Exhibit 10.1

  

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of September 18,
2014, is by and among Sinocoking Coal & Coke Chemical Industries, Inc., a
Florida corporation with headquarters located at Kuanggong Road and Tiyu Road,
10th Floor, ChengshiXin Yong She, Tiyu Road, Xinhua District, Pingdingshan,
Henan Province 467000, People’s Republic of China (the “Company”), and each of
the investors listed on the Schedule of Buyers attached hereto (individually, a
“Buyer” and collectively, the “Buyers”).

 

RECITALS

 

A.           The Company and each Buyer desire to enter into this transaction to
purchase the Common Shares (as defined below) and Warrants (as defined below)
set forth herein pursuant to a currently effective shelf registration statement
on Form S-3, which has at least $120,000,000 of unallocated securities,
including Common Stock (as defined below) and warrants registered thereunder
(Registration Number 333-178325) (the “Registration Statement”), which
Registration Statement has been declared effective in accordance with the
Securities Act of 1933, as amended (the “1933 Act”), by the United States
Securities and Exchange Commission (the “SEC”).

 

B.           Each Buyer wishes to purchase, and the Company wishes to sell at
the Initial Closing (as defined below), upon the terms stated in this Agreement,
(i) the aggregate number of shares of common stock, $0.001 par value per share,
of the Company (the “Common Stock”) set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers (which aggregate amount for all Buyers
shall be 2,818,845 shares of Common Stock and shall collectively be referred to
herein as the “Initial Common Shares”), (ii) a Series A Warrant to initially
acquire up to the aggregate number of shares of Common Stock set forth opposite
such Buyer’s name in column (5) on the Schedule of Buyers, as evidenced by a
certificate in the form attached hereto as Exhibit A-1 (the “Initial Series A
Warrants”) (as exercised, collectively, the “Initial Series A Warrant Shares”)
and (iii) a Series B Warrant to initially acquire up to the aggregate number of
shares of Common Stock set forth opposite such Buyer’s name in column (6) on the
Schedule of Buyers, as evidenced by a certificate in the form attached hereto as
Exhibit A-2 (the “Initial Series B Warrants”, and together with the Initial
Series A Warrants, the “Initial Warrants”) (as exercised, collectively, the
“Initial Series B Warrant Shares”, and together with the Initial Series A
Warrant Shares, the “Initial Warrant Shares”).

 

C.           Subject to the terms and conditions set forth in this Agreement,
each Buyer may, in its sole option, elect to participate in one or more
Additional Closings for the purchase by such Buyer, and the sale by the Company,
of (i) up to such aggregate number of shares of Common Stock set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers (which aggregate
amount for all Buyers shall be 1,644,737 shares of Common Stock and shall
collectively be referred to herein as the “Additional Common Shares”, and
together with the Initial Common Shares, the “Common Shares”), and (ii) a Series
C Warrant to initially acquire up to the aggregate number of shares of Common
Stock set forth opposite such Buyer’s name in column (7) on the Schedule of
Buyers (subject to a proportional decrease if such Buyer does not elect to
acquire all of the Additional Common Shares eligible to be purchased by such
Buyer at such Additional Closing (i.e. 50% warrant coverage)), as evidenced by a
certificate in the form attached hereto as Exhibit A-3 (the “Additional
Warrants”, and together with the Initial Warrants, the “Warrants”) (as
exercised, collectively, the “Additional Warrant Shares”, and together with the
Initial Warrant Shares, the “Warrant Shares”).

 

 

 

 

D.           The Common Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities.”

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Buyer hereby
agree as follows:

 

1.PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.

 

(a)          Common Shares and Warrants.

 

(i)          Initial Closing. The Company shall issue and sell to each Buyer,
and each Buyer severally, but not jointly, shall purchase from the Company on
the Initial Closing Date (as defined below), such aggregate number of Initial
Common Shares as is set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers along with (x) Initial Series A Warrants to initially acquire
up to that aggregate number of Initial Series A Warrant Shares as is set forth
opposite such Buyer’s name in column (5) on the Schedule of Buyers and (y)
Initial Series B Warrants to initially acquire up to that aggregate number of
Initial Series B Warrant Shares as is set forth opposite such Buyer’s name in
column (6) on the Schedule of Buyers.

 

(ii)         Additional Closings. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 1(b)(ii) below with respect to any Additional
Closing, the Company shall issue and sell to each Buyer electing to participate
in such Additional Closing, and each such Buyer severally, but not jointly,
shall purchase from the Company on the Additional Closing Date (as defined
below), with respect to such Additional Closing such aggregate number of
Additional Common Shares as is set forth in the applicable Additional Closing
Notice (as defined below) of such Buyer, but not to exceed such aggregate number
of Additional Common Shares opposite such Buyer’s name in column (4) on the
Schedule of Buyers along with Additional Warrants to initially acquire up to
that aggregate number of Additional Warrant Shares as is set forth opposite such
Buyer’s name in column (7) on the Schedule of Buyers (subject to a proportional
decrease if such Buyer does not elect to acquire all of the Additional Common
Shares eligible to be purchased by such Buyer at the Additional Closing (i.e.
50% warrant coverage)).

 

(ii)         Limitations on Exercise. The parties hereto acknowledge and agree
that the aggregate number of Warrant Shares initially issuable upon exercise of
Warrants to be purchased by the Buyers as described in this Section 1, the
recitals and the Schedule of Buyers have been calculated without regard to any
limitations on exercise set forth in the applicable Warrants.

 

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(b)          Closings.

 

(i)          Initial Closings. The initial closing (the “Initial Closing”) of
the purchase of the Common Shares and the Warrants by the Buyers shall occur at
the offices of Greenberg Traurig, LLP, MetLife Building, 200 Park Avenue, New
York, NY 10166 or such other place as the parties shall agree. The date and time
of the Initial Closing (the “Initial Closing Date”) shall be 10:00 a.m., New
York time, on the third (3rd) Trading Day (as defined in the Warrants) after the
date hereof (or such earlier date as is mutually agreed to by the Company and
each Buyer). As used herein “Business Day” means any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are
authorized or required by law to remain closed.

 

(ii)         Additional Closings.

 

(1)         Additional Closing Dates. Subject to the satisfaction (or waiver) of
the conditions set forth in this Section 1(b)(ii), the date and time of each
additional closing (each, an “Additional Closing”, and together with the Initial
Closing, each, a “Closing”) shall be 10:00 a.m., New York time on the third
(3rd) Trading Day after the Company shall have received an Additional Closing
Notice from a Buyer (or such later date as is mutually agreed to by the Company
and such Buyer) (each, an “Additional Closing Date” and together with the
Initial Closing, each a “Closing Date”).

 

(2)         Additional Closing Mechanics.

 

(A)         Subject to Section 1(b)(ii)(2)(B) below, any Buyer may, in its sole
option, elect to effect an Additional Closing by delivery of a written notice in
the form attached hereto as Exhibit B (each, an “Additional Closing Notice”, and
the date thereof, each, an “Additional Closing Notice Date”) to the Company at
any time after the six month and a calendar day anniversary of the Initial
Closing Date, but not after 11:59 p.m., New York time, on the ten month
anniversary of the Initial Closing Date (as extended in accordance herewith, the
“Additional Closing Expiration Date”, and such exercise period (as extended in
accordance herewith), the “Additional Closing Eligibility Period”) (provided
that if on any Trading Day during such four month period ending on the
Additional Closing Expiration Date (or the last Trading Day of any extension
thereof, as applicable, contemplated by this proviso) the Registration Statement
is not effective or any prospectus contained therein is not available for use by
such Buyer, the Additional Closing Expiration Date shall be extended to four
months after such initial subsequent date that the Registration Statement (or
Replacement Registration Statement (as defined below) is again effective and all
prospectuses contained therein are available for use by such Buyer) setting
forth (w) such aggregate number of Additional Common Shares to be purchased by
such Buyer at such Additional Closing (which aggregate number (together with any
Additional Shares of Common Stock previously issued to such Buyer) may not
exceed such aggregate number of Additional Common Shares opposite such Buyer’s
name in column (4) on the Schedule of Buyers), (x) such aggregate number of
Additional Warrant Shares initially issuable upon exercise of the Additional
Warrant to be purchased by such Buyer at such Additional Closing (which
aggregate number (together with any Warrant Shares initially issuable upon
exercise of any Additional Warrants previously issued to such Buyer) shall not
exceed the aggregate number of Additional Warrant Shares as is set forth
opposite such Buyer’s name in column (6) on the Schedule of Buyers (subject to a
proportional decrease if such Buyer does not elect to acquire all of the
Additional Common Shares eligible to be purchased by such Buyer at the
Additional Closing (i.e. 50% warrant coverage)), (y) the applicable Additional
Purchase Price for such Buyer and (z) the applicable Additional Closing Date.
Upon delivery of an Additional Closing Notice, such Buyer shall be deemed for
all corporate purposes to have become the holder of record of such Additional
Common Shares and such Additional Warrant specified in such Additional Closing
Notice to be delivered to such Buyer (or its designee) on such applicable
Additional Closing Date, irrespective of the date such Additional Common Shares
are credited to the Buyer’s (or its designee’s) DTC (as defined below) account
or the date of delivery of the certificates evidencing such Additional Warrants
(as the case may be).

 

