EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
February 1, 2007 by and among Bronze Marketing, Inc., a Nevada corporation, and
all predecessors thereto (the "COMPANY") and the investors identified on the
signature pages hereto (each, an "INVESTOR" and collectively, the "INVESTORS").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below) and Rule
506 promulgated thereunder, the Company desires to issue and sell to each
Investor, and each Investor, severally and not jointly, desires to purchase from
the Company certain securities of the Company, as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
ARTICLE 1.
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"2007 GUARANTEED ATNI" has the meaning set forth in Section 4.11.
"2007 MAKE GOOD SHARES" has the meaning set forth in Section 4.11.
"2008 GUARANTEED ATNI" has the meaning set forth in Section 4.11.
"2008 MAKE GOOD SHARES" has the meaning set forth in Section 4.11.
"ACTION" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 144.
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which is a federal legal holiday or a day on which banking institutions in the
State of New York or the State of Utah are authorized or required by law or
other governmental action to close.
"BUY-IN" has the meaning set forth in Section 4.1(c).
"CERTIFICATE OF DESIGNATION" shall mean a Certificate of Designation
to be filed prior to the Closing by the Company with the Secretary of State of
the State of Nevada, setting forth the rights, preferences and privileges of the
Shares, in the form attached as Exhibit A hereto.
"CLOSING" means the closing of the purchase and sale of the Shares
pursuant to Article II.
"CLOSING DATE" means the Business Day on which all of the conditions
set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as
the parties may agree.
"CLOSING ESCROW AGREEMENT" means the Closing Escrow Agreement, dated
as of the date hereof, between the Company and the escrow agent (the "ESCROW
AGENT") identified therein, in the form of Exhibit C hereto.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value
$0.001 per share, and any securities into which such common stock may hereafter
be reclassified or for which it may be exchanged as a class.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or
any Subsidiary which entitle the holder thereof to acquire Common Stock at any
time, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"COMPANY COUNSEL" means ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Raysman and ▇▇▇▇▇▇▇ LLP.
"COMPANY DELIVERABLES" has the meaning set forth in Section 2.2(a).
"DISCLOSURE MATERIALS" has the meaning set forth in Section 3.1(h).
"EFFECTIVE DATE" means the date that the Registration Statement
required by Section 2(a) of the Registration Rights Agreement is first declared
effective by the Commission.
"EVALUATION DATE" has the meaning set forth in Section 3.1(s).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FIRST MEETING" has the meaning set forth in Section 4.12(b).
"GAAP" means U.S. generally accepted accounting principles.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section
3.1(p).
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"INVESTMENT AMOUNT" means, with respect to each Investor, the
Investment Amount indicated on such Investor's signature page to this Agreement.
"INVESTOR DELIVERABLES" has the meaning set forth in Section 2.2(b).
"INVESTOR PARTY" has the meaning set forth in Section 4.7.
"LIEN" means any lien, charge, encumbrance, security interest, right
of first refusal, right of participation or other restrictions of any kind.
"MAKE GOOD ESCROW AGREEMENT" means the Make Good Escrow Agreement,
dated as of the date hereof, among the Company, ▇▇▇▇ Capital Partners, LLC, as
agent, the escrow agent (the "MAKE GOOD ESCROW AGENT") identified therein and
▇▇. ▇▇▇▇▇▇ ▇▇▇▇, in the form of Exhibit D hereto.
"MAKE GOOD PLEDGOR" means ▇▇. ▇▇▇▇▇▇ ▇▇▇▇.
"MATERIAL ADVERSE EFFECT" means any of (i) a material and adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material and adverse effect on the results of operations, assets,
prospects, business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company's
ability to perform on a timely basis its obligations under any Transaction
Document.
"NEW YORK COURTS" means the state and federal courts sitting in the
City of New York, Borough of Manhattan.
"OUTSIDE DATE" means the sixtieth day following the date of this
Agreement.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of Exhibit B hereto.
"REGISTRATION STATEMENT" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Investors of the Underlying Shares.
"REVERSE SPLIT" means a 1-10 reverse stock split of the Company's
Common Stock.
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"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC REPORTS" has the meaning set forth in Section 3.1(h).
"SECURITIES" means the Shares and the Underlying Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARE DELIVERY DATE" has the meaning set forth in Section 4.1(c).
"SHARES" means the shares of Series B Voting Convertible Preferred
Stock issued or issuable to the Investors pursuant to this Agreement.
