Document:

Unassociated Document

 

EXHIBIT 10.3

 

 

CHINA
WORLD TRADE CORPORATION

PLACEMENT
AGENT AGREEMENT

Dated as
of: November
15, 2004

Duncan
Capital Group

Ladies
and Gentlemen:

The
undersigned, China World Trade Corporation, a Nevada corporation (the
“Company”),
hereby agrees with Duncan
Capital Group (the “Placement
Agent”) and
Cornell Capital Partners, LP, a Delaware Limited Partnership (the “Investor”), as
follows:

 

1  Offering. The
Company hereby engages the Placement Agent to act as its exclusive placement
agent in connection with the Standby Equity Distribution Agreement dated the
date hereof (the “Standby
Equity Distribution Agreement”),
pursuant to which the Company shall issue and sell to the Investor, from time to
time, and the Investor shall purchase from the Company (the “Offering”) up to
Thirty Million U.S. Dollars ($30,000,000) of the Company’s common stock (the
“Commitment
Amount”), par
value US$0.001 per share (the “Common
Stock”), at
price per share equal to the Purchase Price, as that term is defined in the
Standby Equity Distribution Agreement. The
Placement Agent services
shall
consist of reviewing the
terms of
the
Standby Equity Distribution Agreement and advising the
Company with
respect to those
terms.

 

All
capitalized terms used herein and not otherwise defined herein shall have the
same meaning ascribed to them as in the Standby Equity Distribution Agreement.
The Investor will be granted certain registration rights with respect to the
Common Stock as more fully set forth in the Registration Rights Agreement
between the Company and the Investor dated the date hereof (the “Registration
Rights Agreement”). The
documents to be executed and delivered in connection with the Offering,
including, but not limited, to the
Company’s latest Quarterly Report on Form 10-QSB as filed with the United
States Securities and Exchange Commission, this
Agreement, the Standby Equity Distribution Agreement, the Registration Rights
Agreement, and the Escrow Agreement dated the date hereof (the “Escrow
Agreement”), are
referred to sometimes hereinafter collectively as the “Offering
Materials.” The
Company’s Common Stock
purchased by the Investor hereunder or to be
issued in connection with the conversion of any debentures are sometimes
referred to hereinafter as the “Securities.” The
Placement Agent shall not be obligated to sell any Securities.

 

 2 Compensation.

 

Upon the
execution of this Agreement, the Company shall issue to the Placement Agent or
its designee One Hundred Fifty Thousand (150,000) shares of the Company’s Common
Stock (the “Placement
Agent’s Shares”). The
Placement Agent shall be entitled to “piggy-back” registration rights, which
shall be triggered upon registration of any shares of Common Stock by the
Investor with respect to the Placement Agent’s Shares pursuant to the
Registration Rights Agreement dated the date hereof. For a period of ninety (90)
calendar days following the Effective Date, as this term is defined in the
Registration Rights Agreement dated the date hereof, the Placement Agent shall
not sell the Placement Agent Shares if the volume weighted average price of the
Company’s Common Stock as quoted Bloomberg, LP (the “VWAP”) is
less than One Dollar and Fifty Cents ($1.50). Thereafter the Placement Agent
shall be entitled to sell the Placement Agent Shares free of any limitation
other than as outlined herein. Notwithstanding the foregoing if the Company does
not obtain the effectiveness of the Registration Statement the Placement Agent
shall be entitled to convert and sell pursuant to Rule 144 and the restrictions
contained below. In addition, for a period of twelve (12) months following the
declaration of effectiveness of the Registration Statement by the United States
Securities and Exchange Commission, the Placement Agent shall not sell more than
twenty five percent (25%) of the Placement Agent Shares every thirty (30)
calendar days if the VWAP of the Company’s Common Stock is less than Two Dollars
and Fifty Cents ($2.50). If the VWAP of the Company’s Common Stock is higher
than Two Dollars and Fifty Cents ($2.50) the Placement Agent shall be entitled
to sell the Placement Agent Shares free of any limitation. 

 

1

 

On each
Advance Date pursuant to the Standby Equity Distribution Agreement the Company
shall pay to the Placement Agent, directly from the gross proceeds held in
escrow, an amount equal to four percent (4%) of the amount of each
Advance.

 

    3   Representations,
Warranties and Covenants of the Placement Agent.

 

A.  The Placement Agent represents, warrants and covenants as
follows:

 

(i)  The
Placement Agent has the necessary power to enter into this Agreement and to
consummate the transactions contemplated hereby.

 

(ii)  The
execution and delivery by the Placement Agent of this Agreement and the
consummation of the transactions contemplated herein will not result in any
violation of, or be in conflict with, or constitute a default under, any
agreement or instrument to which the Placement Agent is a party or by which the
Placement Agent or its properties are bound, or any judgment, decree, order or,
to the Placement Agent’s knowledge, any statute, rule or regulation applicable
to the Placement Agent. This Agreement when executed and delivered by the
Placement Agent, will constitute the legal, valid and binding obligations of the
Placement Agent, enforceable in accordance with their respective terms, except
to the extent that (a) the enforceability hereof or thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect and affecting the rights of creditors generally, (b) the
enforceability hereof or thereof is subject to general principles of equity, or
(c) the indemnification provisions hereof or thereof may be held to be in
violation of public policy.

 

(iii)  Upon
receipt and execution of this Agreement, the Placement Agent will promptly
forward copies of this Agreement to the Company or its counsel and the Investor
or its counsel.

 

(iv)  The
Placement Agent will not intentionally take any action that it reasonably
believes would cause the Offering to violate the provisions of the Securities
Act of 1933, as amended (the “1933
Act”), the
Securities Exchange Act of 1934 (the “1934
Act”), the
respective rules and regulations promulgated thereunder (the
“Rules
and Regulations”) or
applicable “Blue Sky” laws of any state or jurisdiction.

 

(v)  The
Placement Agent is a member of the National Association of Securities Dealers,
Inc., and is a broker-dealer registered as such under the 1934 Act and under the
securities laws of the states in which the Securities will be offered or sold by
the Placement Agent unless an exemption for such state registration is available
to the Placement Agent. The Placement Agent is in material
compliance
with the rules
and regulations applicable to the Placement Agent generally and applicable to
the Placement Agent’s participation in the Offering.

 

 4  Representations
and Warranties of the Company.

 

A  The
Company represents and warrants as follows:

 

(i)  The
execution, delivery and performance of each of this Agreement, the Standby
Equity Distribution Agreement, the Escrow Agreement, and the Registration Rights
Agreement has been or will be duly and validly authorized by the Company and is,
or with respect to this Agreement, the Standby Equity Distribution Agreement,
the Escrow Agreement, and the Registration Rights Agreement, will be a valid and
binding agreement of the Company, enforceable in accordance with its respective
terms, except to the extent that (a) the enforceability hereof or thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect and affecting the rights of creditors generally, (b)
the enforceability hereof or thereof is subject to general principles of equity
or (c) the indemnification provisions hereof or thereof may be held to be
in violation of public policy. The Securities to be issued pursuant to the
transactions contemplated by this Agreement and the Standby Equity Distribution
Agreement have been duly authorized and, when issued and paid for in accordance
with this Agreement, the Standby Equity Distribution Agreement and the
certificates/instruments representing such Securities, will be valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except to the extent that (1) the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect and affecting the rights of creditors generally, and
(2) the enforceability thereof is subject to general principles of equity. All
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken by the Company.

 

(ii)  The
Company has a duly authorized, issued and outstanding capitalization as set
forth herein and in the Standby Equity Distribution Agreement. The Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement, the agreements described herein and as
described in the Standby Equity Distribution Agreement, dated the date hereof
and the agreements described therein. All
issued and outstanding securities of the Company, have been duly authorized and
validly issued and are fully paid and non-assessable; the holders thereof have
no rights of rescission or preemptive rights with respect thereto and are not
subject to personal liability solely by reason of being security holders; and
none of such securities were issued in violation of the preemptive rights of any
holders of any security of the Company. 

 

2

 

(iii)  The
Common Stock to be issued in accordance with this Agreement and the Standby
Equity Distribution Agreement has been duly authorized and, when issued and paid
for in accordance with this Agreement, the Standby Equity Distribution Agreement
and the certificates/instruments representing such Common Stock will be validly
issued, fully-paid and non-assessable; the holders thereof will not be subject
to personal liability solely by reason of being such holders; such Securities
are not and will not be subject to the preemptive rights of any holder of any
security of the Company.

 

(iv)  The
Company has good and marketable title to, or valid and enforceable leasehold
estates in, all items of real and personal property necessary to conduct its
business (including, without limitation, any real or personal property stated in
the Offering Materials to be owned or leased by the Company), free and clear of
all liens, encumbrances, claims, security interests and defects of any material
nature whatsoever, other than those set forth in the Offering Materials and
liens for taxes not yet due and payable.

 

(v)  There is
no litigation or governmental proceeding pending or, to the best of the
Company’s knowledge, threatened against, or involving the properties or business
of the Company, except as set forth in the Offering Materials. 

 

(vi)  The
Company has been duly organized and is validly existing as a corporation in good
standing under the laws of the State of Nevada. Except as set forth in the
Offering Materials, the Company does not own or control, directly or indirectly,
an interest in any other corporation, partnership, trust, joint venture or other
business entity. The Company is duly qualified or licensed and in good standing
as a foreign corporation in each jurisdiction in which the character of its
operations requires such qualification or licensing and where failure to so
qualify would have a material adverse effect on the Company. The Company has all
requisite corporate power and authority, and all material and necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies (domestic and foreign) to
conduct its businesses (and proposed business) as described in the Offering
Materials. Any disclosures in the Offering Materials concerning the effects of
foreign, federal, state and local regulation on the Company’s businesses as
currently conducted and as contemplated are correct in all material respects and
do not omit to state a material fact. The Company has all corporate power and
authority to enter into this Agreement, the Standby Equity Distribution
Agreement, the Registration Rights Agreement, and the Escrow Agreement, to carry
out the provisions and conditions hereof and thereof, and all consents,
authorizations, approvals and orders required in connection herewith and
therewith have been obtained. No consent, authorization or order of, and no
filing with, any court, government agency or other body is required by the
Company for the issuance of the Securities or execution and delivery of the
Offering Materials except for applicable federal and state securities laws. The
Company, since its inception, has not incurred any liability arising under or as
a result of the application of any of the provisions of the 1933 Act, the 1934
Act or the Rules and Regulations.

 

(vii)  There has
been no material adverse change in the condition or prospects of the Company,
financial or otherwise, from the latest dates as of which such condition or
prospects, respectively, are set forth in the Offering Materials, and the
outstanding debt, the property and the business of the Company conform in all
material respects to the descriptions thereof contained in the Offering
Materials.

