EXHIBIT 10.2
KIWA BIO-TECH PRODUCTS GROUP CORPORATION
PLACEMENT AGENT AGREEMENT
Dated as of: July 6, 2004
Newbridge Securities Corporation
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Ladies and Gentlemen:
The undersigned, Kiwa Bio-Tech Products Group Corporation, a Utah
corporation in the process of reincorporating in Delaware (the "Company"),
hereby agrees with Newbridge Securities Corporation (the "Placement Agent") and
Cornell Capital Partners, LP, a Delaware Limited Partnership (the "Investor"),
as follows:
1. Offering. The Company hereby engages the Placement Agent to
act as its exclusive placement agent in connection with the Standby Equity
Distribution Agreement dated the date hereof (the "Standby Equity Distribution
Agreement"), pursuant to which the Company shall issue and sell to the Investor,
from time to time, and the Investor shall purchase from the Company (the
"Offering") up to Ten Million U.S. Dollars ($10,000,000) of the Company's common
stock (the "Commitment Amount"), par value US$0.001 per share (the "Common
Stock"), at price per share equal to the Purchase Price, as that term is defined
in the Standby Equity Distribution Agreement. The Placement Agent services shall
consist of reviewing the terms of the Standby Equity Distribution Agreement and
advising the Company with respect to those terms.
All capitalized terms used herein and not otherwise defined herein
shall have the same meaning ascribed to them as in the Standby Equity
Distribution Agreement. The Investor will be granted certain registration rights
with respect to the Common Stock as more fully set forth in the Registration
Rights Agreement between the Company and the Investor dated the date hereof (the
"Registration Rights Agreement"). The documents to be executed and delivered in
connection with the Offering, including, but not limited, to the Company's
latest Quarterly Report on Form 10-QSB as filed with the United States
Securities and Exchange Commission, this Agreement, the Standby Equity
Distribution Agreement, the Registration Rights Agreement, and the Escrow
Agreement dated the date hereof (the "Escrow Agreement"), are referred to
sometimes hereinafter collectively as the "Offering Materials." The Company's
Common Stock purchased by the Investor hereunder or to be issued in connection
with the conversion of any debentures are sometimes referred to hereinafter as
the "Securities." The Placement Agent shall not be obligated to sell any
Securities.
2. Compensation.
A. Upon the execution of this Agreement, the Company
shall issue to the Placement Agent or its designee shares of the Company's
Common Stock in an amount equal to
Ten Thousand U.S. Dollars (US$10,000) divided by the volume weighted average
price of the Company's Common Stock as quoted by Bloomberg, LP on the date
hereof (the "Placement Agent's Shares"). The Placement Agent shall be entitled
to "piggy-back" registration rights, which shall be triggered upon registration
of any shares of Common Stock by the Investor with respect to the Placement
Agent's Shares pursuant to the Registration Rights Agreement dated the date
hereof.
3. Representations, Warranties and Covenants of the Placement
Agent.
A. The Placement Agent represents, warrants and
covenants as follows:
(i) The Placement Agent has the necessary power
to enter into this Agreement and to consummate the transactions contemplated
hereby.
(ii) The execution and delivery by the Placement
Agent of this Agreement and the consummation of the transactions contemplated
herein will not result in any violation of, or be in conflict with, or
constitute a default under, any agreement or instrument to which the Placement
Agent is a party or by which the Placement Agent or its properties are bound, or
any judgment, decree, order or, to the Placement Agent's knowledge, any statute,
rule or regulation applicable to the Placement Agent. This Agreement when
executed and delivered by the Placement Agent, will constitute the legal, valid
and binding obligations of the Placement Agent, enforceable in accordance with
their respective terms, except to the extent that (a) the enforceability hereof
or thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws from time to time in effect and affecting the rights of
creditors generally, (b) the enforceability hereof or thereof is subject to
general principles of equity, or (c) the indemnification provisions hereof or
thereof may be held to be in violation of public policy.
(iii) Upon receipt and execution of this
Agreement, the Placement Agent will promptly forward copies of this Agreement to
the Company or its counsel and the Investor or its counsel.