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(B)         Limitations on Additional Closings. A Buyer shall not have the right
to deliver an Additional Closing Notice (and no Additional Closing Notice in
violation of this Section 1(b)(ii)(2)(B) shall be valid or accepted by the
Company), to the extent (but only to the extent) that such Buyer together with
the other Attribution Parties (as defined in the Warrants) to such Buyer would
beneficially own in excess of  4.99% (the “Maximum Percentage”) of the shares of
Common Stock then outstanding immediately after giving effect to such issuance
of Additional Common Shares as set forth on the applicable Additional Closing
Notice. For purposes of the foregoing sentence, the aggregate number of shares
of Common Stock beneficially owned by such Buyer and the other Attribution
Parties to such Buyer shall include the number of shares of Common Stock held by
the Holder and all other Attribution Parties to such Buyer plus the number of
shares of Common Stock issuable upon pursuant to the applicable Additional
Closing Notice with respect to which the determination of such sentence is being
made, but shall exclude (A) any unexercised right to acquire Additional Common
Shares of such Buyer or any of the other Attribution Parties to such Buyer and
(B) shares of Common Stock which would be issuable upon exercise or conversion
of the unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any convertible notes or convertible preferred
stock or warrants or rights to purchase Additional Common Shares hereunder)
beneficially owned by such Buyer or any other Attribution Party to such Buyer
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Section 1(b)(ii)(2)(B). For purposes of this Section
1(b)(ii)(2)(B), beneficial ownership shall be calculated in accordance with
Section 13(d) of the 1934 Act. For purposes of determining the number of
Additional Common Shares such Buyer may acquire in an Additional Closing without
exceeding the Maximum Percentage, such Buyer may rely, subject to account for
the issuance to such Buyer, on the number of outstanding shares of Common Stock
as reflected in (x) the Company’s most recent Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing
with the SEC, as the case may be, (y) a more recent public announcement by the
Company or (z) any other written notice by the Company or the Transfer Agent, if
any, setting forth the number of shares of Common Stock outstanding (the
“Reported Outstanding Share Number”). If the Company receives an Additional
Closing Notice from such Buyer at a time when the actual number of outstanding
shares of Common Stock is less than the Reported Outstanding Share Number, the
Company shall (i) notify such Buyer in writing of the number of shares of Common
Stock then outstanding and, to the extent that such Additional Closing Notice
would otherwise cause such Buyer’s beneficial ownership, as determined pursuant
to this Section 1(b)(ii)(2)(B), to exceed the Maximum Percentage, such Buyer
must notify the Company of a reduced number of Additional Common Shares and
related Additional Warrants to be purchased pursuant to such Additional Closing
Notice (the number of Additional Common Shares by which such purchase is
reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, the
Company shall return to such Buyer any purchase price paid by such Buyer for the
Reduction Shares and related Additional Warrants. For any reason at any time,
upon the written or oral request of such Buyer, the Company shall within one (1)
Business Day confirm orally and in writing or by electronic mail to such Buyer
the number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this
Agreement, by such Buyer and any other Attribution Party to such Buyer since the
date as of which the Reported Outstanding Share Number was reported. In the
event that the issuance of Additional Common Shares being purchased by such
Buyer at such applicable Additional Closing results in such Buyer and the other
Attribution Parties to such Buyer being deemed to beneficially own, in the
aggregate, more than the Maximum Percentage of the number of outstanding shares
of Common Stock (as determined under Section 13(d) of the 1934 Act), the number
of Additional Common Shares so issued by which such Buyer’s and the other
Attribution Parties’ aggregate beneficial ownership exceeds the Maximum
Percentage (the “Excess Shares”) and related Additional Warrants shall be deemed
null and void and shall be cancelled ab initio, and such Buyer shall not have
the power to vote or to transfer the Excess Shares or related Additional
Warrants. As soon as reasonably practicable after the issuance of the Excess
Shares and related Additional Warrants have been deemed null and void, the
Company shall return to such Buyer the purchase price paid by the Holder for the
Excess Shares and related Additional Warrants (and such Excess Shares and
related Additional Warrants shall be eligible to be purchased by such Buyer at
an Additional Closing in compliance with this Section 1(b)(ii)(2)(B)). Upon
delivery of a written notice to the Company, such Buyer may from time to time
increase (with such increase not effective until the sixty-first (61st) day
after delivery of such notice) or decrease the Maximum Percentage to any other
percentage not in excess of 4.99% as specified in such notice; provided that (i)
any such increase in the Maximum Percentage will not be effective until the
sixty-first (61st) day after such notice is delivered to the Company and (ii)
any such increase or decrease will apply only to such Buyer and the other
Attribution Parties to such Buyer and not to any other Buyer that is not an
Attribution Party to such Buyer. For purposes of clarity, the Additional Common
Shares issuable pursuant to the terms hereof to such Buyer in excess of the
Maximum Percentage shall not be deemed to be beneficially owned by such Buyer
for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of
the 1934 Act. No prior inability to deliver a valid Additional Closing Notice
pursuant to this paragraph shall have any effect on the applicability of the
provisions of this paragraph or the ability of such Buyer to deliver a
subsequent Additional Closing Notice. The provisions of this Section
1(b)(ii)(2)(B) shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 1(b)(ii)(2)(B)) to the extent
necessary to correct this paragraph or any portion of this paragraph which may
be defective or inconsistent with the intended beneficial ownership limitation
contained in this Section 1(b)(ii)(2)(B), or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The
limitation contained in this this Section 1(b)(ii)(2)(B) may not be waived and
shall apply to a successor to such Buyer hereunder.

 

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(c)          Purchase Price. The aggregate purchase price for the Initial Common
Shares and the Initial Warrants to be purchased by each Buyer (each, an “Initial
Purchase Price”) shall be the amount set forth opposite such Buyer’s name in
column (8) on the Schedule of Buyers. The aggregate purchase price for any
Additional Common Shares and related Additional Warrants purchased by a Buyer at
an Additional Closing shall equal the product of (x) $6.08 and (y) such number
of Additional Closing Shares set forth in the applicable Additional Closing
Notice of such Buyer (each, an “Additional Purchase Price”, and together with
the Initial Purchase Price, each, a “Purchase Price”).

 

(d)          Payment of Purchase Price; Deliveries. On each Closing Date, (i)
each Buyer participating in such Closing shall pay its respective Purchase Price
to the Company for the Common Shares and the Warrants to be issued and sold to
such Buyer at such Closing, by wire transfer of immediately available funds in
accordance with the Company’s written wire instructions (less, in the case of
the lead Buyer, the amounts withheld pursuant to Section 4(g)) and (ii) the
Company shall (A) cause Interwest Transfer Company, Inc. (together with any
subsequent transfer agent, the “Transfer Agent”) through the Depository Trust
Company (“DTC”) Fast Automated Securities Transfer Program, to credit such
aggregate number of Common Shares that such Buyer is purchasing at such Closing
to such participating Buyer’s or its designee’s balance account with DTC through
its Deposit/Withdrawal at Custodian system, (B) deliver to each participating
Buyer the Warrants such Buyer is purchasing at such Closing, in each case, duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee and (C) deliver to each such Buyer the other documents, instruments
and certificates set forth in Section 6(a)(ii) duly executed on behalf of the
Company.

 

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(e)          Failure to Timely Deliver Common Shares. If the Company shall fail,
for any reason or for no reason (other than the applicable Buyer’s failure to
deliver the applicable Purchase Price at such applicable Closing), with respect
to any Buyer participating in the applicable Closing on the applicable Closing
Date, to issue and credit such Buyer’s (or its designee’s) balance account with
DTC for such number of Common Shares to which such Buyer is entitled at such
Closing and if on or after such Closing Date such Buyer (or any other Person in
respect, or on behalf, of such Buyer) purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such Buyer of all or any portion of the number of shares of Common Stock, or a
sale of a number of shares of Common Stock equal to all or any portion of the
number of Common Shares that such Buyer so anticipated receiving from the
Company, then, in addition to all other remedies available to such Buyer, the
Company shall, within three (3) Business Days after such Buyer’s request and in
such Buyer’s discretion, either (i) pay cash to such Buyer in an amount equal to
such Buyer’s total purchase price (including reasonable brokerage commissions
and other reasonable out-of-pocket expenses, if any) for the shares of Common
Stock so purchased (including, without limitation, by any other Person in
respect, or on behalf, of such Buyer) (the “Buy-In Price”), at which point the
Company’s obligation to credit such Buyer’s (or its designee’s) balance account
with DTC for the number of Common Shares to which such Buyer is entitled at such
Closing (and to issue such Common Shares) shall terminate, or (ii) promptly
honor its obligation to so issue and credit such Buyer’s (or its designee’s)
balance account with DTC for the number of Common Shares to which such Buyer is
entitled at such Closing and pay cash to such Buyer in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of
Common Shares multiplied by (B) the lowest Closing Sale Price (as defined in the
Warrants) of the Common Stock on any Trading Day during the period commencing on
such Closing Date and ending on the date of such issuance and payment under this
clause (ii).

 

2.          BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer, severally and not jointly, represents and warrants to the Company
with respect to only itself as of the date hereof and as of the Closing Date and
each applicable Additional Closing Date, in the case of a Buyer participating in
an Additional Closing:

 

(a)          Organization; Authority. Such Buyer is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents (as
defined below) to which it is a party and otherwise to carry out its obligations
hereunder and thereunder.

 

(b)          Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and constitutes the
legal, valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with its terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.

 

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(c)          No Conflicts. The execution, delivery and performance by such Buyer
of this Agreement and the consummation by such Buyer of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of such Buyer, (ii) conflict with, or constitute a default (or an
event which 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 of, any agreement, indenture or instrument to which such Buyer is a
party or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws) applicable to
such Buyer, except, in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of such Buyer to perform its obligations hereunder.

 

(d)          Certain Trading Activities. Solely with respect to the Initial
Closing, such Buyer has not directly or indirectly, nor has any Person acting on
behalf of or pursuant to any understanding with such Buyer, engaged in any
transactions in the securities of the Company (including, without limitation,
any Short Sales (as defined below) involving the Company’s securities) during
the period commencing as of the time that such Buyer was first contacted by the
Placement Agent (as defined below) regarding the specific investment in the
Company contemplated by this Agreement and ending immediately prior to the
execution of this Agreement by such Buyer, excluding any transaction in any
securities of the Company that relates to the exercise or assignment by a third
party of any option sold or bought by such Buyer prior to the initial date of
contact of such Buyer. “Short Sales” means all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the Securities Exchange Act of 1934,
as amended (the “1934 Act”) (but shall not be deemed to include the location
and/or reservation of borrowable shares of Common Stock).

 

3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to (x) each of the Buyers as of the date
hereof and as of the Closing Date and (y) each Buyer participating in an
Additional Closing as of each of the applicable Additional Closing Notice Date
and the applicable Additional Closing Date:

 

(a)          Organization and Qualification. Each of the Company and each of its
Subsidiaries are entities duly organized and validly existing and in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization to own their properties and to carry on
their business as now being conducted and as presently proposed to be conducted.
Each of the Company and each of its Subsidiaries is duly qualified as a foreign
entity to do business and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not reasonably be expected to have a
Material Adverse Effect. “Material Adverse Effect” means any material adverse
effect on (i) the business, properties, assets, liabilities, operations
(including results thereof), condition (financial or otherwise) or prospects of
the Company or any Subsidiary, either individually or taken as a whole, (ii) the
transactions contemplated hereby or in any of the other Transaction Documents or
(iii) the authority or ability of the Company to perform any of its obligations
under any of the Transaction Documents. Other than the Persons (as defined
below) set forth in the Company’s Quarterly Report on Form 10-Q, as filed with
the SEC in the SEC Documents (as defined below), the Company has no
Subsidiaries. “Subsidiaries” means any Person in which the Company, directly or
indirectly, (A) owns any of the outstanding capital stock or holds any equity or
similar interest of such Person or (B) controls or operates all or any part of
the business, operations or administration of such Person, and each of the
foregoing, is individually referred to herein as a “Subsidiary.”

 

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(b)          Authorization; Enforcement; Validity. The Company has the requisite
power and authority to enter into and perform its obligations under this
Agreement and the other Transaction Documents and to issue the Securities in
accordance with the terms hereof and thereof. The execution and delivery of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Common Shares, the issuance
of the Warrants and the reservation for issuance and issuance of the Warrant
Shares issuable upon exercise of the Warrants) have been duly authorized by the
Company’s board of directors and (other than the filing with the SEC of one or
more prospectus supplements required by the Registration Statement pursuant to
Rule 424(b) under the 1933 Act (collectively, the “Prospectus Supplement”)
supplementing the base prospectus forming part of the Registration Statement
(the “Prospectus”) and any other filings as may be required by any state
securities agencies) no further filing, consent or authorization is required by
the Company, its board of directors or its stockholders or other governing body.
This Agreement has been, and the other Transaction Documents will be prior to
the Initial Closing, duly executed and delivered by the Company, and each
constitutes the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with its respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies and except as rights to indemnification and to contribution
may be limited by federal or state securities law. “Transaction Documents”
means, collectively, this Agreement, the Warrants, the Irrevocable Transfer
Agent Instructions (as defined below) and each of the other agreements and
instruments entered into or delivered by any of the parties hereto in connection
with the transactions contemplated hereby and thereby, as may be amended from
time to time.

