PLACEMENT AGREEMENT October 17, 2006
October
17, 2006
▇▇▇▇▇▇▇
Securities, LLC
▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Greenwood
Village, CO 80111
| Re: |
Offering
of Common Stock in the Aggregate Principal Amount of $10,000,000
(Minimum)
and $12,000,000 (Maximum) with Attached
Warrants
|
Gentlepersons:
1. Introduction.
▇▇▇▇▇▇▇
Securities, LLC, a Delaware limited liability company (the "Placement
Agent"),
proposes to act on a best efforts basis as the exclusive placement agent for
Applied Spectrum Technologies, Inc., a Delaware corporation ("Applied
Spectrum"),
in a
private placement offering (the "Offering")
of
common stock, $0.001 par value (the "Common
Stock"),
of
Applied Spectrum (the "Shares")
with
attached warrants ("Warrants",
together with the Shares, the "Units"),
in a
minimum principal amount of $10,000,000 (the "Minimum
Amount")
and a
maximum principal amount of $12,000,000 (the "Maximum
Amount"),
to be
issued by Applied Spectrum, upon the closing of the Exchange Agreement described
below.
Prior
to
the closing of the Offering (the "Closing"),
Applied Spectrum and Ever Leader Holdings Limited, a company incorporated under
the laws of Hong Kong SAR and its direct and indirect subsidiaries
(collectively, "Ever
Leader")
shall
have completed the transactions under a certain exchange agreement (the
"Exchange
Agreement")
entered into by and among the shareholders of Ever Leader (the "Shareholders"),
Applied Spectrum, KI Equity Partners III, LLC, a Delaware limited liability
company and Applied Spectrum's majority shareholder ("KI
Equity").
Pursuant to the Exchange Agreement, all of the issued and outstanding shares
of
capital stock of Ever Leader will be transferred to Applied Spectrum in exchange
for 64,942,360 shares of Common Stock (the "Exchange").
Upon
completion of the Exchange, Ever Leader will be an indirect, wholly owned
subsidiary of Applied Spectrum.
Investors
in the Offering ("Investors")
will
also receive warrants exercisable for five years to purchase shares of Common
Stock in an amount equal to 100% of the Shares. The Warrants will be exercisable
at a price of $0.555 per share (the "Exercise
Price").
Following
the consummation of the Exchange and prior to the closing of the Offering,
Applied Spectrum shall assume all of Ever Leader's rights and obligations under
this Agreement; provided that prior to Applied Spectrum's approval and
assumption of this Agreement, references to Ever Leader shall only be deemed
to
include Ever Leader and references to Applied Spectrum shall only be deemed
to
include Applied Spectrum.
The
Exchange and the transactions contemplated under the Exchange Agreement are
herein referred to as the "Transaction"
or
collectively as the "Transactions".
Upon
consummation of the Exchange, Applied Spectrum will prepare a proxy or
information statement pursuant to Regulation 14A or 14C under the Exchange
Act
(as defined below) (together with any amendments or supplements thereto, the
"Proxy/Information
Statement")
and
will either solicit proxies from its shareholders or obtain majority consent
from and inform its shareholders to: (i) approve a change in the name of Applied
Spectrum to a name approved by its Board of Directors ("Board");
and
(ii) to approve such other actions as may be approved by the Board. As a
condition of the closing of the Exchange, KI Equity and the Shareholders will
enter into a voting agreement ("Voting
Agreement")
that
requires their share approval vote favoring the actions provided in (i) and
(ii)
above.
The
Shares and the Warrants are more fully described in a private placement
memorandum dated October 20, 2006, including any supplements or amendments
thereto (the "Memorandum").
Except as otherwise defined herein, all capitalized terms shall have the meaning
set forth in the Memorandum.
Ever
Leader desires to employ the Placement Agent as its exclusive placement agent
to
offer, offer for sale and sell the Units subject to all of the terms and
conditions of this Agreement and subject to the terms and conditions contained
in the Memorandum. In the event of any inconsistency between this Agreement
and
the Memorandum, the terms and conditions of this Agreement shall supersede
and
be controlling.
2. Representations
and Warranties of Ever Leader and Applied Spectrum.
(a) Ever
Leader represents and warrants to, and covenants with, the Placement Agent
as of
the date of this Agreement and as of the date of the Closing as
follows:
(i) Authority.
All
action required to be taken by Ever Leader necessary for the authorization
of
this Agreement and the performance of all obligations of Ever Leader hereunder
will have been taken; and this Agreement, the Transaction Documents (as defined
below), the Related Documents (as defined below) and the Escrow Documents (as
defined below) shall be in full force and effect.
(ii) Authority
for Exchange Agreement.
All
action required to be taken by Ever Leader necessary for the authorization
of
the Exchange Agreement (collectively with each of the ancillary agreements
related thereto, collectively the "Transaction
Documents")
and
the performance of all obligations of Ever Leader thereunder will have been
taken.
(iii) Organization
and Qualification.
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(a) Ever
Leader is a company incorporated under the laws of Hong Kong SAR, is duly formed
or organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as
it
is now being or currently planned by Ever Leader to be conducted. Ever Leader
is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Approvals")
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, and to
consummate the Transactions contemplated under this Agreement and the Exchange
Agreement, except where the failure to have such Approvals could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect (as hereinafter defined). Ever Leader is not in violation of
any
of the provisions of Ever Leader's articles of organization or bylaws or similar
governing, organization or charter documents (collectively referred to herein
as
"Charter
Documents").
Ever
Leader is in good standing in Hong Kong. The minute books or the equivalent
contain true, complete and accurate records of meetings and consents in lieu
of
meetings of its board of directors (and any committees thereof), similar
governing bodies and stockholders ("Corporate
Records")
of
Ever Leader, since the time of Ever Leader's organization. The ownership records
of shares of Ever Leader's capital stock are true, complete and accurate records
of the ownership such of shares as of the date of such records and contain
all
transfers of such shares since the time of Ever Leader's organization
("Share
Records").
Ever
Leader is not required to qualify to do business as a foreign corporation in
any
other jurisdiction. For purposes of this Agreement, the term "Material
Adverse Effect"
when
used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect, individually or when aggregated with other
changes, events, violations, inaccuracies, circumstances or effects, that is
materially adverse to the business, assets (including intangible assets),
revenues, prospects, financial condition or results of operations of such entity
or its subsidiaries, if any, taken as a whole or on the transactions
contemplated hereby and the other Transaction Documents, the Related Documents
and the Escrow Documents or by the agreements and instruments to be entered
into
in connection herewith or therewith, or on the authority or ability of such
entity to perform its obligations, if any, under the Transaction Documents,
the
Related Documents and the Escrow Documents or under the agreements and
instruments to be entered into in connection herewith or therewith.
(b) Each
member of the Group (as hereinafter defined) is organized under the laws of
the
jurisdiction set forth in Schedule 2(a)(iii) hereto, is duly formed or
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as
it
is now being or currently planned by each member of the Group to be conducted.
Each member of the Group is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease, to carry
on its business as it is now being conducted, and to consummate the
Transactions. No member of the Group is in violation of any of the provisions
of
their respective Charter Documents. The Corporate Records of each member of
the
Group contain true, complete and accurate records of meetings and consents
in
lieu of meetings of its board of directors (and any committees thereof), similar
governing bodies and holders of its registered capital, since the time of their
respective organization. The ownership records of each Group member's registered
capital are true, complete and accurate records of such ownership as of the
date
of such records and contains all transfers of such registered capital since
the
time of their respective organization. No member of the Group is required to
qualify to do business as a foreign corporation in any other jurisdiction.
For
purposes of this Agreement, (i) the term "Group"
shall
mean collectively Ever Leader,
Hubei Tongji ▇▇▇▇▇ Ebei Pharmaceutical Co., Ltd. ("▇▇▇▇▇
Ebei"),
a Sino-Foreign Equity Joint Venture company incorporated under the laws of
the
People's Republic of China ("PRC"),
Jiangling ▇▇▇▇▇ Pharmaceutical Co., Ltd. ("Jiangling
▇▇▇▇▇"),
a company formed under the laws of the PRC, Yidu ▇▇▇▇▇ Chemical Co., Ltd.
("Yidu
▇▇▇▇▇"),
a company incorporated under the laws of the PRC; and Beijing Shusai Pharyngitis
Research Co., Ltd. ("Beijing
Shusai"),
a company incorporated under the laws of the PRC
and (ii)
the term "Affiliated
Companies"
shall
mean, collectively, Ever Leader, any member of the Group or any direct or
indirect Subsidiary of Ever Leader or any member of the Group. For purposes
of
this Agreement, (i) the term "Subsidiary"
shall
mean any Person in which Ever Leader, any member of the Group or any Subsidiary,
directly or indirectly, owns an equity or security interest, and (ii) the term
"Person"
shall
mean and include an individual, a corporation, a partnership (general or
limited), a joint venture, an association, a limited liability company, a trust
or any other organization or entity, including a government or political
subdivision or an agency or instrumentality thereof.
3
(iv) Subsidiaries.
Set
forth in Schedule 2(a)(iv) hereto is a true and complete list of all
Subsidiaries of Ever Leader and any member of the Group stating, with respect
to
each Subsidiary, its jurisdiction of incorporation or organization, date of
incorporation or organization, capitalization and equity ownership. Each
Subsidiary is a corporation duly incorporated or organized, validly existing
and
in good standing under the laws of the jurisdiction of its incorporation or
organization, has all requisite corporate power and authority to own, lease
and
operate its properties and to carry on its businesses as they are now being
conducted, and no Subsidiary is required to qualify to do business as a foreign
corporation in any other jurisdiction. All of the outstanding shares of capital
stock of each Subsidiary have been duly and validly authorized and issued,
are
fully paid and non-assessable, have not been issued in violation of any
preemptive or other right of stockholders, or any other Person, or of any Legal
Requirements (as defined in Section 2(a)(vii) below), and are owned beneficially
and of record by the Person as specified on Schedule 2(a)(iv), free and clear
of
any liens, claims, charges, encumbrances, pledges, mortgages, security
interests, options, rights to acquire, proxies, voting trusts or similar
agreements, restrictions on transfer or adverse claims of any nature whatsoever
("Liens").
No
Subsidiary is in violation of any of the provisions of its Charter
Documents.
Except
as
described in Schedule 2(a)(iv) hereto, neither Ever Leader, any member of the
Group nor any Subsidiary owns, directly or indirectly, any ownership, equity,
profits or voting interest in any Person (other than Ever Leader, a member
of
the Group or the Subsidiaries) or has any agreement or commitment to purchase
any such interest, and Ever Leader, each Group member and their Subsidiaries
have not agreed and are not obligated to make nor are bound by any written,
oral
or other agreement, contract, subcontract, lease, binding understanding,
instrument, note, option, warranty, purchase order, license, sublicense,
insurance policy, benefit plan, commitment or undertaking of any nature, as
of
the date hereof or any date hereafter, under which any of them may be obligated
to make any future investment in or capital contribution to any other
entity.
(v) Capitalization.
(a) The
authorized capital stock of Ever Leader currently consists of 1,000,000 shares
of capital stock, par value HK$0.01 per share, or an authorized and registered
capital of HK$10,000. At the close of business on the business day prior to
the
date hereof, Schedule 2(a)(v) hereto contains all of the outstanding equity
securities of Ever Leader. All Shares on Schedule 2(a)(v) have been validly
issued, fully paid and are non-assessable and have not been issued in violation
of any preemptive or other right of stockholders (or any other Person), or
of
any legal requirement. Except as set forth in Schedule 2(a)(v), there are no
outstanding securities, convertible securities, options, warrants or derivative
securities, and there are no agreements or commitments obligating Ever Leader
to
issue or grant any of the foregoing, including any pre-emptive or similar
rights. All outstanding shares of capital stock, options, warrants and other
securities of Ever Leader have been issued in compliance with (i) all applicable
securities laws and (in all material respects) other applicable laws and
regulations, and (ii) all requirements set forth in any applicable contracts.
Except as described in Schedule 2(a)(v) or in Schedule 2(a)(v) hereto,
there are no commitments or agreements of any character to which Ever Leader
is
bound obligating Ever Leader to accelerate the vesting of any options or
warrants as a result of the Transactions.
