EXHIBIT 4.4
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EQUITY REGISTRATION RIGHTS AGREEMENT
DATED AS OF AUGUST 30, 2006
BY AND BETWEEN
HARBIN ELECTRIC, INC.
AND
CITADEL EQUITY FUND LTD.
AND
▇▇▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL
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This Equity Registration Rights Agreement (the "Agreement") is made and
entered into as of August 30, 2006, by and between (i) Harbin Electric Inc., a
Nevada corporation (the "Company"), (ii) Citadel Equity Fund Ltd. ("Citadel")
and (iii) ▇▇▇▇▇▇▇ ▇▇▇▇▇ International ("ML" and collectively, with Citadel, the
"Purchasers").
RECITALS
WHEREAS, this Agreement is made pursuant to the Purchase Agreement, dated
as of August 29, 2006, by and among the Company, the Subsidiary Guarantor and
each of the Purchasers (each a, "Purchase Agreement" and collectively, the
"Purchase Agreements").
WHEREAS, Citadel has agreed to purchase an aggregate of 38,000 Units, each
consisting of $1,000 in aggregate principal amount of a Guaranteed Senior
Secured Floating Rate Notes due 2012 (the "2012 Notes") of the Company and a
proportionate share of the six-year warrants to purchase 525,830 shares of the
Company's Common Stock at an exercise price of $10.84 per share and a
proportionate share of the six-year warrants to purchase 2,192,308 shares of the
Company's Common Stock at an exercise price of $7.80 per share, pursuant to the
Purchase Agreement.
WHEREAS, ML has agreed to purchase an aggregate of 12,000 Units, each
consisting of $1,000 in aggregate principal amount of a Guaranteed Senior
Secured Floating Rate Notes due 2010 (the "2010 Notes" and together with the
2012 Notes, the "Notes") of the Company and a proportionate share of the
three-year warrants to purchase 769,230 shares of the Company's Common Stock at
an exercise price of $7.80 per share, pursuant to the Purchase Agreement.
WHEREAS, to induce the Purchasers to purchase the Units pursuant to the
Purchase Agreements, the Company has agreed to provide the registration rights
set forth in this Agreement.
WHEREAS, the execution and delivery of this Agreement is a condition to
the obligations of the Purchasers set forth in Section 3 of the Purchase
Agreements. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Purchase Agreements.
AGREEMENT
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall have the
following meanings:
"2010 Notes": As defined in the Recitals.
"2012 Notes": As defined in the Recitals.
"Affiliate": As defined in Rule 144 of the Securities Act.
"Closing Date": The date hereof.
"Common Stock": The common stock, par value $.00001 per share, of the
Company.
"Company": As defined in the Preamble.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Holder": Any Person who holds Warrants or Registrable Securities. A
Person is deemed to be a Holder whenever such Person owns Warrants or
Registrable Securities or has the right to acquire such Registrable Securities
by exercising Warrants held by such Person, whether or not such acquisition has
actually been effected.
"Indemnified Party": As defined in Section 7 hereof.
"Inspectors": As defined in Section 3 hereof.
"Liquidated Damages Cap": As defined in Section 4 hereof.
"Liquidated Damages Period": As defined in Section 4 hereof.
"Notes": As defined in the Recitals.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Prospectus": The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as supplemented by any
prospectus supplement, and all material incorporated by reference into such
prospectus.
"Purchase Agreements": As defined in the Recitals.
"Purchaser": As defined in the Recitals.
"Recommencement Date": As defined in Section 5 hereof.
"Registrable Securities": At any time, any of (i) the Warrant Shares
(whether or not the related Warrants have been exercised) and (ii) any other
securities issued or issuable with respect to any Warrant Shares by way of stock
dividends or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a Registration Statement with respect to the
offering of such securities by the Holder thereof shall have been declared
effective under the Securities Act and such securities shall have been disposed
of by such Holder pursuant to such Registration Statement, (b) such securities
have been sold to the public pursuant to Rule 144(k) (or any similar provisions
then in force, but not Rule 144A) promulgated under the Securities Act, (c) such
securities may be sold without restriction under Rule 144(k)(or successor rule),
(d) such securities shall have been otherwise transferred by the Holder thereof
and new certificates for such securities not bearing a legend restricting
further transfer shall have been delivered by the Company or its transfer agent
and subsequent disposition of such securities shall not require registration or
qualification under the Securities Act or any similar state law then in force or
(e) such securities shall have ceased to be outstanding.