 

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(c)          Issuance of Securities; Registration Statement. The issuance of the
Common Shares and the Warrants are duly authorized and, upon issuance and
payment in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and non-assessable and free from all preemptive or
similar rights, taxes, liens, charges and other encumbrances with respect to the
issue thereof. As of each Closing, the Company shall have reserved from its duly
authorized capital stock not less than 100% of the maximum number of shares of
Common Stock issuable upon exercise of the Warrants (without taking into account
any limitations on the exercise of the Warrants set forth therein). The issuance
of the Warrant Shares is duly authorized, and upon exercise in accordance with
the Warrants, the Warrant Shares, when issued, will be validly issued, fully
paid and non-assessable and free from all preemptive or similar rights, taxes,
liens, charges and other encumbrances with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.
The issuance by the Company of the Securities has been registered under the 1933
Act, the Securities are being issued pursuant to the Registration Statement and
all of the Securities are freely transferable and freely tradable by each of the
Buyers without restriction. The Registration Statement is effective and
available for the issuance of the Securities thereunder and the Company has not
received any notice that the SEC has issued or intends to issue a stop-order
with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened in writing to do so.
The “Plan of Distribution” section under the Registration Statement permits the
issuance and sale of the Securities hereunder and as contemplated by the other
Transaction Documents. Upon receipt of the Securities, each of the Buyers will
have good and marketable title to the Securities. The Registration Statement and
any prospectus included therein, including the Prospectus and the Prospectus
Supplement, complied in all material respects with the requirements of the 1933
Act and the 1934 Act and the rules and regulations of the SEC promulgated
thereunder and all other applicable laws and regulations. At the time the
Registration Statement and any amendments thereto became effective, at the date
of this Agreement and at each deemed effective date thereof pursuant to Rule
430B(f)(2) of the 1933 Act, the Registration Statement and any amendments
thereto complied and will comply in all material respects with the requirements
of the 1933 Act and did not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus and
any amendments or supplements thereto (including, without limitation the
Prospectus Supplement), at the time the Prospectus or any amendment or
supplement thereto was issued and at each Closing Date, complied, and will
comply, in all material respects with the requirements of the 1933 Act and did
not, and will not, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company meets all of the requirements for the use of Form S-3 under the 1933 Act
for the offering and sale of the Securities contemplated by this Agreement and
the other Transaction Documents, and the SEC has not notified the Company of any
objection to the use of the form of the Registration Statement pursuant to Rule
401(g)(1) under the 1933 Act. The Registration Statement meets the requirements
set forth in Rule 415(a)(1)(x) under the 1933 Act. At the earliest time after
the filing of the Registration Statement that the Company or another offering
participant made a bona fide offer (within the meaning of Rule 164(h)(2) under
the 1933 Act) relating to any of the Securities, the Company was not and is not
an “Ineligible Issuer” (as defined in Rule 405 under the 1933 Act). The Company
(i) has not distributed any offering material in connection with the offer or
sale of any of the Securities and (ii) until no Buyer holds any of the
Securities, shall not distribute any offering material in connection with the
offer or sale of any of the Securities to, or by, any of the Buyers (if
required), in each case, other than the Registration Statement, the Prospectus
or the Prospectus Supplement. The offering of the Securities has been registered
with the SEC on Form S-3 under the 1933 Act, and the Securities are being
offered pursuant to Rule 415 promulgated under the 1933 Act.

 

(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 hereby and thereby (including, without limitation, the
issuance of the Common Shares, the Warrants and Warrant Shares and the
reservation for issuance of the Warrant Shares) will not (i) result in a
violation of the Certificate of Incorporation (as defined below) (including,
without limitation, any certificates of designation contained therein) or other
organizational documents of the Company or any of its Subsidiaries, any capital
stock of the Company, or Bylaws (as defined below), (ii) conflict with, or
constitute a default (or an event which 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 of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including, without limitation, foreign, federal and state securities laws and
regulations and the rules and regulations of the Nasdaq Capital Market (the
“Principal Market”)) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except, in the case of clause (ii) or (iii) above, to the extent
such violations that could not reasonably be expected to have a Material Adverse
Effect.

 

9

 

  

(e)          Consents. Except for the filing of the Company’s Listing of
Additional Shares application with the Principal Market, the Company is not
required to obtain any consent from, authorization or order of, or make any
filing or registration with (other than the filing with the SEC of the
Prospectus Supplement and any other filings as may be required by any state
securities agencies), any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under, or contemplated by, the Transaction
Documents, in each case, in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain at or prior to the applicable Closing have been obtained or
effected on or prior to such Closing Date, and neither the Company nor any of
its Subsidiaries are aware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the registration, application or
filings contemplated by the Transaction Documents. The Company is not in
violation of the requirements of the Principal Market and has no knowledge of
any facts or circumstances which could reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future.

 

(f)          Acknowledgment Regarding Buyer’s Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, (ii) an “affiliate” (as
defined in Rule 144 promulgated under the 1933 Act (or a successor rule thereto)
(collectively, “Rule 144”)) of the Company or any of its Subsidiaries or (iii)
to its knowledge, a “beneficial owner” of more than 10% of the shares of Common
Stock (as defined for purposes of Rule 13d-3 of the 1934 Act). The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company or any of its Subsidiaries (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer’s purchase of
the Securities. The Company further represents to each Buyer that the Company’s
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.

 

(g)          Placement Agent’s Fees. The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or brokers’
commissions (other than for Persons engaged by any Buyer or its investment
advisor) relating to or arising out of the transactions contemplated hereby.
Other than FT Global Capital, Inc. (the “Placement Agent”), neither the Company
nor any of its Subsidiaries has engaged any placement agent or other agent in
connection with the offer or sale of the Securities.

 

10

 

  

(h)          No Integrated Offering. None of the Company, its Subsidiaries or
any of their affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to require approval of stockholders of the Company under any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated for quotation.
None of the Company, its Subsidiaries, their affiliates nor any Person acting on
their behalf will take any action or steps that would cause the offering of any
of the Securities to be integrated with other offerings of securities of the
Company.

 

(i)          Dilutive Effect. The Company understands and acknowledges that the
number of Warrant Shares will increase in certain circumstances. The Company
further acknowledges that its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants is
absolute and unconditional, regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.

 

(j)          Application of Takeover Protections; Rights Agreement. The Company
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, interested stockholder,
business combination, poison pill (including, without limitation, any
distribution under a rights agreement) or other similar anti-takeover provision
under the Certificate of Incorporation, Bylaws or other organizational documents
or the laws of the jurisdiction of its incorporation or otherwise which is or
could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any Buyer’s ownership of the Securities. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of shares of Common Stock or a
change in control of the Company or any of its Subsidiaries.

 

(k)          SEC Documents; Financial Statements. Except as set forth on
Schedule 3(k), during the two (2) years prior to the date hereof, the Company
has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the “SEC Documents”). The Company has delivered to the Buyers or their
respective representatives true, correct and complete copies of each of the SEC
Documents not available on the EDGAR system to the extent requested by such
Buyers. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as in effect as of the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material, either individually or in the
aggregate). No other information provided by or on behalf of the Company to any
of the Buyers which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein not misleading, in the light of the
circumstance under which they are or were made. The Company has not been
informed by its independent accountants that they recommend that the Company
amend or restate any of the Financial Statements or that there is any need for
the Company to amend or restate any of the Financial Statements.

 

11

 

  

(l)          Absence of Certain Changes. Since the date of the Company’s most
recent audited financial statements contained in a Form 10-K, except as
disclosed in the SEC Documents filed subsequent to such Form 10-K, there has
been no material adverse change and no material adverse development in the
business, assets, liabilities, properties, operations (including results
thereof), condition (financial or otherwise) or prospects of the Company or any
of its Subsidiaries. Since the date of the Company’s most recent audited
financial statements contained in a Form 10-K, neither the Company nor any of
its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets
outside of the ordinary course of business or (iii) made any material capital
expenditures, individually or in the aggregate, outside of the ordinary course
of business. Neither the Company nor any of its Subsidiaries has taken any steps
to seek protection pursuant to any law or statute relating to bankruptcy,
insolvency, reorganization, receivership, liquidation or winding up, nor does
the Company or any Subsidiary have any knowledge or reason to believe that any
of their respective creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a
creditor to do so. The Company and its Subsidiaries, individually and on a
consolidated basis, are not as of the date hereof, and after giving effect to
the transactions contemplated hereby to occur at the applicable Closing will not
be, Insolvent (as defined below). “Insolvent” means, (A) with respect to the
Company and its Subsidiaries, on a consolidated basis, (1) the present fair
saleable value of the Company’s and its Subsidiaries’ assets is less than the
amount required to pay the Company’s and its Subsidiaries’ total Indebtedness
(as defined below), (2) the Company and its Subsidiaries are unable to pay their
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (3) the Company and its Subsidiaries
intend to incur or believe that they will incur debts that would be beyond their
ability to pay as such debts mature; and (B) with respect to the Company and
each Subsidiary, individually, (1) the present fair saleable value of the
Company’s or such Subsidiary’s (as the case may be) assets is less than the
amount required to pay its respective total Indebtedness, (2) the Company or
such Subsidiary (as the case may be) is unable to pay its respective debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (3) the Company or such Subsidiary
(as the case may be) intends to incur or believes that it will incur debts that
would be beyond its respective ability to pay as such debts mature. Neither the
Company nor any of its Subsidiaries has engaged in any business or in any
transaction, and is not about to engage in any business or in any transaction,
for which the Company’s or such Subsidiary’s remaining assets constitute
unreasonably small capital.

 

12

 

  

(m)          No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
reasonably expected to occur or exist with respect to the Company, any of its
Subsidiaries or any of their respective businesses, properties, liabilities,
prospects, operations (including results thereof) or condition (financial or
otherwise) that (i) would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced, (ii) could reasonably be expected to have
a material adverse effect on any Buyer’s investment hereunder or (iii) could
reasonably be expected to have a Material Adverse Effect.

 

(n)          Conduct of Business; Regulatory Permits. Neither the Company nor
any of its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, any certificate of designation, preferences or
rights of any other outstanding series of preferred stock of the Company or any
of its Subsidiaries or Bylaws or their organizational charter, certificate of
formation or certificate of incorporation or bylaws, respectively. Neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing, except in all
cases for possible violations which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Company is not in violation of any of the
rules, regulations or requirements of the Principal Market and has no knowledge
of any facts or circumstances that could reasonably lead to delisting or
suspension of the Common Stock by the Principal Market in the foreseeable
future. Since the date of the Company’s last Annual Report on Form 10-K filed
with the SEC, (i) the Common Stock has been listed or designated for quotation
on the Principal Market, (ii) trading in the Common Stock has not been suspended
by the SEC or the Principal Market and (iii) the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding
the suspension or delisting of the Common Stock from the Principal Market. The
Company and each of its Subsidiaries possess all certificates, authorizations
and permits issued by the appropriate regulatory authorities necessary to
conduct their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit.

 

(o)          Foreign Corrupt Practices. Neither the Company nor any of its
Subsidiaries nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company or any of its Subsidiaries (i) used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.

 

(p)          Sarbanes-Oxley Act. The Company and each Subsidiary is in
compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002
that are effective as of the date hereof, and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof.

 

13

 

  

(q)          Transactions With Affiliates. Other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors or employees of
the Company or any of its Subsidiaries is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for ordinary course
services as employees, officers or 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 such officer, director or employee or, to the
knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other Person in which any such officer, director or
employee has a substantial interest or is an employee, officer, director,
trustee or partner.

 

(r)          Equity Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 100,000,000 shares of Common Stock,
of which, 21,141,372 are issued and outstanding and 3,847,380 shares are
reserved for issuance pursuant to securities (other than the Common Shares and
the Warrants) exercisable or exchangeable for, or convertible into, shares of
Common Stock and (ii) no shares of preferred stock. 78,858,628 shares of Common
Stock are authorized but unissued shares (including reserved but unissued
shares). All of such outstanding shares are duly authorized and have been, or
upon issuance will be, validly issued and are fully paid and non-assessable.
7,948,168 shares of the Company’s issued and outstanding Common Stock on the
date hereof are owned by Persons who are “affiliates” (as defined in Rule 405 of
the 1933 Act and calculated based on the assumption that only officers,
directors and holders of at least 10% of the Company’s issued and outstanding
Common Stock are “affiliates” without conceding that any such Persons are
“affiliates” for purposes of federal securities laws) of the Company or any of
its Subsidiaries. To the Company’s knowledge, other than as disclosed in the SEC
Documents, no Person owns 10% or more of the Company’s issued and outstanding
shares of Common Stock (calculated based on the assumption that all Convertible
Securities (as defined below), whether or not presently exercisable or
convertible, have been fully exercised or converted (as the case may be) taking
account of any limitations on exercise or conversion (including “blockers”)
contained therein without conceding that such identified Person is a 10%
stockholder for purposes of federal securities laws). Except as disclosed in the
SEC Documents: (i) none of the Company’s or any Subsidiary’s capital stock is
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company or any Subsidiary; (ii) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become
bound; (iv) there are no financing statements securing obligations in any
amounts filed in connection with the Company or any of its Subsidiaries; (v)
there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except pursuant to this Agreement); (vi) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) neither the Company nor any Subsidiary has any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement; and (ix) neither the Company nor any of its Subsidiaries have any
liabilities or obligations required to be disclosed in the SEC Documents which
are not so disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company’s or its Subsidiaries’ respective businesses and
which, individually or in the aggregate, do not or could not reasonably be
expected to have a Material Adverse Effect. The SEC Documents contain true,
correct and complete copies of the Company’s Articles of Incorporation, as
amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s bylaws, as amended and as in effect on the date hereof (the
“Bylaws”), and the terms of all securities convertible into, or exercisable or
exchangeable for, shares of Common Stock and the material rights of the holders
thereof in respect thereto.

