Document:

Promissory Note, w/o interest

Exhibit 10.4

DEMAND PROMISSORY NOTE

FOR VALUE RECEIVED TEXADA VENTURES INC. unconditionally promises to pay to or to the order of IFG SERVICES INC. on demand at Spokane Valley, WA the sum of $50,000.00 (Fifty Thousand Dollars) in US Funds, bearing 5% interest.

The principal of this Promissory Note shall be paid in US dollars without set-off or counterclaim.

Texada Ventures Inc. waives presentment, protest and notice of any kind in the enforcement of this Promissory Note.

Made at Spokane Valley, WA this 19th day of December, 2008.

Texada Ventures Inc.

11616 East Montgomery Dr, Suite #54

Spokane Valley, WA  99206

Per: ____________________________ 

(Authorized Signing Officer)

IFG Services Inc.

Per: _____________________________

(Authorized Signing Officer)Promissory Note, w/o interest

Exhibit 10.5

DEMAND PROMISSORY NOTE

FOR VALUE RECEIVED TEXADA VENTURES INC. unconditionally promises to pay to or to the order of IFG SERVICES INC. on demand at Spokane Valley, WA the sum of $25,000.00 (Fifty Thousand Dollars) in US Funds, bearing 5% interest.

The principal of this Promissory Note shall be paid in US dollars without set-off or counterclaim.

Texada Ventures Inc. waives presentment, protest and notice of any kind in the enforcement of this Promissory Note.

Made at Spokane Valley, WA this 25th day of March, 2009.

Texada Ventures Inc.

11616 East Montgomery Dr, Suite #54

Spokane Valley, WA  99206

Per: ____________________________ 

(Authorized Signing Officer)

IFG Services Inc.

Per: _____________________________

(Authorized Signing Officer)Yaterra Ventures Corp.: Exhibit 10.7 - Filed by newsfilecorp.com

FOURTH AMENDMENT AGREEMENT TO OPTION AGREEMENT

THIS AGREEMENT is dated for reference as of the 1st day
of June, 2010.

BETWEEN:

	 	GEOFFREY GOODALL 	 
		an individual having an address at Unit 154,
      101 – 1001 
West Broadway Street, Vancouver, BC V6H 4E4 	
	 	  	 
	 	(the "Optionor") 	 

OF THE FIRST PART 

AND:

	 	YATERRA VENTURES CORP. 	  
		a Nevada corporation having an address at 1200
      Dupont Street, Suite 2J, Bellingham, WA 98225 	
	 	  	  
	 	(the "Optionee") 	  

OF THE SECOND PART 

WHEREAS:

A. The Optionor and the Optionee entered into an option
agreement dated July 14, 2009 (the “Option Agreement”) whereby the Optionee was
granted an option to acquire a 60% interest in the mineral claim referred to as
the “Frances Property” located in the Vancouver Mining District of British
Columbia, Canada.

B. On October 27, 2009, the Optionor and the Optionee entered
into an Amendment Agreement to the Option Agreement pursuant to which the
Optionor agreed to extend the due date of the Payment (as defined in the
Amendment Agreement).

C. On December 10, 2009, the Optionor and the Optionee entered
into a Second Amendment Agreement to the Option Agreement pursuant to which the
Optionor agreed to further extend the due date of certain payments, share
issuances and Exploration Expenditures (as defined in the Option Agreement).

D. On February 1, 2010, the Optionor and the Optionee entered
into a Third Amendment Agreement to the Option Agreement pursuant to which the
Optionor agreed to further extend the due date of certain payments, share
issuances and Exploration Expenditures.

E. The Optionor has now agreed to further extend the due date
of certain payments, share issuances and Exploration Expenditures on the terms
and conditions hereinafter set forth. 

NOW THEREFORE THIS AGREEMENT WITNESSES that in
consideration of the sum of $10.00 now paid by the Optionee to the Optionor (the
receipt of which is hereby acknowledged), the parties agree as follows:

	 1.	
      The Optionee shall pay $500 CDN to the Optionor on
      execution of this Agreement.

	 	 
	 2. 	
      Section 2.1(a)(ii) of the Option Agreement is hereby
      deleted and replaced with the following: 

	 	 
	 	“(i) 	paying the Optionor $13,000 CDN as
      follows: 
	 	 	 	 
	 		(A) 	
      $3,000 CDN on October 15, 2010; and

	 	 	 	 
	 		(B) 	
      an additional $10,000 CDN within eighteen months of the
      Effective Date.”

	 	 	 	 
	 3. 	
      Section 2.1(a)(iii) of the Option Agreement is hereby
      deleted and replaced with the following: 

	 	 	 	 
	 	“(iii)	 incurring Exploration Expenditures of
      $160,000 CDN on the Property as follows; 
	 	 	 	 
	 		(A) 	
      $10,000 CDN on or before September 15, 2010;
and

	 	 	 	 
	 		(B) 	
      a further $150,000 CDN on or before the second
      anniversary of the Effective Date.”

