NOTES PURCHASE AGREEMENT by and between CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. as the Company and CITADEL EQUITY FUND LTD. as the Purchaser Dated: February 5, 2007
by
and
between
CHINA
SECURITY & SURVEILLANCE TECHNOLOGY, INC.
as
the
Company
and
CITADEL
EQUITY FUND LTD.
as
the
Purchaser
Dated:
February 5, 2007
This
Notes Purchase Agreement (this “Agreement”)
is
dated as of February 5, 2007, by and between China Security & Surveillance
Technology, Inc., a Delaware corporation (the “Company”)
and
Citadel Equity Fund Ltd. (the “Purchaser”).
WHEREAS,
the Company proposes to issue, and the Purchaser proposes to purchase,
US$60,000,000 Senior Notes due February 16, 2007 (or such other date to be
extended up to 120 days from the date of this Agreement by mutual agreement
by
and between the Company and the Purchaser, the “Maturity
Date”)
on the
terms of this Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants and promises contained
herein and for other good and valuable consideration the receipt and adequacy
of
which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions
For
all
purposes of this Agreement, except as otherwise expressly provided or unless
the
context otherwise requires:
“Acquisition”
has
the
meaning given in Section 7(f).
“Act”
means
the Securities Act of 1933, as amended.
“Affiliate”
of
any
specified Person means:
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(a)
|
any
other Person directly or indirectly controlling or controlled by
or under
direct or indirect common control with such specified Person, or
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(b)
|
any
other Person who is a director or officer
of:
|
|
(1)
|
such
specified Person,
|
|
(2)
|
any
Subsidiary of such specified Person,
or
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(3)
|
any
Person described in clause (a) above.
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For
the
purposes of this definition, “control” when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.
“Agreement”
has
the
meaning given in the recitals.
“Applicable
Agreements”
has
the
meaning given in Section 6(g).
“Applicable
Law”
has
the
meaning given in Section 6(g).
“Business
Day”
has
the
meaning given in the Conditions.
“Charter
Documents”
has
the
meaning given in Section 6(g).
“Closing”
has
the
meaning given in Section 5(a).
“Closing
Date”
means
the date of the Closing.
“Collateral”
means
the collateral described and pledged under the Share Pledge
Agreement.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
shares of common stock of the Company, par value US$0.0001 per
share.
“Conditions”
means
the terms and conditions of the Notes.
“Disclosure
Schedule”
has
the
meaning given in Section 6.
“Environmental
Laws”
has
the
meaning given in Section 6(z).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“GAAP”
has
the
meaning given in Section 6(a).
“Governmental
Authority”
has
the
meaning given in Section 6(g).
“Indemnified
Party”
has
the
meaning given in Section 10(a).
“Indemnifying
Party”
has
the
meaning given in Section 10(a).
“Intellectual
Property”
has
the
meaning given in Section 6(o)(i).
“Lien”
means
a
mortgage, charge, pledge, lien or other security interest securing any
obligation of any person or any other agreement or arrangement having a similar
effect.
“Material
Adverse Change”
has
the
meaning given in Section 6(q).
“Material
Adverse Effect”
means
a
material adverse effect on:
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(a)
|
the
business, operations, property or financial condition of the Company
and
its Subsidiaries taken as a whole;
|
|
(b)
|
the
ability of the Company or any Shareholder to perform its material
obligations under the Transaction Documents;
or
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(c)
|
the
validity or enforceability of the Transaction Documents or the rights
and
remedies of any holder of the Notes under the
Notes.
|
“Maturity
Date”
has
the
meaning given in the recitals.
“Money
Laundering Laws”
has
the
meaning given in Section 6(hh).
“Notes”
has
the
meaning given in Section 3.
“OFAC”
has
the
meaning given in Section 6(gg).
“OTC”
has
the
meaning given in Section 6(a).
“Outside
Financing”
has
the
meaning given in Section 7(e).
“Permits”
has
the
meaning given in Section 6(k).
“Person”
means
any individual, corporation, company (including any limited liability company),
association, partnership, joint venture, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other
entity.
“PFIC”
has
the
meaning given in Section 6(ff).
“PRC”
means
People’s Republic of China.
“Proceedings”
has
the
meaning given in Section 6(j).
“Purchaser”
has
the
meaning given in the recitals.
“Resale
Restriction Termination Date”
has
the
meaning given in Section 8(c).
“SEC
Reports”
has
the
meaning given in Section 6(a).
“Shareholder”
means
Mr. Tu ▇▇▇ ▇▇▇▇ and Ms. ▇▇ ▇▇▇ Qun, together with Whitehorse Technology Limited,
a British Virgin Islands company wholly owned by Mr. Tu ▇▇▇ ▇▇▇▇ and the
registered owner of the Common Stock pledged under the Share Pledge
Agreement.
“Share
Pledge Agreement”
means
the share pledge agreement dated on or prior to the Closing Date made between
the Shareholder and the Purchaser, a form of which is attached hereto as
Exhibit
B.
“Subsidiary”
means,
in respect of any Person, any corporation, company (including any limited
liability company), association, partnership, joint venture or other business
entity of which at least a majority of the total voting power of the voting
stock is at the time owned or controlled, directly or indirectly,
by:
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(a)
|
such
Person,
|
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(b)
|
such
Person and one or more Subsidiaries of such Person, or
|
|
(c)
|
one
or more Subsidiaries of such Person.
|
“Tax”
has
the
meaning given in Section 6(n).
“Transaction
Document”
means
this Agreement, the Share Pledge Agreement and the Notes, or any of them as
the
context may so require.
“US$”
means
the lawful currency of the United States from time to time.
2. Rules
of Construction.
(a) Unless
the context otherwise requires:
(i) a
term
has the meaning assigned to it;
(ii) “or”
is
not exclusive;
(iii) words
in
the singular include the plural, and in the plural include the
singular;
(iv) all
references in this Agreement to “Sections”, “Exhibits” and other subdivisions
are to the designated Sections, Exhibits and subdivisions of this Agreement
as
originally executed;
(v) a
reference to any person is, where relevant, deemed to be a reference to or
to
include, as appropriate, that person’s successors and permitted assignees or
transferees;
(vi) a
reference to (or to any specified provision of) any agreement or document
(including any Transaction Document) is to be construed as a reference to that
agreement or document as it may be amended from time to time;
(vii) the
words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Section or other
subdivision.
(viii) “including”
means “including without limitation;”
(ix) provisions
apply to successive events and transactions; and
(x) references
to a statute or statutory provision is to be construed as a reference to that
statute or statutory provision as it may be amended from time to
time.
3. Issuance
of Notes.
Subject
to the terms and conditions of this Agreement, the Company will issue and sell
to the Purchaser, and the Purchaser will purchase from the Company, on the
Closing Date, an aggregate principal amount of US$60,000,000 of the Company’s
Senior Notes due on the Maturity Date (the “Notes”).
The
Notes
will be secured by a perfected first-priority Lien on certain of the equity
interests of the Shareholder in the Company pursuant to the Share Pledge
Agreement.
