acquired the Required Percentage (as defined in the Certificate of Designation)
of Common Stock. In the event the Company, shall, at any time within two (2)
years following the date hereof, shall issue any securities convertible into
or
exchangeable for, directly or indirectly, Common Stock ("Convertible
Securities"),
other
than the Preferred Shares or the Company’s Series A Preferred Stock, or any
rights or warrants or options to purchase any such Common Stock or Convertible
Securities (collectively, the "Common
Stock Equivalents")
shall
be issued or sold, and the price per share for which Additional Shares of Common
Stock may be issuable pursuant to any such Common Stock Equivalent shall be
less
than $2.74, or if, after any such issuance of Common Stock Equivalents, the
price per share for which Additional Shares of Common Stock may be issuable
thereafter is amended or adjusted, and such price as so amended shall be less
than $2.74, then the Conversion Rate will be adjusted so that the number of
shares of Common Stock issuable on such Conversion of the Preferred Shares
shall
be increased in proportion to such increase in outstanding shares of Common
Stock and to ensure the Series B Purchasers, in the aggregate, acquired the
Required Percentage of Common Stock. The terms of this Section 3.21 shall not
apply to securities issued in connection with a Permitted Financing (as defined
in Section 3.23 (b) below).
Section
3.23 Subsequent
Financings.
(a)
For
a
period of two (2) years following
the
effective date of the registration statement providing for the resale of the
Conversion Shares and the Warrant Shares,
the
Company covenants and agrees to promptly notify (in no event later than five
(5)
business days after making or receiving an applicable offer) in writing (a
"Rights
Notice")
the
Series B Purchasers of the terms and conditions of any proposed offer or sale
to
any third party by the Company, of Common Stock or any debt or equity securities
convertible, exercisable or exchangeable into Common Stock (a “Subsequent
Financing”).
The
Rights Notice shall describe, in reasonable detail, the proposed Subsequent
Financing, the names and investment amounts of all investors participating
in
the Subsequent Financing, the proposed closing date of the Subsequent Financing,
which shall be within twenty (20) calendar days from the date of the Rights
Notice, and all of the terms and conditions thereof
and
proposed definitive documentation to be entered into in connection
therewith.
The
Rights Notice shall provide each Series B Purchaser an option (the “Rights
Option”)
during
the ten (10) Trading Days following delivery of the Rights Notice (the
“Option
Period”)
to
inform the Company whether such Series B Purchaser will purchase up
to its
pro rata portion of all or a portion of the securities being
offered in such Subsequent Financing on the same, absolute terms and conditions
as contemplated by such Subsequent Financing. If
any
Series B Purchaser elects not to participate in such Subsequent Financing,
the
other Series B Purchasers may participate on a pro-rata basis so long as such
participation in the aggregate does not exceed the total Purchase Price
hereunder. For
purposes of this Section, all references to “pro
rata”
means,
for any Series B Purchaser electing to participate in such Subsequent Financing,
the percentage obtained by dividing (x) the number of Preferred Shares purchased
by such Purchaser at the Closing plus the number of shares of Series B
Convertible Preferred Stock purchased by the Series B Purchasers at the
closing(s) of an Additional Series B Financing by (y) the total number of all
of
the Preferred Shares purchased by all of the participating Purchasers at the
Closing plus the number of shares of Series B Convertible Preferred Stock
purchased by the Series B Purchasers at the closing(s) of an Additional Series
B
Financing. Delivery
of any Rights Notice constitutes a representation and warranty by the Company
that there are no other material terms and conditions, arrangements, agreements
or otherwise except for those disclosed in the Rights Notice, to provide
additional compensation to any party participating in any proposed Subsequent
Financing, including, but not limited to, additional compensation based on
changes in the Purchase Price or any type of reset or adjustment of a purchase
or conversion price or to issue additional securities at any time after the
closing date of a Subsequent Financing. If the Company does not receive notice
of exercise of the Rights Option from the Series B Purchasers within the Option
Period, the Company shall have the right to close the Subsequent Financing
on
the scheduled closing date with a third party; provided
that all
of the material terms and conditions of the closing are the same as those
provided to the Series B Purchasers in the Rights Notice. If the closing of
the
proposed Subsequent Financing does not occur on that date, any closing of the
contemplated Subsequent Financing or any other Subsequent Financing shall be
subject to all of the provisions of this Section 3.23(a), including, without
limitation, the delivery of a new Rights Notice. The provisions of this Section
3.23(a) shall not apply to issuances of securities in a Permitted
Financing.
