SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT Dated as of October 3, 2007 among VICTORY DIVIDE MINING COMPANY and THE PURCHASERS LISTED ON EXHIBIT A
EXHIBIT
10.2
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT
Dated
as of October 3, 2007
among
and
THE
PURCHASERS LISTED ON EXHIBIT A
ARTICLE
I
|
Purchase
and Sale of Preferred Stock
|
4
|
Section
1.1
|
Purchase
and Sale of Stock
|
4
|
Section
1.2
|
Warrants
|
4
|
Section
1.3
|
Conversion
Shares
|
5
|
Section
1.4
|
Purchase
Price and Closing
|
5
|
Section
1.5
|
Share
Exchange Transaction
|
6
|
Section
1.6
|
Adjustment
in Per Share Purchase Price
|
6
|
ARTICLE
II
|
Representations
and Warranties
|
6
|
Section
2.1
|
Representations
and Warranties of the Company
|
6
|
Section
2.2
|
Representations
and Warranties of the Purchasers
|
18
|
ARTICLE
III
|
Covenants
|
21
|
Section
3.1
|
Securities
Compliance
|
21
|
Section
3.2
|
Registration
and Listing
|
21
|
Section
3.3
|
Inspection
Rights
|
21
|
Section
3.4
|
Compliance
with Laws
|
22
|
Section
3.5
|
Keeping
of Records and Books of Account
|
22
|
Section
3.6
|
Reporting
Requirements
|
22
|
Section
3.7
|
Amendments
|
22
|
Section
3.8
|
Other
Agreements
|
23
|
Section
3.9
|
Distributions
|
23
|
Section
3.10
|
Use
of Proceeds
|
23
|
Section
3.11
|
Reservation
of Shares
|
23
|
Section
3.12
|
Transfer
Agent Instructions
|
23
|
Section
3.13
|
Disposition
of Assets
|
24
|
Section
3.14
|
Reporting
Status
|
24
|
i
Section
3.15
|
Disclosure
of Transaction
|
24
|
Section
3.16
|
Disclosure
of Material Information
|
24
|
Section
3.17
|
Pledge
of Securities
|
24
|
Section
3.18
|
Form
SB-2 Eligibility
|
25
|
Section
3.19
|
Lock-Up
Agreement
|
25
|
Section
3.20
|
Investor
and Public Relations Escrow
|
25
|
Section
3.22
|
DTC
|
26
|
Section
3.23
|
Subsequent
Financings.
|
26
|
Section
3.24
|
Xxxxxxxx-Xxxxx
Act
|
28
|
Section
3.25
|
Exchange
Listing
|
28
|
Section
3.26
|
No
Commissions in connection with Conversion of Preferred
Shares
|
29
|
ARTICLE
IV
|
CONDITIONS
|
30
|
Section
4.1
|
Conditions
Precedent to the Obligation of the Company to Sell the
Shares
|
30
|
Section
4.2
|
Conditions
Precedent to the Obligation of the Purchasers to Purchase the
Shares
|
30
|
ARTICLE
V
|
Stock
Certificate Legend
|
33
|
Section
5.1
|
Legend
|
33
|
ARTICLE
VI
|
Indemnification
|
35
|
Section
6.1
|
General
Indemnity
|
35
|
Section
6.2
|
Indemnification
Procedure
|
35
|
ARTICLE
VII
|
Miscellaneous
|
36
|
Section
7.1
|
Fees
and Expenses
|
36
|
Section
7.2
|
Specific
Enforcement, Consent to Jurisdiction.
|
36
|
Section
7.3
|
Entire
Agreement; Amendment
|
37
|
ii
Section
7.4
|
Notices
|
37
|
Section
7.5
|
Waivers
|
38
|
Section
7.6
|
Headings
|
38
|
Section
7.7
|
Successors
and Assigns
|
38
|
Section
7.8
|
No
Third Party Beneficiaries
|
38
|
Section
7.9
|
Governing
Law
|
39
|
Section
7.10
|
Survival
|
39
|
Section
7.11
|
Counterparts
|
39
|
Section
7.12
|
Publicity
|
39
|
Section
7.13
|
Severability
|
39
|
Section
7.14
|
Further
Assurances
|
39
|
iii
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”),
is
dated as of October 3, 2007 by and among Victory Divide Mining Company, a Nevada
corporation (the “Company”),
and
each of the Purchasers of shares of Series A Convertible Preferred Stock of
the
Company whose names are set forth on Exhibit
A
hereto
(individually, a “Purchaser”
and
collectively, the “Purchasers”).
The
parties hereto agree as follows:
ARTICLE
I
Purchase
and Sale of Preferred Stock
Section
1.1 Purchase
and Sale of Stock.
Upon
the following terms and conditions, the Company shall issue and sell to the
Purchasers and each of the Purchasers shall purchase from the Company, the
number of shares of the Company’s Series A Convertible Preferred Stock, par
value $0.001 per share the “Preferred
Shares”
at
a
purchase price of $2.15 per share (subject to adjustment as set forth in Section
1.6 hereof) convertible into shares of the Company’s common stock, par value
$0.001 per share (the “Common
Stock”),
in
the amounts set forth opposite such Purchaser’s name on Exhibit
A
hereto.
The designation, rights, preferences and other terms and provisions of the
Series A Convertible Preferred Stock are set forth in the Series A Certificate
of Designation of the Relative Rights and Preferences of the Series A
Convertible Preferred Stock attached hereto as Exhibit
B
(the
“Series
A Certificate of Designation”).
The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“Commission”)
under
the Securities Act of 1933, as amended (the “Securities
Act”)
or
Section 4(2) of the Securities Act.
Section
1.2 Warrants.
Upon
the following terms and conditions and for no additional consideration, except
in the case of the Series J Warrants (as hereinafter defined), (i) each of
the
Purchasers shall be issued (x) Series A Warrants, in substantially the form
attached hereto as Exhibit C-1 (the “Series
A Warrants”),
to
purchase the number of shares of Common Stock equal to one hundred percent
(100%) of the number of shares of Common Stock issuable upon conversion of
the
Preferred Shares purchased by each Purchaser pursuant to the terms of this
Agreement, as set forth opposite such Purchaser’s name on Exhibit
A
hereto,
(y) Series B Warrants, in substantially the form attached hereto as Exhibit
C-2 (the “Series
B Warrants”)
to
purchase the number of shares of Common Stock equal to fifty percent (50%)
of
the number of shares of Common Stock issuable upon conversion of the Preferred
Shares purchased by each Purchaser pursuant to the terms of this Agreement,
as
set forth opposite such Purchaser’s name on Exhibit
A
hereto
and (ii) each Purchaser who purchases not less than $4,000,000 Preferred Shares,
shall also be issued (x) a Series J Warrant, in substantially the form attached
hereto as Exhibit C-3 (the “Series
J Warrant”),
to
purchase such number of Series B Convertible Preferred Shares, par value $0.001
per share (the “Series
B Shares”)
equal
to the Purchase Price (as defined below) paid by such Purchaser pursuant to
this
Agreement as set forth opposite such Purchaser’s name on Exhibit
A
hereto
divided by $2.37 or, if the Purchase Price is reduced, 110% of the adjusted
per
share Purchase Price as determined in accordance with Section 1.6 hereof, (y)
a
Series C Warrant, in substantially the form attached hereto as Exhibit C-4
(the
“Series
C Warrant”)
to
purchase the number of shares of Common Stock equal to one hundred percent
(100%) of the number of Series B Shares purchased by such Purchaser pursuant
to
the Series J Warrant, and (z) a Series D Warrant, in substantially the form
attached hereto as Exhibit C-5 (the “Series
D Warrant”
and,
together with the Series B Warrants, the Series A Warrants, the Series J Warrant
and the Series C Warrant, the “Warrants”)
to
purchase the number of shares of Common Stock equal to fifty percent (50%)
of
the number of Series B Shares purchased by such Purchasers pursuant to the
Series J Warrant. The Warrants shall expire five (5) years following the Closing
Date, except for the Series J Warrant, which shall expire upon eighteen (18)
months following the Closing Date. Each of the Warrants shall have an exercise
price per share equal to the Warrant Price (as defined in the applicable
Warrant).
4
Section
1.3 Conversion
Shares.
The
Company has authorized and has reserved and covenants to continue to reserve,
free of preemptive rights and other similar contractual rights of stockholders,
a number of shares of Common Stock equal to one hundred fifty percent (150%)
of
the number of shares of Common Stock as shall from time to time be sufficient
to
effect the conversion of all of the Preferred Shares and exercise of the
Warrants then outstanding. Any shares of Common Stock issuable upon conversion
of the Preferred Shares and exercise of the Warrants (and such shares when
issued) are herein referred to as the “Conversion
Shares”
and
the
“Warrant
Shares”,
respectively. The Preferred Shares, the Conversion Shares and the Warrant Shares
are sometimes collectively referred to as the “Shares”.
Section
1.4 Purchase
Price and Closing.
Subject
to the terms and conditions hereof, the Company agrees to issue and sell to
the
Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the Preferred
Shares and the Warrants for an aggregate purchase price of $21,500,000 (the
“Purchase
Price”).
The
closing of the purchase and sale of the Preferred Shares and the Warrants to
be
acquired by the Purchasers from the Company under this Agreement shall take
place at the offices of Loeb & Loeb LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the “Closing”)
at
10:00 a.m., New York time on such date as the Purchasers and the Company may
agree upon; provided,
that
(i) all of the conditions set forth in Article IV hereof and applicable to
the
Closing shall have been fulfilled or waived in accordance herewith and (ii)
the
Purchase Price has been deposited in escrow, in accordance the terms of the
Escrow Agreement (the “Closing
Date”).
In no
event shall the Closing take place until the total Purchase Price has been
deposited in the escrow account; provided,
however,
that if
the Company receives prior written instructions from Vision to consummate the
transactions contemplated by this Agreement prior to receipt of the total
Purchase Price, the Closing shall occur subject to the per share Purchase Price
adjustments as determined in accordance with Section 1.6 hereof. Subject to
the
terms and conditions of this Agreement, at the Closing the Company shall deliver
or cause to be delivered to each Purchaser (x) a certificate for the number
of
Preferred Shares set forth opposite the name of such Purchaser on Exhibit
A
hereto,
(y) its Warrants to purchase such number of shares of Common Stock and Series
B
Shares, as the case may be, as is set forth opposite the name of such Purchaser
on Exhibit
A
attached
hereto and (z) any other documents required to be delivered pursuant to Article
IV hereof. At the Closing, each Purchaser shall deliver its Purchase Price
by
wire transfer to the escrow account pursuant to the Escrow Agreement (as
hereafter defined). In addition, the parties acknowledge that Five Hundred
Thousand Dollars ($500,000) of the Purchase Price funded on the Closing Date
shall be deposited into a separate escrow account pursuant to the Investor
and
Public Relations Escrow Agreement (as hereinafter defined) to be used by the
Company in connection with investor and public relations and securities law
compliance, in accordance with Section 3.20 hereof.
5
Section
1.5 Share
Exchange Transaction.
The
parties acknowledge that immediately prior to the consummation of the
transactions contemplated by this Agreement, the Company will issue shares
of
its Common Stock to Winner State Investments Limited, a company organized in
the
British Virgin Islands (“Winner
State”),
pursuant to that certain Share Exchange Agreement dated as of the date hereof
by
and among the Company and Winner State (the “Share
Exchange Agreement”),
and
upon the consummation of the transactions contemplated by the Share Exchange
Agreement, Faith Winner Investments Limited, a company organized in the British
Virgin Islands and a direct wholly-owned subsidiary of Winner State immediately
prior to the consummation of the transactions contemplated by the Share Exchange
Agreement, will become a wholly-owned subsidiary of the Company (the
“Share
Exchange Transaction”).
Section
1.6 Adjustment
in Purchase Price. It
is
hereby acknowledged and agreed by the Company and each of the Purchasers that
the pre-money valuation of Yanglin Soybean Group (“Yanglin”) is $43,000,000 (the
“Pre-Money
Valuation”).
In
the event that at the time of the Closing, the aggregate Purchase Price in
the
amount of $21,500,000 has not been deposited in the escrow account pursuant
to
the Escrow Agreement, the per share Purchase Price of $2.15 shall be reduced
to
such number that is the quotient of (x) the sum of (i) the Pre-Money Valuation
and (ii) the
amount of the Purchase Price that has been deposited as of the Closing Date,
divided by (y) 30,000,000, which represents the number of issued and outstanding
shares of the Company upon consummation of the Share Exchange Transaction and
the transactions contemplated by this Agreement.
ARTICLE
II
Representations
and Warranties
Section
2.1 Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchasers, as of the date hereof
and the Closing Date (except as set forth on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein),
as follows:
(a) Organization,
Good Standing and Power.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada and has the requisite corporate
power to own, lease and operate its properties and assets and to conduct its
business as it is now being conducted. Prior to the closing under the Share
Exchange Agreement, the Company did not have any subsidiaries except as set
forth in the Company’s Form 10-KSB for the year ended December 31, 2006,
including the accompanying financial statements (the “Form
10-KSB”),
or in
the Quarterly Reports on Form 10-QSB for its fiscal quarters ended March 31,
2007 and June 30, 2007 (collectively, the “Form
10-QSBs”).
Except as set forth on Schedule
2.1(a),
the
Company and each such subsidiary is duly qualified as a foreign corporation
to
do business and is in good standing in every jurisdiction in which the nature
of
the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the aggregate) in which
the failure to be so qualified will not have a Material Adverse Effect (as
defined in Section 2.1(c) hereof) on the Company’s financial
condition.
6
(b) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement in the form attached
hereto as Exhibit
D-1(the
“Registration
Rights Agreement”),
the
Series J Registration Rights Agreement in the form attached hereto as
Exhibit
D-2
(the
“Series
J Registration Rights Agreement”),
the
Lock-Up Agreement (as defined in Section 3.19 hereof) in the form attached
hereto as Exhibit
E,
the
Escrow Agreement by and among the Company, the Purchasers and the escrow agent
named therein, dated as of the date hereof, substantially in the form of
Exhibit
F-1
attached
hereto (the “
Escrow Agreement”),
the
Investor and Public Relations Escrow Agreement by and among the Company, the
Purchasers and the escrow agent named therein, dated as of the date hereof,
substantially in the form of Exhibit
F-2
attached
hereto (the “Investor
and Public Relations Escrow Agreement”),
the
Securities Escrow Agreement by and among the Company, the Purchasers and the
escrow agent named therein, dated as of the date hereof, substantially in the
form of Exhibit
F-3
attached
hereto (the “Securities
Escrow Agreement”
and
together with the Escrow Agreement and the Investor and Public Relations Escrow
Agreement the “Escrow
Agreements”),
the
Irrevocable Transfer Agent Instructions (as defined in Section 3.12), the Series
A Certificate of Designation, and the Warrants (collectively, the “Transaction
Documents”)
and to
issue and sell the Shares and the Warrants in accordance with the terms hereof.
The execution, delivery and performance of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby
and
thereby have been duly and validly authorized by all necessary corporate action,
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required. This Agreement has been duly executed and delivered
by the Company. The other Transaction Documents will have been duly executed
and
delivered by the Company at the Closing. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.
(c) Capitalization.
The
authorized capital stock of the Company and the shares thereof currently issued
and outstanding as of the date hereof are set forth on Schedule
2.1(c)
hereto.
All of the outstanding shares of the Common Stock and the Preferred Shares
have
been duly and validly authorized. Except as contemplated by the Transaction
Documents or as set forth on Schedule
2.1(c)
hereto,
no shares of Common Stock are entitled to preemptive rights or registration
rights and there are no outstanding options, warrants, scrip, rights to
subscribe to, call or commitments of any character whatsoever relating to,
or
securities or rights convertible into, any shares of capital stock of the
Company. Except as contemplated by the Transaction Documents, there are no
contracts, commitments, understandings, or arrangements by which the Company
is
or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except as contemplated by the Transaction Documents or
as
set forth on Schedule
2.1(c)
hereto,
the Company is not a party to any agreement granting registration or
anti-dilution rights to any person with respect to any of its equity or debt
securities. Except for the Lock-up Agreement, the Company is not a party to,
and
it has no knowledge of, any agreement restricting the voting or transfer of
any
shares of the capital stock of the Company. The offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued prior to the Closing complied with all applicable Federal and state
securities laws, and no stockholder has a right of rescission or claim for
damages with respect thereto which would have a Material Adverse Effect (as
defined below). The (i) 200 for 1 reverse stock split of the Common Stock
described in the Schedule 14C Information Statement filed with the Securities
and Exchange Commission the (“SEC”) on March 19, 2007 and (ii) 1 for 100 forward
stock split of the Common Stock effected on September 14, 2007, 2007, were
authorized and approved by the Company’s Board of Directors and stockholders, as
necessary, and complied in all respects with the laws of the State of Nevada
and
all applicable Federal and state securities laws, and no stockholder has a
claim
for damages with respect thereto. The Company has furnished or made available
to
the Purchasers true and correct copies of the Company’s Articles of
Incorporation as in effect on the date hereof (the “Articles”),
and
the Company’s Bylaws as in effect on the date hereof (the “Bylaws”).
For
the purposes of this Agreement, “Material
Adverse Effect”
means
any material adverse effect on the business, operations, properties, or
financial condition of the Company and its subsidiaries and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its obligations under this
Agreement in any material respect.
7
(d) Issuance
of Shares.
The
Preferred Shares and the Warrants to be issued at the Closing have been duly
authorized by all necessary corporate action and the Preferred Shares, when
paid
for or issued in accordance with the terms hereof, shall be validly issued
and
outstanding, fully paid and nonassessable and entitled to the rights and
preferences set forth in the Series A Certificate of Designation. When the
Conversion Shares and the Warrant Shares are issued in accordance with the
terms
of the Series A Certificate of Designation and the Warrants, respectively,
such
shares will be duly authorized by all necessary corporate action and validly
issued and outstanding, fully paid and nonassessable, and the holders shall
be
entitled to all rights accorded to a holder of Common Stock.
(e) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated herein
and
therein do not and will not (i) violate any provision of the Company’s Articles
or Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party or by which
it or its properties or assets are bound, (iii) create or impose a lien,
mortgage, security interest, charge or encumbrance of any nature on any property
of the Company under any agreement or any commitment to which the Company is
a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to
the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries are bound or affected, except, in all cases
other than violations pursuant to clauses (i) and (iv) above, for such
conflicts, defaults, terminations, amendments, accelerations, cancellations
and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in
the
aggregate do not and will not have a Material Adverse Effect. The Company is
not
required under Federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with,
any
court or governmental agency in order for it to execute, deliver or perform
any
of its obligations under the Transaction Documents, or issue and sell the
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares
in
accordance with the terms hereof or thereof (other than (x) any consent,
authorization or order that has been obtained as of the date hereof, (y) any
filing or registration that has been made as of the date hereof or (z) any
filings which may be required to be made by the Company with the Commission
or
state securities administrators subsequent to the Closing; provided,
that,
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchasers herein.
8
(f) Commission
Documents, Financial Statements.
The
Common Stock is currently registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended the “Exchange
Act”),
and
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant
to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
“Commission
Documents”).
At
the request of such Purchaser, the Company has delivered or made available
to
each of the Purchasers true and complete copies of any Commission Documents
which are not available on the Commission’s website at xxx.xxx.xxx. The Company
has not provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, was required
to have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. At the times of their respective filings, the Form 10-KSB and the
Form 10-QSBs and the current report on Form 8-K that is required to be and shall
be filed by the Company within four business days after the Closing Date to
disclose the transactions contemplated hereby and under the other Transaction
Documents and the transactions contemplated by the Share Exchange Agreement
and
the Restructuring Agreements (as defined in Section 2.1(gg) hereof) (the
“Form
8-K”),
complied and, in the case of the Form 8-K, will comply in all material respects
with the requirements of the Exchange Act and the rules and regulations of
the
Commission promulgated thereunder and other federal, state and local laws,
rules
and regulations applicable to such documents, and, as of respective dates,
neither the Form 10-KSB nor the Form 10-QSBs contained or, in the case of the
Form 8-K, will contain any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were
made, not misleading. The financial statements of the Company included in the
Commission Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto.
Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as may
be
otherwise indicated in such financial statements or the notes thereto or (ii)
in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in
all
material respects the financial position of the Company and its subsidiaries
as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). The Yanglin Financial Statements (as defined in
Section 4.2(t) hereof) comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. The Yanglin Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved and fairly present in all material respects,
the financial condition of Yanglin as defined in Section 4.2(t) hereof and
its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended.
9
(g) Subsidiaries.
Schedule
2.1(g)
hereto
sets forth each subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person’s
ownership. For the purposes of this Agreement, “subsidiary”
shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. All of the outstanding shares of capital
stock of each subsidiary have been duly authorized and validly issued, and
are
fully paid and nonassessable. Other than as contemplated by the Transaction
Documents, there are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
subsidiary for the purchase or acquisition of any shares of capital stock of
any
subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Other
than as contemplated by the Transaction Documents, neither the Company nor
any
subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is party
to,
nor has any knowledge of, any agreement restricting the voting or transfer
of
any shares of the capital stock of any subsidiary.
(h) No
Material Adverse Effect.
Other
than as disclosed in the Company’s Commission Documents, since June 30, 2007,
neither the Company nor any of its subsidiaries has experienced or suffered
any
Material Adverse Effect.
(i) No
Undisclosed Liabilities.
Except
as disclosed in the Form 10-KSB, the Form 10-QSBs and the Form 8-K, neither
the
Company nor any of its subsidiaries has any liabilities, obligations, claims
or
losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) other than those incurred in the ordinary
course of the Company’s or its subsidiaries’ respective businesses since June
30, 2007 and which, individually or in the aggregate, do not or would not have
a
Material Adverse Effect on the Company or its subsidiaries.
(j) No
Undisclosed Events or Circumstances.
To the
Company’s knowledge, no event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or
disclosed.
10
(k) Indebtedness.
The
Form 10-KSB and Form 10-QSBs do, and the Form 8-K will set forth all outstanding
secured and unsecured Indebtedness of the Company or any subsidiary, or for
which the Company or any subsidiary has commitments. For the purposes of this
Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
Indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of
any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary
is
in default with respect to any Indebtedness.
(l) Title
to Assets.
Each of
the Company and the subsidiaries has good and marketable title to all of its
real and personal property reflected in the Form 10-KSB, Form 10-QSBs and in
the
Form 8-K free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, all properties and assets (i) purportedly
owned
or used by them as reflected in the Form 10-KSB, Form 10-QSBs, and the Form
8-K
or (ii) necessary for the conduct of their business as currently conducted
except for those disclosed in the Form 10-KSB, Form 10-QSBs and the Form 8-K.
All leases of the Company and each of its subsidiaries are valid and subsisting
and in full force and effect.
(m) Actions
Pending.
There
is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or any other proceeding pending or, to the knowledge
of
the Company, threatened against the Company or any subsidiary which questions
the validity of this Agreement or any of the other Transaction Documents or
the
transactions contemplated hereby or thereby or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees
of
any court, arbitrator or governmental or regulatory body against the Company
or
any subsidiary or any executive officers or directors of the Company or
subsidiary in their capacities as such.
(n) Compliance
with Law.
The
business of the Company and the subsidiaries has been and is presently being
conducted in material compliance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances. The Company and each
of
its subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business in all material respects as now being conducted by
it
unless the failure to possess such franchises, permits, licenses, consents
and
other governmental or regulatory authorizations and approvals, individually
or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
11
(o) Taxes.
The
Company and each of the subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has
paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected
in
the financial statements of the Company and the subsidiaries for all current
taxes and other charges to which the Company or any subsidiary is subject and
which are not currently due and payable. None of the federal income tax returns
of the Company or any subsidiary have been audited by the Internal Revenue
Service. The Company has no knowledge of any additional assessments, adjustments
or contingent tax liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Company or any subsidiary for any
period, nor of any basis for any such assessment, adjustment or
contingency.
(p) Certain
Fees.
Except
as set forth on Schedule
2.1(p)
hereto,
no brokers, finders or financial advisory fees or commissions will be payable
by
the Company or any subsidiary with respect to the transactions contemplated
by
this Agreement and the other Transaction Documents.
(q) Disclosure.
Neither
this Agreement nor the Schedules hereto nor any other documents, certificates
or
instruments furnished to the Purchasers by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material
fact
necessary in order to make the statements made herein or therein, taken as
a
whole and in the light of the circumstances under which they were made herein
or
therein, not false or misleading.
(r) Operation
of Business.
The
Company and each of the subsidiaries owns or possesses all patents, trademarks,
domain names (whether or not registered) and any patentable improvements or
copyrightable derivative works thereof, websites and intellectual property
rights relating thereto, service marks, trade names, copyrights, licenses and
authorizations, and all rights with respect to the foregoing, which are
necessary for the conduct of its business as now conducted without any conflict
with the rights of others, except where the failure to so own or possess would
not have a Material Adverse Effect.
(s) Environmental
Compliance.
Since
their inception, neither the Company, nor any of its subsidiaries have been,
in
violation of any applicable law relating to the environment or occupational
health and safety, where such violation would have a material adverse effect
on
the business or financial condition of any of the Company and its Subsidiaries.
Each of the Company and its Subsidiaries has operated all facilities and
properties owned, leased or operated by it in material compliance with the
Environmental Laws. “Environmental
Laws”
shall
mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. The Company
has
all necessary governmental approvals required under all Environmental Laws
and
used in its business or in the business of any of its subsidiaries. The Company
and each of its subsidiaries are also in material compliance with all other
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws. There are no past
or present events, conditions, circumstances, incidents, actions or omissions
relating to or in any way affecting the Company or its subsidiaries that violate
or may violate any Environmental Law after the Closing Date or that may give
rise to any environmental liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation (i) under
any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.
12
(t) Books
and Record Internal Accounting Controls.
Except
as otherwise disclosed in the Form 10-KSB, the Form 10-QSBs, or the Form 8-K,
the books and records of the Company and its subsidiaries accurately reflect
in
all material respects the information relating to the business of the Company
and the subsidiaries, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or accounts receivable
of the Company or any subsidiary. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment
of
the Company, to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions are taken with respect to any differences.
(u) Material
Agreements.
Except
for this Agreement and other Transaction Documents, neither the Company nor
any
subsidiary is a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Commission as an exhibit to a registration statement on
Form SB-2 or Form S-1, as the case may be (collectively, the “Material
Agreements”)
if the
Company or any subsidiary were registering securities under the Securities
Act,
or in any report, schedule, form, statement or other document required to be
filed by it pursuant to the Exchange Act. The Company and each of its
subsidiaries has in all material respects performed all the obligations required
to be performed by them to date under the foregoing agreements, have received
no
notice of default and are not in default under any Material Agreement now in
effect the result of which would cause a Material Adverse Effect. Except as
restricted under applicable laws and regulations, the incorporation documents,
certificates of designations or the Transaction Documents, no written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement
of
the Company or of any subsidiary limits or shall limit the payment of dividends
on the Company’s Preferred Shares, other preferred stock, if any, or its Common
Stock.
(v) Transactions
with Affiliates.
Except
as set forth in the Commission Documents or the Transaction Documents, there
are
no loans, leases, agreements, contracts, royalty agreements, management
contracts or arrangements or other continuing transactions between (a) the
Company or any subsidiary on the one hand, and (b) on the other hand, any
officer, employee, consultant or director of the Company, or any of its
subsidiaries, or any person owning any capital stock of the Company or any
subsidiary or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder,
or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.
13
(w) Securities
Act of 1933.
Based
in material part upon the representations herein of the Purchasers, the Company
has complied and will comply with all applicable federal and state securities
laws in connection with the offer, issuance and sale of the Shares and the
Warrants hereunder. Neither the Company nor anyone acting on its behalf,
directly or indirectly, has or will sell, offer to sell or solicit offers to
buy
any of the Shares, the Warrants or similar securities to, or solicit offers
with
respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person, or has taken or will take any
action so as to bring the issuance and sale of any of the Shares and the
Warrants in violation of the registration provisions of the Securities Act
and
applicable state securities laws, and neither the Company nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale
of
any of the Shares and the Warrants.
(x) Governmental
Approvals.
Except
for the filing of any notice prior or subsequent to the Closing Date that may
be
required under applicable state and/or Federal securities laws (which if
required, shall be filed on a timely basis), including the filing of a Form
D
and a registration statement or statements (the “Registration
Statement”)
pursuant to the Registration Rights Agreement, and the filing of the Series
A
Certificate of Designation with the Secretary of State for the State of Nevada,
no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Preferred Shares
and the Warrants, or for the performance by the Company of its obligations
under
the Transaction Documents.
(y) Employees.
Except
as disclosed in the Commission Documents or the Form 8-K, neither the Company
nor any subsidiary has any collective bargaining arrangements or agreements
covering any of its employees. Except as disclosed in the Commission Documents
or the Form 8-K, neither the Company nor any subsidiary has any employment
contract, agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
subsidiary required to be disclosed in the Commission Documents on the Form
8-K
that is not so disclosed. Since June 30, 2007, no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, would have a Material Adverse Effect, has terminated or,
to
the knowledge of the Company, has any present intention of terminating his
or
her employment or engagement with the Company or any subsidiary.
(z) Absence
of Certain Developments.
Since
June 30, 2007, neither the Company nor any subsidiary has:
14
(i) issued
any stock, bonds or other corporate securities or any rights, options or
warrants with respect thereto;
(ii) borrowed
any amount or incurred or become subject to any liabilities (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of
its
prior fiscal year, as adjusted to reflect the current nature and volume of
the
Company’s or such subsidiary’s business;
(iii) discharged
or satisfied any lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business;
(iv) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements
so
to purchase or redeem, any shares of its capital stock;
(v) sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, except in the ordinary course of business;
(vi) sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights, or
disclosed any proprietary confidential information to any person except to
customers in the ordinary course of business or to the Purchasers or their
representatives;
(vii) suffered
any substantial losses or waived any rights of material value, whether or not
in
the ordinary course of business, or suffered the loss of any material amount
of
prospective business;
(viii) made
any
changes in employee compensation except in the ordinary course of business
and
consistent with past practices;
(ix) made
capital expenditures or commitments therefor that aggregate in excess of
$50,000;
(x) entered
into any other transaction other than in the ordinary course of business, or
entered into any other material transaction, whether or not in the ordinary
course of business;
(xi) made
charitable contributions or pledges in excess of $10,000;
(xii) suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;
(xiii) experienced
any material problems with labor or management in connection with the terms
and
conditions of their employment;
15
(xiv) effected
any two or more events of the foregoing kind which in the aggregate would be
material to the Company or its subsidiaries; or
(xv) entered
into an agreement, written or otherwise, to take any of the foregoing
actions.
(aa) Public
Utility Holding Company Act and Investment Company Act Status.
The
Company is not a “holding company” or a “public utility company” as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended.
The
Company is not, and as a result of and immediately upon the Closing will not
be,
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
(bb) ERISA.
No
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan (as defined below) by the Company or any of its subsidiaries
which is or would be materially adverse to the Company and its subsidiaries.
The
execution and delivery of this Agreement and the other Transaction Documents
and
the issuance and sale of the Preferred Shares and the Warrants will not involve
any transaction which is subject to the prohibitions of Section 406 of ERISA
or
in connection with which a tax could be imposed pursuant to Section 4975 of
the
Internal Revenue Code of 1986, as amended, provided, that, if any of the
Purchasers, or any person or entity that owns a beneficial interest in any
of
the Purchasers, is an “employee pension benefit plan” (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a “party in
interest” (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in
this
Section 2.1(ac), the term “Plan”
shall
mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which
is or has been established or maintained, or to which contributions are or
have
been made, by the Company or any subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any subsidiary, is
under common control, as described in Section 414(b) or (c) of the
Code.
(cc) Dilutive
Effect.
The
Company understands and acknowledges that it has an obligation to issue
Conversion Shares upon conversion of the Preferred Shares in accordance with
this Agreement and the Series A Certificate of Designation and to issue the
Warrant Shares upon the exercise of the Warrants in accordance with this
Agreement and the Warrants regardless of the dilutive effect that such issuance
may have on the ownership interest of other stockholders of the
Company.
(dd) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or 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 cause
the offering of the Shares pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the Securities Act which would
prevent the Company from selling the Shares pursuant to Rule 506 under the
Securities Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Shares to be integrated
with other offerings. The Company does not have any registration statement
pending before the Commission or currently under the Commission’s review and
since March 1, 2007, except as contemplated under the Transaction Documents,
the
Company has not offered or sold any of its equity securities or debt securities
convertible into shares of Common Stock.
