EXCHANGE AGREEMENT
Exhibit
10.1
This
Exchange Agreement (this “Agreement”) is
effective as of March 19, 2010, among Solar Enertech Corp. a Delaware
corporation (the “Company”), and
Capital Ventures International (the “Holder”).
WHEREAS, the Holder is the
holder of that certain Series B Convertible Note, dated as of March 2007 (the
“Original
Note”); and
WHEREAS, subject to the
terms and conditions set forth in this Agreement and pursuant to Sections
3(a)(9) and 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), the
Company desires to exchange with the Holder, and the Holder, desires to exchange
with the Company, the Original Note for shares of Common Stock and a new Note,
as more fully described in this Agreement.
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 the Holder agree as follows (with capitalized
terms used here in and not otherwise defined having the meanings set forth in
the Original Warrant):
1.
Exchange of the Original
Note. On the terms and
subject to the conditions set forth herein, effective as of March 19, 2010 (the
“Closing
Date”), the Holder hereby sells, assigns, delivers and transfers to the
Company all of its right, title and interest in and to the Original Note in
exchange for (a) (i) 666,666 shares of the Company’s Common Stock, plus (ii)
283,498 shares of the Company’s Common Stock, which represent such number of
shares in respect of accrued but unpaid interest under the Original Note as of
the Closing Date, at an issuance price equal to 90% of the 5-day Weighted
Average Price (as defined in the Original Note) of the Common Stock ending on
the day prior to the Closing Date (collectively, the “Exchange Shares”) and
(b) a new Series B-1 Convertible Note in the form attached hereto as Exhibit A (the “Exchange
Note”).
2.
Deliveries. On
the date one Business Day following the date hereof, the Company shall deliver
to the Holder (a) the Exchange Shares by electronic delivery at the applicable
balance account at the Depositary Trust Company (“DTC”) in accordance
with the instructions set forth on Schedule A hereto and
(b) a duly executed copy of the Exchange Note.
3.
Representations and
Warranties
(a) Mutual Representations and
Warranties. Each
party hereto hereby makes the following representations and warranties to the
other party hereto:
(i) It
is duly organized and validly existing, in good standing under the laws of its
jurisdiction of incorporation or organization.
(ii) (A)
It has full power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby, and (B) the person who has executed this
Agreement on its behalf is duly authorized to do so and thereby bind the party
on whose behalf he or she is purporting to act.
(iii) This
Agreement is its valid and binding agreement, enforceable against it in
accordance with its terms.
(iv) Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate, result in a breach of any of the
terms or provisions of, constitute a default (or any event that, with the giving
of notice or the passage of time or both would constitute a default) under,
accelerate any obligations under, or conflict with, (i) its charter, articles or
certificate of incorporation, partnership agreement or bylaws (or other
organizational documents), if applicable, or any agreement, indenture or other
instrument to which it is a party or by which it or its properties are bound,
(ii) any judgment, decree, order or award or any court, governmental body or
arbitrator to which it is subject or (iii) any law, rule or regulation
applicable to it.
(b) Representations, Warranties
and Covenants of the Company. The Company hereby represents,
warrants and covenants to the Holder that:
(i) The
Exchange Shares and the Exchange Note are duly authorized and, upon issuance in
accordance with the terms hereof, shall be validly issued and free from all
taxes, liens and charges with respect to the issue thereof and the Exchange
Shares shall be fully paid and nonassessable with the Holder being entitled to
all rights accorded to a holder of Common Stock. As of the Closing
Date, the Company shall have duly authorized and reserved for issuance a number
of shares of Common Stock which equals the number of shares of Common Stock
issuable upon conversion of the Exchange Note (the “Note
Shares”). Upon conversion in accordance with the Exchange
Note, the Note Shares will be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common
Stock. The offer and issuance by the Company of the Exchange Shares
and Exchange Note is exempt from registration under the Securities
Act.
(ii)
The Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other person, including, without
limitation, any other security holders of the Company, in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date
hereof. Except with respect to its share price and stockholders
equity and except as has been disclosed in writing to the Holder, the Company is
not in violation of the listing requirements of the Principal Market and has no
knowledge of any facts that would reasonably lead to delisting or suspension of
the Common Stock in the foreseeable future.