"SHORT SALES" include, without limitation, all "short sales" as
defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and
all types of direct and indirect stock pledges, forward sale contracts, options,
puts, calls, swaps and similar arrangements (including on a total return basis),
and sales and other transactions through non-US broker dealers or foreign
regulated brokers.
"STOCKHOLDER APPROVAL" has the meaning set forth in Section 4.12.
"SUBSIDIARY" means any "significant subsidiary" as defined in Rule
1-02(w) of the Regulation S-X promulgated by the Commission under the Exchange
Act.
"TRADING DAY" means (i) a day on which the Common Stock is traded on
a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common
Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a
day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.
"TRADING MARKET" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common
Stock is listed or quoted for trading on the date in question.
"TRANSACTION DOCUMENTS" means this Agreement, the Certificate of
Designation, the Registration Rights Agreement, the Closing Escrow Agreement,
the Make Good Escrow Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion or exchange of the Shares.
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ARTICLE 2.
PURCHASE AND SALE
2.1. Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Investor, and
each Investor shall, severally and not jointly, purchase from the Company, the
Shares representing such Investor's Investment Amount. The Closing shall take
place at the offices of ▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇ on the Closing Date or at such other location or time as the parties
may agree.
2.2. Closing Deliveries. (a) At the Closing, the Company shall deliver or
cause to be delivered to each Investor the following (the "COMPANY
DELIVERABLES"):
(i) one or more stock certificates, evidencing Shares with a
stated value equal to such Investor's Investment Amount, registered in the name
of such Investor;
(ii) a copy of the executed, filed and effective Certificate
of Designation, accompanied by a certificate evidencing the acceptance thereof
by the Secretary of State of the State of Nevada;
(iii) an executed consent of at least a majority of the shares
of Common Stock then outstanding, irrevocably approving the items set forth in
Section 4.12(a) herein;
(iv) the Closing Escrow Agreement, duly executed by all
parties thereto;
(v) the Make Good Escrow Agreement, duly executed by all
parties thereto;
(vi) the legal opinion of Company Counsel, in agreed form,
addressed to the Investors; and
(vii) the Registration Rights Agreement, duly executed by the
Company.
(b) Following its execution of this Agreement, each Investor shall
deliver or cause to be delivered the following (the "INVESTOR DELIVERABLES"):
(i) to the Escrow Agent for deposit and disbursement in
accordance with the Closing Escrow Agreement, its Investment Amount, in United
States dollars and in immediately available funds, by wire transfer to an
account designated in writing by the Company for such purpose; and
(ii) to the Company, the Registration Rights Agreement, duly
executed by such Investor.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to each Investor:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than as specified in the SEC Reports. Except as disclosed in Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital stock of
each Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.
Immediately after the Closing, the Company shall own 100% of the capital stock
of ▇▇▇▇▇ Steel Technology Co., Ltd. ("▇▇▇▇▇") in accordance with that certain
Share Exchange Agreement, dated September 7, 2006, by and among the Company (as
successor to BTHC III, Inc.), ▇▇▇▇▇ and the stockholders of ▇▇▇▇▇ (the "SHARE
EXCHANGE AGREEMENT"), free and clear of all Liens. From and after the Closing,
the term "Subsidiaries" shall include ▇▇▇▇▇, with the effect that all references
to Subsidiaries in the representations and warranties in this Agreement shall
also refer to ▇▇▇▇▇.
(b) Organization and Qualification. The Company and each Subsidiary
are duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company and each Subsidiary are duly
qualified to conduct its respective businesses and are in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
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(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of one or more Registration
Statements in accordance with the requirements of the Registration Rights
Agreement, (ii) filings required by state securities laws, (iii) the filing of a
Notice of Sale of Securities on Form D with the Commission under Regulation D of
the Securities Act, (iv) the filings required in accordance with Section 4.5 and
(v) those that have been made or obtained prior to the date of this Agreement.
(f) Issuance of the Shares. Upon the Stockholder Approval, the
Securities will be duly authorized and, when issued and paid for in accordance
with the Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. Upon Stockholder Approval, the
Company will reserve from its duly authorized capital stock the shares of Common
Stock issuable pursuant to this Agreement in order to issue the Shares.