 

(viii)  Except as
set forth in the Offering Materials, the
Company is not in breach of, or in default under, any term or provision of any
material indenture, mortgage, deed of trust, lease, note, loan or Standby Equity
Distribution Agreement or any other material agreement or instrument evidencing
an obligation for borrowed money, or any other material agreement or instrument
to which it is a party or by which it or any of its properties may be bound or
affected. The Company is not in violation of any provision of its charter or
by-laws or in violation of any franchise, license, permit, judgment, decree or
order, or in violation of any material statute, rule or regulation. Neither the
execution and delivery of the Offering Materials nor the issuance and sale or
delivery of the Securities, nor the consummation of any of the transactions
contemplated in the Offering Materials nor the compliance by the Company with
the terms and provisions hereof or thereof, has conflicted with or will conflict
with, or has resulted in or will result in a breach of, any of the terms and
provisions of, or has constituted or will constitute a default under, or has
resulted in or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or pursuant to the terms
of any indenture, mortgage, deed of trust, note, loan or any other agreement or
instrument evidencing an obligation for borrowed money, or any other agreement
or instrument to which the Company may be bound or to which any of the property
or assets of the Company is subject except (a) where such default, lien, charge
or encumbrance would not have a material adverse effect on the Company and (b)
as described in the Offering Materials; nor will such action result in any
violation of the provisions of the charter or the by-laws of the Company or,
assuming the due performance by the Placement Agent of its obligations
hereunder, any material statute or any material order, rule or regulation
applicable to the Company of any court or of any foreign, federal, state or
other regulatory authority or other government body having jurisdiction over the
Company.

 

3

 

(ix)  Subsequent
to the dates as of which information is given in the Offering Materials, and
except as may otherwise be indicated or contemplated herein or therein and the
securities offered pursuant to the Securities Purchase Agreement dated the date
hereof, the Company has not (a) issued any securities or incurred any liability
or obligation, direct or contingent, for borrowed money, or (b) entered into any
transaction other than in the ordinary course of business, or (c) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock. Except as described in the Offering Materials, the Company has no
outstanding obligations to any officer or director of the Company.

 

(x)  The
Company owns or possesses, free and clear of all liens or encumbrances and
rights thereto or therein by third parties, the requisite licenses or other
rights to use all trademarks, service marks, copyrights, service names, trade
names, patents, patent applications and licenses necessary to conduct its
business (including, without limitation, any such licenses or rights described
in the Offering Materials as being owned or possessed by the Company) and,
except as set forth in the Offering Materials, there is no claim or action by
any person pertaining to, or proceeding, pending or threatened, which challenges
the exclusive rights of the Company with respect to any trademarks, service
marks, copyrights, service names, trade names, patents, patent applications and
licenses used in the conduct of the Company’s businesses (including, without
limitation, any such licenses or rights described in the Offering Materials as
being owned or possessed by the Company) except any claim or action that would
not have a material adverse effect on the Company; the Company’s current
products, services or processes do not infringe or will not infringe on the
patents currently held by any third party.

 

(xi)  Except as
described in the Offering Materials and the fees to World Trade Center
Association, the Company is not under any obligation to pay royalties or fees of
any kind whatsoever to any third party with respect to any trademarks, service
marks, copyrights, service names, trade names, patents, patent applications,
licenses or technology it has developed, uses, employs or intends to use or
employ, other than to their respective licensors.

 

(xii)  Subject
to the performance by the Placement Agent of its obligations
hereunder the
offer and sale of the Securities complies, and
will continue to comply, in all
material respects with the requirements of Rule 506 of Regulation D promulgated
by the SEC pursuant to the 1933 Act and any other applicable federal and state
laws, rules, regulations and executive orders. Neither the Offering Materials
nor any amendment or supplement thereto nor any documents prepared by the
Company in connection with the Offering will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All statements of material facts in the
Offering Materials are true and correct as of the date of the Offering
Materials.

 

4

 

(xiii)  All material
taxes which are due and payable from the Company have been paid in full or
adequate provision has been made for such taxes on the books of the
Company, except
for those taxes disputed in good faith by
the
Company. 

 

(xiv)  None of
the Company nor any of its officers, directors, employees or agents, nor any
other person acting on behalf of the Company, has, directly or indirectly, given
or agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any governmental agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or foreign) or
other person who is or may be in a position to help or hinder the business of
the Company (or assist it in connection with any actual or proposed transaction)
which (A) might subject the Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, or (B) if not given in the
past, might have had a materially adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Offering Materials, or (C) if not continued in the future,
might adversely affect the assets, business, operations or prospects of the
Company in the future.

 

5  Representations,
Warranties and Covenants of the Investor.

 

  A The
Investor represents, warrants and covenants as follows:

 

(i)  The
Investor has the necessary power to enter into this Agreement and to consummate
the transactions contemplated hereby.

 

(ii)  The
execution and delivery by the Investor of this Agreement and the consummation of
the transactions contemplated herein will not result in any violation of, or be
in conflict with, or constitute a default under, any agreement or instrument to
which the Investor is a party or by which the Investor or its properties are
bound, or any judgment, decree, order or, to the Investor’s knowledge, any
statute, rule or regulation applicable to the Investor. This Agreement when
executed and delivered by the Investor, will constitute the legal, valid and
binding obligations of the Investor, enforceable in accordance with their
respective terms, except to the extent that (a) the enforceability hereof or
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect and affecting the rights of creditors
generally, (b) the enforceability hereof or thereof is subject to general
principles of equity, or (c) the indemnification provisions hereof or thereof
may be held to be in violation of public policy.

 

(iii)  The
Investor will promptly forward copies of any and all due diligence
questionnaires compiled by the Investor to the Placement Agent.

 

(iv)  The Investor
is an Accredited Investor (as
defined under the 1933 Act).

 

(v)  The
Investor is acquiring the Securities for the Inventor’s own account as
principal, not as a nominee or agent, for investment purposes only, and not with
a view to, or for, resale, distribution or fractionalization thereof in whole or
in part and no other person has a direct or indirect beneficial interest in such
Securities. Further, the Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.

 

(vi)  The
Investor acknowledges the Investor’s understanding that the offering and sale of
the Securities is intended to be exempt from registration under the 1933 Act by
virtue of Section 3(b) of the 1933 Act and the provisions of Regulation D
promulgated thereunder (“Regulation
D”). In
furtherance thereof, the Investor represents and warrants as
follows:

 

(a)  
The Investor has the financial ability to bear the economic risk of the
Investor’s investment, has adequate means for providing for the Inventor’s
current needs and personal contingencies and has no need for liquidity with
respect to the Investor’s investment in the Company; and

 

(b)  
The Investor has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of the prospective
investment. The Inventor also represents it has not been organized for the
purpose of acquiring the Securities.

 

(vii)  The
Investor has been given the opportunity for a reasonable time prior to the date
hereof to ask questions of, and receive answers from, the Company or its
representatives concerning the terms and conditions of the Offering, and other
matters pertaining to this investment, and has been given the opportunity for a
reasonable time prior to the date hereof to obtain such additional information
in connection with the Company in order for the Investor to evaluate the merits
and risks of purchase of the Securities, to the extent the Company possesses
such information or can acquire it without unreasonable effort or expense. The
Investor is not relying on the Placement Agent or any of its affiliates with
respect to the accuracy or completeness of the Offering Materials or for any
economic considerations involved in this investment.

 

5

 

     
6.     Certain Covenants and Agreements of the
Company.

 

The
Company covenants and agrees at its expense and without any expense to the
Placement Agent as follows:

 

A.             To
advise the Placement Agent and the
Investor of any
material adverse change in the Company’s financial condition, prospects or
business or of any development materially affecting the Company or rendering
untrue or misleading any material statement in the Offering Materials occurring
at any time as soon as the Company is either informed or becomes aware
thereof.

 

B.             
To use its commercially reasonable efforts to cause the Common Stock issuable in
connection with the Standby Equity Distribution Agreement to be qualified or
registered for sale on terms consistent with those stated in the Registration
Rights Agreement and under the securities laws of such jurisdictions as the
Placement Agent and the Investor shall reasonably request. Qualification,
registration and exemption charges and fees shall be at the sole cost and
expense of the Company.

 

C.            
Upon written request, to provide and continue to provide the Placement Agent and
the Investor copies of all quarterly financial statements and audited annual
financial statements prepared by or on behalf of the Company, other reports
prepared by or on behalf of the Company for public disclosure and all documents
delivered to the Company’s stockholders.

 

D.             
To deliver, during the registration period of the Standby Equity Distribution
Agreement, to the Investor upon the
Investor’s
request, within fifty (50) days, a statement of its income for each such
quarterly period, and its balance sheet and a statement of changes in
stockholders’ equity as of the end of such quarterly period, all in reasonable
detail, certified by its principal financial or accounting officer; (ii) within
one hundred five (105) days after the close of each fiscal year, its balance
sheet as of the close of such fiscal year, together with a statement of income,
a statement of changes in stockholders’ equity and a statement of cash flow for
such fiscal year, such balance sheet, statement of income, statement of changes
in stockholders’ equity and statement of cash flow to be in reasonable detail
and accompanied by a copy of the certificate or report thereon of independent
auditors if audited financial statements are prepared; and (iii) a copy of all
documents, reports and information furnished to its stockholders at the time
that such documents, reports and information are furnished to its
stockholders, if such
information is unavaiable on the official website of the SEC.

 

E.               
To comply with the terms of the Offering Materials.

 

F.               
To ensure that any transactions between or among the Company, or any of its
officers, directors and affiliates be on terms and conditions that are no less
favorable to the Company, than the terms and conditions that would be available
in an “arm’s length” transaction with an independent third party.

 

7.       
Indemnification and
Limitation of Liability.

 

  The
Company hereby agrees that it will indemnify and hold the Placement Agent and
each officer, director, shareholder, employee or representative of the Placement
Agent and each person controlling, controlled by or under common control with
the Placement Agent within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act or the SEC’s Rules and Regulations promulgated thereunder
(the “Rules
and Regulations”),
harmless from and against any and all loss, claim, damage, liability, cost or
expense whatsoever (including, but not limited to, any and all reasonable legal
fees and other expenses and disbursements incurred in connection with
investigating, preparing to defend or defending any action, suit or proceeding,
including any inquiry or investigation, commenced or threatened, or any claim
whatsoever or in appearing or preparing for appearance as a witness in any
action, suit or proceeding, including any inquiry, investigation or pretrial
proceeding such as a deposition) to which the Placement Agent or such
indemnified person of the Placement Agent may become subject under the 1933 Act,
the 1934 Act, the Rules and Regulations, or any other federal or state law or
regulation, common law or otherwise, arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in (a)
Section 4 of this Agreement, (b) the Offering Materials (except those written
statements relating to the Placement Agent given by the
Placement Agent for
inclusion therein), (c) any application or other document or written
communication executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Common Stock under the securities laws thereof, or any state securities
commission or agency; (ii) the omission or alleged omission from documents
described in clauses (a), (b) or (c) above of a material fact required to be
stated therein or necessary to make the statements therein not misleading; or
(iii) the breach of any representation, warranty, covenant or agreement made by
the Company in this Agreement. The Company further agrees that upon demand by an
indemnified person, at any time or from time to time, it will promptly reimburse
such indemnified person for any loss, claim, damage, liability, cost or expense
actually and reasonably paid by the indemnified person as to which the Company
has indemnified such person pursuant hereto. Notwithstanding the foregoing
provisions of this Paragraph 7(A), any such payment or reimbursement by the
Company of fees, expenses or disbursements incurred by an indemnified person in
any proceeding in which a final judgment by a court of competent jurisdiction
(after all appeals or the expiration of time to appeal) is entered against the
Placement Agent or such indemnified person based upon specific finding of fact
that the Placement Agent or such indemnified person’s gross negligence or
willful misfeasance will be promptly repaid to the Company.