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(iii) The
exchange of the Original Note for the Exchange Shares and Exchange Note is being
consummated pursuant to Sections 3(a)(9) and Rule 149 of the Securities
Act. The Company has not engaged in any general solicitation or
engaged or agreed to compensate any broker or agent in connection with the
transactions contemplated by this Agreement. None of the
Company, its subsidiaries, any of their affiliates, and any person acting on
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Exchange Shares under the Securities
Act or cause this Exchange to be integrated with prior offerings by the Company
for purposes of 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 Exchange Shares under the Securities Act or cause
this Exchange to be integrated with other offerings.
(iv) The
Company is current in its filings of all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as
amended. Assuming the accuracy of Holder’s representations and
warranties in Section 3(c), to the Company’s knowledge, upon issuance, the
Exchange Shares and the Note Shares will be eligible for resale by the Holder to
the public under Rule 144 without registration under the Securities Act;
provided, however, that if the Company becomes subject to the restrictions under
Rule 144(i), the Company shall use its reasonable best efforts to provide for
the resale by the holder to the public under Section 4(1) of the Securities
Act.
(v) The
Company confirms that neither it nor any other person acting on its behalf has
provided the Holder or their agent or counsel with any information that
constitutes or could reasonably be expected to constitute material, nonpublic
information other than the terms of this Exchange which will be publicly
disclosed pursuant to Section 4(a). The Company
understands and confirms that the Holder will rely on the foregoing
representations in effecting transactions in securities of the
Company.
(vi) The
Company and its counsel will concurrently with the execution of this Agreement
deliver to its transfer agent any required legal opinions or documentation
necessary to effect the delivery of the Exchange Shares to the Holder as
required hereby and such Exchange Shares shall be delivered to the Holder no
later than by the third (3rd) trading date from the date hereof. The
Company shall be responsible for the fees of its transfer agent and all DTC fees
associated with the issuance of the Exchange Shares
hereunder.
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(c) Representations, Warranties
and Covenants of the Holder. The Holder hereby represents and warrants to
the Company that the Holder: (i) is the sole legal and beneficial
owner of the Original Note and the Original Warrant free and clear of any liens,
encumbrances, pledges, security interests or other restrictions or claims of
third parties, (ii) is an “accredited investor” (as defined in Regulation D
under the Act) and is acquiring the Exchange Shares for its own account and not
with a view to any distribution thereof except in compliance with the Securities
Act; (iii) is not an "affiliate" of the Company (as defined in Rule 144), (iv)
has made all investigations that it deems necessary or desirable in connection
with the transactions contemplated by this Agreement and has had an opportunity
to ask questions of and receive answers from the Company, (v) has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment in the Exchange Shares and the Exchange
Note and (vi) has owned the Original Note beneficially and of record since the
date of its original acquisition from the Company. The Holder’s legal
residence is as specified in Section 5(b).
(d)
All representations, warranties
and agreements of each party hereto shall survive the
Closing.
4. Covenants
(a) Disclosure of Transactions
and Other Material Information. The Company shall, on or
before 8:30 a.m., New York City Time, on the first Business Day after the
date of this Agreement, file a Current Report on form 8-K with the SEC
disclosing all material terms of the transactions contemplated
hereby. Upon the filing of the Form 8-K, the Holder shall not be in
possession of any material, nonpublic information received from the Company, any
of its Subsidiaries or any of its respective officers, directors, employees or
agents, that is not disclosed in the Form 8-K. The Company shall not,
and shall cause each of its Subsidiaries and each of their respective officers,
directors, employees and agents, not to, provide the Holder with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the Form 8-K without the express written consent of the
Holder. The Company shall not disclose the name of the Holder in any
filing, announcement, release or otherwise, unless such disclosure is required
by law or regulation; provided, however, that Holder understands and consents to
the filing of this Agreement and the Exchange Note (and the disclosure of
Holder’s name in this Agreement and the Exchange Note) in the Company’s filing
on Form 8-K contemplated by this paragraph.
(b) Reverse Stock
Split. The Company shall not effect a reverse stock
split of one or more classes of the Company's Common Stock for at least 90 days
following the date hereof.
5.
Miscellaneous
(a)
Further
Assurances. Each party hereto shall promptly execute and deliver such
further agreements and instruments, and take such further actions, as the other
party may reasonably request in order to carry out the purpose and intent of
this Agreement.