4
(b) The
authorized and registered capital stock of each member of the Group shall be
as
set forth in Schedule 2(a)(v) hereto. All of the outstanding shares of capital
stock of each member of the Group have been duly and validly authorized and
issued, are fully paid and non-assessable, have not been issued in violation
of
any preemptive or other right of stockholders (or any other Person) or of any
Legal Requirement, and are owned beneficially and of record by the Person as
specified on Schedule 2(a)(v), free and clear of any Lien. Except as set forth
in Schedule 2(a)(v), there are no outstanding securities, convertible
securities, options, warrants or derivative securities, and there are no
agreements or commitments obligating any member of the Group to issue or grant
any of the foregoing, including any pre-emptive or similar rights. All
outstanding shares, options, warrants and other securities of each member of
the
Group have been issued in compliance with (i) all applicable securities laws
and
(in all material respects) other applicable laws and regulations, and (ii)
all
requirements set forth in any applicable contracts.
(c) Except
as
set forth in this Section 2(a)(v) or in Schedule 2(a)(v) hereto, there are
no
equity securities, partnership interests or similar ownership interests of
any
class of any equity security of any Affiliated Company, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except as set forth in this Section 2(a)(v) or in
Schedule 2(a)(v) hereof, there are no subscriptions, options, warrants, equity
securities, ownership or partnership interests or similar ownership interests,
calls, rights (including preemptive rights), commitments or agreements of any
character to which the Affiliated Companies are a party or by which they are
bound obligating them to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any registered capital, ownership
interests, partnership interests or similar ownership interests of the
Affiliated Companies or obligating the Affiliated Companies to grant, extend,
accelerate the vesting of or enter into any such subscription, option, warrant,
equity security, call, right, commitment or agreement.
(d) Except
as
contemplated by this Agreement, and except
as
set forth in Schedule 2(a)(v) hereto,
there
are no registration rights, and there is no voting trust, voting agreement,
proxy, rights plan, anti-takeover plan or other agreement or understanding
to
which the Affiliated Companies are a party or by which they are bound with
respect to any shares of capital stock, registered capital, equity securities,
partnership interests or similar ownership interests of any class of the
Affiliated Companies, and there are no agreements to which the Affiliated
Companies are a party, or which the Affiliated Companies have knowledge of,
which conflict with this Agreement or the transactions contemplated herein
or
otherwise prohibit the consummation of the transactions contemplated
hereunder.
5
(e) Except
as
set forth in Schedule 2(a)(v) hereto, there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Units.
(f) As
of the
Closing Date (as defined in Section 4(d)) (and following completion of the
Exchange), Ever Leader's capitalization will be the capitalization of Applied
Spectrum as described in Section 2(b)(vi).
(vi) Authority
Relative to this Agreement.
Ever
Leader has all necessary corporate power and authority to execute and deliver
this Agreement, the Transaction Documents, the Related Documents and the Escrow
Documents and to perform its obligations hereunder and thereunder and, to
consummate the transactions contemplated hereby and thereby (including the
Transactions). The execution and delivery of this Agreement, the Transaction
Documents, the Related Documents and the Escrow Documents and the consummation
by Ever Leader of the transactions contemplated hereby and thereby (including
the Transactions) have been duly and validly authorized by all necessary action
on the part of Ever Leader (including the approval by Ever Leader's
stockholders), and no other proceedings on the part of any Affiliated Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement, the Transaction Documents, the Related
Documents and the Escrow Documents have been duly and validly executed and
delivered by Ever Leader and, assuming the due authorization, execution and
delivery thereof by the other parties hereto, constitutes the legal and binding
obligation of Ever Leader, enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity and public policy.
(vii) No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this
Agreement, the Exchange Agreement and the other Transaction Documents, the
Related Documents and Escrow Documents by
Ever
Leader does not, and the performance of this Agreement, the Exchange Agreement
and the other Transaction Documents, the Related Documents and Escrow Documents
to which it is a party by Ever Leader shall not, (i) conflict with or violate
their respective Charter Documents, (ii) conflict with or violate any Legal
Requirements (as defined below), or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become
a
default) under, or materially impair any Affiliated Company's rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien or encumbrance on any of the properties or assets of any
Affiliated Company pursuant to, any Material Contracts (as defined in Section
2(a)(xxi) below), except, with respect to clauses (ii) or (iii), for any such
conflicts, violations, breaches, defaults or other occurrences that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on any of the Affiliated Companies. For purposes of this
Agreement, the term "Legal
Requirements"
means
any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined below).
6
(b) The
execution and delivery of this Agreement, the Exchange Agreement and the other
Transaction Documents, Related Documents and Escrow Documents to which it is
a
party by Ever Leader does not, and the performance of obligations of Ever Leader
hereunder or thereunder will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any court, administrative
agency, commission, governmental or regulatory authority, domestic or foreign
(a
"Governmental
Entity"),
except (i) for applicable requirements, if any, of the Securities Act of 1933,
as amended (the "Securities
Act"),
the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"),
state
securities laws ("Blue
Sky Laws"),
and
the rules and regulations thereunder, and appropriate documents with the
relevant authorities of other jurisdictions in which Ever Leader is qualified
to
do business, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on any of the Affiliated Companies or, after the closing of
the
Exchange Agreement, Applied Spectrum, or prevent consummation of the
Transactions or otherwise prevent the parties hereto from performing their
obligations under this Agreement, the Exchange Agreement or any other
Transaction Documents, Related Documents or Escrow Documents.
(viii) Compliance.
Each
Affiliated Company has complied with and is not in violation of any Legal
Requirements with respect to the conduct of their business, or the ownership
or
operation of their business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely
to
have a Material Adverse Effect on any of the Affiliated Companies. To the
knowledge of Ever Leader, the businesses and activities of the Affiliated
Companies have not been and are not being conducted in violation of any Legal
Requirements. Each Affiliated Company is not in default or violation of any
term, condition or provision of any applicable Charter Documents or Contracts.
Except as set forth on Schedule 2(a)(viii), no written notice of non-compliance
with any Legal Requirements relating or with respect to the business of the
Affiliated Companies has been received by the Affiliated Companies (and each
Affiliated Company has no knowledge of any such material notice delivered to
any
other Person). To the knowledge of Ever Leader, the Affiliated Companies are
not
in violation of any material term of any contract or covenant relating to
employment, patents, proprietary information disclosure, non-competition or
non-solicitation.
(ix) Financial
Statements.
(a) The
audited financial statements of Ever Leader in the Memorandum are a correct
and
complete copy of the audited financial statements (including, in each case,
any
related notes thereto) of Ever Leader and the members of the Group, on a
consolidated basis, for the fiscal years ended December 31, 2004 and 2005,
prepared in accordance with the published rules and regulations of any
applicable Governmental Entity and with generally accepted accounting principles
of the United States ("U.S.
GAAP")
applied on a consistent basis throughout the periods involved (except as may
be
indicated in the notes thereto) and audited in accordance with the auditing
standards of the Public Company Accounting Oversight Board ("PCAOB")
by an
independent accountant registered with PCAOB, and such statements fairly present
in all material respects the financial position of Ever Leader and the members
of the Group, on a consolidated basis, at the respective dates thereof and
the
results of its operations and cash flows for the periods indicated, and each
does not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
7
(b) The
unaudited financial statements of Ever Leader in the Memorandum are a complete
copy of the unaudited financial statements (including, in each case, any related
notes thereto) of Ever Leader and each member of the Group, on a consolidated
basis, for the three-month periods ended March 31, 2006 and June 30, 2006,
prepared in accordance with U.S. GAAP applied on a consistent basis throughout
the period involved (except as may be indicated in the notes thereto), and
have
been reviewed by an independent accountant registered with PCAOB, and such
statements will fairly present in all material respects the financial position
of Ever Leader and the members of the Group, on a consolidated basis, at the
dates thereof and the results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements will be
subject to normal adjustments which are not expected to have a Material Adverse
Effect on any of the Affiliated Companies. The audited financial statements
and
the unaudited financial statements described in this Section 2(a)(ix) are
collectively referred to herein as the "U.S.
GAAP Financial Statements".
(c) Ever
Leader and each member of the Group maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets and liabilities is compared with the existing
assets and liabilities at reasonable intervals and appropriate action is taken
with respect to any difference. During the twelve months prior to the date
hereof neither Ever Leader nor any member of the Group have received any notice
or correspondence from any accountant relating to any material weakness in
any
part of the system of internal accounting controls of Ever Leader or any member
of the Group.
(x) No
Undisclosed Liabilities.
Except
as set forth in Schedule 2(a)(x) hereto, the Affiliated Companies have no
liabilities individually in excess of $25,000 and in the aggregate in excess
of
$100,000 (absolute, accrued, contingent or otherwise) of a nature required
to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with U.S. GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of the Affiliated Companies, except:
(i) liabilities provided for in or otherwise disclosed in the consolidated
balance sheets of Ever Leader and the members of the Group as of December 31,
2005, prepared in accordance with U.S. GAAP, as included in the Memorandum,
and
(ii) such liabilities not in excess of $100,000, in the aggregate, arising
in
the ordinary course of business of the Affiliated Companies since December
31,
2005, none of which would have a Material Adverse Effect on any of the
Affiliated Companies.
8
(xi) Absence
of Certain Changes or Events.
Except
as set forth in Schedule 2(a)(xi) hereto or in the Memorandum, including the
consolidated balance sheets of Ever Leader and the members of the Group since
December 31, 2005, and except for the transactions contemplated under this
Agreement (including the Offering), there has not been, with respect to any
Affiliated Company: (a) any Material Adverse Effect, (b) any declaration,
setting aside or payment of any dividend on, or other distribution (whether
in
cash, securities or property) in respect of, any of equity securities, or any
purchase, redemption or other acquisition of any of equity securities or any
options, warrants, calls or rights to acquire any equity securities or other
securities, (c) any split, combination or reclassification of any equity
securities, (d) any granting of any increase in compensation or fringe benefits,
except for normal increases of cash compensation in the ordinary course of
business consistent with past practice, or any payment of any bonus, except
for
bonuses made in the ordinary course of business consistent with past practice,
or any granting of any increase in severance or termination pay or any entry
into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction of the nature contemplated hereby, (e) entry into any licensing
or
other agreement with regard to the acquisition or disposition of any
Intellectual Property (as hereinafter defined) other than licenses in the
ordinary course of business consistent with past practice or any amendment
or
consent with respect to any licensing agreement filed or required to be filed
with respect to any Governmental Entity, (f) any material change in its
accounting methods, principles or practices, (g) any change in the auditing
firm, (h) any issuance of securities, or (i) any revaluation of any of their
respective assets, including, without limitation, writing down the value of
capitalized inventory or writing off notes or accounts receivable or any sale
of
assets other than in the ordinary course of business.
(xii) Litigation.
Except
as disclosed in Schedule 2(a)(xii) hereto, there are no claims, suits, actions
or proceedings pending, or to the knowledge of any Affiliated Company,
threatened against the Affiliated Companies, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which could reasonably be expected, either
individually or in the aggregate with all such claims, actions or proceedings,
to have a Material Adverse Effect on any of the Affiliated Companies or have
a
Material Adverse Effect on the ability of any of the parties hereto to
consummate the Transactions.
(xiii) Employee
Benefit Plans.
(a) All
employee compensation, incentive, fringe or benefit plans, programs, policies,
commitments or other arrangements (whether or not set forth in a written
document) covering any active or former employee, director or consultant of
the
Affiliated Companies, or any trade or business (whether or not incorporated)
which is under common control with the Affiliated Companies, with respect to
which the Affiliated Companies has liability (collectively, the "Plans")
has
been maintained and administered in all material respects in compliance with
its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Plans, and all liabilities
with respect to the Plans have been properly reflected in the consolidated
financial statements of Ever Leader and the members of the Group. No suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of Plan activities) has been brought or is continuing, or to
the
knowledge of Ever Leader is threatened, against or with respect to any such
Plan. There are no audits, inquiries or proceedings pending or, to the knowledge
of Ever Leader, threatened by any governmental agency with respect to any Plans.
All contributions, reserves or premium payments required to be made or accrued
as of the date hereof to the Plans have been timely made or accrued. Each Plan
can be amended, terminated or otherwise discontinued after the closing of the
Transactions in accordance with its terms, subject to applicable laws, without
liability to Ever Leader or the Affiliated Companies (other than ordinary
administration expenses and expenses for benefits accrued but not yet
paid).
9
(b) Except
as
disclosed on Schedule 2(a)(xiii) hereto, neither the execution and delivery
of
this Agreement, the Exchange Agreement or any other Transaction Documents,
Related Documents or Escrow Documents nor the consummation of the transactions
contemplated hereby or thereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any stockholder, officer, director or employee of the Affiliated
Companies under any Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any Plan, or (iii) result in the
acceleration of the time of payment or vesting of any such
benefits.
