Exhibit 10.1
SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT
CHINA PHARMA HOLDINGS, INC.
Private Offering of up to 5,882,353 Units of Securities
Purchase Price: $1.70 per Unit of Securities
This Subscription and Registration Rights Agreement (this "Agreement"),
made as of the date set forth below by and between China Pharma Holdings, Inc.,
a Delaware corporation (the "Company"), and the undersigned (the "Subscriber"),
is intended to set forth certain representations, covenants and agreements
between the Company and the Subscriber, with respect to the offering (the
"Offering") for sale by the Company of up to 5,882,353 units of securities
(collectively, the "Securities") pursuant to the exemptions from registration
provided in the Securities Act of 1933, as amended (the "Securities Act"),
applicable state securities laws, and the rules and regulations promulgated
thereunder. Each unit of Securities shall consist of the following two (2)
securities: (i) one (1) share of the Company's common stock, par value $.001 per
share, issued at $1.70 per share (individually, the "Common Share" and
collectively, the "Common Shares") and (ii) one (1) warrant to purchase one-half
(1/2) share of the Company's common stock at $2.38 per share (individually, the
"Warrant" and collectively, the "Warrants"), which Warrants shall have the terms
set forth in the "Form of Warrant" attached hereto as Exhibit X. Xxxxxx, Xxxx &
Xxxxx, Inc. is the exclusive placement agent (the "Placement Agent") in
connection with the Offering.
1. Subscription. Subject to the terms and conditions hereof, the Subscriber
hereby irrevocably subscribes for and agrees to purchase from the Company, the
number of units of Securities set forth under the Subscriber's name on the
signature page hereto, at a purchase price of $1.70 per unit of Securities (the
"Offering Price"), and the Company agrees to sell such units of Securities to
the Subscriber at the Offering Price, subject to the Company's right to sell to
the Subscriber such lesser number of units of Securities as the Company may, in
its sole discretion, deem necessary or desirable.
2. Delivery of Subscription Amount; Acceptance of Subscription; Delivery of
Securities. The Subscriber understands and agrees that this subscription is made
subject to the following terms and conditions:
(a) The Subscriber understands that separate Subscription and Registration
Rights Agreements will be executed with other subscribers for up to 5,882,353
units of Securities to be sold in the Offering;
(b) Contemporaneously with the completion, execution and delivery of this
Agreement, the Subscriber shall complete, execute and deliver the "Certificate
of Accredited Investor Status" attached as Exhibit C hereto, and shall submit to
the Company payment in the form of a wire of immediately available United States
funds in the amount equal to the Offering Price multiplied by the number of
units of Securities for which the Subscriber has subscribed (the "Subscription
Amount") in accordance with the "Subscription Instructions" set forth on Exhibit
B hereto;
(c) The subscription for Securities shall be deemed to be accepted only
when this Agreement has been signed by an authorized officer of the Company, and
the deposit of the Subscription Amount for clearance will not be deemed an
acceptance of this Agreement;
(d) The Company shall have the right to reject this subscription, in whole
or in part, and shall have the right to allocate Securities among subscribers in
any manner it may desire;
(e) The payment representing the Subscription Amount (or, in the case of
rejection of a portion of the Subscriber's subscription, the part of the payment
relating to such rejected portion) will be returned promptly to the Subscriber,
without interest, if the Subscriber's subscription is rejected in whole or in
part or if the Offering is withdrawn or canceled;
(f) The Placement Agent and the Company may conduct one or more closings of
the Offering (each a "Closing") until all 5,882,353 units of Securities offered
hereby are sold;
(g) The Company may, in its sole discretion, terminate the Offering at any
time and accept any subscriptions then in its receipt;
(h) Certificates representing the Securities purchased will be issued in
the name of each Subscriber within 14 days following each Closing;
(i) The minimum Subscription Amount is $50,000 (29,412 units of
Securities), provided, however, that the Company reserves the right to accept
subscriptions for less than the minimum Subscription Amount;
(j) The Offering is being conducted on a "best efforts" basis, and the
Company is not required to accept any minimum amount of subscriptions before
conducting a Closing; and
(k) The representations and warranties of the Company and the Subscriber
set forth herein shall be true and correct as of the date that the Company
accepts this subscription.
3. Terms of Subscription.
(a) The subscription period will begin as of December 18, 2006, and will
continue until such time as the Company terminates it in its sole discretion.
(b) The Placement Agent will receive a placement management fee equal to
five percent (5.0%) of the aggregate purchase price of the Securities sold. The
Company has also agreed to reimburse the Placement Agent for their reasonable
out of pocket expenses, including the fees and expenses of the Placement Agent's
legal counsel, up to a maximum (without the consent of the Company) of $40,000.