The
Notes
will be offered and sold to the Purchaser pursuant to Regulation S or other
exemption from the registration requirements under the Act. Upon original
issuance thereof, and until such time as the same is no longer required under
the applicable requirements of the Act, the Notes shall bear the legends
relating to the offer and the sale of the Notes as required by (i) Regulation
S
under the Act or (ii) any other applicable laws or regulations relating to
the
issuance of the Notes.
4. Form
of Notes.
The
Notes
shall be issued in a certificated form and shall be substantially in the form
of
Exhibit
A
and
shall represent such aggregate principal amount of the outstanding Notes as
shall be specified therein. The Conditions shall form an integral part of the
Notes and the Company shall comply with its obligations thereunder.
5. Purchase,
Sale and Delivery.
The
sale
and purchase of the Notes to be purchased by the Purchaser shall occur at the
Hong Kong office of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, at 10:00 a.m., Chicago
time, at a closing (the “Closing”)
on
February 8, 2007 or on such other time or Business Day thereafter on or prior
to
February 15, 2007 as may be agreed upon by the Company and the Purchaser. At
the
Closing, the Company shall deliver to the Purchaser one or more certificates
representing the Notes in definitive form (duly executed by the Company’s Chief
Executive Officer and President on behalf of the Company), registered in such
names and denominations as the Purchaser may request, against payment by the
Purchaser of US$60,000,000 as the purchase price therefor by immediately
available federal funds bank wire transfer to such bank account or accounts
as
the Company shall have beforehand designated to the Purchaser.
6. Representations
and Warranties of the Company.
Except
as set forth in the Disclosure Schedule attached hereto as Exhibit
C
(“Disclosure
Schedule”),
the
Company represents and warrants to the Purchaser the following:
(a) SEC
Reports; Financial Statements.
(i)
Except
as
set forth on Schedule
6(a)
of the
Disclosure Schedule, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it under the Act and
the
Exchange Act (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”)
on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension, and
to
the Company’s best knowledge after due inquiry, no disciplinary actions or
proceedings have been initiated against the Company and no such actions are
threatened. As of the date of filing, in the case of SEC Reports filed pursuant
to the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for
the twenty-four months preceding the date hereof (or such shorter period as
the
Company was required by law to file such reports, forms or other information)
(and to the extent any such SEC Report was amended, then as of the date of
filing of such amendment), and as of the date of effectiveness in the case
of
SEC Reports filed pursuant to the Act (and to the extent any such SEC Report
was
amended, then as of the date of effectiveness of such amendment), the SEC
Reports complied in all material respects with the requirements of the Act
and
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, as applicable, and none of the SEC Reports, as of the date of
filing, in the case of SEC Reports filed pursuant to the Exchange Act (and
to
the extent any such SEC Report was amended, then as to the date of filing of
such amendment), and as of the date of effectiveness in the case of SEC Reports
filed pursuant to the Act (and to the extent any such SEC Report was amended,
then as of the date of effectiveness of such amendment), contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports have been
prepared in accordance with the applicable accounting requirements and the
rules
and regulations of the Commission with respect thereto as in effect at the
time
of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial condition, results of operations and cash flows of the Company and
its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case
of
unaudited statements, to normal, immaterial, year-end audit adjustments. All
other financial, statistical, and market and industry-related data included
in
the SEC Reports are based on or derived from sources that the Company reasonably
believes to be reliable and accurate. For the purposes of this Agreement, the
term “filed” (or any derivations thereof) includes filing, furnishing or
otherwise providing any reports, forms or other information provided to the
Commission.
(ii)
Except
as
set forth on Schedule
6(a)
of the
Disclosure Schedule, the Company has not, in the 12 months preceding the date
hereof, received notice from the Over The Counter (“OTC”)
Bulletin Board on which the Common Stock has been traded to the effect that
the
Company is not in compliance with the OTC requirements, and to the Company’s
best knowledge after due inquiry, no disciplinary actions or proceedings have
been initiated against the Company and no such actions are threatened. The
Company is, and upon consummation of the transactions contemplated hereby
expects to be, in compliance with all of the OTC listing requirements.
(b) Ownership
of Shares of Subsidiaries; Affiliates.
(i)
The
SEC
Reports contain complete and correct lists of each Person in which the Company
owns, directly or indirectly, any capital stock or similar equity interests,
showing, as to each Subsidiary, the correct name thereof, the jurisdiction
of
its organization, and the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Company and each
other Subsidiary.
(ii)
All
of
the outstanding shares of capital stock or similar equity interests of each
Subsidiary owned by the Company and its Subsidiaries have been validly issued,
are fully paid and non-assessable and are owned by the Company or another
Subsidiary free and clear of any Lien.
(iii)
No
Subsidiary is a party to, or otherwise subject to any legal or regulatory
restriction or any agreement (other than this Agreement) restricting the ability
of such Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of its Subsidiaries that owns
outstanding shares of capital stock or similar equity interests of such
Subsidiary.
(c) Organization.
Each of
the Company and its Subsidiaries (i) has been duly organized, is validly
existing and is in good standing under the laws of its jurisdiction of
organization, (ii) has all requisite power and authority to carry on its
business and to own, lease and operate its properties and assets, and (iii)
is
duly qualified or licensed to do business and is in good standing as a domestic
or foreign corporation or limited liability company, as the case may be,
authorized to do business in each jurisdiction in which the nature of such
business or the ownership or leasing of such properties requires such
qualification, except where, for the purposes of (ii) or (iii) only, the failure
to have all such requisite power and authority or to be so duly qualified or
licensed does not, and would not, individually or in the aggregate, have a
Material Adverse Effect.
(d) Capitalization.
All of
the outstanding shares of capital stock or similar equity interests of the
Company have been validly issued, are fully paid and non-assessable, and are
free and clear of any Lien.
(e) Authorization.
(i) The
Company has all requisite corporate power and authority to execute, deliver
and
perform its obligations under each of the Transaction Documents to which it
is a
party and to consummate the transactions contemplated thereby, (ii) this
Agreement has been duly authorized, executed and delivered by the Company and
(iii) this Agreement shall constitute a legal, valid and binding obligation
of
the Company, enforceable against the Company in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally.
(f) Valid
Issuance of Notes.
The
Notes, when issued, sold and delivered in accordance with the terms and for
the
consideration set forth herein, will be free of restrictions on transfer, other
than restrictions on transfer under applicable state and federal securities
laws. Assuming the accuracy of the Purchaser’s representations in Section 8
below, the Notes will be issued in compliance with applicable state and federal
securities laws. The Notes have been duly authorized by the Company and, when
executed and delivered by the Company to the Purchaser, in accordance with
the
terms of this Agreement, the Notes will have been duly executed, issued and
delivered by the Company and will constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally.
(g) Compliance
with Instruments.
Neither
the Company nor any of its Subsidiaries is in violation of its respective
articles of incorporation, certificate of incorporation, by-laws or other
organizational documents (the “Charter
Documents”).