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"Registration Default": As defined in Section 4 hereof.
"Registration Statement": Any registration statement of the Company
relating to the registration for resale of Registrable Securities that is filed
pursuant to the provisions of this Agreement, including the Prospectus included
therein, all amendments thereto (including post-effective amendments) and all
exhibits and all material incorporated by reference therein.
"SEC": The Securities and Exchange Commission.
"Securities Act": The Securities Act of 1933, as amended.
"Shelf Registration": As defined in Section 2 hereof.
"Suspension Notice": As defined in Section 5 hereof.
"Warrant Agreement": The Warrant Agreement dated the Closing Date by and
between the Company and The Bank of New York, as Warrant Agent.
"Warrant Shares": The Common Stock or other securities that any Holder may
acquire upon exercise of a Warrant, together with any other securities which
such Holder may acquire on account of any such securities, including, without
limitation, as the result of any dividend or other distribution on Common Stock
or any split or combination of such Common Stock as provided for in the Warrant
Agreement.
"Warrants": The warrants of the Company issued and sold pursuant to the
Purchase Agreements and the Warrant Agreement, together with any warrants issued
in substitution or replacement therefor.
SECTION 2. FILING OF REGISTRATION STATEMENT.
(a) As soon as reasonably practicable after the Closing Date, the Company
shall prepare and cause to be filed with the SEC pursuant to Rule 415 under the
Securities Act a Registration Statement on the appropriate form relating to
resales of all Registrable Securities (the "Shelf Registration"). The Company
shall use its reasonable best efforts to cause any such Registration Statement
to be declared effective by the SEC as soon as reasonably practicable and no
later than March 30, 2007.
To the extent necessary to ensure that the Registration Statement is
available for sales of Registrable Securities by the Holders thereof entitled to
the benefit of this Section 2(a), the Company shall use its reasonable best
efforts to keep any Registration Statement required by this Section 2(a)
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Section 2(a) hereof and in conformity with the
requirements of this Agreement, the Securities Act and the rules and regulations
of the SEC promulgated thereunder from time to time (including (A) preparing and
filing with the SEC such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep such Registration Statement
effective; (B) cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and complying fully with Rules 424, 430A and 462, as
applicable, under the Securities Act in a timely manner; and (C) comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement), until the date when all
Registrable Securities covered by the Registration Statement (i) have been sold
pursuant thereto or (ii) may be sold without volume restrictions pursuant to
Rule 144(k) as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company's
transfer agent and the affected Holders.
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(b) No Holder may include any of its Registrable Securities in any
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes in writing to the Company within 10 business days of a request
therefore, such information as is requested by the Company regarding such
Holder, the Registrable Securities held by such Holder and the intended method
of disposition of the Registrable Securities held by such Holder, as shall be
reasonably required (but in no event shall such information provided be less
than the information required by Regulation S-K and other applicable SEC rules,
regulations and interpretations) to effect the registration of such Registrable
Securities. Each selling Holder agrees to promptly furnish (but in no event more
than 5 business days following the Company's request) additional information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading. The Company shall not
have any obligation to include in a Registration Statement Registrable
Securities held by a Holder that does not furnish the information requested by
the Company pursuant to this Section 2(b).
(c) The Company shall be deemed not to have used its commercially
reasonable efforts to keep the Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in Holders
of Registrable Securities covered thereby not being able to offer and sell such
Registrable Securities during that period, unless such action is required by
applicable law or this Agreement.
SECTION 3. REGISTRATION PROCEDURES.
In connection with the Shelf Registration, the following provisions shall
apply:
(a) The Company shall (i) furnish to the Holders, prior to the filing
thereof with the SEC, an electronic copy of the Registration Statement and each
amendment thereof (and if a Holder so requests in writing, and electronic copies
of all such documents incorporated therein by reference) and each supplement, if
any, to the Prospectus, which documents will be subject to the review and
comment of such Holders in connection with such sale, if any, for a period of at
least five business days, and the Company will not file any such Registration
Statement or related Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus to which such Holders shall reasonably
object within two business days after the receipt thereof; and (ii) include the
names of the Holders who propose to sell Registrable Securities pursuant to the
Registration Statement as selling securityholders. A Holder's objection shall be
deemed to be a reasonable objection to such filing if such Registration
Statement, amendment, related Prospectus or supplement, as applicable, as
proposed to be filed, contains an untrue statement of a material fact or omits
to state any material fact necessary to make the statements therein (in the case
of the Prospectus, in light of the circumstances under which they were made) not
misleading or fails to comply with the applicable requirements of the Securities
Act.