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(c) If the Subscriber is not a United States person, the Subscriber hereby
represents that it has satisfied itself as to the full observance of the laws of
its jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including, without limitation, (i) the
legal requirements within its jurisdiction for the purchase of the Securities,
(ii) any foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the Securities. The Subscriber
represents and warrants that the Subscriber's subscription and payment for, and
the Subscriber's continued beneficial ownership of, the Securities will not
violate any applicable securities or other laws of the Subscriber's
jurisdiction.
4. Registration Rights.
(a) The Subscriber acknowledges that it is acquiring the Securities for its
own account and for the purpose of investment and not with a view to any
distribution or resale thereof within the meaning of the Securities Act. The
Subscriber further agrees that it will not sell, assign or transfer the
Securities at any time in violation of the Securities Act and acknowledges that,
in taking unregistered securities, it must continue to bear the economic risk of
its investment for an indefinite period of time because of the fact that the
Securities have not been registered under the Securities Act, and further
realizes that the Securities cannot be sold unless subsequently registered under
the Securities Act or an exemption from such registration is available. The
Subscriber also acknowledges that appropriate legends reflecting the status of
the Securities under the Securities Act may be placed on the face of the
certificates for such Securities at the time of their transfer and delivery to
the holder thereof.
(b) The Securities may not be transferred except in a transaction that is
in compliance with the Securities Act. Except as provided hereafter with respect
to registration of the Common Shares and the shares of the Company's common
stock issuable upon the exercise of the Warrants (collectively, the "Registrable
Securities"), it shall be a condition to any such transfer that the Company
shall be furnished with an opinion of counsel to the holder of such Securities,
reasonably satisfactory to the Company, to the effect that the proposed transfer
would be in compliance with the Securities Act.
(c) Within 60 days following the earlier to occur of (i) the sale of all of
the Securities in the Offering or (ii) the termination of the Offering following
any sale of Securities as reflected in a written notice given by the Company to
the Placement Agent, the Company shall prepare and file with the Securities and
Exchange Commission (the "SEC"), a registration statement on Form SB-2 and such
other documents as may be necessary in the opinion of counsel for the Company,
and use its commercially reasonable efforts to have such registration statement
declared effective as soon as reasonably practicable after such filing in order
to comply with the provisions of the Securities Act, so as to permit the
registered resale of the Registrable Securities. Except as set forth in Section
4(e), the Company shall keep the Registration Statement continuously effective
until such time as all of the Registrable Securities are eligible for resale
pursuant to Rule 144(k) promulgated under the Securities Act. The Company shall
prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective for the period herein
prescribed and to comply with the requirements of the Securities Act and the
rules and regulations promulgated by the SEC thereunder relating to the sale or
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other disposition of the securities covered by the Registration Statement. The
Subscriber acknowledges that certain shares of the Company's common stock held
by certain shareholders will be included in the registration statement, as
described in the Company's Confidential Private Placement Memorandum, dated
December 18, 2006, and the exhibits and appendices (the "Memorandum"), a copy of
which has heretofore been delivered to the Subscriber. The Registrable
Securities that are registered for resale under the Registration Statement are
referred to herein as the "Registration Statement Securities", and the
Subscribers who are eligible to sell their Registration Statement Securities
under the Registration Statement, together with their respective affiliates, are
hereafter referred to as "Offering Holders." The Company will include in such
registration statement (i) the information required under the Securities Act to
be so included concerning the Offering Holders, as provided by the Offering
Holders on the signature pages to this Agreement and the other Subscription and
Registration Rights Agreements entered into in connection with the Offering,
including any changes in such information that may be provided by the Offering
Holders in writing to the Company from time to time, and (ii) a section entitled
"Plan of Distribution," substantially in the form of Exhibit D hereto, that
describes the various procedures that may be used by the Offering Holders in the
sale of their Registration Statement Securities.
(d) In the event that the Company does not file a registration statement to
register the Registration Statement Securities with the SEC within the time
period specified in Section 4(c) hereof, the Company will be required to pay a
penalty to each Offering Holder equal to one percent (1%) of the purchase price
for such Offering Holder's Registration Statement Securities, and an additional
one percent (1%) of the purchase price for such Offering Holder's Registration
Statement Securities for each additional 30-day period during which such
registration statement is not filed.
(e) Notwithstanding the foregoing provisions of this Section 4, the Company
may voluntarily suspend the effectiveness of any such registration statement for
a limited time, which in no event shall be longer than 60 days in any
three-month period and no longer than 120 days in any twelve-month period, if
the Company has been advised in writing by counsel or underwriters to the
Company that the offering of any Registration Statement Securities pursuant to
the registration statement would materially adversely affect, or would be
improper in view of (or improper without disclosure in a prospectus), a proposed
financing, reorganization, recapitalization, merger, consolidation, or similar
transaction involving the Company. The Company shall notify all Offering Holders
to such effect, and, upon receipt of such notice, each such Offering Holder
shall immediately discontinue any sales of Registration Statement Securities
pursuant to such registration statement until such Offering Holder has received
copies of a supplemented or amended prospectus or until such Offering Holder is
advised in writing by the Company that the then current prospectus may be used
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such prospectus.
(f) If any event occurs that would cause any such registration statement to
contain a material misstatement or omission or not to be effective and usable
during the period that such registration statement is required to be effective
and usable, the Company shall promptly notify the Offering Holders of such event
and, if requested, the Offering Holders shall immediately cease making offers of
Registration Statement Securities and return all prospectuses to the Company.
The Company shall promptly file an amendment to the registration statement to
correct such misstatement or omission and use its commercially reasonable
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efforts to cause such amendment to be declared effective as soon as practicable
thereafter. The Company shall promptly provide the Offering Holders with revised
prospectuses and, following receipt of the revised prospectuses, the Offering
Holders shall be free to resume making offers of the Registration Statement
Securities.
(g) Notwithstanding any provision contained herein to the contrary, the
Company's obligation to include, or continue to include, Registration Statement
Securities in any such registration statement under this Section 4 shall
terminate to the extent such Registration Statement Securities are eligible for
resale under Rule 144(k) promulgated under the Securities Act.
(i) If and whenever the Company is required by the provisions of this
Agreement to use its commercially reasonable efforts to effect the registration
of the Registration Statement Securities under the Securities Act for the
account of an Offering Holder, the Company will, as promptly as possible:
(A) prepare and file with the SEC a registration statement, on Form
SB-2, complying with applicable requirements under the Securities Act, with
respect to such securities and use its commercially reasonable efforts to
cause such registration statement to become and remain effective until all
Registration Statement Securities qualify for resale under 144(k);
(B) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to
comply with the requirements of the Securities Act and the rules and
regulations promulgated by the SEC thereunder relating to the sale or other
disposition of the securities covered by such registration statement; and
(C) furnish to each Offering Holder such numbers of copies of a
prospectus, including a preliminary prospectus, complying with the
requirements of the Securities Act, and such other documents as such
Offering Holder may reasonably request in order to facilitate the public
sale or other disposition of the Registration Statement Securities owned by
such Offering Holder, but such Offering Holder shall not be entitled to use
any selling materials other than a prospectus and such other materials as
may be approved by the Company, which approval will not be unreasonably
withheld.
(j) Except as provided below in this Section 4, the expenses incurred by
the Company in connection with action taken by the Company to comply with this
Section 4, including, without limitation, all registration and filing fees,
printing and delivery expenses, accounting fees, fees and disbursements of
counsel to the Company, consultant and expert fees, premiums for liability
insurance, if the Company chooses to obtain such insurance, obtained in
connection with a registration statement filed to effect such compliance and all
expenses, including counsel fees, of complying with any state securities laws,
shall be paid by the Company. All fees and disbursements of any counsel,
experts, or consultants employed by any Offering Holder shall be borne by such
Offering Holder. The Company shall not be obligated in any way in connection
with any registration pursuant to this Section 4 for any selling commissions or
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discounts payable by any Offering Holder to any underwriter or broker of
securities to be sold by such Offering Holder. The Subscriber agrees that any
such selling commissions or discounts shall be borne by such Offering Holder.
(k) In the event of any registration of Registration Statement Securities
pursuant to this Section 4, the Company will indemnify and hold harmless each
Offering Holder, its officers, directors, attorneys, partners, agents, employees
and consultants and each underwriter of such Registration Statement Securities,
and any person who controls such Offering Holder or underwriter within the
meaning of Section 15 of the Securities Act (collectively, the "Indemnified
Parties"), against all claims, actions, losses, damages, liabilities and
expenses, joint or several, to which any of such Indemnified Parties may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any actual or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the actual or
alleged omission to state therein a 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, and will reimburse each of such
Indemnified Parties for any legal and any other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises directly out of or is based primarily upon an
untrue statement or omission of a material fact made in said registration
statement, said preliminary prospectus or said prospectus, or said amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such Offering Holder or such underwriter specifically for use
in the preparation thereof; and provided further, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability or action arises directly out of or is based primarily upon an
untrue statement or omission of a material fact made in any preliminary
prospectus or final prospectus if (i) such Offering Holder failed to send or
deliver the copy of the final prospectus or prospectus supplement which such
Offering Holder shall have been previously provided by the Company, with or
prior to the delivery of written confirmation of the sale of the Registration
Statement Securities, and (ii) the final prospectus or prospectus supplement
would have corrected such untrue statement or omission.
(l) At any time when a prospectus relating to the Offering is required to
be delivered under the Securities Act, the Company will notify the Offering
Holder of the happening of any event, upon the notification or awareness of such
event by an executive officer of the Company, as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing.
(m) In the event of any registration of any Registration Statement
Securities under the Securities Act pursuant to this Section 4, the Subscriber
agrees to indemnify and hold harmless the Company, its officers, directors,
attorneys, partners, agents, employees and consultants and any person who
controls the Company within the meaning of Section 15 of the Securities Act
(collectively, the "Indemnified Persons"), against any losses, claims, damages,
liabilities, or actions, joint or several, to which any of such Indemnified
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Persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages, liabilities, or actions arise out of or are based
upon any actual or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are based
upon the actual or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, in
each case to the extent and only to the extent that any such loss, claim,
damage, liability, or action arises out of or is based upon an untrue statement
or omission of a material fact made in said registration statement, said
preliminary prospectus or said prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by the Subscriber or any affiliate (as defined in the Securities Act) of
the Subscriber specifically for use in the preparation thereof.
(n) Any party entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (which consent may not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(o) With a view to making available to the Offering Holder the benefits of
Rule 144 promulgated under the Securities Act, the Company agrees that it will
use its commercially reasonable efforts to maintain registration of its common
stock under Section 12 or 15 of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and to file with the SEC in a timely manner all
reports and other documents required to be filed by an issuer of securities
registered under the Exchange Act so as to maintain the availability of Rule
144. Upon the request of any record owner, the Company will deliver to such
owner a written statement as to whether it has complied with the reporting
requirements of Rule 144.
5. Representations and Warranties of the Subscriber. The Subscriber hereby
represents and warrants to the Company and the Placement Agent as follows:
(a) The Subscriber is acquiring the Securities for its own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act, and applicable state securities laws. The Subscriber understands that (A)
the Securities (1) have not been registered under the Securities Act or any
state securities laws, (2) will be issued in reliance upon an exemption from the
registration and prospectus delivery requirements of the Securities Act pursuant
to Section 4(2) and/or Regulation D thereof, and (3) will be issued in reliance
upon exemptions from the registration and prospectus delivery requirements of
state securities laws which relate to private offerings, and (B) the Subscriber
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must therefore bear the economic risk of such investment indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt therefrom. The Subscriber further
understands that such exemptions depend upon, among other things, the bona fide
nature of the investment intent of the Subscriber expressed herein. Pursuant to
the foregoing, the Subscriber acknowledges that the certificates representing
the Securities acquired by the Subscriber shall bear a restrictive legend
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF UNLESS (I) REGISTERED UNDER THE
APPLICABLE SECURITIES LAWS OR (II) AN OPINION OF COUNSEL,
WHICH OPINION AND COUNSEL ARE BOTH REASONABLY SATISFACTORY
TO THE COMPANY, HAS BEEN DELIVERED TO THE COMPANY AND SUCH
OPINION STATES THAT THE SECURITIES MAY BE TRANSFERRED
WITHOUT SUCH REGISTRATION."
(b) The Subscriber has knowledge, skill and experience in financial,
business and investment matters relating to an investment of this type and is
capable of evaluating the merits and risks of such investment and protecting the
Subscriber's interest in connection with the acquisition of the Securities. The
Subscriber understands that the acquisition of the Securities is a speculative
investment and involves substantial risks and that the Subscriber could lose the
Subscriber's entire investment in the Securities. Further, the Subscriber has
carefully read and considered the matters set forth under the section entitled
"Risk Factors" in the Memorandum, and has taken full cognizance of and
understands all of the risks related to the purchase of the Securities. To the
extent deemed necessary by the Subscriber, the Subscriber has retained, at its
own expense, and relied upon, appropriate professional advice regarding the
investment, tax and legal merits and consequences of purchasing and owning the
Securities. The Subscriber has the ability to bear the economic risks of the
Subscriber's investment in the Company, including a complete loss of the
investment, and the Subscriber has no need for liquidity in such investment.
(c) The Subscriber has been furnished by the Company all information (or
provided access to all information) regarding the business and financial
condition of the Company, its expected plans for future business activities, the
attributes of the Securities and the merits and risks of an investment in the
Securities which the Subscriber has requested or otherwise believes that the
Subscriber needs to evaluate the investment in the Company.
(d) The Subscriber is in receipt of and has carefully read and understands
the following items:
o THE MEMORANDUM;
o ANNUAL REPORT ON FORM 10-KSB/A FOR FISCAL YEAR ENDED
DECEMBER 31, 2005
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o QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED MARCH
31, 2006
o QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED JUNE
30, 2006
o QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED
SEPTEMBER 30, 2006
o DEFINITIVE INFORMATION STATEMENT ON SCHEDULE 14C FILED WITH
THE U.S. SECURITIES AND EXCHANGE COMMISSION ON MARCH 28,
2006
o CURRENT REPORT ON FORM 8-K FILED WITH THE U.S. SECURITIES
AND EXCHANGE COMMISSION ON MAY 4, 2006
o CURRENT REPORT ON FORM 8-K FILED WITH THE U.S. SECURITIES
AND EXCHANGE COMMISSION ON SEPTEMBER 21, 2006
o AUDIT AND OPINION FOR HAINAN HELPSON MEDICINE AND
BIO-TECHNOLOBY CO. LTD. ("HELPSON"), AUDIT AND OPINION FOR
TS ELECTRONICS INC. (THE PREVIOUS NAME OF CHINA PHARMA
HOLDINGS, INC.) AND THE MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("MD&A") IN
THE REGISTRATION STATEMENT ON FORM SB-2/A FILED WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 2005
o PROFORMA FINANCIAL STATEMENTS FOR DECEMBER 31, 2005
(e) In making the Subscriber's investment decision, the Subscriber is
relying solely on investigations made by the Subscriber and the Subscriber's
representative(s), if any. The offer to sell the Securities was communicated to
the Subscriber in such a manner that the Subscriber was able to ask questions of
and receive answers from the management of the Company concerning the terms and
conditions of the proposed transaction. At no time was the Subscriber presented
with or solicited by or through any advertisement, article, leaflet, public
promotional meeting, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or meeting or any other form of general or public advertising or
solicitation.
(f) The Subscriber acknowledges that the Subscriber has been advised that:
(A) The Securities offered hereby have not been approved or
disapproved by the SEC or any state securities commission nor has the SEC
or any state securities commission passed upon the accuracy or adequacy of
any representations by the Company. Any representation to the contrary is a
criminal offense.
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(B) In making an investment decision, the Subscriber must rely on its
own examination of the Company and the terms of the Offering, including the
merits and risks involved. The Securities have not been recommended by any
federal or state securities commission or other regulatory authority.
Furthermore, the foregoing authorities have not confirmed the accuracy or
determined the adequacy of any representation by the Company. Any
representation to the contrary is a criminal offense.
(C) The Securities will be "restricted securities" within the meaning
of Rule 144 under the Securities Act, are subject to restrictions on
transferability and resale and may not be transferred or resold except as
permitted under the Securities Act and applicable state securities laws,
pursuant to registration or exemption therefrom. The Subscriber is aware
that the Subscriber may be required to bear the financial risks of this
investment for an indefinite period of time.
(g) The Subscriber acknowledges and is aware that there has never been any
representation, guarantee or warranty made by the Company or any officer,
director, employee or agent or representative of the Company, expressly or by
implication, as to (i) the approximate or exact length of time that the
Subscriber will be required to remain an owner of the Securities; (ii) the
percentage of profit and/or amount of or type of consideration, profit or loss
to be realized, if any, as a result of this investment; or (iii) that the
limited past performance (if any) or experience on the part of the Company, or
any future expectations regarding the Company's business or operations, will in
any way indicate the predictable results of the ownership of the Securities or
of the overall financial performance of the Company.
(h) The Subscriber agrees to furnish the Company such other information as
the Company may reasonably request in order to verify the accuracy of the
information contained herein and agrees to notify the Company immediately of any
material change in the information provided herein that occurs prior to the
Company's acceptance of this Agreement.
(i) The Subscriber further represents and warrants that (1) the Subscriber
is an institutional investor and an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act, (2) the Subscriber has
executed the "Certificate of Accredited Investor Status", attached hereto as
Exhibit C and (3) the Subscriber has a preexisting relationship with the
Placement Agent.
(j) If this Agreement is executed and delivered on behalf of a partnership,
corporation, trust, estate or other entity (an "Entity"): (i) such Entity has
the full legal right and power and all authority and approval required (a) to
execute and deliver, or authorize execution and delivery of, this Agreement and
all other instruments executed and delivered by or on behalf of such Entity in
connection with the purchase of the Securities, (b) to delegate authority
pursuant to power of attorney and (c) to purchase and hold such Securities, (ii)
the signature of the party signing on behalf of such Entity is binding upon such
Entity; and (iii) such Entity has not been formed for the specific purpose of
acquiring such Securities, unless each beneficial owner of such Entity is
qualified as an accredited investor within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act and has submitted information
substantiating such individual qualification.
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(k) If the Subscriber is a retirement plan or is investing on behalf of a
retirement plan, the Subscriber acknowledges that investment in the Company's
common stock poses additional risks, including, without limitation, the
inability to use losses generated by an investment in its common stock to offset
taxable income.
(l) The Subscriber represents and warrants that it is not a broker-dealer
or an affiliate of a broker-dealer, except as follows:__________________________
_______________________________________________________________________________.
If the Subscriber is a broker-dealer, the Subscriber acknowledges that the
Subscriber will be deemed to be an underwriter with respect to the resale of its
Securities. If the Subscriber is an affiliate of a broker-dealer, the Subscriber
acknowledges that the Subscriber will be deemed to be an underwriter with
respect to the resale of its Securities to the extent that such Securities are
sold through its affiliated broker-dealer. To the extent that the Subscriber is
affiliated in any manner with a broker-dealer, the Subscriber further represents
and warrants that it is purchasing the Securities in the ordinary course of its
business and that as of the date hereof it has no agreements or understandings,
directly or indirectly, with any person to distribute the Securities.
(m) Neither the Subscriber nor any of its affiliates or any person acting
on its behalf has entered into any "short sale" (as such term is defined in Rule
200 under Regulation SHO adopted by the SEC under the Exchange Act) of shares of
the Company's Common Stock within a period of 60 days prior to the date that the
Subscriber executes this Agreement. Further, the Subscriber hereby agrees that
neither the Subscriber nor any of its affiliates or any person acting on its
behalf shall enter into any "short sale" of shares of the Company's common stock
within a period of 30 days after the date that the Subscriber executes this
Agreement.
The foregoing representations and warranties and undertakings are made by
the Subscriber with the intent that they be relied upon by the Company and the
Placement Agent in determining the Subscriber's suitability as an investor, and
the Subscriber hereby agrees that such representations and warranties shall
survive the Subscriber's purchase of the Securities.
6. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Subscriber as follows:
(a) The Company is duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, and is duly qualified to do business as
a foreign corporation in all jurisdictions in which the failure to be so
qualified would materially and adversely affect the business or financial
condition, properties or operations of the Company.
(b) The Company has duly authorized the issuance and sale of the Securities
in accordance with the terms of this Agreement (as described herein) by all
requisite corporate action, including the authorization of the Company's Board
of Directors of the issuance and sale of the Securities in accordance herewith,
and the execution, delivery and performance of any other agreements and
instruments executed in connection herewith. This Agreement constitutes a valid
and legally binding obligation of the Company, enforceable 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, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
11
remedies, and (iii) to the extent the indemnification provisions contained
herein may be limited by applicable federal or state securities laws.
(c) As of the date of this Agreement, the Memorandum does not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(d) The documents incorporated by reference or included with the
Memorandum, at the time they were filed with the SEC, complied in all material
respects with the requirements of the Exchange Act, and, when read together and
with the other information in the Memorandum, did not contain, at the time they
were filed with the SEC, any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
7. Understandings. The Subscriber understands, acknowledges and agrees with
the Company as follows:
(a) This Subscription may be rejected, in whole or in part, by the Company
in its sole and absolute discretion, at any time before a Closing,
notwithstanding prior receipt by the undersigned of notice of acceptance of the
undersigned's Subscription. The Company may terminate this Offering at any time
in its sole discretion. Neither the execution of this Agreement nor the
solicitation of the investment contemplated hereby shall create any obligation
of the Company to accept any subscription or complete the Offering. The Company
is not required to accept any minimum amount of subscriptions before conducting
a Closing.
(b) The Subscriber hereby acknowledges and agrees that the subscription
hereunder is irrevocable by the Subscriber, that, except as required by law, the
Subscriber is not entitled to cancel, terminate or revoke this Agreement or any
agreements of the Subscriber hereunder and that this Agreement and such other
agreements shall survive the death or disability of the Subscriber and shall be
binding upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives and permitted assigns. If the
Subscriber is more than one person, the obligations of the Subscriber hereunder
shall be joint and several and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his/her heirs, executors, administrators, successors,
legal representatives and permitted assigns.
(c) No federal or state agency has made any finding or determination as to
the accuracy or adequacy of the Memorandum or as to the suitability of the
Offering for investment, nor any recommendation or endorsement of the
Securities.
(d) The Offering is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and the
provisions of Regulation D thereunder, which is in part dependent upon the
truth, completeness and accuracy of the statements made by the Subscriber
herein.
(e) There can be no assurance that the Subscriber will be able to sell or
dispose of the Securities. It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the Securities Act and Regulation
12
D, any transferee will, at a minimum, be required to fulfill the investor
suitability requirements thereunder.
(f) The Subscriber acknowledges that the information contained in the
Memorandum is confidential and non-public and agrees that all such information
shall be kept in confidence by the Subscriber and neither used for the
Subscriber's personal benefit (other than in connection with this subscription)
nor disclosed to any third party for any reason; provided, however, that this
confidentiality obligation shall not apply to any such information that (i) is
part of the public knowledge or literature, (ii) becomes part of the public
knowledge or literature (except as a result of a breach of this provision) or
(iii) is received from third parties (except third parties who disclose such
information in violation of any confidentiality agreements or obligations,
including, without limitation, any subscription agreement entered into with the
Company). In addition, the Subscriber may disclose any information as may be
required by law or applicable legal process; provided, however, to the extent
permitted by law or applicable legal process, the Subscriber shall provide the
Company at least five business days prior written notice before making any such
disclosure.
(g) The representations, warranties and agreements of the Subscriber
contained herein and in any other writing delivered in connection with the
transactions contemplated hereby shall be true and correct in all respects on
and as of the date of a Closing of the sale of the Securities as if made on and
as of such date and shall survive the execution and delivery of this Agreement
and the purchase of the Securities.
8. Survival; Indemnification. All representations, warranties and covenants
contained in this Agreement and the indemnification obligations contained in
this Section 8 shall survive (i) the acceptance of this Agreement by the
Company, (ii) changes in the transactions, documents and instruments described
herein which are not material or which are to the benefit of the Subscriber, and
(iii) the death or disability of the Subscriber. The Subscriber understands the
meaning and legal consequences of the representations, warranties and covenants
contained in this Agreement and that the Company and the Placement Agent have
relied upon such representations, warranties and covenants in determining the
Subscriber's qualification and suitability to purchase the Securities. The
Subscriber hereby agrees to indemnify, defend and hold harmless the Company, the
Placement Agent and their respective officers, directors, employees, agents and
controlling persons, from and against any and all losses, claims, damages,
liabilities, expenses (including attorneys' fees and disbursements), judgments
or amounts paid in settlement of actions arising out of or resulting from the
untruth of any representation of the Subscriber herein or the breach of any
warranty or covenant herein by the Subscriber. Notwithstanding the foregoing,
however, no representation, warranty, covenant or acknowledgment made herein by
the Subscriber shall in any manner be deemed to constitute a waiver of any
rights granted to it under the Securities Act or state securities laws.
9. Notices. All notices and other communications provided for herein shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid, or sent by reputable overnight courier, charges prepaid:
(a) if to the Company, to the following address:
13
c/o King and Wood
40th Floor, Office Tower A
Beijing Fortune Plaza
7 Dongsanhuan Zhonglu
Chaoyang District
Beijing 100020, PRC
Attn: Xxxxxxx Law
Telephone: 00-00-0000-0000
(b) if to the Subscriber, to the address set forth on the signature page
hereto;
or at such other address as any party shall have specified by notice in writing
to the other.
10. Notification of Changes. The Subscriber agrees and covenants to notify
the Company immediately upon the occurrence of any event prior to the
consummation of the Offering that would cause any representation, warranty,
covenant or other statement contained in this Agreement to be false or incorrect
or of any change in any statement made herein occurring prior to the
consummation of the Offering.
11. Assignability; Modification. This Agreement is not assignable by the
Subscriber, and may not be modified, waived or terminated except by an
instrument in writing signed by the party against whom enforcement of such
modification, waiver or termination is sought.
12. Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns, and the agreements, representations, warranties and acknowledgments
contained herein shall be deemed to be made by and be binding upon such heirs,
executors, administrators, successors, legal representatives and permitted
assigns.
13. Obligations Irrevocable. The obligations of the Subscriber shall be
irrevocable, except with the written consent of the Company, until the
consummation or termination of the Offering.
14. Entire Agreement. This Agreement constitutes the entire agreement of
the Subscriber and the Company relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN DELAWARE.
16. Severability. If any provision of this Agreement or the application
thereof to the Subscriber or any circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other subscriptions or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
14
17. Headings. The headings in this Agreement are inserted for convenience
and identification only and are not intended to describe, interpret, define, or
limit the scope, extent or intent of this Agreement or any provision hereof.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
19. Counsel. The Subscriber hereby acknowledges that the Company and its
counsel represent the interests of the Company and not those of the Subscriber
in any agreement (including this Agreement) to which the Company is a party.
[SIGNATURE PAGES TO FOLLOW]
15
IN WITNESS WHEREOF, the Subscriber has executed this Subscription and
Registration Rights Agreement as of ____________ ___, 2007.
SUBSCRIBER
-----------------------------------------------
Number of Units of Securities:
-------------------
Offering Price per Unit of Securities: $1.70
-----
Subscription Amount: $________________________
By: __________________________________________
Name:__________________________________________
Title:_________________________________________
Address: _____________________________________
_______________________________________________
_______________________________________________
Please designate name in which stock
certificate(s) representing the Securities
purchased are to be registered.
-----------------------------------------------
Please designate address for delivery of stock
certificate(s) representing the Securities
purchased (if different from above).
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
Please designate the individual to whom all
correspondence concerning the Subscriber's
subscription for the Securities should be sent,
along with such individual's requested
contact information.
Name:__________________________________________
Address:_______________________________________
_______________________________________________
Telephone: (____)______________________________
E-mail:________________________________________
16
The name(s) of the natural person(s) who will have voting and investment power
over the Securities purchased are as follows (please print legibly, as the
name(s) must be disclosed in the registration statement):
-----------------------
Please indicate the number of shares of the Company's common stock currently
owned by the Subscriber in addition to those being subscribed for in this
Agreement (this must also be disclosed in the registration statement).
----------------------------
The Company hereby accepts the foregoing subscription subject to the terms
and conditions hereof as of February 1, 2007.
CHINA PHARMA HOLDINGS, INC.,
a Delaware corporation
By: CHINA PHARMA HOLDINGS, INC.
Name: XXxxxx Xx
Title: President and CEO
17
EXHIBIT A
---------
FORM OF WARRANT
EXHIBIT B
---------
SUBSCRIPTION INSTRUCTIONS
(1) If you are subscribing for the purchase of Securities, please complete,
date and sign the signature page to this Subscription and Registration Rights
Agreement in the applicable spaces. Please signify the number of units of
Securities for which you are subscribing by inserting such amount in the space
provided for on the signature page to the Agreement.
(2) Complete, date and sign the accompanying Certificate of Accredited
Investor Status (Exhibit C).
(3) Send all completed documents to:
Sterne Agee & Xxxxx, Inc.
0000 X. Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
(4) Fax the signature pages for all completed documents to:
Sterne, Agee & Xxxxx, Inc.
Attn: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(5) Transmit funds (in an amount equal to the number of Securities for
which you are subscribing multiplied by the Offering Price) via wire to the
following escrow account of China Pharma Holdings, Inc.:
Legal Name: China Pharma Holdings, Inc,
Bank Name: Columbus Bank & Trust Company, Columbus,
Georgia
Beneficiary Bank First Commercial Bank,
Birmingham, Alabama
Contact: Xxxx X. Xxxxxxxx
Phone Number: (000) 000-0000
Account Name: Escrow Account - China Pharma Holdings, Inc.
ABA / Routing Number: 000000000
Account Number: 1060083191
Tax ID Number: 00-0000000
ATTENTION SUBSCRIBERS: NO SUBSCRIPTION WILL BE ACCEPTED UNLESS ALL DOCUMENTATION
PRESCRIBED HEREIN IS FULLY COMPLETED AND EXECUTED. ANY MATERIALS RECEIVED THAT
ARE INCOMPLETE IN ANY RESPECT WILL BE RETURNED BY THE COMPANY.
EXHIBIT C
---------
CERTIFICATE OF ACCREDITED INSTITUTIONAL INVESTOR STATUS
The undersigned is an "accredited investor," as that term is defined in
Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"). The undersigned has checked the box below indicating the basis on which
the undersigned is representing the undersigned's status as an "accredited
investor":
[_] a bank as defined in Section 3(a)(2) of the Securities Act, or any savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended; an insurance company as
defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that Act; a small
business investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment
Act of 1958; a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, and such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of such
Act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee benefit plan
has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are "accredited
investors";
[_] a private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940;
[_] an organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the securities offered,
with total assets in excess of $5,000,000;
[_] a trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a person who has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of
the prospective investment;
[_] an individual who is a director or executive officer of China Pharma
Holdings, Inc.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Accredited Investor Status effective as of the ___ day of ____________, 2007.
----------------------------
Name of Subscriber
By: ________________________
Name: ______________________
Title: _____________________
EXHIBIT D
---------
PLAN OF DISTRIBUTION
As of the date of this prospectus, we have not been advised by the selling
stockholders as to any plan of distribution. Securities owned by the selling
stockholders, or by their partners, pledgees, donees (including charitable
organizations), transferees or other successors in interest, may from time to
time be offered for sale either directly by such individual, or through
underwriters, dealers or agents or on any exchange on which the shares may from
time to time be traded, in the over-the-counter market, or in independently
negotiated transactions or otherwise. The methods by which the shares may be
sold include:
o a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to facilitate
the transaction;
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its own account pursuant to this prospectus;
o exchange distributions and/or secondary distributions;
o sales in the over-the-counter market;
o underwritten transactions;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o privately negotiated transactions.
Such transactions may be effected by the selling stockholders at market
prices prevailing at the time of sale or at negotiated prices. The selling
stockholders may effect such transactions by selling the common stock to
underwriters or to or through broker-dealers, and such underwriters or
broker-dealers may receive compensations in the form of discounts or commissions
from the selling stockholders and may receive commissions from the purchasers of
the common stock for whom they may act as agent. The selling stockholders may
agree to indemnify any underwriter, broker-dealer or agent that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. We have agreed to
register the shares for sale under the Securities Act and to indemnify the
selling stockholders, certain representatives of the selling stockholders and
each person who participates as an underwriter in the offering of the shares
against certain civil liabilities, including certain liabilities under the
Securities Act.
In connection with sales of the securities under this prospectus, the
selling stockholders may enter into hedging transactions with broker-dealers,
who may in turn engage in short sales of the common stock in the course of
hedging the positions they assume. The selling stockholders also may sell shares
of common stock short and deliver them to close out the short positions, or loan
or pledge the shares of common stock to broker-dealers that in turn may sell
them.
The selling stockholders and any underwriters, dealers or agents that
participate in distribution of the shares may be deemed to be underwriters, and
any profit on sale of the shares by them and any discounts, commissions or
concessions received by any underwriter, dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.
There can be no assurances that the selling stockholders will sell any or
all of the shares offered under this prospectus.