2

	4. 	Section 2.1(a)(iv) of the Option
      Agreement is hereby deleted and replaced with the following: 
	 	 
	  	“(iv) 	Issuing shares of the Optionee’s
      common stock (the “Shares”) to the Optionor as follows: 
	 	 	 
	  	  	(A) 	2,000 Shares on or before September 15, 2010;
    
	 	 	 	 
	  	  	(B) 	an additional 3,000 Shares on or before October
      15, 2010; and 
	 	 	 	 
	  	  	(C) 	an additional 10,000 Shares within eighteen
      months of the Effective Date. 
	 	 	 	 
	 	 	 (collectively
      referred to as the “Option Shares”)” 

	5. 	
      The parties confirm that the terms, covenants and
      conditions of the Option Agreement remain unchanged and in full force and
      effect, except as modified by this Agreement.

	 	 
	6. 	
      This Agreement has been prepared by O’Neill Law Group
      PLLC acting solely on behalf of the Optionor and the Optionee acknowledges
      that it has been advised to obtain independent legal advice.

	 	 
	7. 	
      Except as otherwise expressly provided herein, the
      provisions hereof shall inure to the benefit of, and be binding upon, the
      successors, assigns, heirs, executors and administrators of the parties
      hereto.

	 	 
	8. 	
      This Agreement constitutes the full and entire
      understanding and agreement between the parties with regard to the subject
      hereof.

	 	 
	9. 	
      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 executed
      this Agreement as of the 14th day of July, 2010. 
	 
	SIGNED, SEALED AND DELIVERED 
	GEOFFREY GOODALL 
	in the presence of: 

	  	 	/s/
      Geoffrey Goodall 
	Signature of Witness 	 	GEOFFREY GOODALL 
	 	 	 
	 	 	 
	Name of Witness 	 	  
	 	 	 
	 	 	 
	Address 	 	  
	 	 	 
	YATERRA VENTURES CORP. 	 	  
	by its authorized signatory: 	 	  
	 	 	 
	/s/ David K.
      Ryan 	 	  
	Authorized Signatoryexh10-1_16860.htm

EXHIBIT 10.1

 

 

 

 

 

 

 

 

 

 

 

SECURITIES PURCHASE AGREEMENT

 

Dated as of July 9, 2010

 

by and among

 

ZAP, a California corporation

 

and

 

Cathaya Capital, L.P., a Cayman Islands exempted limited partnership

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

TABLE OF CONTENTS

 

 

	 	Page
	 	 
	
SECTION I PURCHASE AND SALE OF SHARES

	1  
	
Section 1.1

	
Issuance of Common Stock

	
1

	
Section 1.2

	
Purchase Price and Closing

	
1

	 	 
	
SECTION II REPRESENTATIONS AND WARRANTIES OF COMPANY

	2
	
Section 2.1

	
Organization and Qualification

	
2

	
Section 2.2

	
Authorization; Enforcement; Validity

	
2

	
Section 2.3

	
Issuance of Shares

	
2

	
Section 2.4

	
No Conflicts

	
2

	
Section 2.5

	
Consents

	
3

	
Section 2.6

	
No General Solicitation; Placement Agent’s Fees

	
3

	
Section 2.7

	
No Integrated Offering

	
3

	
Section 2.8

	
Application of Takeover Protections; Rights Agreement

	
3

	
Section 2.9

	
SEC Documents; Financial Statements

	
3

	
Section 2.10

	
Absence of Certain Changes

	
4

	
Section 2.11

	
No Undisclosed Events, Liabilities, Developments or Circumstances

	
4

	
Section 2.12

	
Conduct of Business; Regulatory Permits

	
4

	
Section 2.13

	
Foreign Corrupt Practices

	
5

	
Section 2.14

	
Sarbanes-Oxley Act

	
5

	
Section 2.15

	
Transactions With Affiliates

	
5

	
Section 2.16

	
Equity Capitalization

	
5

	
Section 2.17

	
Indebtedness and Other Contracts

	
6

	
Section 2.18

	
Absence of Litigation

	
6

	
Section 2.19

	
Insurance

	
6

	
Section 2.20

	
Employee Relations.

	
6

	
Section 2.21

	
Title

	
7

	
Section 2.22

	
Intellectual Property Rights

	
7

	
Section 2.23

	
Environmental Laws

	
7

	
Section 2.24

	
Subsidiary Rights

	
8

	
Section 2.25

	
Tax Status

	
8

	
Section 2.26

	
Internal Accounting Controls

	
8

	
Section 2.27

	
U.S. Real Property Holding Corporation

	
8

	
Section 2.28

	
Manipulation of Price

	
8

	
Section 2.29

	
Disclosure

	
8

	 	 
	
SECTION III REPRESENTATIONS AND WARRANTIES OF INVESTOR

	9
	
Section 3.1

	
Organization; Authority

	
9

	
Section 3.2

	
No Public Sale or Distribution

	
9

	
Section 3.3

	
Accredited Investor Status

	
9

	
Section 3.4

	
Reliance on Exemptions

	
9

 

  

-i-

  

	
Section 3.5

	
Information

	
9

	
Section 3.6

	
No Governmental Review

	
9

	
Section 3.7

	
Transfer or Resale

	
9

	
Section 3.8

	
Legends

	
10

	
Section 3.9

	
Validity; Enforcement

	
10

	
Section 3.10

	
No Conflicts

	
11

	 	 
	