(iv) The Placement Agent will not intentionally
take any action that it reasonably believes would cause the Offering to violate
the provisions of the Securities Act of 1933, as amended (the "1933 Act"), the
Securities Exchange Act of 1934 (the "1934 Act"), the respectie rules and
regulations promulgated thereunder (the "Rules and Regulations") or applicable
"Blue Sky" laws of any state or jurisdiction.
(v) The Placement Agent is a member of the
National Association of Securities Dealers, Inc., and is a broker-dealer
registered as such under the 1934 Act and under the securities laws of the
states in which the Securities will be offered or sold by the Placement Agent
unless an exemption for such state registration is available to the Placement
Agent. The Placement Agent is in material compliance with the rules and
regulations applicable to the Placement Agent generally and applicable to the
Placement Agent's participation in the Offering.
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4. Representations and Warranties of the Company.
A. The Company represents and warrants as follows:
(i) The execution, delivery and performance of
each of this Agreement, the Standby Equity Distribution Agreement, the Escrow
Agreement, and the Registration Rights Agreement has been or will be duly and
validly authorized by the Company and is, or with respect to this Agreement, the
Standby Equity Distribution Agreement, the Escrow Agreement, and the
Registration Rights Agreement, will be a valid and binding agreement of the
Company, enforceable in accordance with its respective terms, except to the
extent that (a) the enforceability hereof or thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect and affecting the rights of creditors generally, (b) the
enforceability hereof or thereof is subject to general principles of equity or
(c) the indemnification provisions hereof or thereof may be held to be in
violation of public policy. The Securities to be issued pursuant to the
transactions contemplated by this Agreement and the Standby Equity Distribution
Agreement have been duly authorized and, when issued and paid for in accordance
with this Agreement, the Standby Equity Distribution Agreement and the
certificates/instruments representing such Securities, will be valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except to the extent that (1) the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws from time
to time in effect and affecting the rights of creditors generally, and (2) the
enforceability thereof is subject to general principles of equity. All corporate
action required to be taken for the authorization, issuance and sale of the
Securities has been duly and validly taken by the Company.
(ii) The Company has a duly authorized, issued
and outstanding capitalization as set forth herein and in the Standby Equity
Distribution Agreement. The Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement,
the agreements described herein and as described in the Standby Equity
Distribution Agreement, dated the date hereof and the agreements described
therein. All issued and outstanding securities of the Company, have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission or preemptive rights with respect thereto
and are not subject to personal liability solely by reason of being security
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company.
(iii) The Common Stock to be issued in accordance
with this Agreement and the Standby Equity Distribution Agreement has been duly
authorized and, when issued and paid for in accordance with this Agreement and
the Standby Equity Distribution Agreement, the certificates/instruments
representing such Common Stock will be validly issued, fully-paid and
non-assessable; the holders thereof will not be subject to personal liability
solely by reason of being such holders; such Securities are not and will not be
subject to the preemptive rights of any holder of any security of the Company.
(iv) The Company has good and marketable title
to, or valid and enforceable leasehold estates in, all items of real and
personal property necessary to conduct its
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business (including, without limitation, any real or personal property stated in
the Offering Materials to be owned or leased by the Company), free and clear of
all liens, encumbrances, claims, security interests and defects of any material
nature whatsoever, other than those set forth in the Offering Materials and
liens for taxes not yet due and payable.
(v) There is no litigation or governmental
proceeding pending or, to the best of the Company's knowledge, threatened
against, or involving the properties or business of the Company, except as set
forth in the Offering Materials.
(vi) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Utah. Except as set forth in the Offering Materials, the Company does not own
or control, directly or indirectly, an interest in any other corporation,
partnership, trust, joint venture or other business entity. The Company is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction in which the character of its operations requires such
qualification or licensing and where failure to so qualify would have a material
adverse effect on the Company. The Company has all requisite corporate power and
authority, and all material and necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies (domestic and foreign) to conduct its businesses (and
proposed business) as described in the Offering Materials. Any disclosures in
the Offering Materials concerning the effects of foreign, federal, state and
local regulation on the Company's businesses as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact. The Company has all corporate power and authority to enter into
this Agreement, the Standby Equity Distribution Agreement, the Registration
Rights Agreement, and the Escrow Agreement, to carry out the provisions and
conditions hereof and thereof, and all consents, authorizations, approvals and
orders required in connection herewith and therewith have been obtained. No
consent, authorization or order of, and no filing with, any court, government
agency or other body is required by the Company for the issuance of the
Securities or execution and delivery of the Offering Materials except for
applicable federal and state securities laws. The Company, since its inception,
has not incurred any liability arising under or as a result of the application
of any of the provisions of the 1933 Act, the 1934 Act or the Rules and
Regulations.