(xiv) Labor
Matters.
Except
as disclosed in Schedule 2(a)(xiv) hereto, the Affiliated Companies are not
a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Affiliated Companies nor does any
Affiliated Company know of any activities or proceedings of any labor union
to
organize any such employees.
(xv) Restrictions
on Business Activities.
Except
as disclosed on Schedule 2(a)(xv) hereto, there is no agreement, commitment,
judgment, injunction, order or decree binding upon the Affiliated Companies
or
to which the Affiliated Companies is a party which has or could reasonably
be
expected to have the effect of prohibiting or materially impairing any business
practice of the Affiliated Companies, any acquisition of property by the
Affiliated Companies or the conduct of business by the Affiliated Companies
as
currently conducted other than such effects, individually or in the aggregate,
which have not had and could not reasonably be expected to have a Material
Adverse Effect on the Affiliated Companies.
(xvi) Title
to Property.
(a) All
real
estate or land use rights owned by the Affiliated Companies (including land
use
rights, improvements and fixtures thereon, easements and rights of way) (the
"Real
Property")
is
shown or reflected on the U.S. GAAP Financial Statements. The Affiliated
Companies have good, valid and marketable title to the Real Property, and except
as set forth in the U.S. GAAP Financial Statements or on Schedule 2(a)(xvi)
hereto, all of the Real Property is held free and clear of all Liens, rights
of
way, easements, restrictions, exceptions, variances, reservations, covenants
or
other title defects or limitations of any kind, other than Liens for taxes
not
yet due and payable and such Liens or other imperfections of title, if any,
that
do not materially detract from the value of or materially interfere with the
present use of the property affected thereby. Schedule 2(a)(xvi) hereto is
a
list of all options or other contracts under which any Affiliated Company has
a
right to acquire any interest in real property.
10
(b) All
leases of real property held by the Affiliated Companies and all personal
property and other property and assets of the Affiliated Companies (other than
Real Property) owned, used or held for use in connection with the business
of
the Affiliated Companies (the "Personal
Property")
are
shown or reflected on the U.S. GAAP Financial Statements. The Affiliated
Companies own and have good and marketable title to the Personal Property,
and
all such assets and properties are in each case held free and clear of all
Liens, except for Liens disclosed in the U.S. GAAP Financial Statements or
in
Schedule 2(a)(xvi) hereto, none of which Liens has or will have, individually
or
in the aggregate, a Material Adverse Effect on such property or on the present
or contemplated use of such property in the businesses of any of the Affiliated
Companies.
(c) All
leases pursuant to which an Affiliated Company leases from others material
real
or personal property are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing material default
or event of default of the Affiliated Companies or, to the knowledge of Ever
Leader, any other party (or any event which with notice or lapse of time, or
both, would constitute a material default), except where the lack of such
validity and effectiveness or the existence of such default or event of default
could not reasonably be expected to have a Material Adverse Effect on any of
the
Affiliated Companies.
(xvii) Taxes.
(a) Definition
of Taxes.
For the
purposes of this Agreement, "Tax"
or
"Taxes"
refers
to any and all applicable central, federal, provincial, state, local, municipal
and foreign taxes, including, without limitation, gross receipts, income,
profits, sales, use, occupation, value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes,
assessments, governmental charges and duties together with all interest,
penalties and additions imposed with respect to any such amounts and any
obligations under any agreements or arrangements with any other person with
respect to any such amounts and including any liability of a predecessor entity
for any such amounts.
(b) Tax
Returns and Audits.
Except
as set forth in Schedule 2(a)(xvii) hereto:
(i) The
Affiliated Companies have timely filed all federal, state, local and foreign
returns, estimates, information statements and reports relating to Taxes
("Returns")
required to be filed by the Affiliated Companies with any Tax authority prior
to
the date hereof. All such Returns are true, correct and complete in all material
respects. The Affiliated Companies have paid all Taxes shown to be due on such
Returns.
(ii) All
Taxes
that the Affiliated Companies are required by law to withhold or collect have
been duly withheld or collected, and have been timely paid over to the proper
governmental authorities to the extent due and payable.
11
(iii) The
Affiliated Companies have not been delinquent in the payment of any Tax nor
is
there any Tax deficiency outstanding, proposed or assessed against the
Affiliated Companies, nor have the Affiliated Companies executed any unexpired
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) No
audit
or other examination of any Return of the Affiliated Companies by any Tax
authority is presently in progress, nor have the Affiliated Companies been
notified of any request for such an audit or other examination.
(v) No
adjustment relating to any Returns filed by the Affiliated Companies has been
proposed in writing, formally or informally, by any Tax authority to the
Affiliated Companies or any representative thereof.
(vi) The
Affiliated Companies have no liability for any unpaid Taxes which have not
been
accrued for or reserved on Ever Leader's balance sheets included in the U.S.
GAAP Financial Statements for the most recent fiscal year ended, whether
asserted or unasserted, contingent or otherwise, other than any liability for
unpaid Taxes that may have accrued since the end of the most recent fiscal
year
in connection with the operation of the business of the Affiliated Companies
in
the ordinary course of business, none of which is material to the business,
results of operations or financial condition of the Affiliated
Companies.
(xviii) Environmental
Matters.
Except
as disclosed in Schedule 2(a)(xviii) hereto and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect: (a) the Affiliated Companies have complied with all applicable
Environmental Laws; (b) the properties currently owned or operated by the
Affiliated Companies (including soils, groundwater, surface water, buildings
or
other structures) are not contaminated with any Hazardous Substances; (c) the
properties formerly owned or operated by the Affiliated Companies were not
contaminated with Hazardous Substances prior to or during the period of
ownership or operation by the Affiliated Companies; (d) the Affiliated Companies
are not subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (e) the Affiliated Companies have
not
been associated with any release or threat of release of any Hazardous
Substance; (f) the Affiliated Companies have not received any notice, demand,
letter, claim or request for information alleging that the Affiliated Companies
may be in violation of or liable under any Environmental Law; and (g) the
Affiliated Companies are not subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or subject to any indemnity
or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances.
As
used
in this Agreement, the term "Environmental
Law"
means
all applicable central, federal, provincial, state, local or municipal law,
regulation, order, decree, permit, authorization, opinion, common law or agency
requirement relating to: (A) the protection, investigation or restoration of
the
environment, health and safety, or natural resources; (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance
or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat
of
injury to persons or property.
As
used
in this Agreement, the term "Hazardous
Substance"
means
any substance that is: (a) listed, classified or regulated pursuant to any
Environmental Law; (b) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (c) any other substance which is the subject
of regulatory action by any Governmental Entity pursuant to any Environmental
Law.
12
(xix) Brokers;
Third Party Expenses.
Except
as set forth in this Agreement and in the Related Agreements, and except as
set
forth in this Section 2(a)(xix), neither the Affiliated Companies, Ever Leader
nor, to the knowledge of Ever Leader, the Shareholders, have incurred, nor
will
they incur, directly or indirectly, any liability for brokerage, finders' fees,
agent's commissions or any similar charges in connection with this Agreement,
the Exchange Agreement, any other Transaction Documents, Related Documents
or
Escrow Documents or any transactions contemplated hereby or thereby. Except
as
disclosed on Schedule 2(a)(xix), no ownership interests, equity securities,
convertible securities, warrants, options, or other derivative securities of
the
Affiliated Companies or Applied Spectrum are payable to any third party by
any
Affiliated Company, Ever Leader or any Shareholder as a result of the
Transactions.
(xx) Intellectual
Property.
For the
purposes of this Agreement, the following terms have the following
definitions:
(a) "Intellectual
Property"
shall
mean any or all of the following: (i) patents and applications therefor and
all reissues, divisions, renewals, extensions, provisionals, continuations
and
continuations-in-part thereof ("Patents")
worldwide; (ii) inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know how, technology,
technical data and customer lists, and all documentation relating to any of
the
foregoing; (iii) registered copyrights and applications therefor, and all other
rights corresponding thereto, worldwide; (iv) material domain names, uniform
resource locators ("URLs")
and
other names and locators associated with the Internet ("Domain
Names");
(v)
registered industrial designs and applications therefor, worldwide; (vi)
registered trade names, logos, trademarks and service marks, and any
applications therefor (collectively, "Trademarks"), worldwide; (vii) all
databases and data collections and all rights therein; and (viii) all moral
and
economic rights of authors and inventors, however denominated.
(b) "Ever
Leader Intellectual Property"
shall
mean any Intellectual Property that is owned by, or licensed to any of the
Affiliated Companies.
(c) "Ever
Leader Products"
means
all current versions of products or services of any of the Affiliated
Companies.
(d) The
Affiliated Companies own or possess adequate rights or licenses to use all
Intellectual Property necessary to conduct their respective businesses as now
conducted. None of any Affiliated Company's registered, or applied for, Ever
Leader Intellectual Property have expired or terminated or have been abandoned,
or are expected to expire or terminate or expected to be abandoned, within
three
years from the date of this Agreement. The Affiliated Companies have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their Intellectual Property Rights.
13
(e) Except
as
disclosed on Schedule 2(a)(xx), Ever Leader Intellectual Property and Ever
Leader Products are not subject to any material proceeding or outstanding
decree, order, judgment, contract, license, agreement or stipulation restricting
in any manner the use, transfer or licensing thereof by the Affiliated
Companies, or which may affect the validity, use or enforceability of such
Ever
Leader Intellectual Property or Ever Leader Products, which in any such case
could reasonably be expected to have a Material Adverse Effect on any of the
Affiliated Companies. No Affiliated Company has any knowledge of any
infringement by any Affiliated Company of Intellectual Property of others.
There
is no claim, action or proceeding being made or brought, or to the knowledge
of
Ever Leader, being threatened, against any Affiliated Company regarding the
Ever
Leader Intellectual Property and/or the Ever Leader Products. No Affiliated
Company is aware of any facts or circumstances which might give rise to any
of
the foregoing infringements or claims, actions or proceedings.
(f) Except
as
disclosed on Schedule 2(a)(xx) hereto, the Affiliated Companies either own
and
have good and marketable title to each material item of Ever Leader Intellectual
Property owned by it free and clear of any Liens (excluding licenses and related
restrictions granted in the ordinary course) or have one or more licenses
sufficient for use of Ever Leader Intellectual Property by the Affiliated
Companies; and the Affiliated Companies are the owner or licensee of all
Trademarks used in connection with the operation or conduct of the business
of
the Affiliated Companies including the sale of any Ever Leader
Products.
(g) The
operation of the business of the Affiliated Companies as such business currently
is conducted, including the use of any product, device or process, to the
knowledge of Ever Leader and except as could not reasonably be expected to
have
a Material Adverse Effect, has not and does not infringe or misappropriate
the
Intellectual Property of any third party or constitute unfair competition or
trade practices under the laws of any jurisdiction.
(xxi) Agreements,
Contracts and Commitments.
(a) For
purposes of this Agreement, (i) "Indebtedness"
of any
Person means, without duplication (A) all indebtedness for borrowed money,
(B)
all obligations issued, undertaken or assumed as the deferred purchase price
of
property or services, including (without limitation) "capital leases" in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and
other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect
to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in
the
event of default are limited to repossession or sale of such property), (F)
all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment
of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (ii) "Contingent
Obligation"
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; (iii) the term "Contracts"
shall
mean all written contracts, agreements, leases, mortgages, indentures, notes,
bonds, Liens, licenses, arbitration awards, judgments, decrees, orders,
documents, instruments, understandings and commitments to which the Affiliated
Companies is a party or by or to which any of the properties or assets of the
Affiliated Companies may be bound, subject or affected (including without
limitation notes or other instruments payable to the Affiliated Companies),
and
(iv) the term "Material
Contracts"
shall
mean (x) each Contract, (I) providing for payments (present or future) to the
Affiliated Companies in excess of $100,000 in the aggregate, or (II) under
which
or in respect of which the Affiliated Companies presently have any liability
or
obligation of any nature whatsoever (absolute, contingent or otherwise) in
excess of $100,000, and (y) without limitation of subclause (x), each of the
following Contracts:
14
(i) any
Indebtedness of the Affiliated Companies, including, without limitation, any
mortgage, indenture, note, installment obligation or other instrument, agreement
or arrangement for or relating to any borrowing of money by or from Ever Leader
or any of the Affiliated Companies;
(ii) any
guaranty, direct or indirect, by the Affiliated Companies or any officer,
director or 5% or more stockholder ("Insider")
of the
Affiliated Companies of any obligation of the Affiliated Companies for
borrowings, or otherwise, excluding endorsements made for collection in the
ordinary course of business;
(iii) any
Contract made other than in the ordinary course of business or (x) providing
for
the grant of any preferential rights to purchase or lease any asset of the
Affiliated Companies or (y) providing for any right (exclusive or non-exclusive)
to sell or distribute, or otherwise relating to the sale or distribution of,
any
product or service of the Affiliated Companies;
(iv) any
obligation to register any shares of the capital stock or other securities
of
the Affiliated Companies with any Governmental Entity;
(v) any
obligation to make payments, contingent or otherwise, arising out of the prior
acquisition of the business, assets or stock of other Persons;
(vi) any
collective bargaining agreement with any labor union;
(vii) any
lease
or similar arrangement for the use by Ever Leader or any of Affiliated Companies
of personal property;
15
(viii) any
Contract granting or purporting to grant, or otherwise in any way relating
to,
any mineral rights or any other interest (including, without limitation, a
leasehold interest) in real property;
(ix) any
Contract of the Affiliated Companies, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument could
reasonably be expected to result in a Material Adverse Effect; and
(x) any
Contract with the Affiliated Companies to which any Insider of the Affiliated
Companies is a party.