Neither the Company nor any of its Subsidiaries is, nor does any condition
exist
(with the passage of time or otherwise) that could reasonably be expected to
cause the Company or any of its Subsidiaries to be, (i) in violation of any
statute, rule, regulation, law or ordinance, or any judgment, decree or order
applicable to the Company, any of its Subsidiaries or any of their properties
(collectively, “Applicable
Law”)
of any
federal, state, national, provincial, local or other governmental authority,
governmental or regulatory agency or body, court, arbitrator or self-regulatory
organization of applicable jurisdictions (each, a “Governmental
Authority”),
or
(ii) in breach of or in default under any bond, debenture, note or other
evidence of indebtedness, indenture, mortgage, deed of trust, lease or any
other
agreement or instrument to which any of them is a party or by which any of
them
or their respective property is bound (collectively, “Applicable
Agreements”),
other
than in each of clause (i) and (ii) such violations, breaches or defaults that
do not, and would not, individually or in the aggregate, have a Material Adverse
Effect.
(h) No
Conflicts.
Neither
the execution, delivery or performance of this Agreement or any other
Transaction Document nor the consummation of any of the transactions
contemplated herein or therein will conflict with, violate, constitute a breach
of or a default (with the passage of time or otherwise) under, require the
consent of any Person or a Governmental Authority (other than consents already
obtained) or result in the imposition of a Lien on any assets of the Company
or
any of its Subsidiaries under or pursuant to (i) the Charter Documents, (ii)
any
Applicable Agreement, or (iii) any Applicable Law, other than in each of clause
(ii) and (iii) such violations, breaches or defaults that do not, and would
not,
individually or in the aggregate, have a Material Adverse Effect. Immediately
following consummation of the transactions contemplated in the Transaction
Documents, no default will exist under the Notes.
(i) Governmental
Filings.
No
filing with, consent, approval, authorization or order of, any Governmental
Authority is required to be made by the Company or any of its Subsidiaries
for
the consummation of the transactions contemplated by the Transaction Documents,
except as have been made or obtained prior to the date of this Agreement or
obtained after the Closing in accordance with the terms of the Transaction
Documents.
(j) Proceedings.
There
is no action, claim, suit, demand, hearing, notice of violation or deficiency,
or proceeding, domestic or foreign (collectively, “Proceedings”),
pending or, to the knowledge of the Company, threatened, that seeks to restrain,
enjoin, prevent the consummation of, or otherwise challenges any of the
Transaction Documents or any of the transactions contemplated
therein.
(k) Permits.
Each of
the Company and its Subsidiaries possesses all material licenses, permits,
certificates, consents, orders, approvals and other authorizations from, and
has
made all declarations and filings with, all Governmental Authorities, presently
required or necessary to own or lease, as the case may be, and to operate their
respective properties and to carry on their respective businesses as now
conducted (“Permits”),
except where the failure to possess such permits could not, individually or
in
the aggregate, have a Material Adverse Effect. All of the Permits are valid
and
in full force and effect. Each of the Company and its Subsidiaries has fulfilled
and performed all of its respective obligations with respect to such Permits
and
no event has occurred which allows, or after notice or lapse of time could
allow, revocation or termination thereof or result in any other material
impairment of the rights of the holder of any such Permit. None of the Company
or its Subsidiaries has received actual notice of any Proceeding relating to
revocation or modification of any such Permit.
(l) Title
to Property.
Each of
the Company and its Subsidiaries has good and marketable title to all real
property and personal property owned by it that is material to their respective
businesses, in each case free and clear of any Liens as of the Closing Date.
For
unowned real property of the Company or its Subsidiaries that is currently
used
or currently planned to be used for the business operations of the Company
or
its Subsidiaries, each of the Company and its Subsidiary has good and marketable
title to all leasehold estates in real and personal property being leased by
it
that is material to their respective businesses and, in each case free and
clear
of all Liens as of the Closing Date.
(m) Insurance.
Each of
the Company and its Subsidiaries maintains reasonably adequate insurance
covering its material properties, operations, personnel and business, and is
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the businesses
in
which it is engaged. All policies of insurance insuring the Company and any
of
its Subsidiaries and their respective businesses, assets, employees, officers
and directors are in full force and effect. Each of the Company and its
Subsidiaries is in compliance with the terms of such policies and instruments
in
all material respects, and there are no claims by the Company or any of its
Subsidiaries under any such policy or instrument as to which, to the Company’s
knowledge, any insurance company is denying liability or defending under a
reservation of rights clause. Neither the Company nor any Subsidiary has been
refused any insurance coverage sought or applied for, and neither the Company
nor any Subsidiary 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 does not, and would not, individually or in the
aggregate, have a Material Adverse Effect.
(n) Taxes.
All Tax
returns required to be filed by the Company or any of its Subsidiaries have
been
filed (taking into account all extensions of due dates), and all such returns
are true, complete and correct in all material respects. All material Taxes
that
are due from the Company or any of its Subsidiaries have been paid other than
those (i) currently payable without penalty or interest or (ii) being diligently
contested in good faith and by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP. To the knowledge of
the
Company, there are no proposed Tax assessments against the Company or any of
its
Subsidiaries. The accruals and reserves on the books and records of the Company
and its Subsidiaries in respect of any Tax liability for any Taxable period
not
finally determined are adequate to meet any assessments of Tax for any such
period. For purposes of this Agreement, the term “Tax”
and
“Taxes”
shall
mean all federal, state, national, provincial, local and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
(o) Intellectual
Property.
(i) Each
of
the Company and its Subsidiaries owns, or is validly licensed under, or has
the
right to use, all
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems, software or procedures), trademarks, service
marks, trade names or master works, whether or not
registered, filed, or issued under the authority of any governmental
authority,
(collectively, “Intellectual
Property”)
necessary
for the conduct of its business and all Intellectual Properties owned by the
Company and its Subsidiaries necessary for the conduct of their businesses
are
valid and in full force and effect. As of the Closing Date, such Intellectual
Property is or will be free and clear of all Liens, except where the failure
to
own, possess, or have the right to use such Intellectual Property does not,
and
would not, individually or in the aggregate, have a Material Adverse Effect.
To
the Company’s knowledge, no Proceedings have been asserted by any Person
challenging the use of any such Intellectual Property by the Company or any
of
its Subsidiaries or questioning the validity or effectiveness of the
Intellectual Property or any license or agreement related thereto, and, to
the
Company’s knowledge, there are no facts which would form a valid basis for any
such Proceeding. To the Company’s knowledge, the use of such Intellectual
Property by the Company or any of its Subsidiaries will not infringe on the
Intellectual Property rights of any other Person.
(ii) Each
of
the Company and its Subsidiaries has taken reasonable steps and measures to
establish and preserve ownership of or right to use all Intellectual Property
material to the operation of its business, including any Intellectual Property
that was jointly developed with any third-parties, or any Intellectual Property
for which improper or unauthorized disclosure would impair its value or
validity, and has had executed appropriate nondisclosure and confidentiality
agreements and made all appropriate filings, registrations and payments of
fees
in connection with the foregoing. To the Company’s knowledge, there is no
infringement or misappropriation by any other Person of any Intellectual
Property of the Company or its Subsidiaries. No Proceedings in which the Company
or any of its Subsidiaries alleges that any Person is infringing upon, or
otherwise violating, any Intellectual Property of the Company or its
Subsidiaries are pending, and none has been served, instituted or asserted
by
the Company or its Subsidiaries.