 

6

 

    B.           
The Placement Agent hereby agrees that it will indemnify and hold the Company
and each officer, director, shareholder, employee or representative of the
Company, and each person controlling, controlled by or under common control with
the Company within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act or the Rules and Regulations, harmless from and against any and all
loss, claim, damage, liability, cost or expense whatsoever (including, but not
limited to, any and all reasonable legal fees and other expenses and
disbursements incurred in connection with investigating, preparing to defend or
defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever or in appearing
or preparing for appearance as a witness in any action, suit or proceeding,
including any inquiry, investigation or pretrial proceeding such as a
deposition) to which the Company or such indemnified person of the Company may
become subject under the 1933 Act, the 1934 Act, the Rules and Regulations, or
any other federal or state law or regulation, common law or otherwise, arising
out of or based upon (i) the material
breach of any representation, warranty, covenant or agreement made by the
Placement Agent in this Agreement, or (ii) any
false or misleading information provided to the Company in
writing by one of
the Placement Agent’s indemnified persons
specifically for inclusion in the Offering Materials.

 

    C.           
The
Investor hereby agrees that it will indemnify and hold the Placement Agent and
each officer, director, shareholder, employee or representative of the Placement
Agent, and each person controlling, controlled by or under common control with
the Placement Agent within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act or the Rules and Regulations, harmless from and against any
and all loss, claim, damage, liability, cost or expense whatsoever (including,
but not limited to, any and all reasonable legal fees and other expenses and
disbursements incurred in connection with investigating, preparing to defend or
defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever or in appearing
or preparing for appearance as a witness in any action, suit or proceeding,
including any inquiry, investigation or pretrial proceeding such as a
deposition) to which the Placement Agent or such indemnified person of the
Placement Agent may become subject under the 1933 Act, the 1934 Act, the Rules
and Regulations, or any other federal or state law or regulation, common law or
otherwise, arising out of or based upon (i) the conduct of the Investor or its
officers, employees or representatives in its acting as the Investor for the
Offering, (ii) the material breach of any representation, warranty, covenant or
agreement made by the Investor in the Offering Materials, or (iii) any false or
misleading information provided to the Placement Agent by one of the Investor’s
indemnified persons.

 

    D.           
The Placement Agent hereby agrees that it will indemnify and hold the Investor
and each officer, director, shareholder, employee or representative of the
Investor, and each person controlling, controlled by or under common control
with the Investor within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act or the Rules and Regulations, harmless from and against any and
all loss, claim, damage, liability, cost or expense whatsoever (including, but
not limited to, any and all reasonable legal fees and other expenses and
disbursements incurred in connection with investigating, preparing to defend or
defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever or in appearing
or preparing for appearance as a witness in any action, suit or proceeding,
including any inquiry, investigation or pretrial proceeding such as a
deposition) to which the Investor or such indemnified person of the Investor may
become subject under the 1933 Act, the 1934 Act, the Rules and Regulations, or
any other federal or state law or regulation, common law or otherwise, arising
out of or based upon the
material breach of any representation, warranty, covenant or agreement made by
the Placement Agent in this Agreement.

 

    E.           
Promptly after receipt by an indemnified party of notice of commencement of any
action covered by Section 7(A), (B), (C) or (D), the party to be indemnified
shall, within five (5) business days, notify the indemnifying party of the
commencement thereof; the omission by one (1) indemnified party to so
notify the indemnifying party shall not relieve the indemnifying party of its
obligation to indemnify any other indemnified party that has given such notice
and shall not relieve the indemnifying party of any liability outside of this
indemnification if not materially prejudiced thereby. In the event that any
action is brought against the indemnified party, the indemnifying party will be
entitled to participate therein and, to the extent it may desire, to assume and
control the defense thereof with counsel chosen by it which is reasonably
acceptable to the indemnified party. After notice from the indemnifying party to
such indemnified party of its election to so assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under such
Section 7(A), (B), (C), or (D) for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof, but
the indemnified party may, at its own expense, participate in such defense by
counsel chosen by it, without, however, impairing the indemnifying party’s
control of the defense. Subject to the proviso of this sentence and
notwithstanding any other statement to the contrary contained herein, the
indemnified party or parties shall have the right to choose its or their own
counsel and control the defense of any action, all at the expense of the
indemnifying party if (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action at the expense of the indemnifying party, or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying party; provided, however, that the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstance, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties. No
settlement of any action or proceeding against an indemnified party shall be
made without the consent of the indemnifying party.

 

7

 

    F.          
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in Section 7(A) or 7(B) is due in
accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the Company and the Placement
Agent shall contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with the
investigation or defense of same) which the other may incur in such proportion
so that the Placement Agent shall be responsible for such percent of the
aggregate of such losses, claims, damages and liabilities as shall equal the
percentage of the gross proceeds paid to the Placement Agent and the Company
shall be responsible for the balance; provided, however, that no person guilty
of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933
Act shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7(F), any person
controlling, controlled by or under common control with the Placement Agent, or
any partner, director, officer, employee, representative or any agent of any
thereof, shall have the same rights to contribution as the Placement Agent and
each person controlling, controlled by or under common control with the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
and each officer of the Company and each director of the Company shall have the
same rights to contribution as the Company. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against the other party under this Section 7(D), notify such party from
whom contribution may be sought, but the omission to so notify such party shall
not relieve the party from whom contribution may be sought from any obligation
they may have hereunder or otherwise if the party from whom contribution may be
sought is not materially prejudiced thereby.

 

    G.         
The indemnity and contribution agreements contained in this Section 7 shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified person or any termination of this
Agreement.

 

    H.         
The Company hereby waives, to the fullest extent permitted by law, any right to
or claim of any punitive, exemplary, incidental, indirect, special,
consequential or other damages (including, without limitation, loss of profits)
against the Placement Agent and each officer, director, shareholder, employee or
representative of the placement agent and each person controlling, controlled by
or under common control with the Placement Agent within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act or the Rules and Regulations
arising out of any cause whatsoever (whether such cause be based in contract,
negligence, strict liability, other tort or otherwise). Notwithstanding anything
to the contrary contained herein, the aggregate liability of the Placement Agent
and each officer, director, shareholder, employee or representative of the
Placement Agent and each person controlling, controlled by or under common
control with the Placement Agent within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act or the Rules and Regulations shall not exceed
the compensation received by the Placement Agent pursuant to Section 2 hereof.
This limitation of liability shall apply regardless of the cause of action,
whether contract, tort (including, without limitation, negligence) or breach of
statute or any other legal or equitable obligation.

 

      
8.    Payment of
Expenses.

 

The
Company hereby agrees to bear all of the expenses in connection with the
Offering, including, but not limited to the following: filing fees, printing and
duplicating costs, advertisements, postage and mailing expenses with respect to
the transmission of Offering Materials, registrar and transfer agent fees,
escrow agent fees and expenses, fees of the Company’s counsel and accountants,
issue and transfer taxes, if any.

 

9.    Conditions
of Closing.

 

The
Closing shall be held at the offices of the Investor or its counsel. The
obligations of the Placement Agent hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company and the
Investor herein as
of the date hereof and as of the Date of Closing (the “Closing
Date”) with
respect to the Company or the
Investor, as the case may be, as if it
had been made on and as of such Closing Date; the accuracy on and as of the
Closing Date of the statements of the officers of the Company made pursuant to
the provisions hereof; and the performance by the Company and the
Investor on and as
of the Closing Date of its covenants and obligations hereunder and to the
following further conditions:

 

8

 

    A.    Upon the
effectiveness of a registration statement covering the Standby Equity
Distribution Agreement, the Investor
and the Placement
Agent shall receive the opinion of Counsel to the Company, dated as of the date
thereof, which opinion shall be in form and substance reasonably satisfactory to
the Investor, their counsel and the Placement Agent.

 

    B.    At or prior
to the Closing, the
Investor and the
Placement Agent shall have been furnished such documents, certificates and
opinions as it may reasonably require for the purpose of enabling them to review
or pass upon the matters referred to in this Agreement and the Offering
Materials, or in order to evidence the accuracy, completeness or satisfaction of
any of the representations, warranties or conditions herein
contained.

 

    C.    At and prior
to the Closing, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition or prospects or the
business activities, financial or otherwise, of the Company from the latest
dates as of which such condition is set forth in the Offering Materials; (ii)
there shall have been no transaction, not in the ordinary course of business
except the transactions pursuant to the Securities Purchase Agreement entered
into by the Company on the date hereof which has not been disclosed in the
Offering Materials or to the Placement Agent in writing; (iii) except as set
forth in the Offering Materials, the Company shall not be in default under any
provision of any instrument relating to any outstanding indebtedness for which a
waiver or extension has not been otherwise received; (iv) except as set forth in
the Offering Materials, the Company shall not have issued any securities (other
than those to be issued as provided in the Offering Materials) or declared or
paid any dividend or made any distribution of its capital stock of any class and
there shall not have been any change in the indebtedness (long or short term) or
liabilities or obligations of the Company (contingent or otherwise) and trade
payable debt; (v) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as indicated in the Offering Materials; and
(v) no action, suit or proceeding, at law or in equity, against the Company or
affecting any of its properties or businesses shall be pending or threatened
before or by any court or federal or state commission, board or other
administrative agency, domestic or foreign, wherein an unfavorable decision,
ruling or finding could materially adversely affect the businesses, prospects or
financial condition or income of the Company, except as set forth in the
Offering Materials.

 

    D.    If requested
at
Closing the
Investor and the
Placement Agent shall receive a certificate of the Company signed by an
executive officer and chief financial officer, dated as of the applicable
Closing, to the effect that the conditions set forth in subparagraph (C) above
have been satisfied and that, as of the applicable closing, the representations
and warranties of the Company set forth herein are true and
correct.

 

    E.    The
Placement Agent shall have no obligation to insure that (x) any check, note,
draft or other means of payment for the Common Stock will be honored, paid or
enforceable against the Investor in accordance with its terms, or (y) subject to
the performance of the Placement Agent’s obligations and the accuracy of the
Placement Agent’s representations and warranties hereunder, (1) the Offering is
exempt from the registration requirements of the 1933 Act or any applicable
state “Blue Sky” law or (2) the Investor is an Accredited Investor.

 

     
10.    Termination.

 

This
Agreement shall be co-terminus with, and terminate upon the same terms and
conditions as those set forth in, the Standby Equity Distribution Agreement. The
rights of the Investor and the obligations of the Company under the Registration
Rights Agreement, and the rights of the Placement Agent and the obligations of
the Company shall survive the termination of this Agreement
unabridged.

 

11.     
Miscellaneous.

 

     A.    This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all which shall be deemed to be one and the same
instrument.