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(b) The Company shall give written notice to the Holders:
(i) when the Registration Statement or any amendment thereto has been
filed with the SEC and when the Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information;
(iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to make
changes in the Registration Statement or the Prospectus in order that the
Registration Statement or the Prospectus does not contain an untrue statement of
a material fact nor omit to state a material fact required to be stated therein
or necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder, without charge, at least one
electronic copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and if the Holder so
request in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(e) The Company shall, during the period which the Registration Statement
is effective, deliver to each Holder an electronic copy of the Prospectus
(including each preliminary Prospectus) included in the Registration Statement
as such Holder may reasonably request. The Company consents, subject to the
provisions of this Agreement, to the use of the Prospectus by each of the
Holders in connection with the offering and sale of Registrable Securities.
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(f) Prior to any public offering of the Registrable Securities pursuant to
any Registration Statement the Company shall register or qualify or cooperate
with the Holders and their respective counsel in connection with the
registration or qualification of the Registrable Securities for offer and sale
under the securities or "blue sky" laws of such states of the United States as
any Holder reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such jurisdictions
of the Registrable Securities; provided, however, that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where it is
not then so qualified or (ii) take any action which would subject it to general
service of process or to taxation in more than a nominal amount in any
jurisdiction where it is not then so subject.
(g) The Company shall cooperate with the Holders or underwriters to
facilitate the timely preparation and delivery of certificates representing the
Registrable Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such names
as the Holders may request a reasonable period of time prior to sales of the
Registrable Securities pursuant to such Registration Statement.
(h) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company is
required to maintain an effective Registration Statement, the Company shall
promptly prepare and file a post-effective amendment to the Registration
Statement or a supplement to the related Prospectus and any other required
document so that, as thereafter delivered to Holders or purchasers of
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(i) Not later than the effective date of the Registration Statement, the
Company will provide a CUSIP number for the Registrable Securities and provide
the Warrant Agent with printed certificates for the Registrable Securities, in a
form eligible for deposit with The Depository Trust Company.
(j) Use its commercially reasonable efforts to cause all such Registrable
Securities to be quoted on Nasdaq (if the Common Stock is so quoted), and enter
into such customary agreements including a listing application and
indemnification agreement in customary form, provided that the applicable
listing requirements are satisfied, and to provide a transfer agent and
registrar for such Registrable Securities covered by such registration statement
no later than the effective date of such registration statement.
(k) Upon their execution of commercially customary confidentiality
agreements for securities offerings, the Company will make available for
inspection by the selling Holders, any underwriter participating in any
disposition pursuant to any Registration Statement, and any attorney, accountant
or other agent retained by any Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries, if any, as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees to supply all information and respond to all inquiries
reasonably requested by any such Inspector in connection with such registration
statement.
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(l) If requested by the managing underwriter or underwriters or any
Holder, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriters, each selling Holder and
the Company agree should be included therein relating to the plan of
distribution with respect to such Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being sold to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten (or best
efforts underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment.
(m) Cooperate with the selling Holders and each underwriter or agent
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with or
any other securities exchange and/or the NASD;
(n) The Company will comply with all rules and regulations of the SEC and
make available to its security holders, within the required time periods, an
earnings statement covering a period of at least twelve months, beginning with
the first month after the effective date of the registration statement (as the
term "effective date" is defined in Rule 158(c) under the Securities Act), which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder or any successor provisions thereto.
(o) The Company shall enter into such customary agreements (including, if
applicable, an underwriting agreement in customary form, which may include
customary indemnification provisions) and take all such other action, if any, in
order to facilitate the disposition of the Registrable Securities pursuant to
the Shelf Registration, including (i) supporting any Holder's efforts to execute
block trades with institutional buyers, (ii) making appropriate members of
senior management of the Company reasonably available (subject to consulting
with them in advance as to schedule) for customary participation in telephonic,
in-person conferences or "road show" presentations to potential investors, (iii)
obtaining customary opinions of counsel to the Company or comfort letters from
the Company's independent auditors and (iv) delivering copies of Prospectuses as
may be requested by the managing underwriter or underwriters.