SECTION IV COVENANTS

	11
	
Section 4.1

	
Form D and Blue Sky

	
11

	
Section 4.2

	
Reporting Status

	
11

	
Section 4.3

	
Use of Proceeds

	
11

	
Section 4.4

	
Financial Information

	
11

	
Section 4.5

	
Listing

	
12

	
Section 4.6

	
Fees

	
12

	
Section 4.7

	
Pledge of Shares

	
12

	
Section 4.8

	
Disclosure of Transaction

	
12

	
Section 4.9

	
Maintenance of Existence

	
12

	
Section 4.10

	
Additional Issuances of Shares

	
12

	
Section 4.11

	
Conduct of Business

	
13

	 	 
	
SECTION V CONDITIONS TO CLOSING OF THE INVESTOR

	13
	
Section 5.1

	
Representations and Warranties

	
13

	
Section 5.2

	
Consents, Permits and Waivers

	
13

	
Section 5.3

	
Shareholder Approval

	
13

	
Section 5.4

	
Legal Requirements

	
13

	
Section 5.5

	
Proceedings and Documents

	
13

	
Section 5.6

	
Transaction Documents

	
13

	
Section 5.7

	
Governmental Approvals

	
13

	
Section 5.8

	
Corporate Documents

	
13

	 	 
	
SECTION VI CONDITIONS TO CLOSING OF THE COMPANY

	14 
	
Section 6.1

	
Representations and Warranties

	
14

	
Section 6.2

	
Consents, Permits and Waivers

	
14

	
Section 6.3

	
Legal Requirements

	
14

	
Section 6.4

	
Purchase Price

	
14

	
Section 6.5

	
Transaction Documents

	
14

	 	 
	
SECTION VII DEFINITIONS

	15  
	 	 
	
SECTION VIII MISCELLANEOUS

	17
	
Section 8.1

	
Governing Law; Jurisdiction

	
17

	
Section 8.2

	
Entire Agreement; Amendment

	
17

	
Section 8.3

	
Notices, etc

	
17

	
Section 8.4

	
Delays or Omissions

	
18

	
Section 8.5

	
Public Disclosure

	
18

	
Section 8.6

	
Titles; Subtitles

	
18

	
Section 8.7

	
Successors and Assigns

	
18

	
Section 8.8

	
No Third Party Beneficiaries

	
18

	
Section 8.9

	
Survival

	
19

	
Section 8.10

	
Counterparts

	
19

	
Section 8.11

	
Severability

	
19

 

  

-ii-

  

 

	    Section 8.12	Specific Performance 	19 
	    Section 8.13	Consents 	19 
	
Section 8.14

	Construction of Agreement 	19 
	
Section 8.15

	Variation of Pronouns 	19 

 

 

  

-iii-

  

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (as amended, restated, modified or otherwise supplemented from time to time, this “Agreement”) is entered into as of July 9, 2010, by and between ZAP, a California corporation (the “Company”), and Cathaya Capital, L.P., a Cayman Islands exempted limited partnership (the “Investor”).

 

 

RECITALS1

A.           On July 2, 2010, the Company entered into an Equity Transfer Agreement for the Purchase and Transfer of Certain Equity Interest in Zhejiang Jonway Automobile Co., Ltd. with Jonway Group Co., Ltd. to acquire a 51% interest in Zhejiang Jonway Autombile Co., Ltd., a limited liability company of the People’s Republic of China, for $29,030,000 (the “Acquisition Transaction”), the closing of which is conditioned on, among other things, the receipt of certain approvals, registrations and licenses from the Ministry of Commerce of the People’s Republic of China, the Zhejiang Administration of Industry and Commerce, and the local counterparts of these entities and other relevant government authorities (“Governmental Approvals”).

B.           On the terms and subject to the conditions set forth herein, the Investor is willing to purchase from the Company, and the Company is willing to sell to the Investor, forty four million (44,000,000) shares of the Company’s common stock, no par value per share (the “Common Stock”), at a price per share equal to $0.25 for an aggregate purchase price of Eleven Million U.S. dollars ($11,000,000.00).

C.           Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering an Amended and Restated Registration Rights Agreement, substantially in the form attached hereto as Exhibit A (the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain registration rights with respect to the Shares under the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

 

 

AGREEMENT

NOW THEREFORE, in consideration of the foregoing, and the representations, warranties, and conditions set forth below, the parties hereto, intending to be legally bound, hereby agree as follows:

 

 

Purchase and Sale of Shares

 

Issuance of Common Stock.  Upon the following terms and conditions, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company forty four million (44,000,000) shares of Common Stock (the “Shares”) at a price per Share equal to $0.25 for an aggregate purchase price of Eleven Million U.S. dollars ($11,000,000.00) (the “Share Purchase Price”).  The Company and the Investor are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder, including Regulation D (“Regulation D”), and/or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the investments to be made hereunder.

 

 

Purchase Price and Closing.  The sale and purchase of the Shares shall take place at a closing (the “Closing”) to be held at such place and time as the Company and the Investor may determine (the “Closing Date”).  At the Closing, the Company will deliver to the Investor a certificate representing the Shares to be purchased by the Investor, against receipt by the Company of the Share Purchase Price.  Each of the Shares will be registered in the Investor’s name in the Company’s records.

