Document:

Exhibit 10.1

                                  JIN JIE CORP.
                        409 - 4th Floor, Tsui King House
                                Choi Hung Estate
                                    Hong Kong

                                                                January 13, 2010

Shlomo Palas (I.D. 057313579 )
17 Etrog St.
Rosh Hayyn
Israel 48570    ("PALAS")

Samuel Keshet (I.D. 030164529 )
19, Reuven St.
Zichron Ya'akov
Israel 30900    ("KESHET")

Eliezer Weinberg (I.D. 065137408 )
6, Hayarkon St.
Haifa
Israel 34465    ("WEINBERG")

(Palas, Keshet and Weinberg together are called the "PRINCIPALS")

Green Biofuels Holdings Ltd. an Israel company,
17 Hactrog Street
Rosh Hayin, Israel ("GBH")

Cally Kai Lai Lai ("LAI") and Wei Xiang Zeng ("ZENG")
409 - 4th Floor, Tsui King House
Choi Hung Estate
Hong Kong

Dear Sirs:

RE: CARBON CREDIT PROJECT CONTRACT ACQUISITION

This letter sets out our agreement ("AGREEMENT") reached among Jin Jie Corp.
("JJC"), with Palas, Keshet, Weinberg and GBH as Vendors (the "VENDORS ")
regarding the transfer and sale by GBH of all of the interest and rights to the
assets and business of the GBH Carbon Credit Project, including know-how,
trademarks, patents, agreements and all other assets (the "the GBH CARBON CREDIT
PROJECT ASSETS") to JJC, a company traded on the non-NASDAQ Over the Counter
Bulletin Board, upon the terms and conditions set forth in this Agreement. At
the time of this Agreement, the assets of the GBH Carbon Credit Project includes
advanced stages of agreements for the turn key development of carbon reduction
and carbon credit creation projects. Any contracts of GBH regarding the GBH
Carbon Credit Project will be assigned to JJC at the closing, at no additional
cost and will be deemed to have been acquired by JJC pursuant to this Agreement.

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<PAGE>
ACQUISITION

1.   GBH hereby agrees to transfer to JJC all the GBH Carbon Credit Project
     Assets on the terms and subject to the conditions set out in this
     Agreement. The transaction will include assumption of any responsibilities
     of GBH related to the GBH Carbon Credit Project under signed agreements.
     The business and contracts of the GBH Carbon Credit Project will be
     referred to as the "GBH BUSINESS".

     The Vendor will transfer the GBH Carbon Credit Project Assets directly to
     JJC or an operating subsidiary of JJC.

CONSIDERATION

2.   In payment for the sale and transfer of the GBH Carbon Credit Project
     Assets to JJC, JJC will assume and carry out all GBH's responsibilities
     under the agreements for carbon reduction. The Principals may lend funds to
     GBH in order to commence certain of the said agreements and the parties
     acknowledge that JCC will use Financing (defined below) proceeds to repay
     same. The Principals will keep accurate records of the loans and
     expenditures made with loan proceeds to qualify for reimbursement.

SHARE SALES AND JJC RESTRUCTURING

3.   Lai and Zeng are each the holders of 500,000 restricted shares of JJC.
     There are a total of 1,900,000 common shares and no preferred shares
     outstanding in the capital of JJC. JJC will split its common stock thirty
     five (35) for one such that Lai and Zeng will hold 35,000,000 common shares
     of restricted stock. Total JJC stock outstanding prior to the Financing
     will be 66,500,000 common shares. JJC will also change its name to Blue
     Sphere Corporation.

4.   Lai and Zeng together will sell for a price of $0.001 per share to each of
     the Principals 5,584,000 common shares. Such shares will be fully vested
     and transferred on Closing.

5.   Lai and Zeng together will sell for a price of $0.001 per share to each of
     Zetta Services Ltd. of BVI and Ehud Barzily Holding and Investments Ltd. of
     Israel ( together, the "FACILITATORS") 1,675,000 common shares. Such shares
     will be fully vested and transferred on Closing.

6.   The total common share fully diluted position of JJC after transfer of the
     Lai and Zeng Shares as above and the Financing (described below) will be
     such that the Principals and Facilitators will have 20,102,000 out of
     67,000,000 shares, or just over 30% of JJC, including the Financing initial
     shares will be newly issued restricted securities. Shares issued on
     exercise of the Financing warrants and later equity fundraisings will be in
     addition to the 67,000,000 shares. Lai and Zeng will cancel such of their
     shares as may be necessary to reach the 67,000,000 share capitalization
     indicated here.

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<PAGE>
7.   The Principals and the Facilitators acknowledge that the Lai and Zeng
     shares will be restricted as to sale under US securities laws and will
     carry a restrictive legend indicating such restrictions. In addition, the
     Principals and the Facilitators agree that the Lai and Zeng shares
     transferred to them will be held in escrow by JJC's attorneys and may not
     be sold, encumbered or released to the Principals or the Facilitators for
     two years after Closing. At the end of the two year period the escrowed
     shares will be unconditionally released from escrow to their owners.
     However, if during the escrow period there is an offer from an arm's length
     third party to purchase or merge with the entire company, the Principals'
     and the Facilitators' shares will be released from escrow to tender to the
     offer for the company.

EQUITY FINANCING

8.   JJC will arrange for JJC to complete a financing prior to or upon Closing
     of $500,000 (the "FINANCING") comprising units priced at $0.50 per unit,
     each unit consisting of one share and one share purchase warrant. Each
     warrant will be exercisable at a price of $0.75 for five years.

9.   The Financing net proceeds will be used in part to repay the Principal's
     loan, and for advance of the GBH Business and for working capital after
     Closing.

10.  Within the next four to six months after Closing, JJC will raise an
     additional $500,000 either through exercise of Financing warrants or
     otherwise at market rates, which proceeds are to be used in the GBH
     Business.

CLOSING

11.  Closing of the transactions contemplated herein (the "Closing") will occur
     on or before February 10, 2010 or on such other date as the parties may
     agree, at such place and time as determined by JJC, acting reasonably.

DUE DILIGENCE

12.  JJC and the Vendors will each have the right, by the closing date, to
     conduct due diligence on the others in connection with the transactions
     contemplated hereunder. Each of JJC and the Vendors and their respective
     accountants, legal counsel and other representatives will have full access
     during normal business hours to the management, properties, books, records,
     contracts, commitments and other documents of the others and their
     subsidiaries in connection with the transactions contemplated herein.

STANDSTILL AGREEMENT

13.  The Vendors agree that they will not for a period ending the earlier of
     Closing or February 10, 2010, negotiate with any party other than JJC as to
     the disposition or development or joint venture of the GBH Carbon Credit
     Project Assets. The parties may extend the term of this clause by mutual
     agreement.

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<PAGE>
REPRESENTATIONS

14.  The Vendors represent and warrant to JJC that:

     (a)  GBH will on or before Closing use its best efforts to transfer or
          cause to be transferred the GBH Carbon Credit Project Assets to JJC
          free and clear of any charges, encumbrances, liens or claims;

     (b)  the GBH Carbon Credit Project has property rights and interest in the
          GBH Carbon Credit Project Assets and holds interests in all aspects of
          the GBH Carbon Credit Project Assets , and to the best of the Vendors
          knowledge, the GBH Carbon Credit Project Assets do not infringe upon
          the intellectual rights of any other party.

14A. JJC represents and warrants to the Vendors that:

     (a)  On Closing JJC will be without liabilities other than legal fees
          accrued for the purpose of this transaction and accounting fees for
          required filings with the SEC in the maximum amount of $40,000, for
          which there will be sufficient funds in its treasury. There will be no
          claims or litigation outstanding against JJC;

     (b)  JJC should hold harmless and indemnify the Vendors for any future
          claims, if any, related to the period prior to the closing;

     (c)  JJC has filed all reports (other than Form 8-K reports) required under
          the Securities Exchange Act of 1934 for the preceding 12 months (or
          for a shorter period that JJC was required to file such reports and
          materials); and

     (d)  By 4 business days after Closing, JJC will file "Form 10 information"
          with the SEC reflecting its status as an entity that is no longer an
          issuer described in Rule 144(i)(1).

CLOSING CONDITIONS

15.  This Agreement and the Closing hereof is subject to the following:

     (c)  the Financing being closed or funds being held in escrow pending the
          Closing;

     (d)  JJC will have no liabilities other than those described in
          clause14A(a), and will be up to date in its filings with the SEC;

     (e)  The GBH Carbon Credit Project Assets will be assigned and delivered to
          JJC, with consent from the contracting partner;

     (f)  The Principals may appoint 2 representatives to the board of directors
          of JJC to take effect after Closing from a total of three directors.

     (g)  JJC having entered into employment agreements with each of the
          Principals on terms satisfactory to JJC and the respective Principals
          whereby the Principals will expend no less than 75% of their full time
          and energy on the GBH Business;

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<PAGE>
     (h)  each of the Principals having agreed not to compete with the GBH
          Business while employed and for a period of one year after they
          terminate employment with JCC; and

     (i)  no material adverse change will have occurred to the GBH Business or
          to JJC business

     (j)  JCC shall be liable and fully indemnify the Vendors for any claim
          whatsoever resulting from the filing of the 8-K with the SEC or any
          related report thereto. .

PRE AND POST CLOSING COVENANTS

16.  JJC and the Vendors hereby covenant to the other as follows:

     (k)  until Closing the Vendors will conduct the GBH Business in the
          ordinary and normal course; and

     (l)  the Vendors acknowledge that JJC will be required to provide
          substantial disclosure about the GBH Business and its management to
          the SEC and they agree to fully co-operate to provide in a timely
          manner such information and disclosure about the GBH Carbon Credit
          Project Assets and the GBH Business as JJC's legal counsel and
          auditors may request.

BINDING AGREEMENT

17.  This Agreement is intended to be binding.

GENERAL

18.  All dollar references are United States dollars.

19.  JJC will pay the legal costs of the transaction for the acquisition of the
     GBH Carbon Credit Project Assets, and the costs to the Vendors of their
     complying with the terms of this Agreement, including without limitation
     their own lawyers for review of documents.

                                       5
<PAGE>
Our signatures below indicate our intention to be legally bound to the above
terms.

JIN JIE CORP.

Per: /s/ Cally Kai Lai Lai
    -----------------------------------
    Authorized Signatory

Global Biofuels Holding Ltd.

Per: /s/ Shlomo Palas
    -----------------------------------
    Authorized Signatory

/s/ Shlomo Palas                             /s/ Shmuel Keshet
---------------------------------------      -----------------------------------
Shlomo Palas                                 Shmuel Keshet

/s/ Eliezer Weinberg                         /s/ Cally Kai Lai Lai
---------------------------------------      -----------------------------------
Eliezer Weinberg                             Cally Kai Lai Lai

/s/ Wei Xiang Zeng
---------------------------------------
Wei Xiang Zeng

                                       6ex10-01.htm

Exhibit 10.01

 

EXECUTION COPY

SECURITIES PURCHASE AND REGISTRATION RIGHTS AGREEMENT

 

This SECURITIES PURCHASE AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of January 8, 2009, by and between ONE Bio, Corp., a Florida corporation trading on the OTC Bulletin Board under the symbol “ONBI.OB” (the “Company”),
and each of the purchasers listed or to be listed on Schedule 1 attached to this Agreement (each a “Purchaser,” and collectively, the “Purchasers”).

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to issue and sell to each Purchaser, and each Purchaser desires to purchase from the Company, 8% convertible promissory notes, substantially in the form of Exhibit A attached hereto (each a “Note,”
and collectively, the “Notes”), in the aggregate principal amount of between $300,000 (the “Minimum Amount”), $2,000,000 (the “Base Amount”) and $3,000,000 (the “Maximum Amount”); and

 

WHEREAS, to induce each Purchaser to purchase the Note, the Company has agreed to issue to Purchaser warrants (each a “Warrant” and collectively, the “Warrants”) to purchase the
Company’s common stock, par value $0.001 per share (the “Common Stock”), as set forth in the warrant agreement substantially in the form of Exhibit B attached hereto (the “Warrant”).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the parties agree as follows:

 

1.         Sale and Purchase of the Notes and Warrants.

 

1.1       Sale and Issuance of Notes.  Subject to the terms and conditions of this Agreement, each Purchaser agrees to purchase at each Purchaser’s respective Closing
(as defined below), and the Company agrees to sell and issue to each Purchaser, a Note in the principal amount specified with respect to such Purchaser on Schedule 1 attached to this Agreement.  The purchase price of each Note shall be equal to 100% of the principal amount of such Note (the “Purchase Price”).

 

1.2       Issuance of Warrants.  Subject to the terms and conditions of this Agreement, the Company shall issue a Warrant to purchase the number of shares of Common Stock of the
Company set forth opposite such Purchaser’s name on the Warrant to each Purchaser at the Closing.

 

2.         Closing.

 

2.1       Time and Place. The initial closing of the sale and purchase of the Notes and Warrants representing at least the Minimum Amount (the “Initial
Closing”) shall be deemed to take place at the offices of Seyfarth Shaw LLP, 620 Eighth Avenue, New York, NY 10018, at 10:00 a.m., local time, on the date hereof, or at such later time or date as the Purchasers and the Company may mutually agree in writing.  An additional closing of the purchase and sale of Notes and Warrants representing at least the Base Amount (inclusive of the Minimum Amount) and up to the Maximum Amount (the “Final
Closing”) shall be deemed to take place at the offices of  Seyfarth Shaw LLP, 620 Eighth Avenue, New York, NY 10018, from time to time after the Initial Closing as the Company and the Purchasers shall mutually agree to in writing (each such time and place, including the Initial Closing, is designated as a “Closing”), provided, that Purchasers shall not obligated to consummate the Final Closing after March 1, 2010
if the conditions to such Closing have not been satisfied by such date.  The date upon which each Closing shall occur is herein called the “Closing Date”. On each Purchaser’s respective Closing Date, each Purchaser shall pay to the Company the Purchase Price via federal funds wire transfer(s) of immediately available funds, in accordance with written instructions provided to Purchasers prior to the date hereof.

 

 

 

 

 

3.         Pledge and Security Agreements; Subsidiary Guarantees.

 

3.1       Stockholder Pledge and Security Agreements.  At the Initial Closing, ONE-V Group, LLC, Jeanne Chan and Michael Weingarten agree to enter into Pledge and Security Agreements,
substantially in the form of Exhibit C attached hereto (each, a “Stockholder Pledge and Security Agreement”), pledging, as security in favor of the Purchasers of the Notes for the obligations of the Company under the Notes, 3,200,000, 800,000 and 2,000,000 shares of Company Common Stock, respectively, an aggregate of 6,000,000 shares of Common Stock (collectively, the “Stockholder
Pledge Shares”).

 

3.2       BVI Subsidiaries Guarantees.  At the Initial Closing, the Company shall cause Throne (as hereinafter defined) and Supreme (as hereinafter defined) to enter into a
BVI Subsidiary Guarantee, substantially in the form of Exhibit F attached hereto (the “BVI Subsidiary Guarantee”), guaranteeing all obligations of the Company under the Notes and agreeing not to transfer, pledge or encumber their equity interests in GP WFOE (as hereinafter defined) and UGTI WFOE (as hereinafter defined), respectively.

 

3.3       Company Pledge and Security Agreement with Respect to Certain US Subsidiary Shares.  At the Final Closing, the Company shall enter into a Pledge and Security Agreement,
substantially in the form of Exhibit D attached hereto (the “Company Pledge and Security Agreement”), pledging, as security in favor of the Purchasers of the Notes for the obligations of the Company under the Notes:

 

(a)       80% of the issued and outstanding common stock and 100% of the issued and outstanding preferred stock of Green Planet Bioengineering, Co., Ltd., a Delaware corporation (“GP”),
constituting 100% of the capital stock of GP held by the Company; and

 

(b)       98% of the issued and outstanding capital stock of United Green Technology, Inc., a Nevada corporation (“UGTI”), constituting 100% of the capital
stock of UGT held by the Company.

 

3.4       US Subsidiaries Guarantees and Pledge and Security Agreements with Respect to Certain BVI Subsidiary Shares.   At the Final Closing, the Company shall cause GP
and UGTI to enter into a Subsidiary Guarantee and Pledge and Security Agreement, substantially in the form of Exhibit E attached hereto (the “US Subsidiary Guarantee and Pledge and Security Agreement”), guaranteeing all obligations of the Company under the Notes and pledging, as security in favor of the Purchasers of the Notes for the obligations of the Company under the
Notes:

 

 

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(a)       100% of the issued and outstanding ordinary shares of Elevated Throne Overseas, Ltd, a British Virgin Islands company (“Throne”), all of which
are held by GP; and

 

(b)       100% of the issued and outstanding ordinary shares of Supreme Discovery Group, Ltd., a British Virgin Islands company (“Supreme” and, with Throne,
the “BVI Subsidiaries”)), all of which are held by UGTI.

 

3.5       WFOE and non-WFOE PRC Company Collateral Security Arrangements.  At the Final Closing, the Company shall cause, directly or indirectly:

 

(a)       Fujian Green Planet Bio-Engineering, Co., Ltd, a PRC Wholly Foreign-Owned Enterprise (“GP WFOE”) 100% owned by Throne, to enter into an Assignment
of Contract Rights with Purchasers, substantially in the form of Exhibit G attached hereto, pursuant to which (i) GP WFOE will assign to Purchasers all of its contract rights under the existing agreements relating to GP WFOE and Sanming (as defined below), (ii) GP WFOE and Sanming shall each agree that they will use best efforts to ensure that the Purchasers obtain all necessary approvals and registrations (at Company expense) for the Purchasers
to exercise all of GP WFOE’s contract rights under the existing agreements relating to GP WFOE and Sanming, and (iii) GP WFOE shall agree not to transfer, pledge or encumber its contract rights with respect to Sanming.

 

(b)       Sanming Huajian Bio-Engineering Co., Ltd., a PRC operating company (“Sanming”) controlled by GP WFOE, and each of Sanming’s shareholders
to execute and deliver the Acknowledgement Agreement with Purchasers, substantially in the form of Exhibit G-1 attached hereto, under which they will acknowledge the benefits conferred upon Sanming by Purchasers’ loans to the Company and agree not to contest or interfere with Purchases’ exercise of their contractual rights under this Agreement and the other security and collateral arrangements contemplated hereby;

 

(c)       Fujian United Bamboo Technology Company, Ltd., a PRC Wholly Foreign-Owned Enterprise (“UGTI WFOE”) 100% owned by Supreme, to enter into an Assignment
of Contract Rights with Purchasers, substantially in the form of Exhibit G attached hereto, pursuant to which (i) UGTI WFOE will assign to Purchasers all of its contract rights under the existing agreements relating to UGTI WFOE and Jianou (as defined below), (ii) UGTI WFOE and Jianou shall each agree that they will use best efforts to ensure that the Purchasers obtain all necessary approvals and registrations (at Company expense) for the Purchasers
to exercise all of UGTI WFOE’s contract rights under the existing agreements relating to UGTI WFOE and Jianou, and (iii) UGTI WFOE shall agree not to transfer, pledge or encumber its contract rights with respect to Jianou; and

 

(d)       Jianou Lujian Foodstuff Co., Ltd., a PRC operating company (“Jianou”) controlled by UGTI WFOE, and each of Jianou’s shareholders to execute
and deliver the Acknowledgement Agreement with Purchasers, substantially in the form of Exhibit G-1 attached hereto, under which they will acknowledge the benefits conferred upon Jianou by Purchasers’ loans to the Company and agree not to contest or interfere with Purchases’ exercise of their contractual rights under this Agreement and the other security and collateral arrangements contemplated hereby;.

 

 

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GP WFOE, UGTI WFOE, Sanming and Jianou are herein referred to as the “WFOE Subsidiaries.”

 

4.        Representations and Warranties of the Company.  The Company hereby represents and warrants
to the Purchasers as follows (which representations and warranties shall be deemed to apply, where appropriate, to any direct or indirect subsidiary of the Company (each, a “Subsidiary”), including without limitation, GP, UGTI, Throne, Supreme, GP WFOE, UGTI WFOE, Sanming, Jianou, Trade Finance Solutions and TFP International, Inc.), as of each Closing Date:

 

4.1       Subsidiaries.  The Company has no Subsidiaries other than those listed in Schedule 4.1 hereto.  Except
as disclosed in Schedule 4.1 or as specifically disclosed in the SEC Reports (as hereinafter defined) hereto, the Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction (each, a “Lien”) and
all the issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are validly issued, fully paid and non-assessable and free of preemptive and similar rights, except as acknowledged by Purchasers as set forth in Section 4.2 hereof.

 

4.2       Organization and Qualification.  Each of the Company and the Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the requisite legal authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have or reasonably be expected to result in a (a) a material adverse effect on the results of operations, assets, prospects, business condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
(b) a material and adverse impairment the Company’s ability to perform its obligations under any of the Transaction Documents, or (c) a material and adverse effect on the legality, validity or enforceability of any of the Transaction Documents (a “Material Adverse Effect”).  Purchasers acknowledge that: (i) approximately $1.7 million of the registered capital of GP WFOE has not been paid; and (ii) approximately $1.2 million
of the registered capital of UGTI WFOE has not been paid. The Purchasers and Company agree that: (i) at least $1.7 million of the proceeds of any Final Closing shall be used to pay the remaining unpaid registered capital of GP WFOE prior to any other proceeds of such Closing being applied for any other purposes; (i) to the extent there are additional proceeds of  any Final Closing, approximately $0.18 million of such proceeds of any Final Closing shall be used to pay a portion of the remaining unpaid
registered capital of UGTI WFOE prior to any other proceeds of such Closing being applied for any other purposes; and (iii) any remaining unpaid registered capital of UGTI WFOE will be paid from the proceeds of the New Financing (as defined in the Note).

 

 

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4.3       Authorization; Enforcement.  The Company has the requisite corporate authority to enter into and to consummate the transactions contemplated by each of the Transaction
Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of each of the Transaction Documents to which it is a party by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its stockholders.  Each of the Transaction
Documents to which it is a party has been (or in the case of Warrants will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as may be limited by (a) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, and (b) the effect of rules
of law governing the availability of specific performance and other equitable remedies.

 

4.4       No Conflicts.  The execution, delivery and performance of the Transaction Documents to which it is a party by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not, and will not, (a) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (b) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound, or affected, except to the extent that such conflict, default, termination, amendment, acceleration or cancellation right would not reasonably be expected to have a Material Adverse Effect, (c) result in any Lien on assets or on property of the Company,
or (d) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including, assuming the accuracy of the representations and warranties of the Purchasers set forth in Section 5.2 hereof, federal and state securities laws and regulations and the rules and regulations of any self-regulatory organization to
which the Company or its securities are subject, including the NASDAQ Capital Market, OTC Bulletin Board or Pink Sheets LLC on which the Common Stock is listed or quoted for trading on the date in question, as applicable (the “Trading Markets”)), or by which any property or asset of the Company or a Subsidiary is bound or affected, except to the extent that such violation would not reasonably be expected to have a Material Adverse Effect.

 

4.5       The Securities. The Notes, the Warrants and the equity securities issuable upon conversion or exercise thereof (and
the securities issuable upon conversion of such equity securities) (collectively, the “Securities”) are duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and will not be subject to preemptive or similar rights of stockholders (other than those
imposed by the Purchasers).  The Company has reserved from its duly authorized capital stock the maximum number of securities issuable upon conversion of the Notes (the “Conversion Shares”) and reserved from its duly authorized capital stock the maximum number of securities issuable upon exercise of the Warrants (the “Warrant Shares”).  The
offer, issuance and sale of the Notes, the Conversion Shares, the Warrants and the Warrant Shares pursuant to the Transaction Documents are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).

 

 

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4.6       Capitalization.  As of the date of the Agreement, the aggregate number of shares and type of all authorized, issued and outstanding classes of capital stock, options
and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) is set forth in Schedule 4.6 hereto.  All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance in all material respects with all applicable securities laws.  The Company has outstanding
only those Options, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or entered into any agreement giving any Person any right to subscribe for or acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock as set forth on Schedule 4.6.  Except
as set forth on Schedule 4.6 hereto, and except for customary adjustments as a result of stock dividends, stock splits, combinations of shares, reorganizations, recapitalizations, reclassifications or other similar events, there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issuance and sale of the Securities will not obligate
the Company to issue shares of Common Stock or other securities to any Person (as defined in Section 4.26 hereof) (other than the Purchasers) and will not result in a right of any holder of securities to adjust the exercise, conversion, exchange or reset price under such securities.  To the knowledge of the Company, except as disclosed in Schedule 4.6 hereto, no Person
or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), or has the right to acquire, by agreement with or by obligation binding upon the Company, beneficial ownership of in excess of 5% of the outstanding Common Stock.

 

4.7       SEC Reports; Financial Statements; No Material Adverse Effect; Solvency.  Except as set forth on Schedule 4.7 or
as specifically disclosed in the SEC Reports, the Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  Such reports required to be filed by the Company under the Exchange Act, including pursuant to Section 13(a)
or 15(d) thereof, together with any materials filed or furnished by the Company under the Exchange Act, whether or not any such reports were required being collectively referred to herein as the “SEC Reports” and, together with this Agreement and the schedules to this Agreement, the “Disclosure Materials”.  As of their respective dates, the SEC Reports
filed by the Company complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) promulgated thereunder, and none of the SEC Reports, when filed by the Company, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such financial statements, the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP or may be condensed or summary statements, and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments.  All material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or identified in the SEC Reports, to the extent such agreements are required to be included or identified pursuant to the rules and regulations of the SEC.

 

 

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Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in Schedule 4.7 hereto, (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or that would result in
a Material Adverse Effect, (ii) the Company has not incurred any material liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii) the Company has not altered its method of accounting or the changed its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders, in their capacities as such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock (except for repurchases by the Company of shares of capital stock held by employees, officers, directors, or consultants pursuant to an option of the Company to repurchase such shares upon the termination of employment or services), and (v) the Company has not issued any equity securities to any officer, director or affiliate,
except pursuant to existing Company stock-based plans.  The Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its 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 is 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).  For purposes of this Section 4.7, “Insolvent” means (i) the present fair saleable value of the Company’s assets is less than the amount required to pay the Company’s total Indebtedness (as defined in Section 4.26 hereof), (ii) the
Company is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) the Company intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature, or (iv) the Company has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.

 

4.8       Absence of Litigation.  Except as described in Schedule 4.8 or as specifically disclosed in the
SEC Reports, there is no action, suit, claim, or Proceeding (as defined below), or, to the Company’s knowledge, inquiry or investigation, before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries that could, individually or in the aggregate, have a Material Adverse Effect. For the purposes hereof, “Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, or a partial proceeding, such as a deposition), whether commenced or threatened in writing.

 

 

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4.9       Compliance.  Except as described in Schedule 4.9, neither the Company nor any Subsidiary, except
in each case as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, (a) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (b) is in violation of any order of any court, arbitrator or governmental body, or (c) is or has been in violation of any statute, rule or regulation of any governmental authority.  The foregoing notwithstanding, Purchasers acknowledge that at least $1.7 million of the proceeds of any Final Closing shall be used to pay the remaining unpaid
registered capital of GP WFOE prior to any other proceeds of such Closing being applied for any other purposes.

 

4.10     Title to Assets.  The Company and, to the Company’s knowledge, the Subsidiaries own no real property except as described in Schedule 4.10.  The
Company and the Subsidiaries have good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens that do not, individually or in the aggregate, have or result in a Material Adverse Effect.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and, to the
Company’s knowledge, the Subsidiaries are in material compliance.

 

4.11     No General Solicitation; Placement Agent’s Fees.  Neither the Company, nor, to the Company’s knowledge after due inquiry, any of its affiliates, nor any Person acting
on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) in connection with the offer or sale of the Securities.  The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commission (other than for persons engaged by any Purchaser or its investment advisor) relating to or arising out of the issuance of the Securities pursuant to this
Agreement.  The Company shall pay, and hold each Purchaser harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any such claim for fees arising out of the issuance of the Securities pursuant to this Agreement.  The Company has not engaged any placement agent or other agent in connection with the sale of the Securities.

 

 

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4.12     Private Placement.  Neither the Company nor, to the Company’s knowledge after due inquiry, any of its Affiliates nor, any Person acting on the Company’s behalf has,
directly or indirectly, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Securities as contemplated hereby, or (ii) cause the offering of the Securities pursuant to the Transaction Documents to be integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market.  The sale and issuance of the Securities hereunder does not contravene the rules and regulations of any Trading Market on which the Common Stock is listed or quoted.  The Company is not required to be registered as, and is not an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “Investment
Company Act”).  The Company is not required to be registered as, a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980.

 

4.13     Form S-1/S-3 Eligibility.  The Company is eligible to register the Conversion Shares and the Warrant Shares for resale by the Purchasers using Form S-1 promulgated under the
Securities Act. Upon the effectiveness of the Company’s application to list its Common Stock on NASDAQ, the Company will be eligible to register the Conversion Shares and the Warrant Shares for resale by the Purchasers using Form S-3 or other available registration form promulgated under the Securities Act.

 

4.14     Listing and Maintenance Requirements.  Except as described in Schedule 4.14, the Company has not, in the
twelve months preceding the date hereof, received notice (written or oral) from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market.  The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in material compliance with all such listing and maintenance requirements.  The
issuance of the Securities does not require stockholder approval, including without limitation under NASDAQ Marketplace Rule 4350(i), and the failure to obtain such stockholder approval will not materially impair the prospects of approval of the Company’s pending listing application with NASDAQ.

 

4.15     Registration Rights.  Except as described in Schedule 4.15 or as specifically disclosed in the SEC Reports
and the registration rights included herein for the benefit of the Purchasers, the Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the SEC or any other governmental authority that have not been satisfied or waived.

 

4.16     Application of Takeover Protections.  Except as described in Schedule 4.16 or as specifically disclosed
in the SEC Reports, there is no control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or could become applicable to any of the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of
the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

 

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4.17     Disclosure.  Except as described in Schedule 4.17, the Company confirms that neither it nor any officers,
directors or Affiliates, has provided any of the Purchasers or their agents or counsel with any information that constitutes or might constitute material, nonpublic information (other than the existence and terms of the issuance of Securities, as contemplated by this Agreement).  The Company understands and confirms that each of the Purchasers will rely on the foregoing representations in effecting transactions in securities of the Company.  All disclosure provided by the Company to the Purchasers
regarding the Company, its business and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on the behalf of the Company are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  Except for the transactions contemplated by this Agreement, 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, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.  The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated
hereby other than those set forth in the Transaction Documents.

 

4.18     Acknowledgment Regarding Purchasers’ Purchase of Securities.  Based upon the assumption that the transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges and agrees that each of the Purchasers 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.  The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any
advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Purchasers’ purchase of the Securities.  The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

 

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4.19     Patents and Trademarks.  Except as described in Schedule 4.19 or as specifically disclosed in the SEC Reports,
(a) the Company and its Subsidiaries owns or possesses sufficient rights to conduct its business in the ordinary course, including, without limitation, rights to use all material patents, patent rights, industry standards, trademarks, copyrights, licenses, inventions, trade secrets, trade names and know-how (collectively, “Intellectual Property Rights”) as owned or possessed by them or that are necessary for the conduct of its business
as now conducted or as proposed to be conducted except where the failure to currently own or possess such rights would not have a Material Adverse Effect, (b) neither the Company nor any of its Subsidiaries is infringing any rights of a third party with respect to any Intellectual Property Rights that, individually or in the aggregate, would have a Material Adverse Effect, and, since January 1, 2008, neither the Company nor any of its Subsidiaries has received any notice of, or has any knowledge of, any asserted
infringement by the Company or any of its Subsidiaries of, any rights of a third party with respect to any Intellectual Property Rights that, individually or in the aggregate, would have a Material Adverse Effect and (c) since January 1, 2008, neither the Company nor any of its Subsidiaries has received any notice of, or has any knowledge of, infringement by a third party with respect to any Intellectual Property Rights of the Company or of any Subsidiary that, individually or in the aggregate, would have a Material
Adverse Effect.  The Company has not used Publicly Available Software in whole or in part in the development of any part of its Intellectual Property Rights in a manner that would be reasonably likely to subject the Company or its Intellectual Property Rights in whole or in part, to all or part of the license obligations of any Publicly Available Software that, individually or in the aggregate, would have a Material Adverse Effect on the Company.  “Publicly
Available Software” means each of (i) any software that contains, or is derived in any manner (in whole or in part) from, any software that is distributed as free software, open source software (e.g., Linux), or similar licensing and distribution models; and (ii) any software that requires as a condition of use, modification, and/or distribution of such software that such software or other software incorporated into, derived from, or distributed
with such software (A) be disclosed or distributed in source code form; (B) be licensed for the purpose of making derivative works; or (C) be redistributable at no or minimal charge.  Publicly Available Software includes, without limitation, software licensed or distributed under any of the following licenses or distribution models similar to any of the following: (a) GNU General Public License (GPL) or Lesser/Library GPL (LGPL), (b) the Artistic License (e.g. PERL), (c) the Mozilla Public License,
(d) the Netscape Public License, (e) the Sun Community Source License (SCSL), the Sun Industry Source License (SISL), and the Apache Server License.

 

4.20     Insurance.  The Company and, to the Company’s knowledge, the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses and locations in which the Company and the Subsidiaries are engaged.  The Company has had continuous insurance coverage during the 12 months preceding the date of this Agreement and has no reason to believe it will not be able to renew its current insurance coverage in the same amounts or obtain new insurance coverage in amounts not less than it currently has with carriers of equal or better ratings.  The Company maintains Directors
and Officers Liability Insurance as described in Schedule 4.20.

 

4.21     Regulatory Permits.  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Reports (“Material Permits”), except where the failure to possess such permits does not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any written notice of proceedings relating to the revocation or modification of any Material Permit.

 

4.22     Transactions With Affiliates and Employees.  Except as described on Schedule 4.22 or as specifically disclosed
in the SEC Reports, none of the officers, directors or employees of the Company 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 Company’s
knowledge, any corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner.

 

 

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4.23     Internal Accounting Controls.  Except as specifically disclosed in the SEC Reports, the Company and the Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (a) transactions are executed in accordance with management’s general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (c) access to assets is permitted only in accordance with management’s general or specific authorization, and (d) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

4.24     Sarbanes-Oxley Act.  The Company is in compliance in all material respects with currently applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations
promulgated by the SEC thereunder.

 

4.25     Foreign Corrupt Practices.  Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, 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 (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (d) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

4.26     Indebtedness.  Except as disclosed in Schedule 4.26 or as specifically disclosed in the SEC Reports, neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as defined below), (ii) 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 result, individually or in the aggregate, in a Material Adverse Effect, or (iii) 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.  Schedule 4.26 provides a detailed description of the material terms of any such outstanding Indebtedness.  For purposes of this Agreement: (x) “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 (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 Company 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; (y) “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 (z) “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company or a government or any department or agency thereof.

 

 

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4.27     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
maintains good relations with its employees.  Except as described in Schedule 4.27 or as specifically disclosed in the SEC Reports, during the period covered by the SEC Reports, no executive officer of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the Securities Act) 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.  To the knowledge of the Company or any such Subsidiary, no executive officer of the Company or any of its Subsidiaries is 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 does not subject the Company or any
such Subsidiary to any liability with respect to any of the foregoing matters.

 

4.28     Labor Matters.  The Company and its Subsidiaries are in compliance in all material respects 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.

 

4.29     Environmental Laws.  The Company and its Subsidiaries (i) are in compliance in all material respects with any and all Environmental Laws (as hereinafter defined), (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 in all material respects 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 would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.  The term “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.

 

 

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4.30     Subsidiary Rights.  Except as set forth in Schedule 4.30 or as specifically disclosed in the SEC Reports,
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.

 

4.31     Tax Status.  Except as specifically disclosed in the Company’s financial statements, the Company and each of its Subsidiaries (i) has 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 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 know of no basis for any such claim.

 

4.32     No Manipulation of Stock.  The Company has not taken and will not, in violation of applicable law, take any action designed to or that would be reasonably be expected to cause
or result in manipulation in violation of applicable law or regulation of the price of the Common Stock to facilitate the sale or resale of the Conversion Shares or the Warrant Shares.

 

4.33     Company not an “Investment Company”.  The Company has been advised of the rules and requirements under the Investment Company Act.  The Company is not,
and immediately after receipt of payment for the Notes and Warrants will not be, an “investment company,” an “affiliated person” of, “promoter” for or “principal underwriter” for, or an entity “controlled” by an “investment company,” within the meaning of the Investment Company Act and shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

 

4.34     Accountants.  To the Company’s knowledge, Jewitt, Schwartz, Wolfe & Associates, who the Company expects will consent to the incorporation by reference of its report
with respect to the consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 into the Registration Statement (as defined below) and the prospectus which forms a part thereof, are independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder.

 

4.35     Contracts.  The contracts attached as exhibits to the SEC Reports that are material to the Company are in full force and effect on the date hereof, and neither the Company nor,
to the Company’s knowledge, any other party to such contracts is in breach of or default under any of such contracts which would have a Material Adverse Effect.

 

 

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4.36     Off-Balance Sheet Arrangements.  There is no transaction, arrangement or other relationship between the Company and an unconsolidated or other off-balance sheet entity that is
required to be disclosed by the Company in its Exchange Act filings and is not so disclosed.

 

4.37     U.S. Real Property Holding Corporation.  The Company is not, nor has it ever been, as U.S. real property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company shall so certify upon any Purchaser’s request.

 

5.         Representations and Warranties of the Purchasers. Each Purchaser hereby,
as to itself only and for no other Purchaser, represents and warrants to the Company as follows, as of the date hereof and as of the Closing:

 

5.1       Organization; Authority.  Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization
with the requisite corporate, partnership or other power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The purchase by such Purchaser of the Notes and Warrants hereunder has been duly authorized by all necessary corporate, partnership or other action on the part of such Purchaser.  This Agreement has been duly executed and delivered by such Purchaser and constitutes
the valid and binding obligation of such Purchaser, enforceable against it in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally, and (ii) the effect of rules of law governing the availability of specific performance and other equitable remedies.

 

5.2       No Public Sale or Distribution.  Such Purchaser is (i) acquiring the Notes and the Warrants, (ii) upon exercise of the Notes will acquire the Conversion Shares issuable
upon exercise thereof, and (iii) upon exercise of the Warrants will acquire the Warrant Shares issuable upon exercise thereof, in the ordinary course of business for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws, and such Purchaser does not have a present arrangement
to effect any distribution of the Securities to or through any person or entity; provided, however, that by making the representations herein, such Purchaser does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under
the Securities Act.

 

5.3       Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and at the date hereof it is, an “accredited
investor” as defined in Rule 501(a) under the Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not a registered broker dealer registered under Section 15(a) of the Exchange Act, or a member of the NASD, Inc. or an entity engaged in the business of being a broker dealer.  Except as otherwise disclosed in writing to the Company
on or prior to the date of this Agreement, such Purchaser is not affiliated with any broker dealer registered under Section 15(a) of the Exchange Act, or a member of the NASD, Inc. or an entity engaged in the business of being a broker dealer.

 

 

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5.4       Experience of Such Purchaser.  Such Purchaser, either alone or together with its representatives has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser understands that it must bear the economic risk of this investment in the Securities indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment.

 

5.5       Access to Information.  Such Purchaser acknowledges that it has had the opportunity to review the Disclosure Materials and has been afforded: (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information (other than material non-public information) about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.  Neither such inquiries nor any other investigation conducted by or on behalf of such Purchaser or its representatives or counsel shall modify, amend or affect such Purchaser’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the
Company’s representations and warranties contained in the Transaction Documents.

 

5.6       No Governmental Review.  Such Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed on or made
any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

5.7       No Conflicts.  The execution, delivery and performance by such Purchaser of this Agreement and the consummation by such Purchaser of the transactions contemplated
hereby will not (i) result in a violation of the organizational documents of such Purchaser, (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 Purchaser 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 Purchaser, except in the case of clauses (ii) and (iii) above, that do not otherwise affect the ability of such Purchaser to consummate the transactions contemplated hereby.

 

5.8       Prohibited Transactions.  Each Purchaser covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with such Purchaser will engage,
directly or indirectly, in any transactions in the securities, including derivatives, of the Company (including, without limitation, any Short Sales (a “Transaction”) involving any of the Company’s securities prior to the time the transactions contemplated by this Agreement are publicly disclosed.  “Short Sales” include, without limitation, all
“short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers.

 

 

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5.9       Restricted Securities.  The Purchaser understand that the Securities are characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances.

 

5.10     Legends.  It is understood that certificates evidencing such Securities may bear the legend set forth in Section 11.1 of
this Agreement.

 

5.11     No Legal, Tax or Investment Advice.  Such Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Purchaser
in connection with the purchase of the Securities constitutes legal, tax or investment advice.  Such Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Securities.

 

6.         Covenants and Agreements.

 

6.1       Pre-Closing Covenants and Agreements.  The parties hereto covenant and agree to perform or take any and all such actions to effectuate the following from the date
hereof until the earlier of the Closing Date or the termination of this Agreement:

 

(a)     Further Assurances.  Each of the parties shall, prior to or at the Closing, as may be appropriate, execute such documents and other papers and take such other
further actions as may be reasonably required to carry out the provisions hereof and effectuate the transactions contemplated hereby and by the Note and the Warrant Agreement.  Each party shall use its best efforts to fulfill or obtain the fulfillment of the conditions to its obligation to effect the Closing, including promptly obtaining any consents required in connection herewith.

 

(b)     Additional Disclosure.  The Company shall promptly notify Purchasers of, and furnish Purchasers with, any information it may reasonably request with respect
to the occurrence of any event or condition or the existence of any fact that would cause any of the conditions to Purchaser’s obligation to consummate the transactions contemplated by this Agreement not to be fulfilled.

 

6.2       Post-Closing Covenants and Agreements.  While any of the Notes are outstanding, the Company will not, without the prior written consent of Purchasers holding at least
51% of principal amount of the Notes (the “Required Purchaser:”):

 

 

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(a)     from and after the Final Closing Date, have or incur, or permit any of its Subsidiaries to have or incur any Indebtedness (which term for purposes of this Section shall not include obligations under leases not classified as capital
leases under U.S. generally accepted accounting principles) in excess of (i) $4,500,000 in the aggregate with respect to Indebtedness which is recourse to the Company, GP, UGTI, the BVI subsidiaries and/or any of the WFOE Subsidiaries or their respective assets, and (ii) $6,000,000 in the aggregate with respect to other subsidiary indebtedness which is not recourse to the Company, GP, UGTI, the BVI Subsidiaries or any of the WFOE Subsidiaries or their respective assets; provided that
acquisition-related, purchase-money Indebtedness that is expressly subordinate to the Notes shall be permitted so long as no payments of principal or interest thereunder are required to be made by the Company prior to the maturity date of the Notes;

 

(b)     from and after the Final Closing Date, make, or permit any Subsidiary to make, any payments (whether on payment of pre-existing indebtedness or otherwise) or distributions to, or engage in any transactions with, officers, principal
or former principal shareholders or other insiders of the Company or of any Subsidiary or with officers or other insiders of any Subsidiary (other than salary payments consistent with the past practices of the Company and, without duplication, payment of deferred base salaries in annualized amounts not exceeding $240,000 for each of the chief executive officer and chairman, $120,000 for the senior vice president, or $600,000 in the aggregate for all such executive officers), regardless of whether any such payments,
distributions or transactions are described in or contemplated by the SEC Reports or other Disclosure Materials;

 

(c)     from and after the Final Closing Date, pledge, or permit any Subsidiary to pledge, a material portion (in the aggregate) of the assets of the Company or any of the Subsidiaries as collateral to any other third party;

 

(d)     from and after the Final Closing Date, permit the book value of the assets held (with proper registration in the name of the applicable WFOE where required by applicable law or regulation) by GP WFOE and UGTI WFOE on an unconsolidated
basis (without including any value that may be attributed to their contractual control of Sanming and Jianou)  to, in the aggregate, be less than $US8.0 million, or permit the fair market value of the (x) cash and cash-equivalents, (y) accounts receivable collectible in the ordinary course and (z) marketable inventory held by GP WFOE and UGTI WFOE to be less than 50% of GP WFOE’s and UGTI WFOE’s total assets on an unconsolidated basis (without including any value that may be attributed to
the contractual control of Sanming and Jianou);

 

(e)     from and after the Final Closing Date, fail to cause each of GP WFOE and UGTI WFOE to receive, on a quarterly basis (or more frequently), transfers of assets of Sanming and Jianou (with proper registration in the name of the applicable
WFOE where required by applicable law or regulation) having a fair market value equal to the most recent quarterly calculated profits of Sanming and Jianou, in payment of the amounts due to GP WFOE from Sanming and the amounts due to UGTI WFOE from Jianou;

 

(f)     fail to cause the 2009 statutory accounts of the WFOE Subsidiaries to be promptly prepared, audited and approved, or fail to thereafter cause GP WFOE and UGTI WFOE to apply for and use best efforts to obtain all consents, board resolutions,
annual audit report, capital verification report and other necessary documents required to pay a dividend of all 2009 profits, net of any tax, to the BVI Subsidiaries, and upon receipt of such consents and documents, fail to declare such dividend or, upon an Event of Default, fail to cause GP WFOE and UGTI WFOE to distribute any such dividends to the BVI Subsidiaries;

 

 

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(g)     fail to cause the WFOE Subsidiaries to follow the Purchasers’ instructions pursuant to Section 9(c) hereof regarding transfer of any funds under this Agreement if any funds cannot be remitted outside of China due to any legal
requirements;

 

(h)     fail to comply in any material respect with the post-closing obligations of Section 7.2(e); or

 

(i)      take, or permit any Subsidiary to take, any corporate action that would materially impair the value of the collateral for the Notes.

 

7.         Conditions Precedent to the Obligation of Purchaser to Close.

 

7.1       Initial and Subsequent Closing.  The obligation of the Purchaser to complete each Closing is subject to the fulfillment on or prior to each Closing Date of all of
the following conditions, any one or more of which may be waived by Purchaser in writing:

 

(a)     Representations and Warranties.  The representations and warranties of the Company contained in Section
4 shall be true on and as of each Closing.

 

(b)     Agreements and Conditions.  On or before each Closing Date, the Company shall have complied with and duly performed and satisfied in all material respects all
agreements and conditions on its part to be complied with and performed by such date pursuant to this Agreement.

 

(c)     Consents.  The Company shall have obtained any consents necessary to effectuate this Agreement and to consummate the transactions contemplated hereby and delivered
copies thereof to the Purchasers.

 

(d)     Notes.  The Company shall have duly executed and delivered to Purchasers the Notes being sold at the Closing.

 

(e)     Warrant Agreement.  The Company shall have duly executed and delivered to Purchasers the Warrants being issued at the Closing.

 

(f)     Stockholder Pledge and Security Agreements; Deposit of Stockholder Pledge Shares. Certain of the Company’s stockholders shall have executed and delivered to the
Purchasers the agreements described in Section 3.1 hereof, and the Stockholder Pledge Shares shall have been deposited with the security escrow agent designated by the Stockholder Pledge and Security Agreements.

 

(g)     BVI Subsidiary Guarantees. The Company’s BVI Subsidiaries shall have executed and delivered to the Purchasers the agreements described in Section 3.2.

 

(h)     Minimum Investment Amount.  At the Initial Closing, the Company shall sell Notes whose principal amount totals at least the Minimum Amount.

 

 

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(i)     Compliance Certificate.  The President of the Company shall deliver to the Purchasers at each Closing a certificate certifying that the conditions specified
in Section 7.1(a) and Section 7.1(b) have been fulfilled.

 

(j)     Applicable Board and Stockholder Resolutions.  The Company shall deliver to the  Purchasers copies of (i) a unanimous written consent of the Board
of the Directors of the Company authorizing the execution, delivery and performance of the applicable Transaction Documents by the Company, (ii) unanimous written consents or otherwise duly authorized action of each applicable US or BVI Subsidiaries and WFOE Subsidiaries authorizing the execution, delivery and performance of the applicable Transaction Documents by such Subsidiaries, and (iii) to the extent required by law or agreement, written consents or otherwise duly authorized action of each individual shareholder
of the Company or of any individual Subsidiary authorizing the execution, delivery and performance of the applicable Transaction Documents by the Company or any such Subsidiary.

 

(k)     Payment of Facility Fee. The Company shall pay to the Purchasers, in cash, a facility fee equal to 1% of the purchase price of the Notes issued at each Closing, which
amount may, at the option of the Purchasers, be paid by offset against the cash purchase price payable for the Notes purchased at such Closing.

 

7.2       Additional Conditions to Final Closing.  The obligation of the Purchasers to complete the Final Closing is subject to the fulfillment on or prior to each Closing Date
(but in any event no later than March 1, 2010) of all of the following additional conditions, any one or more of which may be waived by Purchaser in writing (subject to the foregoing, the Final Closing on no less than the Base Amount (less the Minimum Amount) shall occur within three (3) business days of the Company’s satisfaction of each of the following conditions):

 

(a)     Base Investment Amount.  The Company shall offer to sell to the Purchasers Notes whose principal amount totals (inclusive of the Minimum Amount previously sold)
at least the Base Amount.

 

(b)     Opinion of Company Counsel.  Each Purchaser shall have received from Arnstein & Lehr LLP, as US counsel for the Company, an opinion, dated as of the Closing,
in substantially the form of Exhibit I attached hereto.

 

(c)     Company Pledge and Security Agreement and US Subsidiary Guarantees and Pledge and Security Agreements. The Company and its US Subsidiaries shall have executed and delivered
to the Purchasers the agreements described in Sections 3.3 and 3.4 hereof.

 

(d)     WFOE and non-WFOE PRC Company Collateral Security Arrangements. The WFOE Subsidiaries shall have executed and delivered to the Purchasers the additional Collateral Security
Agreements described in Section 3.5 hereof.

 

(e)     Irrevocable Signature Authority over GP WFOE and UGTI WFOE Primary Funding Accounts. The Purchasers shall have been granted irrevocable binding signature authority over
a designated bank account for GP WFOE and a designated bank account for UGTI WFOE, or a joint account  for GP WFOE and UGTI WFOE (collectively, the “WFOE Primary Funding Accounts”), pursuant to duly adopted Board resolutions of GP WFOE and UGTI WFOE, which WFOE Primary Funding Accounts shall be subject to the following terms:

 

 

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(i)     The WFOE Funding Accounts shall be the sole and exclusive initial deposit accounts for (x) any proceeds of the Notes that are transmitted to any of the WFOE Subsidiaries, and (y) any other cash payments or proceeds received by GP WFOE
or UGTI WFOE, as the case may, whether from customer payments or amounts due from or transferred by Sanming or Jianou, including pursuant to Section 6.2(e) or Section 7.2(f) or (g);

 

(ii)     Notice of such signature authority and Board authorization shall have been delivered to the PRC banking institution for each such account, with confirmation by each Board member of the irrevocable nature of such signature authority
until the Notes have been repaid in full and confirmation in writing (by the issuance of a signature card or otherwise) by the PRC banking institution of the Purchasers’ signature authority over the WFOE Primary Funding Accounts;

 

(iii)     Any transfer of funds from the WFOE Funding Accounts to other operating accounts of GP WFOE or UGTI WFOE or to other parties, or any attempted modification of signature authority over such accounts shall require Purchasers’
prior written consent, subject to such exceptions for certain categories of payments or minimum RMB or USD thresholds for transfers of funds in the ordinary course of business to other operating accounts of GP WFOE or UGTI WFOE as may be agreed to by the Purchasers, the Company and the WFOE Subsidiaries in writing prior to the Final Closing; and

 

(iv)     The Company shall provide the Purchasers with monthly reports of all account activity with respect to the WFOE Funding Accounts and other operating accounts of GP WFOE and UGTI WFOE  within 30 days after the end of each
calendar month.

 

(f)    Payments of PRC Subsidiary Amounts Due GP WFOE and UGTI WFOE with respect to 2009. The Company shall have provided evidence, reasonably satisfactory to the Purchasers (who
may require, in their sole discretion, independent confirmations by third parties) and Purchasers shall have provided written notice to the Company of the acceptance or non-acceptance of such evidence, which acceptance shall not be unreasonably withheld, within three (3) business days from the time the Company has provided such evidence, that:

 

(i)     GP WFOE and UGTI WFOE shall have completed all legal and contractual legal requirements required for them to be fully entitled to and vested in the amounts due to GP WFOE from Sanming and the amounts due to UGTI WFOE from Jianou in
an amount equal to no less than the full-year 2009 profits of Sanming and Jianou, respectively; and

 

(ii)     Assets having a book value of not less than US$8 million shall have been transferred to (and registered, if required, in the name of) GP WFOE and UGTI WFOE  by Sanming and Jianou, respectively, in payment of the amounts
due to GP WFOE from Sanming and the amounts due to UGTI WFOE from Jianou, without recourse, claim or offset other than satisfaction of the obligation to pay the amounts due GP WFOE and UGTI WFOE with respect to 2009, and at least 50% of such transferred assets shall consist of (x) cash and cash-equivalents, (y) accounts receivable collectible in the ordinary course and (c) marketable inventory.

 

 

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(g)     Ability to Direct Revenues Upon an Event of Default. GP WFOE and UGTI WFOE shall have the legal and effective ability to direct that substantially all future revenues
of Sanming and Jianou be deposited in bank accounts of GP WFOE or UGTI WFOE, as the case may be, according to agreements between GP WFOE and Sanming and UGTI WFOE and Jianou, respectively; Sanming and Jianou shall have delivered irrevocable signed authorizations  to GP WFOE and UGTI WFOE permitting them to direct that all customer payments be directed to the WFOE bank accounts according to such agreements; and the Purchasers shall have been granted the right to exercise such rights upon an Event of Default
under the Notes.

 

(h)     Subordination Agreements with Certain Holders of Company Indebtedness. The Company shall have delivered
to the Purchasers copies of executed written agreements, in form and substance reasonably satisfactory to the Purchasers, (i) with regard to not less than $350,000 in deferred cash payments owed by the Company or its Subsidiaries to certain parties relating to the acquisition of GP and due in 2010 (collectively, the “GP 2010 Deferred Acquisition Payments”); and (ii) with regard to not less than $450,000 in deferred cash payments owed
by the Company or its Subsidiaries to certain parties relating to the acquisition of Supreme and due in 2010 (collectively, the “Supreme 2010 Deferred  Acquisition Payments”), whereby any parties owed amounts in connection with the GP 2010 Deferred Acquisition Payments and/or Supreme 2010 Deferred Acquisition Payments shall agree that any and all payments due from the Company or its Subsidiaries with respect to the respective
GP 2010 Deferred Acquisition Amounts and Supreme 2010 Deferred Acquisition Amounts shall be subordinate to the prior payment of amounts due from the Company to the Purchasers under the Notes, and limiting such parties’ rights to seek to enforce their rights to payment of the GP 2010 Deferred Acquisition Payments and Supreme 2010 Deferred Acquisition Payments (or to accelerate any other payments due them that are due after 2010) until 10 days after the first to occur of (x) the maturity date of the Note
or (y) any earlier repayment in full of the Notes.

 

8.         Conditions Precedent to the Obligation of the Company  to Close.

 

8.1       Closing.  The obligation of the Company to complete each Closing is subject to the fulfillment on or prior to each Closing Date of all of the following conditions,
any one or more of which may be waived by the Company in writing:

 

(a)     Representations and Warranties.  The representations and warranties of each Purchaser contained in Section
5 shall be true on and as of each Closing.

 

(b)     Agreements and Conditions.  On or before each Closing Date, each Purchaser shall have complied with and performed and satisfied in all material respects all
agreements and conditions to be complied with and performed by such date pursuant to this Agreement.

 

(c)     Notes.  Each Purchaser shall have duly executed the Notes.

 

 

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(d)     Payment of Purchase Price.  Each Purchaser shall have paid to the Company the Purchase Price for the Notes.

 

8.2       Event of Purchasers’ Failure to Consummate Final Closing.  If, following the Initial Closing:

 

(a)     the Company has satisfied, in accordance with their terms, each of the conditions set forth in Section 7 to the obligation of the Purchasers to purchase the Notes at the Final Closing;

 

(b)     the Company has given written notice to the Purchasers that it is ready, willing and able to consummate the Final Closing on the terms and conditions set forth in this Agreement; and

 

(c)     nonetheless, the Purchasers fail to tender to the Company the Purchase Price for the Notes within ten (10) days of receipt of such notice, and therefore the Final Closing is not consummated;

 

then, the sole and exclusive remedy at law or in equity of the Company, its Subsidiaries and of any shareholder of the Company for the Purchasers’ failure to consummate the Final Closing shall be as follows:

 

(d)     the Purchasers shall immediately release 5,400,000 of the Stockholder Pledge Shares being held as security to the pledgors with respect thereto (pro rata in proportion to their respective original Stockholder Pledge Shares), retaining
600,000 Stockholder Pledge Shares as security pursuant to the Stockholder Pledge and Security Agreement while any Notes are outstanding;

 

(e)     all of the Warrants issued to Purchasers shall be cancelled;

 

(f)     the Company may thereafter elect to exercise the Company Prepayment Option (as defined in Section 9(a) hereof) on the terms and conditions set forth in Section 9(a) hereof, including the Prepayment Purchase Price, whereupon all of
the remaining Stockholder Pledge Shares shall be immediately released by the Purchasers to the pledgors with respect thereto (pro rata in proportion to their respective original Stockholder Pledge Shares); and

 

(g)     all other terms of this Agreement applicable upon and following the Initial Closing (other than obligations with respect to consummating the Final Closing) and of the Notes previously issued (if and to the extent still outstanding)
shall remain in full force and effect.

 

 

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9.         Company Prepayment Option; Additional Warrant; Alternative Repayment Mechanism.

 

(a)     In the event that the conditions to complete the Final Closing as set forth in Section 7.2 hereof are not met on or before March 1, 2010, the Company will have, at its option, assuming the Notes have not been converted in accordance
with their terms, the right to prepay all, but not less than all, of the principal and interest accrued and owing on the Notes issued at the Initial Closing, plus a premium payment of twenty percent (20%) of the original principal amount of the Notes (collectively, the “Prepayment Purchase Price”) (the “Company Prepayment Option’). In order to exercise the Company
Prepayment Option, the Company shall deliver to the Purchasers written notice (the “Prepayment Notice”) no later than ten (10) business days prior to the date of proposed exercise of the Company Prepayment Option. The Prepayment Purchase Price shall be paid to Purchasers on the date set forth in the Prepayment Notice via federal funds wire transfer(s) of immediately available funds, in accordance with written instructions provided by
Purchasers to the Company prior to the date thereof.  Upon receipt of the Prepayment Purchase Price, Purchaser shall surrender the Notes, appropriately endorsed, and each Purchaser and the Company agree to enter into such documents and make such representations, warranties and covenants as are reasonably customary in order to complete the prepayment of the Notes and to release any and all collateral (including any remaining Stockholder Pledge Shares) previously pledged as security for repayment of the
Notes.

 

(b)     Subject to the terms and conditions of this Agreement, upon the Initial Closing, the Company shall issue to each Purchaser additional warrants, substantially in the form of Exhibit
B attached hereto (each an “Additional Warrant” and collectively, the “Additional Warrants”) to purchase the number of shares of Common Stock of the Company set forth opposite such Purchaser’s name on the Warrant to each Purchaser at the Initial Closing; provided, that each Additional
Warrant shall be held in escrow by Seyfarth Shaw LLP and only released to the respective Purchaser in the event that the conditions to complete the Final Closing as set forth in Section 7.2 hereof are not met on or before March 1, 2010.  In the event such conditions are met and the Final Closing is consummated, Seyfarth Shaw LLP shall release the Additional Warrants to the Company.

 

(c)     In the event there is an Event of Default and the Company is unable to repay its obligations under the Note, at the option of the Purchasers upon written notice to the Company, the Company shall cause its WFOE Subsidiaries to repay
all obligations of the Company under the Notes to an eligible entity in the People’s Republic of China, as designated by the Required Purchasers.

 

10.       Use of Proceeds.  The Company shall
use the proceeds from the Notes for general corporate purposes, including capital initiatives and working capital.

 

10.1     The proceeds of Notes sold at the Initial Closing shall be used for general corporate purposes, less any amount required for the facility fee with respect to those Notes sold at the Initial Closing.

 

10.2     At least $1.7 million of the proceeds of any Final Closing shall be used to pay the remaining unpaid registered capital of GP WFOE, and at least $0.18 million of any remaining proceeds of any Final Closing shall be used to pay a portion of the remaining
unpaid registered capital of UGTI WFOE prior to any other proceeds of such Closing be applied for any other purposes. The balance shall be used as set forth in Schedule 10, less any amount required for the facility fee with respect to those Notes sold at the Final Closing..

 

 

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11.       Restrictions on Transferability; Compliance with the Securities Act; Trading Restrictions.

 

11.1     Restrictive Legend.  Purchaser understands that, until such time as a registration statement pursuant to the Securities Act has been declared effective or the Conversion Shares
may be sold pursuant to Rule 144(k) under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately resold, the certificate(s) representing the Conversion Shares shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for the securities comprising the Conversion Shares):

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ISSUER THAT THE TRANSFER IS EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

 

11.2     Restrictions on Transferability.  Purchaser hereby covenants with the Company not to effect any resale or other disposition of any of the Conversion Shares without complying
with the provisions of this Agreement, and without effectively causing any prospectus delivery requirement under the Securities Act to be satisfied, and Purchaser acknowledges and agrees that such Conversion Shares are not transferable on the books of the Company unless (a) the Conversion Shares have been sold in accordance with an effective registration statement or valid exemptions from registration under the Securities Act and any applicable state securities or “blue sky” laws, (b) prior to such
time that a registration statement shall have become effective under the Securities Act, Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of the Conversion Shares under the Securities Act and (c) if applicable, the requirement of delivering a current prospectus has been satisfied.  Purchaser acknowledges that there is no assurance that a registration statement shall be declared effective
by the SEC.

 

11.3     Trading Restrictions.  (a) The Purchasers agree not to, directly or indirectly, at any time prior to the first to occur of (i) the maturity of the Notes (whether
on the maturity date or by any earlier acceleration in accordance with their terms), or (ii) the closing of a New Financing (as defined in the Note), (A) sell any shares of the Company’s Common Stock in public market transactions; (B) engage in any short selling of the Company’s Common Stock; or (C) pledge the Notes or the Warrants or any interest therein.

 

(b)     Each Purchaser also agrees that in the event any Purchaser transfers or assigns all or any portion of an interest in the Notes or Warrants, such Purchaser will require the transferee or assignee, as the case may be, to agree to the
trading restrictions set forth in Section 11.3 hereof.

 

 

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(c)     Commencing from the Final Closing and until six months after any New Financing, the Company’s directors, officers and holders of 10% or more of its Common Stock will not offer, issue, sell, contract to sell, encumber, grant any
option for the sale of or otherwise dispose of any shares of Company Common Stock. The Company shall, within 10 Trading Days of the Final Closing obtain side letters from each of the Company’s directors, officers and holders of 10% or more of its Common Stock confirming their agreement to the foregoing and implement appropriate stop orders with respect to shares held by all such individuals.

 

12.      Registration Statement.  For purposes
of this Section 12, the following definitions shall apply.

 

12.1     “Effective Date” means the date that a Registration Statement required by Section 12 of this Agreement is first declared effective by the SEC.

 

12.2     “Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market,
OTC Bulletin Board or Pink Sheets LLC.

 

12.3     “Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

12.4     “Registrable Securities” means the Conversion Shares and the Warrant Shares issued or issuable pursuant to the Transaction Documents, including without limitation those issued
under the Note to the Purchasers and those issuable to the Purchasers under the Warrants, together with any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

 

12.5     “Registration Statement” means each registration statement required to be filed under this Section 12, including (in each case) the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

 

12.6     “Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading
Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i),
(ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

 

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12.7     Registration.

 

(a)     On or prior to the date (the “Filing Date”) that is no later than thirty (30) calendar days following the Final Closing Date, and in any event prior to the
filing of a Registration Statement with the SEC for the holders of any other shares of the Company’s capital stock (each, an “Other Registration Statement”), the Company shall prepare and file with the SEC a Registration Statement covering the resale of the Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415, on Form S-3 (or, if Form S-1 is not then available, on Form S-1 or on such other
form appropriate for such purpose).  The initial Registration Statement to be filed under this Section shall be filed to include all of the Registrable Securities.  Such Registration Statement shall contain (except if otherwise required pursuant to written comments received from the SEC upon a review of such Registration Statement) the “Plan of Distribution”
attached hereto as Exhibit H.  The Company shall use its commercially reasonable best efforts to cause such Registration Statement to be declared effective under the Securities Act as soon as possible but, in any event, no later than 180 calendar days following the final Closing Date, and in any event, at least 20 Trading Days prior to the effectiveness of any Other Registration Statement (the “Effectiveness
Date”), and shall use its reasonable best efforts to keep the Registration Statement continuously effective under the Securities Act until the date which is the earliest of (i) two years after its Effective Date (and for purposes of a Registration Statement contemplated in Section 12.7(b) hereof, two years after the Effective Date therefor), (ii) such time as all of the Registrable Securities covered by such Registration Statement
have been publicly sold by the Holders, or (iii) such time as all of the Registrable Securities covered by such Registration Statement may be sold by the Holders pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s Transfer Agent and the affected Purchasers (the “Effectiveness Period”).  By 5:00 p.m. (New York
City time) on the Business Day immediately following the Effective Date of such Registration Statement, the Company shall file with the SEC in accordance with Rule 424 under the Securities Act the final prospectus to be used in connection with sales pursuant to such Registration Statement (if such filing is required under such Rule).

 

(b)     If all of the Registrable Securities to be included in the Registration Statement filed pursuant to Section 12.7(a) cannot be so included because the SEC staff informs
the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415 or other reason, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (i) inform each of the holders thereof, (ii) use its reasonable best efforts to file amendments to the initial Registration Statement as required by the SEC staff and/or (iii) withdraw the initial Registration Statement and file a new registration statement, in either case covering
the maximum number of Registrable Securities permitted to be registered by the SEC staff, on Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or new registration statement, the Company shall be obligated to use its reasonable best efforts to advocate with the then
prevailing SEC guidance, including without limitation, the Manual of Publicly Available Telephone Interpretations D.29.  In the event the Company amends the initial Registration Statement or files a new registration statement, as the case may be, under clauses (ii) or (iii) above, then the Company shall prepare and file such number of additional Registration Statements as may be necessary in order to ensure that all Registrable Securities are covered by an existing and effective Registration Statement.  Accordingly,
if for example, an additional Registration Statement is filed under this Section 12.7(b) to register shares taken off a Registration Statement filed under Section 12.7(a) due to SEC staff comments and SEC staff comments again require shares to be removed for such newly filed Registration Statement under this Section 12.7(b),
then the Company will prepare and file additional Registration Statements until such time as all such removed shares are covered by effective Registration Statements.  Any Registration Statements to be filed under this Section 12.7(b) shall be for an offering to be made on a continuous basis pursuant to Rule 415, on Form S-3 (or on such other form appropriate for such purpose).  Such Registration Statement shall contain
(except if otherwise required pursuant to written comments received from the SEC staff upon a review of such Registration Statement) the “Plan of Distribution” in substantially similar form attached hereto as Exhibit H.  The Company shall cause such Registration Statement(s) to be declared effective under the Securities Act as soon as possible but, in any
event, by its Effectiveness Date, and shall use its reasonable best efforts to keep such Registration Statement continuously effective under the Securities Act during the entire Effectiveness Period.  By 5:00 p.m. (New York City time) on the Effective Date, the Company shall file with the Commission in accordance with Rule 424 under the Securities Act the final prospectus to be used in connection with sales pursuant to such Registration Statement (if such filing is required under such Rule).

 

 

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(c)     In the event that the Company receives SEC staff comments limiting the amount of shares of Common Stock which may be included in any Registration Statement (such number of shares of Common Stock which the Company may include in such
Registration Statement in accordance with the SEC staff comments, the “Allowable Maximum”), the number of Registrable Securities sought to be included in any such Registration Statement shall be cutback and removed from such Registration Statement until the aggregate number of such Registrable Securities to be included in such Registration Statement equals the Allowable Maximum.  Such cutbacks will be in the following order:
(i) any securities of the Company included or to be included in such Registration Statement pursuant to piggyback or demand registration rights (other than those of the Purchasers), (ii) the Warrant Shares issuable upon exercise of the Warrants issued to the Purchasers and (iii) the Conversion Shares.  Any required cutbacks of Conversion Shares or Warrant Shares shall be applied to the Purchasers pro rata in accordance with the number of such
Conversion Shares or Warrant Shares sought to be included in such Registration Statement.

 

(d)     If: (i) a Registration Statement is not filed on or prior to its Filing Date covering the Registrable Securities required under this Agreement to be included therein, or (ii) a Registration Statement is not declared effective by the
SEC on or prior to its Effectiveness Date or if by the Business Day immediately following the Effective Date the Company shall not have filed a “final” prospectus for the Registration Statement with the SEC under Rule 424(b) (if such a prospectus filing is required by such Rule) and notify the Purchasers of the Effectiveness Date, or (iii) after its Effective Date, without regard for the reason thereunder or efforts therefore, such Registration
Statement ceases for any reason to be effective and available to the Purchasers as to the Registrable Securities to which it is required to cover at any time prior to the expiration of its Effectiveness Period for more than an aggregate of 30 Trading Days (which need not be consecutive), or (iv) the Common Stock is not listed or quoted, or is suspended from trading, on an Eligible Market for a period of three Trading Days (which need not be consecutive Trading Days) during the Effectiveness Period, or (v) with
respect to any Purchaser, the Company fails for any reason to deliver a certificate evidencing any securities to the Purchaser within five Trading Days after delivery of such certificate as required pursuant to any Transaction Document, or (vi) during the Effectiveness Period the Company fails to have any of the Common Shares listed on an Eligible Market (any such failure or breach specified in clauses (i) to (vi) above being referred to as an “Event,”
and for purposes of clauses (i) or (ii) the date on which such Event occurs, or for purposes of clauses (iii) to (v) the date which such period is exceeded, being referred to as “Event Date”), then on each such Event or Event Date, and on each monthly anniversary of each such Event or Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as partial liquidated damages and not as a penalty, equal to 1.0% of the aggregate amount paid by the Purchasers for the Notes pursuant to this Agreement (“Investment Amount”); provided, however, that the total amount of partial liquidated damages payable by the Company pursuant to all Events
under this Section shall be capped at an aggregate of 10% of the aggregate Investment Amount paid for the Notes purchased under this Agreement.  The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event, except in the case of the first Event Date.

 

 

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         (i)       In no event
will the Company be liable for liquidated damages under this Agreement in excess of 1.0% of the aggregate Investment Amount in any 30-day period.

 

             (ii)       In addition, the Company shall not be
liable for liquidated damages under this Agreement as to any Registrable Securities which are not permitted by the SEC to be included in Registration Statements due solely to SEC staff comments until the provisions of this Agreement as to the next applicable Registration Statement required to be filed hereunder are triggered, in which case the provisions of this Section 12.7(d) shall apply, if applicable.

 

             (iii)     The partial liquidated damages pursuant to this
Section 12 shall be the exclusive monetary remedy of the Purchasers in the event that the Company fails to satisfy its obligation to file or to have an effective Registration Statement on file with the SEC pursuant to the terms of this Agreement.

 

(e)     If at any time the Registration Statements required by this Section 12 are not filed on Form S-3 or its equivalent, and the Company, subsequent to the filing or effectiveness thereof, becomes eligible to file a Registration Statement
on Form S-3 or its equivalent for the resale of the Registrable Securities as required by this Section 12, then the Company as soon as  practical will file a Registration Statement on Form S-3 in satisfaction of the registration rights provided in this Section 12; provided further that the Company shall use its reasonable best efforts to maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.

 

(f)     The Company shall notify the Purchasers, in writing, immediately after the Effectiveness Date of any Registration Statement, of the effectiveness of a Registration Statement.

 

 

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(g)     Each Purchaser agrees to furnish to the Company a completed Questionnaire in the form attached to this Agreement as Exhibit H-1 (a “Selling
Holder Questionnaire”) within five Trading Days after the written request by the Company, if not previously provided.  The Company shall not be required to include the Registrable Securities of a Purchaser in a Registration Statement and shall not be required to pay any liquidated or other damages under Section 12.7(c) to any Purchaser who fails to furnish to the Company a fully completed Selling Holder Questionnaire
at least two Trading Days prior to the Filing Date, provided the written request by the Company has been made as provided above.

 

(h)     Notwithstanding anything in this Agreement to the contrary, after 90 consecutive Trading Days of continuous effectiveness of the initial Registration Statement filed and declared effective pursuant to this Agreement,
the Company may, by written notice to the Holders, suspend sales under a Registration Statement after the Effective Date thereof and/or require that the Purchasers immediately cease the sale of shares of Common Stock pursuant thereto and/or defer the filing of any subsequent Registration Statement if the Company is engaged in a material merger, acquisition or sale and the Board of Directors of the Company determines in good faith, by appropriate resolutions, that, as a result of such activity, (i) it would be
materially detrimental to the Company (other than as relating solely to the price of the Common Stock) to maintain a Registration Statement at such time or (ii) it is in the best interests of the Company to suspend sales under such registration at such time.  Upon receipt of such notice, each Purchaser shall immediately discontinue any sales of Registrable Securities pursuant to such registration until such Purchaser is advised in writing by the Company that the current Prospectus or amended Prospectus,
as applicable, may be used.  In no event, however, shall this right be exercised to suspend sales beyond the period during which (in the good faith determination of the Company’s Board of Directors) the failure to require such suspension would be materially detrimental to the Company.  The Company’s rights under this Section 12.7(h) may be exercised for a period of no more than 20 Trading Days at a time and not
more than one time in any twelve-month period, without such suspension being considered as part of an Event.  Immediately after the end of any suspension period under this Section 12.7(h), the Company shall take all necessary actions (including filing any required supplemental prospectus) to restore the effectiveness of the applicable Registration Statement and the ability of the Holders to publicly resell their Registrable Securities
pursuant to such effective Registration Statement.  The events described in this Section 12.7(h) are “Excluded Events.”

 

12.8     Registration Procedures.  In connection with the Company’s registration obligations hereunder, the Company shall:

 

(a)     Not less than five (5) Trading Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto, furnish via email to those Purchasers who have supplied the Company with email addresses
copies of all such documents proposed to be filed, which documents (other than any document that is incorporated or deemed to be incorporated by reference therein) will be subject to the review of such Purchasers.  The Company shall reflect in each such document when so filed with the SEC such comments regarding the Purchasers and the plan of distribution as the Purchasers may reasonably and promptly propose no later than two (2) Trading Days after the Purchasers have been so furnished with copies of
such documents as aforesaid.

 

 

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                 (b)       Subject to Section 12.7(g), (i) prepare
and file with the SEC such amendments, including post-effective amendments, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective, as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the SEC such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible, and in any event within 10 Trading Days (except to the extent that the Company reasonably requires additional time to respond to the SEC’s comments), to any comments received from the SEC with respect to the Registration Statement or any amendment thereto; and (iv) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Purchasers thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.

 

(c)       Notify the Purchasers as promptly as reasonably possible, and (if requested by the Purchasers confirm such notice in writing no later than two Trading Days thereafter), of any of the following events: (i) the SEC notifies the Company whether there
will be a “review” of any Registration Statement; (ii) the SEC comments in writing on any Registration Statement; (iii) any Registration Statement or any post-effective amendment is declared effective; (iv) the SEC or any other Federal or state governmental authority requests any amendment or supplement to any Registration Statement or Prospectus or requests additional information related thereto; (v) the SEC issues any stop order suspending
the effectiveness of any Registration Statement or initiates any Proceedings for that purpose; (vi) the Company receives notice of any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (vii) the financial statements included in any Registration Statement become ineligible for inclusion therein or any Registration Statement or Prospectus or other document contains any untrue
statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(d)       Use its reasonable best efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any jurisdiction, as soon as possible.

 

(e)       If requested by a Purchaser, provide such Purchaser without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the SEC.

 

(f)       Promptly deliver to each Purchaser, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request.  The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto by each of the Purchasers in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto to the extent permitted by federal and state securities laws and regulations.

 

 

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(g)       (i) In the time and manner required by each Trading Market, prepare and file with such Trading Market an additional shares listing application covering all of the Registrable Securities; (ii) take all steps necessary to cause such Common Shares
to be approved for listing on a Trading Market as soon as possible thereafter; (iii) provide to each Purchaser evidence of such listing; and (iv) except as a result of the Excluded Events, during the Effectiveness Period, maintain the listing of such Common Shares on such Trading Market or another Eligible Market.

 

(h)       Prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the Purchasers in connection with the registration or qualification (or exemption from such registration or qualification)
of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder requests in writing, to keep each such registration or qualification (or exemption therefrom) effective for so long as required, but not to exceed the duration of the Effectiveness Period, and to do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise so subject.

 

(i)       Cooperate with the Purchasers to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the
extent permitted by this Agreement and under law, of all restrictive legends, and to enable such certificates to be in such denominations and registered in such names as any such Holders may reasonably request.

 

(j)       Upon the occurrence of any event described in Section 12.8(c)(vii), as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment,
to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(k)      Cooperate with any reasonable due diligence investigation undertaken by the Purchasers in connection with the sale of Registrable Securities, including, without limitation, by making available documents and information; provided that the Company
will not deliver or make available to any Holder material, nonpublic information unless such Holder requests in advance in writing to receive material, nonpublic information and agrees to keep such information confidential.

 

 

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(l)       Comply with all rules and regulations of the SEC applicable to the registration of the Securities.

 

(m)     The Company shall comply with all applicable rules and regulations of the SEC under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment
thereof, with the SEC pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Purchasers are required to make available a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.

 

12.9        Registration Expenses.  The Company shall pay all fees and expenses incident to the performance of or compliance with Section 12 of this Agreement by the Company,
including without limitation (a) all registration and filing fees and expenses, including without limitation those related to filings with the SEC, any Trading Market and in connection with applicable state securities or Blue Sky laws, (b) printing expenses (including without limitation expenses of printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses, (d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons retained by the Company
in connection with the consummation of the transactions contemplated by this Agreement, and (f) all listing fees to be paid by the Company to the Trading Market; except that the Company shall not pay any such fees and expenses incurred by the Purchasers.

 

12.10      Rule 144 Reporting. With a view to making available to Purchasers the benefits of certain rules and regulations of the SEC, which may permit the resale of the Registrable Securities
to the public without registration, the Company agrees after the date hereof to:

 

(a)       make and keep public information available, as those terms are understood and defined in Rule 144(c) under the Securities Act;

 

(b)       file with the SEC all reports and other documents required of the Company under the Securities Act and the Exchange Act (it being expressly acknowledged by the parties hereto that if any such report or document is not filed with the SEC within
thirty (30) days of the date required under the rules and regulations of the SEC (after giving effect to any Rule 12b-25 extensions under the Exchange Act), such failure shall be deemed an Event of Default under the Notes); and

 

(c)       so long as a Purchaser owns any Registrable Securities, to furnish to such Purchaser forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as the Purchaser may reasonably request in writing in complying with any rule or regulation of the SEC allowing the Purchaser to sell any such securities without registration.

 

 

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13.           Indemnification.

 

13.1         Indemnification Procedures.

 

(a)         Indemnification by the Company.  The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Purchaser, the officers,
directors, partners, members, agents and employees of each of them, each Person who controls any such Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, reasonable attorneys’
fees (collectively, “Losses”), as incurred, arising out of or relating to (i) any material misrepresentation or material breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (iii) any cause of action, suit or claim brought or made against such Indemnified Party (as defined in Section 13.1(c) hereof) by a third party (including for these purposes a derivative action brought on behalf of the Company), arising out of or resulting from (x) the execution, delivery, performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated
hereby or thereby, (y) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (z) the status of Indemnified Party as holder of the Securities, or (iv) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of Company prospectus or in any amendment or supplement thereto or in any Company preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding such Purchaser furnished in writing to the Company by such Purchaser
for use therein, or to the extent that such information relates to such Purchaser or such Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved by such Purchaser expressly for use in the Registration Statement, or (B) with respect to any prospectus, if the untrue statement or omission of material fact contained in such prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented, if such corrected prospectus was timely
made available by the Company to the Purchaser, and the Purchaser seeking indemnity hereunder was advised in writing not to use the incorrect prospectus prior to the use giving rise to Losses.

 

 

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(b)         Indemnification by Purchaser.  Each Purchaser shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents
and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review) arising solely out of any untrue statement of a material fact contained in the Registration Statement,
any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising out of or relating to any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, but only to the extent that such untrue statement or omission is contained in any information so furnished by such Holder in writing to
the Company specifically for inclusion in such Registration Statement or such Prospectus or to the extent that such untrue statements or omissions are based solely upon information regarding such Holder furnished to the Company by such Purchaser in writing expressly for use therein, or to the extent that such information relates to such Purchaser  or such Purchaser ‘s proposed method of distribution of Registrable Securities and was reviewed and expressly approved by such Purchaser expressly for
use in the Registration Statement (it being understood that the information provided by the Purchaser to the Company in response to Exhibit H-1 and the Plan of Distribution set forth on Exhibit H, as the same may be modified by such Purchaser and other information provided by the Purchaser to the Company in or pursuant to the Transaction Documents constitutes
information reviewed and expressly approved by such Purchaser in writing expressly for use in the Registration Statement), such Prospectus or such form of prospectus or in any amendment or supplement thereto.  In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

(c)         Conduct of Indemnification Proceedings.  If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; (ii) the
Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of separate counsel shall be at the expense of the Indemnifying Party).  It shall be understood, however, that the Indemnifying Party shall not, in connection with any one such Proceeding (including separate Proceedings
that have been or will be consolidated before a single judge) be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, which firm shall be appointed by a majority of the Indemnified Parties.  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

 

 

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All reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section 13.1(c) shall be paid to the Indemnified Party, as incurred, within 20 Trading Days of
written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder).

 

(d)         Contribution.  If a claim for indemnification under Section 13(a) or (b) is unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of such Indemnifying Party and Indemnified Party
shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party
as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 13.1(c), any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section 13.1(d) was
available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 13.1(d) were determined by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 13.1(d), no Purchaser shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Purchaser from the sale of the Registrable Securities subject to the Proceeding exceed the amount of any damages that such Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

 

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The indemnity and contribution agreements contained in this Section 13.1(d) are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

 

13.2         Dispositions.  Each Purchaser agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement and shall sell its Registrable Securities in accordance with the Plan of Distribution set forth in the Prospectus.  Each Holder further agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Sections 12.8(c)(v), (vi) or (vii),
such Holder will discontinue disposition of such Registrable Securities under the Registration Statement until such Holder is advised in writing by the Company that the use of the Prospectus, or amended Prospectus, as applicable, may be resumed.  The Company may provide appropriate stop orders to enforce the provisions of this paragraph.