SECTION 4. REGISTRATION DEFAULT.
(a) The Company agrees that, in the event that (i) the Registration
Statement has not been declared effective by the SEC on or before March 30, 2007
or (ii) if effectiveness of the Registration Statement is suspended at any time
other than pursuant to a Suspension Notice while any Registrable Securities
remain outstanding (each, a "Registration Default"), for any thirty-day period
(a "Liquidated Damages Period") during which the Registration Default remains
uncured, the Company shall pay an aggregate of $250,000 to the Holders, which
cash payment shall be made on a pro rata basis in accordance with each Holder's
percentage holding of the then outstanding Registrable Securities, for each
Liquidated Damages Period during which the Registration Default remains uncured;
provided, however, that if a Holder fails to provide the Company with any
information that is required to be provided in the Registration Statement with
respect to such Holder as set forth herein, then the commencement of the
Liquidated Damages Period described above shall be extended until two business
days following the date of receipt by the Company of such required information;
provided further that the amount payable to any Holder hereunder for any partial
Liquidated Damages Period shall be prorated for the number of actual days during
such Liquidated Damages Period during which a Registration Default remains
uncured.
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(b) The Company shall deliver said cash payment to the Holders by the
seventh business day after the end of each such Liquidated Damages Period. If
the Company fails to pay said cash payment to the Holders in full by the seventh
business day after the end of such Liquidated Damages Period, the Company will
pay interest thereon at a rate of 10% per annum (or such lesser maximum amount
that is permitted to be paid by applicable law) to the Holders, accruing daily
from the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full.
(c) Notwithstanding the other provisions of this Section 4, the maximum
amount of liquidated damages which the Company may be obligated to pay under
this Section 4 shall be limited to $2,000,000 (the "Liquidated Damages Cap").
SECTION 5. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS.
The obligations of the Company described in Section 2 of this Agreement
are subject to each of the following limitations, conditions and qualifications:
(a) Subject to the next sentence of this paragraph, the Company shall be
entitled to postpone, for a reasonable period of time, the filing of
effectiveness of, or suspend the right of any Holder to make sales pursuant to,
any Registration Statement otherwise required to be prepared, filed and made and
kept effective by it under the registration covenants described in Section 2
hereof; provided, however, that the duration of such postponement or suspension
may not exceed 90 days in any 365-day period. Such postponement or suspension
may be effected only if (i) (A) an event or circumstance occurs and is
continuing as a result of which such Registration Statement, any related
Prospectus or any document incorporated therein by reference as then amended or
supplemented or proposed to be filed would, in the Company's good faith
judgment, contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein (in the case of
the Prospectus, in the light of the circumstances under which they were made)
not misleading and (B)(1) the Company determines in its good faith judgment that
the disclosure of the event at that time would have a material adverse effect on
the business, operations or prospects of the Company or (2) the disclosure
otherwise relates to a material business transaction or development that has not
yet been publicly disclosed or (ii) the Company shall have received a notice
referred to Section 3(b)(iii) hereof. If the Company shall so postpone the
filing or effectiveness of, or suspend the rights of any Holders to make sales
pursuant to, a Registration Statement it shall, as promptly as possible, notify
the Holders of such determination (in each case, a "Suspension Notice"). Upon
receipt of such Suspension Notice, each Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 3(g) hereof, or (ii) such Holder is advised
in writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "Recommencement Date"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Registrable Securities that was current at the time
of receipt of the Suspension Notice.
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(b) The Company's obligations shall be subject to the obligations of the
Holders to furnish all information and materials and to take any and all actions
as may be required under federal and state securities laws and regulations
(including any comments issued by the SEC staff with respect to the Registration
Statement or the matters related thereto) to permit the Company to comply with
all applicable requirements of the SEC and to obtain any acceleration of the
effective date of such Registration Statement.