16
(ee) Independent
Nature of Purchasers.
The
Company acknowledges that the obligations of each Purchaser under the
Transaction Documents are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under the Transaction
Documents. The Company acknowledges that the decision of each Purchaser to
purchase securities pursuant to this Agreement has been made by such Purchaser
independently of any other purchase and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company or of its Subsidiaries which may have
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any Purchaser (or any other person) relating to or arising from
any
such information, materials, statements or opinions. The Company acknowledges
that nothing contained herein, or in any Transaction Document, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Purchaser shall be entitled to independently protect and enforce
its
rights, including without limitation, the rights arising out of this Agreement
or out of the other Transaction Documents, and it shall not be necessary for
any
other Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for one of the
Purchasers and such counsel does not represent all of the Purchasers but only
such Purchaser and the other Purchasers have retained their own individual
counsel with respect to the transactions contemplated hereby. The Company
acknowledges that it has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because
it
was required or requested to do so by the Purchasers.
(ff) Transfer
Agent.
The
name, address, telephone number, fax number, contact person and email address
of
the Company’s current transfer agent is set forth on Schedule
2.1(ff)
hereto.
(gg) Subject
to the consummation of the Share Exchange Transaction, the Company represents
on
behalf of Faith Winner (Jixian) Agriculture Development Company Limited
(“WFOE”),
a
“wholly-owned foreign enterprise” organized under the laws of the People’s
Republic of China (the “PRC”)
and,
upon consummation of the Share Exchange Transaction, an indirect wholly-owned
subsidiary of the Company:
(i) that
WFOE
has the legal right, power and authority (corporate and other) to enter into
and
perform its obligations under each of agreements as set forth on Schedule
2.1(gg)
(collectively, the “Restructuring
Agreements”)
to
which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of, and has authorized, executed and
delivered, each of the Restructuring Agreements to which it is a party; and
each
of the Restructuring Agreements to which WFOE is a party constitutes a valid
and
legally binding obligation of WFOE, enforceable in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to
or affecting creditors’ rights and to general equity principles.
17
(ii) that
WFOE
does not own or lease properties or conduct any business outside of the PRC
and
that WFOE does not need to be duly qualified as a foreign corporation for the
transaction of business under the laws of any jurisdiction in which it is not
now so qualified.
(iii) that
the
execution and delivery by WFOE of, and the performance by WFOE of its
obligations under, each of the Restructuring Agreements to which it is a party
and the consummation by WFOE of the transactions contemplated therein will
not:
(A) conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of
trust, loan agreement or other agreement or instrument to which WFOE is a party
or by which WFOE is bound or to which any of the properties or assets of WFOE
is
subject; (B) result in any violation of the provisions of the articles of
association or business license of WFOE; and (C) will not result in any
violation of any laws, regulations, rules, orders, decrees, guidelines or
notices of the PRC, except that, with respect to (A) and (C), such conflict,
breach or violation would not reasonably be expected to have a Material Adverse
Effect on WFOE.
(iv) that
each
of the Restructuring Agreements is in proper and enforceable legal form under
the laws of the PRC and to ensure the legality, validity, enforceability or
admissibility in evidence of each of the Restructuring Agreements in the PRC,
it
is not necessary that any such document be filed or recorded with any court
or
other authority in the PRC or that any stamp or similar tax be paid on or in
respect of any of the Restructuring Agreements, except as set forth on
Schedule
2.1(gg)(iv).
(v) that
Sun
Xx Xxxx Kai Soybean Processing Co. Ltd., is not now and has never been a
subsidiary of, or otherwise affiliated with Yanglin.
Section
2.2 Representations
and Warranties of the Purchasers.
Each
Purchaser hereby makes the following representations and warranties to the
Company as of the date hereof and Closing Date, with respect solely to itself
and not with respect to any other Purchaser:
(a) Organization
and Good Standing of the Purchasers.
If the
Purchaser is an entity, such Purchaser is a corporation, partnership or limited
liability company duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization
and Power.
Each
Purchaser has the requisite power and authority to enter into and perform this
Agreement and each of the other Transaction Documents to which such Purchaser
is
a party and to purchase the Preferred Shares and Warrants being sold to it
hereunder. The execution, delivery and performance of this Agreement and each
of
the other Transaction Documents to which such Purchaser is a party by such
Purchaser and the consummation by it of the transactions contemplated hereby
and
thereby have been duly authorized by all necessary corporate or partnership
action, and no further consent or authorization of such Purchaser or its Board
of Directors, stockholders, or partners, as the case may be, is required. This
Agreement and each of the other Transaction Documents to which such Purchaser
is
a party has been duly authorized, executed and delivered by such Purchaser
and
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of such Purchaser enforceable against such Purchaser in
accordance with the terms thereof.
18
(c) No
Conflicts.
The
execution, delivery and performance of this Agreement and each of the other
Transaction Documents to which such Purchaser is a party and the consummation
by
such Purchaser of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Purchaser’s charter
documents, bylaws, operating agreement, partnership agreement or other
organizational documents or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Purchaser is a party or by which its properties or assets are bound, or
result in a violation of any law, rule, or regulation, or any order, judgment
or
decree of any court or governmental agency applicable to such Purchaser or
its
properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a material adverse effect on such
Purchaser). Such Purchaser is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or any other Transaction Document to which such Purchaser
is a party or to purchase the Preferred Shares or acquire the Warrants in
accordance with the terms hereof, provided, that for purposes of the
representation made in this sentence, such Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) Acquisition
for Investment.
Each
Purchaser is acquiring the Preferred Shares and the Warrants solely for its
own
account for the purpose of investment and not with a view to or for sale in
connection with distribution. Each Purchaser does not have a present intention
to sell the Preferred Shares or the Warrants, nor a present arrangement (whether
or not legally binding) or intention to effect any distribution of the Shares
or
the Warrants to or through any person or entity; provided,
however,
that by
making the representations herein and subject to Section 2.2(h) below, such
Purchaser does not agree to hold the Shares or the Warrants for any minimum
or
other specific term and reserves the right to dispose of the Shares or the
Warrants at any time in accordance with Federal and state securities laws
applicable to such disposition. Each Purchaser acknowledges that it is able
to
bear the financial risks associated with an investment in the Shares and the
Warrants and that it has been given full access to such records of the Company
and the subsidiaries and to the officers of the Company and the subsidiaries
and
received such information as it has deemed necessary or appropriate to conduct
its due diligence investigation and has sufficient knowledge and experience
in
investing in companies similar to the Company in terms of the Company’s stage of
development so as to be able to evaluate the risks and merits of its investment
in the Company. Each Purchaser further acknowledges that such Purchaser
understands the risks of investing in companies domiciled and/or which operate
primarily in the People’s Republic of China and that the purchase of the Shares
and Warrants involves substantial risks.
19
(e) Status
of Purchasers.
Each
Purchaser is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act. Such Purchaser is not required to be registered as
a
broker-dealer under Section 15 of the Exchange Act and such Purchaser is not
a
broker-dealer.
(f) Opportunities
for Additional Information.
Each
Purchaser acknowledges that such Purchaser has had the opportunity to ask
questions of and receive answers from, or obtain additional information from,
the executive officers of the Company concerning the financial and other affairs
of the Company and its subsidiaries. In making the decision to invest in the
Company and its business, each Purchaser hereby acknowledges that such Purchaser
has relied solely upon the Yanglin Financial Statements, the Draft Form 8-K
(defined in Section 4.2(v) hereto) and other written information provided to
such Purchaser by the Company and Yanglin.
(g) No
General Solicitation.
Each
Purchaser acknowledges that the Preferred Shares and the Warrants were not
offered to such Purchaser by means of any form of general or public solicitation
or general advertising, or publicly disseminated advertisements or sales
literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which
such
Purchaser was invited by any of the foregoing means of
communications.
(h) Rule
144.
Such
Purchaser understands that the Shares must be held indefinitely unless such
Shares are registered under the Securities Act or an exemption from registration
is available. Such Purchaser acknowledges that such Purchaser is familiar with
Rule 144 of the rules and regulations of the Commission, as amended, promulgated
pursuant to the Securities Act (“Rule
144”),
and
that such person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the extent that Rule
144 is not available, such Purchaser will be unable to sell any Shares without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(i) General.
Such
Purchaser understands that the Shares are being offered and sold in reliance
on
a transactional exemption from the registration requirement of Federal and
state
securities laws and the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings
of
such Purchaser set forth herein in order to determine the applicability of
such
exemptions and the suitability of such Purchaser to acquire the
Shares.
(j) Independent
Investment.
Except
as may be disclosed in any filings with the Commission by the Purchasers under
Section 13 of the Exchange Act, no Purchaser has agreed to act with any other
Purchaser for the purpose of acquiring, holding, voting or disposing of the
Shares purchased hereunder for purposes of Section 13(d) under the Exchange
Act,
and each Purchaser is acting independently with respect to its investment in
the
Shares.
(k) Certain
Fees.
Except
as set forth on Schedule
2.2(k)
hereto,
no brokers, finders or financial advisory fees or commissions will be payable
by
any Purchaser with respect to the transactions contemplated by this Agreement
and the other Transaction Documents.
20
ARTICLE
III
Covenants
The
Company covenants with each of the Purchasers as follows, which covenants are
for the benefit of the Purchasers and their permitted assignees (as defined
herein).
Section
3.1 Securities
Compliance.
The
Company shall notify the Commission in accordance with their rules and
regulations, of the transactions contemplated by any of the Transaction
Documents, including filing a Form D with respect to the Preferred Shares,
Warrants, Conversion Shares and Warrant Shares as required under Regulation
D
and applicable “blue sky” laws, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Preferred Shares, the
Warrants, the Conversion Shares and the Warrant Shares to the Purchasers or
subsequent holders.
Section
3.2 Registration
and Listing.
The
Company shall (a) comply in all respects with its reporting and filing
obligations under the Exchange Act, (b) comply with all requirements related
to
any registration statement filed pursuant to this Agreement or the Registration
Rights Agreement, and (c) not take any action or file any document (whether
or
not permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act except as
permitted under the Transaction Documents. The Company will take all action
necessary to continue the quotation or listing of its Common Stock on the OTC
Bulletin Board or other exchange or market on which the Common Stock is trading
or may be traded in the future. Subject to the terms of the Transaction
Documents, the Company further covenants that it will take such further action
as the Purchasers may reasonably request, all to the extent required from time
to time to enable the Purchasers to sell the Shares without registration under
the Securities Act within the limitation of the exemptions provided by Rule
144
promulgated under the Securities Act. Upon the request of the Purchasers, the
Company shall deliver to the Purchasers a written certification of a duly
authorized officer as to whether it has complied with such
requirements.
Section
3.3 Inspection
Rights.
The
Company shall permit, during normal business hours and upon reasonable request
and reasonable notice, each Purchaser or any employees, agents or
representatives thereof, so long as such Purchaser shall be obligated hereunder
to purchase the Preferred Shares or shall beneficially own any Preferred Shares,
or shall own Conversion Shares which, in the aggregate, represent more than
5%
of the total combined voting power of all voting securities then outstanding,
for purposes related to such Purchaser’s interests as a stockholder to examine
and make reasonable copies of and extracts from the records and books of account
of, and visit and inspect the properties, assets, operations and business of
the
Company and any subsidiary, and to discuss the affairs, finances and accounts
of
the Company and any subsidiary with any of its officers, consultants, directors,
and key employees. Such Purchaser agrees that such Purchaser and its employees,
agents and representatives will keep confidential and will not disclose, divulge
or use (other than for purposes of monitoring its investment in the Company)
any
confidential information which such Purchaser may obtain from the Company
pursuant to financial statements, reports and other materials submitted by
the
Company to such Purchaser pursuant to this Agreement or pursuant to inspection
rights granted hereunder, unless such information is known to the public through
no fault of such Purchaser or his or its employees or representatives;
provided,
however,
that a
Purchaser may disclose such information (i) to its attorneys, accountants and
other professionals in connection with their representation of such Purchaser
in
connection with such Purchaser’s investment in the Company, (ii) to any
prospective permitted transferee of the Preferred Shares, so long as the
prospective transferee agrees to be bound by the provisions of this Section
3.3,
(iii) to any general partner or affiliate of such Purchaser. The Company may
require each Purchaser to execute a separate confidentiality agreement in form
and substance reasonably acceptable to the Company as a prerequisite to the
exercise of such Purchaser’s inspection rights pursuant to this Section
3.3.
21
Section
3.4 Compliance
with Laws.
The
Company shall comply, and cause each subsidiary to comply in all material
respects, with all applicable laws, rules, regulations and orders.
Section
3.5 Keeping
of Records and Books of Account.
The
Company shall keep and cause each subsidiary to keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company
and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section
3.6 Reporting
Requirements.
If the
Commission ceases making periodic reports filed under the Exchange Act available
via the Internet, then at a Purchaser’s request the Company shall furnish the
following to such Purchaser so long as such Purchaser shall beneficially own
any
Shares:
(a) Quarterly
Reports filed with the Commission on Form 10-QSB as soon as practical after
the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission;
(b) Annual
Reports filed with the Commission on Form 10-KSB as soon as practical after
the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission;
(c) Current
Reports on Form 8-K filed with the Commission as soon as practical after the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission; and
(d) Copies
of
all notices and information, including without limitation notices and proxy
statements in connection with any meetings, that are provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices
or
information to such holders of Common Stock.
Section
3.7 Amendments.
The
Company shall not amend or waive any provision of the Articles or Bylaws of
the
Company in any way that would adversely affect the liquidation preferences,
dividends rights, conversion rights, voting rights or redemption rights of
the
Preferred Shares.
22
Section
3.8 Other
Agreements.
The
Company shall not enter into any agreement in which the terms of such agreement
would restrict or impair the right or ability to perform of the Company or
any
subsidiary under any Transaction Document.
Section
3.9 Distributions.
So long
as any Preferred Shares remain outstanding, the Company agrees that it shall
not
(i) declare or pay any dividends or make any distributions to any holder(s)
of
Common Stock unless such dividends or distributions are also simultaneously
paid
or made to the holders of the Preferred Shares on an as-converted basis or
(ii)
purchase or otherwise acquire for value, directly or indirectly, any Common
Stock or other equity security of the Company.
Section
3.10 Use
of
Proceeds.
The net
proceeds from the sale of the Shares hereunder shall be used by the Company
for
working capital and general corporate purposes and not to redeem any Common
Stock or securities convertible, exercisable or exchangeable into Common Stock
or to settle any outstanding litigation.
Section
3.11 Reservation
of Shares.
So long
as any of the Preferred Shares or Warrants remain outstanding, the Company
shall
take all action necessary to at all times have authorized, and reserved for
the
purpose of issuance, no less than one hundred fifty percent (150%) of the
aggregate number of shares of Common Stock needed to provide for the issuance
of
the Conversion Shares and the Warrant Shares.
Section
3.12 Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates, registered in the name of
each
Purchaser or its respective nominee(s), for the Conversion Shares and the
Warrant Shares in such amounts as specified from time to time by each Purchaser
to the Company upon conversion of the Preferred Shares or exercise of the
Warrants in the form of Exhibit
G
attached
hereto (the “Irrevocable
Transfer Agent Instructions”).
Prior
to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in Section 5.1 of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to
in this Section 3.12 will be given by the Company to its transfer agent and
that
the Shares shall otherwise be freely transferable on the books and records
of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. If a Purchaser provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a public sale,
assignment or transfer of the Shares may be made without registration under
the
Securities Act or the Purchaser provides the Company with reasonable assurances
that such Shares can be sold pursuant to Rule 144 without any restriction as
to
the number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of
the
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by such Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this Section 3.12
will
cause irreparable harm to the Purchasers by vitiating the intent and purpose
of
the transaction contemplated hereby. Accordingly, the Company acknowledges
that
the remedy at law for a breach of its obligations under this Section 3.12 will
be inadequate and agrees, in the event of a breach or threatened breach by
the
Company of the provisions of this Section 3.12, that the Purchasers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
23
Section
3.13 Disposition
of Assets.
So long
as any Preferred Shares remain outstanding, neither the Company nor any
Subsidiary shall sell, transfer or otherwise dispose of any of its properties,
assets and rights to any person except for (i) sales to customers in the
ordinary course of business (ii) sales or transfers between the Company and
its
Subsidiaries or between Subsidiaries of the Company, (iii) sales or transfers
between the Company, any of its Subsidiaries and Yanglin, or (iv) otherwise
with
the prior written consent of the holders of a majority of the Preferred Shares
then outstanding.
Section
3.14 Reporting
Status.
So long
as a Purchaser beneficially owns any of the Shares, the Company shall timely
file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or
the
rules and regulations thereunder would permit such termination.
Section
3.15 Disclosure
of Transaction.
The
Company shall issue a press release describing the material terms of the
transactions contemplated hereby (the “Press
Release”)
as
soon as practicable after the Closing but in no event later than 9:00 A.M.
Eastern Time on the first Trading Day following the Closing. The Company shall
also file with the Commission, the Form 8-K describing the material terms of
the
transactions contemplated hereby and by the Share Exchange Agreement (and
attaching as exhibits thereto this Agreement, the Registration Rights Agreement,
the Series A Certificate of Designation, the Lock-Up Agreement, the Escrow
Agreement, the Investor and Public Relations Escrow Agreement, forms of each
of
the Warrants, the Press Release, the Share Exchange Agreement and each of the
Restructuring Agreements) as soon as practicable following the Closing Date
but
in no event more than four (4) Trading Days following the Closing Date, which
Press Release and Form 8-K shall be subject to prior review and comment by
counsel for the Purchasers as set forth in Section 4.2(v). “Trading
Day”
means
any day during which the OTC Bulletin Board (or other quotation venue or
principal exchange on which the Common Stock is traded) shall be open for
trading.
Section
3.16 Disclosure
of Material Information.
The
Company covenants and agrees that neither it nor any other person acting on
its
behalf has provided or will provide any Purchaser or its agents or counsel
with
any information that the Company believes constitutes material non-public
information (other than with respect to the transactions contemplated by this
Agreement), unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.
Section
3.17 Pledge
of Securities.
The
Company acknowledges and agrees that the Shares may be pledged by a Purchaser
in
connection with a bona fide
margin
agreement or other loan or financing arrangement that is secured by the Common
Stock. The pledge of Common Stock shall not be deemed to be a transfer, sale
or
assignment of the Common Stock hereunder, and no Purchaser effecting a pledge
of
Common Stock shall be required to provide the Company with any notice thereof
or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document; provided,
that a
Purchaser and its pledgee shall be required to comply with the provisions of
Article V hereof in order to effect a sale, transfer or assignment of Common
Stock to such pledgee. At the Purchasers’ expense, the Company hereby agrees to
execute and deliver such documentation as a pledgee of the Common Stock may
reasonably request in connection with a pledge of the Common Stock to such
pledgee by a Purchaser.
24
Section
3.18 Form
SB-2 Eligibility.
The
Company currently meets the “registrant eligibility” and transaction
requirements set forth in the general instructions to Form SB-2 applicable
to
“resale” registrations on Form SB-2 and the Company shall file all reports
required to be filed by the Company with the Commission in a timely
manner.
Section
3.19 Lock-Up
Agreement.
The
persons listed on Schedule
3.19
attached
hereto shall be subject to the terms and provisions of a lock-up agreement
in
substantially the form as Exhibit
E
hereto
(the “Lock-Up
Agreement”),
which
shall provide the manner in which such persons will sell, transfer or dispose
of
their shares of Common Stock. Schedule
3.19
shall
set forth opposite such persons’ name, the number of shares beneficially owned
by such person that are subject to the lock-up.
Section
3.20 Investor
and Public Relations Escrow.
The
Company shall cause to be deposited pursuant to the terms of the Investor and
Public Relations Escrow Agreement, Five Hundred Thousand Dollars ($500,000)
of
the Purchase Price funded on the Closing Date into a separate escrow account
to
be used by the Company in connection with investor and public
relations.
Section
3.21 Approval
of Related Party Transactions.
On and
after the Closing, the Company will not, and will not permit any of its
Subsidiaries, whether directly or indirectly owned, without the unanimous
written consent of the Company’s Board of Directors (including the consent any
independent directors) to:
(a) acquire
any share capital, other securities or interests of Heilongjiang Yanglin Group
Seed Industrial Co., Ltd., Shuangyashan Tianlin Rice Industrial Co., Ltd. and
Heilongjiang Yanglin Soybean Group co., Ltd. Hotel, an unincorporated hotel
(collectively, the “Affiliated
Companies”)
(b) approve
transactions or modify the terms of transactions involving the interests of
the
Affiliated Companies, including but not limited to make any loans, advances
or
other credits to, or guarantee, indemnify, act as surety for, or otherwise
secure or accept or assume any direct or indirect liability for the liabilities
of or obligations of any of such companies;
(c) enter
into any commercial or business contracts with the Affiliated Companies in
excess of US$5,000;
25
(d) approve
or make adjustments or modifications to the terms of transactions involving
the
interest of any director or Shareholder of the Company and/or any Subsidiary,
including but not limited to the making of any loans or advances, whether
directly or indirectly, or the provision of any guarantee, indemnity or security
for or in connection with any indebtedness or liabilities of any director or
Shareholder of the Company and/or any Subsidiary.
Section
3.22 DTC.
Not
later than the effective date of the Registration Statement (as defined in
the
Registration Rights Agreement), the Company shall cause its Common Stock to
be
eligible for transfer with its transfer agent pursuant to the Depository Trust
Company Automated Securities Transfer Program.
Section
3.23 Subsequent
Financings.
(a) For
a
period of two (2) years following the effective date of the initial Registration
Statement (as defined in the Registration Rights Agreement), the Company
covenants and agrees to promptly notify (in no event later than five (5) days
after making or receiving an applicable offer) in writing (a “Rights
Notice”)
each
holder of Preferred Shares (each, a “Preferred
Stockholder”
and
collectively the “Preferred
Stockholders”)
of the
terms and conditions of any proposed offer or sale to, or exchange with (or
other type of distribution to) any third party (a “Subsequent
Financing”),
of
Common Stock or any debt or equity securities convertible, exercisable or
exchangeable into Common Stock; provided,
however,
prior
to delivering to each Preferred Stockholder a Rights Notice, the Company shall
first deliver to each Preferred Stockholder a written notice of its intention
to
effect a Subsequent Financing (“Pre-Notice”)
within
three (3) Trading Days of receiving an applicable offer, which Pre-Notice shall
ask such Preferred Stockholder if it wants to review the details of such
financing. Upon the request of a Preferred Stockholder, and only upon a request
by such Preferred Stockholder within three (3) Trading Days of receipt of a
Pre-Notice, the Company shall promptly, but no later than two (2) Trading Days
after such request, deliver a Rights Notice to such Preferred Stockholder.
The
Rights Notice shall describe, in reasonable detail, the proposed Subsequent
Financing, the names and investment amounts of all investors participating
in
the Subsequent Financing (if known), the proposed closing date of the Subsequent
Financing, which shall be no earlier than ten (10) Trading Days from the date
of
the Rights Notice, and all of the terms and conditions thereof and proposed
definitive documentation to be entered into in connection therewith. The Rights
Notice shall provide each Preferred Stockholder an option (the “Rights
Option”)
during
the ten (10) Trading Days following delivery of the Rights Notice (the
“Option
Period”)
to
inform the Company whether such Preferred Stockholder will purchase up to its
pro rata portion of all or a portion of the securities being offered in such
Subsequent Financing on the same, absolute terms and conditions as contemplated
by such Subsequent Financing, provided the amount of such purchase shall not
exceed the Purchase Price hereunder of the Preferred Shares held by such
Preferred Stockholder except as allowed by the following sentence. If any
Preferred Stockholder elects not to participate in such Subsequent Financing,
the other Preferred Stockholders may participate on a pro-rata basis so long
as
such participation in the aggregate does not exceed the total Purchase Price
hereunder. For purposes of this Section, all references to “pro rata” means, for
any Preferred Stockholder electing to participate in such Subsequent Financing,
the percentage obtained by dividing (x) the number of Preferred Shares held
by
such Preferred Stockholder at the Closing by (y) the total number of all of
the
Preferred Shares issued hereunder. Delivery of any Rights Notice constitutes
a
representation and warranty by the Company that there are no other material
terms and conditions, arrangements, agreements or otherwise except for those
disclosed in the Rights Notice, to provide additional compensation to any party
participating in any proposed Subsequent Financing, including, but not limited
to, additional compensation based on changes in the Purchase Price or any type
of reset or adjustment of a purchase or conversion price or to issue additional
securities at any time after the closing date of a Subsequent Financing. If
the
Company does not receive notice of exercise of the Rights Option from the
Preferred Stockholder within the Option Period, the Company shall have the
right
to close the Subsequent Financing on the scheduled closing date with a third
party; provided,
that
all of the material terms and conditions of the closing are the same as those
provided to the Preferred Stockholder in the Rights Notice. If the closing
of
the proposed Subsequent Financing does not occur by that date, any closing
of
the contemplated Subsequent Financing or any other Subsequent Financing shall
be
subject to all of the provisions of this Section 3.21(a), including, without
limitation, the delivery of a new Rights Notice. The provisions of this Section
3.21(a) shall not apply to issuances of securities in a Permitted
Financing.
26
(b) For
purposes of this Agreement, a Permitted Financing (as defined hereinafter)
shall
not be considered a Subsequent Financing. A “Permitted
Financing”
shall
mean (i) securities issued (other than for cash) in connection with a merger,
acquisition, or consolidation, (ii) securities issued pursuant to the conversion
or exercise of convertible or exercisable securities issued or outstanding
on or
prior to the date of this Agreement or issued pursuant to this Agreement or
any
of the other Transaction Documents (so long as the conversion or exercise price
in such securities are not amended to lower such price and/or adversely affect
the Purchasers), (iii) securities issued in connection with bona fide strategic
license agreements or other partnering arrangements so long as such issuances
are not for the purpose of raising capital, (iv) Common Stock issued or the
issuance or grants of options to purchase Common Stock pursuant to the Issuer’s
equity incentive plans outstanding as they exist on the date of this Agreement,
(v) the issuance or grants of options to purchase Common Stock to employees,
officers or directors of the Company pursuant to any equity incentive plan
duly
adopted by the Board or a committee thereof established for such purpose so
long
as such issuances in the aggregate do not exceed 10% of the issued and
outstanding shares of Common Stock as of the date of this Agreement and the
specified price at which the options may be exercised is equal to or greater
than the Per Share Market Value as of the date of such grant, and (vi) any
warrants issued to the placement agent, financial advisors and their respective
designees for the transactions contemplated by the Transaction Documents;
provided,
however
that with respect to any such Permitted Financing pursuant to (i) and (iii)
such
Permitted Financings shall be subject to the prior written approval of Vision
Opportunity Master Fund, Ltd. (“Vision”).
For
purposes of this Section 3.23(b)(v), “Per Share Market Value” means on the date
of grant (a) the last closing price per share of the Common Stock on such date
on the OTC Bulletin Board or another registered national stock exchange on
which
the Common Stock is then listed, or if there is no closing price on such date,
then the closing bid price on such date, or if there is no closing bid price
on
such date, then the closing price on such exchange or quotation system on the
date nearest preceding such date, or (b) if the Common Stock is not listed
then
on the OTC Bulletin Board or any registered national stock exchange, the last
closing price for a share of Common Stock in the over-the-counter market, as
reported by the OTC Bulletin Board or in the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions
of
reporting prices) at the close of business on such date, or if there is no
closing price on such date, then the closing bid price on such date, or (c)
if
the Common Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency succeeding
to
its functions of reporting prices), then the average of the “Pink Sheet” quotes
for the five (5) Trading Days preceding such date of determination, or (d)
if
the Common Stock is not then publicly traded the fair market value of a share
of
Common Stock as determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants
of
recognized standing that is regularly engaged in the business of appraising
the
capital stock or assets of corporations or other entities as going concerns,
and
which is not affiliated with either the Company or the Purchasers (the
“Independent
Appraiser”)
selected in good faith by the Majority Holders; provided,
however,
that
the Issuer, after receipt of the determination by such Independent Appraiser,
shall have the right to select an additional Independent Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Independent Appraiser; and provided,
further,
that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during
such
period. The determination of fair market value by an Independent Appraiser
shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding
on
all parties. In determining the fair market value of any shares of Common Stock,
no consideration shall be given to any restrictions on transfer of the Common
Stock imposed by agreement or by federal or state securities laws, or to the
existence or absence of, or any limitations on, voting rights.
27
(c) Nothing
herein shall prohibit the Company from establishing an employee stock option,
restricted stock or other form of equity incentive plan for employees, officers
or directors of the Company, and any awards made under such plan or exercises
of
such awards by the recipients thereof shall be deemed to be a Permitted
Financing, subject to the 10% threshold set forth in (b)(v) above.
Section
3.24 Xxxxxxxx-Xxxxx
Act.
The
Company shall use its best efforts to be in compliance with the applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002, and the rules and regulations
promulgated thereunder, as required under such Act.
Section
3.25 Exchange
Listing.
No
later than December 31, 2008, the Company shall apply to list and have its
shares of Common Stock traded on the Nasdaq Capital Market, the Nasdaq Global
Select Market or the Nasdaq Global Market or any successor market thereto
(collectively, “Nasdaq”),
or
the New York Stock Exchange or any successor market thereto (together with
Nasdaq, each a “National
Stock Exchange”).
In
the event the shares of Common Stock are not listed and trading on a National
Stock Exchange by December 31, 2008, each of the stockholders of the Company
as
listed on Schedule
3.25
(each a
“Principal
Stockholder”;
collectively, the “Principal
Stockholders”)
shall
transfer such number of shares of Common Stock held by such Principal
Stockholder as set forth opposite such Principal Stockholder’s name on
Schedule
3.25
(the
“Listing
Penalty Shares”)
to the
Purchasers to be distributed to the Purchasers on a pro rata basis. The number
of Listing Penalty Shares to be transferred by each Principal Stockholder to
the
Purchasers shall be equal to 1,000,000 shares of Common Stock times a fraction,
the numerator of which is the number of shares of Common Stock held by such
Principal Stockholder and the denominator of which is the total number of shares
of Common Stock held by the Principal Stockholders. In connection with the
foregoing, each Purchaser may elect, at each Purchaser’s sole discretion, to
receive (i) shares of Common Stock owned by the Principal Stockholders or (ii)
upon notice to the Company, Escrow Agent and Principal Stockholders (each as
defined in the Securities Escrow Agreement), a portion of the Escrow Shares
(as
defined in the Securities Escrow Agreement) in such amount as set forth in
the
preceding sentence. In the event a Purchaser elects to receive shares of Common
Stock from the Escrow Shares pursuant to the foregoing and if the Escrow Shares
then remaining are insufficient to satisfy the Principal Stockholders’
obligations under Sections 1.3 and 1.4 of the Securities Escrow Agreement,
the
Principal Stockholders shall, on a pro rata basis, deliver to the Escrow Agent
additional shares of Common Stock owned by them in the amounts released to
such
Purchaser within ten (10) business days of the release of such shares from
escrow.
28
Section
3.26 No
Commissions in connection with Conversion of Preferred Shares.
In
connection with the conversion of the Preferred Shares into Conversion Shares,
neither the Company nor any Person acting on its behalf will take any action
that would result in the Conversion Shares being exchanged by the Company other
than with the then existing holders of the Preferred Shares exclusively where
no
commission or other remuneration is paid or given directly or indirectly for
soliciting the exchange in compliance with Section 3(a)(9) of the Securities
Act.
Section
3.27 Ownership
Cap and Exercise Restriction.
Notwithstanding anything to the contrary set forth in this Purchase Agreement,
at no time may a Purchaser of Preferred Shares convert their Preferred Shares
into shares of the Company’s’ Common Stock if the number of shares of Common
Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock beneficially owned by such Purchaser
at
such time, the number of shares of Common Stock which would result in such
Purchaser beneficially owning (as determined in accordance with Section 13(d)
of
the Exchange Act and the rules thereunder) in excess of 4.99% of the then issued
and outstanding shares of Common Stock; provided,
however,
that
upon a Purchaser providing the Company with sixty-one (61) days notice (pursuant
to Section 13 hereof) (the “Waiver
Notice”)
that
such Purchaser would like to waive this Section 3.27 with regard to any or
all
shares of Common Stock issuable upon conversion of the Preferred Shares, this
Section 3.27 will be of no force or effect with regard to all or a portion
of
the Preferred Shares referenced in the Waiver Notice.