(iii) No
former
or current employee, no former or current consultant, and no third-party joint
developer of the Company or its Subsidiaries has any rights in any Intellectual
Property made, developed, conceived, created or written by the aforesaid
employee or consultant during the period of his or her retention by the Company
and its Subsidiaries which can be asserted against the Company and its
Subsidiaries.
(iv) No
Intellectual Property owned by the Company or its Subsidiaries necessary for
the
conduct of their business is the subject of any Lien, license or other contract
granting rights or security interest therein to any other Person, except for
Liens, licenses or other contracts granting rights or security interest that
do
not materially interfere with the use made and proposed to be made of such
Intellectual Property by the Company and the Subsidiaries. Each of the Company
and its Subsidiaries has not (A) transferred or assigned, (B) granted an
exclusive license to or (C) provided or licensed, any Intellectual Property
owned by the Company or its Subsidiaries and necessary for the conduct of their
business to any Person.
(p) Internal
Controls.
Each of
the Company and its Subsidiaries 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 authorization,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any material differences.
(q) Financial
Statements.
Subsequent to the date of the Company’s audited financial statements filed for
the year ended December 31, 2005, except as disclosed therein or in any
subsequent SEC Report, (A) neither the Company nor any of its Subsidiaries
has
incurred any liabilities, direct or contingent, that are material, individually
or in the aggregate, to the Company, or has entered into any material
transactions not in the ordinary course of business, (B) there has not been
any
material decrease in the capital stock or any material increase in long-term
indebtedness or any material increase in short-term indebtedness of the Company
or any Subsidiary, or any payment of or declaration to pay any dividends or
any
other distribution with respect to the Company or any of its Subsidiaries,
and
(C) there has not been any material adverse change in the properties, business,
prospects, operations, earnings, assets, liabilities or condition (financial
or
otherwise) of the Company and its Subsidiaries taken as a whole; excluding
any
changes caused by (x) the condition of the industry of the Company that do
not
disproportionately affect the Company, (y) the failure of the Company to meet
its financial projections or (z) the execution and delivery of this Agreement
and consummation of the transactions contemplated hereby (each of clauses (A),
(B) and (C), a “Material
Adverse Change”).
To
the knowledge of the Company, there is no event that is reasonably likely to
occur in the foreseeable future, which if it were to occur, could, individually
or in the aggregate, have a Material Adverse Change.
(r) Indebtedness.
All
Indebtedness represented by the Notes is being incurred for proper purposes
and
in good faith. Based on the financial condition of the Company as of the Closing
Date after giving effect to the receipt by the Company of the proceeds from
the
sale of the Notes hereunder, (i) the fair saleable value of the Company’s and
its Subsidiaries’ assets taken as a whole exceeds the amount that will be
required to be paid on or in respect of the Company’s and its Subsidiaries’
existing debts and other liabilities (including contingent liabilities) as
they
mature; (ii) the present fair saleable value of the assets of the Company and
its Subsidiaries taken as a whole is greater than the amount that will be
required to pay the probable liabilities of the Company and its Subsidiaries
on
their respective debt as they become absolute and mature, and (iii) the Company
and its Subsidiaries taken as a whole are able to realize upon their assets
and
pay their debt and other liabilities (including contingent obligations) as
they
mature; (iv) the Company’s and its Subsidiaries’ assets taken as a whole do not
constitute unreasonably small capital to carry on their respective businesses
as
now conducted and as proposed to be conducted including their respective capital
needs taking into account the particular capital requirements of the business
conducted by the Company or its Subsidiaries, and projected capital requirements
and capital availability thereof; and (v) the current cash flow of each of
the
Company and its Subsidiaries, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account
all
anticipated uses of the cash, would be sufficient to pay all amounts on or
in
respect of its liabilities when such amounts are required to be paid. Neither
the Company nor any of its Subsidiaries intends to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). The Company has
no
knowledge of any facts or circumstances which lead it to believe that it or
any
of its Subsidiaries will file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction within one year from
the
Closing Date. Neither the Company nor any Subsidiary is, or has reason to
believe it is likely to be, in default with respect to any indebtedness and
no
waiver of default is currently in effect. Neither the Company nor any of its
Subsidiaries has agreed or consented to cause or permit in the future (upon
the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien. Neither the Company nor any
of
its Subsidiaries is a party to, or otherwise subject to any provision contained
in, any instrument evidencing indebtedness of the Company or such Subsidiary,
any agreement relating thereto or any other agreement (including, but not
limited to, its charter or other organizational document) which limits the
amount of, or otherwise imposes restrictions on the incurring of, indebtedness
of the Company.
(s) No
Stabilization.
None of
the Company or its Subsidiaries has and, to each of its knowledge after due
inquiry, no one acting on its behalf has, (i) taken, directly or indirectly,
any
action designed to cause or to result in, or that has constituted or which
might
reasonably be expected to constitute, the stabilization or manipulation of
the
price of any security of either the Company or its Subsidiaries to facilitate
the sale or resale of any of the Notes, (ii) sold, bid for, purchased, or paid
anyone any compensation for soliciting purchases of, the Notes, or (iii) paid
or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company or its Subsidiaries.
(t) No
Sale to the U.S.
None of
the Company, its Subsidiaries, their respective Affiliates, or any person acting
on its or their behalf has, directly or indirectly, made offers or sales of
any
security, or solicited offers to buy, sell or offer to sell or otherwise
negotiate in respect of, in the United States or to any United States citizen
or
resident, any security which is or would be integrated with the sale of the
Notes in a manner or under circumstances that would require the registration
of
the Notes under the Act.
(u) No
Directed Selling Efforts.
None of
the Company, its Subsidiaries, their respective Affiliates, or any person acting
on its or their behalf (other than the Purchaser, its Affiliates or persons
acting on their behalf, as to whom the Company makes no representation) has
engaged in any directed selling efforts (within the meaning of Regulation S)
with respect to the Notes; and each of the Company, its Subsidiaries, their
respective Affiliates and each person acting on its or their behalf has complied
with the offering restrictions requirement of Regulation S.
(v) No
Registration.
Assuming the accuracy of the Purchaser’s representations and warranties set
forth in Section 8, no registration under the Act of the Notes is required
for
the offer and sale of the Notes to the Purchaser in the manner contemplated
herein.
(w) Eligibility.
The
Notes satisfy the eligibility requirements of Rule 144A(d)(3) under the
Act.
(x) Labor
Matters.
There
is no strike or other labor dispute involving the Company or any Subsidiary
pending or threatened, which could, individually or in the aggregate, have
a
Material Adverse Effect. There is no employment related charge, complaint,
grievance, investigation, unfair labor practice claim or inquiry of any kind,
pending against the Company or any Subsidiary that could, individually or in
the
aggregate, have a Material Adverse Effect.
(y) Brokers
and Finders.
The
Company has not engaged any broker, finder, commission agent or other similar
person in connection with the transactions contemplated under the Transaction
Documents, and the Company is not under any obligation to pay any broker’s fee
or commission in connection with such transactions.
(z) Environmental
Matters.