SECTION 6. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of and compliance
with this Agreement will be borne by the Company, including without limitation:
(i) all registration and filing fees and expenses;
(ii) all fees and expenses of compliance with federal securities and
state "blue sky" or securities laws;
(iii) all expenses of printing (including printing certificates for the
securities to be issued in the Registration and printing of prospectuses),
messenger and delivery services and telephone usage;
(iv) all fees and expenses customarily paid by an issuer in connection
with an underwritten offering;
(v) all fees and disbursements of counsel for the Company;
(vi) all fees and disbursements of independent certified public
accountants of the Company (including the expenses of any special audit required
by or incident to such performance); and
(vii) all other reasonable out-of-pocket expenses of any Holder which
are customarily paid by an issuer.
(b) The Company will bear its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by the Company.
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SECTION 7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Holder and each
Person, if any, who controls such Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including, but not limited to, any losses, claims, damages, liabilities
or actions relating to purchases and sales of the Registrable Securities) to
which each Indemnified Party (as defined in Section 7(c) below) may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary Prospectus relating to a Registration, or arise
out of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading, and shall reimburse, as incurred, the
Indemnified Parties for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) the Company
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary Prospectus relating to a Registration Statement in reliance upon and
in conformity with written information pertaining to such Holder and furnished
to the Company by or on behalf of such Holder specifically for inclusion therein
and (ii) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary Prospectus relating to the
Registration Statement, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any Holder from whom the Person asserting any
such losses, claims, damages or liabilities purchased the Registrable Securities
concerned, to the extent that the Prospectus was required to be delivered by
such Holder under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder results from the fact that
there was not sent or given to such Person, at or prior to the written
confirmation of the sale of such Registrable Securities to such Person, a copy
of the final Prospectus if the Company had previously furnished copies thereof
to such Holder; provided further, however, that this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party.
(b) Each Holder of the Registrable Securities, severally and not jointly,
will indemnify and hold harmless the Company and each other Holder and each
Person, if any, who controls the Company or any such other Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any losses, claims, damages or liabilities or any actions in
respect thereof, to which the Company, such other Holder or any such controlling
Person may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary Prospectus relating to a
Registration Statement, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, but in each case only to the extent
that the untrue statement or omission or alleged untrue statement or omission
was made in reliance upon and in conformity with written information pertaining
to such Holder and furnished to the Company by or on behalf of such Holder
specifically for inclusion therein; and, subject to the limitation set forth
immediately preceding this clause, shall reimburse, as incurred, the Company and
each such other Holder for any legal or other expenses reasonably incurred by
the Company, such other Holder or any such controlling Person in connection with
investigating or defending any loss, claim, damage, liability or action in
respect thereof. This indemnity agreement will be in addition to any liability
which such Holder may otherwise have to the Company, such other Holder or any
such controlling Persons. No Holder shall be liable under this Section 7(b) for
any amounts exceeding the net proceeds received by such Holder from the sale of
Registrable Securities pursuant to the Registration Statement giving rise to the
indemnification obligation.
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(c) Promptly after receipt by any Person in respect of which indemnity may
be sought pursuant to Section 7(a) or (b) (any such Person, an "Indemnified
Party") under this Section 7 of notice of the commencement of any action or
proceeding (including a governmental investigation), such Indemnified Party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not, in any event,
relieve the indemnifying party from any obligations to any Indemnified Party
other than the indemnification obligation provided in paragraph (a) or (b)
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
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such Indemnified
Party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying party
to such Indemnified Party of its election so to assume the defense thereof the
indemnifying party will not be liable to such Indemnified Party under this
Section 7 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such Indemnified Party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened action in respect of which any Indemnified Party is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Party unless such settlement includes an unconditional release of such
Indemnified Party from all liability on any claims that are the subject matter
of such action, and 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. The
indemnifying party shall not be liable for the costs and expenses of any
settlement of such action effected by such Indemnified Party without the consent
of the indemnifying party, which consent shall not be unreasonably withheld.
11
(d) If the indemnification provided for in this Section 7 is unavailable
or insufficient to hold harmless an Indemnified Party under subsections (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such Indemnified Party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
Indemnified Party on the other from the sale of the Registrable Securities by
the Holders, or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying party or parties on the one hand and the
Indemnified Party on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties 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 the Company on the one hand or such Holder or such other Indemnified
Party, as the case may be, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
Notwithstanding any other provision of this Section 7(d), the Holders of the
Registrable Securities shall not be required to contribute any amount in excess
of the amount by which the net proceeds received by such Holders from the sale
of the Registrable Securities pursuant to the Registration Statement exceeds the
amount of damages that such Holders have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. 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. For purposes
of this paragraph (d), each Person, if any, who controls such Indemnified Party
within the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as such Indemnified Party, and each Person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act shall have the same rights to contribution as the Company.