(b) Each
Material Contract was entered into at arms' length and in the ordinary course,
is in full force and effect and, to the knowledge of Ever Leader, is valid
and
binding upon and enforceable against each of the parties thereto.
(c) Except
as
set forth in Schedule 2(a)(xxi), neither Ever Leader nor Affiliated Companies
nor, to the knowledge of Ever Leader, any other party thereto, is in breach
of
or in default under, and no event has occurred which with notice or lapse of
time or both would become a breach of or default under, any Material Contract,
which breach, individually or in the aggregate, could be reasonably likely
to
have a Material Adverse Effect on Ever Leader or any of the Affiliated
Companies, and no party to any Material Contract has given any written notice
of
any claim of any such breach, default or event, which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on Ever
Leader or any of the Affiliated Companies. Each Material Contract to which
the
Affiliated Companies is a party or by which it is bound that has not expired
by
its terms is in full force and effect, except where such failure to be in full
force and effect is not reasonably likely to have a Material Adverse Effect
on
Ever Leader or any of the Affiliated Companies.
(xxii) Insurance.
Schedule 2(a)(xxii) sets forth the insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors (collectively, the "Insurance
Policies")
of the
Affiliated Companies. The Affiliated Companies are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of Ever Leader believes to be prudent and customary in
the
businesses in which the Affiliated Companies operate. No Affiliated Company
has
been refused any insurance coverage sought or applied for and no Affiliated
Company has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
at a
cost that would not have a Material Adverse Effect.
(xxiii) Governmental
Actions/Filings; Approvals.
Except
as set forth in Schedule 2(a)(xxiii), the Company and/or the Affiliated
Companies hold, and/or have made, all Governmental Actions/Filings and Approvals
necessary for the conduct by the Company and the Affiliated Companies of their
business (as presently conducted and to be conducted following the Closing
and
the closing of the Exchange Agreement), except with respect to any Governmental
Actions/Filings and Approvals the failure of which to hold or make would not
reasonably be likely to have a Material Adverse Effect on any of the Affiliated
Companies.
16
For
purposes of this Agreement, the term "Governmental
Action/Filing"
shall
mean any franchise, license, certificate of compliance, authorization, consent,
order, permit, approval, consent or other action of, or any filing, registration
or qualification with, any federal, state, municipal, foreign or other
governmental, administrative or judicial body, agency or authority.
(xxiv) Interested
Party Transactions.
Except
as set forth in the Schedule 2(a)(xxiv) hereto or as reflected in the financial
statements included in the Memorandum, no employee, officer, director or
stockholder of the Affiliated Companies or a member of his or her immediate
family is indebted to the Affiliated Companies, nor are the Affiliated Companies
indebted (or committed to make loans or extend or guarantee credit) to any
of
them, other than (a) for payment of salary for services rendered,
(b) reimbursement for reasonable expenses incurred on behalf of the
Affiliated Companies, and (c) for other employee benefits made generally
available to all employees. Except as set forth in Schedule 2(a)(xxiv), to
the
knowledge of Ever Leader, none of such individuals has any direct or indirect
ownership interest in any Person with whom the Affiliated Companies is
affiliated or with whom the Affiliated Companies has a contractual relationship,
or any Person that competes with the Affiliated Companies, except that each
employee, officer, director or stockholder of the Affiliated Companies and
members of their respective immediate families may own less than 5% of the
outstanding stock in publicly traded companies that may compete with the
Affiliated Companies. Except as set forth in Schedule 2(a)(xxiv), to the
knowledge of Ever Leader, no employee, officer, director or stockholder or
any
member of their immediate families is, directly or indirectly, interested in
any
material contract with the Affiliated Companies (other than such contracts
as
relate to any such individual ownership of interests in or securities of the
Affiliated Companies).
(xxv) Management.
Except
as set forth in Schedule 2(a)(xxv) hereto, during the past five year period,
no
current or former officer or director or stockholder of the Affiliated Companies
has been the subject of:
(a) a
petition under bankruptcy laws or any other insolvency or moratorium law or
has
a receiver, fiscal agent or similar officer been appointed by a court for such
person, or any partnership in which such person was a general partner at or
within two years before the time of such filing, or any corporation or business
association of which such person was an executive officer at or within two
years
before the time of such filing;
(b) a
conviction in a criminal proceeding or a named subject of a pending criminal
proceeding (excluding traffic violations that do not relate to driving while
intoxicated or driving under the influence);
(c) any
order, judgment or decree, not subsequently reversed, suspended or vacated,
of
any court of competent jurisdiction, permanently or temporarily enjoining any
such person from, or otherwise limiting, the following activities:
(i) Acting
as
a futures commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage transaction merchant, any other
person regulated by the United States Commodity Futures Trading Commission
or an
associated person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any conduct
or
practice in connection with such activity;
17
(ii) Engaging
in any type of business practice; or
(iii) Engaging
in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of securities laws or commodities
laws;
(d) any
order, judgment or decree, not subsequently reversed, suspended or vacated,
of
any authority barring, suspending or otherwise limiting for more than 60 days
the right of any such person to engage in any activity described in the
preceding sub paragraph, or to be associated with persons engaged in any such
activity;
(e) a
finding
by a court of competent jurisdiction in a civil action or by the U.S. Securities
and Exchange Commission ("SEC")
or
other authority to have violated any securities law, regulation or decree and
the judgment in such civil action or finding by the SEC or any other authority
has not been subsequently reversed, suspended or vacated; or
(f) a
finding
by a court of competent jurisdiction in a civil action or by the Commodity
Futures Trading Commission to have violated any federal commodities law, and
the
judgment in such civil action or finding has not been subsequently reversed,
suspended or vacated.
(xxvi) Escrow
Agreements.
Each of
(w) the Escrow Agreement (the "Escrow
Agreement")
among
Ever Leader, Applied Spectrum, the Placement Agent and ▇▇▇▇▇▇ Street State
Bank
(the "Escrow
Agent"),
(x)
the Escrow Agreement (the "Make
Good Share Escrow
Agreement")
among
the Placement Agent, Ever Leader, Applied Spectrum, certain stockholders of
Ever
Leader and Computershare Trust Company, Inc. (the "Share
Escrow Agent"),
(y)
the Make Good Agreement (the "Make
Good Agreement")
among
the Placement Agent Ever Leader, Applied Spectrum and certain stockholders
of
Ever Leader, and (z) such other ancillary documents related thereto
(collectively with the Escrow Agreement, the Make Good Share Escrow Agreement
and the Make Good Agreement, the "Escrow
Documents")
have
been duly and validly executed and delivered by or on behalf of Ever Leader
and
constitutes a legal, valid, and binding obligation of Ever Leader enforceable
in
accordance with its terms, except as such enforceability may be limited by
(a)
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
of
general application relating to or affecting enforcement of creditors' rights
generally and (b) laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
(xxvii) Injunction.
None of
the Affiliated Companies is or has been subject to any order, judgment, or
decree of any court of competent jurisdiction temporarily, preliminarily, or
permanently enjoining such person for failure to comply with Rule 503 under
Regulation D.
(xxviii) Foreign
Corrupt Practices.
None of
the Affiliated Companies nor any director, officer, agent, employee or other
Person acting on behalf of any Affiliated Company has, in the course of its
actions for, or on behalf of, any Affiliated Company (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from
corporate funds; (iii) violated or is in violation of any provision of the
U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to
any foreign or domestic government official or employee.
18
(xxix) Investment
Company Status.
None of
the Affiliated Companies are, and upon consummation of the sale of the Units
will not be, an "investment company," a company controlled by an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company" as such terms are defined in the Investment Company
Act of 1940, as amended.
(xxx) U.S.
Real Property Holding Corporation.
None of
the Affiliated Companies are, nor have any ever been, a U.S. real property
holding corporation within the meaning of Section 897 of the Internal Revenue
Code of 1986, as amended, and the Affiliated Companies shall so certify upon
the
Placement Agent's request.
(xxxi) Representations
and Warranties Complete.
The
representations and warranties of Ever Leader included in this Agreement and
any
Schedule provided pursuant to this Agreement, are true and complete in all
material respects and do not contain any untrue statement of a material fact
or
omit to state a material fact required to be stated therein or necessary to
make
the statements contained therein not misleading, under the circumstance under
which they were made.
(b) Applied
Spectrum
represents, warrants, and agrees that upon the consummation of the Transactions,
the following are true, correct and complete at and as of the date of Closing.
The parties acknowledge that Applied Spectrum assumes no responsibility for
the
representations, warranties and agreements in this Section 2(b) until completion
of the Exchange:
(i) All
reports and statements required to be filed by Applied Spectrum with the SEC
under the Exchange Act and the rules and regulations thereunder, including
all
reports and statements with respect to the Transactions contemplated hereunder,
have been made or will be made at or prior to the Closing. Such filings,
together with all documents incorporated by reference therein, are referred
to
as "Exchange
Act Documents".
Each
Exchange Act Document, as amended, conformed in all material respects to the
requirements of the Exchange Act and the rules and regulations thereunder,
and
no Exchange Act Document, as amended, at the time each such document was filed,
included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(ii) The
financial statements, together with the related notes, of Applied Spectrum
contained in the Exchange Act Documents filed for the 36 months prior to the
date of this Agreement, and the financial statements that are included in
Applied Spectrum's Annual Report on Form 10-KSB for the year ended September
30,
2005, fairly present in all material respects, on the basis stated therein
and
on the date thereof, the financial position of Applied Spectrum at the
respective dates therein specified and its results of operations and cash flows
for the periods then ended. Such statements and related notes have been prepared
in accordance with U.S. GAAP applied on a consistent basis except as expressly
noted therein (provided that the unaudited financial statements lack footnotes
and other presentation items).
19
(iii) Except
for the Transactions or the transactions contemplated by this Agreement, or
as
disclosed in the Exchange Act Documents or on Schedule 2(b)(iii), since December
31, 2005, Applied Spectrum has not incurred any material liabilities or
obligations, direct or contingent, except in the ordinary course of business,
and there has not been any material adverse change, or to the actual knowledge
of Applied Spectrum, any development involving a prospective material adverse
change, in the condition (financial or otherwise), business, or results of
operations of Applied Spectrum or any change in the capital or material increase
in the long-term debt of Applied Spectrum, nor has Applied Spectrum declared,
paid, or made any dividend or distribution of any kind on its capital
stock.
(iv) All
action required to be taken by Applied Spectrum for the authorization of this
Agreement, the Exchange Agreement, the Related Agreements, the Escrow Documents,
the Transaction Documents, Related Documents or Escrow Documents, the
performance of all obligations of Applied Spectrum and Ever Leader hereunder
and
thereunder at the Closing, and as a condition to the due and proper
authorization, issuance, sale, and delivery of the Units to subscribers therefor
in accordance with the terms of this Agreement has been, or prior to the Closing
Date (as defined in Section 4(d) below), will have been taken and upon the
payment of the consideration for the Units shall be fully paid.