(b)
For
purposes of this Agreement, a Permitted Financing (as defined hereinafter)
shall
not be considered a Subsequent Financing. A "Permitted
Financing"
shall
mean (i) securities issued pursuant to a bona fide firm underwritten public
offering of the Company’s securities, (ii) securities issued pursuant to the
conversion or exercise of convertible or exercisable securities issued or
outstanding on or prior to the date hereof or issued pursuant to this Agreement
(so long as the conversion or exercise price in such securities are not amended
to lower such price and/or adversely affect the Series B Purchasers), (iii)
the
Warrant Shares, (iv) securities issued (other than for cash) in connection
with
an acquisition of the Company, (v) any warrants issued to the placement agent
for the transactions contemplated by this Agreement, (vi) securities issued
in
connection with strategic license agreements and other partnering arrangements
so long as such issuances are not for the purpose of raising capital and the
Company has received the prior written consent of the Series B Purchasers,
and
(vii) the issuance of Common Stock or the issuance or grants of options to
purchase Common Stock pursuant to the Company’s stock option plans and employee
stock purchase plans and which have been approved by the Company’s Board of
Directors so long as such issuances in the aggregate do not exceed ten percent
(10%) of the Company’s issued and outstanding Common Stock as of the Closing
Date.
ARTICLE
IV
CONDITIONS
Section
4.1 Conditions
Precedent to the Obligation of the Company to Sell the Shares.
The
obligation hereunder of the Company to issue and sell the Preferred Shares
and
the Warrants to the Purchasers is subject to the satisfaction or waiver, at
or
before the Closing, of each of the conditions set forth below. These conditions
are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion.
(a) Accuracy
of Each Purchaser’s Representations and Warranties.
Each of
the representations and warranties of each Purchaser in this Agreement and
each
of the other Transaction Documents to which such Purchaser is a party shall
be
true and correct in all material respects as of the date when made and as of
the
Closing Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be
true
and correct in all material respects as of such date.
(b) Performance
by the Purchasers.
Each
Purchaser shall have performed, satisfied and complied in all respects with
all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Purchaser 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 which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(d) Delivery
of Purchase Price.
The
Purchase Price for the Preferred Shares and Warrants has been delivered to
the
Company at the Closing Date.
(e) Delivery
of Transaction Documents.
The
Transaction Documents have been duly executed and delivered by the Purchasers
to
the Company.
(f) Intentionally
left blank.
Section
4.2 Conditions
Precedent to the Obligation of the Purchasers to Purchase the
Shares.
The
obligation hereunder of each Purchaser to acquire and pay for the Preferred
Shares and the Warrants is subject to the satisfaction or waiver, at or before
the Closing, of each of the conditions set forth below. These conditions are
for
each Purchaser’s sole benefit and may be waived by such Purchaser at any time in
its sole discretion.
(a) Accuracy
of the Company’s Representations and Warranties.
Each of
the representations and warranties of the Company in this Agreement and each
of
the other Transaction Documents shall be true and correct in all respects as
of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that are expressly made as of a
particular date), which shall be true and correct in all respects as of such
date.
(b) Performance
by the Company.
The
Company shall have performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the
Closing.
(c) No
Suspension, Etc.