 

14

 

  

(s)          Indebtedness and Other Contracts. Except as set forth in the SEC
Documents, neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), (ii) is a party to any contract,
agreement or instrument, the violation of which, or default under which, by the
other party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of, or in default under, any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not reasonably
be expected to result, individually or in the aggregate, in a Material Adverse
Effect, or (iv) is a party to any contract, agreement or instrument relating to
any Indebtedness, the performance of which, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect. For purposes of
this Agreement: “Indebtedness” of any Person means, without duplication (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (including,
without limitation, “capital leases” in accordance with generally accepted
accounting principles) (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; “Contingent Obligation” means, as
to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and “Person” means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department
or agency thereof.

 

15

 

  

(t)          Absence of Litigation. Except as disclosed in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened in
writing against or affecting the Company or any of its Subsidiaries, the Common
Stock or any of the Company’s or its Subsidiaries’ officers or directors which
is outside of the ordinary course of business or individually or in the
aggregate material to the Company or any of its Subsidiaries. No director,
officer or employee of the Company or any of its subsidiaries has willfully
violated 18 U.S.C. §1519 or engaged in spoliation in reasonable anticipation of
litigation. There has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the SEC involving the Company,
any of its Subsidiaries or any current or former director or officer of the
Company or any of its Subsidiaries. The SEC has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by
the Company under the 1933 Act or the 1934 Act, including, without limitation,
the Registration Statement.

 

(u)          Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for, and neither the Company nor any such
Subsidiary has any reason to believe that it will be unable to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not reasonably be expected to have a Material
Adverse Effect.

 

(v)         Employee Relations. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or employs any member of a
union. The Company believes that its and its Subsidiaries’ relations with their
respective employees are good. No executive officer (as defined in Rule 501(f)
promulgated under the 1933 Act) or other key employee of the Company or any of
its Subsidiaries has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. No
executive officer or other key employee of the Company or any of its
Subsidiaries is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing
matters. The Company and its Subsidiaries are in compliance with all federal,
state, local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 

16

 

  

(w)          Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property, and have good and marketable title to
all personal property, owned by them which is material to the business of the
Company and its Subsidiaries, in each case, free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and any of its Subsidiaries. Any real property and
facilities held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company or any of its Subsidiaries.

 

(x)          Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, original works, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights and all applications and registrations therefor (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now conducted and
as presently proposed to be conducted. None of the Company’s or its
Subsidiaries’ Intellectual Property Rights have expired, terminated or been
abandoned, or are expected to expire, terminate or be abandoned, within three
years from the date of this Agreement. The Company has no knowledge of any
infringement by the Company or any of its Subsidiaries of Intellectual Property
Rights of others. There is no claim, action or proceeding being made or brought,
or to the knowledge of the Company or any of its Subsidiaries, being threatened,
against the Company or any of its Subsidiaries regarding their Intellectual
Property Rights. The Company is not aware of any facts or circumstances which
might give rise to any of the foregoing infringements or claims, actions or
proceedings. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.

 

(y)          Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with all Environmental Laws (as defined below), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. “Environmental Laws” means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

 

17

 

  

(z)          Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.

 

(aa)         Tax Status. Except to the extent that the failure to do so would
not be reasonably expected to have a Material Adverse Effect, the Company and
each of its Subsidiaries (i) has timely made or filed all foreign, federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has timely paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company and its Subsidiaries know of
no basis for any such claim. The Company is not operated in such a manner as to
qualify as a passive foreign investment company, as defined in Section 1297 of
the U.S. Internal Revenue Code of 1986, as amended.

 

(bb)         Internal Accounting and Disclosure Controls. Except as set forth on
Schedule 3(bb), the Company and each of its Subsidiaries maintains internal
control over financial reporting (as such term is defined in Rule 13a-15(f)
under the 1934 Act) that is effective to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles, including that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. Neither the Company nor any of its
Subsidiaries has received any notice or correspondence from any accountant or
other Person relating to any potential material weakness or significant
deficiency in any part of the internal controls over financial reporting of the
Company or any of its Subsidiaries.

 

18

 

  

(cc)         Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of its
Subsidiaries and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.

 

(dd)         Investment Company Status. The Company is not, and upon
consummation of the sale of the Securities will not be, an “investment company,”
an affiliate of an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company” as such terms are defined in the Investment Company
Act of 1940, as amended.

 

(ee)         Acknowledgement Regarding Buyers’ Trading Activity. It is
understood and acknowledged by the Company that (i) following the public
disclosure of the transactions contemplated by the Transaction Documents, in
accordance with the terms thereof, none of the Buyers have been asked by the
Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the
Company or any of its Subsidiaries, to desist from effecting any transactions in
or with respect to (including, without limitation, purchasing or selling, long
and/or short) any securities of the Company, or “derivative” securities based on
securities issued by the Company or to hold any of the Securities for any
specified term; (ii) any Buyer, and counterparties in “derivative” transactions
to which any such Buyer is a party, directly or indirectly, presently may have a
“short” position in the Common Stock which was established prior to such Buyer’s
knowledge of the transactions contemplated by the Transaction Documents; and
(iii) each Buyer shall not be deemed to have any affiliation with or control
over any arm’s length counterparty in any “derivative” transaction. The Company
further understands and acknowledges that following the public disclosure of the
transactions contemplated by the Transaction Documents pursuant to the Press
Release (as defined below) one or more Buyers may engage in hedging and/or
trading activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value
and/or number of the Warrant Shares deliverable with respect to the Securities
are being determined and such hedging and/or trading activities, if any, can
reduce the value of the existing stockholders’ equity interest in the Company
both at and after the time the hedging and/or trading activities are being
conducted. The Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement or any other
Transaction Document or any of the documents executed in connection herewith or
therewith.

 

(ff)         Manipulation of Price. Neither the Company nor any of its
Subsidiaries has, and, to the knowledge of the Company, no Person acting on
their behalf has, directly or indirectly, (i) taken any action designed to cause
or to result in the stabilization or manipulation of the price of any security
of the Company or any of its Subsidiaries to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities (other than the Placement
Agent), or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company or any of its
Subsidiaries. For purposes of this section, no press releases put out in the
ordinary course of business shall be interpreted or construed to constitute
manipulation of price.

 

(gg)         U.S. Real Property Holding Corporation. Neither the Company nor any
of its Subsidiaries is, or has ever been, and so long as any of the Securities
are held by any of the Buyers, shall become, a U.S. real property holding
corporation within the meaning of Section 897 of the Internal Revenue Code of
1986, as amended, and the Company and each Subsidiary shall so certify upon any
Buyer’s request.

 

19

 

  

(hh)        Registration Eligibility. At the time of filing and the declaration
of effectiveness of its registration statement on Form S-3, the Company was
eligible to register the issuance and sale of the Securities to the Buyers using
Form S-3 promulgated under the 1933 Act. At the time of the Initial Closing, the
Company is eligible to use such Form S-3 to sell the Securities contemplated
hereby.

 

(ii)          Transfer Taxes. On the applicable Closing Date, all stock transfer
or other taxes (other than income or similar taxes) which are required to be
paid in connection with the issuance and sale of the Securities to be sold to
each Buyer hereunder will be, or will have been, fully paid or provided for by
the Company, and all laws imposing such taxes will be or will have been complied
with.

 

(jj)          Bank Holding Company Act. Neither the Company nor any of its
Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries
or affiliates owns or controls, directly or indirectly, five percent (5%) or
more of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

 

(kk)        Public Utility Holding Act. None of the Company nor any of its
Subsidiaries is a “holding company,” or an “affiliate” of a “holding company,”
as such terms are defined in the Public Utility Holding Act of 2005.

 

(ll)         Federal Power Act. None of the Company nor any of its Subsidiaries
is subject to regulation as a “public utility” under the Federal Power Act, as
amended.

 

(mm)      No Additional Agreements. The Company does not have any agreement or
understanding with any Buyer with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.

 

(nn)       Real Property. Each of the Company and its Subsidiaries holds good
title to all real property, leases in real property, or other interests in real
property owned or held by the Company or any of its Subsidiaries (the “Real
Property”) owned by the Company or any of its Subsidiaries (as applicable). The
Real Property is free and clear of all mortgages, defects, claims, liens,
pledges, charges, taxes, rights of first refusal, encumbrances, security
interests and other encumbrances (collectively “Encumbrances”) and is not
subject to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except for (a) liens for current
taxes not yet due and (b) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property subject thereto.

 

20

 

  

(oo)         Fixtures and Equipment. Each of the Company and its Subsidiaries
(as applicable) has good title to, or a valid leasehold interest in, the
tangible personal property, equipment, improvements, fixtures, and other
personal property and appurtenances that are used by the Company or its
Subsidiary in connection with the conduct of its business (the “Fixtures and
Equipment”). The Fixtures and Equipment are structurally sound, are in good
operating condition and repair, are adequate for the uses to which they are
being put, are not in need of maintenance or repairs except for ordinary,
routine maintenance and repairs and are sufficient for the conduct of the
Company’s and/or its Subsidiaries’ businesses (as applicable) in the manner as
conducted prior to the applicable Closing. Each of the Company and its
Subsidiaries owns all of its Fixtures and Equipment free and clear of all
Encumbrances except for (a) liens for current taxes not yet due and (b) zoning
laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.

 

(pp)         Illegal or Unauthorized Payments; Political Contributions. Neither
the Company nor any of its Subsidiaries nor, to the best of the Company’s
knowledge (after reasonable inquiry of its officers and directors), any of the
officers, directors, employees, agents or other representatives of the Company
or any of its Subsidiaries or any other business entity or enterprise with which
the Company or any Subsidiary is or has been affiliated or associated, has,
directly or indirectly, made or authorized any payment, contribution or gift of
money, property, or services, whether or not in contravention of applicable law,
(a) as a kickback or bribe to any Person or (b) to any political organization,
or the holder of or any aspirant to any elective or appointive public office
except for personal political contributions not involving the direct or indirect
use of funds of the Company or any of its Subsidiaries.

 

(qq)         Money Laundering. The Company and its Subsidiaries are in
compliance with, and have not previously violated, the USA Patriot Act of 2001
and all other applicable U.S. and non-U.S. anti-money laundering laws and
regulations, including, without limitation, the laws, regulations and Executive
Orders and sanctions programs administered by the U.S. Office of Foreign Assets
Control, including, without limitation, (i) Executive Order 13224 of September
23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079
(2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

(rr)         Management. During the past five year period, no current or former
officer or director or, to the knowledge of the Company, 10% or greater
stockholder of the Company or any of its Subsidiaries has been the subject of:

 

(i)          a petition under bankruptcy laws or any other insolvency or
moratorium law or the appointment by a court of a receiver, fiscal agent or
similar officer for such Person, or any partnership in which such person was a
general partner at or within two years before the filing of such petition or
such appointment, or any corporation or business association of which such
person was an executive officer at or within two years before the time of the
filing of such petition or such appointment;

 

(ii)         a conviction in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations that do not relate to
driving while intoxicated or driving under the influence);

 

(iii)        any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining any such person from, or otherwise limiting, the following activities:

 

21

 

 

(1)         Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the United States Commodity
Futures Trading Commission or an associated person of any of the foregoing, or
as an investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity;

 

(2)         Engaging in any particular type of business practice; or

 

(3)         Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of securities laws
or commodities laws;

 

(iv)        any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any authority barring, suspending or otherwise limiting for more
than 60 days the right of any such person to engage in any activity described in
the preceding sub paragraph, or to be associated with persons engaged in any
such activity;

 

(v)         a finding by a court of competent jurisdiction in a civil action or
by the SEC or other authority to have violated any securities law, regulation or
decree and the judgment in such civil action or finding by the SEC or any other
authority has not been subsequently reversed, suspended or vacated; or

 

(vi)        a finding by a court of competent jurisdiction in a civil action or
by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding has not been
subsequently reversed, suspended or vacated.