Section
3.28 Protection
of Intellectual Property Rights
At any
time on or after the consummation of the transactions contemplated by this
agreement, the Company becomes aware that of an infringement of the Yanglin
name, whether in the United States of America, The People’s Republic of China,
or elsewhere the Company shall take any and all commercially reasonable measures
to enforce its intellectual property rights to protect the Yanglin name, whether
under statute or common law, in law or in equity, in accordance with such
country’s intellectual property laws.
29
ARTICLE
IV
CONDITIONS
Section
4.1 Conditions
Precedent to the Obligation of the Company to Sell the Shares.
The
obligation hereunder of the Company to issue and sell the Preferred Shares
and
the Warrants to the Purchasers is subject to the satisfaction or waiver, at
or
before the Closing, of each of the conditions set forth below. These conditions
are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion.
(a) Accuracy
of Each Purchaser’s Representations and Warranties.
The
representations and warranties of each Purchaser in this Agreement and each
of
the other Transaction Documents to which such Purchaser is a party shall be
true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be
true
and correct in all material respects as of such date.
(b) Performance
by the Purchasers.
Each
Purchaser shall have performed, satisfied and complied in all respects with
all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Purchaser at or prior to the
Closing.
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(d) Delivery
of Purchase Price.
The
Purchase Price for the Preferred Shares and Warrants has been delivered to
the
escrow agent pursuant to the Escrow Agreement.
(e) Delivery
of Transaction Documents.
The
Transaction Documents to which the Purchasers are parties have been duly
executed and delivered by the Purchasers to the Company.
(f) Share
Exchange Transaction.
Prior
to the Closing, the Share Exchange Transaction shall have been
consummated.
Section
4.2 Conditions
Precedent to the Obligation of the Purchasers to Purchase the
Shares.
The
obligation hereunder of each Purchaser to acquire and pay for the Preferred
Shares and the Warrants is subject to the satisfaction or waiver, at or before
the Closing, of each of the conditions set forth below. These conditions are
for
each Purchaser’s sole benefit and may be waived by such Purchaser at any time in
its sole discretion.
(a) Accuracy
of the Company’s Representations and Warranties.
Each of
the representations and warranties of the Company in this Agreement and the
other Transaction Documents shall be true and correct in all respects as of
the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that are expressly made as of a particular
date), which shall be true and correct in all respects as of such
date.
30
(b) Performance
by the Company.
The
Company shall have performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the
Closing.
(c) No
Suspension, Etc.
Quotation of the Common Stock shall not have been suspended by the Commission
or
the OTC Bulletin Board (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to the
Closing), and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets (“Bloomberg”)
shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the
New
York Stock Exchange, nor shall a banking moratorium have been declared either
by
the United States or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of such Purchaser, makes it impracticable or inadvisable to purchase
the Preferred Shares.
(d) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(e) No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any governmental authority
shall have been commenced, and no investigation by any governmental authority
shall have been threatened, against the Company or any subsidiary, or any of
the
officers, directors or affiliates of the Company or any subsidiary seeking
to
restrain, prevent or change the transactions contemplated by this Agreement,
or
seeking damages in connection with such transactions.
(f) Series
A and B Certificates of Designation of Rights and Preferences.
Prior
to the Closing, the Series A and B Certificates of Designation in the form
of
Exhibit
B
attached
hereto (the “Certificates
of Designation”)
shall
have been filed with the Secretary of State of Nevada.
(g) Opinions
of Counsel, Etc.
At the
Closing, the Purchasers shall have received an opinion of counsel to the
Company, dated the date of the Closing, in substantially the form of
Exhibit
H-1
hereto,
and such other certificates and documents as the Purchasers or its counsel
shall
reasonably require incident to the Closing. At the Closing, the Purchasers
shall
have received an opinion of PRC counsel to Yanglin, dated the date of the
Closing with respect to the Restructuring Agreements and such other matters
as
the Purchasers may reasonably request, in substantially the form of Exhibit
H-2
hereto.
31
(h) Registration
Rights Agreement.
At the
Closing, the Company shall have executed and delivered the Registration Rights
Agreement to each Purchaser.
(i) Certificates.
The
Company shall have executed and delivered to the Purchasers the certificates
(in
such denominations as such Purchaser shall request) for the Preferred Shares
and
the Warrants being acquired by such Purchaser at the Closing (in such
denominations as such Purchaser shall request).
(j) Resolutions.
The
Board of Directors of the Company shall have adopted resolutions consistent
with
Section 2.1(b) hereof in a form reasonably acceptable to such Purchaser (the
“Resolutions”).
(k) Reservation
of Shares.
As of
the Closing Date, the Company shall have reserved out of its authorized and
unissued Common Stock, solely for the purpose of effecting the conversion of
the
Preferred Shares and the exercise of the Warrants, a number of shares of Common
Stock equal to one hundred fifty percent (150%) of the aggregate number of
Conversion Shares issuable upon conversion of the Preferred Shares issued or
to
be issued pursuant to this Agreement and the number of Warrant Shares issuable
upon exercise of the number of Warrants issued or to be issued pursuant to
this
Agreement.
(l) Transfer
Agent Instructions.
As of
the Closing Date, the Irrevocable Transfer Agent Instructions, in the form
of
Exhibit
G
attached
hereto, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(m) Lock-Up
Agreement.
As of
the Closing Date, the persons listed on Schedule
3.19
hereto
shall have delivered to the Purchasers a fully executed Lock-Up Agreement in
the
form of Exhibit
E
attached
hereto.
(n) Secretary’s
Certificate.
The
Company shall have delivered to each such Purchaser a secretary’s certificate,
dated as of the Closing Date, as to (i) the Resolutions, (ii) the Articles,
(iii) the Bylaws, (iv) the Series A Certificate of Designation, each as in
effect at the Closing, and (iv) the authority and incumbency of the officers
of
the Company executing the Transaction Documents and any other documents required
to be executed or delivered in connection therewith.
(o) Officer’s
Certificate.
The
Company shall have delivered to the Purchasers a certificate of an executive
officer of the Company, dated as of the Closing Date, confirming the accuracy
of
the Company’s representations, warranties and covenants as of the Closing Date
and confirming the compliance by the Company with the conditions precedent
set
forth in this Section 4.2 as of the Closing Date.
(p) Escrow
Agreements.
At the
Closing, the Company and the escrow agent shall have executed and delivered
the
Escrow Agreement in the form of Exhibit
F-1
attached
hereto and the Investor and Public Relations Escrow Agreement in the form of
Exhibit
F-2
attached
hereto to each Purchaser.
(q) Securities
Escrow Agreement.
The
Securities Escrow Agreement shall have been executed by the parties thereto
and
the Escrow Shares (as defined in the Securities Escrow Agreement) shall have
been deposited into the escrow account pursuant to the terms of the Securities
Escrow Agreement in the form of Exhibit
F-3
attached
hereto.
32
(r) Material
Adverse Effect.
No
Material Adverse Effect shall have occurred at or before the Closing
Date.
(s) Share
Exchange Transaction.
Prior
to the Closing, the Share Exchange Transaction shall have been
consummated.
(t) Financial
Statements.
The
Company has previously delivered to the Purchasers the audited financial
statements of Yanglin for the fiscal years ended December 31, 2006, 2005 and
2004 audited by Xxxxxx X. Xxxx & Co., LLP and the interim financial
statements for the quarters ended March 31, 2007 and June 30, 2007 (the
“Yanglin
Financial Statements”),
which
Yanglin Financial Statements were acceptable to the Purchasers.
(u) Capitalization
Table.
No later
than the third Business Days prior to the Closing Date, the Company shall have
delivered to each of the Purchasers a capitalization table setting forth (i)
its
capitalization, on a fully diluted basis immediately prior to the Closing and
(ii) its pro forma capitalization, on a fully diluted basis, giving effect
to
the consummation of the transactions contemplated by this Agreement. In each
case, the table shall list all outstanding options, warrants and other
securities convertible into equity of the Company.
(v) Draft
Form 8-K No
later
than three (3) Business Day prior to the Closing Date, the Company shall have
delivered to each of the Purchasers, a draft of the Form 8-K (the “Draft
Form 8-K”),
in
substantially final form, that it proposes to file with the Securities and
Exchange Commission, which sections of the Draft Form 8-K shall be reasonably
acceptable to the Purchasers.
(w) Employment
Contracts.
At the
Closing, the Company shall deliver the employment contracts executed by and
between Yanglin and each of Xxxxxx Xxx, Shaocheng Xu and Xxxxxxx Xxx
(collectively, the “Key
Employees”)
and on
the terms and form as attached to the Share Exchange Agreement.
(x) Confidentiality
and Non-Competition Agreement
At the
Closing, the Company shall deliver the confidentiality and non-competition
agreements executed by and between Yanglin and each of the Key Employees on
the
terms and form as attached to the Share Exchange Agreement.
(y) Non-Compete
Undertaking Letters.
At the
Closing the Company shall deliver the non-compete undertaking letters executed
by and between Yanglin and each of the Key Employees on the terms and form
as
attached to the Share Exchange Agreement.
ARTICLE
V
Stock
Certificate Legend
Section
5.1 Legend.
Each
certificate representing the Preferred Shares and the Warrants, and, if
appropriate, securities issued upon conversion thereof, shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required by applicable state securities or “blue sky”
laws):
33
THESE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The
Company agrees to reissue certificates representing any of the Conversion Shares
and the Warrant Shares, without the legend set forth above if at such time,
prior to making any transfer of any such securities, such holder thereof shall
give written notice to the Company describing the manner and terms of such
transfer and removal as the Company may reasonably request. Such proposed
transfer and removal will not be effected until: (a) either (i) the Company
has
received an opinion of counsel reasonably satisfactory to the Company, to the
effect that the registration of the Conversion Shares or the Warrant Shares
under the Securities Act is not required in connection with such proposed
transfer, (ii) a registration statement under the Securities Act covering such
proposed disposition has been filed by the Company with the Commission and
has
become effective under the Securities Act, (iii) the Company has received other
evidence reasonably satisfactory to the Company that such registration and
qualification under the Securities Act and state securities laws are not
required, or (iv) the holder provides the Company with reasonable assurances
that such security can be sold pursuant to Rule 144 under the Securities Act;
and (b) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that registration or qualification
under the securities or “blue sky” laws of any state is not required in
connection with such proposed disposition, or (ii) compliance with applicable
state securities or “blue sky” laws has been effected or a valid exemption
exists with respect thereto. The Company will respond to any such notice from
a
holder within five (5) business days. In the case of any proposed transfer
under
this Section 5.1, the Company will use reasonable efforts to comply with any
such applicable state securities or “blue sky” laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or “blue sky” laws of any state for which registration by
coordination is unavailable to the Company. The restrictions on transfer
contained in this Section 5.1 shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement. Whenever a certificate representing the Conversion Shares
or
Warrant Shares is required to be issued to a Purchaser without a legend, in
lieu
of delivering physical certificates representing the Conversion Shares or
Warrant Shares (provided that a registration statement under the Securities
Act
providing for the resale of the Warrant Shares and Conversion Shares is then
in
effect), the Company may cause its transfer agent to electronically transmit
the
Conversion Shares or Warrant Shares to a Purchaser by crediting the account
of
such Purchaser or such Purchaser’s Prime Broker with the Depository Trust
Company (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”)
system
(to the extent not inconsistent with any provisions of this
Agreement).
34
ARTICLE
VI
Indemnification
Section
6.1 General
Indemnity.
The
Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, managers, partners, members, shareholders,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. Each
Purchaser severally but not jointly agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys’ fees, charges
and disbursements) incurred by the Company as a result of any inaccuracy in
or
breach of the representations, warranties or covenants made by such Purchaser
herein. The maximum aggregate liability of each Purchaser pursuant to its
indemnification obligations under this Article VII shall not exceed the portion
of the Purchase Price paid by such Purchaser hereunder.
Section
6.2 Indemnification
Procedure.
Any
party entitled to indemnification under this Article VI (an “indemnified party”)
will give written notice to the indemnifying party of any matters giving rise
to
a claim for indemnification; provided,
that
the failure of any party entitled to indemnification hereunder to give notice
as
provided herein shall not relieve the indemnifying party of its obligations
under this Article VI except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled
to
participate in and, unless in the reasonable judgment of the indemnified party
a
conflict of interest between it and the indemnifying party may exist with
respect of such action, proceeding or claim, to assume the defense thereof
with
counsel reasonably satisfactory to the indemnified party. In the event that
the
indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of
its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after
it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party’s
costs and expenses arising out of the defense, settlement or compromise of
any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to
such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the indemnified party’s prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does
not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect
of
such claim. The indemnification required by this Article VI shall be made by
periodic payments of the amount thereof during the course of investigation
or
defense, as and when bills are received or expense, loss, damage or liability
is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction
that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
35
ARTICLE
VII
Miscellaneous
Section
7.1 Fees
and Expenses.
Except
as otherwise set forth in this Agreement and the other Transaction Documents,
each party shall pay the fees and expenses of its advisors, counsel, accountants
and other experts, if any, and all other expenses, incurred by such party
incident to the negotiation, preparation, execution, delivery and performance
of
this Agreement, provided that the Company shall pay all actual and reasonable
attorneys’ fees and expenses (including disbursements and out-of-pocket
expenses) up to a maximum of $40,000 incurred by the Purchasers in connection
with the preparation, negotiation, execution and delivery of this Agreement
and
the other Transaction Documents and the consummation of the transactions and
the
review of the Restructuring Agreements. The Company shall also pay to Vision
in
connection with due diligence expenses incurred by Vision an aggregate amount
of
$100,000, of which $10,000 has been previously paid, and the balance in the
aggregate amount of $90,000 shall be paid at the Closing. The Company shall
also
pay all reasonable fees and expenses incurred by the Purchasers in connection
with the enforcement of this Agreement or any of the other Transaction
Documents, including, without limitation, all reasonable attorneys’ fees and
expenses but only if the Purchasers are successful in any litigation or
arbitration relating to such enforcement.
Section
7.2 Specific
Enforcement, Consent to Jurisdiction.
(a) The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific
terms
or were otherwise breached. It is accordingly agreed that the parties shall
be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement or the other Transaction Documents and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.
36
(b) Each
of
the Company and the Purchasers (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New
York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is
not
personally subject to the jurisdiction of such court, that the suit, action
or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Purchasers
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to
it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 7.2
shall affect or limit any right to serve process in any other manner permitted
by law.
Section
7.3 Entire
Agreement; Amendment.
This
Agreement and the other Transaction Documents contains the entire understanding
and agreement of the parties with respect to the matters covered hereby and,
except as specifically set forth herein or in the Transaction Documents, neither
the Company nor any of the Purchasers makes any representations, warranty,
covenant or undertaking with respect to such matters and they supersede all
prior understandings and agreements with respect to said subject matter, all
of
which are merged herein. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the Company and the holders of
at
least seventy-five percent (75%) of the Preferred Shares then outstanding,
and
no provision hereof may be waived other than by an a written instrument signed
by the party against whom enforcement of any such amendment or waiver is sought.
No such amendment shall be effective to the extent that it applies to less
than
all of the holders of the Preferred Shares then outstanding. No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the
same consideration is also offered to all of the parties to the Transaction
Documents or holders of Preferred Shares, as the case may be.
Section
7.4 Notices.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telex (with correct answer back received), telecopy or facsimile
at
the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business
day
during normal business hours where such notice is to be received) or (b) on
the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications
shall be:
If
to the
Company:
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group
Xx.
00
Xxxxxxx Xxxxxx
00
Xxxxxx
Xxxx Xxxxxxxxxxxx
People’x
Xxxxxxxx xx xxxxx 000000
Tel:
00-000-000-0000
Fax:
00-000-000-0000
Email: xxxxxxxxx@000.xxx
with
copies to:
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.:
(000) 000-0000, ext. 127
Fax
No.:
(000) 000-0000
If
to any
Purchaser:
At
the
address of such Purchaser set forth on Exhibit
A
to this
Agreement, with copies to Purchaser’s counsel as set forth on Exhibit
A
or as
specified in writing by such Purchaser with copies to:
Loeb
& Loeb LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxxx X. Xxxxxxxx, Esq.
Tel
No.:
(000) 000-0000
Fax
No.:
(000) 000-0000
Any
party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other party
hereto.
Section
7.5 Waivers.
No
waiver by either party of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver
in
the future or a waiver of any other provisions, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder
in
any manner impair the exercise of any such right accruing to it
thereafter.
Section
7.6 Headings.
The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose
and
shall not be deemed to limit or affect any of the provisions
hereof.
Section
7.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.
Section
7.8 No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
38
Section
7.9 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Agreement shall not be interpreted or construed
with
any presumption against the party causing this Agreement to be
drafted.
Section
7.10 Survival.
The
representations and warranties of the Company and the Purchasers shall survive
the execution and delivery hereof and the Closings hereunder for a period of
two
years following the Closing Date.
Section
7.11 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement and shall become effective when
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties need not sign the same counterpart.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or
on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
Section
7.12 Publicity.
The
Company agrees that it will not disclose, and will not include in any public
announcement, the name of the Purchasers without the consent of the Purchasers
unless and until such disclosure is required by law or applicable regulation,
and then only to the extent of such requirement.
Section
7.13 Severability.
The
provisions of this Agreement and the Transaction Documents are severable and,
in
the event that any court of competent jurisdiction shall determine that any
one
or more of the provisions or part of the provisions contained in this Agreement
or the Transaction Documents shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision
of
this Agreement or the Transaction Documents and such provision shall be reformed
and construed as if such invalid or illegal or unenforceable provision, or
part
of such provision, had never been contained herein, so that such provisions
would be valid, legal and enforceable to the maximum extent
possible.
Section
7.14 Further
Assurances.
From
and after the date of this Agreement, upon the request of any Purchaser or
the
Company, each of the Company and the Purchasers shall execute and deliver such
instrument, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement, the Preferred Shares, the Conversion Shares, the
Warrants, the Warrant Shares, the Series A Certificate of Designation, the
Registration Rights Agreement and the other Transaction Documents.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
39
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
PURCHASER
BENEFIT
GRAND INVESTMENTS LIMITED
By:
/s/
Xiangxu Zhang
Name:
Xiangxu Zhang
Title:
President
CRESCENT
INTERNATIONAL LTD.
By:
/s/
Xxxxxx Xxxxx-Xxxxxxxx
Name:
Xxxxxx Xxxxx-Xxxxxxxx
Title:
Authorized Signatory
GOLDEN
BRIDGE ASSET MANAGEMENT
By:
/s/
Xxxxx Xxxx
Name:
Xxxxx Xxxx
Title:
Director, authorized signatory
By:
/s/
Xxxxxx X. Xxxxxxxx
Name:
Xxxxxx X. Acerley
XXXXXXX
ROAD PARTNERS, LP
By:
/s/
Xxxxxx X. Xxxxxxxx
Name:
Xxxxxx X. Xxxxxxxx
Title:
Manager, RGA Ventures, LLC
General
Partner of Xxxxxxx Road Partners, XX
XXXX
FOOTWEAR
By:
/s/
Xxxx Xxxxxxxxxx
Name:
Xxxx Xxxxxxxxxx
Title:
President
40
PRECEPT
CAPITAL MASTER FUND, G.P.
By:
/s/
D.
Xxxxx Xxxxx
Name:
D.
Xxxxx Xxxxx
Title:
Managing Member
SANSAR
CAPITAL SPECIAL OPPORTUNITY
MASTER
FUND, LP (CAYMAN MASTER)
By:
/s/
Xxxxxx Xxxxxxx
Name:
Xxxxxx Xxxxxxx
Title:
President
VICIS
CAPITAL MASTER FUND
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx X. Xxxxxx
Title:
Chief Financial Officer
VISION
OPPORTUNITY MASTER FUND, LTD.
By:
/s/
Xxxx Xxxxxxxx
Name:
Xxxx Xxxxxxxx
Title:
Director
ACKNOWLEDGED
AND AGREED FOR
PURPOSES
OF SECTION 3.25
WINNER
STATE INTERNATIONAL LIMITED
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
[Signature
page to Series A Convertible Preferred Share Agreement]
41
EXHIBIT
A TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
______________________________________________
Investor
|
Investment
|
Common
Stock
|
Series
A Shares Purchased
|
Series
A Warrants
|
Series
B Warrants
|
Series
J Warrants
|
Series
C
Warrants
|
Series
D
Warrants
|
|||||||||||||||||
Vision
Opportunity Master Fund Ltd.
|
$
|
8,000,000
|
525,000
|
3,720,930
|
3,720,930
|
1,860,465
|
3,382,664
|
3,382,664
|
1,691,332
|
||||||||||||||||
Sansar
Capital Special Opportunity Master Fund, LP (Cayman
Master)
|
$
|
5,950,000
|
--
|
2,767,442
|
2,767,442
|
1,383,721
|
2,515,856
|
2,515,856
|
1,257,928
|
||||||||||||||||
Vicis
Capital Master Fund
|
$
|
4,500,000
|
--
|
2,093,023
|
2,093,023
|
1,046,512
|
1,902,748
|
1,902,748
|
951,374
|
||||||||||||||||
Precept
Capital Master Fund, GP
|
$
|
500,000
|
--
|
232,558
|
232,558
|
116,279
|
--
|
--
|
--
|
||||||||||||||||
Penn
Footwear
|
$
|
250,000
|
--
|
116,279
|
116,279
|
58,140
|
--
|
--
|
--
|
||||||||||||||||
Crescent
International Limited
|
$
|
300,000
|
--
|
139,353
|
139,353
|
69,767
|
--
|
--
|
--
|
||||||||||||||||
Benefit
Grand Investments
|
$
|
500,000
|
--
|
232,558
|
232,558
|
116,279
|
--
|
--
|
--
|
||||||||||||||||
Golden
Bridge Asset Management
|
$
|
1,000,000
|
--
|
465,116
|
465,116
|
232,558
|
--
|
--
|
--
|
||||||||||||||||
Xxxxxx
X Xxxxxxxx
|
$
|
250,000
|
--
|
116,279
|
116,279
|
58,140
|
--
|
--
|
--
|
||||||||||||||||
Xxxxxxx
Road Partners, LP
|
$
|
250,000
|
--
|
116,279
|
116,279
|
58,140
|
--
|
--
|
--
|
42
EXHIBIT
B TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
_________________________________________________
FORM
OF SERIES A AND B CERTIFICATES OF DESIGNATION
43
44
45
EXHIBIT
A
TO
THE CERTIFICATE OF DESIGNATIONS,
PREFERENCES
AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
to
be filed with the Secretary of State
of
the State of Nevada
on
or about September 21, 2007
1. Designation
and Number of Shares.
Shares
of
the series shall be designated and known as the “Series A Convertible Preferred
Stock” of the Company. The Series A Convertible Preferred Stock (the
“Series
A”)
shall
consist of 10,000,000 shares. Shares of the Series A which are redeemed,
retired, converted into shares of the Company’s $.001 par value per share Common
Stock (the “Common
Stock”),
purchased or otherwise acquired by the Company shall be cancelled (and
thereafter shall not be re-issued as shares of Series A) and shall revert to
the
status of authorized but unissued preferred stock, undesignated as to series
and
subject to reissuance by the Company as shares of preferred stock of any one
or
more series as permitted by the Articles of Incorporation.
2.
Redemption;
Liquidation Preference.
The
Series A shall, in respect of the right to participate in distributions or
payments in the event of any liquidation, dissolution or winding up, voluntary
or involuntary, of the Company (a “Liquidation
Event”),
rank
(a) senior to the Common Stock and to any other class or series of stock issued
by the Company not designated as ranking senior to or pari
passu with
the
Series A in respect of the right to participate in distributions or payments
upon a Liquidation Event; and (b) pari
passu
with the
Series B Convertible Preferred Stock (the “Series
B”),
any
other class or series of stock of the Company, the terms of which specifically
provide that such class or series shall rank pari
passu
with the
Series A in respect of the right to participate in distributions or payments
upon a Liquidation Event. No shares of Series A may be redeemed by the Company
without the express written consent of each holder of such shares, provided
or
withheld in such holder’s sole discretion. In
the event of the liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, the holders of shares of Series
A
then outstanding shall be entitled to receive, out of the assets of the Company
available for distribution to its stockholders, an amount equal to $2.15 per
share (such amount, the "Liquidation
Preference Amount")
before any payment shall be made or any assets distributed to the holders of
the
Common Stock or any other stock that ranks junior to the Series A. In
the
event of such a liquidation, dissolution or winding up, the Company shall
provide to each holder of shares of Series A notice of such redemption or
liquidation, dissolution or winding up, which notice shall (i) be sent at least
fifteen (15) days prior to the termination of the Conversion Rights (or, if
the
Company obtains lesser notice thereof, then as promptly as possible after the
date that it has obtained notice thereof) and (ii) state the amount per share
of
Series A that will be paid or distributed on such liquidation, dissolution
or
winding up, as the case may be.
46
3.
Dividends.
The
Series A will not be entitled to dividends unless the Company pays dividends,
in
cash or other property, to holders of outstanding shares of Common Stock, in
which event each outstanding share of the Series A will be entitled to receive
dividends of cash or property, out of any assets legally available therefor,
in
an amount or value equal to the amount of dividends, per share of Series A,
as
would have been payable on the number of shares of Common Stock into which
each
share of Series A would be convertible, if such shares of Series A had been
converted to Common Stock as of the record date for the determination of holders
of Common Stock entitled to receive such dividends (the “Dividends”).
Any
dividend payable to the Series A will have the same record and payment date
and
terms as the dividend payable on the Common Stock.
4.
Conversion.
The
holders of Series A shall have the following conversion rights (the
"Conversion
Rights"):
(a) Right
to Convert.
At any
time on or after the issuance
of the Series A, each share of Series A will be convertible into 1 share of
Common Stock, which may be adjusted from time to time pursuant to Section 5
(the
“Conversion
Rate”).
The
Conversion Rate is calculated by dividing the Liquidation Preference Amount
per
share by the Conversion Price (as defined below) per share. The “Conversion
Price”
means
$2.15 per share, intially, which may be adjusted from time to time pursuant
to
Section 5. At any time on or after the issuance of the Series A, any holder
of
Series A may, at such holder's option, subject to the limitation set forth
in
Section 7 herein, elect to convert all or any portion of the shares of Series
A
held by such person into a number of fully paid and nonassessable shares of
Common Stock (a "Conversion").
In
the event of a liquidation, dissolution or winding up of the Company, the
Conversion Rights shall terminate at the close of business on the last full
day
preceding the date fixed for the payment of any amounts distributable on such
event to the holders of Series A.
(b) Mechanics
of Conversion.
The
Conversion of Series A shall be conducted in the following manner:
(a) (i) Holder's
Delivery Requirements.
To
convert Series A into full shares of Common Stock on any date (a "Conversion
Date"),
the
holder thereof shall (A) transmit by facsimile (or otherwise deliver), for
receipt on or prior to 5:00 p.m., New York time on such date, a copy of a fully
executed notice of conversion in the form attached hereto as Exhibit
I
(the
"Conversion
Notice"),
to
the Company at x00-000-0000000, Attention: Chief Executive Officer, with a
copy
to Guzov Ofsink, LLC at 212-688-7273, Attention: Xxxxxx X. Xxxxxx, Esq., and
(B)
surrender to a common carrier for delivery to the Company as soon as practicable
following such Conversion Date the original certificates representing the shares
of Series A being converted (or an indemnification undertaking with respect
to
such shares in the case of their loss, theft or destruction) (the "Preferred
Stock Certificates")
and
the originally executed Conversion Notice.
47
(b) (ii) Company's
Response.
Upon
receipt by the Company of a facsimile copy of a Conversion Notice, the Company
shall send, via facsimile, a confirmation of receipt of such Conversion Notice
to such holder. The Company or its designated transfer agent (the "Transfer
Agent"),
as
applicable, shall, within ten (10) trading days following the date of such
receipt, issue and deliver to the holder one or more certificates in the name
of
the holder or its designees representing the number of shares of Common Stock
to
which the holder shall be entitled.
(c)
(d) (A)
Converted
Common Stock Held in Book-Entry Form.
If the
holder specifies in the Conversion Notice that instead of receiving certificates
representing Common Stock as described above in this Section 4(d)(ii), it
prefers to receive the shares due to it upon conversion in book-entry form,
then
instead of issuing such certificates, the Company or the Transfer Agent shall
issue and deliver to the Depository Trust Company (“DTC”)
account on the holder’s behalf, via the Deposit Withdrawal Agent Commission
System (“DWAC”),
registered in the name of the holder or its designee, the number of shares
of
Common Stock to which the holder shall be entitled, according to instructions
received in or with the Conversion Notice.
Notwithstanding the foregoing, the Company or its Transfer Agent shall only
be
obligated to issue and deliver shares to DTC on a holder’s behalf via DWAC if a
registration statement providing for the resale of the shares of Common Stock
issuable upon conversion of the Series A (a “Registration
Statement”)
is
effective.
(e)If
the
number of shares of Series A represented by the Preferred Stock Certificate(s)
submitted by a holder for conversion is greater than the number of shares of
Series A being converted, then the Company shall, as soon as practicable and
in
no event later than ten (10) trading days after receipt of the Preferred Stock
Certificate(s) and at the Company's expense, issue and deliver to the holder
a
new Preferred Stock Certificate representing the number of shares of Series
A
not converted.
(f) -(iii) Dispute
Resolution.
In the
case of a dispute as to the arithmetic calculation of the number of shares
of
Common Stock to be issued upon conversion, the Company shall cause its Transfer
Agent to promptly issue to the holder the number of shares of Common Stock
that
is not disputed and shall submit the arithmetic calculations to the holder
via
facsimile as soon as possible, but in no event later than four (4) business
days
after receipt of such holder's originally executed Conversion Notice. If such
holder and the Company are unable to agree upon the arithmetic calculation
of
the number of shares of Common Stock to be issued upon such conversion within
one (1) business day of such disputed arithmetic calculation being submitted
to
the holder, then the Company shall within one (1) business day submit via
facsimile the disputed arithmetic calculation of the number of shares of Common
Stock to be issued upon such conversion to the Company’s independent, outside
accountant. The Company shall cause the accountant to perform the calculations
and notify the Company and the holder of the results no later than seventy-two
(72) hours from the time the accountant received the disputed calculations.
Such
accountant's calculation shall be binding upon all parties absent manifest
error. The reasonable expenses of such accountant in making such determination
shall be paid by the Company, in the event the holder's calculation was correct,
or by the holder, in the event the Company's calculation was correct, or equally
by the Company and the holder in the event that neither the Company's or the
holder's calculation was correct. The period of time in which the Company is
required to effect conversions or redemptions under this Certificate of
Designations shall be tolled with respect to the subject conversion or
redemption pending resolution of any dispute by the Company made in good faith
and in accordance with this Section 4(d)(iii).
48
(g) (iv) Record
Holder.
The
person or persons entitled to receive the shares of Common Stock issuable upon
a
conversion of the Series A shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on the Conversion
Date.
(h) (v)
Company's
Failure to Timely Convert.
Subject
to the terms and conditions of this Certificate of Designations, if within
three
(3) trading days of the Company's receipt of the facsimile copy of the executed
Conversion Notice (the third of such three days, the "Delivery
Date")
the
Company fails (x) to issue and deliver to a holder, in accordance with Section
4(b)(ii) hereof, the number of shares of Common Stock to which such holder
is
entitled upon such holder's conversion of the Series A or (y) to issue a new
Preferred Stock Certificate representing the number of shares of Series A to
which such holder is entitled pursuant to Section 4(a) ("Conversion
Failure"),
then
in addition to all other available remedies which such holder may pursue
hereunder and under the Series A Convertible Preferred Stock Purchase Agreement
(the "Purchase
Agreement")
to be
entered into among the Company and the initial holders of the Series A
(including indemnification pursuant to Section 6 thereof), the Company shall
pay
additional damages to such holder on each business day after the Delivery Date
in an amount equal 0.5% of the product of (A) the sum of the number of shares
of
Common Stock not issued to the holder on a timely basis pursuant to Section
4(a)
to which such holder is entitled and, in the event the Company has failed to
deliver a Preferred Stock Certificate to the holder on a timely basis pursuant
to Section 4(b)(ii), the number of shares of Common Stock issuable upon
conversion of the shares of Series A represented by such Preferred Stock
Certificate, as of the last possible date which the Company could have issued
such Preferred Stock Certificate to such holder without violating Section
4(b)(ii) and (B) the Closing Bid Price (as defined below) of the Common Stock
on
the last possible date which the Company could have issued such Common Stock
or
such Preferred Stock Certificate, as the case may be, to such holder without
violating Section 4(b)(ii). The term "Closing
Bid Price"
shall
mean, for any security as of any date, the last closing bid price of such
security on the OTC Bulletin Board or other principal exchange on which such
security is traded as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the last closing trade price of such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on any date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holders of a majority of the outstanding shares of Series
A.