Quotation of the Common Stock shall not have been suspended by the Commission
or
the OTC Bulletin Board (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to the
Closing), and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets (“Bloomberg”)
shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the
New
York Stock Exchange, nor shall a banking moratorium have been declared either
by
the United States or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of such Purchaser, makes it impracticable or inadvisable to purchase
the Preferred Shares.
(d) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(e) No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any governmental authority
shall have been commenced, and no investigation by any governmental authority
shall have been threatened, against the Company or any subsidiary, or any of
the
officers, directors or affiliates of the Company or any subsidiary seeking
to
restrain, prevent or change the transactions contemplated by this Agreement,
or
seeking damages in connection with such transactions.
(f) Certificate
of Designation of Rights and Preferences.
Prior
to the Closing, the Certificate of Designation in the form of Exhibit
B
attached
hereto shall have been filed with the Secretary of State of Utah.
(g) Opinion
of Counsel.
At the
Closing, the Purchasers shall have received an opinion of counsel to the
Company, dated the date of such Closing, in the form of Exhibit
F
hereto,
and such other certificates and documents as the Purchasers or its counsel
shall
reasonably require incident to such Closing.
(h) Registration
Rights Agreement.
At the
Closing, the Company shall have executed and delivered the Registration Rights
Agreement to each Purchaser.
(i) Stock
Certificates; Warrants.
The
Company shall have executed and delivered to the Purchasers the certificates
(in
such denominations as such Purchaser shall request) for the Preferred Shares
and
the Warrants being acquired by such Purchaser at the Closing (in such
denominations as such Purchaser shall request).
(j) Resolutions.
The
Board of Directors of the Company shall have adopted resolutions consistent
with
Section 2.1(b) hereof in a form reasonably acceptable to such Purchaser (the
"Resolutions").
(k) Reservation
of Shares.
As of
the Closing Date, the Company shall have reserved out of its authorized and
unissued Common Stock, solely for the purpose of effecting the conversion of
the
Preferred Shares and the exercise of the Warrants, a number of shares of Common
Stock equal to the aggregate number of Conversion Shares issuable upon
conversion of the Preferred Shares issued or to be issued pursuant to this
Agreement and the number of Warrant Shares issuable upon exercise of the number
of Warrants issued or to be issued pursuant to this Agreement.
(l) Transfer
Agent Instructions.
As of
the Closing Date, the Irrevocable Transfer Agent Instructions, in the form
of
Exhibit
E
attached
hereto, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(m) Secretary’s
Certificate.
The
Company shall have delivered to such Purchaser a secretary’s certificate, dated
as of the Closing Date, as to (i) the Resolutions, (ii) the Articles, (iii)
the
Bylaws, (iv) the Certificate of Designation, each as in effect at the Closing,
and (iv) the authority and incumbency of the officers of the Company executing
the Transaction Documents and any other documents required to be executed or
delivered in connection therewith.
(n) Officer’s
Certificate.
The
Company shall have delivered to the Purchasers a certificate of an executive
officer of the Company, dated as of the Closing Date, confirming the accuracy
of
the Company’s representations, warranties and covenants as of such Closing Date
and confirming the compliance by the Company with the conditions precedent
set
forth in this Section 4.2 as of such Closing Date.
(o) Material
Adverse Effect.
No
Material Adverse Effect shall have occurred at or before the Closing Date.
(p) Intentionally
left blank
(q) Audited
Financial Statements.
On or
prior to the Closing Date, the Company shall have delivered to the Purchasers
the audited financial statements of Beijing Gas for the fiscal years ended
December 31, 2005 and 2004 prepared by ▇▇▇▇▇▇ ▇. ▇▇▇▇ & Co.,
LLP.
(r) Initial
Form 8-K.
On or
prior to the Closing Date, the Company shall have delivered to the Purchasers
the Initial Form 8-K as filed with the Commission pursuant to Section 3.13
hereof, upon request of the Purchasers.