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(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company, and all shares of Common
Stock reserved for issuance under the Company's various option and incentive
plans, is specified in the SEC Reports. Except as specified in the SEC Reports,
no securities of the Company are entitled to preemptive or similar rights, and
no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as specified in the SEC
Reports, there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not, immediately or with the passage
of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investors) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC REPORTS" and, together with the Schedules to this
Agreement (if any), the "DISCLOSURE MATERIALS") on a timely basis or has timely
filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
The ▇▇▇▇▇ Financial Statements comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. The ▇▇▇▇▇ Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of ▇▇▇▇▇ and its consolidated Subsidiaries as of
and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Press Releases. The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.
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(j) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables, accrued expenses and other liabilities incurred
in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
The Company does not have pending before the Commission any request for
confidential treatment of information.
(k) Litigation. There is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as specifically disclosed in the SEC
Reports, could, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or officer
thereof (in his or her capacity as such), is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty, except as specifically
disclosed in the SEC Reports. There has not been, and to the knowledge of the
Company, there is not pending any investigation by the Commission involving the
Company or any current or former director or officer of the Company (in his or
her capacity as such). The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(l) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(m) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. The Share Exchange Agreement
complies with all applicable laws, rules and regulations of the United States
and the People's Republic of China. The Company is in compliance with all
effective requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended, and the
rules and regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.
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(n) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.
(o) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective businesses,
in each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance, except as
could not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.
(p) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the "INTELLECTUAL PROPERTY
RIGHTS"). Neither the Company nor any Subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. Except as set forth in the
SEC Reports, to the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.
(q) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. The Company has no reason to believe
that it will not be able to renew its and the Subsidiaries' existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business on terms
consistent with market for the Company's and such Subsidiaries' respective lines
of business.
(r) Transactions With Affiliates and Employees. Except as set forth
in the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
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(s) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's Form 10-K or 10-Q, as the case may be, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures in accordance with Item
307 of Regulation S-K under the Exchange Act for the Company's most recently
ended fiscal quarter or fiscal year-end (such date, the "EVALUATION DATE"). The
Company presented in its most recently filed Form 10-K or Form 10-Q the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company's internal controls (as such term is defined in Item 308(c) of
Regulation S-K under the Exchange Act) or, to the Company's knowledge, in other
factors that could significantly affect the Company's internal controls.
(t) Solvency. Based on the financial condition of the Company as of
the Closing Date (and assuming that the Closing shall have occurred), (i) the
Company's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
(u) Certain Fees. Except as described in Schedule 3.1(u), no
brokerage or finder's fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Investors shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to written agreements executed by such
Investor which fees or commissions shall be the sole responsibility of such
Investor) made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
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(v) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Investors under the Transaction Documents. The
Company is eligible to register its Common Stock for resale by the Investors
under Form S-1 promulgated under the Securities Act. Except as specified in
Schedule 3.1(v), the Company has not granted or agreed to grant to any Person
any rights (including "piggy-back" registration rights) to have any securities
of the Company registered with the Commission or any other governmental
authority that have not been satisfied.
(w) Listing and Maintenance Requirements. Except as specified in the
SEC Reports, the Company has not, in the two years preceding the date hereof,
received notice from any Trading Market to the effect that the Company is not in
compliance with the listing or maintenance requirements thereof. The Company is,
and has no reason to believe that it will not in the foreseeable future continue
to be, in compliance with the listing and maintenance requirements for continued
listing of the Common Stock on the Trading Market on which the Common Stock is
currently listed or quoted. The issuance and sale of the Securities under the
Transaction Documents does not contravene the rules and regulations of the
Trading Market on which the Common Stock is currently listed or quoted, and no
approval of the stockholders of the Company thereunder is required for the
Company to issue and deliver to the Investors the Securities contemplated by the
Transaction Documents.
(x) Investment Company. The Company is not, and is not an Affiliate
of, and immediately following the Closing will not have become, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(y) Application of Takeover Protections. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Articles of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Investors' ownership
of the Securities.
(z) No Additional Agreements. The Company does not have any
agreement or understanding with any Investor with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
(aa) Consultation with Auditors. The Company has consulted its
independent auditors concerning the accounting treatment of the transactions
contemplated by the Transaction Documents, and in connection therewith has
furnished such auditors complete copies of the Transaction Documents.
(bb) Make Good Shares. Make Good Pledgor is the sole record and
beneficial owner of the 2007 Make Good Shares and 2008 Make Good Shares, and
holds such shares free and clear of all pledges, liens and encumbrances.