(v) Applied
Spectrum is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware and has all requisite right, power,
and
authority to own or lease its properties, to conduct its business as described
in the Exchange Act Documents, and to execute, deliver, and perform this
Agreement, the Exchange Agreement, the Securities Purchase Agreement between
Applied Spectrum and the purchasers of the Units, in (in such form as executed
by such parties in this Transaction, the "Securities
Purchase Agreement"),
the
Registration Rights Agreement, (in such form as executed by such parties in
this
Transaction, the "Registration
Rights Agreement"
and
together with the Securities Purchase Agreement and the other Transaction
Documents (as defined in the Securities Purchase Agreement), the "Related
Agreements"),
to
issue and sell the Units and to carry out the provisions of this Agreement,
the
Transaction Documents, the Escrow Documents and the Related Agreements and
to
carry on its business as presently conducted. Applied Spectrum is duly qualified
to do business and in good standing as a foreign corporation in all other
jurisdictions in which its ownership or leasing of properties, or the conduct
of
its business requires or may require such qualification except where the failure
to be so qualified would not have a Material Adverse Effect. Applied Spectrum
has complied in all material respects with all material laws, rules,
regulations, applicable to Applied Spectrum's business, operations, properties,
assets, products, and services, and Applied Spectrum is in possession of and
operating in compliance with all material permits, licenses, and other
authorization, required to conduct its business as currently
conducted.
20
(vi) As
of the
date hereof, the authorized capital stock of Applied Spectrum consists of
150,000,000 shares of Common Stock, and 5,000,000 shares of preferred
stock, par value $0.001 ("Preferred
Stock").
Immediately prior to the Closing of the Offering, Applied Spectrum will have
71,002,646 shares of Common Stock issued and outstanding and no shares of
Preferred Stock issued and outstanding. Except
as contemplated by this Agreement and the Exchange Agreement, or as described
in
the Exchange Act Documents or on Schedule 2(b)(vi), immediately prior to the
Closing (a) there is no commitment by Applied Spectrum to issue any shares
of
capital stock, subscriptions, warrants, options, convertible securities, or
other similar rights to purchase or receive Applied Spectrum securities or
to
distribute to the holders of any of its equity securities any evidence of
Indebtedness, cash, or other assets, (b) Applied Spectrum is under no obligation
(contingent or otherwise) to purchase, redeem, or otherwise acquire any of
its
equity or debt securities or any interest therein, (c) there
are
no securities or instruments containing anti-dilution or similar provisions
that
will be triggered by the issuance of the Units
and (d) there are no voting trusts or similar agreements, stockholders'
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights, or proxies relating to any securities of Applied Spectrum.
Except for those persons issued securities pursuant to the Exchange Agreement
or
as set forth in the Exchange Act Documents or filings with the Commission made
by third parties pursuant to Schedule 13D or 13G or Form 3 or 4, and to the
knowledge of Applied Spectrum, no person holds of record or beneficially, 5%
or
more of the outstanding shares of the capital stock of Applied Spectrum. All
outstanding securities of Applied Spectrum were issued in compliance with
applicable Federal and state securities laws.
(vii) Except
as
disclosed in the Exchange Act Documents or as described on Schedule 2(b)(vii),
there is no pending or, to the knowledge of Applied Spectrum, threatened (a)
action, suit, claim, proceeding, or investigation against Applied Spectrum,
at
law or in equity, or before or by any Federal, state, municipal, or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign Governmental Entity, (b) arbitration proceeding against
Applied Spectrum, (c) governmental inquiry against Applied Spectrum, or (d)
any
action or suit by or on behalf of Applied Spectrum pending or threatened against
others.
(viii) Applied
Spectrum is not in violation of its articles of incorporation or bylaws, or
in
default, or with the giving of notice or lapse of time or both, would be in
default, in the performance of any obligation, agreement, or condition contained
in any lease, license, contract, indenture, or loan agreement or in any bond,
debenture, note, or any other evidence of Indebtedness, except for such defaults
as would not have a Material Adverse Effect. The execution, delivery, and
performance of this Agreement, the Transaction Documents, the Related
Agreements, and the Escrow Documents, the incurrence of the obligations herein,
the issuance, sale, and delivery of the Units, and the consummation of the
transactions contemplated herein, have been duly authorized by all requisite
corporate action on the part of Applied Spectrum and (a) do not and will not
conflict with Applied Spectrum's articles of incorporation or bylaws, (b) do
not
and will not, with or without the passage of time or the giving of notice,
result in the breach of, or constitute a default, cause the acceleration of
performance, or require any consent under, or result in the creation of any
lien, charge or encumbrance upon any property assets of Applied Spectrum
pursuant to, any material loan agreement, mortgage, deed of trust, indenture,
or
other instrument or agreement to which Applied Spectrum is a party or by which
Applied Spectrum or its properties are bound, except such consents as have
been
obtained as of the date hereof or to the extent that the same have been, or
prior to the Closing Date will be, waived or cured, and as may be required
by
the Over-the-Counter Bulletin Board ("OTC
BB"),
which
Applied Spectrum undertakes to obtain as promptly as practicable, or (c) do
not
and will not result in the violation of any law, statute, order, rule,
administrative regulation, or decree of any court, or governmental agency or
body having jurisdiction over Applied Spectrum or its properties. Upon execution
and delivery the Exchange Agreement will be in full force and
effect.
21
(ix) Except
as
disclosed in the Exchange Act Documents or as described on Schedule 2(b)(ix),
and other than pursuant to the Exchange Agreement and the documents related
thereto, there are no pre-emptive rights or other rights to subscribe for or
to
purchase, or any restriction upon the voting or transfer of, shares of Common
Stock pursuant to Applied Spectrum's articles of incorporation, bylaws, or
any
agreement or other instrument to which Applied Spectrum is a party. Except
as
disclosed on Schedule 2(b)(ix), the issuance of the Units is not subject to
any
preemptive right of any stockholder of Applied Spectrum or to any right of
first
refusal or other right in favor of any person.
(x) The
obligations of Applied Spectrum under this Agreement has been duly and validly
assumed by Applied Spectrum and this Agreement constitutes a legal, valid,
and
binding obligation of Applied Spectrum enforceable in accordance with its terms,
except to the extent that its enforceability is limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally, and (b) laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies and except as enforceability
of
the indemnity and contribution provisions contained in Section 7 hereof may
be
limited by applicable law or principles of public policy.
(xi) The
Escrow Documents, the Related Documents and the Transaction Documents to which
it is a party have been duly and validly executed and delivered by or on behalf
of Applied Spectrum and constitutes a legal, valid, and binding obligation
of
Applied Spectrum enforceable in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws of general application relating to
or
affecting enforcement of creditors' rights generally and (b) laws relating
to
the availability of specific performance, injunctive relief, or other equitable
remedies.
(xii) No
consent, approval, authorization, or order of any court or governmental
authority or agency is required for the consummation by Applied Spectrum of
the
transactions contemplated by this Agreement.
(xiii) Except
as
disclosed on Schedule 2(b)(xiii), Applied Spectrum has filed, or caused to
be
filed, on a timely basis, all tax returns (including payroll, unemployment,
and
other taxes related to its employees and independent contractors) required
to be
filed with any Governmental Entity and has paid or caused to be paid all taxes,
levies, assessments, tariffs, duties or other fees imposed, assessed, or
collected by any Governmental Entity that may have become due and payable
pursuant to those tax returns or otherwise except taxes being disputed by
Applied Spectrum in good faith. Except as disclosed on Schedule 2(b)(xiii),
no
deficiency assessment with respect to or proposed adjustment of any of Applied
Spectrum's Federal, state, municipal, or local tax returns has occurred or
is
threatened. There has been no tax lien imposed by any Governmental Entity
outstanding against Applied Spectrum's assets or properties, except the lien
for
current taxes not yet due. The charges, accruals, and reserves on the books
of
Applied Spectrum with respect to taxes for all fiscal periods are adequate,
in
the opinion of Applied Spectrum, and Applied Spectrum does not know of any
actual or proposed tax assessment for any fiscal period or of any basis therefor
against which adequate reserves have not been set up. Except as disclosed on
Schedule 2(b)(xiii), Applied Spectrum has not been advised that any Federal
income tax return of Applied Spectrum has been, or will be, examined or audited
by the Internal Revenue Service.
22
(xiv) The
Applied Spectrum Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and is listed for quotation with the symbol "APSP" on the OTC
BB.
(xv) Except
as
set forth on Schedule 2(b)(xv), Applied Spectrum has not during the past twelve
months offered or sold any security by or for Applied Spectrum that is of the
same or a similar class as the Shares and Warrants, other than offers of
securities made solely to accredited investors or otherwise under an employee
benefit plan as defined in Rule 405 under the Securities Act, securities issued
in connection with the Transactions or other acquisitions, or other securities
that will not invalidate the exemption from registration relied on to offer
and
sell the Shares and Warrants.
(xvi) Neither
Applied Spectrum nor any of its affiliates is or has been subject to any order,
judgment, or decree of any court of competent jurisdiction temporarily,
preliminarily, or permanently enjoining such person for failure to comply with
Rule 503 under Regulation D.
(xvii) The
execution, delivery, and performance by Applied Spectrum of this Agreement,
the
Transaction Documents, the Escrow Documents and the Related Agreements, and
the
offer and sale of the Units require no consent of, action by or in respect
of,
or filing with, any person or Governmental Entity other than those consents
that
have been obtained and filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal
securities laws, which Applied Spectrum undertakes to file within the applicable
time period.
(xviii) All
disclosure provided to you regarding Applied Spectrum, its business and the
transactions contemplated hereby, furnished by or on behalf of Applied Spectrum
(including the disclosures, representations and warranties made by each of
the
parities to the Exchange Agreement) are true and correct and do not contain
any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
(xix) Except
as
set forth on Schedule 2(b)(xix), other than pursuant to this Agreement, there
are no brokers, representatives or other persons which have an interest in
commissions or other compensation payable by Applied Spectrum in connection
with
the transactions contemplated hereunder.
3. Representations
and Warranties of the Placement Agent.
The
Placement Agent represents and warrants to, and agrees with, Ever Leader and
Applied Spectrum that as of the date hereof and the Closing Date:
23
(a) The
Placement Agent has been duly organized and validly existing and in good
standing as a limited liability company under the laws of the State of Delaware
with power and authority (corporate and other) to perform its obligations under
this Agreement and the Escrow Documentst; the Placement Agent is a broker-dealer
registered and in good standing under the Exchange Act and under the securities
or Blue Sky laws of each state, where required by applicable law, in which
the
Units are being offered or sold by the Placement Agent, and the Placement Agent
is a member in good standing of the NASD; the Placement Agent is in possession
of and operating in compliance with all authorizations, licenses, permits,
consents, certificates, and orders required for the performance of its duties
under this Agreement and the Escrow Documents, and the Placement Agent's
performance of its duties hereunder and thereunder will be in compliance with
all applicable laws, including state securities and Blue Sky laws.
(b) There
are
no legal or governmental proceedings pending to which the Placement Agent is
a
party or of which any of its properties is the subject or, to the Placement
Agent's knowledge, threatened, which, if determined adversely to the Placement
Agent, would individually or in the aggregate materially and adversely affect
its ability to perform its obligations under this Agreement or the Escrow
Documents.
(c) No
consent, approval, authorization or order of any court or governmental authority
or agency is required for the performance by the Placement Agent of its
obligations under this Agreement, except such as may be required by the NASD
or
under Regulation D or state securities or Blue Sky laws.
(d) This
Agreement has been duly and validly executed and delivered by or on behalf
of
the Placement Agent and constitutes a legal, valid, and binding obligation
of
the Placement Agent enforceable in accordance with its terms, except to the
extent that its enforceability is limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting the enforcement of creditors' rights generally, and
(ii) laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies and except as enforceability of the
indemnity and contribution provisions contained in Section 7 hereof may be
limited by applicable law or principles of public policy.
(e) The
Escrow Documents, when executed and delivered by or on behalf of the Placement
Agent, shall constitute a legal, valid, and binding obligation of the Placement
Agent enforceable in accordance with its terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application relating to or affecting
enforcement of creditors' rights generally and (ii) laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.
4. Offering
and Sale of the Units.
(a) On
the
basis of the representations, warranties, and covenants herein contained, but
subject to the terms and upon the conditions herein set forth, the Placement
Agent is hereby appointed the Placement Agent of Ever Leader and Applied
Spectrum on an exclusive basis during the term herein specified (the
"Offering
Period")
for
the purpose of finding subscribers for the Units on a best-efforts basis for
the
account of Applied Spectrum (conditioned upon closing of the Exchange Agreement)
at $25,000 per Unit ("Offering
Price")
through a private offering (the "Offering")
to an
unlimited number of "accredited investors" (as such term is defined in Rule
501
of Regulation D) ("Accredited
Investors")
pursuant to and in accordance with the Securities Act. The minimum subscription
amount will be $25,000 unless Ever Leader agrees to accept a lesser amount.