(s) Lock-Up
Agreement.
On or
prior to the Closing Date, the persons listed on Schedule
3.20
attached
hereto shall have executed and delivered the Lock-Up Agreement to the
Purchasers.
ARTICLE
V
Stock
Certificate Legend
Section
5.1 Legend.
Each
certificate representing the Preferred Shares and the Warrants, and, if
appropriate, securities issued upon conversion thereof, shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required by applicable state securities or “blue sky”
laws):
THESE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR DOLCE VENTURES INC. SHALL HAVE RECEIVED AN OPINION
OF
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER
THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The
Company agrees to reissue certificates representing any of the Conversion Shares
and the Warrant Shares, without the legend set forth above if at such time,
prior to making any transfer of any such securities, such holder thereof shall
give written notice to the Company describing the manner and terms of such
transfer and removal as the Company may reasonably request. Such proposed
transfer and removal will not be effected until: (a) either (i) the Company
has
received an opinion of counsel reasonably satisfactory to the Company, to the
effect that the registration of the Conversion Shares or the Warrant Shares
under the Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act covering such
proposed disposition has been filed by the Company with the Commission and
has
become effective under the Securities Act, (iii) the Company has received other
evidence reasonably satisfactory to the Company that such registration and
qualification under the Securities Act and state securities laws are not
required, or (iv) the holder provides the Company with reasonable assurances
that such security can be sold pursuant to Rule 144 under the Securities Act;
and (b) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that registration or qualification
under the securities or "blue sky" laws of any state is not required in
connection with such proposed disposition, or (ii) compliance with applicable
state securities or "blue sky" laws has been effected or a valid exemption
exists with respect thereto. The Company will respond to any such notice from
a
holder within five (5) business days. In the case of any proposed transfer
under
this Section 5.1, the Company will use reasonable efforts to comply with any
such applicable state securities or "blue sky" laws, but shall in no event
be
required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or “blue sky” laws of any state for which registration by
coordination is unavailable to the Company. The restrictions on transfer
contained in this Section 5.1 shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement. Whenever
a
certificate representing the Conversion Shares or Warrant Shares is required
to
be issued to a Purchaser without a legend, in lieu of delivering physical
certificates representing the Conversion Shares or Warrant Shares (provided
that a registration statement under the Securities Act providing for the resale
of the Warrant Shares and Conversion Shares is then in effect),
the
Company shall cause its transfer agent to electronically transmit the Conversion
Shares or Warrant Shares to a Purchaser by crediting the account of such
Purchaser's Prime Broker with the Depository Trust Company (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”)
system
(to the extent not inconsistent with any provisions of this
Agreement).
ARTICLE
VI
Indemnification
Section
6.1 General
Indemnity.
The
Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, managers, partners, members, shareholders,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. Each
Purchaser severally but not jointly agrees to indemnify and hold harmless the
Company and its directors, officers, managers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys’ fees, charges and disbursements) incurred by the Company as result of
any inaccuracy in or breach of the representations, warranties or covenants
made
by such Purchaser herein. The maximum aggregate liability of each Purchaser
pursuant to its indemnification obligations under this Article VI shall not
exceed the portion of the Purchase Price paid by such Purchaser hereunder.
Section
6.2 Indemnification
Procedure.
Any
party entitled to indemnification under this Article VI (an “indemnified party”)
will give written notice to the indemnifying party of any matters giving rise
to
a claim for indemnification; provided, that the failure of any party entitled
to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder,
the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between
it
and the indemnifying party may exist with respect of such action, proceeding
or
claim, to assume the defense thereof with counsel reasonably satisfactory to
the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle
or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then
the
indemnified party may, at its option, defend, settle or otherwise compromise
or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party’s costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party
and
shall furnish to the indemnifying party all information reasonably available
to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto.