Each of
the Company and its Subsidiaries (i) is in compliance with any and all currently
applicable foreign, federal, state, national, provincial, and local laws and
regulations relating to the protection of the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental
Laws”),
(ii) has received and is in compliance with all permits, licenses or other
approvals required of it under applicable Environmental Laws to conduct its
business, (iii) has not received actual notice of any actual or potential
liability for the investigation or remediation of any disposal or release of
hazardous or toxic substances or wastes, pollutants or contaminants, (iv)
neither the Company nor any of its Subsidiaries has knowledge of any facts
which
would give rise to any Proceedings, public or private, against it of violation
of Environmental Laws arising out of the operations of the Company and its
Subsidiaries, except, in each case, such as would not reasonably be expected
to
result in a Material Adverse Effect; and (v) neither the Company nor any of
its
Subsidiaries has stored any hazardous materials on real properties now or
formerly owned, leased or operated by any of them, and has not disposed of
any
hazardous materials, in a manner contrary to any Environmental Laws; except
as
to each of the foregoing where such non-compliance with Environmental Laws,
failure to receive required permits, licenses or other approvals, or liability
would not, individually or in the aggregate, have a Material Adverse
Effect.
In
the
ordinary course of its business, the Company periodically reviews the effect
of
Environmental Laws on the business, operations and properties of the Company
and
its Subsidiaries, in the course of which it identifies, estimates and evaluates
associated costs and liabilities (including, without limitation, any capital
or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws, or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties). On the basis of such review, the Company has reasonably
concluded that such associated costs would not, individually or in the
aggregate, have a Material Adverse Effect.
(aa) Encumbrances.
As of
the Closing Date, except for any such restrictions provided under the laws
of
the jurisdiction of incorporation of the Company or the Subsidiary, as
applicable, there will be no encumbrances or restrictions on the ability of
the
Company or any Subsidiary (i) to pay dividends or make other distributions
on
such parties’ capital stock or to make loans or advances or pay any indebtedness
to, or investments in, the Company or any Subsidiary, or (ii) to transfer any
of
its property or assets to the Company or any Subsidiary, except for such
restrictions set forth in the Transaction Documents.
(bb) Foreign
Corrupt Practices Act.
Neither
the Company or its Subsidiaries, nor to the knowledge of the Company, any agent
or other person acting on behalf of the Company or its Subsidiaries, has,
including without limitation in connection with the Acquisition (as defined
in
Section 7(f) below), directly or indirectly, (i) has used any funds, or will
use
any proceeds from the sale of the Notes, for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) has made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) has failed to disclose fully
any contribution made by the Company or its Subsidiaries (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) has violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(cc) Ranking
of Obligations.
The
payment obligations of the Company under this Agreement will rank at least
pari
passu,
without
preference or priority, with all other unsecured and unsubordinated indebtedness
of the Company.
(dd) Related
Party Transactions.
Other
than as set forth in the SEC Reports, no material relationship, direct or
indirect, exists between or among any of the Company or its Subsidiaries or
any
Affiliate of the Company or its subsidiaries, on the one hand, and any former
or
current director, officer, stockholder, customer or supplier of any of them
(including any member of their immediate family), on the other
hand.
(ee) Investment
Company.
The
Company and its Subsidiaries are not, and as a result of the offer and sale
of
the Notes contemplated herein will not be, required to register as an
“investment company” under, and as such term is defined in, the U.S. Investment
Company Act of 1940, as amended in connection with or as a result of the offer
and sale of the Notes.
(ff) PFIC.Neither
the Company nor any of its Subsidiaries is or intends to become a “passive
foreign investment company” within the meaning of Section 1297 of the Code
(“PFIC”).
The Company will use commercially reasonable efforts not to become, and cause
its Subsidiaries not to become, a PFIC. If the Company determines that
either it or any of its Subsidiaries has become a PFIC, it will promptly notify
the Purchaser and provide all information requested by the Purchaser that is
necessary for the Purchaser to make a qualified electing fund (QEF) election.
(gg) OFAC.
Neither
the Company nor, to the knowledge of the Company, any director, officer, agent,
employee, Affiliate or Person acting on behalf of the Company is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”);
and
the Company will not directly or indirectly use the proceeds of the sale of
the
Notes, or lend, contribute or otherwise make available such proceeds to any
Subsidiary, joint venture partner or other Person or entity, towards any sales
or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other
country sanctioned by OFAC or for the purpose of financing the activities of
any
person currently subject to any U.S. sanctions administered by
OFAC.
(hh) Money
Laundering Laws.
The
operations of the Company and its Subsidiaries are and have been conducted
at
all times in compliance with the money laundering statutes of applicable
jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any
applicable governmental agency (collectively, the “Money
Laundering Laws”)
and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending or, to the
best knowledge of the Company, threatened.
(ii) Full
Disclosure.
All
disclosure furnished by or on behalf of the Company to the Purchaser regarding
the Company and its Subsidiaries, their respective businesses and the
transactions contemplated under the Transaction Documents, including the SEC
Reports, with respect to the representations and warranties made herein are
true
and correct with respect to such representations and warranties 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. The Company
acknowledges and agrees that the Purchaser does not make any representations
or
warranties with respect to the transactions contemplated hereby other than
those
specifically set forth in Section 8 hereof.
The
Company does not make any representations or warranties with respect to the
transactions contemplated in this Agreement other than those specifically set
forth in this Section 6.
7. Covenants
of the Company.
The
Company hereby agrees:
(a) As
long
as any of the Notes are “restricted securities” within the meaning of Rule
144(a)(3) or Rule 905 under the Act, to, during any period in which the Company
is not subject to and in compliance with Section 13 or 15(d) of the Exchange
Act, provide to each holder of such restricted securities and to each
prospective purchaser (as designated by such holder) of such restricted
securities, upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the
Act.
(b) To
do and
perform all things required to be done and performed under the Transaction
Documents prior to and after the Closing Date.
(c) To
pay
all stamp, documentary and transfer taxes and other duties, if any, which may
be
imposed by any Governmental Authorities or any political subdivision thereof
or
taxing authority thereof or therein with respect to the issuance of the Notes
or
the sale thereof to the Purchaser.
(d) The
Company agrees that it will not register any transfer of the Notes that is
not
(i) made in accordance with the provisions of Regulation S under the Act, (ii)
made pursuant to registration under the Act, or (iii) made pursuant to an
available exemption under the Act.
(e) Prior
to
February 16, 2007, the Company shall not, without the express prior written
consent of the Purchaser (which consent shall be at the Purchaser’s sole
discretion), pursue or discuss any capital raising transaction or transactions
with any Person other than the Purchaser or its Affiliates (“Outside
Financing”).
(f) The
Company shall procure that the proceeds from the sale and purchase of the Notes
are used by it to finance the acquisition of the companies as listed in
Exhibit
D
(the
“Acquisition”).
(g) The
Company shall procure that the balance of the proceeds from the sale and
purchase of the Notes (net of the use of proceeds in Section 7(f) above) are
used by it for capital expenditures and working capital.
(h) The
Company shall not, and shall procure that its Subsidiaries shall not, do
anything or take any step, action or measure (or omit to take the same), that
has or could be reasonably expected to have, individually or in the aggregate,
a
Material Adverse Effect.