  

  

  

 

Representations and Warranties of Company

 

The Company hereby represents and warrants that:

 

Organization and Qualification.  The Company and its Subsidiaries are entities duly organized and validly existing in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted.  Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.  The Company has no Subsidiaries except as set forth on Schedule 2.1.

 

Authorization; Enforcement; Validity.  The Company has the requisite corporate power and authority to enter into and perform its obligations under each Transaction Document and to issue the Shares in accordance with the terms hereof and thereof.  The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Shares have been duly authorized by the Company’s Board of Directors (the “Board”) and (other than the filing with the Securities and Exchange Commission (the “SEC”) of one or more registration statements in accordance with the requirements of the Registration Rights Agreement) no further filing, consent, or authorization is required by the Company, the Board or its shareholders.  This Agreement and the other Transaction Documents of even date herewith have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

Issuance of Shares.  The issuance of the Shares are duly authorized and upon issuance of the Shares in accordance with the terms of the Transaction Documents, they shall be free from all taxes, liens and charges with respect to the issue thereof.  The offer and issuance by the Company of the Shares is exempt from registration under the Securities Act.

 

No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Shares) will not (i) result in a violation of the Articles of Incorporation (as defined in Section 2.17) of the Company, any capital stock of the Company or Bylaws (as defined in Section 2.17) of the Company or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the OTC Bulletin Board (the “Principal Market”)) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected.

  

-2-

  

 

Consents.  Except as set forth on Schedule 2.5, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case in accordance with the terms hereof or thereof.  All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the Closing Date, and the Company and its Subsidiaries are unaware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the registration, application or filings pursuant to the preceding sentence.  The Company is not in violation of the listing requirements of the Principal Market and has no knowledge of any facts which would reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.

 

No General Solicitation; Placement Agent’s Fees.  Neither the Company, nor 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) in connection with the offer or sale of the Shares.  The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than, in each case, for persons engaged by any Investor or its investment advisor) relating to or arising out of the transactions contemplated hereby.  The Company shall pay, and hold the Investor harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim.  The Company has not engaged any placement agent or other agent in connection with the sale of the Shares.

 

No Integrated Offering.  None of the Company, its Subsidiaries, any of their affiliates, and any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Shares under the Securities Act or cause this offering of the Shares to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable shareholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated.  None of the Company, its Subsidiaries, their affiliates and any Person acting on their behalf will take any action or steps referred to in the preceding sentence that would require registration of any of the Shares under the Securities Act or cause the offering of the Shares to be integrated with other offerings.

 

Application of Takeover Protections; Rights Agreement.  The Company and the Board have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or the laws of the jurisdiction of its formation which is or could become applicable to any Investor as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Shares and the Investor’s ownership of the Shares.

 

SEC Documents; Financial Statements.  During the two (2) years prior to the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”).  The Company has delivered to the Investor or its representatives true, correct and complete copies of each of the SEC Documents not available on the EDGAR system that have been requested by the Investor.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any 

  

-3-

  

untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing.  Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  No other information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.

 

Absence of Certain Changes.  Except as disclosed in Schedule 2.11 or in the SEC Documents listed in Schedule 2.11, since March 31, 2010, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or otherwise), results of operations or prospects of the Company or its Subsidiaries.  Except as disclosed in Schedule 2.11 or in the SEC Documents listed in Schedule 2.11, since March 31, 2010, the Company has not (i) declared or paid any dividends, (ii) as of the date hereof, sold any assets, individually or in the aggregate, in excess of $100,000 outside of the ordinary course of business or (iii) as of the date hereof, had capital expenditures, individually or in the aggregate, in excess of $100,000.  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 Closing, will not be Insolvent (as defined below).

 

No Undisclosed Events, Liabilities, Developments or Circumstances.  Except as set forth on Schedule 2.12, no event, liability, development or circumstance has occurred or exists, or is contemplated to occur with respect to the Company or its Subsidiaries or their respective business, properties, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced.

 

Conduct of Business; Regulatory Permits.  Neither the Company nor its Subsidiaries is in violation of any term of or in default under its Charter Documents.  Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing.  Without limiting the generality of the foregoing, the Company is not in violation of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances which would reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future.  Since November 1, 2008, (i) the Common Stock has been designated for quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market.  The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory 

  

-4-

  

authorities necessary to conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

 

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

 

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

 

Transactions With Affiliates.  Except as set forth in the SEC Documents and other than the grant of stock options disclosed on Schedule 2.16, 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 that would require disclosure pursuant to Item 404 of Regulation S-K promulgated under the Securities Act (other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the knowledge of the Company, 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.

 

Equity Capitalization.  As of the date hereof, the authorized capital stock of the Company consists of (i) 400,000,000 shares of Common Stock, of which 111,843,800 shares were issued and outstanding as of the date hereof, 26,819,000 shares were subject to outstanding options granted pursuant to the Company’s stock option and purchase plans as of the date hereof, 74,134,000 shares are reserved for issuance pursuant to securities exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii) 50,000,000 shares of preferred stock, no par value, of which as of the date hereof, none are issued and outstanding.  All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and nonassessable.  Except as set forth in the SEC Documents or as disclosed in Schedule 2.17: (i) none of the Company’s share capital is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any share capital of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional share capital of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any share capital of the Company or any of its Subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no Liens existing on or against any property of the 

  

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Company or any of its subsidiaries; (v) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except the Registration Rights Agreement); (vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Shares; (viii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) the Company and its Subsidiaries have no liabilities or obligations required to be disclosed in the SEC Documents but not so disclosed in the SEC Documents.  The Company has furnished to the Investor true, correct and complete copies of the Company’s [Amended and Restated] Articles of Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”), and the Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto.