49
(i)
(vi)Buy-In
Rights.
In
addition to any other rights available to the holders of Series A, if the
Company fails to issue to a holder, on or before the Delivery Date and in
accordance with Section 4(b)(ii) hereof, the shares of Common Stock issuable
upon conversion of the Series A to which such holder is entitled, and if after
such date the holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a
sale by the holder of the shares of Common Stock issuable upon conversion of
Series A which the holder anticipated receiving upon such conversion (a
“Buy-In”),
then
the Company shall either (1) pay in cash to the holder the amount by which
(x)
the holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Common Stock issuable upon conversion
of
Series A that the Company was required to deliver to the holder in connection
with the conversion at issue by (B) the price at which the sell order giving
rise to such purchase obligation was executed, at which point the Company's
obligation to issue such shares of Common Stock being converted shall terminate,
or (2) either reinstate the shares of Series A and equivalent number of shares
of Common Stock for which such conversion was not honored or deliver to the
holder the number of shares of Common Stock that would have been issued had
the
Company timely complied with its conversion and delivery obligations hereunder.
For example, if the holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of shares
of Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence,
the Company may choose to pay to the holder $1,000, at which point the Company's
obligation to issue such shares of Common Stock being converted shall terminate.
The holder shall provide the Company written notice indicating the amounts
payable to the holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company. Nothing
herein shall limit a holder’s right to pursue any other remedies available to it
hereunder, at law or in equity, including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock
upon
conversion of the Series A as required pursuant to the terms hereof.
5.
Adjustments
to Conversion Price, Conversion Rate and Certain Other
Adjustments.
The
Conversion Rate for the number of shares of Common Stock into which the Series
A
shall be converted shall be subject to adjustment from time to time as
hereinafter set forth, notice of which shall be promptly provided to the Series
A holders:
(a)
Stock
Dividends, Recapitalization, Reclassification, Split-Ups.
If,
prior to or on the date of a Conversion, the number of outstanding shares of
Common Stock is increased by a stock dividend payable in shares of Common Stock
or any right to acquire Common Stock or by a split-up, recapitalization or
reclassification of shares of Common Stock or other similar event, then, on
the
effective date thereof, the Conversion Rate will be adjusted so that the number
of shares of Common Stock issuable on such Conversion of the Series A shall
be
increased in proportion to such increase in outstanding shares of Common
Stock.
(b)
Aggregation
of Shares.
If
prior to or on the date of a Conversion, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification
of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on Conversion of the
Series A shall be decreased in proportion to such decrease in outstanding shares
of Common Stock.
50
(c) Mergers
or Consolidations.
If at
any time or from time to time prior to the date of a Conversion there is a
merger, consolidation or similar capital reorganization of the Common Stock
(other than a recapitalization, subdivision, combination, reclassification,
exchange or substitution of shares provided for in Section 5(a) or 5(b) above)
(each a “Reorganization”),
then
as a part of such capital reorganization, provision shall be made so that each
holder of outstanding Series A at the time of such reorganization shall
thereafter be entitled to receive, upon conversion of the Series A, the number
of shares of stock or other securities or property of the Company to which
a
holder of the number of shares of Common Stock deliverable upon conversion
of
such holder’s Series A would be entitled on such capital reorganization, subject
to adjustment in respect of such stock or securities by the terms thereof.
In
any such case, the resulting or surviving corporation (if not the Company)
shall
expressly assume the obligations to deliver, upon the exercise of the conversion
privilege, such securities or property as the holders of Series A remaining
outstanding (or of other convertible preferred stock received by such holders
in
place thereof) shall be entitled to receive pursuant to the provisions hereof,
and to make provisions for the protection of the conversion rights as provided
above. If this Section 5(c) applies to a Reorganization, Sections 5(a) and
5(b)
shall not apply to such Reorganization. In
addition to all other rights of the holders of Series A contained herein,
simultaneous with the occurrence of a
Reorganiation,
each holder of Series A shall have the right, at such holder's option, to
require the Company to redeem all or a portion of such holder's shares of Series
A at a price per share of Series A equal to one hundred ten percent (110%)
of
the Liquidation Preference Amount.
(d)
Successive
Changes.
The
provisions of this Section shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
(j)
(i) (e)
Adjustments
for Issuance of Additional Shares of Common Stock.
(ii)
(iii) (i)
In
the event the Company shall, at any time within two (2) years following the
initial issuance date of the Series A, issue or sell any additional shares
of
Common Stock (“Additional
Shares of Common Stock”)
at a
price per share less than $2.15 or without consideration (subject to appropriate
adjustment in the event of any dividend, stock split, combination or other
similar recapitalization affecting such shares, other than as part of an “Exempt
Issuance,” as listed under Section 5(g)), then and in such event, the Conversion
Price upon each such issuance shall be reduced, concurrently with such issue
or
sale, to such lesser price paid for such Additional Shares of Common Stock
and
the Conversion Ratio then in effect immediately prior to such adjustment, shall
be adjusted based on the Conversion Price so adjusted in accordance with the
foregoing..
51
(ii)
For
the period commencing on the two (2) year anniversary of the Original Issue
Date
and ending upon the conversion of all of the shares of Series A, in the event
the Company shall issue any Additional Shares of Common Stock (otherwise than
as
provided in the foregoing subsections (a) through (c) of this Section 5), at
a
price per share less than $2.15 then in effect or without consideration, then
the Conversion Price then in effect shall multiplied by a fraction (a) the
numerator of which shall be equal to the sum of (x) the number of shares of
outstanding Common Stock immediately prior to the issuance of such Additional
Shares of Common Stock plus (y) the number of shares of Common Stock (rounded
to
the nearest whole share) which the aggregate consideration for the total number
of such Additional Shares of Common Stock so issued would purchase at a price
per share equal to the Conversion Price then in effect and (b) the denominator
of which shall be equal to the number of shares of outstanding Common Stock
immediately after the issuance of such Additional Shares of Common Stock. For
purposes of this Section, all shares of Common Stock issuable upon exercise
of
options outstanding immediately prior to such issue or upon conversion of
Convertible Securities outstanding immediately prior to such issue are deemed
outstanding. No adjustment of the number of shares of Common Stock for which
this Warrant shall be exercisable shall be made pursuant to this Section
5(d)(ii) upon the issuance of any Additional Shares of Common Stock which are
issued pursuant to the exercise of any Common Stock Equivalents, if any such
adjustment shall previously have been made upon the issuance of such Common
Stock Equivalents (or upon the issuance of any warrant or other rights therefor)
pursuant to Section 5(f).
(iv) (f) Issuance
of Common Stock Equivalents.
If the
Company, at any time following the initial issuance date of the Series A, shall
issue any securities convertible into or exchangeable for, directly or
indirectly, Common Stock ("Convertible Securities"), or (b) any rights or
warrants or options to purchase any such Common Stock or Convertible Securities
(collectively, the "Common Stock Equivalents") shall be issued or sold, other
than an Exempt Issuance. If the price per share for which Additional Shares
of
Common Stock may be issuable pursuant to any such Common Stock Equivalent shall
be less than $2.15, or if, after any such issuance of Common Stock Equivalents,
the price per share for which Additional Shares of Common Stock may be issuable
thereafter is amended or adjusted, and such price as so amended or adjusted
shall be less than $2.15, then the Conversion Price upon each such issuance
shall be adjusted to the price equal the consideration per share paid for such
Common Stock Equivalents and the Conversion Rate then in effect immediately
prior to such adjustment shall be adjusted based on the Conversion Price so
adjusted in accordance with the foregoing.
(g)
Restriction
on Conversion Rate and Conversion Price Adjustment.
Notwithstanding anything to the contrary set forth in Sections 5(e) and (f),
no
adjustment shall be made to the Conversion Price and/or the Conversion Rate
with
regard to (i) securities issued pursuant to a bona fide firm underwritten public
offering of the Company’s securities, provided such underwritten public offering
has been approved in advance by the the holders of more than fifty percent
(50%)
of the then outstanding shares of Series A (the “Majority Holders”), (ii)
securities issued (other than for cash) in connection with a strategic merger,
acquisition, or consolidation provided that the issuance of such securities
in
connection with such strategic merger, acquisition or consolidation has been
approved in advance by the Majority Holders, (iii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date of the Purchase Agreement or issued pursuant
to the Purchase Agreement (so long as the conversion or exercise price in such
securities are not amended to lower such price and/or adversely affect the
Holders), (iv) securities issued in connection with bona fide strategic license
agreements or other partnering arrangements so long as such issuances are not
for the purpose of raising capital and provided that the issuance of such
securities in connection with such bona fide strategic license, agreements
or
other partnering arrangements has been approved in advance by the Majority
Holders, (v) Common Stock issued or the issuance or grants of options to
purchase Common Stock pursuant to the Company’s equity incentive plans
outstanding as they exist on the date of the Purchase Agreement, (vi) the
issuance or grants of options to purchase Common Stock to employees, officers
or
directors of the Company pursuant to any equity incentive plan duly adopted
by
the Board or a committee thereof established for such purpose so long as such
issuances in the aggregate do not exceed ten percent (10)% of the issued and
outstanding shares of Common Stock as of the Closing Date (as defined in the
Purchase Agreement) and the specified price at which the options may be
exercised is equal to or greater than the Closing Bid Price as of the date
of
such grant, and (vii) any warrants, shares of Common Stock or other securities
issued to a placement agent and its designees for the transactions contemplated
by the Purchase Agreement (the “Exempt Issuance”).
52
(k)
6.
Voting
Rights.
The
holders of shares of Series A shall be entitled to the following voting
rights:
(a)
Those
voting rights required by applicable law;
(b) The
right
to vote together with the holders of the Common Stock as a single class, upon
all matters submitted to holders of Common Stock for a vote, with each
share of Series A carrying a number of votes equal to the number of shares
of
Common Stock issuable upon Conversion of one share of Series A based on the
then
applicable Conversion Rate, and each holder of Series A shall be entitled
to
notice of any stockholders’ meeting in accordance with the bylaws of the
Company;
and
(b)
Whenever
holders of Series A are required or permitted to take any action by vote, such
action may be taken without a meeting on written consent, setting forth the
action so taken and signed by the holders of the outstanding capital stock
of
the Company having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Each share of Series A shall
entitle the holder thereof to the number of votes equal to the number of shares
of Common Stock issuable upon Conversion of one share of Series A based on
the
then applicable Conversion Rate, which is initially 1 share of Common Stock
for
each share of Series A.
7. Conversion
Restriction.
Notwithstanding anything to the contrary set forth in this Certificate of
Designations, at no time may a holder of shares of Series A convert shares
of
Series A if the number of shares of Common Stock to be issued pursuant to such
conversion would cause the number of shares of Common Stock owned by such holder
at such time to equal or exceed, when aggregated with all other shares of Common
Stock beneficially owned by such holder at such time, the number of shares
of
Common Stock which would result in such holder beneficially owning (as
determined in accordance with Section 13(d) of the Securities Exchange Act
of
1934, as amended, and the rules thereunder) in excess of 4.99% of the then
issued and outstanding shares of Common Stock outstanding at such time;
provided,
however,
that
upon a holder of Series A providing the Company with sixty-one (61) days notice
(the "Waiver
Notice")
that
such holder wishes to waive Section 7 of this Certificate of Designation with
regard to any or all shares of Common Stock issuable upon conversion of such
holder’s Series A, this Section 7 shall be of no force or effect with regard to
those shares of Series A referenced in the Waiver Notice.
53
ARTICLE
VIII
ARTICLE
IX8. Inability
to Fully Convert.
Section
9.1 (a) Holder's
Option if Company Cannot Fully Convert.
Section
9.2
Section
9.3 (A)
If,
upon the Company's receipt of a Conversion Notice after the initial issuance
of
the Series A, the Company cannot issue shares of Common Stock upon a Conversion
because the Company (w) does not have a sufficient number of shares of Common
Stock authorized and available, or (x) is otherwise prohibited by applicable
law
or by the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the Company
or its securities from issuing all of the Common Stock which is to be issued
to
a holder of Series A pursuant to a Conversion Notice, then the Company shall
issue as many shares of Common Stock as it is able to issue in accordance with
such holder's Conversion Notice and, with respect to the unconverted Series
A,
the holder, solely at such holder's option, may elect, within five (5) business
days after receipt of notice from the Company thereof to: (i) require the
Company to redeem from such holder those Series A for which the Company is
unable to issue Common Stock in accordance with such holder's Conversion Notice
(such shares of Series A, the “Nonconvertible
Shares”;
such
redemption right, the "Mandatory
Redemption")
at a
price per share payable in cash equal to (A) one hundred ten percent
(110%) of
the Liquidation Preference Amount
(the
"Mandatory
Redemption Price")
plus
(B)
among which (a) the Closing Bid Price on the Conversion Date or, if the Holder
or its broker has received a firm written bid commitment which shall have been
provided to the Company along with the Conversion Notice, the per share price
as
evidenced by the firm written bid (the “Base
Price”),
exceeds (b) the Closing Bid Price on the date the Company has sufficient number
of shares of Common Stock for the conversion of the Nonconvertible Share had
the
Nonconvertible Share been converted; provided that if the Holder or its broker
has received a firm written bid commitment which shall have been provided to
the
Company along with the Conversion Notice, the Base Price for the portion of
the
Nonconvertible Shares subject to the firm written bid commitment shall be per
share price on the firm written bid commitment, or (ii) void its Conversion
Notice and retain or have returned, as the case may be, the shares of Series
A
that were to be converted pursuant to such holder's Conversion Notice (provided
that a holder's voiding its Conversion Notice shall not affect the Company's
obligations to make any payments which have accrued prior to the date of such
notice); or (iii) exercise its Buy-In rights pursuant to and in accordance
with
the terms and provisions of Section 4(b)(vi) hereof.
54
Section
9.4 (B)
If,
upon the Company's receipt of a Conversion Notice after the initial issuance
of
the Series A, the Company cannot issue shares of Common Stock upon a Conversion
because the Company, subsequent to the effective date of a Registration
Statement, fails to have a sufficient number of shares of Common Stock
registered for resale under the Registration Statement, then with respect to
the
unconverted Series A, the holder, may, within five (5) business days after
receipt of notice from the Company thereof to require the Company to issue
restricted shares of Common Stock in accordance with such holder's Conversion
Notice.
Section
9.5 (b) Mechanics
of Fulfilling Holder's Election.
The
Company shall immediately send via facsimile to a holder of Series A, upon
receipt of a facsimile copy of a Conversion Notice from such holder which cannot
be fully satisfied as described in Section 8(a) above, a notice of the Company's
inability to fully satisfy such holder's Conversion Notice (the "Inability
to Fully Convert Notice").
Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Company
is unable to fully satisfy such holder's Conversion Notice, (ii) the number
of
shares of Series A that cannot be converted and (iii) the applicable Mandatory
Redemption Price, if applicable pursuant to Section 8(a)(A) above. If
applicable, such holder shall notify the Company of its election pursuant to
Section 8(a)(A) above by delivering written notice via facsimile to the Company
("Notice
in Response to Inability to Convert").
Section
9.6 (c) Payment
of Redemption Price.
If a
holder shall elect to have its shares redeemed pursuant to Section 8(a)(A)(i)
above, the Company shall pay the Mandatory Redemption Price to such holder
within thirty (30) days of the Company's receipt of the holder's Notice in
Response to Inability to Convert, provided
that
prior to the Company's receipt of the holder's Notice in Response to Inability
to Convert the Company has not delivered a notice to such holder stating, to
the
satisfaction of the holder, that the event or condition resulting in the
Mandatory Redemption has been cured and all shares of Common Stock issuable
to
such holder can and will be delivered to the holder in accordance with the
terms
of Section 4. Until the full Mandatory Redemption Price is paid to such holder,
such holder may (i) void the Mandatory Redemption with respect to those shares
of Series A for which the full Mandatory Redemption Price has not been paid,
and
(ii) receive back such shares.
Section
9.7 (d) Pro-rata
Conversion and Redemption.
In the
event the Company receives a Conversion Notice from more than one holder of
Series A on the same day and the Company is able to convert and redeem some,
but
not all, of the Series A pursuant to this Section 8, the Company shall convert
and redeem from each holder of Series A electing to have Series A converted
and
redeemed at such time an amount equal to such holder's pro-rata amount (based
on
the number shares of Series A held by such holder relative to the number shares
of Series A outstanding) of all shares of Series A being converted and redeemed
at such time.
55
9. No
Impairment.
The
Company will not, by amendment of its Articles of Incorporation or through
any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other action, avoid or seek
to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Certificate of Designations
and in the taking of all such action as may be necessary or appropriate in
order
to protect the conversion rights of the holders of Series A against
impairment.
10.
No
Fractional Shares and Certificate as to Adjustments.
No
fractional shares shall be issued upon the conversion of any share or shares
of
the Series A, and the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole share. The number of shares issuable upon
conversion shall be determined on the basis of the total number of shares of
Series A the holder is at the time converting into Common Stock and the number
of shares of Common Stock issuable upon such aggregate conversion.
11.
Notices
of Record Date.
In the
event of any taking by the Company of a record of the holders of any class
of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend) or other distribution,
any
right to subscribe for, purchase or otherwise acquire any shares of stock of
any
class or any other securities or property, or any other right, the Company
shall
mail to each holder of Series A, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such record is
to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
12.
Notices.
Any
notice required by the provisions of this Certificate of Designations to be
given to the holders of shares of Series A shall be deemed given if deposited
in
the United States mail, postage prepaid, and addressed to each holder of record
at his address appearing on the books of the Company.
13.
Protective
Provisions.
Except
for the designation and issuance of the Company’s Series B, which is being
designated contemporaneously with the Series A, so long as any shares of Series
A are outstanding, the Company shall not without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least
seventy-five percent (75%) of the then outstanding shares of Series A, voting
as
a separate class:
(a)
in
any
manner authorize, issue or create (by reclassification or otherwise) any new
class or series of shares having rights, preferences or privileges equal or
senior to the Series A;
(b)
adversely
alter or change the rights, preferences, designations or privileges of the
Series A;
(c)
amend
the
Company’s Articles of Incorporation or By-laws in a manner that adversely
affects the rights, preferences, designations or privileges of the holders
of
the Series A;
56
(d)
increase
or decrease the authorized number of shares of preferred stock of the Company
or
otherwise reclassify
the Company's outstanding securities;
(e)
redeem,
purchase or otherwise acquire (or pay into or set funds aside for a sinking
fund
for such purpose) any share or shares of preferred stock or Common Stock;
provided,
however, that this restriction shall not apply to the de
minimus repurchases of
shares
of Common Stock from employees, officers, directors, consultants or other
persons performing services for the Company or any subsidiary pursuant to
agreements under which the Company has the option to repurchase such shares
at
cost upon the occurrence of certain events, such as the termination of
employment, or through the exercise of any right of first refusal; and
provided
further
that this restriction shall not apply to any conversion, redemption or other
acquisition of shares of Series A pursuant to this Certificate of Designations
or Series B pursuant to the Certificate of Designations, Preferences and Rights
of Series B Convertible Preferred Stock of the Company; or
(f) voluntarily
file for bankruptcy, liquidate the Company’s assets or make an assignment for
the benefit of the Company’s creditors.
14. No
Charge for Conversion.
The
issuance of certificates for shares of Common Stock upon the conversion of
shares of Series A shall be made without charge to the converting holders for
such certificates and without any tax in respect of the issuance of such
certificates.
15. Reservation
of Shares.
On and
after the initial issuance of the Series A, the Corporation shall at all times
reserve and keep available out of any stock held as treasury stock or out of
its
authorized but unissued Common Stock, or both, solely for the purpose of
effecting the conversion of the shares of Series A, no less than one hundred
fifty percent (150%) of the aggregate number of shares of Common Stock then
issuable upon the conversion of all outstanding shares of Series A. The
Corporation shall immediately, in accordance with the laws of the State of
Nevada, increase the authorized amount of its Common Stock if, at any time,
the
authorized amount of its Common Stock remaining unissued shall not be sufficient
to permit the conversion of all shares of Series A.
16.
Return
of Status as Authorized Shares.
Upon a
Conversion or any other redemption or extinguishment of the Series A, the shares
converted, redeemed or extinguished will be cancelled (and may not be reissued
as shares of Series A) and automatically returned to the status of authorized
and unissued shares of preferred stock, available for future designation and
issuance pursuant to the terms of the Articles of Incorporation.
17.
Amendment.
This
Certificate of Designations constitutes an agreement between the Company and
the
holders of the Series A. For as long as any shares of Series A are outstanding,
the terms hereof may be amended, modified, repealed or waived only by the
affirmative vote or written consent of holders of seventy five percent (75%)
of
the then outstanding shares of Series A, voting together as a class and series.
57
Exhibit
I
to Exhibit A
CONVERSION
NOTICE
Reference
is made to the Certificate of Designations Preferences and Rights of the Series
A Convertible Preferred Stock of Victory Divide Mining Company (the "Certificate
of Designations"). In accordance with and pursuant to the Certificate of
Designations, the undersigned hereby elects to convert the number of shares
of
Series A Preferred Stock, par value $0.001 per share (the "Preferred Shares"),
of Victory Divide Mining Company, a Nevada corporation (the "Company"),
indicated below into shares of Common Stock, par value $0.001 per share (the
"Common Stock"), of the Company, by tendering the stock certificate(s)
representing the share(s) of the Preferred Stock specified below as of the
date
specified below.
Date
of
Conversion:
Number
of
Preferred Shares to be converted:
Stock
certificate no(s). of Preferred Shares to be
converted:
The
Common Stock have been sold pursuant to the Registration Statement: YES ____
NO____
Please
confirm the following information:
Number
of
shares of Common Stock
to
be
issued:
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _________________________
Please
issue the Common Stock into which the Preferred Shares are being converted
and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
Issue
to:
Facsimile
Number:
Authorization:
By:
Title:
Dated:
58
59
60
EXHIBIT
A
TO
THE CERTIFICATE OF DESIGNATIONS,
PREFERENCES
AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK OF
to
be filed with the Secretary of State
of
the State of Nevada
on
or about September 21, 2007
1. Designation
and Number of Shares.
Shares
of
the series shall be designated and known as the “Series B Convertible Preferred
Stock” of the Company. The Series B Convertible Preferred Stock (the
“Series
B”)
shall
consist of 10,000,000 shares. Shares of the Series B which are redeemed,
retired, converted into shares of the Company’s $.001 par value per share Common
Stock (the “Common
Stock”),
purchased or otherwise acquired by the Company shall be cancelled (and
thereafter shall not be re-issued as shares of Series B) and shall revert to
the
status of authorized but unissued preferred stock, undesignated as to series
and
subject to reissuance by the Company as shares of preferred stock of any one
or
more series as permitted by the Articles of Incorporation.
2.
Redemption;
Liquidation Preference.
The
Series B shall, in respect of the right to participate in distributions or
payments in the event of any liquidation, dissolution or winding up, voluntary
or involuntary, of the Company (a “Liquidation
Event”),
rank
(a) senior to the Common Stock and to any other class or series of stock issued
by the Company not designated as ranking senior to or pari
passu with
the
Series B in respect of the right to participate in distributions or payments
upon a Liquidation Event; and (b) pari
passu
with the
Series A Convertible Preferred Stock (the “Series
A”),
any
other class or series of stock of the Company, the terms of which specifically
provide that such class or series shall rank pari
passu
with the
Series B in respect of the right to participate in distributions or payments
upon a Liquidation Event. No shares of Series B may be redeemed by the Company
without the express written consent of each holder of such shares, provided
or
withheld in such holder’s sole discretion. In
the event of the liquidation, dissolution or winding up of the affairs of the
Company, whether voluntary or involuntary, the holders of shares of Series
B
then outstanding shall be entitled to receive, out of the assets of the Company
available for distribution to its stockholders, an amount equal to $2.37 per
share (such amount, the "Liquidation
Preference Amount")
before any payment shall be made or any assets distributed to the holders of
the
Common Stock or any other stock that ranks junior to the Series B. In
the
event of such a liquidation, dissolution or winding up, the Company shall
provide to each holder of shares of Series B notice of such redemption or
liquidation, dissolution or winding up, which notice shall (i) be sent at least
fifteen (15) days prior to the termination of the Conversion Rights (or, if
the
Company obtains lesser notice thereof, then as promptly as possible after the
date that it has obtained notice thereof) and (ii) state the amount per share
of
Series B that will be paid or distributed on such liquidation, dissolution
or
winding up, as the case may be.
61
3.
Dividends.
The
Series B will not be entitled to dividends unless the Company pays dividends,
in
cash or other property, to holders of outstanding shares of Common Stock, in
which event each outstanding share of the Series B will be entitled to receive
dividends of cash or property, out of any assets legally available therefor,
in
an amount or value equal to the amount of dividends, per share of Series B,
as
would have been payable on the number of shares of Common Stock into which
each
share of Series B would be convertible, if such shares of Series B had been
converted to Common Stock as of the record date for the determination of holders
of Common Stock entitled to receive such dividends (the “Dividends”).
Any
dividend payable to the Series B will have the same record and payment date
and
terms as the dividend payable on the Common Stock.
4.
Conversion.
The
holders of Series B shall have the following conversion rights (the
"Conversion
Rights"):
(c) Right
to Convert.
At any
time on or after the issuance of the Series B, each share of Series B will
be
convertible into 1 share of Common Stock, which may be adjusted from time to
time pursuant to Section 5 (the “Conversion
Rate”).
The
Conversion Rate is calculated by dividing the Liquidation Preference Amount
per
share by the Conversion Price (as defined below) per share. The “Conversion
Price”
means
$2.37 per share, intially, which may be adjusted from time to time pursuant
to
Section 5. At any time on or after the issuance of the Series B, any holder
of
Series B may, at such holder's option, subject to the limitation set forth
in
Section 7 herein, elect to convert all or any portion of the shares of Series
B
held by such person into a number of fully paid and nonassessable shares of
Common Stock (a "Conversion").
In
the event of a liquidation, dissolution or winding up of the Company, the
Conversion Rights shall terminate at the close of business on the last full
day
preceding the date fixed for the payment of any amounts distributable on such
event to the holders of Series B.
(d) Mechanics
of Conversion.
The
Conversion of Series B shall be conducted in the following
manner:
(a) (i) Holder's
Delivery Requirements.
To
convert Series B into full shares of Common Stock on any date (a "Conversion
Date"),
the
holder thereof shall (A) transmit by facsimile (or otherwise deliver), for
receipt on or prior to 5:00 p.m., New York time on such date, a copy of a fully
executed notice of conversion in the form attached hereto as Exhibit
I
(the
"Conversion
Notice"),
to
the Company at x00-000-0000000, Attention: Chief Executive Officer, with a
copy
to Guzov Ofsink, LLC at 212-688-7273, Attention: Xxxxxx X. Xxxxxx, Esq., and
(B)
surrender to a common carrier for delivery to the Company as soon as practicable
following such Conversion Date the original certificates representing the shares
of Series B being converted (or an indemnification undertaking with respect
to
such shares in the case of their loss, theft or destruction) (the "Preferred
Stock Certificates")
and
the originally executed Conversion Notice.
62
(b) (ii) Company's
Response.
Upon
receipt by the Company of a facsimile copy of a Conversion Notice, the Company
shall send, via facsimile, a confirmation of receipt of such Conversion Notice
to such holder. The Company or its designated transfer agent (the "Transfer
Agent"),
as
applicable, shall, within ten (10) trading days following the date of such
receipt, issue and deliver to the holder one or more certificates in the name
of
the holder or its designees representing the number of shares of Common Stock
to
which the holder shall be entitled.
(c)
(d) (A)
Converted
Common Stock Held in Book-Entry Form.
If the
holder specifies in the Conversion Notice that instead of receiving certificates
representing Common Stock as described above in this Section 4(d)(ii), it
prefers to receive the shares due to it upon conversion in book-entry form,
then
instead of issuing such certificates, the Company or the Transfer Agent shall
issue and deliver to the Depository Trust Company (“DTC”)
account on the holder’s behalf, via the Deposit Withdrawal Agent Commission
System (“DWAC”),
registered in the name of the holder or its designee, the number of shares
of
Common Stock to which the holder shall be entitled, according to instructions
received in or with the Conversion Notice.
Notwithstanding the foregoing, the Company or its Transfer Agent shall only
be
obligated to issue and deliver shares to DTC on a holder’s behalf via DWAC if a
registration statement providing for the resale of the shares of Common Stock
issuable upon conversion of the Series B (a “Registration
Statement”)
is
effective.
(e)If
the
number of shares of Series B represented by the Preferred Stock Certificate(s)
submitted by a holder for conversion is greater than the number of shares of
Series B being converted, then the Company shall, as soon as practicable and
in
no event later than ten (10) trading days after receipt of the Preferred Stock
Certificate(s) and at the Company's expense, issue and deliver to the holder
a
new Preferred Stock Certificate representing the number of shares of Series
B
not converted.
(f) (iii) Dispute
Resolution.
In the
case of a dispute as to the arithmetic calculation of the number of shares
of
Common Stock to be issued upon conversion, the Company shall cause its Transfer
Agent to promptly issue to the holder the number of shares of Common Stock
that
is not disputed and shall submit the arithmetic calculations to the holder
via
facsimile as soon as possible, but in no event later than four (4) business
days
after receipt of such holder's originally executed Conversion Notice. If such
holder and the Company are unable to agree upon the arithmetic calculation
of
the number of shares of Common Stock to be issued upon such conversion within
one (1) business day of such disputed arithmetic calculation being submitted
to
the holder, then the Company shall within one (1) business day submit via
facsimile the disputed arithmetic calculation of the number of shares of Common
Stock to be issued upon such conversion to the Company’s independent, outside
accountant. The Company shall cause the accountant to perform the calculations
and notify the Company and the holder of the results no later than seventy-two
(72) hours from the time the accountant received the disputed calculations.
Such
accountant's calculation shall be binding upon all parties absent manifest
error. The reasonable expenses of such accountant in making such determination
shall be paid by the Company, in the event the holder's calculation was correct,
or by the holder, in the event the Company's calculation was correct, or equally
by the Company and the holder in the event that neither the Company's or the
holder's calculation was correct. The period of time in which the Company is
required to effect conversions or redemptions under this Certificate of
Designations shall be tolled with respect to the subject conversion or
redemption pending resolution of any dispute by the Company made in good faith
and in accordance with this Section 4(d)(iii).
63
(g) (iv) Record
Holder.
The
person or persons entitled to receive the shares of Common Stock issuable upon
a
conversion of the Series B shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on the Conversion
Date.
(h) (v)
Company's
Failure to Timely Convert.
Subject
to the terms and conditions of this Certificate of Designations, if within
three
(3) trading days of the Company's receipt of the facsimile copy of the executed
Conversion Notice (the third of such three days, the "Delivery
Date")
the
Company fails (x) to issue and deliver to a holder, in accordance with Section
4(b)(ii) hereof, the number of shares of Common Stock to which such holder
is
entitled upon such holder's conversion of the Series B or (y) to issue a new
Preferred Stock Certificate representing the number of shares of Series B to
which such holder is entitled pursuant to Section 4(a) ("Conversion
Failure"),
then
in addition to all other available remedies which such holder may pursue
hereunder and under the Series B Convertible Preferred Stock Purchase Agreement
(the "Purchase
Agreement")
to be
entered into among the Company and the initial holders of the Series B
(including indemnification pursuant to Section 6 thereof), the Company shall
pay
additional damages to such holder on each business day after the Delivery Date
in an amount equal 0.5% of the product of (A) the sum of the number of shares
of
Common Stock not issued to the holder on a timely basis pursuant to Section
4(a)
to which such holder is entitled and, in the event the Company has failed to
deliver a Preferred Stock Certificate to the holder on a timely basis pursuant
to Section 4(b)(ii), the number of shares of Common Stock issuable upon
conversion of the shares of Series B represented by such Preferred Stock
Certificate, as of the last possible date which the Company could have issued
such Preferred Stock Certificate to such holder without violating Section
4(b)(ii) and (B) the Closing Bid Price (as defined below) of the Common Stock
on
the last possible date which the Company could have issued such Common Stock
or
such Preferred Stock Certificate, as the case may be, to such holder without
violating Section 4(b)(ii). The term "Closing
Bid Price"
shall
mean, for any security as of any date, the last closing bid price of such
security on the OTC Bulletin Board or other principal exchange on which such
security is traded as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the last closing trade price of such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on any date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holders of a majority of the outstanding shares of Series
B.