 

(ss)         Registration Rights. Except as set forth on Schedule 3(ss), no
holder of securities of the Company has rights to the registration of any
securities of the Company because of the filing of the Registration Statement or
the issuance of the Securities hereunder that could expose the Company to
material liability or any Buyer to any liability or that could impair the
Company’s ability to consummate the issuance and sale of the Securities in the
manner, and at the times, contemplated hereby, which rights have not been waived
by the holder thereof as of the date hereof.

 

(tt)         Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Buyers or their agents or
counsel with any information that constitutes or could reasonably be expected to
constitute material, non-public information concerning the Company or any of its
Subsidiaries, other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Buyers regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries is true and
correct and does 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 the light of the circumstances under which they were made, not misleading.
Each press release issued by the Company or any of its Subsidiaries during the
twelve (12) months preceding the date of this Agreement did not at the time of
release 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 the light of the circumstances under which they are made,
not misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, liabilities, prospects, operations (including results thereof) or
conditions (financial or otherwise), which, under applicable law, rule or
regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly disclosed. The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

 

22

 

  

4.COVENANTS.

 

(a)          Maintenance of Registration Statement

 

For so long as any of the Warrants remain outstanding or any Additional Common
Shares or Additional Warrants are issuable hereunder, the Company shall use its
best efforts to maintain the effectiveness of the Registration Statement for the
issuance thereunder of the Additional Common Shares, Additional Warrants, and/or
Warrant Shares, provided that if at any time while the Warrants are outstanding
or any Additional Common Shares or Additional Warrants are issuable hereunder
the Company shall be ineligible to utilize Form S-3 (or any successor form) for
the purpose of issuance of the Additional Common Shares, Additional Warrants,
and/or Warrant Shares, the Company shall promptly amend the Registration
Statement on such other form as may be necessary to maintain the effectiveness
of the Registration Statement for this purpose. If at any time during the period
commencing on the date hereof and ending on the last Trading Day during the
Additional Closing Eligibility Period (after giving effect to any extensions
thereof in accordance herewith), the Registration Statement is not effective or
is not otherwise available for the issuance of the Securities or any prospectus
contained therein is not available for use (each, a “Registration Failure”), the
Company shall immediately notify the holders of the Securities in writing that
the Registration Statement is not then effective or a prospectus contained
therein is not available for use, the Company shall promptly (but no later than
10 Trading Days after such Registration Failure) file a new registration
statement (each, a “Replacement Registration Statement”) with respect to the
Additional Common Shares, Additional Warrants and Warrant Shares that are then
eligible to be issued hereunder and/or pursuant to the Warrants, as applicable,
and thereafter shall promptly notify such holders when the Registration
Statement or such Replacement Registration Statement, as applicable, is
effective and available for the issuance of the Securities or such prospectus is
again available for use. The Company shall use its best efforts to cause any
Replacement Registration Statement to be declared effective as soon as
practicable but no later than ninety (90) calendar days following the filing
thereof with the SEC (such effective date, the “Replacement Registration
Statement Effective Date”). On the Replacement Registration Statement Effective
Date, solely with respect to any subsequent issuance of any Additional Common
Shares or Additional Warrants hereunder or any Warrant Shares pursuant to any
Warrants, the definition of “Registration Statement” as used herein and under
the Warrants shall be deemed to be amended and restated as such applicable
Replacement Registration Statement, mutatis mutandis.

 

23

 

  

(b)          Prospectus Supplement and Blue Sky. Immediately prior to execution
of this Agreement, the Company shall have delivered to the Buyers, and as soon
as practicable after execution of this Agreement the Company shall file, the
Prospectus Supplement with respect to the Initial Common Shares, the Initial
Warrants and the Initial Warrant Shares as required under, and in conformity
with, the 1933 Act, including Rule 424(b) thereunder. Immediately prior to each
Additional Closing Date, the Company shall have delivered to the Buyers, and as
soon as practicable after the Additional Closing Notice Date the Company shall
file, the Prospectus Supplement with respect to the Additional Common Shares,
the Additional Warrants and the Additional Warrant Shares related to such
Additional Closing as required under, and in conformity with, the 1933 Act,
including Rule 424(b) thereunder. If required, the Company, on or before the
applicable Closing Date, shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to, qualify the
Securities for sale to the Buyers at the applicable Closing pursuant to this
Agreement under applicable securities or “Blue Sky” laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Buyers on or prior to such
Closing Date. Without limiting any other obligation of the Company under this
Agreement, the Company shall timely make all filings and reports relating to the
offer and sale of the Securities required under all applicable securities laws
(including, without limitation, all applicable federal securities laws and all
applicable “Blue Sky” laws), and the Company shall comply with all applicable
federal, state and local laws, statutes, rules, regulations and the like
relating to the offering and sale of the Securities to the Buyers.

 

(c)          Reporting Status. Until the date on which no Warrants are
outstanding (the “Reporting Period”), the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would no
longer require such filings or otherwise permit such termination.

 

(d)          Use of Proceeds. The Company shall use the proceeds from the sale
of the Securities hereunder (i) with respect to at least $300,000 of the
proceeds, which the Company shall initial deposit into a non-China based bank
account or a law firm’s account, solely for the payment of the fees and expenses
of the Company’s attorneys, auditors and/or investor relations firms of the
Company and (ii) with respect to the remaining net proceeds, for general working
capital purposes. Without limiting the foregoing, none of such proceeds shall be
used, directly or indirectly, (x) for the satisfaction of any debt of the
Company or any of its Subsidiaries (other than payment of trade payables
incurred after the date hereof in the ordinary course of business of the Company
and its Subsidiaries and consistent with prior practices), (y) for the
redemption of any securities of the Company or (z) with respect to any
litigation involving the Company or any of its Subsidiaries (including, without
limitation, (A) any settlement thereof or (B) the payment of any costs or
expenses related thereto).

 

(e)          Financial Information. The Company agrees to send the following to
each Buyer during the Reporting Period (i) unless the following are filed with
the SEC through EDGAR and are available to the public through the EDGAR system,
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim
reports or any consolidated balance sheets, income statements, stockholders’
equity statements and/or cash flow statements for any period other than annual,
any Current Reports on Form 8-K and any registration statements (other than on
Form S-8) or amendments filed pursuant to the 1933 Act, (ii) unless the
following are filed with the SEC through EDGAR and are available to the public
through the EDGAR system, on the same day as the release thereof, facsimile
copies of all press releases issued by the Company or any of its Subsidiaries
and (iii) copies of any notices and other information made available or given to
the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.

 

24

 

  

(f)          Listing. On or prior to each Closing Date, the Company shall
promptly secure the listing or designation for quotation (as the case may be) of
all of the Common Shares and Warrant Shares related to such Closing upon each
national securities exchange and automated quotation system, if any, upon which
the Common Stock is then listed or designated for quotation (as the case may be)
(subject to official notice of issuance) (but in no event later than the
applicable Closing Date) and shall maintain such listing or designation for
quotation (as the case may be) of all the shares of Common Stock from time to
time issuable under the terms of the Transaction Documents on such national
securities exchange or automated quotation system. The Company shall maintain
the Common Stock’s listing or designation for quotation (as the case may be) on
the Principal Market, The New York Stock Exchange, the NYSE MKT, the Nasdaq
Global Market or the Nasdaq Global Select Market (each, an “Eligible Market”).
Neither the Company nor any of its Subsidiaries shall take any action which
could be reasonably expected to result in the delisting or suspension of the
Common Stock on an Eligible Market. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(f).

 

(g)          Fees. The Company shall reimburse Greenberg Traurig, LLP for all
costs and expenses incurred by it or its affiliates in connection with the
transactions contemplated by the Transaction Documents (including, without
limitation, all legal fees and disbursements in connection therewith,
structuring, documentation and implementation of the transactions contemplated
by the Transaction Documents and due diligence and regulatory filings in
connection therewith) in a non-accountable amount equal to $40,000, which amount
shall be withheld by the lead Buyer from its Purchase Price at the Initial
Closing or paid by the Company on demand by Greenberg Traurig, LLP if the lead
Buyer terminates its obligations under this Agreement in accordance with Section
7 (as the case may be), in either case, less $15,000 which was previously
advanced to Greenberg Traurig, LLP by the Company. The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, transfer agent fees, DTC fees or broker’s commissions (other than for
Persons engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby (including, without limitation, any fees payable to the
Placement Agent, who is the Company’s sole placement agent in connection with
the transactions contemplated by this Agreement). The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, reasonable attorneys’ fees and out-of-pocket expenses)
arising in connection with any claim relating to any such payment. Except as
otherwise set forth in the Transaction Documents, each party to this Agreement
shall bear its own expenses in connection with the sale of the Securities to the
Buyers.

 

25

 

 

(h)          Pledge of Securities. Notwithstanding anything to the contrary
contained in this Agreement, the Company acknowledges and agrees that the
Securities may be pledged by a Buyer in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Buyer effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Buyer.

 

(i)          Disclosure of Transactions and Other Material Information. The
Company shall, on or before 8:30 a.m., New York time, on the date of this
Agreement, (i) issue a press release (the “Press Release”) reasonably acceptable
to the Buyers disclosing all the material terms of the transactions contemplated
by the Transaction Documents and (ii) file a Current Report on Form 8-K
describing all the material terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and attaching all the
material Transaction Documents (including, without limitation, this Agreement
(and all schedules to this Agreement) and the form of Warrants) (including all
attachments, the “Initial 8-K Filing”). From and after the issuance of the Press
Release, the Company shall have disclosed all material, non-public information
(if any) delivered to any of the Buyers by the Company or any of its
Subsidiaries, or any of their respective officers, directors, employees or
agents in connection with the transactions contemplated by the Transaction
Documents. The Company shall, between 9:30 and 9:45 a.m., New York time, on the
first (1st) Business Day after any Buyer delivers an Additional Closing Notice
to the Company, file a Current Report on Form 8-K (each, an “Additional 8-K
Filing”, and together with the Initial 8-K Filing, the “8-K Filings”) reasonably
acceptable to the Buyers, disclosing that a Buyer (without disclosing the
identity of such Buyer in the body of such Additional 8-K Filing) has elected to
deliver an Additional Closing Notice and attaching such Additional Closing
Notice and all material Transaction Documents with respect to such Additional
Closing (to the extent not previously included in a filing with the SEC). From
and after the filing of each Additional 8-K Filing, the Company shall have
disclosed all material, non-public information (if any) provided to such Buyers
by the Company or any of its Subsidiaries or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. The Company shall not, and the Company shall cause
each of its Subsidiaries and each of its and their respective officers,
directors, employees and agents, not to, provide any Buyer with any material,
non-public information regarding the Company or any of its Subsidiaries from and
after the issuance of the Press Release without the express prior written
consent of such Buyer. In the event of a breach of any of the foregoing
covenants or any of the covenants contained in Section 4(n) by the Company, any
of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents (as determined in the reasonable good faith judgment of
such Buyer), in addition to any other remedy provided herein or in the
Transaction Documents, such Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, non-public information without the prior approval by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees or agents; provided, however, that the Buyer shall first
give the Company at least four (4) hours’ advance written notice of such
intended public disclosure to allow the Company an opportunity to release such
information itself. No Buyer shall have any liability to the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees,
stockholders or agents, for any such disclosure. Subject to the foregoing,
neither the Company, its Subsidiaries nor any Buyer shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, the Company shall be entitled, without
the prior approval of any Buyer, to make any press release or other public
disclosure with respect to such transactions (A) in substantial conformity with
the 8-K Filings and contemporaneously therewith and (B) as is required by
applicable law and regulations (provided that in the case of clause (A) each
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release). Without the prior
written consent of the applicable Buyer, the Company shall not (and shall cause
each of its Subsidiaries and affiliates to not) disclose the name of such Buyer
in any filing (other than the 8-K Filings), announcement, release or otherwise.
Notwithstanding anything contained in this Agreement to the contrary and without
implication that the contrary would otherwise be true, the Company expressly
acknowledges and agrees that no Buyer has had, and no Buyer shall have (unless
expressly agreed to by a particular Buyer after the date hereof in a written
definitive and binding agreement executed by the Company and such particular
Buyer (it being understood and agreed that no Buyer may bind any other Buyer
with respect thereto)), any duty of confidentiality with respect to, or a duty
not to trade on the basis of, any information regarding the Company or any of
its Subsidiaries.