 

Indebtedness and Other Contracts.  Except as set forth in the SEC Documents or as disclosed in Schedule 2.18, neither the Company nor any of its Subsidiaries (i) is a party to or has any obligation with respect to any outstanding Indebtedness, (ii) is a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument would result in a Material Adverse Effect, (iii) is in violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect.  Schedule 2.18 provides a detailed description of the material terms of any such outstanding Indebtedness.

 

Absence of Litigation.  Except as set forth in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company, the Common Stock or any of the Company’s Subsidiaries or any of the Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as such, that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

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

 

Employee Relations.

 

Except as set forth in the SEC Documents or as disclosed on Schedule 2.21, 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 and its Subsidiaries believe that their relations with their employees are good.  No executive officer of the Company (as defined in Rule 501(f) of the Securities Act) has notified the Company that such officer intends to leave the Company or otherwise terminate such 

  

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officer’s employment with the Company.  No executive officer of the Company, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.

 

The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours.

 

Title.  Except as set forth in the SEC Documents or as disclosed on Schedule 2.22, the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all Liens (other than Permitted Liens) or other encumbrances and defects except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries.   Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.

 

Intellectual Property Rights.  The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted.  Except as set forth in the SEC Documents or as disclosed in Schedule 2.23, none of the Company’s Intellectual Property Rights have expired or terminated, or are expected to expire or terminate, within three years from the date of this Agreement.  The Company does not have any knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of others.  There is no claim, action or proceeding being made or brought, or to the knowledge of the Company, being threatened, against the Company or its Subsidiaries regarding its Intellectual Property Rights.  The Company is unaware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties.

 

Environmental Laws.  Except as set forth in the SEC Documents, the Company and its Subsidiaries (i) are in compliance 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 with all terms and conditions of any such permit, license or approval.  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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Subsidiary Rights.  Except as set forth in the SEC Documents or as disclosed in Schedule 2.25, 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.

 

Tax Status.  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 adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply or otherwise payable in respect of the taxable periods covered by such returns.  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.

 

Internal Accounting Controls.  The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any differences.

 

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

 

Manipulation of Price.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Shares, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Shares, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

 

Disclosure.  The Company understands and confirms that the Investor will rely on the foregoing representations in effecting transactions in securities of the Company.  All disclosure provided to the Investor regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  Each press release issued by the Company during the twelve (12) months preceding the date of this Agreement which contained results of operations or financial condition information of the Company for a completed quarterly or annual fiscal period did not, at the time of release, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.  No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, 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.

  

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Representations and Warranties of Investor

 

Investor hereby represents and warrants that:

 

Organization; Authority.  The Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.

 

No Public Sale or Distribution.  The Investor is acquiring the Shares 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 or exempted under the Securities Act; provided, however, that by making the representations herein, the Investor does not agree to hold any of the Shares for any minimum or other specific term and reserves the right to dispose of the Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.  The Investor is acquiring the Shares hereunder in the ordinary course of its business.  The Investor does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Shares.

 

Accredited Investor Status.  At the time the Investor was offered the Shares, it was, and as of the date hereof, it is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

 

Reliance on Exemptions.  The Investor understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Shares.

 

Information.  The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Shares which have been requested by the Investor.  The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  Neither such inquiries nor any other due diligence investigations conducted by the Investor or its advisors, if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained herein.  The Investor understands that its investment in the Shares involves a high degree of risk.  The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Shares.

 

No Governmental Review.  The Investor 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 Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

 

Transfer or Resale.  The Investor understands that except as provided in the Registration Rights Agreement: (i) the Shares have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Investor shall have delivered to the Company an opinion of counsel, selected by the Investor and reasonably acceptable to the Company, the form and substance of which shall be reasonably satisfactory to the Company, to the effect that such Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) 

  

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the Investor provides the Company with reasonable assurance that such Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Shares under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Shares under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

 

Legends.  The Investor understands that the certificates or other instruments representing the Shares have been registered under the Securities Act as contemplated by the Registration Rights Agreement, the stock certificates representing the Shares, except as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates, certificates or other instruments):

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE OR EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED TO AN “ACCREDITED INVESTOR” (AS SUCH TERM IS DEFINED IN THE RULES AND REGULATIONS PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED) IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Shares upon which it is stamped, if, unless otherwise required by state securities laws, (i) such securities are sold pursuant to an effective registration statement covering the resale of such Shares under the Securities Act, or (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel, selected by the Investor and reasonably acceptable to the Company, the form and substance of which shall be reasonably satisfactory to the Company, to the effect that such sale, assignment or transfer of the Shares may be made without registration under the applicable requirements of the Securities Act and that such Shares are no longer restricted securties.