If
the indemnifying party elects to defend any such action
or
claim, then the indemnified party shall be entitled to participate in such
defense with counsel of its choice at its sole cost and expense. The
indemnifying party shall not be liable for any settlement of any action, claim
or proceeding effected without its prior written consent. Notwithstanding
anything in this Article VI to the contrary, the indemnifying party shall not,
without the indemnified party’s prior written consent, settle or compromise any
claim or consent to entry of any judgment in respect thereof which imposes
any
future obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to
the
indemnified party of a release from all liability in respect of such claim.
The
indemnification required by this Article VI shall be made by periodic payments
of the amount thereof during the course of investigation or defense, as and
when
bills are received or expense, loss, damage or liability is incurred, so long
as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party
was
not entitled to indemnification. The indemnity agreements contained herein
shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
ARTICLE
VII
Miscellaneous
Section
7.1 Fees
and Expenses.
Except
as otherwise set forth in this Agreement and the other Transaction Documents,
each party shall pay the fees and expenses of its advisors, counsel, accountants
and other experts, if any, and all other expenses, incurred by such party
incident to the negotiation, preparation, execution, delivery and performance
of
this Agreement.
Section
7.2 Specific
Enforcement, Consent to Jurisdiction.
(a) The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific
terms
or were otherwise breached. It is accordingly agreed that the parties shall
be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
(b) Each
of
the Company and the Purchasers (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New
York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is
not
personally subject to the jurisdiction of such court, that the suit, action
or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Purchasers
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to
it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 7.2
shall affect or limit any right to serve process in any other manner permitted
by law.
Section
7.3 Entire
Agreement; Amendment.
This
Agreement and the Transaction Documents contains the entire understanding and
agreement of the parties with respect to the matters covered hereby and thereby,
except as specifically set forth herein or in the Transaction Documents, neither
the Company nor any of the Purchasers makes any representations, warranty,
covenant or undertaking with respect to such matters and they supersede all
prior understandings and agreements with respect to said subject matter, all
of
which are merged herein. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the Company and the holders of
at
least seventy-five percent (75%) of the Preferred Shares then outstanding,
and
no provision hereof may be waived other than by an a written instrument signed
by the party against whom enforcement of any such amendment or waiver is sought.
No such amendment shall be effective to the extent that it applies to less
than
all of the holders of the Preferred Shares then outstanding. No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the
same consideration is also offered to all of the parties to the Transaction
Documents or holders of Preferred Shares, as the case may be.
Section
7.4 Notices.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telex (with correct answer back received), telecopy or facsimile
at
the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business
day
during normal business hours where such notice is to be received) or (b) on
the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications
shall be:
|
If
to the Company:
|
c/o
Beijing Zhong Ran Wei Ye Gas Co., Ltd.
N0.18
▇▇▇▇▇ ▇▇▇▇ Cun Dong St.
Haidian
District
Beijing,
China
Attention:
▇▇▇▇ ▇▇▇▇
Tel.
No.: ▇▇▇-▇▇-▇▇-▇▇▇▇▇▇▇▇
Fax
No.: ▇▇▇-▇▇▇-▇▇▇▇▇▇▇▇
|
|
with
copies to:
|
GUZOV
OFSINK, LLC
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Tel.
No.: (▇▇▇) ▇▇▇-▇▇▇▇, ext. 127
Fax
No.: (▇▇▇)
▇▇▇-▇▇▇▇
|
|
If
to any Purchaser:
|
At
the address of such Purchaser set forth on Exhibit
A
to
this Agreement, with copies to Purchaser’s counsel, if any, as set forth
on Exhibit
A
or
as specified in writing by such Purchaser
|
Any
party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other party
hereto.
Section
7.5 Waivers.
No
waiver by either party of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver
in
the future or a waiver of any other provisions, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder
in
any manner impair the exercise of any such right accruing to it
thereafter.
Section
7.6 Headings.
The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose
and
shall not be deemed to limit or affect any of the provisions
hereof.
Section
7.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.