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(cc) Disclosure. The Company confirms that neither it nor any Person
acting on its behalf has provided any Investor or its respective agents or
counsel with any information that the Company believes constitutes material,
non-public information concerning the Company, the Subsidiaries or their
respective businesses, except insofar as the existence and terms of the proposed
transactions contemplated hereunder may constitute such information. The Company
understands and confirms that the Investors will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Investors regarding the Company, the
Subsidiaries or their respective businesses and the transactions contemplated
hereby, furnished by or on behalf of the Company (including the Company's
representations and warranties set forth in this Agreement) are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
Each Investor acknowledges and agrees that the Company has not made nor makes
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.1.
3.2. Representations and Warranties of the Investors. Each Investor
hereby, for itself and for no other Investor, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Investor is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Investor of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or, if such Investor is not a corporation,
such partnership, limited liability company or other applicable like action, on
the part of such Investor. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Investor, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(b) Investment Intent. Such Investor is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor's right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time. Such Investor is
acquiring the Securities hereunder in the ordinary course of its business. Such
Investor does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
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(c) Investor Status. At the time such Investor was offered the
Securities, it was, and at the date hereof it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Investor is not a
registered broker-dealer under Section 15 of the Exchange Act.
(d) General Solicitation. Such Investor is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents. Such Investor acknowledges that
notwithstanding the foregoing, the draft of the Registration Statement to be
filed on Form S-1 in connection with the transactions contemplated hereby that
was provided to such Investor was incomplete in the form distributed, and such
Investor is not relying on such draft on Form S-1 in making its decision to
enter into the transactions contemplated hereby.
(f) Certain Trading Activities. Such Investor has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor, engaged in any transactions in the securities
of the Company (including, without limitations, any Short Sales involving the
Company's securities) since the earlier to occur of (1) the time that such
Investor was first contacted by the Company or ▇▇▇▇ Capital Partners, LLC
regarding an investment in the Company and (2) the 30th day prior to the date of
this Agreement. Such Investor covenants that neither it nor any Person acting on
its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including Short Sales) prior to
the time that the transactions contemplated by this Agreement are publicly
disclosed.
(g) Independent Investment Decision. Such Investor has independently
evaluated the merits of its decision to purchase the Securities pursuant to the
Transaction Documents, and such Investor confirms that it has not relied on the
advice of any other Investor's business and/or legal counsel in making such
decision. Such Investor has not relied on the business or legal advice of ▇▇▇▇
Capital Partners, LLC or any of its agents, counsel or Affiliates in making its
investment decision hereunder, and confirms that none of such Persons has made
any representations or warranties to such Investor in connection with the
transactions contemplated by the Transaction Documents.
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The Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE 4.
OTHER AGREEMENTS OF THE PARTIES
4.1. (a) Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act.
(b) Certificates evidencing the Securities will contain the
following legend, until such time as they are not required under Section 4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
CONVERSION OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE
SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. [THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
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The Company acknowledges and agrees that an Investor may from time to time
pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, such
Investor may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or consent
of the Company and no legal opinion of legal counsel to the pledgee, secured
party or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Investor transferee of the pledge. No notice shall be required of
such pledge. At the appropriate Investor's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder. Except as otherwise provided in Section 4.1(c), any
Securities subject to a pledge or security interest as contemplated by this
Section 4.1(b) shall continue to bear the legend set forth in this Section
4.1(b) and be subject to the restrictions on transfer set forth in Section
4.1(a).
(c) Certificates evidencing Underlying Shares shall not contain any
legend (including the legend set forth in Section 4.1(b)): (i) following a sale
or transfer of such Underlying Shares pursuant to an effective registration
statement (including a Registration Statement), or (ii) following a sale or
transfer of such Underlying Shares pursuant to Rule 144 (assuming the transferee
is not an Affiliate of the Company), or (iii) while such Underlying Shares are
eligible for sale under Rule 144(k). If an Investor shall make a sale or
transfer of Underlying Shares either (x) pursuant to Rule 144 or (y) pursuant to
a registration statement and in each case shall have delivered to the Company or
the Company's transfer agent the certificate representing Underlying Shares
containing a restrictive legend which are the subject of such sale or transfer
and a representation letter in customary form (the date of such sale or transfer
and Underlying Share delivery being the "SHARE DELIVERY DATE") and (1) the
Company shall fail to deliver or cause to be delivered to such Investor a
certificate representing such Underlying Shares that is free from all
restrictive or other legends by the third Trading Day following the Share
Delivery Date and (2) following such third Trading Day after the Share Delivery
Date and prior to the time such Underlying Shares are received free from
restrictive legends, the Investor, or any third party on behalf of such
Investor, purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Investor of such
Underlying Shares (a "BUY-IN"), then the Company shall pay in cash to the
Investor (for costs incurred either directly by such Investor or on behalf of a
third party) the amount by which the total purchase price paid for Common Stock
as a result of the Buy-In (including brokerage commissions, if any) exceed the
proceeds received by such Investor as a result of the sale to which such Buy-In
relates. The Investor shall provide the Company written notice indicating the
amounts payable to the Investor in respect of the Buy-In.