Subject to the performance by Ever Leader and Applied Spectrum of all its
obligations to be performed hereunder, and to the completeness and accuracy
of
all the representations and warranties contained herein, the Placement Agent
hereby accepts such agency and agrees on the terms and conditions herein set
forth to use its best efforts during the Offering Period to find subscribers
for
the Units at the Offering Price. The Placement Agent's agency hereunder, which
is terminable as provided in Section 11 hereof, shall terminate at 11:59 p.m.,
New York time, on the earlier to occur of (i) November 30, 2006, if the fifteen
calendar day extension of the termination date has not been granted by the
mutual agreement of Ever Leader and the Placement Agent on or prior to such
date
or (ii) December 15, 2006 (the "Termination
Date").
24
(b) Each
Investor desiring to purchase Units will be required to: (i) complete,
execute, and deliver to the Placement Agent an executed copy of a Securities
Purchase Agreement in the form attached as Exhibit
A
hereto
together with an Investor Questionnaire, and (ii) deliver to the Escrow Agent
payment for such purchase in the form of a wire transfer of immediately
available funds in the amount that the Investor desires to purchase in
accordance with the wire transfer instructions set forth in the Securities
Purchase Agreement. Any payment received that does not conform to this
requirement will be returned to an Investor by the end of the next business
day
following receipt. In
the event funds are received by the Placement Agent, such party shall hold
all
such signature pages to the Securities Purchase Agreement for safekeeping and
immediately forward all such funds to the Escrow Agent. The Escrow Agent, upon
receipt of such funds, will hold the funds in an escrow account pursuant to
the
Escrow Documents. The
Placement Agent shall
promptly forward each executed Securities Purchase Agreement received to Ever
Leader for acceptance or rejection, together with a schedule setting forth
the
name and address of each subscriber and the amount received from each
subscriber.
(c) In
the
event that acceptable subscriptions for $10,000,000 in aggregate principal
amount of the Units (the "Minimum
Amount")
shall
not have been received and accepted by the Placement Agent by the Termination
Date, all funds received from subscribers (if any) shall be returned in full,
and the Placement Agent's agency and this Agreement shall terminate without
obligation on their part or on the part of Ever Leader or Applied
Spectrum.
(d) If,
by
the Termination Date or such earlier time as may be agreed upon by the Placement
Agent and Ever Leader, the Placement Agent has received subscriptions for the
Minimum Amount and such subscriptions have been accepted by Ever Leader (in
its
sole discretion) and the other conditions to Closing of the Offering have been
satisfied, the Placement Agent shall promptly notify Ever Leader in writing
of
the aggregate amount of Units for which the Placement Agent has received
subscriptions (the "Notice
Date").
Payment of the purchase price for the Units, and delivery, with respect to
each
subscriber for the Units, of a copy of a Securities Purchase Agreement signed
by
such subscriber (the "Closing"),
shall
then be made at such place and time as shall be agreed upon between the
Placement Agent and Ever Leader, no later than the fifth full business day
after
the Notice Date (the "Closing
Date").
(e) As
compensation for the Placement Agent's services, Ever Leader will pay the
Placement Agent a cash fee ("Fee")
with
respect to all subscriptions as to which the payments and deliveries provided
for in this Section 4 are made at the Closing Date equal to 7.5% of
the
gross proceeds from the Offering. Such cash Fees shall be paid to the Placement
Agent, in immediately available funds, pursuant to a mutually agreeable
disbursement schedule provided to Ever Leader by the Placement Agent prior
to
the Closing Date.
25
(f) As
compensation for the Placement Agent's services, Applied Spectrum will also
pay
the Placement Agent a cash fee ("Warrant
Solicitation Fee")
with
respect to the exercise, in whole or in part, of any Warrant equal to
3.0% of
the
total exercise price of the Common Stock issued in such exercise of such
Warrant. Such cash Warrant Solicitation Fees shall be paid to the Placement
Agent, in immediately available funds, within three (3) business days following
receipt, directly or indirectly, by Applied Spectrum, of any cash or other
proceeds from the exercise of such Warrant.
(g) In
addition, Ever Leader agrees to pay the Placement Agent a non-accountable
expense allowance ("Allowance")
equal
to 1.5% of
the
gross proceeds from the Offering. Ever Leader will pay the Placement Agent
a
$20,000 non-refundable advance against the Allowance at the time the Offering
is
commenced. Such Allowance (less any advance previously paid) shall be paid
to
the Placement Agent, on the Closing Date by bank wire transfer payable in
immediately available funds.
(h) Ever
Leader will
pay
all costs and expenses related to the Offering and/or the performance of Ever
Leader's obligations under this Agreement, including preparation and
distribution of the Memorandum and related documentation, accounting fees,
legal
fees, experts' fees, consultants' fees, escrow fees, filing fees with the SEC
and applicable states, any costs and expenses to qualify the Shares and Warrants
for sale in any state, any all costs and expenses for investor or road show
presentations, any and all costs and expenses incurred by the Placement Agent
in
connection with the preparation of closing books and post-Closing expenses.
Except for the specific expenses of Placement Agent set forth above, Ever Leader
shall not be responsible for any expenses of the Placement Agent or any Selected
Dealers (as hereinafter defined) incurred in connection with the Offering,
including, but without limitation, attorneys' fee, operating expenses, travel
expenses and other incidental expenses incurred by the Placement Agent or any
Selected Dealers.
(i) Neither
the Placement Agent, Ever Leader, Applied Spectrum nor any Selected Dealer
(as
hereinafter defined) shall, directly or indirectly, pay or award any finder's
fees, commissions or other compensation to any person engaged by a potential
investor for investment advice as an inducement to such advisor to advise the
purchase of the Units; provided, however, that normal sales commissions payable
to a registered broker-dealer or other properly licensed person for selling
the
Units shall not be prohibited hereby.
(j) As
additional compensation, Applied Spectrum will issue to the Placement Agent
or
its designee on the Closing Date a Common Stock purchase warrant (the
"Agent
Warrants")
in the
form attached hereto as Exhibit
C
granting
such party the right to purchase from Applied Spectrum for a period commencing
after the Closing Date and ending five years after the Closing Date, a number
of
shares of Common Stock equal to 10% of the number of the Shares purchased at
the
Closing. Such Agent Warrants shall be issued by Applied Spectrum to the
Placement Agent in accordance with the Placement Agent's instructions, for
an
issue price of $0.001 per warrant. The Agent Warrants shall be exercisable
at an
exercise price equaling $0.555 per share. Such Agent Warrants shall not be
redeemable by Applied Spectrum and may be exercised on a cashless or
net-issuance basis. Applied Spectrum hereby grants the same registration rights
to the Placement Agent or its designees with respect to the shares of Common
Stock underlying the Agent Warrants as are granted to Investors with respect
to
the Warrants as set forth in this Agreement and the Common Stock issuable upon
exercise of the Warrants shall be registered on the Initial Registration
Statement (as defined in the Registration Rights Agreement).
26
(k) In
connection with the Offering, the Placement Agent will, to the extent within
its
control, conduct the Offering in accordance with the applicable provisions
of
the Securities Act and Regulation D so as to preserve for Ever Leader the
exemption provided by Rule 506 of Regulation D. The Placement Agent agrees
not
to offer or sell the Units by means of (i) any means of general solicitation,
including 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, whose attendees have been invited by
any
general solicitation or general advertising. Prior to the sale of any of the
Units, the Placement Agent will have reasonable grounds to believe, and in
fact
believe, that each subscriber for the Units is an Accredited Investor. The
Placement Agent agrees not to disclose any material nonpublic information
regarding Ever Leader to any subscriber except as such disclosure may be
permitted pursuant to Regulation FD, is included in the Memorandum or other
written information provided to the Placement Agent by Ever Leader, or is
otherwise is agreed to in advance by Ever Leader.
(l) In
connection with the performance of its obligations under this Agreement, the
Placement Agent may engage, for the account of Ever Leader, the services of
one
or more broker-dealers ("Selected
Dealers")
who
are members of NASD and who are acceptable to Ever Leader, and, as compensation
for their services, shall pay to such Selected Dealers an amount to be
negotiated between the Placement Agent and such Selected Dealers. Such amount
will be paid to the Selected Dealers by the Placement Agent only out of the
cash
fees received by you in respect of sales of the Units as described in paragraph
(e) of this Section 4, and Ever Leader shall have no obligation to any Selected
Dealers respecting any such payment. The arrangements, if any, between Ever
Leader, you, and any Selected Dealer shall be set forth in an Selected Dealer
Agreement ("Selected
Dealer Agreement"),
which
shall provide, among other things, that such Selected Dealer shall be deemed
to
have agreed to the matters set forth herein as if the Selected Dealer were
a
signatory hereof. Nothing contained in this Agreement or in the Selected Dealer
Agreement shall be deemed to constitute the Selected Dealers, if any, as agents
of the Placement Agent, and the Placement Agent shall not be liable to Ever
Leader in respect of the performance by the Selected Dealers, if any, of any
representations, warranties or covenants of such Selected Dealers contained
herein or in the Selected Dealer Agreement.
5. Covenants
and Agreements of Ever Leader and Applied Spectrum.
Ever
Leader and Applied Spectrum severally and not jointly covenant and agree with
the Placement Agent that:
(a) Except
as
contemplated or described in this Agreement, the Exchange Agreement or in a
public disclosure made prior to the date hereof, neither Ever Leader nor Applied
Spectrum will, prior to the Closing Date, incur any material liability or
obligation, direct or contingent, or enter into any material transaction, in
each case, other than in the ordinary course of business. Ever Leader nor
Applied Spectrum will, prior to the Closing Date, declare or pay any dividend
on
its shares of common or preferred stock or any distribution on its common or
preferred stock payable to stockholders of record on a date prior to the Closing
Date.
27
(b) Ever
Leader will cooperate with the Placement Agent to enable the Shares and Warrants
to be qualified for sale under the securities laws of such jurisdictions as
the
Placement Agent may designate, subject to approval by Ever Leader, and at the
Placement Agent's request will make such applications and furnish such
information as may be required of it for that purpose; provided, however, that
the Placement Agent and Ever Leader shall first determine whether an exemption
from registration other than the Uniform Limited Offering Exemption (ULOE)
or a
similar exemption is available in each such jurisdiction and Ever Leader shall
not be required to qualify to do business or to file a general consent to
service of process in any such jurisdiction or to subject itself to taxation.
Ever Leader will, from time to time, prepare and file all applications, forms
and documents required in each jurisdiction where the Shares and Warrants are
to
be qualified or registered or qualified or offered in an exempt transaction
under the state securities laws, and Ever Leader will continue such
qualifications in effect for so long a period as the Placement Agent may
reasonably request for the distribution of the Shares and Warrants. Ever Leader
shall provide the Placement Agent with copies of all applications, forms and
documents filed in each jurisdiction.
(c) Ever
Leader will make available to the Placement Agent and each purchaser of the
Units at a reasonable time prior to the Closing Date the opportunity to ask
questions and receive answers concerning the terms and conditions of the
Offering and to obtain any additional information that Ever Leader possesses
or
can acquire without unreasonable effort or expense that is necessary to verify
the accuracy of any information in the Memorandum, the Exchange Act Documents
or
otherwise furnished by Ever Leader to the Placement Agent or any purchaser
of
the Units; provided, however, that Ever Leader shall not be required to disclose
any material nonpublic information to any purchaser of the Units.
(d) Ever
Leader or its counsel will prepare and file a Form D (and any and all amendments
or supplements thereto) with the SEC in timely manner and deliver copies thereof
to the Placement Agent, together with copies of all forms (including without
limitation, Form Ds) and other documents and/or materials filed either before
or
after the Closing, and comply with Regulation D and all applicable state Blue
Sky laws and make any fillings required by the SEC and state securities
authorities in a timely manner.
(e) Ever
Leader will not offer or sell any securities of Ever Leader that are of the
same
or a similar class as the Shares and Warrants for a period of six months after
the Closing Date, other than those offers or sales of securities under an
employee benefit plan as defined in Rule 405 under the Securities Act, in
connection with options, warrants, or convertible securities outstanding as
of
the Closing Date, or in connection with an acquisition of assets or another
business by Ever Leader, if such offering will be integrated with the Offering
of the Shares and Warrants pursuant to this Agreement for purposes of the
exemptions under Regulation D, so as to invalidate the exemption from
registration relied on to offer and sell the Shares and Warrants.