64
(i)(vi)Buy-In
Rights.
In
addition to any other rights available to the holders of Series B, if the
Company fails to issue to a holder, on or before the Delivery Date and in
accordance with Section 4(b)(ii) hereof, the shares of Common Stock issuable
upon conversion of the Series B to which such holder is entitled, and if after
such date the holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a
sale by the holder of the shares of Common Stock issuable upon conversion of
Series B which the holder anticipated receiving upon such conversion (a
“Buy-In”),
then
the Company shall either (1) pay in cash to the holder the amount by which
(x)
the holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Common Stock issuable upon conversion
of
Series B that the Company was required to deliver to the holder in connection
with the conversion at issue by (B) the price at which the sell order giving
rise to such purchase obligation was executed, at which point the Company's
obligation to issue such shares of Common Stock being converted shall terminate,
or (2) either reinstate the shares of Series B and equivalent number of shares
of Common Stock for which such conversion was not honored or deliver to the
holder the number of shares of Common Stock that would have been issued had
the
Company timely complied with its conversion and delivery obligations hereunder.
For example, if the holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of shares
of Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence,
the Company may choose to pay to the holder $1,000, at which point the Company's
obligation to issue such shares of Common Stock being converted shall terminate.
The holder shall provide the Company written notice indicating the amounts
payable to the holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company. Nothing
herein shall limit a holder’s right to pursue any other remedies available to it
hereunder, at law or in equity, including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock
upon
conversion of the Series B as required pursuant to the terms hereof.
5.
Adjustments
to Conversion Price, Conversion Rate and Certain Other
Adjustments.
The
Conversion Rate for the number of shares of Common Stock into which the Series
B
shall be converted shall be subject to adjustment from time to time as
hereinafter set forth, notice of which shall be promptly provided to the Series
B holders:
(a)
Stock
Dividends, Recapitalization, Reclassification, Split-Ups.
If,
prior to or on the date of a Conversion, the number of outstanding shares of
Common Stock is increased by a stock dividend payable in shares of Common Stock
or any right to acquire Common Stock or by a split-up, recapitalization or
reclassification of shares of Common Stock or other similar event, then, on
the
effective date thereof, the Conversion Rate will be adjusted so that the number
of shares of Common Stock issuable on such Conversion of the Series B shall
be
increased in proportion to such increase in outstanding shares of Common
Stock.
(b)
Aggregation
of Shares.
If
prior to or on the date of a Conversion, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification
of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on Conversion of the
Series B shall be decreased in proportion to such decrease in outstanding shares
of Common Stock.
65
(c) Mergers
or Consolidations.
If at
any time or from time to time prior to the date of a Conversion there is a
merger, consolidation or similar capital reorganization of the Common Stock
(other than a recapitalization, subdivision, combination, reclassification,
exchange or substitution of shares provided for in Section 5(a) or 5(b) above)
(each a “Reorganization”),
then
as a part of such capital reorganization, provision shall be made so that each
holder of outstanding Series B at the time of such reorganization shall
thereafter be entitled to receive, upon conversion of the Series B, the number
of shares of stock or other securities or property of the Company to which
a
holder of the number of shares of Common Stock deliverable upon conversion
of
such holder’s Series B would be entitled on such capital reorganization, subject
to adjustment in respect of such stock or securities by the terms thereof.
In
any such case, the resulting or surviving corporation (if not the Company)
shall
expressly assume the obligations to deliver, upon the exercise of the conversion
privilege, such securities or property as the holders of Series B remaining
outstanding (or of other convertible preferred stock received by such holders
in
place thereof) shall be entitled to receive pursuant to the provisions hereof,
and to make provisions for the protection of the conversion rights as provided
above. If this Section 5(c) applies to a Reorganization, Sections 5(a) and
5(b)
shall not apply to such Reorganization. In
addition to all other rights of the holders of Series B contained herein,
simultaneous with the occurrence of a
Reorganiation,
each holder of Series B shall have the right, at such holder's option, to
require the Company to redeem all or a portion of such holder's shares of Series
B at a price per share of Series B equal to one hundred ten percent (110%)
of
the Liquidation Preference Amount.
(d)
Successive
Changes.
The
provisions of this Section shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
(j)
(i) (e)
Adjustments
for Issuance of Additional Shares of Common Stock.
(ii)
(iii) (i)
In
the event the Company shall, at any time within two (2) years following the
initial issuance date of the Series B, issue or sell any additional shares
of
Common Stock (“Additional
Shares of Common Stock”)
at a
price per share less than $2.37 or without consideration (subject to appropriate
adjustment in the event of any dividend, stock split, combination or other
similar recapitalization affecting such shares, other than as part of an “Exempt
Issuance,” as listed under Section 5(g)), then and in such event, the Conversion
Price upon each such issuance shall be reduced, concurrently with such issue
or
sale, to such lesser price paid for such Additional Shares of Common Stock
and
the Conversion Ratio then in effect immediately prior to such adjustment, shall
be adjusted based on the Conversion Price so adjusted in accordance with the
foregoing..
66
(ii)
For
the period commencing on the two (2) year anniversary of the Original Issue
Date
and ending upon the conversion of all of the shares of Series B, in the event
the Company shall issue any Additional Shares of Common Stock (otherwise than
as
provided in the foregoing subsections (a) through (c) of this Section 5), at
a
price per share less than $2.37 then in effect or without consideration, then
the Conversion Price then in effect shall multiplied by a fraction (a) the
numerator of which shall be equal to the sum of (x) the number of shares of
outstanding Common Stock immediately prior to the issuance of such Additional
Shares of Common Stock plus (y) the number of shares of Common Stock (rounded
to
the nearest whole share) which the aggregate consideration for the total number
of such Additional Shares of Common Stock so issued would purchase at a price
per share equal to the Conversion Price then in effect and (b) the denominator
of which shall be equal to the number of shares of outstanding Common Stock
immediately after the issuance of such Additional Shares of Common Stock. For
purposes of this Section, all shares of Common Stock issuable upon exercise
of
options outstanding immediately prior to such issue or upon conversion of
Convertible Securities outstanding immediately prior to such issue are deemed
outstanding. No adjustment of the number of shares of Common Stock for which
this Warrant shall be exercisable shall be made pursuant to this Section
5(d)(ii) upon the issuance of any Additional Shares of Common Stock which are
issued pursuant to the exercise of any Common Stock Equivalents, if any such
adjustment shall previously have been made upon the issuance of such Common
Stock Equivalents (or upon the issuance of any warrant or other rights therefor)
pursuant to Section 5(f).
(iv) (f) Issuance
of Common Stock Equivalents.
If the
Company, at any time following the initial issuance date of the Series B, shall
issue any securities convertible into or exchangeable for, directly or
indirectly, Common Stock ("Convertible Securities"), or (b) any rights or
warrants or options to purchase any such Common Stock or Convertible Securities
(collectively, the "Common Stock Equivalents") shall be issued or sold, other
than an Exempt Issuance. If the price per share for which Additional Shares
of
Common Stock may be issuable pursuant to any such Common Stock Equivalent shall
be less than $2.37, or if, after any such issuance of Common Stock Equivalents,
the price per share for which Additional Shares of Common Stock may be issuable
thereafter is amended or adjusted, and such price as so amended or adjusted
shall be less than $2.37, then the Conversion Price upon each such issuance
shall be adjusted to the price equal the consideration per share paid for such
Common Stock Equivalents and the Conversion Rate then in effect immediately
prior to such adjustment shall be adjusted based on the Conversion Price so
adjusted in accordance with the foregoing.
(g)
Restriction
on Conversion Rate and Conversion Price Adjustment.
Notwithstanding anything to the contrary set forth in Sections 5(e) and (f),
no
adjustment shall be made to the Conversion Price and/or the Conversion Rate
with
regard to (i) securities issued pursuant to a bona fide firm underwritten public
offering of the Company’s securities, provided such underwritten public offering
has been approved in advance by the the holders of more than fifty percent
(50%)
of the then outstanding shares of Series B (the “Majority Holders”), (ii)
securities issued (other than for cash) in connection with a strategic merger,
acquisition, or consolidation provided that the issuance of such securities
in
connection with such strategic merger, acquisition or consolidation has been
approved in advance by the Majority Holders, (iii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date of the Purchase Agreement or issued pursuant
to the Purchase Agreement (so long as the conversion or exercise price in such
securities are not amended to lower such price and/or adversely affect the
Holders), (iv) securities issued in connection with bona fide strategic license
agreements or other partnering arrangements so long as such issuances are not
for the purpose of raising capital and provided that the issuance of such
securities in connection with such bona fide strategic license, agreements
or
other partnering arrangements has been approved in advance by the Majority
Holders, (v) Common Stock issued or the issuance or grants of options to
purchase Common Stock pursuant to the Company’s equity incentive plans
outstanding as they exist on the date of the Purchase Agreement, (vi) the
issuance or grants of options to purchase Common Stock to employees, officers
or
directors of the Company pursuant to any equity incentive plan duly adopted
by
the Board or a committee thereof established for such purpose so long as such
issuances in the aggregate do not exceed ten percent (10)% of the issued and
outstanding shares of Common Stock as of the Closing Date (as defined in the
Purchase Agreement) and the specified price at which the options may be
exercised is equal to or greater than the Closing Bid Price as of the date
of
such grant, and (vii) any warrants, shares of Common Stock or other securities
issued to a placement agent and its designees for the transactions contemplated
by the Purchase Agreement (the “Exempt Issuance”).
67
(k)
6.
Voting
Rights.
The
holders of shares of Series B shall be entitled to the following voting rights:
(a)
Those
voting rights required by applicable law;
(b) The
right
to vote together with the holders of the Common Stock as a single class, upon
all matters submitted to holders of Common Stock for a vote, with each share
of
Series B carrying a number of votes equal to the number of shares of Common
Stock issuable upon Conversion of one share of Series B based on the then
applicable Conversion Rate, and each holder of Series B shall be entitled
to
notice of any stockholders’ meeting in accordance with the bylaws of the
Company; and
(b)
Whenever
holders of Series B are required or permitted to take any action by vote, such
action may be taken without a meeting on written consent, setting forth the
action so taken and signed by the holders of the outstanding capital stock
of
the Company having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Each share of Series B shall
entitle the holder thereof to the number of votes equal to the number of shares
of Common Stock issuable upon Conversion of one share of Series B based on
the
then applicable Conversion Rate, which is initially 1 share of Common Stock
for
each share of Series B.
7. Conversion
Restriction.
Notwithstanding anything to the contrary set forth in this Certificate of
Designations, at no time may a holder of shares of Series B convert shares
of
Series B if the number of shares of Common Stock to be issued pursuant to such
conversion would cause the number of shares of Common Stock owned by such holder
at such time to equal or exceed, when aggregated with all other shares of Common
Stock beneficially owned by such holder at such time, the number of shares
of
Common Stock which would result in such holder beneficially owning (as
determined in accordance with Section 13(d) of the Securities Exchange Act
of
1934, as amended, and the rules thereunder) in excess of 4.99% of the then
issued and outstanding shares of Common Stock outstanding at such time;
provided,
however,
that
upon a holder of Series B providing the Company with sixty-one (61) days notice
(the "Waiver
Notice")
that
such holder wishes to waive Section 7 of this Certificate of Designation with
regard to any or all shares of Common Stock issuable upon conversion of such
holder’s Series B, this Section 7 shall be of no force or effect with regard to
those shares of Series B referenced in the Waiver Notice.
68
ARTICLE
X
ARTICLE
XI8. Inability
to Fully Convert.
Section
11.1 (a) Holder's
Option if Company Cannot Fully Convert.
Section
11.2
Section
11.3 (A)
If,
upon the Company's receipt of a Conversion Notice after the initial issuance
of
the Series B, the Company cannot issue shares of Common Stock upon a Conversion
because the Company (w) does not have a sufficient number of shares of Common
Stock authorized and available, or (x) is otherwise prohibited by applicable
law
or by the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the Company
or its securities from issuing all of the Common Stock which is to be issued
to
a holder of Series B pursuant to a Conversion Notice, then the Company shall
issue as many shares of Common Stock as it is able to issue in accordance with
such holder's Conversion Notice and, with respect to the unconverted Series
B,
the holder, solely at such holder's option, may elect, within five (5) business
days after receipt of notice from the Company thereof to: (i) require the
Company to redeem from such holder those Series B for which the Company is
unable to issue Common Stock in accordance with such holder's Conversion Notice
(such shares of Series B, the “Nonconvertible
Shares”;
such
redemption right, the "Mandatory
Redemption")
at a
price per share payable in cash equal to (A) one hundred ten percent
(110%) of
the Liquidation Preference Amount
(the
"Mandatory
Redemption Price")
plus
(B)
among which (a) the Closing Bid Price on the Conversion Date or, if the Holder
or its broker has received a firm written bid commitment which shall have been
provided to the Company along with the Conversion Notice, the per share price
as
evidenced by the firm written bid (the “Base
Price”),
exceeds (b) the Closing Bid Price on the date the Company has sufficient number
of shares of Common Stock for the conversion of the Nonconvertible Share had
the
Nonconvertible Share been converted; provided that if the Holder or its broker
has received a firm written bid commitment which shall have been provided to
the
Company along with the Conversion Notice, the Base Price for the portion of
the
Nonconvertible Shares subject to the firm written bid commitment shall be per
share price on the firm written bid commitment, or (ii) void its Conversion
Notice and retain or have returned, as the case may be, the shares of Series
B
that were to be converted pursuant to such holder's Conversion Notice (provided
that a holder's voiding its Conversion Notice shall not affect the Company's
obligations to make any payments which have accrued prior to the date of such
notice); or (iii) exercise its Buy-In rights pursuant to and in accordance
with
the terms and provisions of Section 4(b)(vi) hereof.
69
Section
11.4 (B)
If,
upon the Company's receipt of a Conversion Notice after the initial issuance
of
the Series B, the Company cannot issue shares of Common Stock upon a Conversion
because the Company, subsequent to the effective date of a Registration
Statement, fails to have a sufficient number of shares of Common Stock
registered for resale under the Registration Statement, then with respect to
the
unconverted Series B, the holder, may, within five (5) business days after
receipt of notice from the Company thereof to require the Company to issue
restricted shares of Common Stock in accordance with such holder's Conversion
Notice.
Section
11.5 (b) Mechanics
of Fulfilling Holder's Election.
The
Company shall immediately send via facsimile to a holder of Series B, upon
receipt of a facsimile copy of a Conversion Notice from such holder which cannot
be fully satisfied as described in Section 8(a) above, a notice of the Company's
inability to fully satisfy such holder's Conversion Notice (the "Inability
to Fully Convert Notice").
Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Company
is unable to fully satisfy such holder's Conversion Notice, (ii) the number
of
shares of Series B that cannot be converted and (iii) the applicable Mandatory
Redemption Price, if applicable pursuant to Section 8(a)(A) above. If
applicable, such holder shall notify the Company of its election pursuant to
Section 8(a)(A) above by delivering written notice via facsimile to the Company
("Notice
in Response to Inability to Convert").
Section
11.6 (c) Payment
of Redemption Price.
If a
holder shall elect to have its shares redeemed pursuant to Section 8(a)(A)(i)
above, the Company shall pay the Mandatory Redemption Price to such holder
within thirty (30) days of the Company's receipt of the holder's Notice in
Response to Inability to Convert, provided
that
prior to the Company's receipt of the holder's Notice in Response to Inability
to Convert the Company has not delivered a notice to such holder stating, to
the
satisfaction of the holder, that the event or condition resulting in the
Mandatory Redemption has been cured and all shares of Common Stock issuable
to
such holder can and will be delivered to the holder in accordance with the
terms
of Section 4. Until the full Mandatory Redemption Price is paid to such holder,
such holder may (i) void the Mandatory Redemption with respect to those shares
of Series B for which the full Mandatory Redemption Price has not been paid,
and
(ii) receive back such shares.
Section
11.7 (d) Pro-rata
Conversion and Redemption.
In the
event the Company receives a Conversion Notice from more than one holder of
Series B on the same day and the Company is able to convert and redeem some,
but
not all, of the Series B pursuant to this Section 8, the Company shall convert
and redeem from each holder of Series B electing to have Series B converted
and
redeemed at such time an amount equal to such holder's pro-rata amount (based
on
the number shares of Series B held by such holder relative to the number shares
of Series B outstanding) of all shares of Series B being converted and redeemed
at such time.
70
9. No
Impairment.
The
Company will not, by amendment of its Articles of Incorporation or through
any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other action, avoid or seek
to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Certificate of Designations
and in the taking of all such action as may be necessary or appropriate in
order
to protect the conversion rights of the holders of Series B against
impairment.
10.
No
Fractional Shares and Certificate as to Adjustments.
No
fractional shares shall be issued upon the conversion of any share or shares
of
the Series B, and the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole share. The number of shares issuable upon
conversion shall be determined on the basis of the total number of shares of
Series B the holder is at the time converting into Common Stock and the number
of shares of Common Stock issuable upon such aggregate conversion.
11.
Notices
of Record Date.
In the
event of any taking by the Company of a record of the holders of any class
of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend) or other distribution,
any
right to subscribe for, purchase or otherwise acquire any shares of stock of
any
class or any other securities or property, or any other right, the Company
shall
mail to each holder of Series B, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such record is
to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
12.
Notices.
Any
notice required by the provisions of this Certificate of Designations to be
given to the holders of shares of Series B shall be deemed given if deposited
in
the United States mail, postage prepaid, and addressed to each holder of record
at his address appearing on the books of the Company.
13.
Protective
Provisions.
Except
for the designation and issuance of the Company’s Series A, which is being
designated contemporaneously with the Series B, so long as any shares of Series
B are outstanding, the Company shall not without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least
seventy-five percent (75%) of the then outstanding shares of Series B, voting
as
a separate class:
(a)
in
any
manner authorize, issue or create (by reclassification or otherwise) any new
class or series of shares having rights, preferences or privileges equal or
senior to the Series B;
(b)
adversely
alter or change the rights, preferences, designations or privileges of the
Series B;
(c)
amend
the
Company’s Articles of Incorporation or By-laws in a manner that adversely
affects the rights, preferences, designations or privileges of the holders
of
the Series B;
71
(d)
increase
or decrease the authorized number of shares of preferred stock of the Company
or
otherwise reclassify
the Company's outstanding securities;
(e)
redeem,
purchase or otherwise acquire (or pay into or set funds aside for a sinking
fund
for such purpose) any share or shares of preferred stock or Common Stock;
provided,
however, that this restriction shall not apply to the de
minimus repurchases of
shares
of Common Stock from employees, officers, directors, consultants or other
persons performing services for the Company or any subsidiary pursuant to
agreements under which the Company has the option to repurchase such shares
at
cost upon the occurrence of certain events, such as the termination of
employment, or through the exercise of any right of first refusal; and
provided
further
that this restriction shall not apply to any conversion, redemption or other
acquisition of shares of Series B pursuant to this Certificate of Designations
or Series A pursuant to the Certificate of Designations, Preferences and Rights
of Series A Convertible Preferred Stock of the Company; or
(f) voluntarily
file for bankruptcy, liquidate the Company’s assets or make an assignment for
the benefit of the Company’s creditors.
14. No
Charge for Conversion.
The
issuance of certificates for shares of Common Stock upon the conversion of
shares of Series B shall be made without charge to the converting holders for
such certificates and without any tax in respect of the issuance of such
certificates.
15. Reservation
of Shares.
On and
after the initial issuance of the Series B, the Corporation shall at all times
reserve and keep available out of any stock held as treasury stock or out of
its
authorized but unissued Common Stock, or both, solely for the purpose of
effecting the conversion of the shares of Series B, no less than one hundred
fifty percent (150%) of the aggregate number of shares of Common Stock then
issuable upon the conversion of all outstanding shares of Series B. The
Corporation shall immediately, in accordance with the laws of the State of
Nevada, increase the authorized amount of its Common Stock if, at any time,
the
authorized amount of its Common Stock remaining unissued shall not be sufficient
to permit the conversion of all shares of Series B.
16.
Return
of Status as Authorized Shares.
Upon a
Conversion or any other redemption or extinguishment of the Series B, the shares
converted, redeemed or extinguished will be cancelled (and may not be reissued
as shares of Series B) and automatically returned to the status of authorized
and unissued shares of preferred stock, available for future designation and
issuance pursuant to the terms of the Articles of Incorporation.
17.
Amendment.
This
Certificate of Designations constitutes an agreement between the Company and
the
holders of the Series B. For as long as any shares of Series B are outstanding,
the terms hereof may be amended, modified, repealed or waived only by the
affirmative vote or written consent of holders of seventy five percent (75%)
of
the then outstanding shares of Series B, voting together as a class and series.
72
Exhibit
I
to Exhibit A
CONVERSION
NOTICE
Reference
is made to the Certificate of Designations Preferences and Rights of the Series
B Convertible Preferred Stock of Victory Divide Mining Company (the "Certificate
of Designations"). In accordance with and pursuant to the Certificate of
Designations, the undersigned hereby elects to convert the number of shares
of
Series B Preferred Stock, par value $0.001 per share (the "Preferred Shares"),
of Victory Divide Mining Company, a Nevada corporation (the "Company"),
indicated below into shares of Common Stock, par value $0.001 per share (the
"Common Stock"), of the Company, by tendering the stock certificate(s)
representing the share(s) of the Preferred Stock specified below as of the
date
specified below.
Date
of
Conversion:
Number
of
Preferred Shares to be converted:
Stock
certificate no(s). of Preferred Shares to be
converted:
The
Common Stock have been sold pursuant to the Registration Statement: YES ____
NO____
Please
confirm the following information:
Number
of
shares of Common Stock
to
be
issued:
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion: _________________________
Please
issue the Common Stock into which the Preferred Shares are being converted
and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
Issue
to:
Facsimile
Number:
Authorization:
By:
Title:
Dated:
73
EXHIBIT
C-1 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
_______________________________________________
FORM
OF SERIES A WARRANT
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
SERIES
A
WARRANT TO PURCHASE
SHARES
OF
COMMON STOCK
OF
VICTORY
DIVIDE MINING COMPANY
Expires
on October 2, 2012
No.:
W-A-07-
|
Number
of Shares: Up to ________
|
Date
of Issuance: October 3, 2007
|
FOR
VALUE RECEIVED, the undersigned, Victory Divide Mining
Company, a Nevada corporation (together with its successors and assigns,
the
“Issuer”),
hereby certifies that ____________
or
its
registered assigns (the “Holder”)
is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________
shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however,
to
the provisions and upon the terms and conditions hereinafter set forth.
ARTICLE
XIITerm.
The term of this Warrant shall commence on October 3, 2007 and shall expire
at
6:00 p.m., Eastern Time, on October 2, 2012 (such period being the
“Term”
and such date, the “Termination
Date”).
ARTICLE
XIIIMethod
of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
74
Section
13.1 Time
of Exercise.
The
purchase rights represented by this Warrant may be exercised in whole or
in part
during the Term for such number of shares of Common Stock set forth above,
which
number is equal to one hundred percent (100%) of the number of shares of
Common
Stock into which the Series A Convertible Preferred Stock issued by the Issuer
to the Holder on the Original Issue Date pursuant to the Purchase Agreement
may
be converted.
Section
13.2 Method
of Exercise.
The
Holder hereof may exercise this Warrant, in whole or in part, by the surrender
of this Warrant (with the exercise form attached hereto duly executed) at
the
principal office of the Issuer, and by the payment to the Issuer of an amount
of
consideration therefor equal to the Warrant Price in effect on the date of
such
exercise multiplied by the number of shares of Warrant Stock with respect
to
which this Warrant is then being exercised, payable at such Holder’s election
(i) by certified or official bank check or by wire transfer to an account
designated by the Issuer, (ii) by “cashless exercise” in accordance with Section
2(c), but only when a registration statement under the Securities Act providing
for the resale of the Warrant Stock is not then in effect, or (iii) by a
combination of the foregoing methods of payment selected by the Holder of
this
Warrant.
Section
13.3 Cashless
Exercise.
Notwithstanding any provision herein to the contrary, and (i) the volume
weighted average price of one share of Common Stock on the OTC Bulletin Board
or
such other securities exchange on which the Common Stock is then traded or
included for quotation, for any ten (10) consecutive Trading Days is greater
than the Warrant Price (at or prior to the date of calculation as set forth
below) and (ii) commencing eighteen (18) months following the Original Issue
Date if a registration statement under the Securities Act providing for the
resale of the Warrant Stock (A) has not been declared effective by the
Securities and Exchange Commission by the date such registration statement
is
required to be effective pursuant to the Registration Rights Agreement (as
defined in Section 8), or (B) is not effective at the time of exercise of
this
Warrant, unless the registration statement is not effective as a result of
the
Issuer exercising its rights under Section 3(n) of the Registration Rights
Agreement, in lieu of exercising this Warrant by payment of cash, the Holder
may
exercise this Warrant by a cashless exercise and shall receive the number
of
shares of Common Stock equal to an amount (as determined below) by surrender
of
this Warrant at the principal office of the Issuer together with the properly
endorsed Notice of Exercise in which event the Issuer shall issue to the
Holder
a number of shares of Common Stock computed using the following
formula:
X
=
Y - (A)(Y)
|
||
B
|
||
Where
|
X
=
|
the
number of shares of Common Stock to be issued to the
Holder.
|
Y
=
|
the
number of shares of Common Stock purchasable upon exercise of all
of the
Warrant or, if only a portion of the Warrant is being exercised,
the
portion of the Warrant being exercised.
|
|
A
=
|
the
Warrant Price.
|
|
B
=
|
the
Per Share Market Value of one share of Common
Stock.
|
75
Section
13.4 Issuance
of Stock Certificates.
In the
event of any exercise of this Warrant in accordance with and subject to the
terms and conditions hereof, certificates for the shares of Warrant Stock
so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
such
exercise (the “Delivery
Date”)
or, at
the request of the Holder (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Stock is then in effect
or that the shares of Warrant Stock are otherwise exempt from registration),
issued and delivered to the Depository Trust Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”)
within
a reasonable time, not exceeding three (3) Trading Days after such exercise,
and
the Holder hereof shall be deemed for all purposes to be the holder of the
shares of Warrant Stock so purchased as of the date of such exercise.
Notwithstanding the foregoing to the contrary, the Issuer or its transfer
agent
shall only be obligated to issue and deliver the shares to the DTC on a holder’s
behalf via DWAC if such exercise is in connection with a sale or other exemption
from registration by which the shares may be issued without a restrictive
legend
and the Issuer and its transfer agent are participating in DTC through the
DWAC
system. The Holder shall deliver this original Warrant, or an indemnification
undertaking with respect to such Warrant in the case of its loss, theft or
destruction, at such time that this Warrant is fully exercised. With respect
to
partial exercises of this Warrant, the Issuer shall keep written records
for the
Holder of the number of shares of Warrant Stock exercised as of each date
of
exercise.
Section
13.5 Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if the Issuer fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Stock pursuant to an exercise on or before the Delivery
Date, and if after such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Stock which the Holder
anticipated receiving upon such exercise (a “Buy-In”),
then
the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was
required to deliver to the Holder in connection with the exercise at issue
times
(B) the price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the portion
of the Warrant and equivalent number of shares of Warrant Stock for which
such
exercise was not honored or deliver to the Holder the number of shares of
Common
Stock that would have been issued had the Issuer timely complied with its
exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover
a
Buy-In with respect to an attempted exercise of shares of Common Stock with
an
aggregate sale price giving rise to such purchase obligation of $10,000,
under
clause (1) of the immediately preceding sentence the Issuer shall be required
to
pay the Holder $1,000. The Holder shall provide the Issuer written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by
the
Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation,
a
decree of specific performance and/or injunctive relief with respect to the
Issuer’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of this Warrant as required pursuant to the terms
hereof.
76
Section
13.6 Transferability
of Warrant.
Subject
to Section 2(h) hereof, this Warrant may be transferred by a Holder, in whole
or
in part, without the consent of the Issuer. If transferred pursuant to this
paragraph, this Warrant may be transferred on the books of the Issuer by
the
Holder hereof in person or by duly authorized attorney, upon surrender of
this
Warrant at the principal office of the Issuer, properly endorsed (by the
Holder
executing an assignment in the form attached hereto) and upon payment of
any
necessary transfer tax or other governmental charge imposed upon such transfer.
This Warrant is exchangeable at the principal office of the Issuer for Warrants
to purchase the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange.
All
Warrants issued on transfers or exchanges shall be dated the Original Issue
Date
and shall be identical with this Warrant except as to the number of shares
of
Warrant Stock issuable pursuant thereto.
Section
13.7 Continuing
Rights of Holder.
The
Issuer will, at the time of or at any time after each exercise of this Warrant,
upon the request of the Holder hereof, acknowledge in writing the extent,
if
any, of its continuing obligation to afford to such Holder all rights to
which
such Holder shall continue to be entitled after such exercise in accordance
with
the terms of this Warrant, provided that if any such Holder shall fail to
make
any such request, the failure shall not affect the continuing obligation
of the
Issuer to afford such rights to such Holder.
Section
13.8 Compliance
with Securities Laws.
(i) The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and
the shares of Warrant Stock to be issued upon exercise hereof are being acquired
solely for the Holder’s own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement, or
an
exemption from registration, under the Securities Act and any applicable
state
securities laws.
(ii) Except
as
provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following
form:
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
77
(iii) The
Issuer agrees to reissue this Warrant or certificates representing any of
the
Warrant Stock, without the legend set forth above if at such time, prior
to
making any transfer of any such securities, the Holder shall give written
notice
to the Issuer describing the manner and terms of such transfer. Such proposed
transfer will not be effected until: (a) either (i) the Issuer has received
an
opinion of counsel reasonably satisfactory to the Issuer, to the effect that
the
registration of such securities under the Securities Act is not required
in
connection with such proposed transfer, (ii) a registration statement under
the
Securities Act covering such proposed disposition has been filed by the Issuer
with the Securities and Exchange Commission and has become effective under
the
Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under
the
Securities Act and state securities laws are not required, or (iv) the Holder
provides the Issuer with reasonable assurances that such security can be
sold
pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer
has
received an opinion of counsel reasonably satisfactory to the Issuer, to
the
effect that registration or qualification under the securities or “blue sky”
laws of any state is not required in connection with such proposed disposition,
or (ii) compliance with applicable state securities or “blue sky” laws has been
effected or a valid exemption exists with respect thereto. The Issuer will
respond to any such notice from a holder within three (3) Trading Days. In
the
case of any proposed transfer under this Section 2(h), the Issuer will use
reasonable efforts to comply with any such applicable state securities or
“blue
sky” laws, but shall in no event be required, (x) to qualify to do business in
any state where it is not then qualified, (y) to take any action that would
subject it to tax or to the general service of process in any state where
it is
not then subject, or (z) to comply with state securities or “blue sky” laws of
any state for which registration by coordination is unavailable to the Issuer.
The restrictions on transfer contained in this Section 2(h) shall be in addition
to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant. Whenever a certificate
representing the Warrant Stock is required to be issued to the Holder without
a
legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall cause its transfer agent to electronically transmit
the
Warrant Stock to the Holder by crediting the account of the Holder or Holder’s
Prime Broker with DTC through its DWAC system (to the extent not inconsistent
with any provisions of this Warrant or the Purchase Agreement).
Section
13.9 Accredited
Investor Status.
In no
event may the Holder exercise this Warrant in whole or in part unless the
Holder
is an “accredited investor” as defined in Regulation D under the Securities
Act.
ARTICLE
XIVStock
Fully Paid; Reservation and Listing of Shares;
Covenants.
Section
14.1 Stock
Fully Paid.
The
Issuer represents, warrants, covenants and agrees that all shares of Warrant
Stock which may be issued upon the exercise of this Warrant or otherwise
hereunder will, when issued in accordance with the terms of this Warrant,
be
duly authorized, validly issued, fully paid and non-assessable and free from
all
taxes, liens and charges created by or through the Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may
be
exercised, the Issuer will at all times have authorized and reserved for
the
purpose of the issuance upon exercise of this Warrant a number of authorized
but
unissued shares of Common Stock equal to at least one hundred percent (100%)
of
the number of shares of Common Stock issuable upon exercise of this Warrant
without regard to any limitations on exercise.