 

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(j)          Additional Issuance of Securities. The Company agrees that for the
period commencing on the date hereof and ending on the date immediately
following the twenty (20) Trading Day anniversary of the Initial Closing Date
(provided that such period shall be extended by the number of Trading Days
during such period and any extension thereof contemplated by this proviso on
which the Registration Statement is not effective or any prospectus contained
therein is not available for use) (the “Restricted Period”), neither the Company
nor any of its Subsidiaries shall directly or indirectly issue, offer, sell,
grant any option or right to purchase, or otherwise dispose of (or announce any
issuance, offer, sale, grant of any option or right to purchase or other
disposition of) any equity security or any equity-linked or related security
(including, without limitation, any “equity security” (as that term is defined
under Rule 405 promulgated under the 1933 Act), any Convertible Securities, any
preferred stock or any purchase rights) (any such issuance, offer, sale, grant,
disposition or announcement (whether occurring during the Restricted Period or
at any time thereafter) is referred to as a “Subsequent Placement”).
Notwithstanding the foregoing, this Section 4(j) shall not apply in respect of
the issuance of (i) shares of Common Stock or standard options to purchase
Common Stock to directors, officers, employees or consultants of the Company or
any of its Subsidiaries in their capacity as such pursuant to an Approved Share
Plan (as defined below) (it being expressly understood and agreed that lawyers,
law firms, accountants, accounting firms and other similar professional advisors
and professional advisory firms are not consultants), provided that (A) all such
issuances (taking into account the shares of Common Stock issuable upon exercise
of such options) after the date hereof pursuant to this clause (i) do not, in
the aggregate, exceed more than 500,000 shares of Common Stock (adjusted for
stock splits, stock combinations and other similar transactions) and (B) the
exercise price of any such options is not lowered, none of such options are
amended to increase the number of shares issuable thereunder and none of the
terms or conditions of any such options are otherwise materially changed in any
manner that adversely affects any of the Buyers; (ii) shares of Common Stock
issued upon the conversion or exercise of Convertible Securities (other than
standard options to purchase Common Stock issued pursuant to an Approved Share
Plan that are covered by clause (i) above) issued prior to the date hereof,
provided that the conversion price of any such Convertible Securities (other
than standard options to purchase Common Stock issued pursuant to an Approved
Share Plan that are covered by clause (i) above) is not lowered, none of such
Convertible Securities (other than standard options to purchase Common Stock
issued pursuant to an Approved Share Plan that are covered by clause (i) above)
are amended to increase the number of shares issuable thereunder and none of the
terms or conditions of any such Convertible Securities (other than standard
options to purchase Common Stock issued pursuant to an Approved Share Plan that
are covered by clause (i) above) are otherwise materially changed in any manner
that adversely affects any of the Buyers; (iii) Common Shares issued pursuant to
a bona fide firm commitment underwritten public offering with a nationally
recognized underwriter that generates gross proceeds to the Company in excess of
$35,000,000 (but expressly excluding “at-the-market offerings” (as defined in
Rule 415(a)(4) under the 1933 Act) and “equity lines of credit”); (iv) Common
Shares issued in connection with strategic alliances, strategic mergers and
acquisitions and strategic partnerships, provided that (A) the primary purpose
of such issuance is not to raise capital as determined in good faith by the
Buyers, (B) the purchaser or acquirer of such Common Shares in such issuance
solely consists of either (1) the actual participants in such strategic alliance
or strategic partnership, (2) the actual owners of such assets or securities
acquired in such merger or acquisition or (3) the shareholders, partners or
members of the foregoing Persons, (C) the number or amount (as the case may be)
of such Common Shares issued to such Person by the Company shall not be
disproportionate to such Person’s actual participation in such strategic
alliance or strategic partnership or ownership of such assets or securities to
be acquired by the Company (as applicable) and (D) all such issuances of Common
Shares after the date hereof pursuant to this clause (iv) do not, in the
aggregate, exceed more than 2,000,000 Common Shares (adjusted for share splits,
share combinations and other similar transactions); (v) standard warrants to
purchase Common Shares and the Common Shares issuable upon exercise of such
warrants issued solely to placement agents solely as compensation for services
rendered to the Company in their capacity as such in connection with a
Subsequent Placement, provided that (A) all such issuances (taking into account
the Common Shares issuable upon exercise of such warrants) after the date hereof
pursuant to this clause (i) do not, in the aggregate, exceed more than 2,000,000
Common Shares (adjusted for share splits, share combinations and other similar
transactions), (B) the exercise price of any such warrants is not lower than the
Exercise Price (as defined in the Warrants) and (C) the exercise price of any
such warrants is not lowered, none of such warrants are amended to increase the
number of shares issuable thereunder and none of the terms or conditions of any
such warrants are otherwise materially changed in any manner that adversely
affects any of the Buyers; (vi) the Common Shares; (vii) the Warrants and (viii)
the Warrant Shares (each of the foregoing in clauses (i) through (viii),
collectively the “Excluded Securities”). “Approved Share Plan” means any
employee benefit plan which has been approved by the board of directors of the
Company prior to or subsequent to the date hereof pursuant to which shares of
Common Stock and standard options to purchase Common Stock may be issued to any
employee, officer, director or consultant for services provided to the Company
or any of its Subsidiaries in their capacity as such. “Convertible Securities”
means any capital stock or other security of the Company or any of its
Subsidiaries that is at any time and under any circumstances directly or
indirectly convertible into, exercisable or exchangeable for, or which otherwise
entitles the holder thereof to acquire, any capital stock or other security of
the Company (including, without limitation, Common Stock) or any of its
Subsidiaries.

 

27

 

  

(k)          Reservation of Shares. So long as any of the Warrants remain
outstanding, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than 100% of the
maximum number of shares of Common Stock issuable upon exercise of all the
Warrants (without regard to any limitations on the exercise of the Warrants set
forth therein).

 

28

 

 

(l)          Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
reasonably be expected to result, either individually or in the aggregate, in a
Material Adverse Effect.

 

(m)          Variable Rate Transaction. So long as any Warrants remain
outstanding, the Company and each Subsidiary shall be prohibited from effecting
or entering into an agreement to effect any Subsequent Placement involving a
Variable Rate Transaction. “Variable Rate Transaction” means a transaction in
which the Company or any Subsidiary (i) issues or sells any Convertible
Securities either (A) at a conversion, exercise or exchange rate or other price
that is based upon and/or varies with the trading prices of, or quotations for,
the shares of Common Stock at any time after the initial issuance of such
Convertible Securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance of
such Convertible Securities or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the Company or the
market for the Common Stock, other than pursuant to a customary “weighted
average” anti-dilution provision or (ii) enters into any agreement (including,
without limitation, an “equity line of credit” or an “at-the-market offering”)
whereby the Company or any Subsidiary may sell securities at a future determined
price (other than standard and customary “preemptive” or “participation”
rights). Each Buyer shall be entitled to obtain injunctive relief against the
Company and its Subsidiaries to preclude any such issuance, which remedy shall
be in addition to any right to collect damages.

 

(n)          Participation Right. From the date hereof through the first
anniversary of the Initial Closing Date, neither the Company nor any of its
Subsidiaries shall, directly or indirectly, effect any Subsequent Placement
unless the Company shall have first complied with this Section 4(n). The Company
acknowledges and agrees that the right set forth in this Section 4(n) is a right
granted by the Company, separately, to each Buyer.

 

(i)          At least three (3) Trading Days prior to any proposed or intended
Subsequent Placement, the Company shall deliver to each Buyer a written notice
of its proposal or intention to effect a Subsequent Placement (each such notice,
a “Pre-Notice”), which Pre-Notice shall not contain any information (including,
without limitation, material, non-public information) other than: (A) a
statement that the Company proposes or intends to effect a Subsequent Placement,
(B) a statement that the statement in clause (A) above does not constitute
material, non-public information and (iii) a statement informing such Buyer that
it is entitled to receive an Offer Notice (as defined below) with respect to
such Subsequent Placement upon its written request. Upon the written request of
a Buyer within two (2)) Trading Days after the Company’s delivery to such Buyer
of such Pre-Notice, and only upon a written request by such Buyer, the Company
shall promptly, but no later than one (1) Trading Day after such request,
deliver to such Buyer an irrevocable written notice (the “Offer Notice”) of any
proposed or intended issuance or sale or exchange (the “Offer”) of the
securities being offered (the “Offered Securities”) in a Subsequent Placement,
which Offer Notice shall (1) identify and describe the Offered Securities, (2)
describe the price and other terms upon which they are to be issued, sold or
exchanged, and the number or amount of the Offered Securities to be issued, sold
or exchanged, (3) identify the Persons (if known) to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (4) offer to
issue and sell to or exchange with such Buyer in accordance with the terms of
the Offer thirty five percent (35%) of the Offered Securities, provided that the
number of Offered Securities which such Buyer shall have the right to subscribe
for under this Section 4(n) shall be (a) based on such Buyer’s pro rata portion
of the aggregate number of Common Shares purchased hereunder by all Buyers (the
“Basic Amount”), and (b) with respect to each Buyer that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to
the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase
or acquire should the other Buyers subscribe for less than their Basic Amounts
(the “Undersubscription Amount”).

 

29

 

 

(ii)         To accept an Offer, in whole or in part, such Buyer must deliver a
written notice to the Company prior to the end of the third (3rd) Business Day
after such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting
forth the portion of such Buyer’s Basic Amount that such Buyer elects to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then such Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the “Available
Undersubscription Amount”), such Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent it deems reasonably
necessary. Notwithstanding the foregoing, if the Company desires to modify or
amend the terms and conditions of the Offer prior to the expiration of the Offer
Period, the Company may deliver to each Buyer a new Offer Notice and the Offer
Period shall expire on the third (3rd) Business Day after such Buyer’s receipt
of such new Offer Notice.

 

(iii)        The Company shall have five (5) days from the expiration of the
Offer Period above (A) to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by a
Buyer (the “Refused Securities”) pursuant to a definitive agreement(s) (the
“Subsequent Placement Agreement”), but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Offer Notice and (B) to publicly announce
(1) the execution of such Subsequent Placement Agreement, and (2) either (a) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (b) the termination of such Subsequent Placement Agreement, which
shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent
Placement Agreement and any documents contemplated therein filed as exhibits
thereto.

 

30

 

 

(iv)        In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 4(n)(iii) above), then such Buyer may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(n)(ii) above multiplied by a fraction, (A) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to this Section 4(n) prior to such reduction) and (B)
the denominator of which shall be the original amount of the Offered Securities.
In the event that any Buyer so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Company may not issue,
sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Buyers in accordance with Section 4(n)(i) above.