 

B.    Any notice
required or permitted to be given hereunder shall be given in writing and shall
be deemed effective when deposited in the United States mail, postage prepaid,
or when received if personally delivered or faxed (upon confirmation of receipt
received by the sending party), addressed as follows to such
other address of which written notice is given to the others):

 

9

 

	
      If
      to Placement Agent, to:
	
      Duncan
      Capital Group 

	 	
      830
      3rd
      Avenue

	 	
      New
      York, NY 

	 	
      Attention: 

	 	
      Telephone: (212)
      581-5150

	 	
      Facsimile: 

	 	 
	
      If
      to the Company, to:
	
      China
      World Trade Corporation

	 	
      Room
      1217, 12th
      Floor, The Metropolis Tower

	 	
      10
      Metropolis Drive

	 	
      Hunghom,
      Hong Kong China

	 	
      Attention:
      Bernard Chan, Chief Financial Officer

	 	
      Telephone:
      (852) 2330-6622

	 	
      Facsimile:
      (852) 2333-8844

	 	 
	
      With
      a copy to:
	
      Harold
      H. Martin, P.A.

	 	
      17111
      Kenton Drive - Suite 204B

	 	
      Conrelius,
      NC 28031

	 	
      Telephone:
      (704) 894-9760

	 	
      Facsimile:
      (704) 894-9759

	 	 
	
      If
      to the Investor:
	
      Cornell
      Capital Partners, LP

	 	
      101
      Hudson Street - Suite 3700

	 	
      Jersey
      City, New Jersey 07302

	 	
      Attention: Mark
      A. Angelo

	 	
                    
      Portfolio Manager

	 	
      Telephone: (201)
      985-8300

	 	
      Facsimile: (201)
      985-8266

	 	 
	
      With
      copies to:
	
      David
      Gonzalez, Esq.

	 	
      101
      Hudson Street - Suite 3700

	 	
      Jersey
      City, NJ 07302

	 	
      Facsimile: (201)
      985-8266

	 	 

 

    C.    This
Agreement shall be governed by and construed in all respects under the laws of
the State of Nevada , without reference to its conflict of laws rules or
principles. Any suit, action, proceeding or litigation arising out of or
relating to this Agreement shall be brought and prosecuted in such federal or
state court or courts located within the State of New York as provided by law.
The parties hereby irrevocably and unconditionally consent to the jurisdiction
of each such court or courts located within the State of New York and to service
of process by registered or certified mail, return receipt requested, or by any
other manner provided by applicable law, and hereby irrevocably and
unconditionally waive any right to claim that any suit, action, proceeding or
litigation so commenced has been commenced in an inconvenient
forum.

 

    D.    This
Agreement and the other agreements referenced herein contain the entire
understanding between the parties hereto and may not be modified or amended
except by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought.

 

    E.    If any
provision of this Agreement shall be held to be invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision of this
Agreement.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

10

 

IN
WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first written
above.

 

	 	
      COMPANY:

	 	
      CHINA
      WORLD TRADE CORPORATION

	 	 
	 	
      By:
      /s/ John Hui

	 	
      Name: John
      Hui

	 	
      Title: CEO
      & Vice Chairman

	 	 
	 	 
	 	
      PLACEMENT
      AGENT:

	 	
      DUNCAN
      CAPITAL, LLC 

	 	 
	 	
      By:
      /s/ David Fuchs

	 	
      Name: David
      Fuchs

	 	
      Title: Managing
      Member

	 	 
	 	 
	 	
      INVESTOR:

	 	
      CORNELL
      CAPITAL PARTNERS, LP

	 	 
	 	
      By: Yorkville
      Advisors, LLC

	 	
      Its: General
      Partner

	 	 
	 	
      By:
      /s/ Mark A. Angelo

	 	
      Name: Mark
      A. Angelo

	 	
      Title: Portfolio
      Manager

	 	 

11Unassociated Document

EXHIBIT 10.4

SECURITIES
PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”) is
dated as of August 26, 2004, by and among China World Trade Corporation
(the “Company”), and
the purchasers listed on Schedule 1 hereto
(each a “Purchaser” and
collectively, the “Purchasers”).

 

 

WHEREAS, subject
to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below), and Rule 506
promulgated thereunder, the Company desires to issue and sell to the Purchasers,
and the Purchasers, severally and not jointly, desire to purchase from the
Company the (i) number of shares of Common Stock, and (ii) Series A
Warrants set forth opposite each Purchaser’s name on Schedule 1 hereto
(collectively, the "Series
A")
subject to an option in favor of the Purchasers to purchase additional shares
and receive additional warrants. 

 

 

NOW,
THEREFORE, in
consideration of the mutual covenants contained in this Agreement, and for other
good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and each Purchaser agrees as follows:

 

ARTICLE
I. 

 

DEFINITIONS

 

1.1  Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings indicated in this
Section 1.1:

 

 

“Action” shall
have the meaning ascribed to such term in Section 3.1(j).

 

 

“Agent
Shares” shall
have the meaning ascribed to such term in Section
2.6 of this
Agreement.

 

 

“Agent
Warrant Agreement” shall
mean the Placement Agent’s Warrant Agreement dated as of the Closing
Date.

 

 

“Agent
Warrants” shall
have the meaning ascribed to such term in Section
2.6 of this
Agreement.

 

 

“Affiliate” means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as such
terms are used in and construed under Rule 144. With respect to a
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser.

 

 

“Business
Day” means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to
close.

 

1

 

“Closing” means
the closing of the purchase and sale of the Firm Shares and the Series A
Warrants pursuant to Section 2.1 on
August __, 2004, or such other date as agreed to by the parties.

 

 

“Closing
Date” means
the date of the Closing.

 

 

“Commission” means
the Securities and Exchange Commission.

 

 

“Common
Stock” means
the Common stock of the Company, par value $.001 per share, and any securities
into which such Common stock may hereafter be reclassified.

 

 

“Common
Stock Equivalents” means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.

 

 

“Company
Counsel” means
The Law Offices of Harold Martin, P.A.

 

 

“Disclosure
Schedules” means
the Disclosure Schedules attached hereto.

 

 

“Effective
Date” means
the date that the Registration Statement is first declared effective by the
Commission.

 

 

“Exchange
Act” means
the Securities Exchange Act of 1934, as amended.

 

 

“Firm
Shares” means
the Shares issued pursuant to Section 2.1.

 

 

“Indemnified
Party” shall
have the meaning ascribed to such term Section 5.16(b).

 

 

“Indemnifying
Party” shall
have the meaning ascribed to such term in Section 5.16(b).

 

 

“Intellectual
Property Rights” shall
have the meaning ascribed to such term in Section 3.1(o).

 

 

"Investor
Securities" means
the Shares, the Warrants and the Warrant Shares.

 

 

“Liens” means a
lien, charge, security interest, encumbrance, right of first refusal or other
restriction.

 

 

“Material
Adverse Effect” shall
have the meaning ascribed to such term in Section 3.1(b).

 

 

“Material
Permits” shall
have the meaning ascribed to such term in Section 3.1(m).

 

 

“Option” shall
have the meaning ascribed to such term in Section
2.8.

 

 

“Option
Closing Date” means
the date of the closing of the purchase and sale of the Option Shares and the
Series B Warrants.

 

2

 

“Option
Per Share Purchase Price” means
$3.00, subject to adjustment for reverse or forward stock splits, stock
dividends, stock combinations and other similar transactions relating to the
common stock that occur after the date of this Agreement and before the Option
Closing Date.

 

 

“Option
Shares” means
the Shares issued pursuant to Section
2.8.

 

 

“Per
Share Purchase Price” means
$1.50, subject to adjustment for reverse or forward stock splits, stock
dividends, stock combinations and other similar transactions relating to the
Common Stock that occur after the date of this Agreement and before the
Closing.

 

 

“Person” means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

 

 

“Placement
Agent” means
Duncan Capital LLC.

 

 

“Registration
Statement” means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Purchasers of the Shares and the
Warrant Shares and by the Placement Agent of the Agent Shares.

 

 

“Registration
Rights Agreement” means
the Registration Rights Agreement, dated as of the date of this Agreement, among
the Company and each Purchaser, in the form of EXHIBIT A
hereto.

 

 

“Rule 144” means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule. 

 

 

“SEC
Reports” shall
have the meaning ascribed to such term in Section 3.1(h).

 

 

“Securities
Act” means
the Securities Act of 1933, as amended.

 

 

“Series
A Warrants” means
the common stock purchase warrants in the form of EXHIBIT B-1 hereto
issuable to each Purchaser at Closing; such Series A Warrants are exercisable to
purchase up to the number of shares of Common Stock equal to 50% of the
aggregate number of Shares to be issued to such Purchaser at the Closing, which
shall have an exercise price equal to $2.50 per share and be exercisable for a
period of five years.

 

 

“Series
A Warrant Shares” means
the shares of Common Stock issuable upon the exercise of the Series A
Warrants.

 

 

“Series
B Warrants” means
the common stock purchase warrants in the form of EXHIBIT B-2 hereto
issuable to each Purchaser at the Option Closing Date; such Series B Warrants
are exercisable to purchase up to the number of shares of Common Stock equal to
50% of the aggregate number of Shares to be issued to such Purchaser at the
Option Closing Date which shall have an exercise price equal to $4.00 per share
(subject to adjustment for reverse or forward splits, stock dividends, stock
combinations and similar transactions relating to the common stock ussuable upon
exercise of the Series B Warrants) and be exercisable for a period of five years
commencing on the Option Closing Date.

 

3

 

“Series
B Warrant Shares” means
the shares of Common Stock issuable upon the exercise of the Series B
Warrants.

 

 

“Shares” means
the shares of Common Stock purchased by the Purchasers pursuant to this
Agreement consisting of the Firm Shares and, if applicable, the Option
Shares.

 

 

“Subscription
Amount” means
as to each Purchaser, the amount set forth below such Purchaser’s signature
block on the Signature Page of this Agreement in United States Dollars and in
immediately available funds.

 

 

“Subsidiary” shall
have the meaning ascribed to such term in Section 3.1(a).

 

 

“Trading
Day” means
(i) a day on which the Common Stock is traded on a Trading Market, or
(ii) if the Common Stock is not quoted on a Trading Market, a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting price); provided, that in the event
that the Common Stock is not listed or quoted as set forth in (i), and
(ii) hereof, then Trading Day shall mean a Business Day.

 

 

“Trading
Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the OTC Bulletin Board, the American Stock
Exchange, the New York Stock Exchange, the Nasdaq National Market or the Nasdaq
SmallCap Market.

 

 

“Transaction
Documents” means
this Agreement, the Registration Rights Agreement, the Warrants, the Placement
Agent Warrant Agreement, the Agent Warrant(s) and any and all other documents or
agreements executed in connection with the transactions contemplated
hereunder.

 

 

“Transaction
Securities” means
the Shares, the Warrants, the Warrant Shares, the Agent Warrants and the Agent
Shares.

 

 

“Warrants” means
collectively the Series A Warrants and Series B Warrants issuable to each
Purchaser at Closing.