78
Section
14.2 Reservation.
If any
shares of Common Stock required to be reserved for issuance upon exercise
of
this Warrant or as otherwise provided hereunder require registration or
qualification with any Governmental Authority under any federal or state
law
before such shares may be so issued, the Issuer will in good faith use its
best
efforts as expeditiously as possible at its expense to cause such shares
to be
duly registered or qualified. If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, and maintain and increase when necessary such listing, of, all shares
of Warrant Stock from time to time issued upon exercise of this Warrant or
as
otherwise provided hereunder (provided that such Warrant Stock has been
registered pursuant to a registration statement under the Securities Act
then in
effect), and, to the extent permissible under the applicable securities exchange
rules, all unissued shares of Warrant Stock which are at any time issuable
hereunder, so long as any shares of Common Stock shall be so listed. The
Issuer
will also so list on each securities exchange or market, and will maintain
such
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange
or
market by the Issuer.
Section
14.3 Covenants.
The
Issuer shall not by any action including, without limitation, amending the
Articles of Incorporation or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other action, avoid or seek to avoid the observance
or
performance of any of the terms of this Warrant, but will at all times in
good
faith assist in the carrying out of all such terms and in the taking of all
such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against dilution (to the extent specifically provided herein) or
impairment. Without limiting the generality of the foregoing, the Issuer
will
(i) not permit the par value, if any, of its Common Stock to exceed the then
effective Warrant Price, (ii) not amend or modify any provision of the Articles
of Incorporation or by-laws of the Issuer in any manner that would adversely
affect the rights of the Holders of the Warrants, (iii) take all such action
as
may be reasonably necessary in order that the Issuer may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear
of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (iv) use its best efforts to obtain
all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be reasonably necessary to enable the
Issuer
to perform its obligations under this Warrant.
Section
14.4 Loss,
Theft, Destruction of Warrants.
Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss,
theft, destruction or mutilation of any Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security satisfactory
to the Issuer or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Issuer will make and deliver, in lieu of
such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and
representing the right to purchase the same number of shares of Common
Stock.
79
Section
14.5 Payment
of Taxes.
The
Issuer will pay any documentary stamp taxes attributable to the initial issuance
of the Warrant Stock issuable upon exercise of this Warrant; provided,
however,
that
the Issuer shall not be required to pay any tax or taxes which may be payable
in
respect of any transfer involved in the issuance or delivery of any certificates
representing Warrant Stock in a name other than that of the Holder in respect
to
which such shares are issued.
ARTICLE
XVAdjustment
of Warrant Price.
The price at which such shares of Warrant Stock may be purchased upon exercise
of this Warrant shall be subject to adjustment from time to time as set forth
in
this Section 4. The Issuer shall give the Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 in accordance
with
the notice provisions set forth in Section 5.
Section
15.1 Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale.
(i) In
case
the Issuer after the Original Issue Date shall do any of the following (each,
a
“Triggering
Event”):
(a)
consolidate or merge with or into any other Person and the Issuer shall not
be
the continuing or surviving corporation of such consolidation or merger,
or (b)
permit any other Person to consolidate with or merge into the Issuer and
the
Issuer shall be the continuing or surviving Person but, in connection with
such
consolidation or merger, any Capital Stock of the Issuer shall be changed
into
or exchanged for Securities of any other Person or cash or any other property,
or (c) transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or reclassification
of its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made to the Warrant Price and the number of shares of
Warrant
Stock that may be purchased upon exercise of this Warrant so that, upon the
basis and the terms and in the manner provided in this Warrant, the Holder
of
this Warrant shall be entitled upon the exercise hereof at any time after
the
consummation of such Triggering Event, to the extent this Warrant is not
exercised prior to such Triggering Event, to receive at the Warrant Price
in
effect at the time immediately prior to the consummation of such Triggering
Event, in lieu of the Common Stock issuable upon such exercise of this Warrant
prior to such Triggering Event, the Securities, cash and property to which
such
Holder would have been entitled upon the consummation of such Triggering
Event
if such Holder had exercised the rights represented by this Warrant immediately
prior thereto (including the right of a shareholder to elect the type of
consideration it will receive upon a Triggering Event), subject to adjustments
(subsequent to such corporate action) as nearly equivalent as possible to
the
adjustments provided for elsewhere in this Section 4; provided,
however,
the
Holder at its option may elect to receive an amount in unregistered shares
of
the common stock of the surviving entity equal to the value of this Warrant
calculated in accordance with the Black-Scholes formula; provided,
further,
such
shares of Common Stock shall be valued at a twenty percent (20%) discount
to the
VWAP of the Common Stock for the twenty (20) Trading Days immediately prior
to
the Triggering Event. Immediately upon the occurrence of a Triggering Event,
the
Issuer shall notify the Holder in writing of such Triggering Event and provide
the calculations in determining the number of shares of Warrant Stock issuable
upon exercise of the new warrant and the adjusted Warrant Price. Upon the
Holder’s request, the continuing or surviving corporation as a result of such
Triggering Event shall issue to the Holder a new warrant of like tenor
evidencing the right to purchase the adjusted number of shares of Warrant
Stock
and the adjusted Warrant Price pursuant to the terms and provisions of this
Section 4(a)(i). Notwithstanding the foregoing to the contrary, this Section
4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
Event is a company that has a class of equity securities registered pursuant
to
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
its common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board. In the event that the
surviving entity pursuant to any such Triggering Event is not a public company
that is registered pursuant to the Exchange Act or its common stock is not
listed or quoted on a national securities exchange, national automated quotation
system or the OTC Bulletin Board, then the Holder shall have the right to
demand
that the Issuer pay to the Holder an amount in cash equal to the value of
this
Warrant calculated in accordance with the Black-Scholes
formula.
80
(ii) In
the
event that the Holder has elected not to exercise this Warrant prior to the
consummation of a Triggering Event and has also elected not to receive an
amount
in cash equal to the value of this Warrant calculated in accordance with
the
Black-Scholes formula pursuant to the provisions of Section 4(a)(i) above,
so
long as the surviving entity pursuant to any Triggering Event is a company
that
has a class of equity securities registered pursuant to the Exchange Act
and its
common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board, the surviving entity
and/or each Person (other than the Issuer) which may be required to deliver
any
Securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not
release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a),
such Holder shall be entitled to receive, and the surviving entity and/or
each
such Person shall have similarly delivered to such Holder an opinion of counsel
for the surviving entity and/or each such Person, which counsel shall be
reasonably satisfactory to such Holder, or in the alternative, a written
acknowledgement executed by the President or Chief Financial Officer of the
Issuer, stating that this Warrant shall thereafter continue in full force
and
effect and the terms hereof (including, without limitation, all of the
provisions of this subsection (a)) shall be applicable to the Securities,
cash
or property which the surviving entity and/or each such Person may be required
to deliver upon any exercise of this Warrant or the exercise of any rights
pursuant hereto.
Section
15.2 Stock
Dividends, Subdivisions and Combinations.
If at
any time the Issuer shall:
81
(a) make
or
issue or set a record date for the holders of the Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of,
shares of Common Stock,
(b) subdivide
its outstanding shares of Common Stock into a larger number of shares of
Common
Stock, or
(c) combine
its outstanding shares of Common Stock into a smaller number of shares of
Common
Stock,
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of
shares of Common Stock for which this Warrant is exercisable immediately
prior
to the occurrence of such event would own or be entitled to receive after
the
happening of such event, and (2) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the
number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Common Stock
for
which this Warrant is exercisable immediately after such
adjustment.
Section
15.3 Certain
Other Distributions.
If at
any time the Issuer shall make or issue or set a record date for the holders
of
the Common Stock for the purpose of entitling them to receive any dividend
or
other distribution of:
(a) cash,
(b) any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common
Stock
Equivalents or Additional Shares of Common Stock), or
(c) any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents
or
Additional Shares of Common Stock),
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
shall
be adjusted to equal the product of the number of shares of Common Stock
for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Per Share
Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable
and of
the fair value (as determined in good faith by the Board of Directors of
the
Issuer and supported by an opinion from an investment banking firm mutually
agreed upon by the Issuer and the Holder) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or
other
subscription or purchase rights so distributable, and (2) the Warrant Price
then
in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant
is
exercisable immediately prior to the adjustment divided by (B) the number
of
shares of Common Stock for which this Warrant is exercisable immediately
after
such adjustment. A reclassification of the Common Stock (other than a change
in
par value, or from par value to no par value or from no par value to par
value)
into shares of Common Stock and shares of any other class of stock shall
be
deemed a distribution by the Issuer to the holders of its Common Stock of
such
shares of such other class of stock within the meaning of this Section 4(c)
and,
if the outstanding shares of Common Stock shall be changed into a larger
or
smaller number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may
be, of
the outstanding shares of Common Stock within the meaning of Section
4(b).
82
Section
15.4 Issuance
of Additional Shares of Common Stock.
(a) For
the
period commencing on the Original Issue Date and ending on the two (2) year
anniversary of the Original Issue Date, in the event the Issuer shall issue
any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less
than
the Warrant Price then in effect or without consideration, then the Warrant
Price upon each such issuance shall be adjusted to the price equal to the
consideration per share paid for such Additional Shares of Common
Stock.
(b) For
the
period commencing on the two (2) year anniversary of the Original Issue Date
and
ending on the Termination Date, in the event the Issuer shall issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less
than
the Warrant Price then in effect or without consideration, then the Warrant
Price then in effect shall multiplied by a fraction (a) the numerator of
which
shall be equal to the sum of (x) the number of shares of outstanding Common
Stock immediately prior to the issuance of such Additional Shares of Common
Stock plus (y) the number of shares of Common Stock (rounded to the nearest
whole share) which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price per
share
equal to the Warrant Price then in effect and (b) the denominator of which
shall
be equal to the number of shares of outstanding Common Stock immediately
after
the issuance of such Additional Shares of Common Stock. For purposes of this
Section, all shares of Common Stock issuable upon exercise of options
outstanding immediately prior to such issue or upon conversion of Convertible
Securities (as defined below) (including Series A Convertible Preferred Stock
of
the Company, par value $.001 per share) outstanding immediately prior to
such
issue are deemed outstanding. No adjustment of the number of shares of Common
Stock for which this Warrant shall be exercisable shall be made pursuant
to this
Section 4(d)(ii) upon the issuance of any Additional Shares of Common Stock
which are issued pursuant to the exercise of any Common Stock Equivalents,
if
any such adjustment shall previously have been made upon the issuance of
such
Common Stock Equivalents (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4(e).
Section
15.5 Issuance
of Common Stock Equivalents.
In the
event the Issuer shall take a record of the holders of its Common Stock for
the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Issuer is the
surviving corporation) issue or sell, any Common Stock Equivalents, whether
or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange shall be less than the Warrant Price in effect immediately prior
to
the time of such issue or sale, or if, after any such issuance of Common
Stock
Equivalents, the price per share for which Additional Shares of Common Stock
may
be issuable thereafter is amended or adjusted, and such price as so amended
shall be less than the Warrant Price in effect at the time of such amendment
or
adjustment, then the Warrant Price then in effect shall be adjusted as provided
in Section 4(d)(i) or (ii), as applicable. No further adjustments of the
number
of shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Common Stock Equivalents.
83
Section
15.6 Other
Provisions Applicable to Adjustments under this Section.
The
following provisions shall be applicable to the making of adjustments of
the
number of shares of Common Stock for which this Warrant is exercisable and
the
Warrant Price then in effect provided for in this Section 4:
(i) Computation
of Consideration.
To the
extent that any Additional Shares of Common Stock or any Common Stock
Equivalents (or any warrants or other rights therefor) shall be issued for
cash
consideration, the consideration received by the Issuer therefor shall be
the
amount of the cash received by the Issuer therefor, or, if such Additional
Shares of Common Stock or Common Stock Equivalents are offered by the Issuer
for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Common Stock Equivalents are sold to underwriters or dealers for
public
offering without a subscription offering, the initial public offering price
(in
any such case subtracting any amounts paid or receivable for accrued interest
or
accrued dividends and without taking into account any compensation, discounts
or
expenses paid or incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). In connection with any
merger or consolidation in which the Issuer is the surviving corporation
(other
than any consolidation or merger in which the previously outstanding shares
of
Common Stock of the Issuer shall be changed to or exchanged for the stock
or
other securities of another corporation), the amount of consideration therefore
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board, and acceptable to the Holder, of such portion of the
assets
and business of the nonsurviving corporation as the Board may determine to
be
attributable to such shares of Common Stock or Common Stock Equivalents,
as the
case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration received by the Issuer for issuing such
warrants or other rights plus the additional consideration payable to the
Issuer
upon exercise of such warrants or other rights. The consideration for any
Additional Shares of Common Stock issuable pursuant to the terms of any Common
Stock Equivalents shall be the consideration received by the Issuer for issuing
warrants or other rights to subscribe for or purchase such Common Stock
Equivalents, plus the consideration paid or payable to the Issuer in respect
of
the subscription for or purchase of such Common Stock Equivalents, plus the
additional consideration, if any, payable to the Issuer upon the exercise
of the
right of conversion or exchange in such Common Stock Equivalents. In the
event
of any consolidation or merger of the Issuer in which the Issuer is not the
surviving corporation or in which the previously outstanding shares of Common
Stock of the Issuer shall be changed into or exchanged for the stock or other
securities of another corporation, or in the event of any sale of all or
substantially all of the assets of the Issuer for stock or other securities
of
any corporation, the Issuer shall be deemed to have issued a number of shares
of
its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or
other
property of the other corporation. In the event any consideration received
by
the Issuer for any securities consists of property other than cash, the fair
market value thereof at the time of issuance or as otherwise applicable shall
be
as determined in good faith by the Board. In the event Common Stock is issued
with other shares or securities or other assets of the Issuer for consideration
which covers both, the consideration computed as provided in this Section
4(g)(i) shall be allocated among such securities and assets as determined
in
good faith by the Board.
84
(b) When
Adjustments to Be Made.
The
adjustments required by this Section 4 shall be made whenever and as often
as
any specified event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Common Stock for which this Warrant
is
exercisable that would otherwise be required may be postponed (except in
the
case of a subdivision or combination of shares of the Common Stock, as provided
for in Section 4(b)) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made
adds
or subtracts less than one percent (1%) of the shares of Common Stock for
which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except
as
aforesaid) which is postponed shall be carried forward and made as soon as
such
adjustment, together with other adjustments required by this Section 4 and
not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed
to have occurred at the close of business on the date of its
occurrence.
(c) Fractional
Interests.
In
computing adjustments under this Section 4, fractional interests in Common
Stock
shall be taken into account to the nearest one one-hundredth (1/100th) of
a
share.
(d) When
Adjustment Not Required.
If the
Issuer shall take a record of the holders of its Common Stock for the purpose
of
entitling them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously
made
in respect thereof shall be rescinded and annulled.
Section
15.7 Form
of Warrant after Adjustments.
The
form of this Warrant need not be changed because of any adjustments in the
Warrant Price or the number and kind of Securities purchasable upon the exercise
of this Warrant.
85
Section
15.8 Escrow
of Warrant Stock.
If
after any property becomes distributable pursuant to this Section 4 by reason
of
the taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, and the Holder exercises
this Warrant, any shares of Common Stock issuable upon exercise by reason
of
such adjustment shall be deemed the last shares of Common Stock for which
this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the
Holder
by the Issuer to be issued to the Holder upon and to the extent that the
event
actually takes place, upon payment of the current Warrant Price. Notwithstanding
any other provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares shall
be
cancelled by the Issuer and escrowed property returned.
ARTICLE
XVINotice
of Adjustments.
Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
to
Section 4 hereof (for purposes of this Section 5, each an “adjustment”),
the Issuer shall cause its Chief Financial Officer to prepare and execute
a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made
any
determination hereunder), and the Warrant Price and Warrant Share Number
after
giving effect to such adjustment, and shall cause copies of such certificate
to
be delivered to the Holder of this Warrant promptly after each adjustment.
Any
dispute between the Issuer and the Holder of this Warrant with respect to
the
matters set forth in such certificate may at the option of the Holder of
this
Warrant be submitted to a national or regional accounting firm reasonably
acceptable to the Issuer and the Holder (the “Independent
Appraiser”),
provided
that the Issuer shall have ten (10) days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right
of
objection. The Independent Appraiser selected by the Holder of this Warrant
as
provided in the preceding sentence shall be instructed to deliver a written
opinion as to such matters to the Issuer and such Holder within thirty (30)
days
after submission to it of such dispute. Such opinion shall be final and binding
on the parties hereto. The reasonable expenses of the Independent Appraiser
in
making such determination shall be paid by the Issuer, in the event the Holder's
calculation was correct, or by the Holder, in the event the Issuer’s calculation
was correct, or equally by the Issuer and the Holder in the event that neither
the Issuer's or the Holder's calculation was correct.
ARTICLE
XVIIFractional
Shares.
No fractional shares of Warrant Stock will be issued in connection with any
exercise hereof, but in lieu of such fractional shares, the Issuer shall
round
the number of shares to be issued upon exercise up to the nearest whole number
of shares.
ARTICLE
XVIIIOwnership
Cap and Exercise Restriction.
Notwithstanding anything to the contrary set forth in this Warrant, at no
time
may a Holder of this Warrant exercise this Warrant if the number of shares
of
Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock beneficially owned by such
Holder at such time, the number of shares of Common Stock which would result
in
such Holder beneficially owning (as determined in accordance with Section
13(d)
of the Exchange Act and the rules thereunder) in excess of 4.99% of the then
issued and outstanding shares of Common Stock; provided,
however,
that upon a holder of this Warrant providing the Issuer with sixty-one (61)
days
notice (pursuant to Section 13 hereof) (the “Waiver
Notice”)
that such Holder would like to waive this Section 7 with regard to any or
all
shares of Common Stock issuable upon exercise of this Warrant, this Section
7
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice; provided,
further,
that this provision shall be of no further force or effect during the sixty-one
(61) days immediately preceding the expiration of the term of this
Warrant.
86
ARTICLE
XIXRegistration
Rights.
The Holder of this Warrant is entitled to the benefit of certain registration
rights with respect to the shares of Warrant Stock issuable upon the exercise
of
this Warrant pursuant to that certain Registration Rights Agreement, of even
date herewith, by and among the Company and Persons listed on Schedule I
thereto
(the “Registration
Rights Agreement”)
and the registration rights with respect to the shares of Warrant Stock issuable
upon the exercise of this Warrant by any subsequent Holder may only be assigned
in accordance with the terms and provisions of the Registrations Rights
Agreement.
ARTICLE
XXDefinitions.
For the purposes of this Warrant, the following terms have the following
meanings:
“Additional
Shares of Common Stock”
means
all shares of Common Stock issued by the Issuer after the Original Issue
Date,
and all shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) securities issued pursuant to a bona fide firm
underwritten public offering of the Company’s securities, provided such
underwritten public offering has been approved in advance by the holders
of more
than fifty percent (50%) of the then outstanding shares of Series A (the
“Majority
Holders”),
(ii)
securities issued (other than for cash) in connection with a strategic merger,
acquisition, or consolidation, provided that the issuance of such securities
in
connection with such strategic merger, acquisition, or consolidation has
been
approved in advance by the Majority Holders, (iii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date of the Purchase Agreement or issued pursuant
to the Purchase Agreement (so long as the conversion or exercise price in
such
securities are not amended to lower such price and/or adversely affect the
Holders), (iv) the Warrant Stock, (v) securities issued in connection with
bona
fide strategic license agreements or other partnering arrangements so long
as
such issuances are not for the purpose of raising capital and provided that
the
issuance of such securities in connection with such bona fide strategic license
agreements or other partnering arrangements has been approved in advance
by the
Majority Holders, (vi) Common Stock issued or the issuance or grants of options
to purchase Common Stock pursuant to the Issuer’s equity incentive plans
outstanding as they exist on the date of the Purchase Agreement, (vii) the
issuance or grants of options to purchase Common Stock to employees, officers
or
directors of the Issuer pursuant to any equity incentive plan duly adopted
by
the Board or a committee thereof established for such purpose so long as
such
issuances in the aggregate do not exceed ten percent (10)% of the issued
and
outstanding shares of Common Stock as of the Original Issue Date and the
specified price at which the options may be exercised is equal to or greater
than the Per Share Market Value as of the date of such grant, and (viii)
any
warrants, shares of Common Stock or other securities issued to a placement
agent
and its designees for the transactions contemplated by the Purchase Agreement
or
in any other sales of the Issuer’s securities and any securities issued in
connection with any financial advisory agreements of the Issuer and the shares
of Common Stock issued upon exercise of any such warrants or conversions
of any
such other securities.
87
“Articles
of Incorporation”
means
the Articles of Incorporation of the Issuer as in effect on the Original
Issue
Date, and as hereafter from time to time amended, modified, supplemented
or
restated in accordance with the terms hereof and thereof and pursuant to
applicable law.
“Board”
shall
mean the Board of Directors of the Issuer.
“Capital
Stock”
means
and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including,
without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is
a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
“Common
Stock”
means
the Common Stock, $0.001 par value per share, of the Issuer and any other
Capital Stock into which such stock may hereafter be changed.
“Common
Stock Equivalent”
means
any Convertible Security or warrant, option or other right to subscribe for
or
purchase any Additional Shares of Common Stock or any Convertible
Security.
“Convertible
Securities”
means
evidences of Indebtedness, shares of Capital Stock or other Securities which
are
or may be at any time convertible into or exchangeable for Additional Shares
of
Common Stock. The term “Convertible Security” means one of the Convertible
Securities.
“Governmental
Authority”
means
any governmental, regulatory or self-regulatory entity, department, body,
official, authority, commission, board, agency or instrumentality, whether
federal, state or local, and whether domestic or foreign.
“Holders”
mean
the Persons who shall from time to time own any Warrant. The term “Holder” means
one of the Holders.
“Independent
Appraiser”
means
a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may
be
the firm that regularly examines the financial statements of the Issuer)
that is
regularly engaged in the business of appraising the Capital Stock or assets
of
corporations or other entities as going concerns, and which is not affiliated
with either the Issuer or the Holder of any Warrant.
88
“Issuer”
means
Victory Divide Mining Company, a Nevada corporation, and its
successors.
“Majority
Holders”
means
at any time the Holders of Warrants exercisable for a majority of the shares
of
Warrant Stock issuable under the Warrants at the time outstanding.
“Original
Issue Date”
means
October 3, 2007.
“OTC
Bulletin Board”
means
the over-the-counter electronic bulletin board.
“Other
Common”
means
any other Capital Stock of the Issuer of any class which shall be authorized
at
any time after the date of this Warrant (other than Common Stock) and which
shall have the right to participate in the distribution of earnings and assets
of the Issuer without limitation as to amount.
“Outstanding
Common Stock”
means,
at any given time, the aggregate amount of outstanding shares of Common Stock,
assuming full exercise, conversion or exchange (as applicable) of all options,
warrants and other Securities which are convertible into or exercisable or
exchangeable for, and any right to subscribe for, shares of Common Stock
that
are outstanding at such time.
“Person”
means
an individual, corporation, limited liability company, partnership, joint
stock
company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.
“Per
Share Market Value”
means
on any particular date (a) the last closing price per share of the Common
Stock
on such date on the OTC Bulletin Board or another registered national stock
exchange on which the Common Stock is then listed, or if there is no closing
price on such date, then the closing bid price on such date, or if there
is no
closing bid price on such date, then the closing price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the OTC Bulletin Board or any registered national
stock exchange, the last closing price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business
on
such date, or if there is no closing price on such date, then the closing
bid
price on such date, or (c) if the Common Stock is not then reported by the
OTC
Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then
the average of the “Pink Sheet” quotes for the five (5) Trading Days preceding
such date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by
an
Independent Appraiser selected in good faith by the Majority Holders;
provided,
however,
that
the Issuer, after receipt of the determination by such Independent Appraiser,
shall have the right to select an additional Independent Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Independent Appraiser; and provided,
further,
that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during
such
period. The determination of fair market value by an Independent Appraiser
shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding
on
all parties. In determining the fair market value of any shares of Common
Stock,
no consideration shall be given to any restrictions on transfer of the Common
Stock imposed by agreement or by federal or state securities laws, or to
the
existence or absence of, or any limitations on, voting rights.
89
“Purchase
Agreement”
means
the Series A Convertible Preferred Stock Purchase Agreement dated as of October
3, 2007, among the Issuer and the Purchasers.
“Purchasers”
means
the purchasers of the Series A Convertible Preferred Stock and the Warrants
issued by the Issuer pursuant to the Purchase Agreement.
“Securities”
means
any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities
or a
Security, and any option, warrant or other right to purchase or acquire any
Security. “Security” means one of the Securities.
“Securities
Act”
means
the Securities Act of 1933, as amended, or any similar federal statute then
in
effect.
“Subsidiary”
means
any corporation at least 50% of whose outstanding Voting Stock shall at the
time
be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.
“Term”
has
the
meaning specified in Section 1 hereof.
“Trading
Day”
means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board,
or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which
the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided,
however,
that in
the event that the Common Stock is not listed or quoted as set forth in (a)
or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any
day which shall be a legal holiday or a day on which banking institutions
in the
State of New York are authorized or required by law or other government action
to close.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or
quoted
for trading on the date in question: the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market, the New York Stock Exchange
or
the OTC Bulletin Board.
“Voting
Stock”
means,
as applied to the Capital Stock of any corporation, Capital Stock of any
class
or classes (however designated) having ordinary voting power for the election
of
a majority of the members of the Board of Directors (or other governing body)
of
such corporation, other than Capital Stock having such power only by reason
of
the happening of a contingency.
90
“VWAP”
means,
for any date, the price determined by the first of the following clauses
that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date
(or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the
OTC
Bulletin Board is not a Trading Market, the volume weighted average price
of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the "Pink Sheets"
published by Pink Sheets, LLC (or a similar organization or agency succeeding
to
its functions of reporting prices), the most recent bid price per share of
the
Common Stock so reported; or (d) in all other cases, the fair market value
of a
share of Common Stock as determined by an independent appraiser selected
in good
faith by the Holders of a majority in interest of the Warrants then outstanding
and reasonably acceptable to the Company, the fees and expenses of which
shall
be paid by the Company.
“Warrants”
means
the Warrants issued and sold pursuant to the Purchase Agreement, including,
without limitation, this Warrant, and any other warrants of like tenor issued
in
substitution or exchange for any thereof pursuant to the provisions of Section
2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
“Warrant
Price”
initially means $2.75, as such price may be adjusted from time to time as
shall
result from the adjustments specified in this Warrant, including Section
4
hereto.
“Warrant
Share Number”
means
at any time the aggregate number of shares of Warrant Stock which may at
such
time be purchased upon exercise of this Warrant, after giving effect to all
prior adjustments and increases to such number made or required to be made
under
the terms hereof.
“Warrant
Stock”
means
Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
issuable pursuant to any Warrant or Warrants.
ARTICLE
XXIOther
Notices.
In case at any time:
Section
21.1 the
Issuer shall make any distributions to the holders of Common Stock;
or
Section
21.2 the
Issuer shall authorize the granting to all holders of its Common Stock of
rights
to subscribe for or purchase any shares of Capital Stock of any class or
other
rights; or
Section
21.3 there
shall be any reclassification of the Capital Stock of the Issuer;
or
Section
21.4 there
shall be any capital reorganization by the Issuer; or
91
Section
21.5 there
shall be any (i) consolidation or merger involving the Issuer or (ii) sale,
transfer or other disposition of all or substantially all of the Issuer’s
property, assets or business (except a merger or other reorganization in
which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or
Section
21.6 there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of
the Issuer or any partial liquidation of the Issuer or distribution to holders
of Common Stock;
then,
in
each of such cases, the Issuer shall give written notice to the Holder of
the
date on which (i) the books of the Issuer shall close or a record shall be
taken
for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common
Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock
for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days
prior
to the record date or the date on which the Issuer’s transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of
all
financial and other information distributed or required to be distributed
to the
holders of the Common Stock.
ARTICLE
XXIIAmendment
and Waiver.
Any term, covenant, agreement or condition in this Warrant may be amended,
or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by a written instrument or written
instruments executed by the Issuer and the Majority Holders;
provided,
however,
that no such amendment or waiver shall reduce the Warrant Share Number, increase
the Warrant Price, shorten the period during which this Warrant may be exercised
or modify any provision of this Section 11 without the consent of the Holder
of
this Warrant. No consideration shall be offered or paid to any person to
amend
or consent to a waiver or modification of any provision of this Warrant unless
the same consideration is also offered to all holders of the
Warrants.
ARTICLE
XXIIIGoverning
Law; Jurisdiction.
This Warrant shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Warrant shall not be interpreted or construed
with
any presumption against the party causing this Warrant to be drafted. The
Issuer
and the Holder agree that venue for any dispute arising under this Warrant
will
lie exclusively in the state or federal courts located in New York County,
New
York, and the parties irrevocably waive any right to raise forum non conveniens
or any other argument that New York is not the proper venue. The Issuer and
the
Holder irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Issuer and the Holder consent to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address in effect for notices to it under this Warrant
and
agree that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 12 shall affect or limit any
right
to serve process in any other manner permitted by law. The Issuer and the
Holder
hereby agree that the prevailing party in any suit, action or proceeding
arising
out of or relating to this Warrant or the Purchase Agreement, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.
The
parties hereby waive all rights to a trial by jury.
92
ARTICLE
XXIVNotices.
All notices, demands, consents, requests, instructions and other communications
to be given or delivered or permitted under or by reason of the provisions
of
this Agreement or in connection with the transactions contemplated hereby
shall
be in writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of
such
delivery (as evidenced by the receipt of the personal delivery service),
(ii) if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing),
or (iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance
with
this Section 13), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit
of the
sender). All such notices, demands, consents, requests, instructions and
other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
If
to the Issuer:
|
Victory
Divide Mining Company
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group
Xx.
00 Xxxxxxx Xxxxxx
Jixian
Town Heilongjiang
People’x
Xxxxxxxx xx Xxxxx 000000
Tel:
00-000-000-0000
Fax:
00-000-000-0000
Email:xxxxxxxx0@000.xxx
|
with
copies (which copies
shall
not constitute notice)
to:
|
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.: (000) 000-0000, ext. 127
Fax
No.: (000) 000-0000
|
93
If
to any Holder:
|
At
the address of such Holder set forth on Exhibit A to this Agreement,
with
copies to Holder’s counsel as set forth on Exhibit A or as specified in
writing by such Holder with copies to:
|
with
copies (which copies
shall
not constitute notice)
to:
|
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
Facsimile:
212-407-4000
|
Any
party
hereto may from time to time change its address for notices by giving at
least
ten (10) days written notice of such changed address to the other party
hereto.
ARTICLE
XXVWarrant
Agent.
The Issuer may, by written notice to the Holder of this Warrant, appoint
an
agent having an office in New York, New York for the purpose of issuing shares
of Warrant Stock on the exercise of this Warrant pursuant to subsection (b)
of
Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section
2 hereof or replacing this Warrant pursuant to subsection (d) of Section
3
hereof, or any of the foregoing, and thereafter any such issuance, exchange
or
replacement, as the case may be, shall be made at such office by such
agent.
ARTICLE
XXVIRemedies.
The Issuer stipulates that the remedies at law of the Holder of this Warrant
in
the event of any default or threatened default by the Issuer in the performance
of or compliance with any of the terms of this Warrant are not and will not
be
adequate and that, to the fullest extent permitted by law, such terms may
be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
ARTICLE
XXVIISuccessors
and Assigns.
This Warrant and the rights evidenced hereby shall inure to the benefit of
and
be binding upon the successors and assigns of the Issuer, the Holder hereof
and
(to the extent provided herein) the Holders of Warrant Stock issued pursuant
hereto, and shall be enforceable by any such Holder or Holder of Warrant
Stock.
ARTICLE
XXVIIIModification
and Severability.
If, in any action before any court or agency legally empowered to enforce
any
provision contained herein, any provision hereof is found to be unenforceable,
then such provision shall be deemed modified to the extent necessary to make
it
enforceable by such court or agency. If any such provision is not enforceable
as
set forth in the preceding sentence, the unenforceability of such provision
shall not affect the other provisions of this Warrant, but this Warrant shall
be
construed as if such unenforceable provision had never been contained
herein.
94
ARTICLE
XXIXHeadings.
The headings of the Sections of this Warrant are for convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
95
IN
WITNESS WHEREOF, the Issuer has executed this Series A Warrant as of the
day and
year first above written.