4.2. Furnishing of Information. As long as any Investor owns the
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Investor owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Investors and make publicly available in accordance with Rule 144(c) such
information as is required for the Investors to sell the Underlying Shares under
Rule 144. The Company further covenants that it will take such further action as
any holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell the Underlying Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
16
4.3. Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Investors, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market in a manner that would require stockholder
approval of the sale of the Securities to the Investors.
4.4. Subsequent Registrations. Other than pursuant to the Registration
Statement, prior to the Effective Date, the Company may not file any
registration statement (other than on Form S-8) with the Commission with respect
to any securities of the Company.
4.5. Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time)
on the Trading Day following the execution of this Agreement, and by 9:00 a.m.
(New York time) on the Trading Day following the Closing Date, the Company shall
issue press releases disclosing the transactions contemplated hereby and the
Closing. On the Trading Day following the execution of this Agreement the
Company will file a Current Report on Form 8-K disclosing the material terms of
the Transaction Documents (and attach as exhibits thereto the Transaction
Documents), and on the Trading Day following the Closing Date the Company will
file an additional Current Report on Form 8-K to disclose the Closing. In
addition, the Company will make such other filings and notices in the manner and
time required by the Commission and the Trading Market on which the Common Stock
is listed. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
filing with the Commission (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with
periodic filing requirements under the Exchange Act) or any regulatory agency or
Trading Market, without the prior written consent of such Investor, except to
the extent such disclosure is required by law or Trading Market regulations.
4.6. Limitation on Issuance of Future Priced Securities. During the six
months following the Closing Date, the Company shall not issue any "Future
Priced Securities" as such term is described by NASD IM-4350-1.
4.7. Indemnification of Investors. In addition to the indemnity provided
in the Registration Rights Agreement, the Company will indemnify and hold the
Investors and their directors, officers, shareholders, partners, employees and
agents (each, an "INVESTOR PARTY") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation (collectively, "Losses") that any
such Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 4.7 shall be the same as those set forth in
Section 5 of the Registration Rights Agreement.
17
4.8. Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Investor or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Investor shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Investor shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.9. Listing of Securities. The Company agrees, (i) if the Company applies
to have the Common Stock traded on any other Trading Market, it will include in
such application the Underlying Shares, and will take such other action as is
necessary or desirable to cause the Underlying Shares to be listed on such other
Trading Market as promptly as possible, and (ii) it will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the Trading
Market.
4.10. Use of Proceeds. The Company will use the net proceeds from the sale
of the Shares hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables and accrued expenses in the ordinary course of the Company's business
and consistent with prior practices), or to redeem any Common Stock or Common
Stock Equivalents.
4.11. Make Good Shares.
(a) Make Good Pledgor agrees that if the After-Tax Net Income for
the fiscal year ended June 30, 2007 reported in the Company's Annual Report on
Form 10-K for the fiscal year ending June 30, 2007, as filed with the Commission
(the "2007 ANNUAL REPORT") is less than $18,900,000 (the "2007 GUARANTEED
ATNI"), Make Good Pledgor will transfer to each Investor on a pro rata basis
(based upon such Investor's Investment Amount relative to the aggregate
Investment Amount of all Investors hereunder) for no additional consideration, a
number of shares of Common Stock as equals: [($18,900,000 - the actual After-Tax
Net Income reported in the 2007 Annual Report)/$18,900,000] * 50% of the
Underlying Shares which would be issuable in accordance with Section 6(a) of the
Certificate of Designation (but without regard to any restrictions or caps on
conversion contained in the Certificate of Designation or otherwise applicable
to such Shares) upon a full conversion of such Investor's Shares issued at
Closing and then held at the time of such determination (the "2007 MAKE GOOD
SHARES"). If the Company's audited consolidated financial statements for the
fiscal year ended June 30, 2007 specify that the 2007 Guaranteed ATNI shall have
been achieved, no transfer of the 2007 Make Good Shares shall be required by
this Section and all 2007 Make Good Shares deposited with the Make Good Escrow
Agent shall be returned to the Make Good Pledgor within 7 Business Days after
the date which the 2007 Annual Report is filed with the Commission and otherwise
in accordance with the Make Good Escrow Agreement. Transfers of 2007 Make Good
Shares required under this Section shall be made to Investors within 7 Business
Days after the date which the 2007 Annual Report is filed with the Commission
and otherwise in accordance with the Make Good Escrow Agreement.