 

 

“Warrant
Shares” means
the shares of Common Stock issuable upon exercise of the Series A Warrants and,
if applicable, the Series B Warrants collectively.

 

4

 

ARTICLE
II.  

 

PURCHASE
AND SALE

 

2.1  Closing. On the
terms and subject to the conditions set forth in this Agreement, at the Closing,
the Company shall sell and issue to each Purchaser and each Purchaser shall
purchase from the Company subject to Section 2.3, (i) the number of Firm Shares
set forth opposite such Purchaser’s name on Schedule
I hereto,
and (ii) a Series A Warrant for the corresponding number of Series A Warrant
Shares. Each Purchaser shall purchase from the Company, and the Company shall
issue and sell to each Purchaser, a number of Firm Shares equal to such
Purchaser’s Subscription Amount divided by the Per Share Purchase Price. The
Series A Warrants shall be issued, without additional consideration, on the
basis of one Series A Warrant for each two Shares purchased. Upon satisfaction
of the conditions set forth in Section 2.2, the Closing shall occur at the
offices of Placement Agent, located at 830 Third Avenue, 14th Floor,
New York, New York 10022, or such other location as the parties shall mutually
agree.

 

2.2  Closing
Conditions.

 

(a)  At the
Closing, as a condition to the Purchaser’s obligations hereunder, the Company
shall deliver or cause to be delivered to:

 

(i)  each
Purchaser, an irrevocable instruction letter to the Company’s transfer agent
authorizing the issuance of a restricted stock certificate for such number of
Firm Shares set forth next to such Purchaser’s name on Schedule
1 hereto
purchased by each Purchaser;

 

(ii)  subject
to Section
2.3, each
Purchaser, a Series A Warrant, registered in the name of such Purchaser, as duly
executed by the Company, entitling such Purchaser to purchase such amount of
Warrant Shares as are set forth next to such Purchaser’s name on Schedule
1
hereto;

 

(iii)  each
Purchaser, the Registration Rights Agreement duly executed by the Company;

 

(iv)  each
Purchaser, this Agreement duly executed by the Company;

 

(v)  each
Purchaser and the Placement Agent, a legal opinion from Company Counsel in form
and substance reasonably satisfactory to the Purchasers and Placement
Agent;

 

(vi)  the
Placement Agent, a certificate of the Chief Executive Officer of the Company
stating, among other things, that (i) all the conditions set forth in
Section
2.2 of this
Agreement have been satisfied in all, (ii) except as set forth in any Schedule
to this Agreement, since December 31, 2003, there has been no event, condition
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect, and (iii) the Company has complied in all material respects with
all its covenants and agreements set forth in the Transaction
Documents;

 

(vii)  the
Placement Agent, a certificate of the Secretary of the Company containing, among
other items true and complete copies of the resolutions of the Board of
Directors of the Company approving Transaction Documents, Placement Agent
compensation, the Offering and all documents and matters relating thereto; and

 

5

 

(viii)  evidence
satisfactory to the Placement Agent that the Company has completed the
acquisition of 51% of the equity of Guangdong New Generation Commercial
Management Co. Ltd. 

 

(b)  at the
Closing, as a condition to the Company’s obligations hereunder, each Purchaser
shall deliver or cause to be delivered to the Company the following:

 

(i)  this
Agreement duly executed by such Purchaser; 

 

(ii)  such
Purchaser’s payment for the Firm Shares and Series A Warrants being purchased
from the escrow account by wire transfer; and

 

(iii)  the
Registration Rights Agreement duly executed by such Purchaser.

 

(c)  at the
Closing, as a condition to each party’s obligations hereunder, all
representations and warranties of each of the parties herein shall remain true
and correct in all material respects as of the Closing Date.

 

(d)  as of the
Closing Date, as a condition to the Purchasers’ obligations hereunder, there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof.

 

(e)  from the
date hereof to the Closing Date, and as a condition to the Purchaser’s
obligations, (i) trading in the Common Stock shall not have been suspended by
the Commission (except for any suspension of trading of limited duration agreed
to by the Company, which suspension shall be terminated prior to Closing); (ii)
trading in securities generally shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by such service, or on any Trading Market; and (iii) no banking
moratorium shall have been declared either by the United States or New York
State authorities.

 

2.3  Escrow
Provisions. Pending
the sale of the Firm Shares and the Series A Warrants, all funds paid hereunder
shall be deposited by the Company in escrow with Continental Stock Transfer
& Trust Company (the “Escrow
Agent”)
pursuant to an escrow agreement by and among the Escrow Agent, the Company, and
the Placement Agent (the “Escrow
Agreement”). On
the Closing Date, the Escrow Agent shall deliver to the Purchasers the Firm
Shares, Series A Warrants and the net Purchase Price proceeds to the Company.
The Escrow Agent shall also act as the escrow agent in connection with the
closing, if any, of the Option.

 

2.4  Certificates.  Subject
to Section 2.3 each Purchaser hereby authorizes and directs the Company, upon
the Closing, to deliver certificates representing the Firm Shares and Series A
Warrants to be issued to such Purchaser pursuant to this Agreement to each
Purchaser’s address indicated in this Agreement.

 

2.5  Return of
Funds. Each Purchaser hereby authorizes and directs the Company and the
Placement Agent to return any funds for purchases not accepted by the Company to
the same account from which the funds were drawn.

 

6

 

2.6  Expenses;
Fees. Simultaneously with payment for and delivery of the Shares and Warrants,
at the Closing and the Option Closing Date, as the case may be, the Company
shall: (i) pay to the Placement Agent a cash fee equal to ten (10%) percent of
the aggregate purchase price of the Shares and Warrants as and when delivered by
the Escrow Agent to the Purchasers (the “Cash
Fee”); (ii)
reimburse the Placement Agent for its actual out-of-pocket expenses incurred in
connection with the Offering, including, without limitation, the reasonable fees
and expenses of its legal counsel, not to exceed legal fees of $20,000; (iii)
pay all expenses in connection with the qualification of the Transaction
Securities under the blue sky laws of the states which the Placement Agent shall
designate, including filing fees and disbursements in connection with such blue
sky matters; (iv) pay certain fees to the Escrow Agent for acting as escrow
agent; and (v) issue to the Placement Agent five year non-cashless exercised
provisioned warrants (the “Agent
Warrants”) to
purchase such number of shares of Common Stock (the “Agent
Shares”) as
shall equal ten (10%) percent of the aggregate number of (a) Shares sold in the
Offering, and (b) Warrant Shares issuable upon exercise of the Warrants as of
the Closing, at a per share exercise price equal to $2.50. The Company also
agrees to pay the Placement Agent a Cash Fee upon its receipt of proceeds, if
any, upon the exercise of the Series A Warrants and Series B Warrants by
Purchasers. 

 

2.7  Placement
Agent. The Investor Securities are being offered on a “best-effort” basis by the
Placement Agent. The Placement Agreement reserves the right, but is under no
obligation, to sell to its affiliates Shares and Warrants on the terms provided
herein.

 

2.8   Option.
(a) The Company hereby grants each Purchaser an option (the “Option”) to
purchase that number of Option Shares equal to the number of Firm Shares
received by such Purchaser on the Closing Date. Upon exercise of the Option, the
Purchaser shall receive without additional consideration, Series B Warrants to
purchase 50% of the Firm Shares. The Option may be exercised during the period
commencing on the date when the Registration Statement has been declared
effective or such condition has been waived, as the case may be, and expiring
180 calendar days thereafter. 

 

The
Option may be exercised, from time to time, by sending the Notice of Option
Exercise attached hereto as Exhibit B-3 to the Company and the deposit with the
Escrow Agent of an amount equal to the Option Per Share Purchase Price
multiplied by the number of Option Shares being purchased.

 

7

ARTICLE
III.  

 

REPRESENTATIONS
AND WARRANTIES

 

3.1  Representations
and Warranties of the Company. Except
as set forth under the corresponding section of the Disclosure Schedules
delivered concurrently herewith, the Company hereby makes the following
representations and warranties as of the date hereof and as of the Closing Date
to each Purchaser:

 

(a)  Subsidiaries. Other
than as disclosed in the SEC Reports, the Company has no direct or indirect
operating subsidiaries (a “Subsidiary” and
collectively, the “Subsidiaries”). The
Company owns, directly or indirectly, all or the majority of the capital stock
of each Subsidiary free and clear of any Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.

 

(b)  Organization
and Qualification. Each of
the Company and the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite corporate power and authority to own and use its properties and assets
and to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary (as applicable), except
where the failure to be so qualified or in good standing (as applicable), as the
case may be, would not result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole, or
(iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”).

 

(c)  Authorization;
Enforcement; Validity. The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
corporate action is required by the Company in connection therewith. Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, and (iii) with respect to the
indemnification provisions set forth in the Registration Rights Agreement, as
limited by public policy.

 

(d)  No
Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby, do
not and will not (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles of incorporation,
certificates of designation (or similar document related to preferred stock),
bylaws and/or other organizational or charter documents, or (ii) conflict
with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise), or other understanding
to which the Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected, except in the case of each of
clauses (ii) and (iii), such as would not result in a Material Adverse
Effect.

 

8

 

(e)  Filings,
Consents and Approvals. The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than the filing with the Commission of the
Registration Statement, the application(s) and approvals to each Trading Market
for the listing of the Shares, Warrant Shares and the Agent Shares for trading
thereon in the time and manner required thereby, applicable Blue Sky filings,
and the filing of a current report on Form 8-K under the Exchange
Act.

 

(f)  Issuance
of the Securities. All of
the Transaction Securities have been duly authorized and, when issued and paid
for in accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens. The Company
has reserved from its duly authorized capital stock such number of shares of
Common Stock so as to permit the issuance of the Shares, the Warrant Shares and
the Agent Shares. 

 

(g)  Capitalization. Except
as set forth in the SEC Reports, the capitalization of the Company is as
described in the Company’s most recent periodic report filed with the
Commission. Except as set forth in the SEC Reports, the Company has not issued
any capital stock since such filing other than pursuant to the exercise of
employee stock options under the Company’s stock option plans and pursuant to
the conversion or exercise of Common Stock Equivalents outstanding on the date
hereof. No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities, for employee stock options under the Company’s stock
option plans, or otherwise as reflected in the SEC Reports, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.

 

(h)  SEC
Reports; Financial Statements. The
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or
Section 15(d) of
the Exchange Act, for the two (2) years preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto, being collectively referred
to herein as the “SEC
Reports” and,
together with the Disclosure Schedules to this Agreement, the “Disclosure
Materials”). As of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. 

 

9

 

(i)  Material
Changes. Since
the date of the latest audited financial statements included within the SEC
Reports, except as disclosed in the SEC Reports, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any material liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its holders of Common
Stock or purchased, redeemed or made any agreements to purchase or redeem any
shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to the usual
and ordinary course of business and the existing Company stock option plans. The
Company does not have pending before the Commission any request for confidential
treatment of information.