 

Validity; Enforcement.  This Agreement and the Registration Rights Agreement to which the Investor is a party have been duly and validly authorized by all necessary action on the part of the Investor, executed and delivered on behalf of the Investor and shall constitute the legal, valid and binding 

  

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obligations of the Investor enforceable against the Investor in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

No Conflicts.  The execution, delivery and performance by the Investor of this Agreement and the other Transaction Documents to which the Investor is a party and the consummation by the Investor of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of the Investor or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Investor 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 the Investor, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Investor to perform its obligations hereunder.

 

 

 

Covenants

 

Form D and Blue Sky.  The Company agrees to file a Form D with respect to the Shares as required under Regulation D and to provide a copy thereof to the Investor promptly after such filing.  The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Shares for sale to the Investor at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Investor on or prior to the Closing Date.  The Company shall make all filings and reports relating to the offer and sale of the Shares required under applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date.

 

Reporting Status.  Until the date on which the Investor shall have sold all the Shares (the “Reporting Period”), the Company shall (i) file with the SEC within the time periods prescribed by its rules and regulations, and (ii) furnish to the Investor within 15 days after the date on which the Company would be required to file the same with the SEC pursuant to its rules and regulations, all quarterly and annual financial information (without exhibits) required to be contained in a filing with the SEC on Forms 10-Q and 10-K, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual consolidated financial statements only, a report thereon by the Company’s independent auditors.  The Company shall not be required to file any report or other information with the SEC if the SEC does not permit such filing, although such reports or other information will be required to be furnished to the Investor.  In addition, the Company will furnish to Investor, beneficial owners of the Shares and prospective purchasers of the Shares, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) of the Securities Act.

 

Use of Proceeds.  The Company will use the proceeds from the sale of the Shares for working capital and general corporate purposes, and not (i) for the repayment of any other outstanding Indebtedness of the Company or any of its Subsidiaries other than in connection with the Acquisition Transaction, or (ii) for the redemption or repurchase of any of its equity securities.

 

Financial Information.  The Company agrees to send the following to each Investor during the Reporting Period (i) unless the following are filed with the SEC through EDGAR and are available to the public through the EDGAR system, within one (1) business day after the filing thereof with the SEC, a 

  

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copy of its Annual Reports on Form 10-K or 10-KSB, any interim reports or any consolidated balance sheets, income statements, shareholders’ equity statements and/or cash flow statements for any period other than annual, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the Securities Act, (ii) on the same day as the release thereof, copies of all press releases issued by the Company or any of its Subsidiaries via electronic mail, and (iii) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders.

 

Listing.  The Company shall promptly secure the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement) upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall maintain such listing of all Registrable Securities from time to time issuable under the terms of the Transaction Documents.  The Company shall use its best efforts to maintain the Common Stocks’ authorization for quotation on the Principal Market.  Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market.  The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4.5.

 

Fees.  At the Closing, the Company shall pay the reasonable legal fees and expenses incurred by the Company and the Investor in connection with this Agreement and the Transaction Documents, which shall be deducted from the Share Purchase Price and wired directly by Investor to Hogan Lovells US LLP.

 

Pledge of Shares.  The Company acknowledges and agrees that the Shares may be pledged by the Investor in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Shares.  The pledge of Shares shall not be deemed to be a transfer, sale or assignment of the Shares hereunder, and the Investor shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 3.7 hereof; provided that the Investor and its pledgee shall be required to comply with the provisions of Section 3.7 hereof in order to effect a sale, transfer or assignment of Shares to such pledgee.  The Company hereby agrees to execute and deliver such documentation as a pledgee of the Shares may reasonably request in connection with a pledge of the Shares to such pledgee by the Investor.

 

Disclosure of Transaction.  On or before the fourth business day following the date of this Agreement, the Company shall file a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and attaching the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the Registration Rights Agreement and the Voting Agreement) (including all attachments, the “8-K Filing”).

 

Maintenance of Existence.  So long as the Investor beneficially owns any Shares, the Company will do or cause to be done all things necessary to obtain, preserve, renew and keep in full force and effect (a) its legal existence and (b) the rights, licenses, permits, privileges, franchises and Intellectual Property Rights material to the conduct of its business.

 

Additional Issuances of Shares.  So long as the Investor beneficially owns any Shares, the Company shall not, without the prior written consent of the Investor, issue or obligate itself to issue any securities with rights, preferences, privileges, powers, or restrictions provided for the benefit of the purchaser of such securities, senior to or more favorable than the rights, preferences, privileges, powers, and restrictions provided for the benefit of the Investor, of the Shares issued to Investor pursuant to the Transaction Documents.

  

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Conduct of Business.  So long as the Investor beneficially owns any Shares, the business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.

 

 

Conditions to Closing of the Investor

 

The Investor’s obligations at the Closing are subject to the fulfillment, on or prior to the Closing Date, of all of the following conditions, any of which may be waived in whole or in part by the Investor:

 

 

Representations and Warranties.  The representations and warranties made by the Company in Section 2 hereof shall have been true and correct as of the Closing Date, except to the extent such representations and warranties address matters as of a particular date or period, in which case such representations and warranties shall be true and correct as of such date or period and with the same force and effect as if they had been made as of that date.

 

 

Consents, Permits and Waivers.  Except for any notices required or permitted to be filed after the Closing Date with certain federal and state securities commissions, the Company shall have obtained all consents, permits, waivers, and governmental or regulatory approvals required, necessary or appropriate for consummation of the transactions contemplated by this Agreement.