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(b) The Make Good Pledgor agrees that, if the Company's After-Tax
Net Income reported in the Company's Annual Report on Form 10-K for the fiscal
year ending June 30, 2008, as filed with the Commission (the "2008 ANNUAL
REPORT") is less than $23,500,000 (the "2008 GUARANTEED ATNI"), Make Good
Pledgor will transfer to each Investor on a pro rata basis (based upon such
Investor's Investment Amount relative to the aggregate Investment Amount of all
Investors hereunder) for no additional consideration, a number of shares of
Common Stock as equals: [($23,500,000 - the actual After-Tax Net Income reported
in the 2008 Annual Report)/$23,500,000] * 50% of the Underlying Shares which
would be issuable in accordance with Section 6(a) of the Certificate of
Designation (but without regard to any restrictions or caps on conversion
contained in the Certificate of Designation or otherwise applicable to such
Shares) upon a full conversion of such Investor's Shares issued at Closing and
then held at the time of such determination (the "2008 MAKE GOOD SHARES"). If
the 2008 Annual Report indicates that the Company shall have satisfied the 2008
Guaranteed ATNI test specified above for such period, then no transfer to
Investors of 2008 Make Good Shares shall be required by this Section and all
2008 Make Good Shares deposited with the Make Good Escrow Agent shall be
returned to the Make Good Pledgor within 7 Business Days after the date which
the Company's 2008 Annual Report is filed with the Commission and otherwise in
accordance with the Make Good Escrow Agreement. Transfers of 2008 Make Good
Shares required under this Section shall be made to Investors within 7 Business
Days after the date which the Company's 2008 Annual Report is filed with the
Commission and otherwise in accordance with the Make Good Escrow Agreement.
Notwithstanding anything to the contrary contained herein, in the event that the
release of the 2007 Make Good Shares or the 2008 Make Good Shares to the
Investors or the Make Good Pledgor is deemed to be an expense or deduction from
revenues/income of the Company for the applicable year, as required under GAAP,
then such expense or deduction shall be excluded for purposes of determining
whether or not the 2007 Guaranteed ATNI or the 2008 Guaranteed ATNI has been
achieved by the Company.
(c) In connection with the foregoing, Make Good Pledgor agrees that
within one Trading Day following the Closing, Make Good Pledgor will deposit all
potential 2007 Make Good Shares and 2008 Make Good Shares into escrow in
accordance with the Make Good Escrow Agreement along with bank signature stamped
stock powers endorsed in blank, and the handling and disposition of the 2007
Make Good Shares and 2008 Make Good Shares shall be governed by this Section
4.11 and such Make Good Escrow Agreement. The parties hereby agree that the Make
Good Pledgors obligation to transfer shares of Common Stock to Investors
pursuant to this Section shall continue to run to the benefit of an Investor
only to the extent of the portion of such Securities which have not been
transferred or sold by such Investor, and that Investors shall not have the
right to assign its rights to receive all or any such shares of Common Stock to
other Persons in conjunction with negotiated sales or transfers of any of its
Securities. The 2007 Make Good Shares or 2008 Make Good Shares, as applicable,
corresponding to Securities which have been transferred or sold by an Investor,
shall be returned to the Make Good Pledgor within 7 Business Days after the date
which the Company's 2007 Annual Report or 2008 Annual Report, as applicable, is
filed with the Commission.
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(d) The Company covenants and agrees that upon any transfer under
this Section of 2007 Make Good Shares and 2008 Make Good Shares to the Investors
in accordance with Section 4 of the Make Good Escrow Agreement, the Company
shall promptly reissue such 2007 Make Good Shares or 2008 Make Good Shares in
the applicable Investor's name and deliver the same as directed by such
Investor.