(vii) There has been no material adverse change in
the condition or prospects of the Company, financial or otherwise, from the
latest dates as of which such condition or prospects, respectively, are set
forth in the Offering Materials, and the outstanding debt, the property and the
business of the Company conform in all material respects to the descriptions
thereof contained in the Offering Materials.
(viii) Except as set forth in the Offering
Materials, the Company is not in breach of, or in default under, any term or
provision of any material indenture, mortgage, deed of trust, lease, note, loan
or Standby Equity Distribution Agreement or any other material agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which it is a party or by which it or any of its
properties may be bound or affected. The Company is not in violation of any
provision of its charter or by-laws or in violation of any franchise, license,
permit, judgment, decree or order, or in violation of any material statute, rule
or regulation. Neither the execution and delivery of the Offering Materials nor
the issuance and sale or delivery of the Securities, nor the consummation of any
of the
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transactions contemplated in the Offering Materials nor the compliance by the
Company with the terms and provisions hereof or thereof, has conflicted with or
will conflict with, or has resulted in or will result in a breach of, any of the
terms and provisions of, or has constituted or will constitute a default under,
or has resulted in or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or pursuant to
the terms of any indenture, mortgage, deed of trust, note, loan or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company may be bound or to which any
of the property or assets of the Company is subject except (a) where such
default, lien, charge or encumbrance would not have a material adverse effect on
the Company and (b) as described in the Offering Materials; nor will such action
result in any violation of the provisions of the charter or the by-laws of the
Company or, assuming the due performance by the Placement Agent of its
obligations hereunder, any material statute or any material order, rule or
regulation applicable to the Company of any court or of any foreign, federal,
state or other regulatory authority or other government body having jurisdiction
over the Company.
(ix) Subsequent to the dates as of which
information is given in the Offering Materials, and except as may otherwise be
indicated or contemplated herein or therein and the securities offered pursuant
to the Securities Purchase Agreement dated the date hereof, the Company has not
(a) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, or (b) entered into any transaction other than
in the ordinary course of business, or (c) declared or paid any dividend or made
any other distribution on or in respect of its capital stock. Except as
described in the Offering Materials, the Company has no outstanding obligations
to any officer or director of the Company.
(x) There are no claims for services in the
nature of a finder's or origination fee with respect to the sale of the Common
Stock or any other arrangements, agreements or understandings that may affect
the Placement Agent's compensation, as determined by the National Association of
Securities Dealers, Inc.
(xi) The Company owns or possesses, free and
clear of all liens or encumbrances and rights thereto or therein by third
parties, the requisite licenses or other rights to use all trademarks, service
marks, copyrights, service names, trade names, patents, patent applications and
licenses necessary to conduct its business (including, without limitation, any
such licenses or rights described in the Offering Materials as being owned or
possessed by the Company) and, except as set forth in the Offering Materials,
there is no claim or action by any person pertaining to, or proceeding, pending
or threatened, which challenges the exclusive rights of the Company with respect
to any trademarks, service marks, copyrights, service names, trade names,
patents, patent applications and licenses used in the conduct of the Company's
businesses (including, without limitation, any such licenses or rights described
in the Offering Materials as being owned or possessed by the Company) except any
claim or action that would not have a material adverse effect on the Company;
the Company's current products, services or processes do not infringe or will
not infringe on the patents currently held by any third party.
(xii) Except as described in the Offering
Materials, the Company is not under any obligation to pay royalties or fees of
any kind whatsoever to any third party with respect to any trademarks, service
marks, copyrights, service names, trade names, patents, patent
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applications, licenses or technology it has developed, uses, employs or intends
to use or employ, other than to their respective licensors.
(xiii) Subject to the performance by the Placement
Agent of its obligations hereunder the offer and sale of the Securities
complies, and will continue to comply, in all material respects with the
requirements of Rule 506 of Regulation D promulgated by the SEC pursuant to the
1933 Act and any other applicable federal and state laws, rules, regulations and
executive orders. Neither the Offering Materials nor any amendment or supplement
thereto nor any documents prepared by the Company in connection with the
Offering will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All statements of material facts in the Offering Materials are
true and correct as of the date of the Offering Materials.