 

(j)  Litigation. Except
as disclosed in the SEC Reports or on Schedule 3.1(j) hereto, there is no
action, suit, inquiry, notice of violation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency and/or regulatory
authority (federal, state, county, local or foreign) (collectively, an
“Action”) which
(i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents and/or the Transaction
Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor, to the knowledge of the Company, any director
or officer thereof, except as disclosed in the SEC Reports, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty could
result in a Material Adverse Effect. Except as disclosed in the SEC Reports, to
the knowledge of the Company, there is not pending or contemplated any
investigation by the Commission and/or other entity involving the Company or any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

 

(k)  Labor
Relations. No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company which could reasonably be
expected to result in a Material Adverse Effect.

 

(l)  Compliance. Except
as disclosed in the SEC Reports, neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred that
has not been waived that, with notice or lapse of time or both, would result in
a default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business, except in the case of clauses (i),
(ii) and (iii) as would not result in a Material Adverse
Effect.

 

10

 

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

 

(n)  Title
to Assets. The
Company and the Subsidiaries have good and marketable title in fee simple to all
real property owned by them that is material to the business of the Company and
the Subsidiaries, taken as a whole, and good and marketable title in all
personal property owned by them that is material to the business of the Company
and the Subsidiaries, taken as a whole, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are in material
compliance.

 

(o)  Patents
and Trademarks. To the
knowledge of the Company and each Subsidiary, the Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have would result in a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes the rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable.

 

(p)  Transactions
With Affiliates and Employees. Except
as set forth in the SEC Reports, none of the officers, directors and/or
employees of the Company and the Subsidiaries are, to the knowledge of the
Company, a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and 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 officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (a) for payment of
salary or consulting fees for services rendered, (b) reimbursement for
expenses incurred on behalf of the Company and (c) for other employee
benefits, including stock option agreements under any stock option plan of the
Company.

 

(q)  Internal
Accounting Controls. The
Company and each of its subsidiaries maintains 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 GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company's Form 10-K or 10-Q, as the
case may be, is being prepared.

 

11

 

(r)  Certain
Fees. Except
for payments payable to the Placement Agent by the Company and a 3% finder’s fee
payable to V3 Consulting, Inc., the Company has not entered into an agreement to
pay any brokerage or finder’s fees or commissions to any person including, but
not limited to, any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement, except to the
extent a Purchaser made an agreement to make any such payment.

 

(s)  Private
Placement.
Assuming the accuracy of the Purchasers representations and warranties set forth
in Section 3.2, no
registration under the Securities Act is required for the offer and sale of the
Investor Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Transaction Securities hereunder does not contravene
the rules and regulations of the Trading Market. 

 

(t)  Investment
Company. The
Company is not, and is not an Affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.

 

(u)  Listing
and Maintenance Requirements. The
Company has applied for listing of its Common Stock, including all of the
Transaction Securities on the American Stock Exchange and has received no notice
from the American Stock Exchange that such Exchange does not intend to list such
securities. The Company has not, in the twelve (12) months preceding the date
hereof, received notice from any Trading Market on which the Common Stock is or
has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Trading Market, other than
a letter from the Trading Market on which the Common Stock is or has been listed
or quoted notifying the Company that its securities would be delisted if the
trading price did not increase above One Dollar ($1.00) per share. The Company
is, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements, other than potential trading price issues concerning such Trading
Market’s rules and regulations.

 

(v)  Application
of Takeover Protections. The
Company and its Board of Directors have taken all necessary action, if any is
available, 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 Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Transaction Securities and the
Purchasers’ ownership of the Investor Securities.

 

(w)  No
General Solicitation. Neither
the Company, its Subsidiaries, any of their affiliates nor any person acting on
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act)
in connection with the offer or sale of the Transaction Securities.

 

12

 

(x)  No
Integrated Offering. Neither
the Company, its Subsidiaries, any of their affiliates nor any person acting on
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Transaction Securities under the
Securities Act or cause the Offering to be integrated with prior offerings by
the Company for purposes of the Securities Act or any applicable stockholder
approval provisions, including without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated. 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 Transaction Securities under the Securities Act or
cause the Offering to be integrated with other offerings.

 

(y)  Registration
Rights. Except
with respect to Purchasers and the Placement Agent and except as provided on
Schedule
3.1(y) hereto,
no person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company.

 

(z)  Right
of First Refusal. Except
with regard to the Placement Agreement, no person, firm or other business entity
is a party to any agreement, contract or understanding, written or oral
entitling such party to a right of first refusal with respect to offerings of
securities by the Company.

 

(aa)  Disclosure. The
Company confirms that, neither the Company nor any other Person acting on its
behalf has provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material, non-public
information. The Company understands and confirms that the Purchasers will rely
on the foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, furnished by or on behalf of the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

 

(bb)  Insurance. Each of
the Company and its Subsidiaries maintain insurance of the types and in the
amounts deemed adequate for its business, including, but not limited to, product
liability insurance, insurance covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.

 

(cc)  Conduct
of Business. Since
December 31, 2003 and except as otherwise stated in the SEC Reports, the
Company has not (a) incurred any debts, obligations or liabilities, absolute,
accrued, contingent or otherwise, whether due or to become due, except current
liabilities incurred in the usual and ordinary course of business, having a
Material Adverse Effect, (b) made or suffered any changes in its contingent
obligations by way of guaranty, endorsement (other than the endorsement of
checks for deposit in the usual and ordinary course of business), indemnity,
warranty or otherwise, (c) discharged or satisfied any liens other than those
securing, or paid any obligation or liability other than, current liabilities
shown on the balance sheet dated as at December 31, 2003 and forming part of the
SEC Reports, and current liabilities incurred since December 31, 2003, in each
case in the usual and ordinary course of business, (d) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, (e) sold,
transferred or leased any of its assets except in the usual and ordinary course
of business, (f) cancelled or compromised any debt or claim, or waived or
released any right, of material value, (g) suffered any physical damage,
destruction or loss (whether or not covered by insurance) adversely affecting
the properties or business of the Company, (h) entered into any transaction
other than in the usual and ordinary course of business except for this
Agreement and the related agreements referred to herein, (i) encountered any
labor difficulties or labor union organizing activities, (j) made or granted any
wage or salary increase or entered into any employment agreement, (k) issued or
sold any shares of capital stock or other securities or granted any options with
respect thereto, or modified any equity security of the Company, (l) declared or
paid any dividends on or made any other distributions with respect to, or
purchased or redeemed, any of its outstanding equity securities, (m) suffered or
experienced any change in, or condition affecting, its condition (financial or
otherwise), properties, assets, liabilities, business operations or results of
operations other than changes, events or conditions in the usual and ordinary
course of its business, having (either by itself or in conjunction with all such
other changes, events and conditions) a Material Adverse Effect, (n) made any
change in the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted, or (o)
entered into any agreement or otherwise obligated itself, to do any of the
foregoing.

 

13

 

3.2  Representations
and Warranties of the Purchasers. Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company, acknowledging
that the Company is relying upon the accuracy and completeness of the
representations and warranties set forth herein to, among other things, ensure
that registration under Section 5 of the Securities Act is not required in
connection with the sale of the Securities hereby, as follows:

 

(a)  Organization;
Authority. Such
Purchaser, if not a natural person, is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by such Purchaser of the transactions contemplated by
this Agreement has been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. Each Transaction Document to which it is a
party has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms.

 

(b)  Investment
Intent. Such
Purchaser understands that the Investor Securities are “restricted securities”
and have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Investor Securities as principal for its own
account for investment purposes.

 

(c)  Purchaser
Status. At the
time such Purchaser was offered the Shares and Warrants, it was, and at the date
hereof it is an “accredited investor” as defined in Rule 501(a) under
the Securities Act. Such Purchaser is not, and is not required to be, registered
as a broker-dealer under Section 15 of the Exchange Act. In making an
investment decision as to whether to purchase the Shares and Warrants offered
hereby, each Purchaser has relied solely upon the SEC Reports and the
representation and warranties of the Company contained herein. Each Purchaser
has had the opportunity to ask questions of, and receive answers from,
representatives of the Company concerning the Company and the officers and all
such questions have been asked and answered by the Company to the satisfaction
of the Purchaser.

 

(d)  Experience
of Such Purchaser. Each
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Investor Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment in
the Investor Securities and, at the present time, is able to afford a complete
loss of such investment.

 

(e)  General
Solicitation. Such
Purchaser is not purchasing the Shares and Warrants as a result of any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.

 

(f)  Compliance
with the Securities Laws. Such
Purchaser agrees to comply with the requirements of Regulation M, if applicable,
with respect to the resale of the Shares by the Purchaser. Such Purchaser hereby
confirms its understanding that it may not cover short sales made prior to the
Effective Date with shares of Common Stock registered for resale on the
Registration Statement.

 

14

 

(g)  No
Conflicts. Neither
the execution and delivery of this Agreement and/or any Transaction Document,
nor the consummation of the Transactions contemplated hereby, will violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Purchaser is subject or any provision of its organizational
documents or other similar governing instruments.

 

(h)  No
Advice.
Purchaser understands that nothing in this Agreement or any other materials
presented to Purchaser in connection with the purchase and sale of the Investor
Securities constitutes legal, tax or investment advice. Purchaser has consulted
such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the Investor
Securities.

 

(i)  No
Litigation, Etc. There
is no action, suit, proceeding, judgment, claim or investigation pending or, to
the knowledge of the Purchaser, threatened against the Purchaser which could
reasonably be expected in any manner to challenge or seek to prevent, enjoin,
alter or materially delay any of the transactions contemplated by the
Transaction Documents.

 

(j)  Approvals. The
execution, delivery and performance by the Purchaser of this Agreement and the
Transaction Documents to which it is a party, and the consummation of the
transactions set forth herein require no material action by or in respect of, or
material filing with, any governmental body, agency, official or authority, by
the Purchaser other than (i) any filings, authorizations, consents and approvals
as may be required under the Hart-Scott-Rodino Improvements Act of 1976, as
amended; (ii) the filing by the Purchaser with the Commission of such reports
under the Exchange Act as may be required in connection with this Agreement, the
Transaction Documents and the transactions contemplated hereby, and (iii) any
filings required by the securities or blue sky laws of the various
states.

 

(k)  Placement
Agent. Each
Purchaser agrees that neither the Placement Agent nor any of its respective
directors, officers, affiliates, employees or agents shall be liable to the
Purchaser for any action taken or omitted to be taken by it in connection
therewith, except for willful misconduct or gross negligence.

 

The
Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2 and
Section
4.1.

 

15

 

ARTICLE
IV.

 

OTHER
AGREEMENTS OF THE PARTIES

 

4.1  Transfer
Restrictions.

 

(a)  The
Investor Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Investor Securities other
than pursuant to an effective registration statement, pursuant to Rule 144(k),
pursuant to Rule 144 (if customary documentation is provided satisfactory to
legal counsel to the Company), or in connection with a pledge as contemplated in
Section 4.1(b) hereof,
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Investor Securities
under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have the
rights of a Purchaser under this Agreement and the Registration Rights
Agreement.

 

(b)  The
Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of a
legend on any of the Investor Securities in the following form:

 

THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT.