(e) The agreements contained in this Section 7 shall survive the sale of
the Registrable Securities pursuant to the Registration Statement and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any Indemnified
Party.
SECTION 8. RULE 144.
The Company shall use its best efforts to file the reports required to be
filed by it under the Exchange Act in a timely manner and, if at any time the
Company is not required to file such reports, it will, upon the request of any
Holder, make publicly available other information so long as necessary to permit
sales of their securities pursuant to Rule 144. The Company covenants that it
will take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144. Upon the request of any Holder, the
Company shall deliver to such Holder a written statement as to whether it has
complied with such requirements.
12
SECTION 9. MISCELLANEOUS.
(a) Remedies. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Section 2 hereof may result in
material irreparable injury to the Holders for which there is no adequate remedy
at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, any Holder may obtain such
relief as may be required to specifically enforce the Company's obligations
under Section 2 hereof. The Company further agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the date
of this Agreement enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the Closing Date.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority of the Registrable Securities affected by
such amendment, modification, supplement, waiver or consent.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company or Warrant Agent.
(2) if to the Company, at its address as follows:
Harbin Electric, Inc.
▇▇. ▇ ▇▇ ▇▇▇▇ ▇▇ ▇▇, ▇▇ Ping Lu ▇▇ ▇▇▇▇▇ Qu
▇▇▇▇▇▇ ▇▇▇ Fa Qu
Harbin 150060
P.R. China
Attention: Yang Tianfu, CEO
Telecopier No.: ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
U.S.A.
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
13
(3) if to the Warrant Agent, at its address as follows:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - 21st Floor
West New York, NY 10286
U.S.A.
Telecopier No.: ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ or ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
Attention: Global Finance Unit
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇.▇.▇.
Telecopier No.: ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by the recipient's facsimile machine operator, if sent by
facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(e) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit the Company, the Holders and their respective successors
and assigns. In addition, and whether or not any express assignment shall have
been made, the provisions of this Agreement which are for the benefit of the
Purchasers shall also be for the benefit of and enforceable by any subsequent
Holder, subject to the terms and conditions contained in this Agreement. Each
Purchaser and any Holder shall provide written notice to the Company of any
assignment of their rights hereunder or any transfer of Registrable Securities
which are entitled to such rights under the terms of this Agreement; provided
that the failure to provide such notice shall not affect any such rights of any
Purchaser or any Holder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
14
(i) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(j) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its Affiliates (other
than subsequent Holders of Registrable Securities if such subsequent Holders are
deemed to be Affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
(k) Business Combinations. Without the prior written consent of the
Holders, the Company shall not consolidate with or enter into any merger,
consolidation or other business combination transaction (for the purposes of
this Section 9(k), a "business combination") with another Person (whether or not
the Company is the surviving entity) or sell, transfer or distribute all or
substantially all of its assets, whether in a single transaction or through a
series of related transactions, to another Person or group of affiliated Persons
or permit any of its subsidiaries to enter into any such transaction or
transactions, where the business combination or sale, transfer or distribution
involves the payment by any Person of any securities to, or the exchange by any
Person of any securities with, the Company or any holders of Common Stock of the
Company, unless the issuer of such securities agrees to be bound by the terms of
this Agreement with Holders relating to such securities or otherwise enters into
a new registration rights agreement which shall contain terms substantially
similar to this Agreement and shall otherwise be in a form satisfactory to the
Holders.
[Signature Page Follows]
15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HARBIN ELECTRIC, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Executive Officer
CITADEL EQUITY FUND LTD.
By: Citadel Limited Partnership, Portfolio Manager
By: Citadel Investment Group, L.L.C., its General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Authorized Signatory
▇▇▇▇▇▇▇ ▇▇▇▇▇ International
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
[SIGNATURE PAGE TO EQUITY REGISTRATION RIGHTS AGREEMENT]