(i) The
Company shall not, and shall procure that its Subsidiaries shall not, directly
or indirectly, incur, grant or suffer to exist any Lien, other than Liens
arising by operation of law or any Lien or retention of title arrangement
arising by agreement to substantially the same effect and in the ordinary course
of business and not as a result of any default or omission.
(j) Until
all
amounts outstanding under the Notes have been repaid in full, the Company shall
not, and shall procure that its Subsidiaries shall not, declare, make or pay,
or
pay interest on any unpaid amount of, any dividend, charge, fee or other
distribution (whether in cash or in kind) on or in respect of its shares or
share capital (or any class of its share capital) where this would result in
any
amounts being paid to any Person other than the Company.
8. Purchaser’s
Representations, Warranties and Agreements.
The
Purchaser represents and warrants to the Company that:
(a) it
is not
a “U.S. Person” (as defined in Rule 902 of Regulation S under the Act) and it
understands that no action has been or will be taken in any jurisdiction by
the
Company that would permit a public offering of the Notes in any country or
jurisdiction where action for that purpose is required. The Purchaser is not
acquiring the Notes for the account or benefit of any U.S. persons except in
accordance with exemption from registration requirements of the Act below or
in
a transaction not subject thereto.
(b) The
Purchaser is not acquiring the Notes with a view to any distribution thereof
that would violate the Act or the securities laws of any state of the United
States or any other applicable jurisdiction.
(c) The
Purchaser (A) agrees on its own behalf and on behalf of any investor account
for
which it has purchased the Notes that it will not offer, sell or otherwise
transfer any of the Notes prior to the date which is 40 days after the later
of
the date of the commencement of the offering and the date of original issuance
(or of any predecessor of any Note proposed to be transferred by the Purchaser)
and (y) such later date, if any, as may be required by applicable law (the
“Resale
Restriction Termination Date”),
except (a) to the Company, (b) pursuant to a registration statement that has
been declared effective under the Act, (c) for so long as any Note is eligible
for resale pursuant to Rule 144A under the Act, to a person it reasonably
believes is a “qualified institutional buyer” as defined in Rule 144A that
purchases for its own account or for the account of another qualified
institutional buyer to whom notice is given that the transfer is being made
in
reliance on Rule 144A, (d) pursuant to offers and sales to Persons who are
not
“U.S. Persons” (within the meaning of Regulation S) that occur outside the
United States within the meaning of Regulation S or (e) pursuant to any other
available exemption from the registration requirements of the Act, and (B)
agrees that it will give to each person to whom such Note is transferred a
notice substantially to the effect of this paragraph.
(d) No
form
of “directed selling efforts” (as defined in Rule 902 of Regulation S under the
Act), general solicitation or general advertising in violation of the Act has
been or will be used nor will any offers by means of any directed selling
efforts in the United States be made by the Purchaser or any of its
representatives in connection with the offer and sale of any of the
Notes.
(e) The
Notes
to be acquired by the Purchaser will be acquired for investment for the
Purchaser’s own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any Person to sell, transfer or
grant
participations to such Person or to any third Person, with respect to any of
the
Notes.
9. Conditions
to Purchase Notes at Closing.
9.1
Conditions Precedent to the Obligations of the Purchaser to Purchase the
Notes:
The
Purchaser’s obligation to purchase the Notes under this Agreement is subject to
the satisfaction or waiver of each of the following conditions:
(a) All
the
representations and warranties of the Company and the Shareholder contained
in
each Transaction Document shall be true and correct as of the date hereof and
at
the Closing Date. The Company and the Shareholder shall have performed,
satisfied and complied with all covenants, agreements and conditions required
by
the Transaction Documents to be performed, satisfied or complied with by them
at
or prior to the Closing.
(b) No
injunction, restraining order or order of any nature by a Governmental Authority
shall have been issued as of the Closing Date that could prevent or materially
interfere with the consummation of the transactions contemplated under the
Transaction Documents; and no stop order suspending the qualification or
exemption from qualification of any of the Notes in any jurisdiction shall
have
been issued and no Proceeding for that purpose shall have been commenced or,
to
the knowledge of the Company after due inquiry, be pending or threatened as
of
the Closing Date.
(c) No
action
shall have been taken and no Applicable Law shall have been enacted, adopted
or
issued that could, as of the Closing Date, reasonably be expected to prevent
the
consummation of the transactions contemplated under the Transaction Documents.
No Proceeding shall be pending or, to the knowledge of the Company after due
inquiry, threatened other than Proceedings that if adversely determined could
not, individually or in the aggregate, adversely affect the issuance or
marketability of the Notes, or could not, individually or in the aggregate,
have
a Material Adverse Effect.
(d) The
Purchaser shall have received on the Closing Date:
(i) complete,
true and up to date copies of all agreements relating to and evidencing the
Acquisition satisfactory to the Purchaser;
(ii) a
certificate dated the Closing Date, signed by the Chief Executive Officer of
the
Company on behalf of the Company to the effect that (a) the representations
and
warranties set forth in Section 6 are true and correct with the same force
and
effect as though expressly made at and as of the Closing Date, (b) the Company
has complied with all agreements and satisfied all conditions on its part to
be
performed or satisfied hereunder at or prior to the Closing Date, (c) at the
Closing Date, since the date hereof, no event or events have occurred, no
information has become known nor does any condition exist that could,
individually or in the aggregate, have a Material Adverse Effect, and (d) the
sale of any of the Notes has not been enjoined (temporarily or
permanently);
(iii) a
certificate dated the Closing Date, signed by the Shareholder, to the effect
that (a) the representations and warranties set forth in the Share Pledge
Agreement which are given by the Shareholder are true and correct with the
same
force and effect as though expressly made at and as of the Closing Date, (b)
the
Shareholder has complied with all agreements and satisfied all conditions on
its
part to be performed or satisfied under the Share Pledge Agreement at or prior
to the Closing Date,
(iv) a
certificate dated the Closing Date, signed by the Secretary of the Company,
including specimen signatures of those officers of the Company authorized to
sign the Transaction Documents on behalf of the Company, attaching true,
complete and up to date copies of the certificate of incorporation and by-laws
of the Company, attaching the certificate of good standing of the Company and
certifying as to such other maters as the Purchaser may reasonably
require;
(v) stock
powers executed (but undated) by the Shareholder and share certificates relating
to the shares pledged by the Shareholder in the Company;
(vi) the
opinions of ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Raysman & ▇▇▇▇▇▇▇ LLP, U.S. counsel to the
Company, dated the Closing Date, in the form and substance satisfactory to
the
Purchaser;
(vii) the
opinions of ▇▇▇▇▇▇ Westwood & Riegels, British Virgin Islands counsel to the
Shareholder, dated the Closing Date, in the form and substance satisfactory
to
the Purchaser; and
(viii) the
opinions of Jian Da Law Firm, PRC counsel to the Shareholder, dated the Closing
Date, in the form and substance satisfactory to the Purchaser in its sole
discretion.
(e) Each
of
the Transaction Documents shall have been executed and delivered by all parties
thereto, and the Purchaser shall have received a fully executed original (or
clearly legible facsimile copy) of each Transaction Document.