 

 

Shareholder Approval.  [The Company shall have obtained the consent of the Company’s shareholders required, necessary or appropriate for consummation of the transactions contemplated by this Agreement.]

 

 

Legal Requirements.  At the Closing, the sale and issuance by the Company, and the purchase by the Investor of the Shares shall be legally permitted by all laws and regulations to which the Investor or the Company are subject.

 

 

Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Investor.

 

 

Transaction Documents.  The Company shall have duly executed and delivered to the Investor the following documents:

 

 

this Agreement;

 

a certificate representing the Shares issued hereunder; and

 

that certain Registration Rights Agreement, in the form attached hereto as Exhibit A.

 

Governmental Approvals.  All Governmental Approvals in connection with the Acquisition Transaction shall have been received.

 

 

Corporate Documents.  The Company shall have delivered to the Investor each of the following:

  

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a certificate of the Secretary of the Company, dated as of the Closing Date, certifying (i) that the Articles of Incorporation, certified as of a recent date by the Secretary of State of the State of California and attached thereto, is in full force and effect and has not been amended, supplemented, revoked or repealed since the date of such certification; (ii) that attached thereto is a true and correct copy of the Bylaws of the Company as in effect on the Closing Date; and (iii) that attached thereto are true and correct copies of resolutions duly adopted by the Board and continuing in effect, which authorize the execution, delivery and performance by the Company of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby; and

 

a Certificate of Good Standing or comparable certificate as to the Company, certified as of a recent date prior to the Closing Date by the Secretary of State of California.

 

 

 

Conditions to Closing of the Company

 

The Company’s obligations at the Closing are subject to the fulfillment, on or prior to the Closing Date, of the following conditions, any of which may be waived in whole or in part by the Company:

 

 

Representations and Warranties.  The representations and warranties made by the Investor in Section 3 hereof shall be true and correct when made, and shall be true and correct as of the Closing Date.

 

 

Consents, Permits and Waivers.  Except for any notices required or permitted to be filed after the Closing Date with certain federal and state securities commissions, the Company shall have obtained all consents, permits, waivers, and governmental approvals required, necessary or appropriate for consummation of the transactions contemplated by this Agreement.

 

 

Legal Requirements.  At the Closing, the sale and issuance by the Company, and the purchase by the Investor, of the Shares shall be legally permitted by all laws and regulations to which the Investor or the Company are subject.

 

 

Purchase Price.  The Investor shall have delivered to the Company the Share Purchase Price (less any amounts deducted pursuant to Section 4.6 of this Agreement).

 

 

Transaction Documents.  The Investor shall have duly executed and delivered to the Company the following documents:

 

 

this Agreement; and

 

that certain Registration Rights Agreement, in the form attached hereto as Exhibit A.

  

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Definitions

 

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

 

“Charter Documents” means, with respect to any Person, its charter, certificate or articles of incorporation, bylaws, articles of organization, limited liability agreement, operating agreement, members agreement, shareholders agreement, partnership agreement, certificate of partnership, certificate of formation, voting trust agreement, or similar agreement or instrument governing the formation or operation of such Person.

 

 “Equity Securities” of any means (a) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing.

 

“GAAP” means generally accepted accounting principles in the United States of America.

 

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation, provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business or customary and reasonable indemnity obligations (other than any such obligations with respect to Indebtedness).  The amount of any Guarantee shall be deemed to be the lower of (i) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made and (ii) the maximum amount for which such guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guarantee, or, if such Guarantee is not an unconditional guarantee of the entire amount of the primary obligation and such maximum amount is not stated or determinable, the amount of such guaranteeing Person’s maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith.

 

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable and intercompany charges of expenses (including expenses related to research and development and information technology) and other accrued obligations, in each case incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for 

  

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which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances.  The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.  The amount of Indebtedness of any Person for purposes of clause (f) above shall (unless such Indebtedness has been assumed by such Person) be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith.

 

“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, (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.

 

“Investment” of any Person means any loan or advance of funds by such Person to any other Person (other than advances to employees of such Person for moving and travel expense, drawing accounts and similar expenditures in the ordinary course of business), any purchase or other acquisition of any Equity Securities or Indebtedness of any other Person, any capital contribution by such Person to or any other investment by such Person in any other Person (including, without limitation, any Guarantee); provided, however, that Investments shall not include accounts receivable or other indebtedness owed by customers of such Person which are current assets and arose from sales or non-exclusive licensing in the ordinary course of such Person’s business.

 

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

“Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or on the transactions contemplated hereby and by the other Transaction Documents or by the agreements and instruments to be entered into in connection herewith or therewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents.

 

“Permitted Liens” means (a) Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established; (b) Liens in respect of property or assets imposed by law which were incurred in the ordinary course of business, such as carriers’, warehousemen’s, materialmen’s and mechanics’ Liens and other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings; (c) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, and mechanic’s Liens, carrier’s Liens and other Liens to secure the performance of tenders, statutory obligations, contract bids, government contracts, performance and return of money bonds and other similar obligations, incurred in the ordinary course of business, whether pursuant to statutory requirements, common law or consensual arrangements, and (d) Liens in favor of Investor.