 

(v)         Upon the closing of the issuance, sale or exchange of all or less
than all of the Refused Securities, such Buyer shall acquire from the Company,
and the Company shall issue to such Buyer, the number or amount of Offered
Securities specified in its Notice of Acceptance. The purchase by such Buyer of
any Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and such Buyer of a separate purchase agreement relating
to such Offered Securities reasonably satisfactory in form and substance to such
Buyer and its counsel.

 

(vi)        Any Offered Securities not acquired by a Buyer or other Persons in
accordance with this Section 4(n) may not be issued, sold or exchanged until
they are again offered to such Buyer under the procedures specified in this
Agreement.

 

(vii)       The Company and each Buyer agree that if any Buyer elects to
participate in the Offer, neither the Subsequent Placement Agreement with
respect to such Offer nor any other transaction documents related thereto
(collectively, the “Subsequent Placement Documents”) shall include any term or
provision whereby such Buyer shall be required to agree to any restrictions on
trading as to any securities of the Company or be required to consent to any
amendment to or termination of, or grant any waiver, release or the like under
or in connection with, any agreement previously entered into with the Company or
any instrument received from the Company.

 

(viii)      Notwithstanding anything to the contrary in this Section 4(n) and
unless otherwise agreed to by such Buyer, the Company shall either confirm in
writing to such Buyer that the transaction with respect to the Subsequent
Placement has been abandoned or shall publicly disclose its intention to issue
the Offered Securities, in either case in such a manner such that such Buyer
will not be in possession of any material, non-public information, by the fifth
(5th) Business Day following delivery of the Offer Notice. If by such fifth
(5th) Business Day, no public disclosure regarding a transaction with respect to
the Offered Securities has been made, and no notice regarding the abandonment of
such transaction has been received by such Buyer, such transaction shall be
deemed to have been abandoned and such Buyer shall not be in possession of any
material, non-public information with respect to the Company or any of its
Subsidiaries. Should the Company decide to pursue such transaction with respect
to the Offered Securities, the Company shall provide such Buyer with another
Offer Notice in accordance with, and subject to, the terms of this Section 4(n)
and such Buyer will again have the right of participation set forth in this
Section 4(n). The Company shall not be permitted to deliver more than one Offer
Notice to such Buyer in any forty-five (45) day period, except as expressly
contemplated by the last sentence of Section 4(n)(ii).

 

31

 

  

(ix)         The restrictions contained in this Section 4(n) shall not apply in
connection with the issuance of any Excluded Securities. The Company shall not
circumvent the provisions of this Section 4(n) by providing terms or conditions
to one Buyer that are not provided to all.

 

(o)          Passive Foreign Investment Company. The Company shall conduct its
business in such a manner as will ensure that the Company will not be deemed to
constitute a passive foreign investment company within the meaning of Section
1297 of the U.S. Internal Revenue Code of 1986, as amended.

 

(p)          Exercise Procedures. The form of Notice of Exercise included in
each of the Warrants set forth the totality of the procedures required of the
Buyers in order to exercise the Warrants. No additional legal opinion, other
information or instructions shall be required of the Buyers to exercise their
Warrants. The Company shall honor exercises of the Warrants and shall deliver
the Warrant Shares in accordance with the terms, conditions and time periods set
forth in the Warrants.

 

(q)          Closing Documents. On or prior to fourteen (14) calendar days after
each Closing Date, the Company agrees to deliver, or cause to be delivered, to
each Buyer and Greenberg Traurig, LLP executed copies of the Transaction
Documents, Securities and other documents required to be delivered to any party
pursuant to Section 6 hereof with respect to such Closing.

 

5.          REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

 

(a)          Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Securities), a register for the Common Shares and the
Warrants in which the Company shall record the name and address of the Person in
whose name the Common Shares and the Warrants have been issued (including the
name and address of each transferee), the number of Common Shares held by such
Person and the number of Warrant Shares issuable upon exercise of the Warrants
held by such Person. The Company shall keep the register open and available at
all times during business hours for inspection of any Buyer or its legal
representatives.

 

(b)          Transfer Agent Instructions. The Company shall issue irrevocable
instructions to the Transfer Agent in the form previously provided to the
Company (the “Irrevocable Transfer Agent Instructions”) to issue certificates or
credit shares to the applicable balance accounts at DTC, registered in the name
of each Buyer or its respective nominee(s), for the Common Shares and the
Warrant Shares in such amounts as specified from time to time by each Buyer to
the Company upon delivery of the Common Shares or the exercise of the Warrants
(as the case may be). The Company represents and warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b) will be given by the Company to the Transfer Agent with respect to
the Securities, and that the Securities shall otherwise be freely transferable
on the books and records of the Company. If a Buyer effects a sale, assignment
or transfer of the Securities, the Company shall permit the transfer and shall
promptly instruct the Transfer Agent to issue one or more certificates or credit
shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Buyer to effect such sale, transfer or
assignment. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to each Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that
each Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required. Any fees (with respect to the Transfer
Agent, counsel to the Company or otherwise) associated with the issuance of such
opinion shall be borne by the Company.

 

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(c)          Legends. Certificates and any other instruments evidencing the
Securities shall not bear any restrictive or other legend.

 

6.ADDITIONAL CLOSING DELIVERIES OF THE COMPANY.

 

(a)          Deliveries. The Company shall deliver to each Buyer participating
in the applicable Closing on such applicable Closing Date each of the following:

 

(i)          The opinion of Kaufman & Canoles, P.C., the Company’s counsel,
dated as of such Closing Date, in the form previously provided to the Company.

 

(ii)         A copy of the Irrevocable Transfer Agent Instructions, in the form
previously provided to the Company, that have been delivered to and acknowledged
in writing by the Transfer Agent.

 

(iii)        A certificate evidencing the formation and good standing of the
Company and each of its Subsidiaries in each such entity’s jurisdiction of
formation issued by the Secretary of State (or comparable office) of such
jurisdiction of formation as of a date within ten (10) days of such Closing
Date.

 

(iv)        A certificate evidencing the Company’s qualification as a foreign
corporation and good standing issued by the Secretary of State (or comparable
office) of each jurisdiction in which the Company conducts business and is
required to so qualify, as of a date within ten (10) days of such Closing Date.

 

(v)         A certified copy of the Certificate of Incorporation as certified by
the Secretary of State of the Company’s jurisdiction of formation within ten
(10) days of such Closing Date.

 

(vi)        A certificate, in the form previously provided to the Company,
executed by an officer of the Company and dated as of such Closing Date, as to
(i) the resolutions consistent with Section 3(b) as adopted by the Company’s
board of directors in a form reasonably acceptable to such Buyer, (ii) the
Certificate of Incorporation and (iii) the Bylaws, each as in effect at such
Closing.

 

(vii)       A letter from the Transfer Agent certifying the number of shares of
Common Stock outstanding on such Closing Date immediately prior to such Closing.

 

33

 

  

(viii)      A letter on the letterhead of the Company, duly executed by the
Chief Executive Officer of the Company, setting forth the wire amounts of each
Buyer participating in such Closing and the wire transfer instructions of the
Company.

 

(ix)         Such other documents, instruments or certificates relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.

 

7.TERMINATION.

 

In the event that the Initial Closing shall not have occurred with respect to a
Buyer within five (5) days after the date hereof, then such Buyer shall have the
right to terminate its obligations under this Agreement with respect to itself
at any time on or after the close of business on such date without liability of
such Buyer to any other party; provided, however, (a) the right to terminate
this Agreement under this Section 7 shall not be available to such Buyer if the
failure of the transactions contemplated by this Agreement to have been
consummated by such date is the result of such Buyer’s failure to proceed to
Closing or other breach of this Agreement and (b) the abandonment of the sale
and purchase of the Common Shares and the Warrants shall be applicable only to
such Buyer providing such written notice, provided further that no such
termination shall affect any obligation of the Company under this Agreement to
reimburse such Buyer for the expenses described in Section 4(g) above. Nothing
contained in this Section 7 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.

 

8.MISCELLANEOUS.

 

(a)          Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement and
the other Transaction Documents shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdiction other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or under any
of the other Transaction Documents or in connection herewith or therewith or
with any transaction contemplated hereby or thereby or discussed herein or
therein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Nothing contained herein shall be deemed or operate to preclude any Buyer from
bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company’s obligations to such Buyer or to enforce
a judgment or other court ruling in favor of such Buyer. The Company hereby
appoints the agent for service of process listed in Schedule 8(a), as its agent
for service of process in New York. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

34

 

  

(b)          Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page
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
signature page were an original thereof.

 

(c)          Headings; Gender. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Unless the context clearly indicates
otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,”
“includes,” “include” and words of like import shall be construed broadly as if
followed by the words “without limitation.” The terms “herein,” “hereunder,”
“hereof” and words of like import refer to this entire Agreement instead of just
the provision in which they are found.

 

(d)          Severability. If any provision of this Agreement is prohibited by
law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest extent
that it would be valid and enforceable, and the invalidity or unenforceability
of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

35

 

  

(e)          Entire Agreement; Amendments. This Agreement, the other Transaction
Documents and the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein supersede all other prior oral or
written agreements between the Buyers, the Company, their affiliates and Persons
acting on their behalf solely with respect to the matters contained herein and
therein, and this Agreement, the other Transaction Documents, the schedules and
exhibits attached hereto and thereto and the instruments referenced herein and
therein contain the entire understanding of the parties solely with respect to
the matters covered herein and therein; provided, however, nothing contained in
this Agreement or any other Transaction Document shall (or shall be deemed to)
(i) have any effect on any agreements any Buyer has entered into with the
Company or any of its Subsidiaries prior to the date hereof with respect to any
prior investment made by such Buyer in the Company or (ii) waive, alter, modify
or amend in any respect any obligations of the Company or any of its
Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in
any agreement entered into prior to the date hereof between or among the Company
and/or any of its Subsidiaries and any Buyer and all such agreements shall
continue in full force and effect. Except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. For clarification
purposes, the Recitals are part of this Agreement. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and each of the Buyers. No waiver shall be effective unless it is in
writing and signed by an authorized representative of the waiving party. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, all holders of Common Shares or all holders of the
Warrants (as the case may be). The Company has not, directly or indirectly, made
any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment or
promise or has any other obligation to provide any financing to the Company, any
Subsidiary or otherwise. As a material inducement for each Buyer to enter into
this Agreement, the Company expressly acknowledges and agrees that (A) no due
diligence or other investigation or inquiry conducted by a Buyer, any of its
advisors or any of its representatives shall affect such Buyer’s right to rely
on, or shall modify or qualify in any manner or be an exception to any of, the
Company’s representations and warranties contained in this Agreement or any
other Transaction Document, (B) nothing contained in the Registration Statement,
the Prospectus or the Prospectus Supplement shall affect such Buyer’s right to
rely on, or shall modify or qualify in any manner or be an exception to any of,
the Company’s representations and warranties contained in this Agreement or any
other Transaction Document and (C) unless a provision of this Agreement or any
other Transaction Document is expressly preceded by the phrase “except as
disclosed in the SEC Documents,” nothing contained in any of the SEC Documents
shall affect such Buyer’s right to rely on, or shall modify or qualify in any
manner or be an exception to any of, the Company’s representations and
warranties contained in this Agreement or any other Transaction Document.

 

(f)          Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) when sent, if sent by electronic
mail to such email addresses set forth in Schedule 8(f) or provided from time to
time by such parties (provided that such sent e-mail is kept on file (whether
electronically or otherwise) by the sending party and the sending party does not
receive an automatically generated message from the recipient’s e-mail server
that such e-mail could not be delivered to such recipient); or (iv) one (1)
Business Day after deposit with an overnight courier service with next day
delivery specified, in each case, properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

 

36

 

 

If to the Company:

 

Sinocoking Coal & Coke Chemical Industries, Inc.
Kuanggong Road and Tiyu Road, 10th Floor,

ChengshiXin Yong She, Tiyu Road,

Xinhua District, Pingdingshan, Henan Province 467000

People’s Republic of China
Telephone: +86-3752882999
Attention: Jianhua Lv

 

With a copy (for informational purposes only) to:

 

Kaufman & Canoles, P.C.