(f) The
Purchaser shall have received copies of all documents delivered under or in
connection with the transactions contemplated in the Transaction Documents
that
are required to be delivered at or prior to the Closing Date.
(g) None
of
the other parties to any of the Transaction Documents shall be in breach or
default under their respective obligations thereunder.
(h) The
Purchaser and its counsel shall be satisfied that
(i)
the Lien
granted to the Purchaser in the Share Pledge Agreement is a first priority
Lien;
and
(ii)
no Lien
exists on any of the Collateral other than the Lien granted in favor of the
Purchaser.
(i) The
board
of directors of the Company shall have approved and authorized by all necessary
corporate or other action (i) the execution and delivery of the Transaction
Documents, (ii) all actions to be performed or satisfied under the Transaction
Documents, (iii) the consummation of the transactions contemplated by the
Transaction Documents, (iv) the pricing terms of the Notes, and (v) all other
actions necessary in connection with the transactions contemplated by the
Transaction Documents and the offering of the Notes, and shall have provided
the
Purchaser with a copy of such authorizations.
(j) The
Purchaser shall have completed and be satisfied with the results of all
business, legal and financial due diligence, and any items requiring correction
identified by the Purchaser shall have been corrected to the Purchaser’s
satisfaction.
(k) The
Purchaser shall have received all necessary internal approval for the
transactions contemplated hereunder or under the Transaction
Documents.
9.2
Conditions Precedent to the Obligations of the Company to Sell the
Notes:
The
Company’s obligation to sell the Notes under this Agreement is subject to the
satisfaction or waiver of each of the following conditions:
(a) All
the
representations and warranties of the Purchaser contained in each Transaction
Document shall be true and correct as of the date hereof and at the Closing
Date.
(b) No
injunction, restraining order or order of any nature by a Governmental Authority
shall have been issued as of the Closing Date that could prevent or materially
interfere with the consummation of the transactions contemplated under the
Transaction Documents; and no stop order suspending the qualification or
exemption from qualification of any of the Notes in any jurisdiction shall
have
been issued and no Proceeding for that purpose shall have been commenced or,
to
the knowledge of the Company after due inquiry, be pending or threatened as
of
the Closing Date.
(c) No
action
shall have been taken and no Applicable Law shall have been enacted, adopted
or
issued that could, as of the Closing Date, reasonably be expected to prevent
the
consummation of the transactions contemplated under the Transaction Documents.
No Proceeding shall be pending or, to the knowledge of the Company after due
inquiry, threatened other than Proceedings that if adversely determined could
not, individually or in the aggregate, adversely affect the issuance or
marketability of the Notes, or could not, individually or in the aggregate,
have
a Material Adverse Effect.
(d) Each
of
the Transaction Documents shall have been executed and delivered by all parties
thereto, and the Company shall have received a fully executed original (or
clearly legible facsimile copy) of each Transaction Document to which the
Purchase is a party..
10. Indemnification.
(a) The
Company (the “Indemnifying
Party”)
agrees
to indemnify and hold harmless the Purchaser, each of its Affiliates and their
respective officers, directors, partners, shareholders, counsel, employees
and
agents (the Purchaser and each such other person being referred to as an
“Indemnified
Party”),
to
the fullest extent lawful, from and against any losses, claims, damages,
liabilities and reasonable expenses (or actions in respect thereof), as
incurred, related to or arising out of or in connection with:
(i) actions
taken or omitted to be taken by the Company or its Affiliates, officers,
directors, employees or agents; or
(ii) any
breach by the Company or its Affiliates of any of the representations,
warranties, covenants and agreements set forth in any Transaction
Document,
and
will
reimburse the Indemnified Parties for all reasonable expenses (including,
without limitation, fees and expenses of counsel) as they are incurred in
connection with investigating, preparing, defending or settling any such action
or claim, whether or not in connection with litigation in which any Indemnified
Party is a named party. If any of the Indemnified Parties’ personnel appears as
witnesses, are deposed or are otherwise involved in the defense of any action
against an Indemnified Party, the Company will reimburse the Purchaser for
all
reasonable expenses incurred by the Purchaser by reason of any of the
Indemnified Parties being involved in any such action.
(b) As
promptly as reasonably practical after receipt by an Indemnified Party under
this Section 10 of notice of the commencement of any action for which such
Indemnified Party is entitled to indemnification under this Section 10, such
Indemnified Party will, if a claim in respect thereof is to be made against
the
Indemnified Party under this Section 10, notify the Indemnifying Party of the
commencement thereof in writing; but the omission to so notify the Indemnifying
Party (i) will not relieve such Indemnifying Party from any liability under
paragraph (a) above unless and only to the extent it is materially prejudiced
as
a result thereof and (ii) will not, in any event, relieve the Indemnifying
Party
from any obligations to any Indemnified Party otherwise than the indemnification
obligation provided in paragraph (a) above. In case any such action is brought
against any Indemnified Party, and it notifies the Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to participate
therein and, to the extent that it may determine, jointly with any other
Indemnifying Party similarly notified, to assume the defense thereof, with
counsel satisfactory to such Indemnified Party (who shall not, except with
the
consent of the Indemnified Party, be counsel to the Indemnifying Party) at
the
expense of the Indemnifying Party; provided, however, that if (i) the use of
counsel chosen by the Indemnifying Party to represent the Indemnified Party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other Indemnified Party that are different from or
additional to those available to the Indemnifying Party, (iii) the Indemnifying
Party shall not have employed counsel satisfactory to the Indemnified Party
to
represent the Indemnified Party within a reasonable time after notice of the
institution of such action or (iv) the Indemnifying Party shall authorize the
Indemnified Party to employ separate counsel at the expense of the Indemnifying
Party, then, in each such case, the Indemnifying Party shall not have the right
to direct the defense of such action on behalf of such Indemnified Party or
parties and such Indemnified Party or parties shall have the right to select
separate counsel (including local counsel) to defend such action on behalf
of
such Indemnified Party or parties at the expense of the Indemnifying Party.
After notice from the Indemnifying Party to such Indemnified Party of its
election so to assume the defense thereof and approval by such Indemnified
Party
of counsel appointed to defend such action, the Indemnifying Party will not
be
liable to such Indemnified Party under this Section 10 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred
by
such Indemnified Party in connection with the defense thereof, unless the
Indemnified Party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the Indemnifying Party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in
the
same jurisdiction arising out of the same general allegations or circumstances,
representing the Indemnified Party who are parties to such action or actions).
The Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or
claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the Indemnified Party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes
an
unconditional release of the Indemnified Party from all liability arising out
of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any Indemnified
Party.
(c) The
indemnity and expense reimbursement obligations set forth herein (i) shall
be in
addition to any liability the Company may otherwise have to any Indemnified
Party, (ii) shall remain operative and in full force and effect regardless
of
any investigation made by or on behalf of the Purchaser or any other Indemnified
Party and (iii) shall be binding on any successor or assign of the Company
or
its business and assets.