4.12. Stockholder Approval.
(a) The Company covenants and agrees to obtain the approval of its
stockholders in order to (i) increase the number of authorized shares of Common
Stock, (ii) change the name of the Company from Bronze Marketing, Inc. to ▇▇▇▇▇
Technology Group Limited, and (iii) to effectuate the Reverse Split, which
stockholder approval shall be deemed to occur on the thirtieth day following the
filing by the Company of the definitive information statement on Schedule 14C
pertaining thereto (collectively "STOCKHOLDER APPROVAL") as soon as possible,
but in no event later than March 16, 2007.
(b) In furtherance of obtaining the Stockholder Approval, the
Company shall (a) adopt proper resolutions authorizing the actions set forth in
subsection (a) above, (b) the Board of Directors of the Company shall recommend
and the Company shall otherwise use its best efforts to promptly and duly obtain
stockholder approval, including, without limitation, soliciting proxies from its
stockholders in connection therewith in the same manner as all other management
proposals in such proxy statement and having all management-appointed
proxy-holders vote their proxies in favor of such proposals to carry out such
resolutions (and hold a special meeting of the stockholders as soon as
practicable, but in any event not later than the 60th day after delivery of the
proxy or other applicable materials relating to such meeting) and (c) within
three Business Days of obtaining such stockholder authorization, take all
actions necessary to effectuate the actions set forth in subsections (a)(i),
(a)(ii) and (a)(iii) above. If the Company does not obtain Stockholder Approval
at the first meeting (the "FIRST MEETING"), the Company shall, in addition to
satisfying clauses (a), (b) and (c) as contemplated above, call a special
meeting of its stockholders on the first Business Day of each fiscal quarter
thereafter to seek Stockholder Approval until the date Stockholder Approval is
obtained.
4.13. Ranking. The Shares shall rank senior to any class of equity
security of the Company.
4.14. Acknowledgment of Dilution. The Company acknowledges that the
issuance of Underlying Shares upon conversion of Shares will result in
substantial dilution of the outstanding shares of Common Stock. The Company
further acknowledges that its obligation to honor conversions under the Shares
is unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim that the Company may have against any Investor.
4.15. Reservation of Shares. Upon Stockholder Approval, the Company shall
maintain a reserve from its duly authorized shares of Common Stock to comply
with its conversion obligations under the Shares. If on any date the Company
would be, if notice of conversion were to be delivered on such date, precluded
from issuing the number of Underlying Shares issuable upon conversion in full of
the Shares due to the unavailability of a sufficient number of authorized but
unissued or reserved shares of Common Stock, then the Board of Directors of the
Company shall promptly prepare and mail to the stockholders of the Company proxy
materials or other applicable materials requesting authorization to amend the
Company's certificate of incorporation or other organizational document to
increase the number of shares of Common Stock which the Company is authorized to
issue so as to provide enough shares for issuance of the Underlying Shares. In
connection therewith, the Board of Directors shall (a) adopt proper resolutions
authorizing such increase, (b) recommend to and otherwise use its best efforts
to promptly and duly obtain stockholder approval (including the hiring of a
nationally recognized proxy solicitor firm) to carry out such resolutions (and
hold a special meeting of the stockholders as soon as practicable, but in any
event not later than the 60th day after delivery of the proxy or other
applicable materials relating to such meeting) and (c) within five Business Days
of obtaining such stockholder authorization, file an appropriate amendment to
the Company's certificate of incorporation or other organizational document to
evidence such increase.
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ARTICLE 5.
CONDITIONS PRECEDENT TO CLOSING
5.1. Conditions Precedent to the Obligations of the Investors to Purchase
Securities. The obligation of each Investor to acquire Securities at the Closing
is subject to the satisfaction or waiver by such Investor, at or before the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date;
(b) Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) Adverse Changes. Since the date of execution of this Agreement,
no event or series of events shall have occurred that reasonably could have or
result in a Material Adverse Effect or a material adverse change with respect to
▇▇▇▇▇;
(e) ▇▇▇▇▇ Financial Statements. ▇▇▇▇▇ shall have delivered audited
financial statements for the fiscal years ended June 30, 2006, 2005 and 2004 and
unaudited financial statements for the interim period ended September 30, 2006
(collectively, the "▇▇▇▇▇ FINANCIAL STATEMENTS");
(f) PRC Opinion. The Company shall have delivered to the Investors,
and the Investors shall be able to rely upon, the legal opinion that ▇▇▇▇▇ shall
have received from its legal counsel in the People's Republic of China that
confirms the legality under Chinese law of the restructuring being effected by
▇▇▇▇▇ in connection with the Share Exchange Agreement, the obligations of which
having been assigned to and assumed by the Company, and that is otherwise
satisfactory to the Company, the stockholders of ▇▇▇▇▇, ▇▇▇▇▇ and the Investors;
21
(g) Share Exchange Agreement Form 8-K. Concurrently with the
Closing, the Company shall have acquired all of the outstanding capital stock of
▇▇▇▇▇ pursuant to the Share Exchange Agreement, and the Company shall provide
the Investors with the Current Report on Form 8-K to be filed on the Trading Day
following the closing date under the Share Exchange Agreement, containing the
requisite audited financial statements of ▇▇▇▇▇ and other required disclosure
with respect to ▇▇▇▇▇;
(h) Company Deliverables. The Company shall have delivered the
Company Deliverables in accordance with Section 2.2(a); and
(i) Termination. This Agreement shall not have been terminated as to
such Investor in accordance with Section 6.5.