(b) Notices. All notices,
requests, demands and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by facsimile transmission (with
subsequent letter confirmation by mail) or two days after being mailed by
certified or registered mail, postage prepaid, return receipt requested, to the
parties, their successors in interest or their assignees at the following
addresses, or at such other addresses as the parties may designate by written
notice in the manner aforesaid:
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If to the
Holder:
Capital
Ventures International
c/o
Heights Capital Management, Inc.
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx
Xxxxxxxx
Fax: 000-000-0000
If to the
Company:
000
Xxxxxx Xx., Xxxxx 000
Xxxxxxxx
Xxxx, XX00000
Attention:
Xxx Xxx Xxxxx
Fax:
(000-000-0000
With a
copy to
DLA Piper
LLP (US)
0000
Xxxxxxxxxx Xxx
Xxxx Xxxx
Xxxx, XX 00000
Attn: Xxxx
Xxxx, Esq.
Fax: (000)
000-0000
(c) Most Favored
Nation. In the event that the Company shall pay or issue to
any other former holder of any of the other Original Notes (or any of the Series
A Convertible Notes or Series C Convertible issued at or around the same time as
the Original Note (the “Other Securities”)) or any
of the Warrants issued in connection with the Original Notes or the Other
Securities (the “Original Warrants”)
in consideration of the exchange, amendment or redemption of any thereof on
superior terms as that offered to the Holder pursuant to this Agreement (“Alternative
Consideration”), the Company shall notify the Holder of such occurrence
and for a period of 30 days following receipt of such notice, the Holder shall
have the right to exchange the Original Note and its Warrants, as applicable,
for the Alternative Consideration.
(d) Securities Purchase
Agreement; Acknowledgment of Warrant Amendment; Warrant Limitations on
Exercise. The references to the “Series B Notes” and the covenants
contained in Xxxxxxx 0(x), (x), (x), (x), (x), (x), (x), (x) and (o) and Section
9(k), (n) and (o) of the Securities Purchase Agreement, dated March 7, 2007,
relating to the issuance of the Original Note shall be deemed to include the
Exchange Note. Holder hereby acknowledges and agrees to the effectiveness of the
amendment effected on January 7, 2010 of the Holder’s Series B
Warrant to Purchase Common Stock dated March 7, 2007. Notwithstanding
the foregoing, the Company and Holder hereby separately agree to be bound by
Section 1(f)(1) from the Original Warrant with respect to exercisability of
Holder’s Series B Warrant to Purchase Common Stock.
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(e) Issuance of Common Stock
upon Exercise of Exchange Note or Original Warrant. Assuming
that the Holder has been the sole record and beneficial owner of the Original
Note and Original Warrant from its issuance until the closing of the
transactions contemplated hereby on the Closing Date and is the sole record and
beneficial owner of the Exchange Note and Original Warrant until the applicable
date of exercise and there is no intervening change in applicable law, upon
conversion of the Exchange Note or cashless exercise of the Original Warrant,
the Company will cause the applicable shares of Common Stock to be issued to the
Holder without restrictive legend and will not implement any similar impediment
to immediate transfer.
(f) Governing Law; Jurisdiction;
Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(g) Counterparts. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, but all of which shall constitute one and the same
instrument.
(h) Complete Agreement.
This Agreement is an integrated agreement containing the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede all previous, and all contemporaneous oral or written negotiations,
commitments or understandings.
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(i) Expenses. Except as
specifically set forth herein, each party hereto shall bear its own costs and
expenses, including, without limitation, attorneys’ fees, incurred in connection
with this Agreement and the transactions contemplated hereby.
By:
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/s/ Xxx Xxxxx
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Name:
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Xxx Xxxxx
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Title:
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Chairman and Chief Executive
Officer
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CAPITAL
VENTURES INTERNATIONAL
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By:
Heights Capital Management, Inc., its authorized signatory
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/s/ Xxxxxx Xxxxxxxx
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By:
Xxxxxx Xxxxxxxx, Investment Manager
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7
Schedule
A
DTC
INSTRUCTIONS
Address:
Capital Ventures International c/o Heights Capital Management
Inc.
000 Xxxxxxxxxx Xx.
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Broker:
Xxxxxxx Xxxxx
Broker
Account #: 2US01600
DTC# 5198
(fop)
Contact
at Xxxxxxx Xxxxx:
Xxxxxx
Xxxxxxxxxx-Xxxxx
(000)
000-0000
Xxxxxx_Xxxxxxxxxx@xx.xxx
8
Exhibit
A
Exchange
Note
9