 

The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona
fide margin
agreement with a registered broker-dealer or grant a security interest in some
or all of the Investor Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under the Securities
Act and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Investor Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of the
Company and no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection with the grant of the pledge. Further,
no notice shall be required of grant of the pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Transaction Securities may
reasonably request in connection with a pledge or transfer of the Investor
Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder. Notwithstanding anything to the contrary, any
such pledgee shall not be entitled to any rights under any of the Transaction
Documents unless and until such pledgee executes a written agreement to be bound
by Purchasers’ obligations under the Transaction Documents.

 

16

 

(c)  Subject
to compliance with all laws, rules and regulations including, but not limited
to, the Securities Act and the Exchange Act, certificates evidencing the Shares
and Warrant Shares shall not contain any legend (including the legend set forth
in Section 4.1(b)), (i)
following any sale of the Shares or Warrant Shares pursuant to a registration
statement (including the Registration Statement) covering the resale of such
security, or (ii) following any sale of the Shares or Warrant Shares
pursuant to Rule 144, or (iii) if such Shares or Warrant Shares are
eligible for sale under Rule 144(k) and appropriate documentation is
provided satisfactory to legal counsel to the Company, or (iv) if such
legend is not required under applicable regulation of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the Commission). Subject to compliance with all laws, rules and regulations
including, but not limited to, the Securities Act and the Exchange Act, the
Company shall cause its counsel to issue a legal opinion to the Company’s
transfer agent promptly after the Effective Date if required by the Company’s
transfer agent to effect the removal of the legend hereunder. If all or any
portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, such Warrant
Shares shall be issued free of all legends. The Company agrees that at such time
as such legend is no longer required under and pursuant to this Section 4.1(c), it
will, upon written request from the Purchaser and following the submission to
the Company counsel of such materials as shall be reasonably requested by such
counsel therefore, no later than four (4) Trading Days following the delivery by
a Purchaser to the Company or the Company’s transfer agent of a certificate
representing Shares and/or Warrant Shares, as the case may be, issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser (i) a
certificate representing such securities that is free from all restrictive and
other legends, or (ii) in lieu of delivering physical certificates representing
the Shares and/or Warrant Shares, and provided that the Company’s transfer agent
is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (or FAST) program, upon request of the Purchaser,
the Company shall use its reasonable commercial efforts to cause its transfer
agent to electronically transmit the Shares and/or Warrant Shares by crediting
the account of the Purchaser’s prime broker with DTC through its Deposit
Withdrawal Agent Commission (or DWAC) system. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this
Section.

 

(d)  Each
Purchaser severally and not jointly agrees that the removal of the restrictive
legend from certificates representing the Shares and the Warrant Shares as set
forth in this Section 4.1 is
predicated upon the Company’s reliance that the Purchaser will sell any Investor
Securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom.

 

17

 

4.2  Furnishing
of Information. Until
the date no Purchaser owns any Investor Securities, the Company covenants and
agrees to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to the Exchange Act. Upon the request of any such
holder of Investor Securities, the Company shall deliver to such holder a
written certification of a duly authorized officer as to whether it has complied
with the preceding sentence. Until the date no Purchaser owns any Investor
Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell any Shares and Warrant Shares under
Rule 144. The Company further covenants and agrees that it will take such
further action as any holder of Investor Securities may reasonably request, all
to the extent required from time to time to enable such person to sell any
Shares and Warrant Shares without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144.

 

4.3  Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of any of the
Transaction Securities in a manner that would require the registration under the
Securities Act of the sale of the Investor Securities to the Purchasers or that
would be integrated with the offer or sale of the Investor Securities for
purposes of the rules and regulations of any Trading Market. 

 

4.4  Securities
Laws Disclosure; Publicity. The Company shall use its best efforts to by 9:00
a.m., Eastern Daylight Time, on the first Business following this Agreement
issue a press release (which shall be followed by a Form 8-K filing within one
(1) Business Day of the Closing) and, in any event, by the end of business on
the Business Day following the Closing issue a press release (which shall be
followed by a Form 8-K filing within two (2) Business Days thereafter), in
either case disclosing the transactions contemplated hereby and make such other
filings and notices in the manner and time required by the Commission. The
Company and the Placement Agent shall consult with each other in issuing any
press releases with respect to the transactions contemplated hereby, and neither
the Company nor the Placement Agent shall
issue any such press release or otherwise make any such public statement without
the prior consent of the Company, with respect to any press release of the
Placement Agent, or without the prior consent of the Placement Agent, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection
with the registration statement contemplated by the Registration Rights
Agreement and (ii) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under
subclause (i) or (ii).

 

18

 

4.5  Shareholders
Rights Plan. No claim will be made or enforced by the Company or any other
Person that any Purchaser is an “Acquiring Person” under any shareholders rights
plan or similar plan or arrangement in effect or hereafter adopted by the
Company, or that any Purchaser could be deemed to trigger the provisions of any
such plan or arrangement, by virtue of receiving Investor Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.

 

4.6  Non-Public
Information. The Company covenants and agrees that neither it nor any other
Person acting on its behalf will provide any Purchaser or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

 

4.7  Use of
Proceeds. The Company covenants and agrees that all of the net proceeds that it
receives from the sale of the Shares and Warrants pursuant to this Agreement,
although distributed, allocated and expended by the Company in its sole
discretion, shall be used for general working capital and corporate
purposes.

 

4.8  Reimbursement. If any
Purchaser becomes involved in any capacity in any Proceeding by or against any
Person who is a stockholder of the Company (except as a result of sales,
pledges, margin sales and similar transactions by such Purchaser to or with any
current stockholder), solely as a result of such Purchaser's acquisition of the
Securities under this Agreement, and provided any such person has complied with
all laws, rules and regulations and is not in breach of any of its
representations, warranties, or agreements made in any of the Transaction
Documents, the Company will reimburse such Purchaser for its reasonable legal
and other expenses (including the cost of any investigation preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. The reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement, provided such person has complied with all laws, rules and
regulations and is not in breach of any of its representations, warranties and
agreements made in any of the Transaction Documents.

 

4.9  Form D
and Blue Sky. The
Company shall file a Form D with respect to the Transaction Securities as
required under Regulation D under the Securities Act and, upon written
request, provide a copy thereof to the Placement Agent for distribution to the
Purchasers promptly after such filing. The Company shall, on or before the
Closing, take such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify any Transaction Securities for
sale to the Purchasers and/or the Placement Agent pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United
States, and shall provide evidence of any such action so taken to the Purchasers
on or prior to the Closing by providing copies of such filings to the Placement
Agent. The Company shall make all filings and reports relating to the offer and
sale of the Transaction Securities required under applicable securities or “Blue
Sky” laws of the states of the United States following the Closing.

 

19

 

4.10  Reservation
of Common Stock. As of
the date hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, a sufficient
number of shares of Common Stock for the purpose of enabling the Company to
issue the Shares, the Warrant Shares and the Agent Shares.

 

4.11  Listing
of Common Stock. The
Company hereby agrees to use its best efforts to maintain the listing of the
Common Stock on its current Trading Market, and promptly file with the Trading
Market to list the applicable Shares, Warrant Shares and Agent Shares on the
Trading Market. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will include in such
application the Shares, Warrant Shares and Agent Shares and will take such other
action as is necessary or desirable in the opinion of the Purchasers to cause
the Shares, Warrant Shares and Agent Shares to be listed on such other Trading
Market as promptly as possible. The Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on its current
Trading Market and will use its best efforts to comply in all material respects
with the Company’s reporting, filing and other obligations under the bylaws or
rules of the Trading Market.

 

4.12  Indemnification
by the Purchasers. Each of
the Purchasers severally and not jointly agrees to indemnify and hold harmless
the Company and its officers, directors, agents, representatives, shareholders
and employees and each of their respective affiliates, from and against any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation that any such party may
suffer or incur which are caused by or arise out of (i) any material
misrepresentation or material breach or default in the performance by it of any
covenant or agreement made by it in this Agreement or in any of the Transaction
Documents; (ii) any material misrepresentation or material breach of warranty or
representation made by it in this Agreement or in any of the Transaction
Documents or, (iii) any
cause of action, suit or claim brought or made against such Indemnified Party
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents executed pursuant hereto by any of the
Indemnified Parties.
Notwithstanding anything to the contrary provided herein or elsewhere, the
liability of each Purchaser under this Section
4.10 shall be
limited to the amount paid by the Purchaser pursuant hereto to purchase the
Investor Securities, and the procedures and timing for indemnification by the
Purchasers under this Section
4.10 shall
follow the procedures and provisions of Sections
5.16(b) and (c),
mutatis mutandis, with
respect to indemnification by the Company of the Purchasers.

 

4.13  Reporting
Obligations. So long
as any Purchaser beneficially owns any Investor Securities, the Company shall
continue to file or furnish pursuant to the Exchange Act or the Securities Act,
and the Company shall use commercially reasonable best efforts to maintain its
status as an issuer required to file such reports under the Exchange Act. In
addition, during such same period if the Company’s Common Stock is traded on the
American Stock Exchange or any other national exchange, the Company shall take
all actions necessary to continue to meet the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 or any successor
form thereto, to continue to be eligible to register the resale of the Shares,
the Warrant Shares and the Agent Shares under the Securities Act on such
Form.

 

20

 

4.14  Purchase
Price Adjustment.

 

(a)  Firm
Shares. Other
than the Excepted Issuances, defined below, if at any time from the Closing Date
until the first anniversary thereof, the Company shall offer, issue or agree to
issue any shares of common stock to any person or entity at a price per share
which shall be less than the Per Share Purchase Price, without the consent of
each Purchaser holding Shares, the Company shall issue, for each such occasion,
additional shares of Common Stock to each Purchaser so that the average Per
Share Purchase Price of the shares of Common Stock issued to the Purchaser (only
if the Common Stock is still owned by the Purchaser) is equal to such other
lower price per share. 

 

(b)  Option
Shares. If a
Purchaser has exercised the Option, then at any time after from Closing Date
Closing Date until the first anniversary thereof, the Company shall offer, issue
or agree to issue any shares of common stock, other than Excepted Issuances, to
any person or entity at a price per share which is greater than the Per Share
Purchase Price but less than the Option Per Share Purchase Price, without the
consent of each Option Purchaser holding Option Shares, the Company shall issue,
for each such occasion, additional shares of Common Stock to each Purchaser so
that the average Option Per Share Purchase Price of the shares of Common Stock
issued to the Option Purchaser (only if the Common Stock is still owned by the
Purchaser) is equal to such other lower price per share. 

 

If the
Company shall offer, issue or agree to issue any shares of common stock, other
than Excepted Issuances, to any person or entity at a price per share which is
less than the Per Share Purchase Price, without the consent of each Option
Purchaser holding Option Shares, the Company shall issue, for each such
occasion, additional shares of Common Stock to each Purchaser so that the
average Option Per Share Purchase Price of the shares of Common Stock issued to
the Option Purchaser (only if the Common Stock is still owned by the Purchaser)
is equal to the percentage reduction between the Per Share Purchase Price and
such other lower price per share. For example, if the Company issued shares at
$.75, the percentage reduction between the Per Share Purchase Price ($1.50) and
the new lower price would be 50%. Accordingly, the Option Purchaser would
receive that number of additional shares of Common Stock so that the average
Option Per Share Purchase Price of the shares of Common Stock issued to the
Option Purchaser would equal $2.00 per share from the initial per share price of
$4.00.