VICTORY
DIVIDE MINING COMPANY
By:
__/s/_Shulin
Liu________
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
96
EXERCISE
FORM
SERIES
A
WARRANT
VICTORY
DIVIDE MINING COMPANY
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of
________________________________ covered by the within Warrant.
Dated:
|
|
|
Signature
|
|
Address
|
|
|||
|
||||
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by
the
Holder on the date of Exercise: _________________________
The
undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
The
undersigned intends that payment of the Warrant Price shall be made as (check
one):
Cash
Exercise_______
Cashless
Exercise_______
If
the
Holder has elected a Cash Exercise, the Holder shall pay the sum of $________
by
certified or official bank check (or via wire transfer) to the Issuer in
accordance with the terms of the Warrant.
If
the
Holder has elected a Cashless Exercise, a certificate shall be issued to
the
Holder for the number of shares equal to the whole number portion of the
product
of the calculation set forth below, which is ___________. The Company shall
pay
a cash adjustment in respect of the fractional portion of the product of
the
calculation set forth below in an amount equal to the product of the fractional
portion of such product and the Per Share Market Value on the date of exercise,
which product is ____________.
X
= Y -
(A)(Y)
B
Where:
The
number of shares of Common Stock to be issued to the Holder
__________________(“X”).
97
The
number of shares of Common Stock purchasable upon exercise of all of the
Warrant
or, if only a portion of the Warrant is being exercised, the portion of the
Warrant being exercised ___________________________ (“Y”).
The
Warrant Price ______________ (“A”).
The
Per
Share Market Value of one share of Common Stock _______________________
(“B”).
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
Dated:
|
|
|
Signature
|
|
Address
|
|
|||
|
||||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
Dated:
|
|
|
Signature
|
|
Address
|
|
|||
|
||||
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
98
EXHIBIT
C-2 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
_____________________________________________
FORM
OF SERIES B WARRANT
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
SERIES
B
WARRANT TO PURCHASE
SHARES
OF
COMMON STOCK
OF
VICTORY
DIVIDE MINING COMPANY
Expires
on October 2, 2012
No.:
W-B-07-
|
Number
of Shares: Up to _________
|
Date
of Issuance: October 3, 2007
|
|
FOR
VALUE
RECEIVED, the undersigned, Victory Divide Mining Company, a Nevada corporation
(together with its successors and assigns, the “Issuer”),
hereby certifies that ______________
or
its
registered assigns (the “Holder”)
is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to __________
shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however,
to
the provisions and upon the terms and conditions hereinafter set forth.
ARTICLE
XXXTerm.
The term of this Warrant shall commence on October 3, 2007 and shall expire
at
6:00 p.m., Eastern Time, on October 2, 2012 (such period being the
“Term”
and such date, the “Termination
Date”).
ARTICLE
XXXIMethod
of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
99
Section
31.1 Time
of Exercise.
The
purchase rights represented by this Warrant may be exercised in whole or
in part
during the Term for such number of shares of Common Stock set forth above,
which
number is equal to one hundred percent (100%) of the number of shares of
Common
Stock into which the Series A Convertible Preferred Stock issued by the Issuer
to the Holder on the Original Issue Date pursuant to the Purchase Agreement
may
be converted.
Section
31.2 Method
of Exercise.
The
Holder hereof may exercise this Warrant, in whole or in part, by the surrender
of this Warrant (with the exercise form attached hereto duly executed) at
the
principal office of the Issuer, and by the payment to the Issuer of an amount
of
consideration therefor equal to the Warrant Price in effect on the date of
such
exercise multiplied by the number of shares of Warrant Stock with respect
to
which this Warrant is then being exercised, payable at such Holder’s election
(i) by certified or official bank check or by wire transfer to an account
designated by the Issuer, (ii) by “cashless exercise” in accordance with Section
2(c), but only when a registration statement under the Securities Act providing
for the resale of the Warrant Stock is not then in effect, or (iii) by a
combination of the foregoing methods of payment selected by the Holder of
this
Warrant.
Section
31.3 Cashless
Exercise.
Notwithstanding any provision herein to the contrary, and (i) the volume
weighted average price of one share of Common Stock on the OTC Bulletin Board
or
such other securities exchange on which the Common Stock is then traded or
included for quotation, for any ten (10) consecutive Trading Days is greater
than the Warrant Price (at or prior to the date of calculation as set forth
below) and (ii) commencing eighteen (18) months following the Original Issue
Date if a registration statement under the Securities Act providing for the
resale of the Warrant Stock (A) has not been declared effective by the
Securities and Exchange Commission by the date such registration statement
is
required to be effective pursuant to the Registration Rights Agreement (as
defined in Section 8), or (B) is not effective at the time of exercise of
this
Warrant, unless the registration statement is not effective as a result of
the
Issuer exercising its rights under Section 3(n) of the Registration Rights
Agreement, in lieu of exercising this Warrant by payment of cash, the Holder
may
exercise this Warrant by a cashless exercise and shall receive the number
of
shares of Common Stock equal to an amount (as determined below) by surrender
of
this Warrant at the principal office of the Issuer together with the properly
endorsed Notice of Exercise in which event the Issuer shall issue to the
Holder
a number of shares of Common Stock computed using the following
formula:
X
=
Y - (A)(Y)
|
||
B
|
||
Where
|
X
=
|
the
number of shares of Common Stock to be issued to the
Holder.
|
Y
=
|
the
number of shares of Common Stock purchasable upon exercise of all
of the
Warrant or, if only a portion of the Warrant is being exercised,
the
portion of the Warrant being exercised.
|
|
A
=
|
the
Warrant Price.
|
|
B
=
|
the
Per Share Market Value of one share of Common
Stock.
|
100
Section
31.4 Issuance
of Stock Certificates.
In the
event of any exercise of this Warrant in accordance with and subject to the
terms and conditions hereof, certificates for the shares of Warrant Stock
so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
such
exercise (the “Delivery
Date”)
or, at
the request of the Holder (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Stock is then in effect
or that the shares of Warrant Stock are otherwise exempt from registration),
issued and delivered to the Depository Trust Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”)
within
a reasonable time, not exceeding three (3) Trading Days after such exercise,
and
the Holder hereof shall be deemed for all purposes to be the holder of the
shares of Warrant Stock so purchased as of the date of such exercise.
Notwithstanding the foregoing to the contrary, the Issuer or its transfer
agent
shall only be obligated to issue and deliver the shares to the DTC on a holder’s
behalf via DWAC if such exercise is in connection with a sale or other exemption
from registration by which the shares may be issued without a restrictive
legend
and the Issuer and its transfer agent are participating in DTC through the
DWAC
system. The Holder shall deliver this original Warrant, or an indemnification
undertaking with respect to such Warrant in the case of its loss, theft or
destruction, at such time that this Warrant is fully exercised. With respect
to
partial exercises of this Warrant, the Issuer shall keep written records
for the
Holder of the number of shares of Warrant Stock exercised as of each date
of
exercise.
Section
31.5 Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if the Issuer fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Stock pursuant to an exercise on or before the Delivery
Date, and if after such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Stock which the Holder
anticipated receiving upon such exercise (a “Buy-In”),
then
the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was
required to deliver to the Holder in connection with the exercise at issue
times
(B) the price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the portion
of the Warrant and equivalent number of shares of Warrant Stock for which
such
exercise was not honored or deliver to the Holder the number of shares of
Common
Stock that would have been issued had the Issuer timely complied with its
exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover
a
Buy-In with respect to an attempted exercise of shares of Common Stock with
an
aggregate sale price giving rise to such purchase obligation of $10,000,
under
clause (1) of the immediately preceding sentence the Issuer shall be required
to
pay the Holder $1,000. The Holder shall provide the Issuer written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by
the
Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation,
a
decree of specific performance and/or injunctive relief with respect to the
Issuer’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of this Warrant as required pursuant to the terms
hereof.
101
Section
31.6 Transferability
of Warrant.
Subject
to Section 2(h) hereof, this Warrant may be transferred by a Holder, in whole
or
in part, without the consent of the Issuer. If transferred pursuant to this
paragraph, this Warrant may be transferred on the books of the Issuer by
the
Holder hereof in person or by duly authorized attorney, upon surrender of
this
Warrant at the principal office of the Issuer, properly endorsed (by the
Holder
executing an assignment in the form attached hereto) and upon payment of
any
necessary transfer tax or other governmental charge imposed upon such transfer.
This Warrant is exchangeable at the principal office of the Issuer for Warrants
to purchase the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange.
All
Warrants issued on transfers or exchanges shall be dated the Original Issue
Date
and shall be identical with this Warrant except as to the number of shares
of
Warrant Stock issuable pursuant thereto.
Section
31.7 Continuing
Rights of Holder.
The
Issuer will, at the time of or at any time after each exercise of this Warrant,
upon the request of the Holder hereof, acknowledge in writing the extent,
if
any, of its continuing obligation to afford to such Holder all rights to
which
such Holder shall continue to be entitled after such exercise in accordance
with
the terms of this Warrant, provided that if any such Holder shall fail to
make
any such request, the failure shall not affect the continuing obligation
of the
Issuer to afford such rights to such Holder.
Section
31.8 Compliance
with Securities Laws.
(i) The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and
the shares of Warrant Stock to be issued upon exercise hereof are being acquired
solely for the Holder’s own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement, or
an
exemption from registration, under the Securities Act and any applicable
state
securities laws.
(ii) Except
as
provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following
form:
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
102
(iii) The
Issuer agrees to reissue this Warrant or certificates representing any of
the
Warrant Stock, without the legend set forth above if at such time, prior
to
making any transfer of any such securities, the Holder shall give written
notice
to the Issuer describing the manner and terms of such transfer. Such proposed
transfer will not be effected until: (a) either (i) the Issuer has received
an
opinion of counsel reasonably satisfactory to the Issuer, to the effect that
the
registration of such securities under the Securities Act is not required
in
connection with such proposed transfer, (ii) a registration statement under
the
Securities Act covering such proposed disposition has been filed by the Issuer
with the Securities and Exchange Commission and has become effective under
the
Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under
the
Securities Act and state securities laws are not required, or (iv) the Holder
provides the Issuer with reasonable assurances that such security can be
sold
pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer
has
received an opinion of counsel reasonably satisfactory to the Issuer, to
the
effect that registration or qualification under the securities or “blue sky”
laws of any state is not required in connection with such proposed disposition,
or (ii) compliance with applicable state securities or “blue sky” laws has been
effected or a valid exemption exists with respect thereto. The Issuer will
respond to any such notice from a holder within three (3) Trading Days. In
the
case of any proposed transfer under this Section 2(h), the Issuer will use
reasonable efforts to comply with any such applicable state securities or
“blue
sky” laws, but shall in no event be required, (x) to qualify to do business in
any state where it is not then qualified, (y) to take any action that would
subject it to tax or to the general service of process in any state where
it is
not then subject, or (z) to comply with state securities or “blue sky” laws of
any state for which registration by coordination is unavailable to the Issuer.
The restrictions on transfer contained in this Section 2(h) shall be in addition
to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant. Whenever a certificate
representing the Warrant Stock is required to be issued to the Holder without
a
legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall cause its transfer agent to electronically transmit
the
Warrant Stock to the Holder by crediting the account of the Holder or Holder’s
Prime Broker with DTC through its DWAC system (to the extent not inconsistent
with any provisions of this Warrant or the Purchase Agreement).
Section
31.9 Accredited
Investor Status.
In no
event may the Holder exercise this Warrant in whole or in part unless the
Holder
is an “accredited investor” as defined in Regulation D under the Securities
Act.
ARTICLE
XXXIIStock
Fully Paid; Reservation and Listing of Shares;
Covenants.
Section
32.1 Stock
Fully Paid.
The
Issuer represents, warrants, covenants and agrees that all shares of Warrant
Stock which may be issued upon the exercise of this Warrant or otherwise
hereunder will, when issued in accordance with the terms of this Warrant,
be
duly authorized, validly issued, fully paid and non-assessable and free from
all
taxes, liens and charges created by or through the Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may
be
exercised, the Issuer will at all times have authorized and reserved for
the
purpose of the issuance upon exercise of this Warrant a number of authorized
but
unissued shares of Common Stock equal to at least one hundred percent (100%)
of
the number of shares of Common Stock issuable upon exercise of this Warrant
without regard to any limitations on exercise.
103
Section
32.2 Reservation.
If any
shares of Common Stock required to be reserved for issuance upon exercise
of
this Warrant or as otherwise provided hereunder require registration or
qualification with any Governmental Authority under any federal or state
law
before such shares may be so issued, the Issuer will in good faith use its
best
efforts as expeditiously as possible at its expense to cause such shares
to be
duly registered or qualified. If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, and maintain and increase when necessary such listing, of, all shares
of Warrant Stock from time to time issued upon exercise of this Warrant or
as
otherwise provided hereunder (provided that such Warrant Stock has been
registered pursuant to a registration statement under the Securities Act
then in
effect), and, to the extent permissible under the applicable securities exchange
rules, all unissued shares of Warrant Stock which are at any time issuable
hereunder, so long as any shares of Common Stock shall be so listed. The
Issuer
will also so list on each securities exchange or market, and will maintain
such
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange
or
market by the Issuer.
Section
32.3 Covenants.
The
Issuer shall not by any action including, without limitation, amending the
Articles of Incorporation or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other action, avoid or seek to avoid the observance
or
performance of any of the terms of this Warrant, but will at all times in
good
faith assist in the carrying out of all such terms and in the taking of all
such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against dilution (to the extent specifically provided herein) or
impairment. Without limiting the generality of the foregoing, the Issuer
will
(i) not permit the par value, if any, of its Common Stock to exceed the then
effective Warrant Price, (ii) not amend or modify any provision of the Articles
of Incorporation or by-laws of the Issuer in any manner that would adversely
affect the rights of the Holders of the Warrants, (iii) take all such action
as
may be reasonably necessary in order that the Issuer may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear
of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (iv) use its best efforts to obtain
all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be reasonably necessary to enable the
Issuer
to perform its obligations under this Warrant.
Section
32.4 Loss,
Theft, Destruction of Warrants.
Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss,
theft, destruction or mutilation of any Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security satisfactory
to the Issuer or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Issuer will make and deliver, in lieu of
such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and
representing the right to purchase the same number of shares of Common
Stock.
104
Section
32.5 Payment
of Taxes.
The
Issuer will pay any documentary stamp taxes attributable to the initial issuance
of the Warrant Stock issuable upon exercise of this Warrant; provided,
however,
that
the Issuer shall not be required to pay any tax or taxes which may be payable
in
respect of any transfer involved in the issuance or delivery of any certificates
representing Warrant Stock in a name other than that of the Holder in respect
to
which such shares are issued.
ARTICLE
XXXIIIAdjustment
of Warrant Price.
The price at which such shares of Warrant Stock may be purchased upon exercise
of this Warrant shall be subject to adjustment from time to time as set forth
in
this Section 4. The Issuer shall give the Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 in accordance
with
the notice provisions set forth in Section 5.
Section
33.1 Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale.
(i) In
case
the Issuer after the Original Issue Date shall do any of the following (each,
a
“Triggering
Event”):
(a)
consolidate or merge with or into any other Person and the Issuer shall not
be
the continuing or surviving corporation of such consolidation or merger,
or (b)
permit any other Person to consolidate with or merge into the Issuer and
the
Issuer shall be the continuing or surviving Person but, in connection with
such
consolidation or merger, any Capital Stock of the Issuer shall be changed
into
or exchanged for Securities of any other Person or cash or any other property,
or (c) transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or reclassification
of its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made to the Warrant Price and the number of shares of
Warrant
Stock that may be purchased upon exercise of this Warrant so that, upon the
basis and the terms and in the manner provided in this Warrant, the Holder
of
this Warrant shall be entitled upon the exercise hereof at any time after
the
consummation of such Triggering Event, to the extent this Warrant is not
exercised prior to such Triggering Event, to receive at the Warrant Price
in
effect at the time immediately prior to the consummation of such Triggering
Event, in lieu of the Common Stock issuable upon such exercise of this Warrant
prior to such Triggering Event, the Securities, cash and property to which
such
Holder would have been entitled upon the consummation of such Triggering
Event
if such Holder had exercised the rights represented by this Warrant immediately
prior thereto (including the right of a shareholder to elect the type of
consideration it will receive upon a Triggering Event), subject to adjustments
(subsequent to such corporate action) as nearly equivalent as possible to
the
adjustments provided for elsewhere in this Section 4; provided,
however,
the
Holder at its option may elect to receive an amount in unregistered shares
of
the common stock of the surviving entity equal to the value of this Warrant
calculated in accordance with the Black-Scholes formula; provided,
further,
such
shares of Common Stock shall be valued at a twenty percent (20%) discount
to the
VWAP of the Common Stock for the twenty (20) Trading Days immediately prior
to
the Triggering Event. Immediately upon the occurrence of a Triggering Event,
the
Issuer shall notify the Holder in writing of such Triggering Event and provide
the calculations in determining the number of shares of Warrant Stock issuable
upon exercise of the new warrant and the adjusted Warrant Price. Upon the
Holder’s request, the continuing or surviving corporation as a result of such
Triggering Event shall issue to the Holder a new warrant of like tenor
evidencing the right to purchase the adjusted number of shares of Warrant
Stock
and the adjusted Warrant Price pursuant to the terms and provisions of this
Section 4(a)(i). Notwithstanding the foregoing to the contrary, this Section
4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
Event is a company that has a class of equity securities registered pursuant
to
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
its common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board. In the event that the
surviving entity pursuant to any such Triggering Event is not a public company
that is registered pursuant to the Exchange Act or its common stock is not
listed or quoted on a national securities exchange, national automated quotation
system or the OTC Bulletin Board, then the Holder shall have the right to
demand
that the Issuer pay to the Holder an amount in cash equal to the value of
this
Warrant calculated in accordance with the Black-Scholes
formula.
105
(ii) In
the
event that the Holder has elected not to exercise this Warrant prior to the
consummation of a Triggering Event and has also elected not to receive an
amount
in cash equal to the value of this Warrant calculated in accordance with
the
Black-Scholes formula pursuant to the provisions of Section 4(a)(i) above,
so
long as the surviving entity pursuant to any Triggering Event is a company
that
has a class of equity securities registered pursuant to the Exchange Act
and its
common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board, the surviving entity
and/or each Person (other than the Issuer) which may be required to deliver
any
Securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not
release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a),
such Holder shall be entitled to receive, and the surviving entity and/or
each
such Person shall have similarly delivered to such Holder an opinion of counsel
for the surviving entity and/or each such Person, which counsel shall be
reasonably satisfactory to such Holder, or in the alternative, a written
acknowledgement executed by the President or Chief Financial Officer of the
Issuer, stating that this Warrant shall thereafter continue in full force
and
effect and the terms hereof (including, without limitation, all of the
provisions of this subsection (a)) shall be applicable to the Securities,
cash
or property which the surviving entity and/or each such Person may be required
to deliver upon any exercise of this Warrant or the exercise of any rights
pursuant hereto.
Section
33.2 Stock
Dividends, Subdivisions and Combinations.
If at
any time the Issuer shall:
106
(a) make
or
issue or set a record date for the holders of the Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of,
shares of Common Stock,
(b) subdivide
its outstanding shares of Common Stock into a larger number of shares of
Common
Stock, or
(c) combine
its outstanding shares of Common Stock into a smaller number of shares of
Common
Stock,
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of
shares of Common Stock for which this Warrant is exercisable immediately
prior
to the occurrence of such event would own or be entitled to receive after
the
happening of such event, and (2) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the
number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Common Stock
for
which this Warrant is exercisable immediately after such
adjustment.
Section
33.3 Certain
Other Distributions.
If at
any time the Issuer shall make or issue or set a record date for the holders
of
the Common Stock for the purpose of entitling them to receive any dividend
or
other distribution of:
(a) cash,
(b) any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common
Stock
Equivalents or Additional Shares of Common Stock), or
(c) any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents
or
Additional Shares of Common Stock),
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
shall
be adjusted to equal the product of the number of shares of Common Stock
for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Per Share
Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable
and of
the fair value (as determined in good faith by the Board of Directors of
the
Issuer and supported by an opinion from an investment banking firm mutually
agreed upon by the Issuer and the Holder) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or
other
subscription or purchase rights so distributable, and (2) the Warrant Price
then
in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant
is
exercisable immediately prior to the adjustment divided by (B) the number
of
shares of Common Stock for which this Warrant is exercisable immediately
after
such adjustment. A reclassification of the Common Stock (other than a change
in
par value, or from par value to no par value or from no par value to par
value)
into shares of Common Stock and shares of any other class of stock shall
be
deemed a distribution by the Issuer to the holders of its Common Stock of
such
shares of such other class of stock within the meaning of this Section 4(c)
and,
if the outstanding shares of Common Stock shall be changed into a larger
or
smaller number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may
be, of
the outstanding shares of Common Stock within the meaning of Section
4(b).
107
Section
33.4 Issuance
of Additional Shares of Common Stock.
(a) For
the
period commencing on the Original Issue Date and ending on the two (2) year
anniversary of the Original Issue Date, in the event the Issuer shall issue
any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less
than
the Warrant Price then in effect or without consideration, then the Warrant
Price upon each such issuance shall be adjusted to the price equal to the
consideration per share paid for such Additional Shares of Common
Stock.
(b) For
the
period commencing on the two (2) year anniversary of the Original Issue Date
and
ending on the Termination Date, in the event the Issuer shall issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less
than
the Warrant Price then in effect or without consideration, then the Warrant
Price then in effect shall multiplied by a fraction (a) the numerator of
which
shall be equal to the sum of (x) the number of shares of outstanding Common
Stock immediately prior to the issuance of such Additional Shares of Common
Stock plus (y) the number of shares of Common Stock (rounded to the nearest
whole share) which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price per
share
equal to the Warrant Price then in effect and (b) the denominator of which
shall
be equal to the number of shares of outstanding Common Stock immediately
after
the issuance of such Additional Shares of Common Stock. For purposes of this
Section, all shares of Common Stock issuable upon exercise of options
outstanding immediately prior to such issue or upon conversion of Convertible
Securities (as defined below) (including Series A Convertible Preferred Stock
of
the Company, par value $.001 per share) outstanding immediately prior to
such
issue are deemed outstanding. No adjustment of the number of shares of Common
Stock for which this Warrant shall be exercisable shall be made pursuant
to this
Section 4(d)(ii) upon the issuance of any Additional Shares of Common Stock
which are issued pursuant to the exercise of any Common Stock Equivalents,
if
any such adjustment shall previously have been made upon the issuance of
such
Common Stock Equivalents (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4(e).
Section
33.5 Issuance
of Common Stock Equivalents.
In the
event the Issuer shall take a record of the holders of its Common Stock for
the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Issuer is the
surviving corporation) issue or sell, any Common Stock Equivalents, whether
or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange shall be less than the Warrant Price in effect immediately prior
to
the time of such issue or sale, or if, after any such issuance of Common
Stock
Equivalents, the price per share for which Additional Shares of Common Stock
may
be issuable thereafter is amended or adjusted, and such price as so amended
shall be less than the Warrant Price in effect at the time of such amendment
or
adjustment, then the Warrant Price then in effect shall be adjusted as provided
in Section 4(d)(i) or (ii), as applicable. No further adjustments of the
number
of shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Common Stock Equivalents.
108
Section
33.6 Other
Provisions Applicable to Adjustments under this Section.
The
following provisions shall be applicable to the making of adjustments of
the
number of shares of Common Stock for which this Warrant is exercisable and
the
Warrant Price then in effect provided for in this Section 4:
(i) Computation
of Consideration.
To the
extent that any Additional Shares of Common Stock or any Common Stock
Equivalents (or any warrants or other rights therefor) shall be issued for
cash
consideration, the consideration received by the Issuer therefor shall be
the
amount of the cash received by the Issuer therefor, or, if such Additional
Shares of Common Stock or Common Stock Equivalents are offered by the Issuer
for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Common Stock Equivalents are sold to underwriters or dealers for
public
offering without a subscription offering, the initial public offering price
(in
any such case subtracting any amounts paid or receivable for accrued interest
or
accrued dividends and without taking into account any compensation, discounts
or
expenses paid or incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). In connection with any
merger or consolidation in which the Issuer is the surviving corporation
(other
than any consolidation or merger in which the previously outstanding shares
of
Common Stock of the Issuer shall be changed to or exchanged for the stock
or
other securities of another corporation), the amount of consideration therefore
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board, and acceptable to the Holder, of such portion of the
assets
and business of the nonsurviving corporation as the Board may determine to
be
attributable to such shares of Common Stock or Common Stock Equivalents,
as the
case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration received by the Issuer for issuing such
warrants or other rights plus the additional consideration payable to the
Issuer
upon exercise of such warrants or other rights. The consideration for any
Additional Shares of Common Stock issuable pursuant to the terms of any Common
Stock Equivalents shall be the consideration received by the Issuer for issuing
warrants or other rights to subscribe for or purchase such Common Stock
Equivalents, plus the consideration paid or payable to the Issuer in respect
of
the subscription for or purchase of such Common Stock Equivalents, plus the
additional consideration, if any, payable to the Issuer upon the exercise
of the
right of conversion or exchange in such Common Stock Equivalents. In the
event
of any consolidation or merger of the Issuer in which the Issuer is not the
surviving corporation or in which the previously outstanding shares of Common
Stock of the Issuer shall be changed into or exchanged for the stock or other
securities of another corporation, or in the event of any sale of all or
substantially all of the assets of the Issuer for stock or other securities
of
any corporation, the Issuer shall be deemed to have issued a number of shares
of
its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or
other
property of the other corporation. In the event any consideration received
by
the Issuer for any securities consists of property other than cash, the fair
market value thereof at the time of issuance or as otherwise applicable shall
be
as determined in good faith by the Board. In the event Common Stock is issued
with other shares or securities or other assets of the Issuer for consideration
which covers both, the consideration computed as provided in this Section
4(g)(i) shall be allocated among such securities and assets as determined
in
good faith by the Board.
109
(b) When
Adjustments to Be Made.
The
adjustments required by this Section 4 shall be made whenever and as often
as
any specified event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Common Stock for which this Warrant
is
exercisable that would otherwise be required may be postponed (except in
the
case of a subdivision or combination of shares of the Common Stock, as provided
for in Section 4(b)) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made
adds
or subtracts less than one percent (1%) of the shares of Common Stock for
which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except
as
aforesaid) which is postponed shall be carried forward and made as soon as
such
adjustment, together with other adjustments required by this Section 4 and
not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed
to have occurred at the close of business on the date of its
occurrence.
(c) Fractional
Interests.
In
computing adjustments under this Section 4, fractional interests in Common
Stock
shall be taken into account to the nearest one one-hundredth (1/100th) of
a
share.
(d) When
Adjustment Not Required.
If the
Issuer shall take a record of the holders of its Common Stock for the purpose
of
entitling them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously
made
in respect thereof shall be rescinded and annulled.
Section
33.7 Form
of Warrant after Adjustments.
The
form of this Warrant need not be changed because of any adjustments in the
Warrant Price or the number and kind of Securities purchasable upon the exercise
of this Warrant.
110
Section
33.8 Escrow
of Warrant Stock.
If
after any property becomes distributable pursuant to this Section 4 by reason
of
the taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, and the Holder exercises
this Warrant, any shares of Common Stock issuable upon exercise by reason
of
such adjustment shall be deemed the last shares of Common Stock for which
this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the
Holder
by the Issuer to be issued to the Holder upon and to the extent that the
event
actually takes place, upon payment of the current Warrant Price. Notwithstanding
any other provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares shall
be
cancelled by the Issuer and escrowed property returned.
ARTICLE
XXXIVNotice
of Adjustments.
Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
to
Section 4 hereof (for purposes of this Section 5, each an “adjustment”),
the Issuer shall cause its Chief Financial Officer to prepare and execute
a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made
any
determination hereunder), and the Warrant Price and Warrant Share Number
after
giving effect to such adjustment, and shall cause copies of such certificate
to
be delivered to the Holder of this Warrant promptly after each adjustment.
Any
dispute between the Issuer and the Holder of this Warrant with respect to
the
matters set forth in such certificate may at the option of the Holder of
this
Warrant be submitted to a national or regional accounting firm reasonably
acceptable to the Issuer and the Holder (the “Independent
Appraiser”),
provided
that the Issuer shall have ten (10) days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right
of
objection. The Independent Appraiser selected by the Holder of this Warrant
as
provided in the preceding sentence shall be instructed to deliver a written
opinion as to such matters to the Issuer and such Holder within thirty (30)
days
after submission to it of such dispute. Such opinion shall be final and binding
on the parties hereto. The reasonable expenses of the Independent Appraiser
in
making such determination shall be paid by the Issuer, in the event the Holder's
calculation was correct, or by the Holder, in the event the Issuer’s calculation
was correct, or equally by the Issuer and the Holder in the event that neither
the Issuer's or the Holder's calculation was correct.
ARTICLE
XXXVFractional
Shares.
No fractional shares of Warrant Stock will be issued in connection with any
exercise hereof, but in lieu of such fractional shares, the Issuer shall
round
the number of shares to be issued upon exercise up to the nearest whole number
of shares.
ARTICLE
XXXVIOwnership
Cap and Exercise Restriction.
Notwithstanding anything to the contrary set forth in this Warrant, at no
time
may a Holder of this Warrant exercise this Warrant if the number of shares
of
Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock beneficially owned by such
Holder at such time, the number of shares of Common Stock which would result
in
such Holder beneficially owning (as determined in accordance with Section
13(d)
of the Exchange Act and the rules thereunder) in excess of 4.99% of the then
issued and outstanding shares of Common Stock; provided,
however,
that upon a holder of this Warrant providing the Issuer with sixty-one (61)
days
notice (pursuant to Section 13 hereof) (the “Waiver
Notice”)
that such Holder would like to waive this Section 7 with regard to any or
all
shares of Common Stock issuable upon exercise of this Warrant, this Section
7
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice; provided,
further,
that this provision shall be of no further force or effect during the sixty-one
(61) days immediately preceding the expiration of the term of this
Warrant.
111
ARTICLE
XXXVIIRegistration
Rights.
The Holder of this Warrant is entitled to the benefit of certain registration
rights with respect to the shares of Warrant Stock issuable upon the exercise
of
this Warrant pursuant to that certain Registration Rights Agreement, of even
date herewith, by and among the Company and Persons listed on Schedule I
thereto
(the “Registration
Rights Agreement”)
and the registration rights with respect to the shares of Warrant Stock issuable
upon the exercise of this Warrant by any subsequent Holder may only be assigned
in accordance with the terms and provisions of the Registrations Rights
Agreement.
ARTICLE
XXXVIIIDefinitions.
For the purposes of this Warrant, the following terms have the following
meanings:
“Additional
Shares of Common Stock”
means
all shares of Common Stock issued by the Issuer after the Original Issue
Date,
and all shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) securities issued pursuant to a bona fide firm
underwritten public offering of the Company’s securities, provided such
underwritten public offering has been approved in advance by the holders
of more
than fifty percent (50%) of the then outstanding shares of Series A (the
“Majority
Holders”),
(ii)
securities issued (other than for cash) in connection with a strategic merger,
acquisition, or consolidation, provided that the issuance of such securities
in
connection with such strategic merger, acquisition, or consolidation has
been
approved in advance by the Majority Holders, (iii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date of the Purchase Agreement or issued pursuant
to the Purchase Agreement (so long as the conversion or exercise price in
such
securities are not amended to lower such price and/or adversely affect the
Holders), (iv) the Warrant Stock, (v) securities issued in connection with
bona
fide strategic license agreements or other partnering arrangements so long
as
such issuances are not for the purpose of raising capital and provided that
the
issuance of such securities in connection with such bona fide strategic license
agreements or other partnering arrangements has been approved in advance
by the
Majority Holders, (vi) Common Stock issued or the issuance or grants of options
to purchase Common Stock pursuant to the Issuer’s equity incentive plans
outstanding as they exist on the date of the Purchase Agreement, (vii) the
issuance or grants of options to purchase Common Stock to employees, officers
or
directors of the Issuer pursuant to any equity incentive plan duly adopted
by
the Board or a committee thereof established for such purpose so long as
such
issuances in the aggregate do not exceed ten percent (10)% of the issued
and
outstanding shares of Common Stock as of the Original Issue Date and the
specified price at which the options may be exercised is equal to or greater
than the Per Share Market Value as of the date of such grant, and (viii)
any
warrants, shares of Common Stock or other securities issued to a placement
agent
and its designees for the transactions contemplated by the Purchase Agreement
or
in any other sales of the Issuer’s securities and any securities issued in
connection with any financial advisory agreements of the Issuer and the shares
of Common Stock issued upon exercise of any such warrants or conversions
of any
such other securities.
