Exhibit 10.2
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
August ___ , 2005, by and among HARBIN ELECTRIC, INC., a Nevada corporation (the
"Company"), Xx. Xxxx Fu Xxxx, a resident of Heilongjiang Province, PRC (the
"Executive"), and each of the entities whose names appear on the signature pages
hereof. Such entities are, individually, referred to herein as a "Purchaser"
and, collectively, as the "Purchasers."
WHEREAS, the Company wishes to sell to the Purchasers, and the Purchasers
wish to purchase, on the terms and subject to the conditions set forth in this
Agreement, an aggregate of up to 1,600,000 shares of the Company's Common Stock,
par value $0.00001 (the "Shares"), at a price of $3.00 per share;
WHEREAS, the Company wishes to grant to the Purchasers, and the Purchasers
wish to accept, on terms and subject to the conditions set forth in this
Agreement, the option to purchase an aggregate of up to 480,000 Shares, at a
price of $3.50 per share;
WHEREAS, the Executive wishes to make certain personal guarantees with
respect to the performance of the Company, all in accordance with the terms and
conditions hereinafter provided;
WHEREAS, the sale of the Shares by the Company to the Purchasers will be
effected in reliance upon the exemption from securities registration afforded by
the provisions of Regulation D ("Regulation D"), as promulgated by the
Commission under the Securities Act; and
WHEREAS, the Company has agreed to effect the registration of the Shares
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a certain Registration Rights Agreement of even date (the "Registration Rights
Agreement"), by and between the Company and the Purchasers, in substantially the
form attached hereto as Exhibit "A".
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Purchaser
hereby agree as follows:
I. DEFINED TERMS. When used herein, the following terms shall have the
respective meanings indicated:
"Business Day" means any day on which the commercial banks in the Untied
States are open for business.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.00001.
"Exchange Act" means the Shares Exchange Act of 1934, as amended (or any
successor act), and the rules and regulations thereunder (or respective
successors thereto).
"Material Adverse Effect" means an effect that has material and adverse
consequences on (i) the consolidated business, operations, properties, financial
condition, or results of operations of the Company and its Subsidiaries taken as
1
a whole or (ii) the ability of the Company to perform its obligations under this
Agreement.
"Net Income" shall have the meaning set forth in Section 3.3 of this
Agreement.
"Subsidiaries" means Advanced Electric Motors, a Delaware corporation and
wholly-owned subsidiary of the Company, and Tech Full Electric Co., Ltd., a
Chinese company and wholly-owned subsidiary of Advanced Electric Motors.
"Trading Day" shall mean any day on which the Common Stock is purchased and
sold on the principal market on which the Common Stock is then listed or traded.
"Transaction Documents" means this Agreement and the Registration Rights
Agreement.
II. PURCHASE AND SALE OF SHARES; PURCHASE PRICE.
A. Sale and Purchase of Shares. Upon the terms and subject to the conditions
set forth herein, the Company agrees to sell and each Purchaser agrees to
purchase an aggregate of up to 1,600,000 Shares for the Purchase Price set
out in Section 2.3, which Purchase Price shall be paid in cash in
accordance with Section 2.4.
B. Closing; Closing Date. The date on which the closing of the purchase and
sale of the Shares occurs (the "Closing") is hereinafter referred to as the
"Closing Date". Subject to the satisfaction or waiver of the conditions set
forth herein, the Closing will be deemed to occur when (a) this Agreement
and the other Transaction Documents have been executed and delivered by,
respectively, the Company and each Purchaser (which delivery may be
effected by facsimile transmission), and (b) full payment of each
Purchaser's Purchase Price has been made by such Purchaser by wire transfer
of immediately available funds to an account designated by the Company
against physical delivery by the Company of duly executed certificates
representing the Shares purchased by such Purchaser. A different Closing
may occur for each Purchaser. The Company reserves the right to reject any
offer to purchase the Shares.
C. Purchase Price. As consideration for the sale of the Shares to the
Purchasers, the Purchasers shall pay collectively an aggregate purchase
price of $4,800,000. This sum, as it may be adjusted pursuant to this
Agreement, is the "Purchase Price." The portion of the Purchase Price to be
paid by each Purchaser (the "Closing Amount") is set fort beneath each
Purchaser's signature on the signature page hereto.
D. Payment of the Purchase Price. The Purchasers shall, on the Closing Date,
transfer to the designated bank account, by wire transfer of immediately
available funds no later than 2:00 in the afternoon (New York time) the
Closing Amount, as follows:
Bank: SHANGHAI PUDONG DEVELOPMENT BANK HARBIN BRANCH
Bank Address: Xx.000 Xxxxxxx Xxxx, Xxxxxxx District,
Post Code 150090, Harbin, Heilongjiang
Province, China
2
Swift Bic: XXXXXXXX000
Beneficiary: Harbin Tech.Full Electric Co., Ltd.
Credit A/C No.:65011455300000072
You may choose anyone from our correspondent U.S.D. settling banks:
1. Bank of America N.A. New York (SWIFT BIC:XXXXXX0X)
2. Citi Bank N.A. New York (SWIFT BIC:XXXXXX00)
3. American Express Bank (SWIFT BIC:XXXXXX00)
4. SWIFT: XXXXXX00XXX
III. POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE.
A. Escrow. As soon as practicable, but in any event within 45 days after the
Closing Date, the Executive shall transfer 480,000 Shares (the "Escrow
Amount"), personally owned by him, into an escrow (the "Escrow Account")
with an escrow company (the "Escrow Agent").
B. 2005 Performance Guaranty. The Company shall deliver the audited
consolidated financial statements for the Company, prepared in accordance
with GAAP, for the year ended December 31, 2005 (the "2005 Financial
Statements") to the Purchasers on or before April 30, 2006. If the 2005 Net
Income (as derived from the audited 2005 Financial Statements) is less than
$9,400,000 (the "2005 Threshold Amount"), then the Escrow Agent shall
transfer 240,000 Shares from the Escrow Account and distribute such Shares
to the Purchasers in the aggregate, and to each Purchaser, in the same
proportion as each Purchaser's Closing Amount bears to the aggregate
Purchase Price.
C. 2006 Performance Guaranty. The Company shall deliver the audited
consolidated financial statements for the Company, prepared in accordance
with GAAP, for the year ended December 31, 2006 (the "2006 Financial
Statements") to the Purchasers on or before April 30, 2007 (the "Final
Adjustment Determination Date"). If the 2006 Net Income (as derived from
the audited 2006 Financial Statements) is less than $12,400,000 (the "2006
Threshold Amount"), then the Escrow Agent shall transfer 240,000 Shares
from the Escrow Account and distribute such Shares to the Purchasers in the
aggregate, and to each Purchaser, in the same proportion as each
Purchaser's Closing Amount bears to the aggregate Purchase Price.
D. Release of Escrow. As soon as practicable, but in any event within 45 days
after the Final Adjustment Determination Date, the Escrow Agent shall
release to the Executive the Escrow Amount to the extent not previously
applied by the Escrow Agent as necessary to satisfy the performance
guarantees of this Article 3.
X. XXXXX OF OPTION. Simultaneous with the Closing, the Company shall grant
Options to the Purchasers pursuant to certain Stock Option Agreements (the
"Option Agreements") by and between the Company and each Purchaser
individually, in substantially the form attached hereto as Exhibit "B".
3
IV. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER. Each Purchaser hereby
makes the following representations and warranties to the Company and agrees
with the Company that, as of the date of this Agreement and as of the date of
each Closing:
A. Authorization; Enforceability. Such Purchaser is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization as set forth below such
Purchaser's name on the signature page hereof with full power and authority
to purchase the Shares and to execute and deliver this Agreement. This
Agreement constitutes such Purchaser's valid and legally binding
obligation, enforceable in accordance with its terms, except as such
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity.
B. Accredited Investor. Such Purchaser is an accredited investor as that term
is defined in Rule 501 of Regulation D, and is acquiring the Shares solely
for its own account as a principal and not with a present view to the
public resale or distribution of all or any part thereof, except pursuant
to sales that are exempt from the registration requirements of the
Securities Act and/or sales registered under the Securities Act; provided,
however, that in making such representation, such Purchaser does not agree
to hold the Shares for any minimum or specific term and reserves the right
to sell, transfer or otherwise dispose of the Shares at any time in
accordance with the provisions of this Agreement and with Federal and state
securities laws applicable to such sale, transfer or disposition.
C. Information. The Company has provided such Purchaser with information
regarding the business, operations and financial condition of the Company
and its Subsidiaries, and has granted to such Purchaser the opportunity to
ask questions of and receive answers from representatives of the Company,
its officers, directors, employees and agents concerning the Company and
its Subsidiaries and materials relating to the terms and conditions of the
purchase and sale of the Shares hereunder. Neither such information nor any
other investigation conducted by such Purchaser or any of its
representatives shall modify, amend or otherwise affect such Purchaser's
right to rely on the Company's representations and warranties contained in
this Agreement.
D. Limitations on Disposition. Such Purchaser acknowledges that, except as
provided in the Registration Rights Agreement, the Shares have not been and
are not being registered under the Securities Act and may not be
transferred or resold without registration under the Securities Act or
unless pursuant to an exemption therefrom.
E. Legend. Such Purchaser understands that the certificates representing the
Shares may bear at issuance a restrictive legend in substantially the
following form:
"The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
the securities laws of any state, and may not be offered or
sold unless a registration statement under the Securities
4
Act and applicable state securities laws shall have become
effective with regard thereto, or an exemption from
registration under said Securities Act and applicable state
securities laws is available in connection with such offer
or sale."
F. Reliance on Exemptions. Such Purchaser understands that the Shares are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States Federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations and warranties of such Purchaser set forth in this Section
2 in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Shares.
G. Non-Affiliate Status; Common Stock Ownership. Such Purchaser is not an
affiliate or an associate (as such terms are defined in Rule 12b-2
promulgated under the Exchange Act) of the Company or of any other
Purchaser and is not acting in association or concert with any other
Purchaser in regard to its purchase of Shares or otherwise in regard to the
Company. Such Purchaser's investment in Shares is not for the purpose of
acquiring, directly or indirectly, control of, and it has no intent to
acquire or exercise control of, the Company or to influence the decisions
or policies of the Company's Board of Directors.
V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes the
following representations and warranties to each Purchaser and agrees with each
Purchaser that, as of the date of this Agreement and as of the date of the
Closing:
A. Organization, Good Standing and Qualification. Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has
all requisite power and authority to carry on its business as now
conducted. Each of the Company and its Subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify has had or would reasonably be expected to have a
Material Adverse Effect.
B. Authorization; Consents. The Company has the requisite corporate power and
authority to enter into and perform its obligations under the Transaction
Documents, to issue and sell the Shares to the Purchasers in accordance
with the terms hereof. All corporate action on the part of the Company
necessary for the authorization, execution and delivery of, and the
performance by the Company of its obligations under, the Transaction
Documents has been taken, and no further consent or authorization of the
Company, its Board of Directors, its stockholders, any governmental agency
or organization (other than such approval as may be required under the
Securities Act and applicable state securities laws in respect of the
Registration Rights Agreement), or any other person or entity is required.
C. Enforcement. Each of the Transaction Documents constitutes the valid and
legally binding obligation of the Company, enforceable in accordance with
5
its terms, except as such enforcement may be limited by (i) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally and
(ii) general principles of equity.
D. Disclosure Documents. The Company has filed with the Commission reports on
Form 8-K on January 13, January 27, March 3, and May 12, 2005, Form 8-K/A
on March 4, 2005, Form 10-QSB on May 13, 2005, Form 8-K on July 6, 2005,
and Form 10-QSB on August 15, 2005 (collectively, the "Disclosure
Documents"). As of the date of such filing, the Disclosure Documents did
not contain an untrue statement of material fact or omit to state 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. As of their respective dates, the financial
statements of the Company included in the Disclosure Documents have been
prepared in accordance with generally accepted accounting principles
consistently applied at the times and during the periods involved.
E. Due Authorization; Valid Issuance. The Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof, (i) will be
duly and validly issued, fully paid and non-assessable, and (ii) based in
part upon the representations of each Purchaser in this Agreement, will be
issued, sold and delivered in compliance with all applicable Federal and
state securities laws.
F. No Conflict with Other Instruments. Neither the Company nor any of its
Subsidiaries is in violation of any provisions of its charter, bylaws or
any other governing document or in default (and no event has occurred
which, with notice or lapse of time or both, would constitute a default)
under any provision of any instrument or contract to which it is a party or
by which it is bound, which has had or would reasonably be expected to have
a Material Adverse Effect. The (i) execution, delivery and performance of
the Transaction Documents and (ii) consummation of the transactions
contemplated hereby and thereby (including without limitation, the issuance
of the Shares) will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument or contract or an
event which results in the creation of any encumbrance upon any assets of
the Company or of any of its Subsidiaries or the triggering of any
preemptive or anti-dilution rights or rights of first refusal or first
offer, or any other rights that would allow or permit the holders of the
Company's shares to purchase shares of Common Stock or other shares of the
Company.
G. Financial Condition. The Company and its Subsidiaries' financial condition
on a consolidated basis is, in all material respects, as described in the
Disclosure Documents, except for changes in the ordinary course of business
and changes that are not, in the aggregate, materially adverse to the
consolidated business or financial condition of the Company and its
Subsidiaries taken as a whole. Except as otherwise described in the
Disclosure Documents, there has been no material adverse change to the
Company's and Subsidiaries' business, operations, properties, financial
condition, prospects or results of operations since the date of the
financial statements contained in the Disclosure Documents.
6
H. Disclosure. No written statement, information, report, representation or
warranty made by the Company in any Transaction Document or furnished to
such Purchaser by or on behalf of the Company in connection with (i) the
Transaction Documents, (ii) any transaction contemplated hereby or thereby,
or (iii) such Purchaser's due diligence investigation of the Company
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein, in light
of the circumstances in which made, not misleading.
VI. COVENANTS OF THE COMPANY.
A. The Company agrees with each Purchaser that it will, following the Closing:
(1) subject to constraints that may from time to time exist by law, including
the provisions of the Securities Act and the Exchange Act and the
regulations promulgated thereunder, cause its management, upon request of
any of the Purchasers, to conduct quarterly conference calls with the
Purchasers to discuss financial results and the operations of the Company;
(2) retain research, investor relations professionals to assist in the
dissemination of the Company's financial results;
(3) on a best effort basis, have management conduct marketing trips to the U.S.
at least once a year to meet with both current and potential investors to
discuss the Company's current development and future prospects;
(4) on a reasonable effort basis, participate in investors conferences in the
U.S. when the opportunity arises; and
(5) apply to list its securities on the NASDAQ Small Cap Market as soon as it
becomes qualified.
B. Use of Proceeds. The Company shall use the net proceeds from the sale of
the Shares for general corporate purposes. The Company expects to use the
net proceeds for develop and manufacture the liner motor used in generator
control-box switch servo, automated three-dimensional warehouse and
logistical line, the allocation were as follows:
(1) $2 million for expansion of production capacity;
(2) $1 million for research and development;
(3) $0.25 million for the certification process for new products; and
(4) the balance will be used for general working capital, including the
employment of additional personnel, raw materials, market development and
sales.
VII. MISCELLANEOUS.
7
A. Amendment; Waiver. Any provision of this Agreement may be amended or waived
only pursuant to a written instrument executed by the Company and each
Purchaser. Any amendment or waiver affected in accordance with this
paragraph shall be binding upon each Purchaser and the Company. The failure
of any party to exercise any right or remedy under this Agreement or
otherwise, or the delay by any party in exercising such right or remedy,
shall not operate as a waiver thereof.
B. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which together shall be deemed one
and the same instrument. This Agreement, once executed by a party, may be
delivered to any other party hereto by facsimile transmission.
C. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within the State of New York.
D. Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
This Agreement is not assignable by either party without the prior written
consent of the other party.
E. Usage. For purposes of this Agreement, except as otherwise expressly
provided:
(1) all pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require;
(2) all terms defined in this Agreement in their singular or plural forms have
correlative meanings when used herein in their plural or singular forms,
respectively;
(3) unless otherwise expressly provided, the words "include," "includes" and
"including" do not limit the preceding words or terms and shall be deemed
to be followed by the words "without limitation" or "but not limited to,"
as applicable;
(4) all accounting terms not otherwise defined in this Agreement have the
meaning assigned to them in accordance with GAAP;
(5) the words "herein", "hereof" and "hereunder" and other words of similar
import as used in this Agreement refer to the Agreement as a whole and not
to any particular Article, Section or other subdivision;
(6) all references to "dollars" or "$" are U.S. dollars; and
(7) all references to "this Agreement" or to the "Preamble" or "any "Recital,"
"article," "Section.," "Annex," or "Schedule" in this Agreement are to this
Agreement itself or to the Preamble, recital, Article, Section, Annex, or
Schedule to or of this Agreement, unless otherwise indicated.
F. Articles and Sections. All references herein to Articles and Sections shall
be deemed references to such parts of this Agreement, unless the context
8
shall otherwise require. The Article and Section headings in this Agreement
are for reference only and shall not affect the interpretation of this
Agreement.
G. Interpretation. The parties acknowledge and agree that (a) each party and
its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision, (b) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this
Agreement, and (c) the terms and provisions of this Agreement shall be
construed fairly as to all parties, regardless of which party was generally
responsible for the preparation of this Agreement. Any Law defined or
referred to herein (or in any agreement or instrument that is referred to
herein) means such Law as, from time to time, may be amended, modified or
supplemented, including (in the case of statutes) by succession of
comparable successor statutes. References to a Person also refer to its
predecessors and permitted successors and assigns.
H. Severability of Provisions. If any provision or any portion of any
provision of this Agreement shall be held invalid or unenforceable, the
remaining portion of such provision and the remaining provisions of this
Agreement shall not be affected thereby. If the application of any
provision or any portion of any provision of this Agreement to any Person
or circumstance shall be held invalid or unenforceable, the application of
such provision or portion of such provision to Persons or circumstances
other than those as to which it is held invalid or unenforceable shall not
be affected thereby.
I. No Personal Liability. Except as set forth in Section 3.1 herein, this
Agreement (and each agreement, certificate and instrument delivered
pursuant hereto) shall not create or be deemed to create or permit any
personal liability or obligation on the part of any officer, director,
employee, agent, representative or investor of any party hereto.
J. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall
be an original, but all such counterparts together shall constitute one and
the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all, of the
parties hereto.
9
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first-above written.
HARBIN ELECTRIC, INC.
By: _________________________________
Name: Tian Fu Yang
Title: CEO
______________________________________
By: __________________________________
Name:
Title:
Address: _____________________________
_____________________________
Tax ID _____________________________
Tel: _____________________________
Fax: _____________________________
Number of Shares:_____________________
Purchase Price: _____________________
10