  

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“Person” means an individual, a partnership, a corporation, a business trust, a joint stock company, a limited liability company, an unincorporated association or other entity and any domestic or foreign national, state or local government, any political subdivision thereof, and any department, agency, authority or bureau of any of the foregoing.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

 

“Transaction Documents” means this Agreement and the Registration Rights Agreement and each other agreement entered into by the parties hereto in connection with the transactions contemplated hereby.

 

 

 

Miscellaneous

 

Governing Law; Jurisdiction.  This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California without giving effect to the principles of conflicts of laws.  Any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement may be brought or otherwise commenced in any state or federal court located in the State of California.  Each party hereto agrees to the entry of an order to enforce any resolution, settlement, order or award made pursuant to this Section 8.1 by the state and federal courts located in the State of California and in connection therewith hereby waives, and agrees not to assert by way of motion, as a defense, or otherwise, any claim that such resolution, settlement, order or award is inconsistent with or violative of the laws or public policy of the laws of the State of California or any other jurisdiction.

 

Entire Agreement; Amendment.  This Agreement and the other Transaction Documents constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof.  Any previous agreements among the parties relative to the specific subject matter hereof are superseded by this Agreement.  Neither this Agreement nor any provision hereof may be amended, changed, waived, discharged or terminated other than by a written instrument signed by the party against who enforcement of any such amendment, change, waiver, discharge or termination is sought.

 

Notices, etc.  All notices and other communications required or permitted hereunder shall be effective upon receipt and shall be in writing and may be delivered in person, by telecopy, electronic mail, express delivery service or U.S. mail, in which event it may be mailed by first-class, certified or registered, postage prepaid, addressed, to the party to be notified, at the respective addresses set forth below, or at such other address which may hereinafter be designated in writing:

  

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If to the Investor, to:

 

Cathaya Capital, L.P.

In care of Priscilla Lu

718 Best Court

San Carlos, CA 94070

 

If to the Company, to:

 

ZAP

Attention:ChiefFinancialOfficer

5014thStreet

SantaRosa,CA95401

Attention:ChiefExecutiveOfficer

Phone:(707)525-8658

Fax No.: (707) 525-8692

 

with a copy to:

 

HoganLovellsUSLLP

525UniversityAvenue,4thFloor

PaloAlto,CA94301

Attention:JonLayman,Esq.

Fax No.:  (650) 463-4199

 

Delays or Omissions.  It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  It is further agreed that any waiver, permit, consent or approval of any kind or character of any breach or default under this Agreement, or any waiver of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing, and that all remedies, either under this Agreement, by law or otherwise, shall be cumulative and not alternative.

 

Public Disclosure.  The parties shall consult with each other, and to the extent practicable, agree, before issuing any press release or otherwise making any public statement with respect to the transactions contemplated by the Transaction Documents.

 

Titles; Subtitles.  The titles of the Sections of this Agreement are for convenience of reference only and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any of its provisions.

 

Successors and Assigns.  Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.  The Investor shall have the right to assign any and all of Investor’s rights, duties and obligations hereunder at any time without the prior written consent of the Company.

 

No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

  

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Survival.  The representations and warranties of the Company and the Investor contained herein shall not survive the Closing except as specifically stated in such representations and warranties.

 

Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

 

Severability.  If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

SPECIFIC PERFORMANCE

 

.  THE PARTIES HERETO AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH ITS SPECIFIC INTENT OR WERE OTHERWISE BREACHED.  IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS, WITHOUT BOND, TO PREVENT OR CURE BREACHES OF THE PROVISIONS OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS HEREOF, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY MAY BE ENTITLED BY LAW OR EQUITY, AND ANY PARTY SUED FOR BREACH OF THIS AGREEMENT EXPRESSLY WAIVES ANY DEFENSE THAT A REMEDY IN DAMAGES WOULD BE ADEQUATE.

 

Consents.  Any permission, consent, or approval of any kind or character under this Agreement shall be in writing and shall be effective only to the extent specifically set forth in such writing.

 

Construction of Agreement.  No provision of this Agreement shall be construed against either party as the drafter thereof.

 

Variations of Pronouns.  All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which they are used may require.

 

[Remainder of page intentionally left blank.  Signature pages to follow]

 

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

 

	 	
ZAP

	 
	 	
a California corporation

	 
	 	 	 
	
 

	
By: 

	/s/ Steven Schneider	 
	 	 	Name: Steven Schneider 	 
	 	 	Title: Chief Executive Officer	 
	 	 	 	 

 

 

 

Signature Page to Securities Purchase Agreement

 

  

  

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

 

CATHAYA CAPITAL, L.P.

a Cayman Islands exempted limited partnership

By: Cathaya Capital, G.P.

Its General Partner

By: Cathaya Capital Co., Ltd.

Its General Partner

By: /s/ Priscilla Lu           

 

Name: Priscilla Lu                                                                                  

 

Title: Director                   

 

 

Signature Page to Securities Purchase Agreement

 

 

 

  

  

  

 

SCHEDULE I

 

SCHEDULE OF INVESTORS

 

 

	

Name

	

Shares of Common Stock Purchased

	

Share Purchase Price

	
 

Cathaya Capital, L.P.

In care of Priscilla Lu

718 Best Court

San Carlos, CA 94070

 

	
 

44,000,000

	
 

$11,000,000.00

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