Section
7.8 No
Third Party Beneficiaries.
This
Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns
and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
Section
7.9 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Agreement shall not be interpreted or construed
with
any presumption against the party causing this Agreement to be
drafted.
Section
7.10 Survival.
The
representations and warranties of the Company and the Purchasers shall survive
the execution and delivery hereof and the Closings hereunder for a period of
two
years following the Closing Date.
Section
7.11 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 and shall become effective when
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties need not sign the same counterpart.
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.
Section
7.12 Publicity.
The
Company agrees that it will not disclose, and will not include in any public
announcement, the name of the Purchasers without the consent of the Purchasers
unless and until such disclosure is required by law or applicable regulation,
and then only to the extent of such requirement.
Section
7.13 Severability.
The
provisions of this Agreement and the Transaction Documents are severable and,
in
the event that any court of competent jurisdiction shall determine that any
one
or more of the provisions or part of the provisions contained in this Agreement
or the Transaction Documents shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision
of
this Agreement or the Transaction Documents and such provision shall be reformed
and construed as if such invalid or illegal or unenforceable provision, or
part
of such provision, had never been contained herein, so that such provisions
would be valid, legal and enforceable to the maximum extent
possible.
Section
7.14 Further
Assurances.
From
and after the date of this Agreement, upon the request of any Purchaser or
the
Company, each of the Company and the Purchasers shall execute and deliver such
instrument, documents and other writings as may be reasonably necessary
or desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and each of the other Transaction
Documents.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.
|
DOLCE
VENTURES INC.
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title | ||
|
PURCHASERS:
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title | ||
EXHIBIT
A to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
|
Names
and Addresses
|
Number
of Preferred Shares
|
Dollar
Amount of
|
|
of
Purchasers
|
& Warrants
Purchased
|
Investment
|
|
Vision
Opportunity Master Fund, Ltd.
|
Preferred
Shares: 729,927
|
$2,000,000
|
|
▇▇
▇ ▇▇▇▇ ▇▇., ▇▇▇ floor
|
Series
A Warrants: 729,927
|
|
|
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
Series
B Warrants: 364,964
|
|
|
Tax
ID: ▇▇-▇▇▇▇▇▇▇
|
Series
J Warrants: 664,452
|
|
|
|
Series
C Warrants: 664,452
|
|
|
|
Series
D Warrants: 332,226
|
|
|
Nite
Capital LP
|
Preferred
Shares: 127,737
|
$350,000
|
|
▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
|
Series
A Warrants: 127,737
|
|
|
Suite
201
|
Series
B Warrants: 63,869
|
|
|
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
Series
J Warrants: 116,279
|
|
|
TAX
ID: ▇▇-▇▇▇▇▇▇▇
|
Series
C Warrants: 116,279
|
|
|
Series
D Warrants: 58,140
|
||
|
▇▇▇▇
▇▇▇▇▇
|
Preferred
Shares: 20,000
|
$54,800
|
|
▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
|
Series
A Warrants: 20,000
|
|
|
▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇
|
Series
B Warrants: 10,000
|
|
|
Series
J Warrants: 18,206
|
||
|
Series
C Warrants: 18,206
|
||
|
|
Series
D Warrants: 9,103
|
EXHIBIT
B to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF CERTIFICATE OF DESIGNATION
EXHIBIT
C-1 to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF SERIES A WARRANT
EXHIBIT
C-2 to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF SERIES B WARRANT
EXHIBIT
C-3 to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF SERIES J WARRANT
EXHIBIT
C-4 to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF SERIES C WARRANT
EXHIBIT
C-5 to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF SERIES D WARRANT
EXHIBIT
D to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT
E to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
DOLCE
VENTURES INC.
as
of
September ___, 2006
[Name
and
address of Transfer Agent]
Attn:
_____________
Ladies
and Gentlemen:
Reference
is made to that certain Series B Convertible Preferred Stock Purchase Agreement
(the “Purchase
Agreement”),
dated
as of September ___, 2006, by and among Dolce Ventures Inc., a Utah corporation
(the “Company”),
and
the purchasers named therein (collectively, the “Purchasers”)
pursuant to which the Company is issuing to the Purchasers shares of its Series
B Convertible Preferred Stock, par value $.001 per share, (the “Preferred
Shares”)
and
warrants (the “Warrants”)
to
purchase shares of the Company’s common stock, par value $.001 per share (the
“Common
Stock”).