28
(f) For
a
period of at least 24 months following the Closing Date, Ever Leader will
maintain the registration of Applied Spectrum's common stock under Section
12 of
the Exchange Act so long as the Exchange Act requires it to be so registered,
will comply in all respects with its reporting and filing obligations under
the
Exchange Act, and will not take any action or file any document (whether or
not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said Act unless required to do so by the Exchange
Act.
(g) Ever
Leader shall prepare and file with the OTC BB an additional shares listing
application covering the Shares issuable in the Offering and the shares of
Common Stock issuable upon exercise of the Warrants and Agent Warrants and
take
all steps necessary to cause such shares to be approved for listing as soon
as
practicable thereafter.
(h) For
a
period of at least 24 months following the Closing Date, Ever Leader will use
its best efforts (i) to timely file all reports required to be filed by Applied
Spectrum under the Securities Act and the Exchange Act (including the reports
pursuant to Section 13(a) or 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144) and the rules and regulations adopted by the
Commission thereunder), (ii) if Applied Spectrum is not required to file reports
pursuant to such sections, Ever Leader will prepare and furnish to the
purchasers of the Shares and Warrants and make publicly available in accordance
with Rule 144(c) such information as is required for the purchasers to sell
the
shares underlying the Shares and Warrants under Rule 144, and (iii) to take
such
further action as any holder of the Shares and Warrants may reasonably request,
all to the extent required from time to time to enable the purchasers to sell
shares underlying the Shares and Warrants without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144,
including causing its attorneys to issue and deliver any appropriate legal
opinion required to permit a purchaser to sell shares underlying the Shares
and
Warrants under Rule 144 upon receipt of appropriate documentation relating
to
such sale.
(i) Ever
Leader and Applied Spectrum shall use commercially reasonable efforts to
consummate the Transactions.
(j) Before
Ever Leader releases any information referring to the Placement Agent's role
under this Offering or uses the Placement Agent's name in a manner which may
result in public dissemination thereof, Ever Leader shall furnish drafts of
all
documents or prepared oral statements to the Placement Agent for comments,
and
shall not release any information relating thereto without the prior written
consent of the Placement Agent. Nothing herein shall prevent Ever Leader from
releasing any information to the extent that such release is required by law,
rule or regulation.
6. Memorandum.
Ever
Leader warrants and represents to the Placement Agent that the Memorandum,
and
any amendments or supplements thereto, as of the date hereof, and at all
subsequent times through the Closing, together with all other information
concerning Ever Leader provided to the Placement Agent in connection with the
Offering, shall in all material respects conform to all applicable provisions
of
the Securities Act, the rules and regulations under the Securities Act and
state
securities laws, and shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to
make the statements therein not misleading
29
7. Indemnification
and Contribution.
(a) Ever
Leader agrees to indemnify and hold harmless the Placement Agent, each Selected
Dealer, and each person, if any, who controls the Placement Agent or such
Selected Dealer within the meaning of the Securities Act (the "Indemnified
Parties"),
along
with the agents and advisors of such Indemnified Parties, against any
losses, claims, damages, liabilities, or expenses
(including, unless Ever Leader elects to assume the defense as hereinafter
provided, the reasonable cost of investigating and defending against any claims
therefor and counsel fees incurred in connection therewith), joint or several,
which arise out of Ever Leader's breach of a representation or warranty or
covenant or agreement contained in this Agreement (it being understood that
in
the event the Transactions are not completed, Ever Leader shall not provide
any
indemnity or contribution with respect to breaches by Applied Spectrum). Ever
Leader will be entitled to participate at its own expense in the defense, or
if
it so elects, to assume the defense of any suit brought to enforce any such
liability, but, if Ever Leader elects to assume the defense, such defense shall
be conducted by counsel chosen by it and reasonably acceptable to the
indemnified parties. In the event Ever Leader elects to assume the defense
of
any such suit and retain such counsel, the Placement Agent, such Selected
Dealer, or such controlling person or persons, defendant or defendants in the
suit, may retain additional counsel but shall bear the fees and expenses of
such
counsel unless (i) Ever Leader shall have specifically authorized the
retaining of such counsel or (ii) the parties to such suit include the Placement
Agent, such Selected Dealer, or such controlling person or persons, and Ever
Leader and the Placement Agent, such Selected Dealer, or such controlling person
or persons have been advised by counsel that one or more material legal defenses
may be available to the Placement Agent, such Selected Dealer, or them that
may
not be available to Ever Leader in which case Ever Leader shall not be entitled
to assume the defense of such suit notwithstanding its obligation to bear the
reasonable fees and expenses of such counsel. In no event shall Ever Leader
be
liable for the fees and expenses of more than one counsel for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations
or
circumstances. Ever Leader shall not be required to indemnify any person for
any
settlement of any such claim effected without Ever Leader's consent, which
shall
not be unreasonably withheld. Ever Leader shall not, without an indemnified
party's consent, consent to the entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof, the giving
by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. This indemnification
obligation will be in addition to any primary liability that Ever Leader might
otherwise have.
30
(b) The
Placement Agent, and each Selected Dealer agrees to indemnify and hold harmless
Ever Leader, each of Ever Leader's officers, directors, and each other person,
if any, who controls Ever Leader within the meaning of the Securities Act,
against any losses, claims, damages, liabilities, or expenses (including, unless
the Placement Agent, or such Selected Dealer elects to assume the defense,
the
reasonable cost of investigating and defending against any claims therefor
and
counsel fees incurred in connection therewith), joint or several, which (i)
arise out of any untrue statement of a material fact with respect to Ever Leader
made by the Placement Agent or such Selected Dealer to any purchaser of Shares
and Warrants not contained in an Exchange Act Document, the Memorandum or other
written material provided to the Placement Agent or such Selected Dealer by
Ever
Leader, (ii) arise out of any acts or omissions by the Placement Agent, any
Selected Dealer, or any purchaser of the Shares or Warrants that cause the
offering to involve a public offering under the Securities Act or such party's
failure to be properly licensed to sell the Shares or Warrants, or (iii) arise
out of such party's breach of a representation or warranty or covenant or
agreement contained in this Agreement; provided, however, that in no case are
the Placement Agent or any Selected Dealer to be liable with respect to any
claims made against Ever Leader or any such person against whom the action
is
brought unless Ever Leader or such person shall have notified the Placement
Agent or such Selected Dealer, as the case may be, in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon Ever Leader
or such person, but failure to provide such notification shall not relieve
the
Placement Agent or such Selected Dealer from any liability that the Placement
Agent or such Selected Dealer may have to Ever Leader or such person otherwise
than on account of the indemnity agreement contained in this paragraph. The
Placement Agent or such Selected Dealer shall be entitled to participate at
its
expense in the defense, or if the Placement Agent or such Selected Dealer so
elect, to assume the defense of any suit brought to enforce any such liability,
but, if the Placement Agent or such Selected Dealer elect to assume the defense,
counsel chosen by the Placement Agent or such Selected Dealer and reasonably
acceptable to Ever Leader shall conduct such defense. In the event that the
Placement Agent or such Selected Dealer elect to assume the defense of any
such
suit and retain such counsel, Ever Leader, said officers and directors and
any
person or persons, defendant or defendants in the suit, may retain additional
counsel but shall bear the fees and expenses of such counsel unless (i) the
indemnifying parties shall have specifically authorized the retaining of such
counsel or (ii) the parties to such suit include the Placement Agent, such
Selected Dealer, or such controlling person or persons, and Ever Leader and
the
Placement Agent, such Selected Dealer, or such controlling person or persons
have been advised by counsel that one or more material legal defenses may be
available to Ever Leader that may not be available to the Placement Agent or
them in which case the indemnifying party parties not be entitled to assume
the
defense of such suit notwithstanding their obligation to bear the reasonable
fees and expenses of such counsel. The Placement Agent or such Selected Dealer
shall not be liable to indemnify any person for any settlement of any such
claim
effected without its consent which consent shall not be unreasonably withheld.
The Placement Agent or an Selected Dealer shall not, without the consent of
Ever
Leader, consent to entry of any judgment or enter into any settlement that
does
not include as an unconditional term thereof, the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation. This indemnification obligation will be in addition
to any primary liability that the Placement Agent or any Selected Dealer might
otherwise have.
31
(c) If
the
indemnification provided for in this Section 7 is unavailable, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
or
expenses (or actions in respect thereof) in such proportion as is appropriate
to
reflect not only the relative benefits received by Ever Leader on one hand
and
the Placement Agent and the Selected Dealers, if any, on the other from the
Offering, but also the relative fault of Ever Leader on the one hand and the
Placement Agent and the Selected Dealers, if any, on the other in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities, or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by Ever Leader
on the one hand and the Placement Agent and the Selected Dealers, if any, on
the
other, shall be deemed to be in the same proportion as the total gross proceeds
from the Offering (before deducting expenses) received by Ever Leader, bear
to
the total cash fees received by the Placement Agent and the Selected Dealers,
if
any, pursuant to Section 4(e) and the value of the Agent Warrant issued to
the
Placement Agent and the Selected Dealers, if any, pursuant to Section 4(i)
(collectively, the "Placement
Agent Proceeds").
The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
Ever Leader, the Placement Agent, or an Selected Dealer, the party's relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and whether a party breached a representation or
warranty or covenant or agreement contained in this Agreement. Ever Leader
and
the Placement Agent and the Selected Dealers agree that it would not be just
and
equitable if contribution were determined by pro rata allocation or by any
other
method of allocation which does not take account of the equitable considerations
referred to above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses (or actions
in
respect thereof) referred to above shall be deemed to include any legal or
other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(d) The
indemnification required by this Section 7 shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as and
when bills are received or such losses, claims, damages, liabilities, or
expenses are incurred.
(e) Notwithstanding
anything to the contrary contained in this Agreement: (i) the Placement Agent
and the Selected Dealers shall not be liable for any special, exemplary or
punitive damages and (ii) the maximum amount of any indemnifiable losses,
claims, damages, liabilities, or expenses which may be recovered from either
the
Placement Agent or the Selected Dealers, in the aggregate, shall equal the
Placement Agent Proceeds received by such indemnifying party.
8. Survival
of Indemnities, Representations, Warranties, etc.
The
respective representations and warranties of the Placement Agent, Ever Leader
and Applied Spectrum as set forth in this Agreement or made by them
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Placement Agent,
Ever Leader, or any of the officers or directors of Ever Leader or any
controlling person, and shall survive delivery of and payment for the
Units.
32
9. Conditions
of the Placement Agent's Obligations.
The
Placement Agent's obligations hereunder are subject to: (i) the representations
and warranties made by Ever Leader in Sections 2(a) and 6 shall be true and
correct in all material respects at and as of the date hereof (except for such
representations and warranties qualified by materiality, which shall be true
and
correct in all respects and except for such representation and warranties
qualified by an other date, which shall be true and correct as of such other
date); (ii) the representations and warranties made by Ever Leader and Applied
Spectrum in Sections 2(a), 2(b) and 6 shall be true and correct in all material
respects at and as of the Closing Date (except for such representations and
warranties qualified by materiality, which shall be true and correct in all
respects and except for such representation and warranties qualified by an
other
date, which shall be true and correct as of such other date); (iii) the
compliance in all material respects at and as of the Closing Date by Ever Leader
and Applied Spectrum with its covenants and agreements contained herein and
in
any other Transaction Document, Escrow Document or Related Agreement, and other
provisions hereof and thereof to be satisfied at or prior to the Closing Date;
and (iv) the following additional conditions:
(a) The
Transactions shall have been consummated.
(b) The
Placement Agent shall have received a certificate, dated the Closing Date,
on
behalf of Applied Spectrum by the Chief Executive Officer or the President
and
the Chief Financial or Accounting Officer of Applied Spectrum to the effect
that:
(i) The
representations and warranties in Sections 2(a), 2(b) and 6 are true and correct
in all material respects at and as of the Closing Date (except for such
representations and warranties qualified by materiality, which shall be true
and
correct in all respects and except for such representation and warranties
qualified by an other date, which shall be true and correct as of such other
date), and Ever Leader and Applied Spectrum has complied with all the agreements
and satisfied in all material respects all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) The
Transactions have been consummated;
(iii) The
representations and warranties of Applied Spectrum contained in the Securities
Purchase Agreement entered into with the Investors are true and correct in
all
material respects as of the date of such certificate (except for such
representations and warranties qualified by materiality, which shall be true
and
correct in all respects and except for such representation and warranties
qualified by an other date, which shall be true and correct as of such other
date);
(iv) Between
the date of this Agreement and the Closing Date, no litigation has been
instituted or, to the knowledge of Applied Spectrum, threatened against Ever
Leader or Applied Spectrum; and
(v) Between
the date of this Agreement and the Closing Date, there has not been any material
adverse change in the financial condition, business, prospects or results of
operations of Ever Leader or Applied Spectrum.