11. Termination.
(a) The
Purchaser may terminate this Agreement at any time prior to the Closing Date
by
written notice to the Company if any of the following has occurred:
(iii) since
the
date hereof, any Material Adverse Effect or development involving or reasonably
expected to result in a prospective Material Adverse Effect that could, in
the
Purchaser’s reasonable judgment, be expected to (A) make it impracticable or
inadvisable to proceed with the consummation of the transaction on the terms
and
in the manner contemplated in this Agreement or (B) materially impair the
investment quality of any of the Notes;
(iv) the
failure of the Company or any Shareholder to satisfy the conditions contained
in
Section 9 on or prior to the Closing Date;
(v) any
outbreak or escalation of hostilities or other national or international
calamity or crisis, including acts of terrorism, or material adverse change
or
disruption in economic conditions in, or in the financial markets of, the United
States, the European Union, the Peoples’ Republic of China or Hong Kong (it
being understood that any such change or disruption shall be relative to such
conditions and markets as in effect on the date hereof), if the effect of such
outbreak, escalation, calamity, crisis, act or material adverse change in the
economic conditions in, or in the financial markets of, the United States,
the
European Union, the Peoples’ Republic of China or Hong Kong could be reasonably
expected to make it, in the Purchaser’s sole judgment, impracticable or
inadvisable to proceed with the consummation of the transaction on the terms
and
in the manner contemplated in this Agreement;
(vi) trading
in the Common Stock shall have been suspended by the OTC market or the
suspension or limitation of trading generally in securities on the New York
Stock Exchange, the American Stock Exchange, the London Stock Exchange, the
Hong
Kong Stock Exchange, the NASDAQ Capital Market or the NASDAQ Global Market
or
any setting of limitations on prices for securities on any such exchange or
the
NASDAQ Capital Market or the NASDAQ Global Market;
(vii) the
enactment, publication, decree or other promulgation after the date hereof
of
any Applicable Law that could be reasonably expected to have a Material Adverse
Effect; or
(viii) the
declaration of a banking moratorium by any federal or New York state
Governmental Authority; or the taking of any action by any Governmental
Authority after the date hereof in respect of its monetary or fiscal affairs
that could reasonably be expected to have a material adverse effect on the
financial markets in the United States, European Union, the Peoples’ Republic of
China, Hong Kong or elsewhere.
(b) The
Company may terminate this Agreement at any time prior to the Closing Date
by
written notice to the Purchaser based upon the Purchaser’s intentional breach of
its representations, warranties, covenants and obligations under this
Agreement.
12. Survival
of Representations and Indemnities.
The
representations and warranties, covenants, indemnities and contribution and
expense reimbursement provisions and other agreements of the Company set forth
in this Agreement shall remain operative and in full force and effect, and
will
survive, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the parties hereto, and (ii) acceptance of
the
Notes, and payment for them hereunder.
13. Substitution
of Purchaser.
The
Purchaser shall have the right to substitute any one of its Affiliates as the
purchaser of the Notes, by written notice to the Company, which notice shall
be
signed by both the Purchaser and such Affiliate, shall contain such Affiliate’s
agreement to be bound by this Agreement and shall contain a confirmation by
such
Affiliate of the accuracy with respect to it of the representations and
warranties set forth in Section 8. Upon receipt of such notice, wherever the
word “Purchaser” is used in this Agreement (other than in this Section 13), such
word shall be deemed to refer to such Affiliate in lieu of the original
Purchaser. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to the original Purchaser
all
of the Notes then held by such Affiliate, upon receipt by the Company of notice
of such transfer, wherever the word “Purchaser” is used in this Agreement (other
than in this Section 13), such word shall no longer be deemed to refer to such
Affiliate, but shall refer to the original Purchaser, and the original Purchaser
shall have all the rights of an original holder of the Notes under this
Agreement.
14. Miscellaneous.
(a) Notices
given pursuant to any provision of this Agreement shall be addressed as follows:
(i) if to the Company, to: 13/F, Shenzhen Special Zone Press Tower, Shennan
Road, Futian, Shenzhen, China, Fax: (▇▇) ▇▇▇-▇▇▇▇▇▇▇▇, Attention: Mr. Tu ▇▇▇
▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Raysman & ▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇
▇▇▇▇▇▇,
▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Fax: (▇-▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇▇, Esq., (ii) if to the Purchaser, to: c/o
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇,
Fax:
(▇-▇▇▇)
▇▇▇ ▇▇▇▇,
Attention: ▇▇.
▇▇▇▇
▇. ▇▇▇▇▇▇,
with a
copy to ▇▇/▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, Fax: (▇▇▇) ▇▇▇▇ ▇▇▇▇,
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇. ▇▇▇ ▇▇▇,
and with
a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ICBC ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ SAR, China, Fax: (▇▇▇) ▇▇▇▇ ▇▇▇▇, Attention: ▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
(b) This
Agreement has been and is made solely for the benefit of and shall be binding
upon the parties hereto and, to the extent provided in Section 10 hereof, the
controlling persons and their respective agents, employees, officers, directors,
partners, counsel, and shareholders referred to in Section 10, and their
respective heirs, executors, administrators, successors and assigns, all as
and
to the extent provided in this Agreement, and no other person shall acquire
or
have any right under or by virtue of this Agreement.
(c) THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF
THE STATE OF NEW YORK.
(d) The
parties hereto agree that any suit, action or proceeding arising out of or
based
upon this Agreement or the transactions contemplated hereby may be instituted
in
any State or U.S. federal court in The City of New York and County of New York,
and waives any objection which it may now or hereafter have to the laying of
venue of any such proceeding, and irrevocably submits to the non-exclusive
jurisdiction of such courts in any suit, action or proceeding.
(e) The
parties hereto each hereby waive any right to trial by jury in any action,
proceeding or counterclaim arising out of or relating to this
Agreement.
(f) No
failure to exercise, and no course of dealing with respect to, and no delay
in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of
any
other right, power or remedy.
(g) This
Agreement may be signed in various counterparts which together shall constitute
one and the same instrument. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
(h) The
headings in this Agreement are for convenience of reference only and shall
not
constitute part of this Agreement nor limit or otherwise affect the meaning
of
any provision of this Agreement.
(i) If
any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, in each case to the extent permitted by applicable law, and
the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of
such that may be hereafter declared invalid, illegal, void or unenforceable,
to
the extent permitted by applicable law.
(j) This
Agreement may be amended, modified or supplemented, and waivers or consents
to
departures from the provisions hereof may be given; provided
that the
same are in writing and signed by all of the signatories hereto.
[Signature
Page(s) to Follow]
| For and on behalf of: | ||
| CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. | ||
| |
|
|
| By: |
/s/
Tu
▇▇▇ ▇▇▇▇
|
|
|
Name: Tu ▇▇▇ ▇▇▇▇ |
||
| Title: Chief Executive Officer | ||
| For and on behalf of: | ||
|
CITADEL EQUITY FUND LTD.
By:
Citadel Limited Partnership, its Portfolio Manager
By:
Citadel Investment Group, L.L.C., its General
Partner
|
||
| |
|
|
| By: |
/s/
▇▇▇▇▇▇
▇▇▇▇
|
|
|
Name: ▇▇▇▇▇▇ ▇▇▇▇ |
||
| Title:Authorized Signatory | ||