This
letter shall serve as our irrevocable authorization and direction to you
provided that you are the transfer agent of the Company at such time) to issue
shares of Common Stock upon conversion of the Preferred Shares (the
“Conversion
Shares”)
and
exercise of the Warrants (the “Warrant
Shares”)
to or
upon the order of a Purchaser from time to time upon (i) surrender to you of
a
properly completed and duly executed Conversion Notice or Exercise Notice,
as
the case may be, in the form attached hereto as Exhibit I and Exhibit II,
respectively, (ii) in the case of the conversion of Preferred Shares, a copy
of
the certificates (with the original certificates delivered to the Company)
representing Preferred Shares being converted or, in the case of Warrants being
exercised, a copy of the Warrants (with the original Warrants delivered to
the
Company) being exercised (or, in each case, an indemnification undertaking
with
respect to such share certificates or the warrants in the case of their loss,
theft or destruction), and (iii) delivery of a treasury order or other
appropriate order duly executed by a duly authorized officer of the Company.
So
long as you have previously received (x) written confirmation from counsel
to
the Company that a registration statement covering resales of the Conversion
Shares or Warrant Shares, as applicable, has been declared effective by the
Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “1933
Act”),
and
no subsequent notice by the Company or its counsel of the suspension or
termination of its effectiveness and (y) a copy of such registration statement,
and if the Purchaser represents in writing that the Conversion Shares or the
Warrant Shares, as the case may be, were sold pursuant to the Registration
Statement, then certificates representing the Conversion Shares and the Warrant
Shares, as the case may be, shall not bear any legend restricting transfer
of
the Conversion Shares and the Warrant Shares, as the case may be, thereby and
should not be subject to any stop-transfer restriction. Provided, however,
that
if you have not previously received those items and representations listed
above, then the certificates for the Conversion Shares and the Warrant Shares
shall bear the legend substantially as follows:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR
AN
OPINION OF COUNSEL HAS BEEN PROVIDED THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.”
and,
provided further, that the Company may from time to time notify you to place
stop-transfer restrictions on the certificates for the Conversion Shares and
the
Warrant Shares in the event a registration statement covering the Conversion
Shares and the Warrant Shares is subject to amendment for events then
current.
A
form of
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares and the Warrant Shares has been
declared effective by the SEC under the 1933 Act is attached hereto as Exhibit
III. Further, the legal opinion should indicate if the Conversion Shares or
Warrant Shares can be issued directly from the transfer agent without
restrictive legend as an original issue.
Please
be
advised that the Purchasers are relying upon this letter as an inducement to
enter into the Purchase Agreement and, accordingly, each Purchaser is a third
party beneficiary to these instructions.
Please
execute this letter in the space indicated to acknowledge your agreement to
act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at ___________.
| Very truly yours, | ||
| DOLCE VENTURES INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
|
ACKNOWLEDGED
AND AGREED:
|
||
| [TRANSFER AGENT] | ||
| By: | ||
| Name: | ||
| Title: | ||
| Date: | ||
EXHIBIT
I
DOLCE
VENTURES INC.