Two James Center, 14th Floor

1021 E. Cary St.

Richmond, VA 23219

Telephone: (804) 771-5700
Facsimile: (804) 771-5777
Attention: Anthony W. Basch, Esq.

 

If to the Transfer Agent:

 

Interwest Transfer Company, Inc.
1981 Murray Holladay Road, Suite 100

Salt Lake City, UT 84117
Telephone: (801) 272-9294
Facsimile: (801) 277-3147
Attention: Melinda Orth

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the Schedule
of Buyers,

 

with a copy (for informational purposes only) to:

 

Greenberg Traurig, LLP
MetLife Building
200 Park Avenue
New York, NY 10166
Telephone: (212) 801-9200
Facsimile: (212) 805-9222
Attention: Michael A. Adelstein, Esq.

 

or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change,
provided that Greenberg Traurig, LLP shall only be provided copies of notices
sent to the lead Buyer. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clause (i), (ii) or (iii) above,
respectively. A copy of the e-mail transmission containing the time, date and
recipient e-mail address shall be rebuttable evidence of receipt by e-mail in
accordance with clause (iii) above.

 

37

 

  

(g)          Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including, as contemplated below, any assignee of any of the Securities. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Buyers, including, without
limitation, by way of a Fundamental Transaction (as defined in the Warrants)
(unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Warrants). A Buyer may assign some or
all of its rights hereunder in connection with any transfer of any of its
Securities without the consent of the Company, in which event such assignee
shall be deemed to be a Buyer hereunder with respect to such assigned rights.

 

(h)          No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, other than the Indemnitees referred to in Section 8(k).

 

(i)          Survival. The representations, warranties, agreements and covenants
shall survive the Closings. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

 

(j)          Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

(k)          Indemnification.

 

(i)          In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company’s other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
holder of any Securities and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the
foregoing Persons’ agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Indemnitees”) from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and disbursements
(the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (A) any misrepresentation or breach of any
representation or warranty made by the Company in any of the Transaction
Documents, (B) any breach of any covenant, agreement or obligation of the
Company contained in any of the Transaction Documents or (C) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of the
Company) and arising out of or resulting from (1) the execution, delivery,
performance or enforcement of any of the Transaction Documents, (2) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (3) any
disclosure properly made by such Buyer pursuant to Section 4(i), or (4) the
status of such Buyer or holder of the Securities as an investor in the Company
pursuant to the transactions contemplated by the Transaction Documents. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.

 

38

 

  

(ii)         Promptly after receipt by an Indemnitee under this Section 8(k) of
notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified Liability, such
Indemnitee shall, if a claim in respect thereof is to be made against the
Company under this Section 8(k), deliver to the Company a written notice of the
commencement thereof, and the Company shall have the right to participate in,
and, to the extent the Company so desires, to assume control of the defense
thereof with counsel mutually satisfactory to the Company and the Indemnitee;
provided, however, that an Indemnitee shall have the right to retain its own
counsel with the fees and expenses of such counsel to be paid by the Company if:
(A) the Company has agreed in writing to pay such fees and expenses; (B) the
Company shall have failed promptly to assume the defense of such Indemnified
Liability and to employ counsel reasonably satisfactory to such Indemnitee in
any such Indemnified Liability; or (C) the named parties to any such Indemnified
Liability (including any impleaded parties) include both such Indemnitee and the
Company, and such Indemnitee shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnitee and the Company (in which case, if such Indemnitee notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, then the Company shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Company), provided
further, that in the case of clause (C) above the Company shall not be
responsible for the reasonable fees and expenses of more than one (1) separate
legal counsel for the Indemnitees. The Indemnitee shall reasonably cooperate
with the Company in connection with any negotiation or defense of any such
action or Indemnified Liability by the Company and shall furnish to the Company
all information reasonably available to the Indemnitee which relates to such
action or Indemnified Liability. The Company shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the
prior written consent of the Indemnitee, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all liability in respect to such Indemnified
Liability or litigation, and such settlement shall not include any admission as
to fault on the part of the Indemnitee. Following indemnification as provided
for hereunder, the Company shall be subrogated to all rights of the Indemnitee
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the Company within a reasonable time of the commencement of any such action
shall not relieve the Company of any liability to the Indemnitee under this
Section 8(k), except to the extent that the Company is materially and adversely
prejudiced in its ability to defend such action.

 

39

 

  

(iii)        The indemnification required by this Section 8(k) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, within ten (10) days after bills are received or Indemnified
Liabilities are incurred.

 

(iv)        The indemnity agreement contained herein shall be in addition to (A)
any cause of action or similar right of the Indemnitee against the Company or
others, and (B) any liabilities the Company may be subject to pursuant to the
law.

 

(l)          Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. No specific
representation or warranty shall limit the generality or applicability of a more
general representation or warranty. Each and every reference to share prices,
shares of Common Stock and any other numbers in this Agreement that relate to
the Common Stock shall be automatically adjusted for stock splits, stock
dividends, stock combinations and other similar transactions that occur with
respect to the Common Stock after the date of this Agreement.

 

(m)          Remedies. Each Buyer and each holder of any Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek specific performance
and/or temporary, preliminary and permanent injunctive or other equitable relief
from any court of competent jurisdiction in any such case without the necessity
of proving actual damages and without posting a bond or other security.

 

(n)          Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer 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 Buyer 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.

 

40

 

  

(o)          Payment Set Aside; Currency. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to any of the other
Transaction Documents or any of the Buyers enforce or exercise their rights
hereunder or 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, foreign, 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. Until the Warrants are no longer
outstanding, the Company shall not effect any stock combination, reverse stock
split or other similar transaction (or make any public announcement or
disclosure with respect to any of the foregoing) without the prior written
consent of each of the Buyers, such consent not to be unreasonably withheld,
conditioned or delayed. Unless otherwise expressly indicated, all dollar amounts
referred to in this Agreement and the other Transaction Documents are in United
States Dollars (“U.S. Dollars”), and all amounts owing under this Agreement and
all other Transaction Documents shall be paid in U.S. Dollars. All amounts
denominated in other currencies (if any) shall be converted into the U.S. Dollar
equivalent amount in accordance with the Exchange Rate on the date of
calculation. “Exchange Rate” means, in relation to any amount of currency to be
converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange
rate as published in the Wall Street Journal on the relevant date of
calculation.

 

(p)          Independent Nature of Buyers’ Obligations and Rights. The
obligations of each Buyer under the Transaction Documents are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of group or entity, or create a presumption that the Buyers are in
any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Transaction Documents or any
matters, and the Company acknowledges that the Buyers are not acting in concert
or as a group, and the Company shall not assert any such claim, with respect to
such obligations or the transactions contemplated by the Transaction Documents.
The decision of each Buyer to purchase Securities pursuant to the Transaction
Documents has been made by such Buyer independently of any other Buyer. Each
Buyer acknowledges that no other Buyer has acted as agent for such Buyer in
connection with such Buyer making its investment hereunder and that no other
Buyer will be acting as agent of such Buyer in connection with monitoring such
Buyer’s investment in the Securities or enforcing its rights under the
Transaction Documents. The Company and each Buyer confirms that each Buyer has
independently participated with the Company in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and advisors.
Each Buyer shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of any other Transaction Documents, and it shall not be necessary for any other
Buyer to be joined as an additional party in any proceeding for such purpose.
The use of a single agreement to effectuate the purchase and sale of the
Securities contemplated hereby was solely in the control of the Company, not the
action or decision of any Buyer, and was done solely for the convenience of the
Company and not because it was required or requested to do so by any Buyer. It
is expressly understood and agreed that each provision contained in this
Agreement and in each other Transaction Document is between the Company and a
Buyer, solely, and not between the Company and the Buyers collectively and not
between and among the Buyers.

 

41

 

  

(q)          Judgment Currency.

 

(i)          If for the purpose of obtaining or enforcing judgment against the
Company in any court in any jurisdiction it becomes necessary to convert into
any other currency (such other currency being hereinafter in this Section 8(q)
referred to as the “Judgment Currency”) an amount due in U.S. Dollars under this
Agreement or any other Transaction Document, the conversion shall be made at the
Exchange Rate prevailing on the Trading Day immediately preceding: (A) the date
actual payment of the amount due, in the case of any proceeding in the courts of
New York or in the courts of any other jurisdiction that will give effect to
such conversion being made on such date or (B) the date on which the foreign
court determines, in the case of any proceeding in the courts of any other
jurisdiction (the date as of which such conversion is made pursuant to this
Section 8(q)(i) being hereinafter referred to as the “Judgment Conversion
Date”).

 

(ii)         If in the case of any proceeding in the court of any jurisdiction
referred to in Section 8(q)(i) above, there is a change in the Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of U.S. Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.

 

(iii)        Any amount due from the Company under this provision shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other amounts due under or in respect of this Agreement or any other Transaction
Document.

 

[The remainder of this page is intentionally left blank]

 

42

 

  

IN WITNESS WHEREOF, Buyer and the Company have caused their respective signature
page to this Agreement to be duly executed as of the date first written above.

  

  COMPANY:          

Sinocoking Coal & Coke Chemical

Industries, Inc.

          By:         Name:       Title:  

 

 

 

 

IN WITNESS WHEREOF, Buyer and the Company have caused their respective signature
page to this Agreement to be duly executed as of the date first written above.

 

  BUYER:           [OTHER BUYERS]           By:             Name:           
Title:     

 

SCHEDULE OF BUYERS

  

(1)   (2)   (3)   (4)   (5)   (6)   (7)   (8)   (9)                            
      Buyer   Address and Facsimile Number   Aggregate
Number
of
Initial
Common
Shares   Aggregate
Number
of
Additional
Common
Shares (*)   Aggregate
Number
of
Initial
Series A
Warrant
Shares   Aggregate
Number
of
Initial
Series B
Warrant
Shares   Aggregate
Number
of
Additional
Warrant
Shares (*)   Initial
Purchase
Price (1)   Legal
Representative’s
Address and
Facsimile
Number                                  

 

(*) Subject to adjustment for stock splits, stock dividends, recapitalizations
and similar events.

 

 

 

 

Exhibit B

 

Form of Additional Closing Notice

 

TO BE EXECUTED BY A BUYER TO ELECT TO
EFFECT AN ADDITIONAL CLOSING

SINOCOKING COAL & COKE CHEMICAL INDUSTRIES, INC.

 

The undersigned hereby exercises its right pursuant to Section 1(b)(ii) of that
certain Securities Purchase Agreement, dated September 18, 2014, by and among
Sinocoking Coal & Coke Chemical Industries, Inc., a Florida corporation (the
“Company”) and the investors party thereto (the “Securities Purchase Agreement”)
to effect an Additional Closing (as defined in the Securities Purchase
Agreement) as described below. Capitalized terms not defined herein shall have
the meaning as set forth in the Securities Purchase Agreement.

 

1.Additional Closing Notice Date: _________________

 

2.Additional Closing Date: _________________**

 

** Insert Third (3rd) Trading Day after the Additional Closing Notice Date

 

3.Securities to be issued:

 

(a)          _________ Additional Common Shares; and

 

(b)an Additional Warrant to purchase up to _______ Additional Warrant Shares.

 

4.             Additional Purchase Price. The undersigned shall pay the
Additional Purchase Price in the sum of $___________________ to the Company on
or prior to the Additional Closing Date in accordance with the terms of the
Securities Purchase Agreement.

 

5.            Delivery of Securities. The Company shall deliver the Additional
Common Shares and Additional Warrant described above to the undersigned, or its
designee or agent as specified below:

 

The certificate with respect to the Additional Warrant should be delivered to
the following name and to the following address:

 

Issue to:          

 

 

 

 

The Additional Common Shares should be delivered by Deposit/Withdrawal at
Custodian as follows:

 

DTC Participant:       DTC Number:       Account Number:  

 

Date: _____________ __, ______           Name of Buyer       By:       Name:    
Title:           Tax ID:               Facsimile: