Document:

exv4w42

 

Exhibit 4.42

COMMON STOCK PURCHASE AGREEMENT

     THIS COMMON STOCK PURCHASE AGREEMENT is made as of      , 2003 by
and among Mobility Electronics, Inc. (the “Company”), a corporation organized
under the laws of the State of Delaware, with its principal offices at 17800
North Perimeter Drive, Scottsdale, Arizona 85255, and the purchaser whose name
and address is set forth on the signature page hereof (the “Purchaser”).

     IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:

Section 1. Authorization of Sale of the Shares. Subject to the terms and
conditions of this Agreement, the Company has authorized the sale of up to
[     ] shares (the “Shares”) of common stock, par value $0.01 per share
(the “Common Stock”), of the Company.

Section 2. Agreement to Sell and Purchase the Shares. At the Closing (as
defined in Section 3.1), the Company will sell to the Purchaser, and the
Purchaser will buy from the Company, upon the terms and conditions hereinafter
set forth, the number of Shares (at the purchase price) shown below:

	 	 	 	 	 
	Number of Shares	 	Price Per Share	 	Aggregate
	to Be Purchased	 	In Dollars	 	Price
	
	 	
	 	

     The Company proposes to enter into this same form of purchase agreement
with certain other investors (the “Other Purchasers”) and expects to complete
sales of the Shares to them. The Purchaser and the Other Purchasers are
hereinafter sometimes collectively referred to as the “Purchasers,” and this
Agreement and the agreements executed by the Other Purchasers are hereinafter
sometimes collectively referred to as the “Agreements.” The term “Placement
Agents” shall mean Needham & Company, Inc. and A.G. Edwards & Sons, Inc.

Section 3. Closing and Delivery of the Shares.

     3.1 Closing. The purchase and sale of the Shares (the “Closing”) shall
occur as soon as practicable after the execution of the Agreements by the
Company and the Purchasers at the time and date (the “Closing Date”) and at
such location as shall be agreed upon by the Company and the Placement Agents.
The Placement Agents will promptly notify the Purchasers of the date, place and
time of the Closing by facsimile transmission or otherwise.

     3.2 Delivery of the Shares. At the Closing, the Company shall deliver to
the Purchaser one or more stock certificates registered in the name of the
Purchaser, or in such nominee name(s) as designated by the Purchaser in
writing, representing the number of Shares set forth in Section 2 above and
bearing the legend specified in Section 5.7 hereof referring to the fact that
the Shares were sold in reliance upon the exemption from registration under the
Securities Act of 1933, as amended (the “Securities Act”) provided by Section
4(2) thereof and Rule 506 thereunder. The Company will promptly substitute one
or more replacement certificates without the legend at such time as the
Registration Statement becomes effective. The

 

 

 name(s) in which the stock certificates are to be registered are set forth
in the Stock Certificate Questionnaire attached hereto as Exhibit A.

     3.3 Conditions to Closing. (a) The Company’s obligation to complete the
purchase and sale of the Shares and deliver such stock certificate(s) to the
Purchaser at the Closing shall be subject to the following conditions, any one
or more of which may be waived by the Company:

	 	 	 	(i) receipt by the Company of same-day funds in the full amount of
the purchase price for the Shares being purchased hereunder;
	 
	 	 	 	(ii) completion of the purchases and sales under the Agreements
with all of the Other Purchasers accepted by the Company;
	 
	 	 	 	(iii) the accuracy of the representations and warranties made by
the Purchaser and the fulfillment of those undertakings of the
Purchaser to be fulfilled prior to the Closing; and
	 
	 	 	 	(iv) receipt by the Company of a completed version of Exhibit A,
Exhibit B and Exhibit C-1 or C-2 (as applicable) attached hereto.

          (b) The Purchaser’s obligation to accept delivery of such stock
certificate(s) and to pay for the Shares evidenced thereby shall be subject to
the following condition: the accuracy in all material respects of the
representations and warranties made by the Company herein and the fulfillment
in all material respects of those undertakings of the Company to be fulfilled
prior to Closing. The Purchaser’s obligations hereunder are expressly not
conditioned on the purchase by any or all of the Other Purchasers of the Shares
that they have agreed to purchase from the Company.

Section 4. Representations, Warranties and Covenants of the Company. Except as
otherwise described in the Company’s periodic reports on Forms 10-Q and 10-K,
in the Company’s current reports on Form 8-K and Registration Statement on Form
S-3 filed in August 2003 as filed by the Company with the Securities and
Exchange Commission (the “SEC”) since December 31, 2002 (the “SEC Documents”
and collectively, including the documents incorporated by reference therein,
the “Company Information”), which qualify the following representations and
warranties in their entirety, the Company hereby represents and warrants to,
and covenants with, the Purchaser, as follows:

     4.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and the Company is qualified to do business as a
foreign corporation in each jurisdiction in which qualification is required,
except where failure to so qualify would not have a Material Adverse Effect (as
defined herein). All of the subsidiaries of the Company (the “Subsidiaries”)
are listed on Schedule 4.1 hereto, along with the Company’s percentage
ownership of each subsidiary and each subsidiary’s jurisdiction of
incorporation. Each Subsidiary is duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and is
qualified

 

 

 to do business as a foreign corporation in each jurisdiction in which
qualification is required, except where failure to so qualify would not have a
Material Adverse Effect.

     4.2 Authorized Capital Stock. Except as disclosed in or contemplated by
the Confidential Private Placement Memorandum dated August 21, 2003 prepared by
the Company, including all Exhibits, supplements and amendments thereto (the
“Private Placement Memorandum”), the authorized and outstanding capital stock
of the Company conforms in all material respects to the description thereof
contained in the SEC Documents, as of the dates set forth therein; the issued
and outstanding shares of the Company’s Common Stock and Series C Preferred
Stock, par value $.01 per share (“Series C Preferred Stock”), have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and conform in all material respects to
the description thereof contained in the SEC Documents. The description of the
Company’s stock, stock bonus and other stock plans or arrangements and the
options or other rights granted and exercised thereunder, set forth in the SEC
Documents accurately and fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights. With respect to
each Subsidiary, (i) the Company owns 100% of the Subsidiary’s capital stock,
(ii) all the issued and outstanding shares of the Subsidiary’s capital stock
have been duly authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with applicable federal and state securities
laws, were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and (iii) there are no
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into,
or any contracts or commitments to issue or sell, shares of the Subsidiary’s
capital stock or any such options, rights, convertible securities or
obligations.

     4.3 Issuance, Sale and Delivery of the Shares. The Shares have been duly
authorized and, when issued, delivered and paid for in the manner set forth in
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform in all material respects to the description
thereof set forth in the SEC Documents. No preemptive rights or other rights
to subscribe for or purchase exist with respect to the issuance and sale of the
Shares by the Company pursuant to this Agreement. No stockholder of the
Company has any right (which has not been waived or has not expired by reason
of lapse of time following notification of the Company’s intent to file the
registration statement to be filed by the Company pursuant to Section 7.1
hereof (the “Registration Statement”)) to require the Company to register the
sale of any shares owned by such stockholder under the Securities Act in the
Registration Statement. No further approval or authority of the stockholders
or the Board of Directors of the Company will be required for the issuance and
sale of the Shares to be sold by the Company as contemplated herein.

     4.4 Due Execution, Delivery and Performance of the Agreements. The
Company has full legal right, corporate power and authority to enter into the
Agreements and perform the transactions contemplated hereby. The Agreements
have been duly authorized, executed and delivered by the Company. The making
and performance of the Agreements by the Company and the consummation of the
transactions herein contemplated will not violate any provision of

 

 

 the organizational documents of the Company and will not result in the
creation of any lien, charge, security interest or encumbrance upon any assets
of the Company pursuant to the terms or provisions of, or will not conflict
with, result in the breach or violation of, or constitute, either by itself or
upon notice or the passage of time or both, a default under any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other
instrument to which the Company or any Subsidiary is a party or by which the
Company or its properties, or any Subsidiary or such Subsidiary’s properties,
may be bound or affected and in each case which would have a material adverse
effect on the condition (financial or otherwise), properties, business,
prospects or results of operations of the Company and its Subsidiaries, taken
as a whole (a “Material Adverse Effect”), or, to the Company’s knowledge, any
statute or any authorization, judgment, decree, order, rule or regulation of
any court or any regulatory body, administrative agency or other governmental
body applicable to the Company or any Subsidiary or any of their respective
properties. No consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body is required
for the execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement, except for compliance with the
Blue Sky laws and federal securities laws applicable to the offering of the
Shares. Upon their execution and delivery, and assuming the valid execution
thereof by the respective Purchasers, the Agreements will constitute valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as the indemnification agreements of the Company in Section 7.3
hereof may be legally unenforceable.

     4.5 Accountants. KPMG LLP has expressed its opinion with respect to the
consolidated financial statements to be incorporated by reference from the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2002 (the “Form 10-K”) into the Registration Statement, and is an independent
accountant as required by the Securities Act and the rules and regulations
promulgated thereunder (the “Rules and Regulations”).

     4.6 No Defaults. Except as disclosed in the Private Placement Memorandum
and except as to defaults, violations and breaches which individually or in the
aggregate would not have a Material Adverse Effect, neither the Company nor any
Subsidiary is in violation or default of any provision of its respective
certificate of incorporation or bylaws, or other organizational documents, or
in breach of or default with respect to any provision of any agreement,
judgment, decree, order, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which it is a party or by which they
or any of their properties are bound; and there does not exist any state of
fact which, with notice or lapse of time or both, would constitute an event of
default on the part of the Company or any Subsidiary as defined in such
documents, except such defaults which individually or in the aggregate would
not have a Material Adverse Effect.

     4.7 Contracts. The contracts described in the Private Placement
Memorandum as being in effect on the date hereof that are material to the
Company, are in full force and effect on the date hereof; and neither the
Company nor any Subsidiary is, nor to the Company’s

 

 

 knowledge is any other party, in breach of or default under any of such
contracts which would have a Material Adverse Effect.

     4.8 No Actions. Except as disclosed in the Private Placement Memorandum,
there are no legal or governmental actions, suits or proceedings pending or, to
the Company’s knowledge, threatened to which the Company or any Subsidiary is
or may be a party or of which property owned or leased by the Company or any
Subsidiary is or may be the subject, or related to environmental or
discrimination matters, or instituted by the SEC, The Nasdaq Stock Market,
Inc., any state securities commission or other governmental or regulatory
agency, which actions, suits or proceedings, individually or in the aggregate,
might prevent or might reasonably be expected to materially and adversely
affect the transactions contemplated by this Agreement or result in a material
adverse change in the condition (financial or otherwise), properties, business,
prospects or results of operations of the Company and its Subsidiaries, taken
as a whole (a “Material Adverse Change”); and no labor disturbance by the
employees of the Company or any Subsidiary exists or, to the Company’s
knowledge, is imminent which might reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any Subsidiary is a party to or
subject to the provisions of any material injunction, judgment, decree or order
of any court, regulatory body, administrative agency or other governmental
body.

     4.9 Properties. Each of the Company and its Subsidiaries has good and
marketable title to all the properties and assets reflected as owned by it in
the consolidated financial statements included in the Private Placement
Memorandum, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except (i) those, if any, reflected in such consolidated financial
statements (including the notes thereto), or (ii) those which are not material
in amount and do not adversely affect the use made and proposed to be made of
such property by the Company or any Subsidiary. Such leased properties are
held under valid and binding leases, with such exceptions as are not materially
significant in relation to its business. Except as disclosed in the Private
Placement Memorandum, the Company or a Subsidiary owns or leases all such
properties as are necessary to its operations as now conducted.

     4.10 No Material Change. Since June 30, 2003 and except as specifically
contemplated by the Private Placement Memorandum, (i) neither the Company nor
any Subsidiary has incurred any material liabilities or obligations, indirect,
or contingent, or entered into any material verbal or written agreement or
other transaction which is not in the ordinary course of business or which
could reasonably be expected to result in a material reduction in the future
earnings of the Company; (ii) neither the Company nor any Subsidiary has
sustained any material loss or interference with its respective businesses or
properties from fire, flood, windstorm, accident or other calamity not covered
by insurance; (iii) the Company has not paid or declared any dividends or other
distributions with respect to its capital stock and neither the Company nor any
Subsidiary is in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the capital
stock of the Company other than the sale of the Shares hereunder and the
issuance of a warrant exercisable for 5,000 shares of the Company’s Common
Stock, shares or options issued pursuant to employee equity incentive plans or
purchase plans approved by the Company’s Board of Directors, or indebtedness
material to the Company (other than in the ordinary course of business); and
(v) there has not been any Material Adverse Change.

 

 

     4.11 Intellectual Property. Except as specifically contemplated by the
Private Placement Memorandum, (i) the Company or a Subsidiary owns or possesses
adequate rights to use the inventions, patent applications, patents, patent
rights, trademarks (both registered and unregistered), service marks,
tradenames, copyrights, trade secrets and know-how necessary for the conduct of
the Company’s and its Subsidiaries’ businesses as currently conducted and as
the Private Placement Memorandum indicates the Company and its Subsidiaries
contemplate conducting (collectively, the “Intellectual Property”), except
where the failure to currently own or possess such Intellectual Property would
not have a Material Adverse Effect; (ii) neither the Company nor any Subsidiary
has received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property which, singularly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could reasonably be expected to have a
Material Adverse Effect; and (iii) to the Company’s or any Subsidiary’s
knowledge, none of the patent rights owned or licensed by the Company or any
Subsidiary are unenforceable or invalid.

     4.12 Compliance. Neither the Company nor any Subsidiary has been advised,
and has no reason to believe, that it is not conducting its business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not have a Material Adverse Effect.

     4.13 Taxes. Each of the Company and its Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns for which
taxes are due and owing or has paid or accrued all taxes shown as due thereon,
and neither the Company nor any Subsidiary has any knowledge of a tax
deficiency which has been or might be asserted or threatened against it which
could have a Material Adverse Effect.

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

     4.15 Investment Company. The Company is not an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for an
investment company, within the meaning of the Investment Company Act of 1940,
as amended.

     4.16 Offering Materials. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Shares other than the Private Placement Memorandum
or any amendment or supplement thereto. The Company has not in the past nor
will it hereafter take any action independent of the Placement Agents to sell,
offer for sale or solicit offers to buy any securities of the Company that
would bring the offer, issuance or sale of the Shares, as contemplated by this
Agreement, within the provisions of Section 5 of the Securities Act, unless
such offer, issuance or sale was or shall be within the exemptions of Section 4
of the Securities Act.

 

 

     4.17 Insurance. The Company maintains insurance of the types and in the
amounts that the Company reasonably believes is adequate for its business,
including, but not limited to, insurance covering all real and personal
property owned or leased by the Company against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against by similarly
situated companies, all of which insurance is in full force and effect.

     4.18 Corrupt Practices. Neither the Company nor any Subsidiary nor, to the
knowledge of the Company or any Subsidiary, any agent or other person acting on
behalf of the Company or any Subsidiary, have (i) directly or indirectly, used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made
any unlawful payment to foreign or domestic government officials or employees
or to foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company or any
Subsidiary or made by any person acting on its behalf and of which the Company
or any Subsidiary is aware in violation of law, or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.

     4.19 Additional Information. The information contained in the following
documents, which the Placement Agents have furnished to the Purchaser, or will
furnish prior to the Closing, did not, or will not, as of their respective
final dates, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading:

		
	 	     (a) the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2002;

		
	 	     (b) the Company’s Quarterly Report on Form 10-Q for the fiscal
quarters ended March 31 and June 30, 2003;

		
	 	     (c) the Company’s Proxy Statement for the 2003 Annual Meeting of
Stockholders;

		
	 	     (d) the Company’s Current Reports on Form 8-K filed on January 21,
February 3, February 7, June 12 and June 19, 2003;

		
	 	     (e) the Private Placement Memorandum, including all addenda and
exhibits thereto (other than the Appendices); and

		
	 	     (f) All other documents, if any, filed by the Company with the SEC
since December 31, 2002, pursuant to the reporting requirements of the
Exchange Act.

     4.20 Legal Opinions. Prior to the Closing, Jackson Walker LLP, counsel to
the Company, will deliver its legal opinion to the Placement Agents in the form
attached hereto as Exhibit E. Each such opinion shall also state that each of
the Purchasers may rely thereon as though it were addressed directly to such
Purchaser.

 

 

     4.21 Certificate. At the Closing, the Company will deliver to Purchaser
and the Placement Agents a certificate executed by the Chief Executive Officer
and the Chief Financial Officer of the Company, dated the Closing Date, in form
and substance reasonably satisfactory to the Purchasers and the Placement
Agents, to the effect that the representations and warranties of the Company
set forth in this Section 4 are true and correct in all material respects as of
the date of this Agreement and as of the Closing Date, and the Company has
complied with all the agreements and satisfied all the conditions herein on its
part to be performed or satisfied on or prior to such Closing Date.

     4.22 Nasdaq Compliance and Listing. The Company’s Common Stock is
registered pursuant to Section 12(g) of the Exchange Act and is listed on the
Nasdaq National Market, and the Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act or delisting the Common Stock from the Nasdaq National
Market. The Company shall comply with all requirements of the National
Association of Securities Dealers, Inc. with respect to the issuance of the
Shares and the listing thereof on the Nasdaq National Market.

     4.23 Price of Common Stock. The Company has not taken any action intended
to stabilize or manipulate the price of the Company’s shares of the Common
Stock to facilitate the sale or resale of the Shares. The Company has not
repurchased any of its shares of Common Stock since June 30, 2003.

Section 5. Representations, Warranties and Covenants of the Purchaser. The
Purchaser hereby represents and warrants to, and covenants with, the Company,
effective as of the Closing Date, as follows:

     5.1 Investment Representations and Covenants. The Purchaser is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares representing an
investment decision like that involved in the purchase of the Shares, including
investments in securities issued by the Company, and has requested, received,
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Shares. The Purchaser is acquiring the number of
Shares set forth in Section 2 above in the ordinary course of its business and
for its own account for investment (as defined for purposes of the
Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the regulations
thereunder) only and with no present intention of distributing any of such
Shares or entering into any arrangement or understanding with any other persons
regarding the distribution of such Shares within the meaning of Section 2(11)
of the Securities Act. The Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares except in
compliance with the Securities Act and the Rules and Regulations promulgated
thereunder. The Purchaser has completed or caused to be completed the Stock
Certificate Questionnaire attached hereto as Exhibit A and the Registration
Statement Questionnaire attached hereto as Exhibit B, for use in preparation of
the Registration Statement and the Certificate attached hereto as Exhibit C-1
or C-2, as applicable, and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the effective date of the
Registration Statement. The Purchaser will notify the Company immediately of
any change in any of such information until such time as the Purchaser

 

 

 has sold all of its Shares or until the Company is no longer required to
keep the Registration Statement effective. The Purchaser acknowledges receipt
of the Private Placement Memorandum and further acknowledges that it 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 Shares and the merits and risks of
investing in the Shares; (ii) access to information about the Company and the
Company’s financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment in
the Shares; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy and completeness of the
information contained in the Private Placement Memorandum. The Purchaser has,
in connection with its decision to purchase the number of Shares set forth in
Section 2 above, relied solely upon the Private Placement Memorandum and the
documents included therein and the representations and warranties of the
Company contained herein. The Purchaser is an “accredited investor” within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act. The
Purchaser recognizes that an investment in the Shares involves substantial
risks. The Purchase further recognizes that no federal or state agencies have
passed upon the offering of the Shares or made any finding or determination as
to the fairness of this investment. The Purchaser also understands and
acknowledges that (i) any forward-looking information included in the Private
Placement Memorandum or SEC Documents supplied to such Purchaser by the Company
or its management is subject to risks and uncertainties, including those risks
and uncertainties set forth in the Private Placement Memorandum and SEC
Documents; and (ii) the Company’s actual results may differ materially from
those projected by the Company or its management in such forward-looking
information.

     5.2 Compliance with Resale Requirements. Unless such sale is pursuant to
an applicable exemption from the Securities Act, the Purchaser hereby covenants
with the Company not to make any sale of the Shares without satisfying the
prospectus delivery requirement under the Securities Act, and the Purchaser
acknowledges and agrees that such Shares are not transferable on the books of
the Company unless the certificate submitted to the transfer agent evidencing
the Shares is accompanied by a separate officer’s certificate: (i) in the form
of Exhibit D hereto, (ii) executed by an officer of, or other authorized person
designated by, the Purchaser, and (iii) to the effect that (A) the Shares have
been sold in accordance with the Registration Statement, the Securities Act and
the Rules and Regulations and any applicable state securities or blue sky laws
and (B) the requirement of delivering a current prospectus has been satisfied.
The Purchaser acknowledges that there may occasionally be times when the
Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment or supplement to the
Registration Statement or such prospectus has been filed by the Company and
declared effective by the SEC, or until such time as the Company has filed an
appropriate report with the SEC pursuant to the Exchange Act. The Purchaser
hereby covenants that it will not sell any Shares pursuant to said prospectus
during the period commencing at the time at which the Company gives the
Purchaser written notice of the suspension of the use of said prospectus and
ending at the time the Company gives the Purchaser written notice that the
Purchaser may thereafter effect sales pursuant to said prospectus. The
Purchaser further covenants to notify the Company promptly of the sale of all
of its Shares.

 

 

     5.3 Authorization; Validity of Agreement. The Purchaser further
represents and warrants to, and covenants with, the Company that (i) the
Purchaser has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement, and (ii) upon the execution and delivery of this Agreement,
this Agreement shall constitute a valid and binding obligation of the Purchaser
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ and contracting parties’ rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Purchaser
in Section 7.3 hereof may be legally unenforceable.

     5.4 Requirements of Foreign Jurisdictions. The Purchaser acknowledges,
represents and agrees that no action has been or will be taken in any
jurisdiction outside the United States by the Company or the Placement Agents
that would permit an offering of the Shares, or possession or distribution of
offering materials in connection with the issue of the Shares, in any
jurisdiction outside the United States where action for that purpose is
required. Each Purchaser outside the United States will comply with all
applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers Shares or has in its possession or
distributes any offering material, in all cases at its own expense. The
Placement Agents are not authorized to make any representation or use any
information in connection with the issue, placement, purchase and sale of the
Shares.

     5.5 Restriction on Short Sales and Hedging. The Purchaser will not, prior
to the effectiveness of the Registration Statement, sell, offer to sell,
solicit offers to buy, dispose of, loan, pledge or grant any right with respect
to (collectively, a “Disposition”), the Common Stock, nor will the Purchaser
engage in any hedging or other transaction which is designed to or could
reasonably be expected to lead to or result in a Disposition of Common Stock by
the Purchaser or any other person or entity. Such prohibited hedging or other
transactions would include, without limitation, effecting any short sale or
having in effect any short position (whether or not such sale or position is
against the box and regardless of when such position was entered into) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to the Common Stock or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from the Common Stock.

     5.6 No Legal, Tax or Investment Advice. The Purchaser understands that
nothing in this Agreement or any other materials presented to the Purchaser in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. The 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 Shares.

     5.7 Restrictive Legend. The Purchaser understands that, until such time
as the Registration Statement has been declared effective or the Shares may be
sold pursuant to Rule 144 under the Securities Act without any restriction as
to the number of securities as of a

 

 

 particular date that can then be immediately sold, the Shares may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for the Shares):

	 	 	 	“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID ACT.”

     5.8 Shares Offered on “Best Efforts” Basis. The Purchaser understands and
acknowledges that the Shares offered by the Company, as described in the
Private Placement Memorandum, are offered on a “best efforts” basis and that
the Company reserves the right to accept purchases of more or less than the
number of Shares set forth in the Private Placement Memorandum; in the event
that less than the number of Shares set forth in the Private Placement
Memorandum are sold by the Company, any information regarding the Company’s use
of proceeds, operations and financial information as set forth in the Private
Placement Memorandum could be adversely affected.

Section 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Purchaser herein and in the certificates for the Shares
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchaser of the Shares being purchased and the payment
therefor.

Section 7. Registration of the Shares; Compliance with the Securities Act.

     7.1 Registration Procedures and Expenses. The Company shall:

		
	 	     (a) use all commercially reasonable efforts, subject to receipt of
necessary information from the Purchasers, to prepare and file with the
SEC within ten (10) days following the Closing Date (the “Filing Date”)
the Registration Statement on Form S-3 relating to the sale of the Shares
by the Purchaser from time to time through the Nasdaq Stock Market or the
facilities of any national securities exchange on which the Common Stock
is then traded or in privately-negotiated transactions;

		
	 	     (b) use all commercially reasonable efforts to cause the
Registration Statement to become effective as promptly after filing as
possible;

		
	 	     (c) prepare and file with the SEC (and promptly notify the Purchaser
of such filing) such amendments and supplements to the Registration
Statement and the

 

 

		
	 	prospectus used in connection therewith as may be necessary to keep
the Registration Statement effective until the earlier of (i) twenty-four
months after the effective date of the Registration Statement, (ii) the
date on which the Shares may be resold by the Purchasers without
registration by reason of Rule 144(k) under the Securities Act or any
other rule of similar effect, or (iii) the re-sale of all of the shares
of Common Stock under the Agreements;

		
	 	     (d) furnish to the Purchaser with respect to the Shares registered
under the Registration Statement (and to each underwriter, if any, of
such Shares) such reasonable number of copies of prospectuses and such
other documents as the Purchaser may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the
Shares by the Purchaser;

		
	 	     (e) file documents required of the Company for normal blue sky
clearance in states specified in writing by the Purchaser; provided,
however, that the Company shall not be required to qualify to do business
or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented; and

		
	 	     (f) advise each Purchaser promptly:

	 	 	 	(i) of any request by the SEC for amendments to the Registration
Statement or amendments to the prospectus or for additional
information relating thereto;
	 
	 	 	 	(ii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement under the Securities
Act or of the suspension by any state securities commission of the
qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
purposes; and
	 
	 	 	 	(iii) of the existence of any fact and the happening of any event
that makes any statement of a material fact made in the
Registration Statement, the prospectus and amendment or supplement
thereto, or any document incorporated by reference therein, untrue,
or that requires the making of any additions to or changes in the
Registration Statement or the prospectus in order to make the
statements therein, in the light of the circumstances in which they
were made, not misleading; and

		
	 	     (g) bear all expenses in connection with the procedures in
paragraphs (a) through (f) of this Section 7.1 and the registration of
the Shares pursuant to the Registration Statement, other than fees and
expenses, if any, of counsel or other advisers to the Purchaser or the
Other Purchasers or underwriting discounts, brokerage fees and
commissions incurred by the Purchaser or the Other Purchasers, if any.

     7.2 Transfer of Shares After Registration. The Purchaser agrees that it
will not effect any disposition of the Shares or its right to purchase the
Shares that would constitute a sale within the meaning of the Securities Act,
except as contemplated in the Registration Statement referred to in Section 7.1
or as otherwise permitted by the Securities Act or applicable law, and

 

 

 that it will promptly notify the Company of any changes in the information
set forth in the Registration Statement regarding the Purchaser or its Plan of
Distribution.

     7.3 Indemnification. For the purpose of this Section 7.3:

	 	 	 	(i) the term “Purchaser” shall include the Purchaser and any
affiliate of such Purchaser; and
	 
	 	 	 	(ii) the term “Registration Statement” shall include any final
prospectus, exhibit, supplement or amendment included in or
relating to the Registration Statement referred to in Section 7.1.

          (a) The Company agrees to indemnify and hold harmless each of the
Purchasers and each person, if any, who controls any Purchaser within the
meaning of the Securities Act, against any losses, claims, damages, liabilities
or expenses, joint or several, to which such Purchasers or such controlling
person may become subject, under the Securities Act, the Exchange Act, or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, including the prospectus, financial statements and schedules, and
all other documents filed as a part thereof, as amended at the time of
effectiveness of the Registration Statement, including any information deemed
to be a part thereof as of the time of effectiveness pursuant to paragraph (b)
of Rule 430A, or pursuant to Rule 434, of the Rules and Regulations promulgated
under the Securities Act, or the prospectus, in the form first filed with the
SEC pursuant to Rule 424(b) of the Regulations promulgated under the Securities
Act, or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) filing is required (the “Prospectus”), or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in any of them, in the light
of the circumstances under which they were made, not misleading, or arise out
of or are based in whole or in part on any inaccuracy in the representations
and warranties of the Company contained in this Agreement, or any failure of
the Company to perform its obligations hereunder or under law, and will
reimburse each Purchaser and each such controlling person for any reasonable
legal and other expenses as such expenses are reasonably incurred by such
Purchaser or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon (i) an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, the Prospectus or any amendment or supplement thereto
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Purchaser expressly for use therein, or (ii) the
failure of such Purchaser to comply with the covenants and agreements contained
in Sections 5.2 or 7.2 hereof respecting sale of the Shares (unless such
failure shall be a result of the Company breaching any of its obligations to
the Purchaser hereunder), or (iii) the inaccuracy of any representations made
by such Purchaser

 

 

herein or (iv) any statement or omission in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to the Purchaser
prior to the pertinent sale or sales by the Purchaser.

          (b) Each Purchaser will severally indemnify and hold harmless the Company,
each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act, against any losses, claims, damages, liabilities or
expenses to which the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person may become subject,
under the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (i) any failure to comply with the covenants and agreements
contained in Sections 5.2 or 7.2 hereof respecting the sale of the Shares
(unless such failure shall be a result of the Company breaching any of its
obligations to the Purchaser hereunder) or (ii) the inaccuracy of any
representation made by such Purchaser herein or (iii) any untrue or alleged
untrue statement of any material fact contained in the Registration Statement,
the Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances in which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Purchaser expressly for use therein, and will
reimburse the Company, each of its directors, each of its officers who signed
the Registration Statement or controlling person for any reasonable legal and
other expense reasonably incurred by the Company, each of its directors, each
of its officers who signed the Registration Statement or controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action.; provided, however,
that no Purchaser shall be liable for any amount in excess of the net proceeds
(the “Net Proceeds”) received by such Purchaser with respect to such
Purchaser’s sale of the shares.

          (c) Promptly after receipt by an indemnified party under this Section 7.3
of notice of the threat or commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 7.3 promptly notify the indemnifying party in writing
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party for
contribution or otherwise than under the indemnity agreement contained in this
Section 7.3 or to the extent it is not materially prejudiced as a result of
such failure. In case any such action is brought against any indemnified party
and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with all other indemnifying
parties similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, that if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party and the indemnifying party shall
have

 

 

reasonably concluded that the representation of both the indemnified party
and the indemnifying party by the same counsel would not be appropriate because
there may be a conflict between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7.3 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate counsel,
approved by such indemnifying party in the case of paragraph (a), representing
the indemnified parties who are parties to such action) or (ii) the indemnified
party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of action, in each of which cases the reasonable
fees and expenses of counsel shall be at the expense of the indemnifying party.

          (d) If the indemnification provided for in this Section 7.3 is required by
its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) of this Section 7.3 in respect to any losses, claims, damages, liabilities
or expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any losses, claims, damages, liabilities or expenses referred to herein (i)
in such proportion as is appropriate to reflect the relative fault of the
Company and the Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative fault of the Company
and each Purchaser shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by such Purchaser and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in paragraph (c) of
this Section 7.3, any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim.
The provisions set forth in paragraph (c) of this Section 7.3 with respect to
the notice of the threat or commencement of any threat or action shall apply if
a claim for contribution is to be made under this paragraph (d); provided,
however, that no additional notice shall be required with respect to any threat
or action for which notice has been given under paragraph (c) for purposes of
indemnification. The Company and each Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 7.3

 

 

 were determined solely by pro rata allocation (even if the Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in this
paragraph. Notwithstanding the provisions of this Section 7.3, no Purchaser
shall be required to contribute any amount in excess of the amount by which the
Net Proceeds exceeds the amount of any damages that such Purchaser has
otherwise been required to pay by reason of all 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. The Purchasers’ obligations to contribute
pursuant to this Section 7.3 are several and not joint.

     7.4 Termination of Conditions and Obligations. The restrictions imposed
by Section 5 or this Section 7 upon the transferability of the Shares shall
cease and terminate as to any particular number of the Shares upon the passage
of twenty-four months from the effective date of the Registration Statement
covering such Shares or at such time as an opinion of counsel satisfactory in
form and substance to the Company shall have been rendered to the effect that
such conditions are not necessary in order to comply with the Securities Act.

     7.5 Information Available. So long as the Registration Statement is
effective covering the resale of Shares owned by the Purchaser, the Company
will furnish to the Purchaser upon the reasonable request of the Purchaser, a
reasonable number of copies of the prospectuses to supply to any other party
requiring such prospectuses, and the Company, upon the reasonable request of
the Purchaser, will meet with the Purchaser or a representative thereof at the
Company’s headquarters to discuss information relevant for disclosure in the
Registration Statement covering the Shares subject to appropriate
confidentiality limitations.

 

 

Section 8. Broker’s Fee. The Purchaser acknowledges that the Company intends
to pay to the Placement Agents a fee in respect of the sale of the Shares to
the Purchaser. Each of the parties hereto hereby represents that, on the basis
of any actions and agreements by it, there are no other brokers or finders
entitled to compensation in connection with the sale of the Shares to the
Purchaser.

Section 9. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, facsimile (with receipt confirmed by telephone) or
nationally recognized overnight express courier postage prepaid, and shall be
deemed given when so mailed and shall be delivered as addressed as follows:

          (a) if to the Company, to:

	 	 	 	Mobility Electronics, Inc.

17800 North Perimeter Drive

Scottsdale, Arizona 85255

Attention: Chief Financial Officer

Phone: (480) 596-0061

Fax: (480) 596-0349

 

 

with a copy to:

	 	 	 	Jackson Walker LLP

2435 North Central Expressway, Suite 600

Richardson, Texas 75080

Attention: Richard F. Dahlson

Phone: (972) 744-2996

Fax: (972) 744-2990

or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and

		
	 	     (b) if to the Purchaser, at its address as set forth on the
signature page of this Agreement, or at such other address or addresses
as may have been furnished to the Company in writing.

Section 10. Changes. With the exception of Section 7 hereof, this Agreement may
not be modified or amended except pursuant to an instrument in writing signed
by the Company and Purchaser. With respect to Section 7 hereof, with the
written consent of the Company and holders of more than a majority of the
Shares then outstanding and held by all Purchasers, the terms of the Agreement
may be waived or amended and any such waiver or amendment shall be binding upon
the Company and all holders of Shares.

Section 11. Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.

Section 12. Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.

Section 13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that no party hereto may assign its rights or
delegate its obligations hereunder without the prior written consent of the
other party and no such assignment shall relieve such assigning party of its
obligations hereunder. Any assignment made in contravention of this Section 13
shall be void and unenforceable.

Section 14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of laws.

Section 15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.

	 	 	 	 	 
	 	 	MOBILITY ELECTRONICS, INC.
	 	 	 	 	 
	 	 	
By:	 	 
	 	 	 	 	

	 	 	
Name:	 	 
	 	 	
Title:	 	 

Print or Type:

	 	 	 
	 	 	
Name of Purchaser
	 	 	
(Individual or Institution):
	 	 	 
	 	 	

	 	 	
Name of Individual representing
	 	 	
Purchaser (if an Institution):
	 	 	 
	 	 	

	 	 	
Title of Individual representing
	 	 	
Purchaser (if an Institution):
	 	 	 
	 	 	

	 	 	
Signature by:
	 	 	
Individual Purchaser or Individual
	 	 	
representing Purchaser:
	 	 	 
	 	 	

	 	 	 	 	 
	 	 	
Address:	 	 
	 	 	 	 	

	 	 	
Telephone:	 	 
	 	 	 	 	

	 	 	
Telecopier:Exhibit 10.1

Exhibit 10.1

SHARE EXCHANGE AGREEMENT

THIS AGREEMENT dated August 27, 2003, is between Asian Alliance Ventures Inc.  (hereinafter referred to as "AAVI") and the shareholders of WelWay Development Limited (hereinafter referred to collectively as "the Shareholders" or singly as "Shareholder"), who represent 100% of the issued and outstanding shares of WelWay Development Limited, a corporation incorporated under the laws of the Hong Kong SAR, China (hereinafter referred to as "WelWay").  All the shareholders of WelWay and the number of shares each owns in WelWay are listed in Schedule A of this agreement.

THIS AGREEMENT sets forth the terms and conditions upon which the Shareholders are today selling to AAVI, and AAVI is today purchasing from the Shareholders a total of  100,000 shares of WelWay, representing 100% of the issued and outstanding shares of capital stock of WelWay.

IN CONSIDERATION OF THE MUTUAL AGREEMENT CONTAINED HEREIN, THE PARTIES HEREBY AGREE AS FOLLOWS:

	ISSUE OF SHARES

1.01   Shares being Sold

Subject to the terms and conditions of this Agreement, the Shareholders are selling, assigning, and delivering the WelWay Shares to AAVI at the closing provided for in Section 1.03 hereof (the "Closing"), free and clear of all liens, charges, or encumbrances of whatsoever nature.

1.02   Consideration 

At the Closing, AAVI is delivering to the Shareholders 6,500,000 (six million five hundred thousand) common shares of AAVI ("AAVI shares") which will be deposited with Weir & Associates, 5/F Landmark East, 12 Ice House Street, Central, Hong Kong as escrow agent, ("Escrow Agent").

1.03   Closing  

The Closing of the transactions provided for in this Agreement will taking place upon satisfaction of terms set forth in Section 1.04.

1.04   Escrow

AAVI will deliver to the "Escrow Agent" a total of 6,500,000 (six million five hundred thousand) common shares of AAVI, divided into share certificates as directed by the Shareholders.  The Shareholders will deliver to Escrow Agent duly endorsed stock certificates representing 100,000 shares of common stock of WelWay (the "WelWay Shares").  Upon receipt of the aforementioned from both parties, the Escrow Agent will deliver the WelWay Shares to AAVI and concurrently therewith, the Escrow Agent will deliver to the Shareholders the AAVI common shares.

1.05   Shares issued for Performance

At the Closing, AAVI is also delivering to the Shareholders 4,000,000 (four million) common shares of AAVI ("Performance Shares"), divided into share certificates as directed by the Shareholders. These certificates will also be deposited with Weir & Associates, 5/F Landmark East, 12 Ice House Street, Central, Hong Kong as escrow agent, ("Escrow Agent").

1.06   Release of Escrow Shares

Upon the achievement of each of the five milestones as specified in Schedule B of this agreement, and as confirmed in writing by a resolution passed by the AAVI Board of Directors, the Escrow Agent will release one-fifth of the Performance Shares to the Shareholders.

 

1.07   Cancellation of Performance Shares

At the end of a period of five years from the date of this agreement the Performance Shares still remaining with the Escrow Agent will be returned to AAVI for cancellation and the Shareholders will have no right to receive any further Performance shares.

1.08   Conditions and Restrictions Apply to All AAVI Shares

All shares of common stock issued by AAVI to the Shareholders pursuant to this agreement will be subject to all relevant restrictions and conditions imposed by all applicable federal and/or state securities acts or any foreign laws, whether they are issued as consideration for the WelWay shares or as Performance shares.

	RELATED TRANSACTIONS

2.01   Finder

There are no finders with respect to the transaction contemplated herein.

	REPRESENTATIONS AND WARRANTIES BY THE SHAREHOLDERS.

The Shareholders hereby jointly and severally represent and warrant as follows:

3.01   Organization, Capitalization, etc.

WelWay is a corporation duly organized, validly existing, and in good standing under the laws of the Hong Kong SAR, China and is qualified no where else. The authorized capital stock of WelWay consists of 100,000 shares, par value HK$1.00 per share, 100,000 of which are validly issued and outstanding, fully paid and nonassessable.  All of the shares owned by the Shareholders are owned free and clear of any liens, claims, options, charges, or encumbrances of whatsoever nature.  The Shareholders have the unqualified right to sell, assign, and deliver the WelWay Shares, and, upon consummation of the transactions contemplated by this Agreement, AAVI will acquire good and valid title to the WelWay Shares, free and clear of all liens, claims, options, charges, and encumbrances of whatsoever nature.  The Shareholders acknowledge that the AAVI common shares being acquired from AAVI are restricted securities as that term is defined in Rule 144 of the Securities Act of 1933, as amended (the "Act").  There are no outstanding options or other agreements of any nature whatsoever relating to the issuance by WelWay of any shares of its capital stock. WelWay has the corporate power and authority to carry on its business as presently conducted.

3.02   No Violation

Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will constitute a violation or default under any term or provision of the Certificate of Incorporation or Articles of the Company, or of any contract, commitment, indenture, other agreement or restriction of any kind or character to which WelWay or any of the Shareholders is a party or by which WelWay or any of the Shareholders is bound.

3.03   Tax Returns

WelWay has duly filed all tax reports and returns required to be filed by it and has fully paid all taxes and other charges claimed to be due from taxing authorities; there are no liens upon any of WelWay's property or assets; there are not now any pending questions relating to, or claims asserted for, taxes or assessments asserted against WelWay.

 

 

 

-2-

3.04   Title to Properties; Encumbrances

WelWay has good and marketable title to all of its properties and assets, real and personal, tangible and intangible, and all such properties and assets are subject to no mortgage, pledge, lien, conditional sale agreement, encumbrance, or charge of whatsoever nature.  There are currently no properties owned by WelWay.

3.05   Accounts Receivable

There  are currently no accounts receivable of WelWay.

3.06   Undisclosed Liabilities

Except to the extent disclosed by WelWay, WelWay as of the date hereof has no liabilities or obligations of any nature, whether absolute, accrued, contingent, or otherwise and whether due or to become due.  Further, the Shareholders do not know or have any reasonable ground to know of any basis for the assertion against WelWay of any liability or obligation as of the date hereof, of any nature or in any amount not previously and fully disclosed. WelWay had no accounts payable at the date hereof.

3.07   Absence of Certain Changes

WelWay has not since inception:

a)   Suffered any material adverse change in financial condition, assets, liabilities, business, or prospects;

b)   Incurred any obligation or liability (whether absolute, accrued, contingent, or otherwise) other than in the ordinary course of business and consistent with past practice;

c)   Paid any claim or discharged or satisfied any lien or encumbrance or paid or satisfied any liability (whether absolute, accrued, contingent, or otherwise) in the ordinary course of business and consistent with past practices;

d)   Permitted or allowed any of its assets, tangible or intangible, to be mortgaged, pledged, or subjected to any liens or encumbrances;

e)   Written down the value of any inventory or written-off as un-collectible any notes or accounts receivable or any portion thereof;

f)   Cancelled any other debts or claims or waived any rights of substantial value, or sold or transferred any of its assets or properties, tangible or intangible, other than sales of inventory or merchandise made in the ordinary course of business and consistent with past practice;

g)   Made any capital expenditures or commitments for additions to property, plant or equipment

h)   Declared, paid, or set aside for payment to its stockholders any dividend or other distribution in respect of its capital stock or redeemed or purchased or otherwise acquired any of its capital stock or any options relating thereto or agreed to take any such action;

i)   Made any material change in any method of accounting or accounting practice.

 

-3-

3.08   Litigation.  

There are no actions, proceedings, or investigations pending or, to the knowledge of the Shareholders, threatened against WelWay, and the Sellers know or have any reason to know of any basis for any such action, proceeding, or investigation.  There is no event or condition of any kind or character pertaining to the business, assets, or prospects of WelWay that may materially and adversely affect such business, assets or prospects.

3.09   Disclosure.

The Shareholders have disclosed to AAVI all facts material to the assets, prospects, and business of WelWay.  No representation or warranty by the Shareholders contained in this Agreement, and no statement contained in any instrument, list, certificate, or writing furnished to AAVI pursuant to the provisions hereof or in connection with the transaction contemplated hereby, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading or necessary in order to provide a prospective purchaser of the business of WelWay with proper information as to WelWay and its affairs.

3.10   Reports and  Filings.  

WelWay is current in its reporting obligations.  

3.11   Undertakings and Acknowledgements by the WelWay Shareholders

The WelWay Shareholders acknowledge and understand that:

a)   the common shares to be issued to them by AAVI have not been approved or disapproved by the United States Securities and Exchange Commission, any state securities agency, or any foreign securities agency;

b)   the WelWay Shareholders are not underwriters and are acquiring AAVI's common shares solely for investment purposes for their own account and not with a view to, or for, resale in connection with any distribution within the meaning of any federal securities act, state securities act or any other applicable federal or state laws; 

c)   the Shareholders understand the speculative nature and risks of investments associated with AAVI, and confirm that the AAVI shares are suitable and consistent with their investment program; and, that their financial position enables them to bear the risks of this investment;

d)   the AAVI shares may not be transferred, encumbered, sold, hypothecated, or otherwise disposed of, if such disposition will violate any federal and/or state securities acts or foreign laws.  Disposition shall include, but is not limited to acts of selling, assigning, transferring, pledging, encumbering, hypothecating, giving, and any form of conveying, whether voluntary or not for a period of one (1) year from the date of issuance and thereafter, only in compliance with Rule 144 of the Securities Act of 1933;

e)   to the extent that any federal, and/or state securities laws shall require, the Shareholders hereby agree that any AAVI shares acquired pursuant to this Agreement shall be without preference as to assets;

 

 

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f)   except As specified in Section 4.04, AAVI is under no obligation to register or seek an exemption under any federal securities act, state securities act, or any foreign securities act for any of its common shares or to cause or permit such shares to be transferred in the absence of any such registration or exemption;

g)   the Shareholders have had the opportunity to ask questions of AAVI and have received additional information from AAVI to the extent that AAVI possessed such information, necessary to evaluate the merits and risks of any investment in the AAVI. Further, the Shareholders have been given access to:  (i)  all material books, records, documents, correspondence, and financial statements of AAVI; (ii) all material contracts and documents relating to the proposed transaction; (iii) all reports filed with the Securities and Exchange Commission; and, (iv) an opportunity to question the appropriate executive officers of AAVI.

h)   the Shareholders have satisfied the suitability standards imposed by their place of residence and have a pre-existing business relationship with AAVI;

i)   the Shareholders have adequate means of providing for their current needs and personal contingencies and have no need to sell the AAVI shares in the foreseeable future (that is, at the time of the investment, the Shareholders can afford to hold the investment for an indefinite period of time); 

j)   the Shareholders have sufficient knowledge and experience in financial matters to evaluate the merits and risks of this investment.  Further, the Shareholders represent and warrant that they are able to evaluate and interpret the information furnished to them  by AAVI and are capable of reading and interpreting financial statements;  

k)   the Shareholders warrant and represent that they are "sophisticated investors" as that term is defined in United States court decisions and the rules, regulations and decisions of the United States Securities and Exchange Commission;

l)   further, the Shareholders warrant and represent that they are "accredited investors" as that term is defined in Section 2(15)(i) or (ii) of the Securities Act of 1933;

m)   the Shareholders acknowledge that if they are residents of the State of Florida, they have the privilege of declaring this transaction null and void provided the Shareholders communicate such intention to AAVI in writing within three (3) days of the of the tender of their consideration.

	REPRESENTATIONS AND WARRANTIES BY AAVI.

AAVI hereby represents and warrants as follows:

4.01   Organization, etc.  

AAVI is a corporation organized under the laws of the State of Nevada, USA.

 

 

 

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4.02   Representations 

a)   Regarding the Shares:

b)   AAVI understands that the SHARES IT WILL ISSUE HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCIES;

c)   AAVI is not an underwriter and is acquiring the Shareholder's Shares solely for investment for the account of AAVI and not with a view to, or for, resale in connection with any distribution with in the meaning of the federal securities act, the state securities acts or any other applicable state securities acts;

d)   AAVI understands the speculative nature and risks of investments associated with WelWay and confirms that the WelWay Shares are suitable and consistent with its business program;

e)   Except as specified in Section 4.04 AAVI is under no obligation to register or seek an exemption under any federal and/or state securities acts for any stock of the Company or to cause or permit such stock to be transferred in the absence of any such registration or exemption and that the Shareholders herein must hold such stock indefinitely unless such stock is subsequently registered under any federal and/or state securities acts or an exemption from registration is available;

f)   AAVI has satisfied the suitability standards imposed by the laws of its domicile.  The WelWay Shares being acquired from the Shareholders have not been registered under US federal, state or foreign laws.

4.03   Authority

The execution and delivery of this Agreement by AAVI and the consummation by AAVI of the transactions contemplated hereby have been duly authorized by the Board of Directors of AAVI.

4.04   Restricted Shares.  

The Certificates representing the AAVI common shares delivered pursuant to this Agreement which will be issued to the Shareholders are "Restricted Shares" as that term is defined in the Securities Act of 1933 (the "Act").  Further, some or all of the Shareholders will become affiliates of AAVI and accordingly, the AAVI shares issued to the Shareholders will contain a "144 Legend."  AAVI acknowledges that, subject to any applicable federal and/or state securities acts or foreign laws, AAVI will undertake to register the shares issued to the Shareholders with the Securities and Exchange Commission of the United States at the earliest practical date.

	SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.

5.01   Survival of Representations

All representations, warranties, and agreements made by any party in this Agreement or pursuant hereto shall survive the execution and delivery hereof and any investigation at any time made by or on behalf of any party.

 

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5.02   Indemnification

The Shareholders, jointly and severally, agree to indemnify AAVI and hold it harmless from and in respect of any assessment, loss, damage, liability, cost, and expense (including without limitation interest, penalties, and reasonable attorneys' fees) in excess of $1,000 in the aggregate, imposed upon or incurred by AAVI resulting from a breach of any agreement, representation, or warranty of the Shareholders.  Assertion by AAVI of its right to indemnification under this Section 5.02 shall not preclude the assertion by AAVI of any other rights or the seeking of any other remedies against the Shareholders.

	MISCELLANEOUS.

6.01   Further Assurances

From time to time, at AAVI's request and without further consideration, the Shareholders, at their own expense, will execute and transfer such documents and will take such action as AAVI may reasonably request in order to effectively consummate the transactions herein contemplated.

6.02   Parties in Interest

All the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of, and shall be enforceable by the prospective heirs, beneficiaries, representatives, successors, and assigns of the parties hereto.

6.03   Prior Agreements; Amendments

This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof.  This Agreement may be amended only by a written instrument duly executed by the parties hereto or their respective successors or assigns.

6.04   Headings

The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretations of this Agreement.

6.05   Governing Law

This Agreement shall be governed by and construed and enforced in accordance with the laws of the state of Nevada, without regard to its conflict-of-laws rules and venue of any actions brought under this Agreement will be in the federal or state courts of Nevada.

6.06   Notices

All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed (registered or certified mail, postage prepaid, return receipt requested) or by facsimile, as follows:

If to the Shareholders:

c/o Matt Mecke

6th Floor Landmark East

12 Ice House Street

Central

Hong Kong

Fax No. (852) 3101-7530  (Attention: Matt Mecke)

 

 

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If to AAVI;

Asian Alliance Ventures, Inc.

c/o  Asian Alliance Ventures (Hong Kong) Limited

1304 Kinwick Centre

32 Hollywood Road

Central

Hong Kong

Fax  No.  (852) 2110-9983

6.07   Agent

Each Shareholder, individually, shall have full authority to execute all documents and receive said AAVI common shares on behalf of the other Seller, individually.  Further, the Shareholders hereby authorize and direct each other to act as their agent in connection with the disbursement of the moneys set forth above.  

6.08   Effect 

In the event any portion of this Agreement is deemed to be null and void under any state, federal or foreign law, all other portions and provisions not deemed void or voidable shall be given full force and effect. 

6.09   Counterparts

This Agreement may be executed simultaneously in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Shareholders and AAVI, on the date first above written.

Asian Alliance Ventures, Inc.

 

/s/ Robert Clarke

Robert G. Clarke, Chairman

WelWay Development Limited

/s/ Matt Mecke

Matt Mecke, Director

 

 

 

 

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Shareholders of WelWay Development Limited

/s/ Matthew Ryan Mecke

Matthew Ryan Mecke

/s/ Andrew Crampton

Andrew Crampton 

/s/ David James Fiddes

David James Fiddes 

/s/ Robert James Henson Johnson

Robert James Henson Johnson 

/s/ Francois Williams

Francois Williams

/s/ Christopher Michael Fox

Christopher Michael Fox

/s/ Martin Lewis McCullough

Martin Lewis McCullough

/s/ Ho Edith Kan Ying

Ho Edith Kan Ying

 

 

 

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SCHEDULE A

Shareholders of WelWay Development Limited

	
Matthew Ryan Mecke

address omitted

	

32,560 shares

	

Andrew Crampton

address omitted

	

17,700 shares

	

David James Fiddes

address omitted

	

16,580 shares

	

Robert James Henson Johnson

address omitted

	

15,920 shares

	

Francois Williams

address omitted

	

17,200 shares

	
Christopher Michael Fox

address omitted

	

16 shares

	
Martin McCullough

address omitted

	

15 shares

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(continued)

SCHEDULE A

Shareholders of WelWay Development Limited

	
Edith Kam Ying Ho

address omitted

	

5 shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Schedule B

Performance Share Milestones

Milestones are to be considered as being reached when:

1.The target results specified for each Milestone is confirmed by AAVI's audited financial statements for a full fiscal year (ending December 31).

2.All financial results are to be measured on a consolidated basis, except for Milestone C (below).

3.AAVI's financial statements have been reviewed and approved by the AAVI audit Committee.

4.Achievement of each Milestone is confirmed by a Resolution passed by the AAVI Board of Directors and appropriate instructions issued to the Escrow Agent authorizing the release.

Five Milestones are required to achieve release of the total of 4,000,000 (four million) Performance Shares from Escrow.  Achievement of each Milestone will result in the release of 800,000 Performance Shares, allocated pro rata among the Shareholders.

The five Milestones are:

A.Net revenues of US$10,000,000 (ten million) in a fiscal year.

B.Net revenues of US$25,000,000 (twenty-five million) in a fiscal year.

C.Net revenues of US$5,000,000 (five million) from one or more Joint Ventures in China in a fiscal year, i.e. net revenues received by AAVI from the China market only.

D.Earnings before interest, taxes, depreciation and amortization (EBITDA) of US$1,000,000 (one million) in a fiscal year.

E.Net earnings, after tax, of US$1,000,000 (one million) in a fiscal year.

The Milestones are not sequential and more than one Milestone may be achieved in a given fiscal year.

 

 

 

 

 

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