(c) Applied
Spectrum shall have entered into the Registration Rights Agreement with the
Investors.
(d) Applied
Spectrum shall have accepted subscriptions in such amount as mutually determined
by Applied Spectrum and the Placement Agent, but not less than the Minimum
Amount.
(e) The
conditions set forth in Securities Purchase Agreement between Applied Spectrum
and each Investor shall have been satisfied.
33
(f) The
Placement Agent shall have received an opinion of Ever Leader's U.S. counsel,
as
to matters reasonably requested by the Placement Agent.
(g) Applied
Spectrum shall have filed the Proxy/Information Statement contemplated by the
Exchange Agreement with the SEC.
(h) Applied
Spectrum shall have delivered a Voting Agreement executed by each of KI Equity
and the Shareholders, substantially in the form attached to the Exchange
Agreement.
(i) Applied
Spectrum shall have obtained all consents, waivers and approvals required in
connection with the consummation of the transactions contemplated by the
Offering, other than consents, waivers and approvals the absence of which,
either alone or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
(j) Immediately
prior to Closing, Applied Spectrum shall be in compliance with the reporting
requirements under the Exchange Act and shall be quoted on the OTC
BB.
If
any of
the conditions provided for in this Section 9 shall not have been satisfied
when
and as required by this Agreement, this Agreement may be terminated by the
Placement Agent by notifying Ever Leader of such termination in writing at
or
prior to the Closing Date, but the Placement Agent shall be entitled to waive
any of such conditions.
10. Effective
Date.
This
Agreement shall become effective at 11:00 A.M., New York time, on the date
hereof (the "Effective
Time").
11. Termination.
In the
event of any termination of this Agreement under this or any other provision
of
this Agreement, there shall be no liability of any party to this Agreement
to
any other party, other than as provided in Sections 7 and 8, and this Section
11. This Agreement may be terminated after the Effective Time by (a) Ever Leader
for any reason by notice to the Placement Agent, and (b) the Placement
Agent by notice to Ever Leader (i) if, Ever Leader shall materially breach
any
of its representations and warranties in this Agreement or shall fail to fulfill
its covenants and agreements contained in this Agreement; (ii) if at or prior
to
the Closing Date there shall have been a material escalation of hostilities
between the United States and any foreign country (other than Iraq), or any
other material insurrection or armed conflict involving the United States which,
in the reasonable judgment of the Placement Agent after consultation with Ever
Leader, makes it impracticable or inadvisable to offer or sell the Share and
Warrants; or (iii) if there shall be any material litigation or regulatory
action, pending or threatened against or involving Ever Leader, which, in the
reasonable judgment of the Placement Agent after consultation with Ever Leader,
makes it impracticable or inadvisable to offer or deliver the Units on the
terms
contemplated by this Agreement. Section 12 of this Agreement shall automatically
terminate on the first anniversary of the Closing Date.
If,
and
only if, Ever Leader terminates this Agreement after it becomes effective for
any reason (other than the Placement Agent's material failure to comply with
its
obligations under this Agreement or material breach of its representations
and
warranties) or the Offering fails to close because of Ever Leader's breach
of
any representations or warranties contained in this Agreement or Ever Leader's
failure to fulfill its covenants and agreements contained in this Agreement,
Ever Leader shall pay the Placement Agent their actual out-of-pocket expenses
incurred (less than amount of the advance of the Allowance paid under Section
4(f)).
34
12. Confidentiality.
The
Placement Agent agrees to treat confidentially any material non-public
information that is furnished to the Placement Agent (or to parties acting
on
their behalf) by or on behalf of Ever Leader (the "Information")
until
such time as such Information is disclosed to the public (including disclosures
in SEC filings). The Placement Agent agrees that it will use the Information
only for the purposes related to a determination of its willingness to act
as an
exclusive selling agent pursuant to this Agreement, and that the Information
will be kept confidential by them and their partners, members, managers,
officers, directors, employees, agents, and other affiliates (collectively,
the
"Affiliates"),
and
their attorneys and accountants (collectively, the "Professionals");
provided, however, that the Information may be disclosed to (a) Selected
Dealers, Affiliates and Professionals who need to know such Information for
the
purpose of evaluating or providing services in connection with the Placement
Agent and their clients' investment in Ever Leader; provided such parties agree
to be bound by this undertaking, (b) to any federal or state regulatory agency
and their employees, agents, and attorneys (collectively, "Regulators")
for
the purpose of making any filings with Regulators if disclosure of such
Information is required by law (provided that you advise Ever Leader in writing
of the Information to be so disclosed within a reasonable time prior to such
filing), (c) any other person to which Ever Leader consents in writing prior
to
any such disclosure, and (d) any potential Investor or its Affiliates or
Professionals who need to know such Information for the purpose of evaluating
the transaction contemplated hereby, if such Investor has executed a
confidentiality agreement with Ever Leader and such Investors has agreed to
keep
the Information confidential and to cause its Affiliates and Professionals
to
keep the Information confidential.
In
the
event that the Placement Agent is requested or required (by oral questions,
documents, subpoena, civil investigation, demand, interrogatories, request
for
information, or other similar process) to disclose to any Governmental Entity
any information supplied to such party, Selected Dealers, its Affiliates, or
its
Professionals in the course of their dealings with Ever Leader or their
respective representatives, such Placement Agent agrees that it will provide
Ever Leader with prompt notice of such request(s) so that Ever Leader may seek
an appropriate protective order and/or waiver of compliance with the provisions
of this Agreement. It is further agreed that, if a protective order is not
obtained, or a waiver is not granted hereunder, and such Placement Agent is
nonetheless, in the opinion of counsel, compelled to disclose information
concerning Ever Leader to any Governmental Entity, such Placement Agent may
disclose such information to such Governmental Entity without liability
hereunder. Such Placement Agent will exercise its commercially reasonable
efforts, at Ever Leader's expense, to obtain a protective order or other
reliable assurance that confidential treatment will be accorded the
Information.
13. Notices.
All
notices or other communications that are required or permitted under this
Agreement shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, by electronic
mail, or by courier or overnight carrier, to the persons at the addresses set
forth below (or at such other address as any party shall have furnished to
the
other parties in writing),
and shall be deemed to have been delivered as of the date so
delivered:
35
If
to
Ever Leader:
▇▇/▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇▇▇▇ ▇▇
Wuhan
430021, P.R. China
Telephone: ▇▇
(▇▇
▇▇) ▇▇▇▇-▇▇▇▇
Facsimile: ▇▇
(▇▇
▇▇) ▇▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇
▇▇▇
with
a
copy to:
▇▇▇▇▇▇
& ▇▇▇▇▇▇, LLP
▇▇▇
▇▇▇▇▇
▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Manalapan,
New Jersey 07726
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
If
to the
Placement Agent:
▇▇▇▇▇▇▇
Securities, LLC
▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Greenwood
Village, CO 80111
Telephone:
(▇▇▇)
▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇)
▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
with
a
copy (for informational purposes only) to:
▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, Esq.
Ever
Leader hereby irrevocably appoints National Corporate Research, Ltd.,
of ▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. 10112, U.S.A. ("NCR")
as its
agent for the receipt of service of process in the United States. Ever Leader
agrees that any document may be effectively served on it in connection with
any
action, suit or proceeding in the United States by service on its agents. The
Placement Agent consents and agrees that Ever Leader may, in its reasonable
discretion, irrevocably appoint a substitute agent for the receipt of service
of
process located within the Untied States, and that upon such appointment, the
appointment of NCR may be revoked.
Any
document shall be deemed to have been duly served if marked for the attention
of
the NCR at its address as set forth in Section 13 or such other address in
the
United States as may be notified to the party wishing to serve the document
and
(a) left at the specified address if its receipt is acknowledged in writing;
or
(b) sent to the specified address by post, registered mail return receipt
requested. In the case of (a), the document will be deemed to have been duly
served when it is left and signed for. In the case of (b), the document shall
be
deemed to have been duly served when received and acknowledged.
If
Ever
Leader's agent at any time ceases for any reason to act as such, Ever Leader
shall appoint a replacement agent having an address for service in the United
States and shall notify the Placement Agent of the name and address of the
replacement agent. Failing such appointment and notification, the holders of
a
majority of the Shares shall be entitled by notice to Ever Leader to appoint
a
replacement agent to act on Ever Leader's behalf. The provisions of this Section
13 applying to service on an agent apply equally to service on a replacement
agent.
36
14. Successors.
This
Agreement shall inure to the benefit of and be binding upon the Placement Agent,
and Selected Dealers, Ever Leader, Applied Spectrum and their respective
successors and legal representatives, except that neither Ever Leader nor the
Placement Agent may assign or transfer any of its or their rights or obligations
under this Agreement without the prior written consent of the other; provided,
however, that upon consummation of the Transactions, Applied Spectrum shall
assume all of the rights and obligations of Ever Leader under this Agreement
without the need for further consent of the parties. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person
other than the persons mentioned in the preceding sentence any legal or
equitable right, remedy or claim under or in respect of this Agreement, or
any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of
such
persons and for the benefit of no other person; except that the indemnities
of
Ever Leader contained in this Agreement shall also be for the benefit of the
person or persons, if any, who control the Placement Agent or any Selected
Dealers within the meaning of Section 15 of the Securities Act, and the
Placement Agent's and any Selected Dealer's indemnities shall also be for the
benefit of each officer and director of Ever Leader and the person or persons,
if any, who control Ever Leader within the meaning of Section 15 of the
Securities Act.
15. Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
37
16. Lock-Up
Agreement.
The
Placement Agent agrees during the period commencing on the Initial Effective
Date (as defined in the Registration Rights Agreement) and ending ninety (90)
days following the Initial Effective Date not to (i) sell, offer to sell,
contract or agree to sell, hypothecate, hedge, pledge, grant any option to
purchase or otherwise dispose of or agree to dispose of, directly or indirectly,
any Common Stock or warrants or other rights to purchase Common Stock, or (ii)
enter into any swap or other arrangement that transfers to another, in whole
or
in part, any of the economic consequences of ownership of Common Stock, or
warrants or other rights to purchase Common Stock, whether any such transaction
is to be settled by delivery of such securities, in cash or
otherwise.
17. Currency.
As used
herein, "Dollar", "US Dollar" and "$" each mean the lawful money of the United
States.
18. Miscellaneous
Provisions.
(a) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(b) Modification,
Amendment or Waiver.
This
Agreement may not be modified or amended except by written agreement executed
by
the parties hereto. No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is
sought.
(c) Number
and Gender of Words.
Whenever the contest so requires, the masculine shall include the feminine
and
neuter, and the singular shall include the plural, and conversely.
(d) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
(e) No
Partnership.
Each of
the parties hereto agree and acknowledge that neither of the Placement Agent
is
a principal of or a partner with, or does not control in any way, Ever Leader
or
its employees or agents and nothing contained in this Agreement shall be deemed
to create any partnership or other similar arrangement between Ever Leader
and
the Placement Agent.
(f) Entire
Agreement.
This
Agreement contains the entire understanding between the parties and supersedes
any prior understandings or written or oral agreements between them respecting
the subject matter hereof.
(g) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement..
38
(h) 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.
(i) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(j) No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
[Signatures
on following page]
39
If
the
foregoing correctly sets forth our understanding please indicate your acceptance
thereof in the space provided below for that purpose, whereupon this letter
and
your acceptance shall constitute a binding agreement between us.
Very
truly yours,
APPLIED
SPECTRUM TECHNOLOGIES, INC.
By:
/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
President
EVER
LEADER HOLDINGS LIMITED
By:
/s/
▇▇▇▇▇▇ ▇▇▇
Name:
▇▇▇▇▇▇ ▇▇▇
Title:
Director
Accepted
and agreed:
▇▇▇▇▇▇▇
SECURITIES, LLC
By:
/s/
▇▇▇▇
▇. ▇▇▇▇▇▇▇
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
Senior Vice President