CONVERSION
NOTICE
Reference
is made to the Certificate of Designation of the Relative Rights and Preferences
of the Series B Preferred Stock of Dolce Ventures, Inc., as amended and
corrected from time to time (the “Certificate of Designations”). In accordance
with and pursuant to the Certificate of Designation, the undersigned hereby
elects to convert the number of shares of Series B Preferred Stock, par value
$.001 per share (the “Preferred Shares”), of Dolce Ventures Inc., a Utah
corporation (the “Company”), indicated below into shares of Common Stock, par
value $.001 per share (the “Common Stock”), of the Company, by tendering the
stock certificate(s) representing the share(s) of Preferred Shares specified
below as of the date specified below.
|
Date
of Conversion:
|
______________________________________ | |
|
Number
of Preferred Shares to be converted:
|
||
|
Stock
certificate no(s). of Preferred Shares to be converted:
|
||
|
The
Common Stock have been sold pursuant to the Registration Statement
(as
defined in the Registration Rights
|
||
| Agreement): YES ____ NO____ | ||
|
Please
confirm the following information:
|
||
|
Conversion
Price:
|
______________________________________ | |
|
Number
of shares of Common Stock to
be issued:
|
______________________________________ | |
| Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the Date of Conversion: __________________________ | ||
| Please issue the Common Stock into which the Preferred Shares are being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: | ||
| Issue to: | ______________________________________ | |
| Facsimile Number: | ______________________________________ | |
| Authorization: | ______________________________________ | |
| By: ________________________________ | ||
| Title: ________________________________ | ||
| Dated: | ||
EXHIBIT
II
FORM
OF EXERCISE NOTICE
DOLCE
VENTURES INC.
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of Dolce Ventures Inc.
covered by the within Warrant.
| Dated: _________________ | Signature ___________________________ | |||
| Address _____________________ | ||||
| _____________________ | ||||
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the date of Exercise: _________________________
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
| Dated: _________________ | Signature ___________________________ | |||
| Address _____________________ | ||||
| _____________________ | ||||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
| Dated: _________________ | Signature ___________________________ | |||
| Address _____________________ | ||||
| _____________________ | ||||
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
EXHIBIT
III
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
[Name
and
address of Transfer Agent]
Attn:
_____________
Re: Dolce
Ventures Inc.
Ladies
and Gentlemen:
We
are
counsel to Dolce Ventures Inc., a Utah corporation (the “Company”),
and
have represented the Company in connection with that certain Series B
Convertible Preferred Stock Purchase Agreement (the “Purchase
Agreement”),
dated
as of September ___, 2006, by and among the Company and the purchasers named
therein (collectively, the “Purchasers”)
pursuant to which the Company issued to the Purchasers shares of its Series
B
Convertible Preferred Stock, par value $.001 per share, (the “Preferred
Shares”)
and
warrants (the “Warrants”)
to
purchase shares of the Company’s common stock, par value $.001 per share (the
“Common
Stock”).
Pursuant to the Purchase Agreement, the Company has also entered into a
Registration Rights Agreement with the Purchasers (the “Registration
Rights Agreement”),
dated
as of September ___, 2006, pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the Registration
Rights Agreement), including the shares of Common Stock issuable upon conversion
of the Preferred Shares and exercise of the Warrants, under the Securities
Act
of 1933, as amended (the “1933
Act”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on ________________, 2006, the Company filed a Registration Statement
on Form SB-2 (File No. 333-________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the resale of the Registrable Securities which names each of the
present Purchasers as a selling stockholder thereunder.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC
and
accordingly, the Registrable Securities are available for resale under the
1933
Act pursuant to the Registration Statement.
| Very truly yours, | ||
|
[COMPANY
COUNSEL]
|
||
| By: | ||
cc: [LIST
NAMES OF PURCHASERS]
EXHIBIT
F to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF OPINION OF COUNSEL
EXHIBIT
G to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
DISCLOSURE
DOCUMENT
The
Current Report of the Company on Form 8-K as filed with the Commission on
September 13, 2006.
EXHIBIT
H to the
SERIES
B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
DOLCE
VENTURES INC.
FORM
OF LOCK-UP AGREEMENT