 

13.3         Piggy-Back Registrations.  If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other
employee benefit plans, then the Company shall send to each Holder not then eligible to sell all of their Registrable Securities under Rule 144 in a three-month period, written notice of such determination and if, within ten days after receipt of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of any Registrable Securities that the Holder requests to be registered.  Notwithstanding the foregoing, in the event that, in
connection with any underwritten public offering, the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which such Holder
has requested inclusion hereunder as the underwriter shall permit; provided, however, that (i) the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not contractually entitled to inclusion of such securities in such Registration Statement or are not contractually entitled to pro rata inclusion
with the Registrable Securities and (ii) after giving effect to the immediately preceding proviso, any such exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities and the holders of other securities having the contractual right to inclusion of their securities in such Registration Statement by reason of demand registration rights, in proportion to the number of Registrable Securities or other securities, as applicable, sought to be included by each
such Holder or other holder.  If an offering in connection with which a Holder is entitled to registration under this Section 13.3 is an underwritten offering, then each Holder whose Registrable Securities are included in such Registration Statement shall, unless otherwise agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, subject to the provisions
of this Agreement, on the same terms and conditions as other shares of Common Stock included in such underwritten offering and shall enter into an underwriting agreement in a form and substance reasonably satisfactory to the Company and the underwriter or underwriters.  Upon the effectiveness the registration statement for which piggy-back registration has been provided in this Section 13.3, any partial liquidated damages payments
payable to an Holder whose Securities are included in such registration statement shall terminate and no longer be payable.

 

 

37

 

 

14.           Participation Rights. For purposes of this Section 14,
the following definitions shall apply.

 

14.1         “Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for shares of Common Stock.

 

14.2         “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

14.3         “Common Stock Equivalents” means, collectively, Options and Convertible Securities.

 

14.4         Participation Rights Procedures.

 

(a)         Any offer, sale, grant, disposition or announcement of offer or sale by the Company with respect to its Common Stock or Common Stock Equivalents in a manner that is not required to be registered under the Securities Act is hereinafter
referred to as a “Subsequent Placement.”

 

(b)         From and after the Final Closing Date and until the first anniversary of such Final Closing Date, the Company will not, directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with this Section
14.

 

             (i)   The
Company shall deliver to each Purchaser who purchased Notes and Warrants pursuant to this Agreement 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 (w) identify and describe the Offered Securities, (x) 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, (y) identify the persons or entities (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Purchasers the Offered Securities, allocated to the Purchasers as a group based on the ratio of (I) the number of Conversion Shares and Warrant Shares issuable to all Purchasers as a group at the time of the Offer Notice to (II) the number of shares of the Company’s Common Stock then issued and outstanding,
and allocated among such Purchasers (a) based on such Purchaser’s pro rata portion of the number of Conversion Shares and Warrant Shares issuable to such Purchaser at the time of the Offer Notice (the “Basic Amount”), and (b) with respect to each Purchaser that
elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Purchasers as such Purchaser shall indicate it will purchase or acquire should the other Purchasers subscribe for less than their Basic Amounts (the “Undersubscription Amount”), which process shall
be repeated until the Purchasers shall have an opportunity to subscribe for any remaining Undersubscription Amount.

 

 

38

 

 

(ii)          To accept an Offer, in whole or in part, such Purchaser must deliver a written notice to the Company prior to the end of the tenth (10th) Business
Day after such Purchaser’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion of such Purchaser’s Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects to
purchase (in either case, the “Notice of Acceptance”).  If the Basic Amounts subscribed for by all Purchasers are less than the total of all of the Basic Amounts, then each Purchaser 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, that if the Basic Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), each Purchaser 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 Purchaser bears to the total Basic Amounts of all Purchasers that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent it deems reasonably necessary.

 

(iii)         The Company shall have sixty (60) Business Days from the expiration of the Offer Period above (i) 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 the Purchasers (the “Refused Securities”), but only to the offerees or class of offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of
such Subsequent Placement Agreement, and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y) 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.

 

(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 14.4 (b)(iii) above),
then each Purchaser 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 Purchaser elected to purchase pursuant to Section 14.4(b)(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 Purchasers pursuant to Section 14.4(b)(iii) above prior to such reduction) and (B) the denominator of which shall be the original amount of the Offered Securities.  In the event that any Purchaser 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 Purchasers in accordance with Section 14.4(b)(iii) above.

 

 

39

 

 

(v)         Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Purchasers shall acquire from the Company, and the Company shall issue to the Purchasers, the number or amount of Offered Securities
specified in the Notices of Acceptance, as reduced pursuant to Section 14.4(b)(iii) above if the Purchasers have so elected, upon the terms and conditions specified in the Offer.  Notwithstanding anything to the contrary contained in this Agreement, if the Company does not consummate the closing of the issuance, sale or exchange of all or less than all of the Refused Securities within sixty (60) Business Days of the expiration of the Offer
Period, the Company shall issue to the Purchasers the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 14.4(b)(iii) above if the Purchasers have so elected, upon the terms and conditions specified in the Offer.  The purchase by the Purchasers of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and the Purchasers of a purchase
agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Purchasers and their respective counsel.

 

(vi)         Any Offered Securities not acquired by the Purchasers or other persons in accordance with Section 14.4(b)(iii) above may not be issued, sold or exchanged until
they are again offered to the Purchasers under the procedures specified in this Agreement.

 

(vii)        Notwithstanding anything to the contrary in this Section 14 and unless otherwise agreed to by the Purchasers, the Company shall either confirm in writing to the Purchasers
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 the Purchasers will not be in possession of material non-public information, by the fifteenth (15th) Business Day following delivery of the Offer Notice.  If by the fifteenth (15th)
Business Day following delivery of the Offer Notice 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 the Purchasers, such transaction shall be deemed to have been abandoned and the Purchasers shall not be deemed to be in possession of any material, non-public information with respect to the Company.  Should the Company decide to pursue such transaction with respect to the
Offered Securities, the Company shall provide each Purchaser with another Offer Notice and each Purchaser will again have the right of participation set forth in this Section 14.4(b)(iii).  The Company shall not be permitted to deliver more than one such Offer Notice to the Purchasers in any 60 day period.

 

(viii)       The restrictions contained in subsections (ii) and (iii) of this Section 14.4(b) shall not apply in connection with any Exempt Issuance.

 

15.           Miscellaneous.

 

15.1         Termination.  This Agreement may be terminated by the Company or any Purchaser, by written notice to the other parties, if the Initial Closing has not been
consummated by 11:00 a.m. on January 12, 2010; provided that no such termination will affect the right of any party to sue for any breach by the other party (or parties).

 

 

40

 

 

15.2         Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  In addition to its obligations pursuant to Section 12.9 hereof, the Company agrees to reimburse the Purchasers at the Initial Closing up to an aggregate amount of $55,000 for legal fees, due diligence expenses and reasonable expenses incurred for services relating to the transactions contemplated herein, which
amount (net of any amounts previously advanced by the Company) may, at the option of the Purchasers, be paid by offset against the cash purchase price payable for the Notes purchased at such Closing.

 

15.3         Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.  At or after the initial Closing and any Final Closing, and without further consideration, the Company will execute and deliver to the Purchasers such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction
Documents.

 

15.4         Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section 15.4 prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section 15.4 on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.  The addresses, facsimile numbers and email addresses for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such
Person.

 

15.5         Amendments; Waivers.  No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company
and each of the Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any
such right.  Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Purchasers under Article XII may be given by Purchaser holding at least 75% of the Registrable Securities to which such waiver or consent relates.

 

 

41

 

 

15.6         Construction.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

15.7         Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The
Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchasers.  Any Purchaser may assign its rights under this Agreement to any Person to whom such Purchaser assigns or transfers or will assign or transfer (including by way of distribution to its members, partners or stockholders) any Securities, provided (i) such transferor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished
to the Company after such assignment, (ii) the Company is furnished with written notice of (x) the name and address of such transferee or assignee and (y) the Registrable Securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (iv) such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply to the “Purchasers” and (v) such transfer shall have been made in accordance with the applicable requirements of this Agreement and with all laws applicable thereto.

 

15.8         No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and the Placement Agent, and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Indemnified Party is an intended third-party beneficiary of Section 13.1 and (in each case) may enforce the provisions of such section directly against the parties with obligations thereunder.

 

15.9         Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT 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 VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY)
TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF.  NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.  THE COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

 

 

42

 

 

15.10         Survival.  The representations and warranties, agreements and covenants contained herein shall survive the Closing.

 

15.11         Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or email attachment, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or email-attached signature page were an original
thereof.

 

15.12         Severability.  If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

15.13         Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents,
whenever any Purchaser exercises a right, election, demand or option owed to such Purchaser by the Company under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then, prior to the performance by the Company of the Company’s related obligation, such Purchaser 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.

 

15.14         Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith.  The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.

 

15.15         Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and
the Company will be entitled to seek specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

 

 

43

 

 

15.16         Payment Set Aside.  To the extent that the Company makes a payment or payments to any Purchaser hereunder or any Purchaser enforces or exercises its rights
hereunder, 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 by a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

15.17         Adjustments in Share Numbers and Prices.  In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other
securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in any Transaction Document to a number of shares or a price per share shall be amended to appropriately account for such event.

 

15.18         Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Documents.  The decision of each Purchaser to purchase Securities pursuant to this Agreement has been made by such Purchaser independently of any other Purchaser and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations,
condition (financial or otherwise) or prospects of the Company which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any other Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions.  Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed
to constitute the Purchaser as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document.  Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder.  Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose.

 

[SIGNATURE PAGE FOLLOWS]

 

 

44

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Note Purchase Agreement on the date first above written.

	  	
THE COMPANY:

	  	  
	  	
ONE BIO, CORP.

	  	  
	  	
By:____________________________________

	  	
   Name:

	  	
   Title:

	  	  	  	  
	  	
Address: 
	
8525 NW 53rd Terr., Suite C101

	  	  	
Doral, Fl 33166

	  	  	
Attention: Chief Executive Officer

	  	  	
Facsimile: ______________________

	  	  	  	  
	  	
PURCHASERS:

	  	
____________________________________

	  	
Udi Toledano

	  	  	  	  
	  	
Address:
	
100 Executive Drive, Suite 330

	  	  	
West Orange, NJ 07052

	  	  	
Attention: Udi Toledano

	  	  	
Facsimile:__________________________

 

 

45

 

 

EXECUTION COPY

 

SCHEDULE 1

 

	
Purchasers
	
Purchase Price of Note
	
Warrants

	 	 	 
	
Initial Closing
	  	  
	 	 	 
	
Udi Toledano*
	
$300,000
	
Warrants,
exercisable at
$6.077 per share,
to purchase 49,366
shares

	 	 	 
	
Final Closing
	  	  
	 	 	 
	
UTA Capital LLC
	
TBD
	
[same Warrant
coverage ratio as
Initial Closing;
exercise price may
vary]

	 	 	 
	
[Other Purchasers TBD]
	
TBD
	
[same Warrant
coverage ratio as
Initial Closing;
exercise price may
vary]

	 	 	 
	
Total
	
$[TBD, but not less than
the Base Amount nor
more than the Maximum
Amount]
	
[same Warrant
coverage ratio as
Initial Closing;
exercise price may
vary]

 

 

* The Notes issued to Mr. Toledano and all of Mr. Toledano’s rights under the Purchase Agreement and any other agreements delivered pursuant to the Purchase Agreement are expected to be transferred and assigned to UTA Capital LLC and one or more other Purchasers soon after the Initial
Closing, who will agree to be subject to Section 11.3 of the purchase Agreement, and the Company agrees to such transfer and assignment.

 

 

46

 

SCHEDULE 10

 

Use of Proceeds

 

 

47

 

EXECUTION COPY

 

EXHIBIT A

 

Form of Convertible Promissory Note

 

 

48

 

EXECUTION COPY

EXHIBIT B

 

Form of Common Stock Purchase Warrant

 

 

49

 

EXHIBIT C

 

Form of Stockholder Pledge and Security Agreement

 

(with Respect to Certain One Bio Shares)

 

 

50

 

EXHIBIT D

 

Form of Company Pledge and Security Agreement

 

(with Respect to Certain US Subsidiary Shares)

 

 

51

 

EXHIBIT E

 

Form of US Subsidiary Guarantee and Pledge and Security Agreement

 

(with Respect to BVI Subsidiary Shares)

 

 

52

 

EXHIBIT F

 

Form of BVI Subsidiary Guarantee Agreement

 

 

53

 

EXHIBIT G

 

Form of WFOE Subsidiary Collateral Security Agreement

 

 

54

 

EXHIBIT G-1

 

Form of PRC Company Acknowledgement Agreement

 

 

55

 

EXHIBIT H

 

Form of  “Plan of Distribution” for Purchasers’ Resale Registration Statement

 

 

56

 

EXHIBIT H-1

 

Form of  Selling Holder Questionnaire

 

 

57

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