(xiv) All material taxes which are due and payable
from the Company have been paid in full or adequate provision has been made for
such taxes on the books of the Company, except for those taxes disputed in good
faith by the Company
(xv) None of the Company nor any of its officers,
directors, employees or agents, nor any other person acting on behalf of the
Company, has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who is or may be
in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) which (A) might subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, or (B) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company
as reflected in any of the financial statements contained in the Offering
Materials, or (C) if not continued in the future, might adversely affect the
assets, business, operations or prospects of the Company in the future.
5. Representations, Warranties and Covenants of the Investor.
A. The Investor represents, warrants and covenants as
follows:
(i) The Investor has the necessary power to
enter into this Agreement and to consummate the transactions contemplated
hereby.
(ii) The execution and delivery by the Investor
of this Agreement and the consummation of the transactions contemplated herein
will not result in any violation of, or be in conflict with, or constitute a
default under, any agreement or instrument to which the Investor is a party or
by which the Investor or its properties are bound, or any judgment, decree,
order or, to the Investor's knowledge, any statute, rule or regulation
applicable to the Investor. This Agreement when executed and delivered by the
Investor, will constitute the legal, valid and binding obligations of the
Investor, enforceable in accordance with their respective terms, except to the
extent that (a) the enforceability hereof or thereof may be limited by
bankruptcy,
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insolvency, reorganization, moratorium or similar laws from time to time in
effect and affecting the rights of creditors generally, (b) the enforceability
hereof or thereof is subject to general principles of equity, or (c) the
indemnification provisions hereof or thereof may be held to be in violation of
public policy.
(iii) The Investor will promptly forward copies of
any and all due diligence questionnaires compiled by the Investor to the
Placement Agent.
(iv) The Investor is an Accredited Investor (as
defined under the 1933 Act).
(v) The Investor is acquiring the Securities for
the Inventor's own account as principal, not as a nominee or agent, for
investment purposes only, and not with a view to, or for, resale, distribution
or fractionalization thereof in whole or in part and no other person has a
direct or indirect beneficial interest in such Securities. Further, the Investor
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Securities.
(vi) The Investor acknowledges the Investor's
understanding that the offering and sale of the Securities is intended to be
exempt from registration under the 1933 Act by virtue of Section 3(b) of the
1933 Act and the provisions of Regulation D promulgated thereunder ("Regulation
D"). In furtherance thereof, the Investor represents and warrants as follows:
(a) The Investor has the financial
ability to bear the economic risk of the Investor's investment, has adequate
means for providing for the Inventor's current needs and personal contingencies
and has no need for liquidity with respect to the Investor's investment in the
Company; and
(b) The Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of the prospective investment. The Inventor also represents it
has not been organized for the purpose of acquiring the Securities.
(vii) The Investor has been given the opportunity for a
reasonable time prior to the date hereof to ask questions of, and receive
answers from, the Company or its representatives concerning the terms and
conditions of the Offering, and other matters pertaining to this investment, and
has been given the opportunity for a reasonable time prior to the date hereof to
obtain such additional information in connection with the Company in order for
the Investor to evaluate the merits and risks of purchase of the Securities, to
the extent the Company possesses such information or can acquire it without
unreasonable effort or expense. The Investor is not relying on the Placement
Agent or any of its affiliates with respect to the accuracy or completeness of
the Offering Materials or for any economic considerations involved in this
investment.
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6. Certain Covenants and Agreements of the Company.
The Company covenants and agrees at its expense and without any expense
to the Placement Agent as follows:
A. During the Registration Period, as this term is
defined in the Registration Rights Agreement dated the date hereof, advise the
Placement Agent and the Investor of any material adverse change in the Company's
financial condition, prospects or business or of any development materially
affecting the Company or rendering untrue or misleading any material statement
in the Offering Materials occurring at any time as soon as the Company is either
informed or becomes aware thereof.
B. To use its commercially reasonable efforts to cause
the Common Stock issuable in connection with the Standby Equity Distribution
Agreement to be qualified or registered for sale on terms consistent with those
stated in the Registration Rights Agreement and under the securities laws of
such jurisdictions as the Placement Agent and the Investor shall reasonably
request. Qualification, registration and exemption charges and fees shall be at
the sole cost and expense of the Company.
C. During the Registration Period, as this term is
defined in the Registration Rights Agreement dated the date hereof, upon written
request, to provide and continue to provide the Placement Agent and the Investor
copies of all quarterly financial statements and audited annual financial
statements prepared by or on behalf of the Company, other reports prepared by or
on behalf of the Company for public disclosure and all documents delivered to
the Company's stockholders.
D. To deliver, during the Registration Period, as this
term is defined in the Registration Rights Agreement dated the date hereof, of
the Standby Equity Distribution Agreement, to the Investor upon the Investor's
request, within forty five (45) days, a statement of its income for each such
quarterly period, and its balance sheet and a statement of changes in
stockholders' equity as of the end of such quarterly period, all in reasonable
detail, certified by its principal financial or accounting officer; (ii) within
ninety (90) days after the close of each fiscal year, its balance sheet as of
the close of such fiscal year, together with a statement of income, a statement
of changes in stockholders' equity and a statement of cash flow for such fiscal
year, such balance sheet, statement of income, statement of changes in
stockholders' equity and statement of cash flow to be in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
auditors if audited financial statements are prepared; and (iii) a copy of all
documents, reports and information furnished to its stockholders at the time
that such documents, reports and information are furnished to its stockholders.
E. To comply with the terms of the Offering Materials.
F. During the Registration Period, as this term is
defined in the Registration Rights Agreement dated the date hereof, to ensure
that any transactions between or among the Company, or any of its officers,
directors and affiliates be on terms and conditions that are no less favorable
to the Company, than the terms and conditions that would be available in an
"arm's length" transaction with an independent third party.
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7. Indemnification and Limitation of Liability.
A. The Company hereby agrees that it will indemnify and
hold the Placement Agent and each officer, director, shareholder, employee or
representative of the Placement Agent and each person controlling, controlled by
or under common control with the Placement Agent within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act or the SEC's Rules and
Regulations promulgated thereunder (the "Rules and Regulations"), harmless from
and against any and all loss, claim, damage, liability, cost or expense
whatsoever (including, but not limited to, any and all reasonable legal fees and
other expenses and disbursements incurred in connection with investigating,
preparing to defend or defending any action, suit or proceeding, including any
inquiry or investigation, commenced or threatened, or any claim whatsoever or in
appearing or preparing for appearance as a witness in any action, suit or
proceeding, including any inquiry, investigation or pretrial proceeding such as
a deposition) to which the Placement Agent or such indemnified person of the
Placement Agent may become subject under the 1933 Act, the 1934 Act, the Rules
and Regulations, or any other federal or state law or regulation, common law or
otherwise, arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in (a) Section 4 of this
Agreement, (b) the Offering Materials (except those written statements relating
to the Placement Agent given by the Placement Agent for inclusion therein), (c)
any application or other document or written communication executed by the
Company or based upon written information furnished by the Company filed in any
jurisdiction in order to qualify the Common Stock under the securities laws
thereof, or any state securities commission or agency; (ii) the omission or
alleged omission from documents described in clauses (a), (b) or (c) above of a
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (iii) the breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement. The Company further
agrees that upon demand by an indemnified person, at any time or from time to
time, it will promptly reimburse such indemnified person for any loss, claim,
damage, liability, cost or expense actually and reasonably paid by the
indemnified person as to which the Company has indemnified such person pursuant
hereto. Notwithstanding the foregoing provisions of this Paragraph 7(A), any
such payment or reimbursement by the Company of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final judgment by
a court of competent jurisdiction (after all appeals or the expiration of time
to appeal) is entered against the Placement Agent or such indemnified person
based upon specific finding of fact that the Placement Agent or such indemnified
person's gross negligence or willful misfeasance will be promptly repaid to the
Company.
B. The Placement Agent hereby agrees that it will
indemnify and hold the Company and each officer, director, shareholder, employee
or representative of the Company, and each person controlling, controlled by or
under common control with the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act or the Rules and Regulations, harmless
from and against any and all loss, claim, damage, liability, cost or expense
whatsoever (including, but not limited to, any and all reasonable legal fees and
other expenses and disbursements incurred in connection with investigating,
preparing to defend or defending any action, suit or proceeding, including any
inquiry or investigation, commenced or threatened, or any claim whatsoever or in
appearing or preparing for appearance as a witness in any action, suit or
proceeding, including any inquiry, investigation or pretrial proceeding such as
a deposition) to which the Company or such indemnified person of the Company may
become subject
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under the 1933 Act, the 1934 Act, the Rules and Regulations, or any other
federal or state law or regulation, common law or otherwise, arising out of or
based upon (i) the material breach of any representation, warranty, covenant or
agreement made by the Placement Agent in this Agreement, or (ii) any false or
misleading information provided to the Company in writing by one of the
Placement Agent's indemnified persons specifically for inclusion in the Offering
Materials.
C. The Investor hereby agrees that it will indemnify and
hold the Placement Agent and each officer, director, shareholder, employee or
representative of the Placement Agent, and each person controlling, controlled
by or under common control with the Placement Agent within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act or the Rules and
Regulations, harmless from and against any and all loss, claim, damage,
liability, cost or expense whatsoever (including, but not limited to, any and
all reasonable legal fees and other expenses and disbursements incurred in
connection with investigating, preparing to defend or defending any action, suit
or proceeding, including any inquiry or investigation, commenced or threatened,
or any claim whatsoever or in appearing or preparing for appearance as a witness
in any action, suit or proceeding, including any inquiry, investigation or
pretrial proceeding such as a deposition) to which the Placement Agent or such
indemnified person of the Placement Agent may become subject under the 1933 Act,
the 1934 Act, the Rules and Regulations, or any other federal or state law or
regulation, common law or otherwise, arising out of or based upon (i) the
conduct of the Investor or its officers, employees or representatives in its
acting as the Investor for the Offering, (ii) the material breach of any
representation, warranty, covenant or agreement made by the Investor in the
Offering Materials, or (iii) any false or misleading information provided to the
Placement Agent by one of the Investor's indemnified persons.
D. The Placement Agent hereby agrees that it will
indemnify and hold the Investor and each officer, director, shareholder,
employee or representative of the Investor, and each person controlling,
controlled by or under common control with the Investor within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act or the Rules and
Regulations, harmless from and against any and all loss, claim, damage,
liability, cost or expense whatsoever (including, but not limited to, any and
all reasonable legal fees and other expenses and disbursements incurred in
connection with investigating, preparing to defend or defending any action, suit
or proceeding, including any inquiry or investigation, commenced or threatened,
or any claim whatsoever or in appearing or preparing for appearance as a witness
in any action, suit or proceeding, including any inquiry, investigation or
pretrial proceeding such as a deposition) to which the Investor or such
indemnified person of the Investor may become subject under the 1933 Act, the
1934 Act, the Rules and Regulations, or any other federal or state law or
regulation, common law or otherwise, arising out of or based upon the material
breach of any representation, warranty, covenant or agreement made by the
Placement Agent in this Agreement.
E. Promptly after receipt by an indemnified party of
notice of commencement of any action covered by Section 7(A), (B), (C) or (D),
the party to be indemnified shall, within five (5) business days, notify the
indemnifying party of the commencement thereof; the omission by one (1)
indemnified party to so notify the indemnifying party shall not relieve the
indemnifying party of its obligation to indemnify any other indemnified party
that has given such notice and shall not relieve the indemnifying party of any
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liability outside of this indemnification if not materially prejudiced thereby.
In the event that any action is brought against the indemnified party, the
indemnifying party will be entitled to participate therein and, to the extent it
may desire, to assume and control the defense thereof with counsel chosen by it
which is reasonably acceptable to the indemnified party. After notice from the
indemnifying party to such indemnified party of its election to so assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under such Section 7(A), (B), (C), or (D) for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, but the indemnified party may, at its own expense, participate in such
defense by counsel chosen by it, without, however, impairing the indemnifying
party's control of the defense. Subject to the proviso of this sentence and
notwithstanding any other statement to the contrary contained herein, the
indemnified party or parties shall have the right to choose its or their own
counsel and control the defense of any action, all at the expense of the
indemnifying party if (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action at the expense of the indemnifying party, or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying party; provided, however, that the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstance, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties. No
settlement of any action or proceeding against an indemnified party shall be
made without the consent of the indemnifying party.
F. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 7(A) or 7(B) is due in accordance with its terms but is for any reason
held by a court to be unavailable on grounds of policy or otherwise, the Company
and the Placement Agent shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with the investigation or defense of same) which the other may
incur in such proportion so that the Placement Agent shall be responsible for
such percent of the aggregate of such losses, claims, damages and liabilities as
shall equal the percentage of the gross proceeds paid to the Placement Agent and
the Company shall be responsible for the balance; provided, however, that no
person guilty of fraudulent misrepresentation within the meaning of Section
11(f) of the 1933 Act shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
7(F), any person controlling, controlled by or under common control with the
Placement Agent, or any partner, director, officer, employee, representative or
any agent of any thereof, shall have the same rights to contribution as the
Placement Agent and each person controlling, controlled by or under common
control with the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act and each officer of the Company and each director of
the Company shall have the same rights to contribution as the Company. Any party
entitled to contribution will, promptly after receipt of
11
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against the other party
under this Section 7(D), notify such party from whom contribution may be sought,
but the omission to so notify such party shall not relieve the party from whom
contribution may be sought from any obligation they may have hereunder or
otherwise if the party from whom contribution may be sought is not materially
prejudiced thereby.
G. The indemnity and contribution agreements contained
in this Section 7 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any indemnified person or any
termination of this Agreement.
H. Each of the parties hereby waives, to the fullest
extent permitted by law, any right to or claim of any punitive, exemplary,
incidental, indirect, special, consequential or other damages (including,
without limitation, loss of profits) against the Placement Agent and each
officer, director, shareholder, employee or representative of the other party
and each person controlling, controlled by or under common control with the
other party within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act or the Rules and Regulations arising out of any cause whatsoever
(whether such cause be based in contract, negligence, strict liability, other
tort or otherwise). Notwithstanding anything to the contrary contained herein,
the aggregate liability of the Placement Agent and each officer, director,
shareholder, employee or representative of the Placement Agent and each person
controlling, controlled by or under common control with the Placement Agent
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
or the Rules and Regulations shall not exceed the compensation received by the
Placement Agent pursuant to Section 2 hereof. This limitation of liability shall
apply regardless of the cause of action, whether contract, tort (including,
without limitation, negligence) or breach of statute or any other legal or
equitable obligation.
8. Payment of Expenses.
The Company hereby agrees to bear all of the expenses in connection
with the Offering, including, but not limited to the following: filing fees,
printing and duplicating costs, advertisements, postage and mailing expenses
with respect to the transmission of Offering Materials, registrar and transfer
agent fees, escrow agent fees and expenses, fees of the Company's counsel and
accountants, issue and transfer taxes, if any.
9. Conditions of Closing.
The Closing shall be held at the offices of the Investor or its
counsel. The obligations of the Placement Agent hereunder shall be subject to
the continuing accuracy of the representations and warranties of the Company and
the Investor herein as of the date hereof and as of the Date of Closing (the
"Closing Date") with respect to the Company or the Investor, as the case may be,
as if it had been made on and as of such Closing Date; the accuracy on and as of
the Closing Date of the statements of the officers of the Company made pursuant
to the provisions hereof; and the performance by the Company and the Investor on
and as of the Closing Date of its covenants and obligations hereunder and to the
following further conditions:
A. Upon the effectiveness of a registration statement
covering the Standby Equity Distribution Agreement, the Investor and the
Placement Agent shall receive the opinion
12
of Counsel to the Company, dated as of the date thereof, which opinion shall be
in form and substance reasonably satisfactory to the Investor, their counsel and
the Placement Agent.
B. At or prior to the Closing, the Investor and the
Placement Agent shall have been furnished such documents, certificates and
opinions as it may reasonably require for the purpose of enabling them to review
or pass upon the matters referred to in this Agreement and the Offering
Materials, or in order to evidence the accuracy, completeness or satisfaction of
any of the representations, warranties or conditions herein contained.