5.2. Conditions Precedent to the Obligations of the Company to sell
Securities. The obligation of the Company to sell Securities at the Closing is
subject to the satisfaction or waiver by the Company, at or before the Closing,
of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of each Investor contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date;
(b) Performance. Each Investor shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Investor at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) Investors Deliverables. Each Investor shall have delivered its
Investors Deliverables in accordance with Section 2.2(b); and
(e) Termination. This Agreement shall not have been terminated as to
such Investor in accordance with Section 6.5.
ARTICLE 6.
MISCELLANEOUS
6.1. Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of the Transaction Documents. The Company shall pay all
stamp and other taxes and duties levied in connection with the sale of the
Securities.
22
6.2. Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
6.3. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: Bronze Marketing, Inc.
▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇
Attn: Chairman
Facsimile: ▇▇-▇▇▇-▇▇▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Raysman and ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
If to an Investor: To the address set forth under such Investor's
name on the signature pages hereof;
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4. Amendments; Waivers; No Additional Consideration. No provision of
this Agreement may be waived or amended except in a written instrument signed by
the Company and the Investors holding a majority of the Securities. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right. No
consideration shall be offered or paid to any Investor to amend or consent to a
waiver or modification of any provision of any Transaction Document unless the
same consideration is also offered to all Investors who then hold Securities. In
the event of any discrepancy between this Agreement and the Make Good Escrow
Agreement, the terms of the Make Good Escrow Agreement shall apply to the extent
of such discrepancy.
23
6.5. Termination. This Agreement may be terminated prior to Closing:
(a) by written agreement of the Investors and the Company; and
(b) by the Company or an Investor (as to itself but no other
Investor) upon written notice to the other, if the Closing shall not have taken
place by 6:30 p.m. Eastern time on the Outside Date; provided, that the right to
terminate this Agreement under this Section 6.5(b) shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time.
In the event of a termination pursuant to this Section, the Company shall
promptly notify all non-terminating Investors. Upon a termination in accordance
with this Section 6.5, the Company and the terminating Investor(s) shall not
have any further obligation or liability (including as arising from such
termination) to the other and no Investor will have any liability to any other
Investor under the Transaction Documents as a result therefrom.
6.6. Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Shares, provided such transferee agrees in writing to
be bound, with respect to the transferred Shares, by the provisions hereof that
apply to the "Investors."
6.8. No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.7 (as to each
Investor Party).
6.9. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys' fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
24
6.10. Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Shares.
6.11. Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.12. Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.13. Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
its related obligations within the periods therein provided, then such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
6.14. Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
25
6.15. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate. 6.16. Payment Set Aside. To the extent that the
Company makes a payment or payments to any Investor pursuant to any Transaction
Document or an Investor enforces or exercises its rights thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
6.17. Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
26
6.18. Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
BRONZE MARKETING, INC.
By:______________________________
Name:
Title:
Only as to Section 4.11 herein:
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▇▇▇▇▇▇ ▇▇▇▇
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]
28
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
NAME OF INVESTOR
-----------------------------------------
By:
-----------------------------------------
Name:
Title:
Investment Amount: $
---------------------
Tax ID No.:
-------------------------------
ADDRESS FOR NOTICE
c/o:
----------------------------------------
Street:
-----------------------------------
City/State/Zip:
---------------------------
Attention:
--------------------------------
Tel:
--------------------------------------
Fax:
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DELIVERY INSTRUCTIONS
(if different from above)
c/o:
----------------------------------------
Street:
-----------------------------------
City/State/Zip:
---------------------------
Attention:
--------------------------------
Tel:
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