 

(c)  Option
Price Adjustment. If a
Purchaser has not exercised the Option, then at any time after from Closing Date
until the first anniversary thereof, the Company shall offer, issue or agree to
issue any shares of common stock, other than Excepted Issuances, to any person
or entity at a price per share which is greater than the Per Share Purchase
Price but less than the Option Per Share Purchase Price, without the consent of
each Purchaser, the Option Per Share Purchase Price shall be adjusted to equal
to such other lower price per share. 

 

If the
Company shall offer, issue or agree to issue any shares of common stock, other
than Excepted Issuances, to any person or entity at a price per share which is
less than the Per Share Purchase Price, without the consent of each Purchaser,
the Company shall issue, the Option Per Share Purchase Price shall be adjusted
to equal to the percentage reduction between the Per Share Purchase Price and
such other lower price per share. 

 

21

 

(d)  Maximum
Exercise of Rights. In the
event the exercise of the rights described in this Section 14.4 would result in
the issuance to the Purchaser of an amount of common stock of the Company that
would cause the Purchaser’s beneficially ownership in the Company to exceed
4.99% after giving effect to such issuance, the issuance of such additional
shares of common stock of the Company to such Purchaser shall be, at each such
Purchaser’s discretion, deferred in whole or in part until such time as such
Purchaser is able to beneficially own such shares of common stock without
exceeding 4.99% of the then issued and outstanding common stock of the Company
from the initially set $4.00 per share. 

 

(e)  Registration
Rights. All
shares issued pursuant to this Section 4.14 which are issued prior to the
effective date of the Registration Statement shall have the mandatory
registration rights set forth in Section 2 the Registration Rights Agreement.
All shares issued pursuant to this Section 4.14 which are issued after the
effective date of the Registration Statement shall have the piggyback
registration rights set forth in Section 6(e) of the Registration Rights
Agreement.

 

For
purposes of this Section 14.4 “Excepted
Issuances” shall
mean the sale or issuance of common stock except in connection with (i)
the
granting of options to employees, officers, directors or consultants of the
Company pursuant to any stock option plan or other written compensatory
agreement, or (ii) the exercise of any security issued by the Company in
connection with the offer and sale of the Company’s securities pursuant to the
Purchase Agreement (including any securities issued as compensation in
connection therewith), or (iii) the exercise of or conversion of any convertible
securities, options or warrants issued and outstanding on the date hereof,
provided such securities have not been amended since the date hereof, or (iv)
the issuance of securities in connection with acquisitions, joint ventures,
arrangements related to the Company’s operations and strategic relationships, or
other strategic investments, the primary purpose of which is not to raise
capital.

 

The
delivery to the Purchaser of the additional shares of Common Stock shall be not
later than the closing date of the transaction giving rise to the requirement to
issue additional shares of Common Stock.

 

22

 

ARTICLE
V.  

 

MISCELLANEOUS

 

5.1  Fees
and Expenses. Except
as otherwise set forth in this Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement; provided,
however, that the Company shall pay a maximum of $20,000 for the aggregate fees
and expenses of counsel to the Placement Agent. The Company shall pay all stamp
and other taxes and duties levied in connection with the sale of the
Securities.

 

5.2  Entire
Agreement. The
Transaction Documents, together with the exhibits and schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules. 

 

5.3  Notices. Any and
all notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on (a) the next Business Day, if sent by U.S. nationally recognized
overnight courier service for next day priority delivery, or (b) upon
actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications to the Company shall be as set forth
below and for each Purchaser shall be as set forth on the signature pages
attached hereto.

 

If to the
Company:

China
World Trade Corporation

4th Floor,
Goldilcon Digital Network Center

138 Tiyu
Road East, 

Tianhe
Guanzhou 510620

People’s
Republic of China

Facsimile:
8620-3878-1515

Attn:
John Hui

With a
copy to:

Bernard
Chan

Rm 1217
12th
Floor

The
Metropolis Tower

10
Metropolis Drive

Hong
Kong

Facsimile:
852-2333-8844

5.4  Amendments;
Waivers. No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and each
Purchaser or, in the case of a waiver, by the party against whom enforcement of
any such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

 

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

 

23

 

5.6  Successors
and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser. Any Purchaser, however, may assign any or all of its
Investor Securities and/or rights under this Agreement to any Person, provided
such transferee agrees in writing to be bound, with respect to the transferred
Investor Securities and otherwise, by the provisions hereof that apply to the
“Purchasers.”

 

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

 

5.8  Governing
Law. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York without regard to the conflicts of laws principles
thereof. The parties hereto hereby irrevocably agree that any suit or proceeding
arising directly and/or indirectly pursuant to or under this Agreement, shall be
brought solely in a federal or state court located in the City, County and State
of New York. By its execution hereof, the parties hereby covenant and
irrevocably submit to the in personam
jurisdiction of the federal and state courts located in the City, County and
State of New York and agree that any process in any such action may be served
upon any of them personally, or by certified mail or registered mail upon them
or their agent, return receipt requested, with the same full force and effect as
if personally served upon them in New York City. The parties hereto waive any
claim that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense or lack of in
personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from the
other party hereto of its reasonable counsel fees and
disbursements.

 

5.9  Survival. The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and delivery of the Shares and Warrants for a period of
twelve (12) months.

 

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

 

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

 

24

 

5.12  Replacement
of Investor Securities. If any
certificate or instrument evidencing any Investor Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested. The applicants
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement
Investor Securities.

 

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

 

5.14  Payment
Set Aside. To the
extent that the Company makes a payment or payments to any Purchaser pursuant to
any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall, to the extent permissible under
applicable law, be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not
occurred.

 

5.15  Independent
Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser represents that it has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.

 

25

 

5.16  Indemnification
by the Company.

 

(a)  The
Company shall, notwithstanding any termination of this Agreement, indemnify and
hold harmless each Purchaser, the officers, directors, agents and employees of
each of them, each Person who controls any such Purchaser (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys' fees) and expenses (including the cost
(including without limitation, reasonable attorneys’ fees) and expenses relating
to an Indemnified Party’s (as defined below) actions to enforce the provisions
of this Section
5.16)
(collectively, “Losses”), as
incurred, to the extent arising out of or relating to (i) any material
misrepresentation or material breach of any representation or warranty made by
the Company in the Transaction Documents, or, (ii) any material breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents, or (iii) any cause of action, suit or claim brought or made against
such Indemnified Party and arising out of or resulting from the execution,
delivery, performance or enforcement of the Transaction Documents executed
pursuant hereto by any of the Indemnified Parties. If the indemnification
provided for in this Section
5.16 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any Losses, then the Indemnifying Party (as defined below), in
lieu of indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of Losses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the actions or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The Company shall notify the Purchasers
promptly of the institution, threat or assertion of any proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.

 

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

 

 

An
Indemnified Party shall have the right to employ separate counsel in any such
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such proceeding; or (3) the named parties to any such
proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and the reasonable fees and expenses of one separate counsel for all Indemnified
Parties in any matters related on a factual basis shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such proceeding affected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such
proceeding.

 

(c)  Timing
of Payments. All
reasonable fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such proceeding in a manner not inconsistent with this
Section
5.16 shall be
paid to the Indemnified Party, as incurred, within ten (10) Trading Days of
written notice thereof to the Indemnifying Party; provided,
however, that
the Indemnified Party shall promptly reimburse the Indemnifying Party for that
portion of such fees and expenses applicable to such actions for which such
Indemnified Party is not entitled to indemnification hereunder, determined based
upon the relative faults of the parties.

 

 

(Remainder
of Page Intentionally Left Blank)

 

26

 

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

 

CHINA
WORLD TRADE CORPORATION

By:
/s/ John H.W. Hui 

John H.W.
Hui

Chief
Executive Officer and Vice Chairman

27

PURCHASERS
SIGNATURE PAGE

                                                       

 

By:      

Name:

Title:

 

                                                         
 

Address

 

                                                          
                                                     

Facsimile
Number

 

                                                           

Tax Id
#:

Subscription
Amount:$   

                                                       

 

By:      

Name:

Title:

 

                                                         
 

Address

 

                                                          
                                                     

Facsimile
Number

 

                                                           

Tax Id
#:

Subscription
Amount:$   

                                                       

 

By:      

Name:

Title:

 

                                                         
 

Address

 

                                                          
                                                     

Facsimile
Number

 

                                                           

Tax Id
#:

Subscription
Amount:$   

 

28

 

 

 

INDEX
OF EXHIBITS AND SCHEDULES

                                                
EXHIBITS

Exhibit
A                       
Form of
Registration Rights Agreement

Exhibit
B-1   Form of
Series A Warrant

Exhibit
B-2   Form of
Series B Warrant

Exhibit
B-3   Notice of
Option Exercise

                                            
SCHEDULES

Schedule
1                   
List of
Purchasers and Amounts

Schedule
3.1(j)             
Litigation

Schedule
3.1(y)             Form SB-2
Selling Stockholders

29

 

EXHIBIT
A

FORM
OF REGISTRATION RIGHTS AGREEMENT

30

 

EXHIBIT
B-1

FORM
OF SERIES A WARRANT

 

31

 

EXHIBIT
B-2

FORM
OF SERIES B WARRANT

 

32

EXHIBIT
B-3

NOTICE
OF OPTION EXERCISE

To: China
World Trade Corporation

 

 

1.  The
undersigned hereby elects to exercise the Option to purchase ________ additional
Firm Shares of China World Trade Corporation pursuant to the terms of the
Securities Purchase Agreement, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.

 

2.  Payment
shall take the form of (check applicable box) in lawful money of the United
States; or

 

The Firm
Shares and the Series B Warrant shall be delivered to the
following:

 

 

3.  Accredited
Investor. The
undersigned is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act of 1933, as amended.

 

[PURCHASER]

By:      

Name:

Title:

 

33

 

SCHEDULE
1

LIST
OF PURCHASERS AND AMOUNTS

Name
of Purchaser    Amount
of Shares and Warrant Shares Purchased    

1.      _____
Shares ______
Series A Warrant Shares

 

                                                                           ______

 

2.      _____
Shares______Series A
Warrant Shares

 

                                                                          
______

 

3.      _____
Shares______Series A
Warrant Shares

 

                                                                           ______

 

4.      _____
Shares  
Series A Warrant Shares

 

                                                                          
______

 

5.      _____
Shares  
Series A Warrant Shares

 

                                                                          
______

 

6.      _____
Shares  
Series A Warrant Shares

 

                                                                          
______

 

7.      _____
Shares  
Series A Warrant Shares

 

                                                                          
______

 

8.      _____
Shares  
Series A Warrant Shares

 

                                                                          
______

 

34

 

SCHEDULE
3.1 (y)

Form
SB-2 Selling Stockholders

 

35

SCHEDULE
3.1 (j)

Litigation

36

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