C. At and prior to the Closing, (i) there shall have
been no material adverse change nor development involving a prospective change
in the condition or prospects or the business activities, financial or
otherwise, of the Company from the latest dates as of which such condition is
set forth in the Offering Materials; (ii) there shall have been no transaction,
not in the ordinary course of business except the transactions pursuant to the
Securities Purchase Agreement entered into by the Company on the date hereof
which has not been disclosed in the Offering Materials or to the Placement Agent
in writing; (iii) except as set forth in the Offering Materials, the Company
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness for which a waiver or extension has not been otherwise
received; (iv) except as set forth in the Offering Materials, the Company shall
not have issued any securities (other than those to be issued as provided in the
Offering Materials) or declared or paid any dividend or made any distribution of
its capital stock of any class and there shall not have been any change in the
indebtedness (long or short term) or liabilities or obligations of the Company
(contingent or otherwise) and trade payable debt; (v) no material amount of the
assets of the Company shall have been pledged or mortgaged, except as indicated
in the Offering Materials; and (v) no action, suit or proceeding, at law or in
equity, against the Company or affecting any of its properties or businesses
shall be pending or threatened before or by any court or federal or state
commission, board or other administrative agency, domestic or foreign, wherein
an unfavorable decision, ruling or finding could materially adversely affect the
businesses, prospects or financial condition or income of the Company, except as
set forth in the Offering Materials.
D. If requested at Closing the Investor and the
Placement Agent shall receive a certificate of the Company signed by an
executive officer and chief financial officer, dated as of the applicable
Closing, to the effect that the conditions set forth in subparagraph (C) above
have been satisfied and that, as of the applicable closing, the representations
and warranties of the Company set forth herein are true and correct.
E. The Placement Agent shall have no obligation to
insure that (x) any check, note, draft or other means of payment for the Common
Stock will be honored, paid or enforceable against the Investor in accordance
with its terms, or (y) subject to the performance of the Placement Agent's
obligations and the accuracy of the Placement Agent's representations and
warranties hereunder, (1) the Offering is exempt from the registration
requirements of the 1933 Act or any applicable state "Blue Sky" law or (2) the
Investor is an Accredited Investor.
10. Termination.
This Agreement shall be co-terminus with, and terminate upon the same
terms and conditions as those set forth in, the Standby Equity Distribution
Agreement. The rights of the
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Investor and the obligations of the Company under the Registration Rights
Agreement, and the rights of the Placement Agent and the obligations of the
Company shall survive the termination of this Agreement unabridged for the life
of the Standby Equity Distribution Agreement.
11. Miscellaneous.
A. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all which
shall be deemed to be one and the same instrument.
B. Any notice required or permitted to be given
hereunder shall be given in writing and shall be deemed effective when deposited
in the United States mail, postage prepaid, or when received if personally
delivered or faxed (upon confirmation of receipt received by the sending party),
addressed as follows to such other address of which written notice is given to
the others):
If to Placement Agent, to: Newbridge Securities Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, to: Kiwa Bio-Tech Products Group Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
City of Industry, California 91748
Attention: ▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Markiles, LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: V. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor: Cornell Capital Partners, LP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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With copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
C. This Agreement shall be governed by and construed in
all respects under the laws of the State of Delaware, without reference to its
conflict of laws rules or principles. Any suit, action, proceeding or litigation
arising out of or relating to this Agreement shall be brought and prosecuted in
such federal or state court or courts located within the State of New Jersey as
provided by law. The parties hereby irrevocably and unconditionally consent to
the jurisdiction of each such court or courts located within the State of New
Jersey and to service of process by registered or certified mail, return receipt
requested, or by any other manner provided by applicable law, and hereby
irrevocably and unconditionally waive any right to claim that any suit, action,
proceeding or litigation so commenced has been commenced in an inconvenient
forum.
D. This Agreement and the other agreements referenced
herein contain the entire understanding between the parties hereto and may not
be modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
E. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
COMPANY:
KIWA BIO-TECH PRODUCTS GROUP CORPORATION
/s/ ▇▇▇ ▇▇
By: --------------------------------------
Name: ▇▇▇ ▇▇
Title: President and Chief Executive
Officer
PLACEMENT AGENT:
NEWBRIDGE SECURITIES CORPORATION
/s/ ▇▇▇ ▇. ▇▇▇▇▇
By: --------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: President
INVESTOR:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
By: --------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Portfolio Manager
16