112
“Articles
of Incorporation”
means
the Articles of Incorporation of the Issuer as in effect on the Original
Issue
Date, and as hereafter from time to time amended, modified, supplemented
or
restated in accordance with the terms hereof and thereof and pursuant to
applicable law.
“Board”
shall
mean the Board of Directors of the Issuer.
“Capital
Stock”
means
and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including,
without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is
a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
“Common
Stock”
means
the Common Stock, $0.001 par value per share, of the Issuer and any other
Capital Stock into which such stock may hereafter be changed.
“Common
Stock Equivalent”
means
any Convertible Security or warrant, option or other right to subscribe for
or
purchase any Additional Shares of Common Stock or any Convertible
Security.
“Convertible
Securities”
means
evidences of Indebtedness, shares of Capital Stock or other Securities which
are
or may be at any time convertible into or exchangeable for Additional Shares
of
Common Stock. The term “Convertible Security” means one of the Convertible
Securities.
“Governmental
Authority”
means
any governmental, regulatory or self-regulatory entity, department, body,
official, authority, commission, board, agency or instrumentality, whether
federal, state or local, and whether domestic or foreign.
“Holders”
mean
the Persons who shall from time to time own any Warrant. The term “Holder” means
one of the Holders.
“Independent
Appraiser”
means
a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may
be
the firm that regularly examines the financial statements of the Issuer)
that is
regularly engaged in the business of appraising the Capital Stock or assets
of
corporations or other entities as going concerns, and which is not affiliated
with either the Issuer or the Holder of any Warrant.
113
“Issuer”
means
Victory Divide Mining Company, a Nevada corporation, and its
successors.
“Majority
Holders”
means
at any time the Holders of Warrants exercisable for a majority of the shares
of
Warrant Stock issuable under the Warrants at the time outstanding.
“Original
Issue Date”
means
October 3, 2007.
“OTC
Bulletin Board”
means
the over-the-counter electronic bulletin board.
“Other
Common”
means
any other Capital Stock of the Issuer of any class which shall be authorized
at
any time after the date of this Warrant (other than Common Stock) and which
shall have the right to participate in the distribution of earnings and assets
of the Issuer without limitation as to amount.
“Outstanding
Common Stock”
means,
at any given time, the aggregate amount of outstanding shares of Common Stock,
assuming full exercise, conversion or exchange (as applicable) of all options,
warrants and other Securities which are convertible into or exercisable or
exchangeable for, and any right to subscribe for, shares of Common Stock
that
are outstanding at such time.
“Person”
means
an individual, corporation, limited liability company, partnership, joint
stock
company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.
“Per
Share Market Value”
means
on any particular date (a) the last closing price per share of the Common
Stock
on such date on the OTC Bulletin Board or another registered national stock
exchange on which the Common Stock is then listed, or if there is no closing
price on such date, then the closing bid price on such date, or if there
is no
closing bid price on such date, then the closing price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the OTC Bulletin Board or any registered national
stock exchange, the last closing price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business
on
such date, or if there is no closing price on such date, then the closing
bid
price on such date, or (c) if the Common Stock is not then reported by the
OTC
Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then
the average of the “Pink Sheet” quotes for the five (5) Trading Days preceding
such date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by
an
Independent Appraiser selected in good faith by the Majority Holders;
provided,
however,
that
the Issuer, after receipt of the determination by such Independent Appraiser,
shall have the right to select an additional Independent Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Independent Appraiser; and provided,
further,
that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during
such
period. The determination of fair market value by an Independent Appraiser
shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding
on
all parties. In determining the fair market value of any shares of Common
Stock,
no consideration shall be given to any restrictions on transfer of the Common
Stock imposed by agreement or by federal or state securities laws, or to
the
existence or absence of, or any limitations on, voting rights.
114
“Purchase
Agreement”
means
the Series A Convertible Preferred Stock Purchase Agreement dated as of October
3, 2007, among the Issuer and the Purchasers.
“Purchasers”
means
the purchasers of the Series A Convertible Preferred Stock and the Warrants
issued by the Issuer pursuant to the Purchase Agreement.
“Securities”
means
any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities
or a
Security, and any option, warrant or other right to purchase or acquire any
Security. “Security” means one of the Securities.
“Securities
Act”
means
the Securities Act of 1933, as amended, or any similar federal statute then
in
effect.
“Subsidiary”
means
any corporation at least 50% of whose outstanding Voting Stock shall at the
time
be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.
“Term”
has
the
meaning specified in Section 1 hereof.
“Trading
Day”
means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board,
or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which
the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided,
however,
that in
the event that the Common Stock is not listed or quoted as set forth in (a)
or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any
day which shall be a legal holiday or a day on which banking institutions
in the
State of New York are authorized or required by law or other government action
to close.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or
quoted
for trading on the date in question: the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market, the New York Stock Exchange
or
the OTC Bulletin Board.
“Voting
Stock”
means,
as applied to the Capital Stock of any corporation, Capital Stock of any
class
or classes (however designated) having ordinary voting power for the election
of
a majority of the members of the Board of Directors (or other governing body)
of
such corporation, other than Capital Stock having such power only by reason
of
the happening of a contingency.
115
“VWAP”
means,
for any date, the price determined by the first of the following clauses
that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date
(or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the
OTC
Bulletin Board is not a Trading Market, the volume weighted average price
of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the "Pink Sheets"
published by Pink Sheets, LLC (or a similar organization or agency succeeding
to
its functions of reporting prices), the most recent bid price per share of
the
Common Stock so reported; or (d) in all other cases, the fair market value
of a
share of Common Stock as determined by an independent appraiser selected
in good
faith by the Holders of a majority in interest of the Warrants then outstanding
and reasonably acceptable to the Company, the fees and expenses of which
shall
be paid by the Company.
“Warrants”
means
the Warrants issued and sold pursuant to the Purchase Agreement, including,
without limitation, this Warrant, and any other warrants of like tenor issued
in
substitution or exchange for any thereof pursuant to the provisions of Section
2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
“Warrant
Price”
initially means $3.50, as such price may be adjusted from time to time as
shall
result from the adjustments specified in this Warrant, including Section
4
hereto.
“Warrant
Share Number”
means
at any time the aggregate number of shares of Warrant Stock which may at
such
time be purchased upon exercise of this Warrant, after giving effect to all
prior adjustments and increases to such number made or required to be made
under
the terms hereof.
“Warrant
Stock”
means
Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
issuable pursuant to any Warrant or Warrants.
ARTICLE
XXXIXOther
Notices.
In case at any time:
Section
39.1 the
Issuer shall make any distributions to the holders of Common Stock;
or
Section
39.2 the
Issuer shall authorize the granting to all holders of its Common Stock of
rights
to subscribe for or purchase any shares of Capital Stock of any class or
other
rights; or
Section
39.3 there
shall be any reclassification of the Capital Stock of the Issuer;
or
Section
39.4 there
shall be any capital reorganization by the Issuer; or
116
Section
39.5 there
shall be any (i) consolidation or merger involving the Issuer or (ii) sale,
transfer or other disposition of all or substantially all of the Issuer’s
property, assets or business (except a merger or other reorganization in
which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or
Section
39.6 there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of
the Issuer or any partial liquidation of the Issuer or distribution to holders
of Common Stock;
then,
in
each of such cases, the Issuer shall give written notice to the Holder of
the
date on which (i) the books of the Issuer shall close or a record shall be
taken
for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common
Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock
for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days
prior
to the record date or the date on which the Issuer’s transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of
all
financial and other information distributed or required to be distributed
to the
holders of the Common Stock.
ARTICLE
XLAmendment
and Waiver.
Any term, covenant, agreement or condition in this Warrant may be amended,
or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by a written instrument or written
instruments executed by the Issuer and the Majority Holders;
provided,
however,
that no such amendment or waiver shall reduce the Warrant Share Number, increase
the Warrant Price, shorten the period during which this Warrant may be exercised
or modify any provision of this Section 11 without the consent of the Holder
of
this Warrant. No consideration shall be offered or paid to any person to
amend
or consent to a waiver or modification of any provision of this Warrant unless
the same consideration is also offered to all holders of the
Warrants.
ARTICLE
XLIGoverning
Law; Jurisdiction.
This Warrant shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Warrant shall not be interpreted or construed
with
any presumption against the party causing this Warrant to be drafted. The
Issuer
and the Holder agree that venue for any dispute arising under this Warrant
will
lie exclusively in the state or federal courts located in New York County,
New
York, and the parties irrevocably waive any right to raise forum non conveniens
or any other argument that New York is not the proper venue. The Issuer and
the
Holder irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Issuer and the Holder consent to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address in effect for notices to it under this Warrant
and
agree that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 12 shall affect or limit any
right
to serve process in any other manner permitted by law. The Issuer and the
Holder
hereby agree that the prevailing party in any suit, action or proceeding
arising
out of or relating to this Warrant or the Purchase Agreement, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.
The
parties hereby waive all rights to a trial by jury.
117
ARTICLE
XLIINotices.
All notices, demands, consents, requests, instructions and other communications
to be given or delivered or permitted under or by reason of the provisions
of
this Agreement or in connection with the transactions contemplated hereby
shall
be in writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of
such
delivery (as evidenced by the receipt of the personal delivery service),
(ii) if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing),
or (iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance
with
this Section 13), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit
of the
sender). All such notices, demands, consents, requests, instructions and
other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
If
to the Issuer:
|
Victory
Divide Mining Company
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group
Xx.
00 Xxxxxxx Xxxxxx
Jixian
Town Heilongjiang
People’x
Xxxxxxxx xx Xxxxx 000000
Tel:
00-000-000-0000
Fax:
00-000-000-0000
Email:xxxxxxxx0@000.xxx
|
with
copies (which copies
shall
not constitute notice)
to:
|
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.: (000) 000-0000, ext. 127
Fax
No.: (000) 000-0000
|
118
If
to any Holder:
|
At
the address of such Holder set forth on Exhibit A to this Agreement,
with
copies to Holder’s counsel as set forth on Exhibit A or as specified in
writing by such Holder with copies to:
|
with
copies (which copies
shall
not constitute notice)
to:
|
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
Facsimile:
212-407-4000
|
Any
party
hereto may from time to time change its address for notices by giving at
least
ten (10) days written notice of such changed address to the other party
hereto.
ARTICLE
XLIIIWarrant
Agent.
The Issuer may, by written notice to the Holder of this Warrant, appoint
an
agent having an office in New York, New York for the purpose of issuing shares
of Warrant Stock on the exercise of this Warrant pursuant to subsection (b)
of
Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section
2 hereof or replacing this Warrant pursuant to subsection (d) of Section
3
hereof, or any of the foregoing, and thereafter any such issuance, exchange
or
replacement, as the case may be, shall be made at such office by such
agent.
ARTICLE
XLIVRemedies.
The Issuer stipulates that the remedies at law of the Holder of this Warrant
in
the event of any default or threatened default by the Issuer in the performance
of or compliance with any of the terms of this Warrant are not and will not
be
adequate and that, to the fullest extent permitted by law, such terms may
be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
ARTICLE
XLVSuccessors
and Assigns.
This Warrant and the rights evidenced hereby shall inure to the benefit of
and
be binding upon the successors and assigns of the Issuer, the Holder hereof
and
(to the extent provided herein) the Holders of Warrant Stock issued pursuant
hereto, and shall be enforceable by any such Holder or Holder of Warrant
Stock.
ARTICLE
XLVIModification
and Severability.
If, in any action before any court or agency legally empowered to enforce
any
provision contained herein, any provision hereof is found to be unenforceable,
then such provision shall be deemed modified to the extent necessary to make
it
enforceable by such court or agency. If any such provision is not enforceable
as
set forth in the preceding sentence, the unenforceability of such provision
shall not affect the other provisions of this Warrant, but this Warrant shall
be
construed as if such unenforceable provision had never been contained
herein.
119
ARTICLE
XLVIIHeadings.
The headings of the Sections of this Warrant are for convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
120
IN
WITNESS WHEREOF, the Issuer has executed this Series B Warrant as of the
day and
year first above written.
VICTORY
DIVIDE MINING COMPANY
By:
___/s/
Shulin Liu____
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
121
EXERCISE
FORM
SERIES
B
WARRANT
VICTORY
DIVIDE MINING COMPANY
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of
________________________________ covered by the within Warrant.
Dated:
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|
Signature
|
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Address
|
|
|||
|
||||
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by
the
Holder on the date of Exercise: _________________________
The
undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
The
undersigned intends that payment of the Warrant Price shall be made as (check
one):
Cash
Exercise_______
Cashless
Exercise_______
If
the
Holder has elected a Cash Exercise, the Holder shall pay the sum of $________
by
certified or official bank check (or via wire transfer) to the Issuer in
accordance with the terms of the Warrant.
If
the
Holder has elected a Cashless Exercise, a certificate shall be issued to
the
Holder for the number of shares equal to the whole number portion of the
product
of the calculation set forth below, which is ___________. The Company shall
pay
a cash adjustment in respect of the fractional portion of the product of
the
calculation set forth below in an amount equal to the product of the fractional
portion of such product and the Per Share Market Value on the date of exercise,
which product is ____________.
X
= Y -
(A)(Y)
B
Where:
The
number of shares of Common Stock to be issued to the Holder
__________________(“X”).
122
The
number of shares of Common Stock purchasable upon exercise of all of the
Warrant
or, if only a portion of the Warrant is being exercised, the portion of the
Warrant being exercised ___________________________ (“Y”).
The
Warrant Price ______________ (“A”).
The
Per
Share Market Value of one share of Common Stock _______________________
(“B”).
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
Dated:
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Signature
|
|
Address
|
|
|||
|
||||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
Dated:
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Signature
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Address
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|||
|
||||
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
123
EXHIBIT
C-3 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
____________________________________________________
FORM
OF SERIES J WARRANT
THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
SERIES
J
WARRANT TO PURCHASE
SHARES
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
VICTORY
DIVIDE MINING COMPANY
Expires
on April 2, 2009
No.:
X-X-07- Number
of Shares: Up
to _________
Date
of
Issuance: October 3, 2007
FOR
VALUE
RECEIVED, the undersigned, Victory Divide Mining Company., a Nevada corporation
(together with its successors and assigns, the “Issuer”),
hereby certifies that __________
or its
registered assigns (the “Holder”)
is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ___________
shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Series B Convertible Preferred Stock
(the
“Series
B Stock”)
of the
Issuer, at an exercise price per share equal to the Warrant Price then in
effect, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. Capitalized terms used in this Warrant and not otherwise
defined herein shall have the respective meanings specified in Section 9
hereof.
ARTICLE
XLVIIITerm.
The term of this Warrant shall commence on October 3, 2007 and shall expire
at
6:00 p.m., Eastern Time, on April 2, 2009 (such period being the
“Term”
and such date, the “Termination
Date”).
124
ARTICLE
XLIXMethod
of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange.
Section
49.1 Time
of Exercise.
The
purchase rights represented by this Warrant may be exercised in whole or
in part
during the Term for such number of shares of Series B Stock set forth above,
which number is equal to one hundred percent (100%) of the number of shares
of
Series B Stock issued by the Issuer to the Holder on the Original Issue Date
pursuant to the Purchase Agreement.
Section
49.2 Method
of Exercise.
The
Holder hereof may exercise this Warrant, in whole or in part, by the surrender
of this Warrant (with the exercise form attached hereto duly executed) at
the
principal office of the Issuer, and by the payment to the Issuer of an amount
of
consideration therefore equal to the Warrant Price in effect on the date
of such
exercise multiplied by the number of shares of Warrant Stock with respect
to
which this Warrant is then being exercised, payable at such Holder’s election by
certified or official bank check or by wire transfer to an account designated
by
the Issuer.
Section
49.3 Issuance
of Stock Certificates.
In the
event of any exercise of this Warrant in accordance with and subject to the
terms and conditions hereof, certificates for the shares of Warrant Stock
so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
such
exercise (the “Delivery
Date”),
the
Holder hereof shall be deemed for all purposes to be the holder of the shares
Warrant Stock so purchased as of the date of such exercise. Upon the conversion
by the Holder of the Warrant Stock into shares of Common Stock of the Issuer
(the “Underlying
Common Stock”),
the
Holder may request (provided that a registration statement under the Securities
Act providing for the resale of the Underlying Common Stock is then in effect
or
that the shares of Underlying Common Stock are otherwise exempt from
registration), that such shares be issued and delivered to the Depository
Trust
Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”)
within
a reasonable time, not exceeding three (3) Trading Days after such exercise,
and
the Holder hereof shall be deemed for all purposes to be the holder of the
shares of Underlying Common Stock as of the date of such conversion.
Notwithstanding the foregoing to the contrary, the Issuer or its transfer
agent
shall only be obligated to issue and deliver the shares to the DTC on a holder’s
behalf via DWAC if such conversion is in connection with a sale or other
exemption from registration by which the shares of Underlying Common Stock
may
be issued without a restrictive legend and the Issuer and its transfer agent
are
participating in DTC through the DWAC system. The Holder shall deliver this
original Warrant, or an indemnification undertaking with respect to such
Warrant
in the case of its loss, theft or destruction, at such time that this Warrant
is
fully exercised. With respect to partial exercises of this Warrant, the Issuer
shall keep written records for the Holder of the number of shares of Warrant
Stock exercised as of each date of exercise.
Section
49.4 Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if upon conversion
of the
Warrant Stock, the Issuer fails to cause its transfer agent to transmit to
the
Holder a certificate or certificates representing the shares of Underlying
Common Stock pursuant to such conversionon or before the Delivery Date, and
if
after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the shares of Underlying Common Stock
which the Holder anticipated receiving upon such conversion (a “Buy-In”),
then
the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Underlying Common Stock that the
Issuer
was required to deliver to the Holder in connection with the conversion at
issue, times (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either reinstate
the Warrant and equivalent number of shares of Warrant Stock for which such
conversion was not honored or deliver to the Holder the number of shares
of
Underlying Common Stock that would have been issued had the Issuer timely
complied with its exercise and delivery obligations hereunder. For example,
if
the Holder purchases Common Stock having a total purchase price of $11,000
to
cover a Buy-In with respect to an attempted conversion of shares of Underlying
Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding sentence
the Issuer shall be required to pay the Holder $1,000. The Holder shall provide
the Issuer written notice indicating the amounts payable to the Holder in
respect of the Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Issuer. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer’s failure to timely deliver
certificates representing shares of Underlying Common Stock upon conversion
of
the Warrant Stock exercised in this Warrant as required pursuant to the terms
hereof.
125
Section
49.5 Transferability
of Warrant.
Subject
to Section 2(g) hereof, this Warrant may be transferred by a Holder, in whole
or
in part, without the consent of the Issuer. If transferred pursuant to this
paragraph, this Warrant may be transferred on the books of the Issuer by
the
Holder hereof in person or by duly authorized attorney, upon surrender of
this
Warrant at the principal office of the Issuer, properly endorsed (by the
Holder
executing an assignment in the form attached hereto) and upon payment of
any
necessary transfer tax or other governmental charge imposed upon such transfer.
This Warrant is exchangeable at the principal office of the Issuer for Warrants
to purchase the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange.
All
Warrants issued on transfers or exchanges shall be dated the Original Issue
Date
and shall be identical with this Warrant except as to the number of shares
of
Warrant Stock issuable pursuant thereto.
Section
49.6 Continuing
Rights of Holder.
The
Issuer will, at the time of or at any time after each exercise of this Warrant,
upon the request of the Holder hereof, acknowledge in writing the extent,
if
any, of its continuing obligation to afford to such Holder all rights to
which
such Holder shall continue to be entitled after such exercise in accordance
with
the terms of this Warrant, provided that if any such Holder shall fail to
make
any such request, the failure shall not affect the continuing obligation
of the
Issuer to afford such rights to such Holder.
Section
49.7 Compliance
with Securities Laws.
126
(a) The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and
the shares of Warrant Stock and Underlying Common Stock issuable hereunder
are
being acquired solely for the Holder’s own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell
or
otherwise dispose of this Warrant or any shares of Warrant Stock or Underlying
Common Stock to be issued upon exercise hereof except pursuant to an effective
registration statement, or an exemption from registration, under the Securities
Act and any applicable state securities laws.
(b) Except
as
provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof and, if
appropriate, the Underlying Common Stock issued upon conversion of the Warrant
Stock, shall be stamped or imprinted with a legend in substantially the
following form:
THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
(c) The
Issuer agrees to reissue this Warrant or certificates representing any of
the
Warrant Stock and Underlying Common Stock, without the legend set forth above
if
at such time, prior to making any transfer of any such securities, the Holder
shall give written notice to the Issuer describing the manner and terms of
such
transfer. Such proposed transfer will not be effected until: (a) either (i)
the
Issuer has received an opinion of counsel reasonably satisfactory to the
Issuer,
to the effect that the registration of such securities under the Securities
Act
is not required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has
been
filed by the Issuer with the Securities and Exchange Commission and has become
effective under the Securities Act, (iii) the Issuer has received other evidence
reasonably satisfactory to the Issuer that such registration and qualification
under the Securities Act and state securities laws are not required, or (iv)
the
Holder provides the Issuer with reasonable assurances that such security
can be
sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the
Issuer has received an opinion of counsel reasonably satisfactory to the
Issuer,
to the effect that registration or qualification under the securities or
“blue
sky” laws of any state is not required in connection with such proposed
disposition, or (ii) compliance with applicable state securities or “blue sky”
laws has been effected or a valid exemption exists with respect thereto.
The
Issuer will respond to any such notice from a holder within three (3) Trading
Days. In the case of any proposed transfer under this Section 2(h), the Issuer
will use reasonable efforts to comply with any such applicable state securities
or “blue sky” laws, but shall in no event be required, (x) to qualify to do
business in any state where it is not then qualified, (y) to take any action
that would subject it to tax or to the general service of process in any
state
where it is not then subject, or (z) to comply with state securities or “blue
sky” laws of any state for which registration by coordination is unavailable to
the Issuer. The restrictions on transfer contained in this Section 2(g) shall
be
in addition to, and not by way of limitation of, any other restrictions on
transfer contained in any other section of this Warrant. Whenever a certificate
representing the Warrant Stock is required to be issued to the Holder without
a
legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall cause its transfer agent to electronically transmit
the
Warrant Stock to the Holder by crediting the account of the Holder or Holder’s
Prime Broker with DTC through its DWAC system (to the extent not inconsistent
with any provisions of this Warrant or the Purchase Agreement).
127
Section
49.8 Accredited
Investor Status.
In no
event may the Holder exercise this Warrant in whole or in part unless the
Holder
is an “accredited investor” as defined in Regulation D under the Securities
Act.
ARTICLE
LStock
Fully Paid; Reservation and Listing of Shares; Covenants.
Section
50.1 Stock
Fully Paid.
The
Issuer represents, warrants, covenants and agrees that all shares of Warrant
Stock which may be issued upon the exercise of this Warrant or otherwise
hereunder, and all shares of Underlying Common Stock which may be issued
upon
the conversion of the Warrant Stock or otherwise hereunder will, when issued
in
accordance with the terms of this Warrant, be duly authorized, validly issued,
fully paid and non-assessable and free from all taxes, liens and charges
created
by or through the Issuer. The Issuer further covenants and agrees that during
the period within which this Warrant may be exercised, the Issuer will at
all
times have authorized and reserved for the purpose of the issuance upon exercise
of this Warrant a number of authorized but unissued shares of Preferred Stock
equal to at least one hundred percent (100%) of the number of shares of Series
B
Stock issuable upon exercise of this Warrant without regard to any limitations
on exercise, and a number of authorized but unissued shares of Common Stock
equal to at least one hundred percent (100%) of the number of shares of
Underlying Common stock issuable upon conversion of the Warrant
Stock.
Section
50.2 Reservation.
If any
shares of Series B Stock or Common Stock required to be reserved for issuance
upon exercise of this Warrant or as otherwise provided hereunder require
registration or qualification with any Governmental Authority under any federal
or state law before such shares may be so issued, the Issuer will in good
faith
use its best efforts as expeditiously as possible at its expense to cause
such
shares to be duly registered or qualified. If the Issuer shall list any shares
of Common Stock on any securities exchange or market it will, at its expense,
list thereon, and maintain and increase when necessary such listing, of,
all
shares of Underlying Common Stock from time to time issued upon conversion
of
the Warrant Stock or as otherwise provided hereunder (provided that such
Underlying Common Stock has been registered pursuant to a registration statement
under the Securities Act then in effect), and, to the extent permissible
under
the applicable securities exchange rules, all unissued shares of Underlying
Common Stock which are at any time issuable upon conversion of the Warrant
Stock
hereunder, so long as any shares of Common Stock shall be so listed. The
Issuer
will also so list on each securities exchange or market, and will maintain
such
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange
or
market by the Issuer.
128
Section
50.3 Covenants.
The
Issuer shall not by any action including, without limitation, amending the
Articles of Incorporation or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other action, avoid or seek to avoid the observance
or
performance of any of the terms of this Warrant, but will at all times in
good
faith assist in the carrying out of all such terms and in the taking of all
such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against dilution (to the extent specifically provided herein) or
impairment. Without limiting the generality of the foregoing, the Issuer
will
(i) not permit the par value, if any, of its Common Stock to exceed the then
effective Warrant Price, (ii) not amend or modify any provision of the Articles
of Incorporation or by-laws of the Issuer in any manner that would adversely
affect the rights of the Holder of the Warrants, (iii) take all such action
as
may be reasonably necessary in order that the Issuer may validly and legally
issue fully paid and nonassessable shares of Preferred Stock, upon exercise
of
this Warrant and Common Stock upon conversion of the Warrant Stock, free
and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein), and (iv) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be reasonably necessary to enable the Issuer
to
perform its obligations under this Warrant.
Section
50.4 Loss,
Theft, Destruction of Warrants.
Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss,
theft, destruction or mutilation of any Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security satisfactory
to the Issuer or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Issuer will make and deliver, in lieu of
such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and
representing the right to purchase the same number of shares of Common
Stock.
Section
50.5 Payment
of Taxes.
The
Issuer will pay any documentary stamp taxes attributable to the initial issuance
of the Warrant Stock issuable upon exercise of this Warrant; provided,
however,
that
the Issuer shall not be required to pay any tax or taxes which may be payable
in
respect of any transfer involved in the issuance or delivery of any certificates
representing Warrant Stock in a name other than that of the Holder in respect
to
which such shares are issued.
ARTICLE
LIAdjustment
of Warrant Price.
The price at which such shares of Warrant Stock may be purchased upon exercise
of this Warrant shall be subject to adjustment from time to time as set forth
in
this Section 4. The Issuer shall give the Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 in accordance
with
the notice provisions set forth in Section 5.
Section
51.1 Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale.
129
(a) In
case
the Issuer after the Original Issue Date shall do any of the following (each,
a
“Triggering
Event”):
(a)
consolidate or merge with or into any other Person and the Issuer shall not
be
the continuing or surviving corporation of such consolidation or merger,
or (b)
permit any other Person to consolidate with or merge into the Issuer and
the
Issuer shall be the continuing or surviving Person but, in connection with
such
consolidation or merger, any Capital Stock of the Issuer shall be changed
into
or exchanged for Securities of any other Person or cash or any other property,
or (c) transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or reclassification
of its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made to the Warrant Price and the number of shares of
Warrant
Stock that may be purchased upon exercise of this Warrant so that, upon the
basis and the terms and in the manner provided in this Warrant, the Holder
of
this Warrant shall be entitled upon the exercise hereof at any time after
the
consummation of such Triggering Event, to the extent this Warrant is not
exercised prior to such Triggering Event, to receive at the Warrant Price
in
effect at the time immediately prior to the consummation of such Triggering
Event, in lieu of the Series B issuable upon such exercise of this Warrant
prior
to such Triggering Event, the Securities, cash and property to which such
Holder
would have been entitled upon the consummation of such Triggering Event if
such
Holder had exercised the rights represented by this Warrant immediately prior
thereto (including the right of a shareholder to elect the type of consideration
it will receive upon a Triggering Event), subject to adjustments (subsequent
to
such corporate action) as nearly equivalent as possible to the adjustments
provided for elsewhere in this Section 4; provided,
however,
the
Holder at its option may elect to receive an amount in unregistered shares
of
the common stock of the surviving entity equal to the value of this Warrant
calculated in accordance with the Black-Scholes formula; provided,
further,
such
shares of Common Stock shall be valued at a twenty percent (20%) discount
to the
VWAP of the Common Stock for the twenty (20) Trading Days immediately prior
to
the Triggering Event. Immediately upon the occurrence of a Triggering Event,
the
Issuer shall notify the Holder in writing of such Triggering Event and provide
the calculations in determining the number of shares of Warrant Stock issuable
upon exercise of the new warrant and the adjusted Warrant Price. Upon the
Holder’s request, the continuing or surviving corporation as a result of such
Triggering Event shall issue to the Holder a new warrant of like tenor
evidencing the right to purchase the adjusted number of shares of Warrant
Stock
and the adjusted Warrant Price pursuant to the terms and provisions of this
Section 4(a)(i). Notwithstanding the foregoing to the contrary, this Section
4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
Event is a company that has a class of equity securities registered pursuant
to
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
its common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board. In the event that the
surviving entity pursuant to any such Triggering Event is not a public company
that is registered pursuant to the Exchange Act or its common stock is not
listed or quoted on a national securities exchange, national automated quotation
system or the OTC Bulletin Board, then the Holder shall have the right to
demand
that the Issuer pay to the Holder an amount in cash equal to the value of
this
Warrant calculated in accordance with the Black-Scholes
formula.
130
(b) In
the
event that the Holder has elected not to exercise this Warrant prior to the
consummation of a Triggering Event and has also elected not to receive an
amount
in cash equal to the value of this Warrant calculated in accordance with
the
Black-Scholes formula pursuant to the provisions of Section 4(a)(i) above,
so
long as the surviving entity pursuant to any Triggering Event is a company
that
has a class of equity securities registered pursuant to the Exchange Act
and its
common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board, the surviving entity
and/or each Person (other than the Issuer) which may be required to deliver
any
Securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not
release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a),
such Holder shall be entitled to receive, and the surviving entity and/or
each
such Person shall have similarly delivered to such Holder an opinion of counsel
for the surviving entity and/or each such Person, which counsel shall be
reasonably satisfactory to such Holder, or in the alternative, a written
acknowledgement executed by the President or Chief Financial Officer of the
Issuer, stating that this Warrant shall thereafter continue in full force
and
effect and the terms hereof (including, without limitation, all of the
provisions of this subsection (a)) shall be applicable to the Securities,
cash
or property which the surviving entity and/or each such Person may be required
to deliver upon any exercise of this Warrant or the exercise of any rights
pursuant hereto.
Section
51.2 Stock
Dividends, Subdivisions and Combinations.
If at
any time the Issuer shall:
(a) make
or
issue or set a record date for the holders of any Preferred Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Preferred Stock ,
(b) subdivide
its outstanding shares of Series B Stock into a larger number of shares of
Preferred Stock , or
(c) combine
its outstanding shares of Series B Stock into a smaller number of shares
of
Series B Stock
then
(1)
the number of shares of Series B Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Series B Stock which a record holder of the same
number
of shares of Preferred Stock for which this Warrant is exercisable immediately
prior to the occurrence of such event would own or be entitled to receive
after
the happening of such event, and (2) the Warrant Price then in effect shall
be
adjusted to equal (A) the Warrant Price then in effect multiplied by the
number
of shares of Series B Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Series B Stock
for which this Warrant is exercisable immediately after such
adjustment.
131
Section
51.3 Certain
Other Distributions.
If at
any time the Issuer shall make or issue or set a record date for the holders
of
the Preferred Stock for the purpose of entitling them to receive any dividend
or
other distribution of:
(a) cash,
(b) any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Preferred
Stock Equivalents or Additional Shares of Preferred Stock), or
(c) any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Preferred Stock Equivalents
or Additional Shares of Preferred Stock),
then
(1)
the number of shares of Series B Stock for which this Warrant is exercisable
shall be adjusted to equal the product of the number of shares of Series
B Stock
for which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Per Share
Market Value of the Underlying Common Stock at the date of taking such record
and (B) the denominator of which shall be such Per Share Market Value of
the
Underlying Common Stock minus the amount allocable to one share of Underlying
Common Stock of any such cash so distributable and of the fair value (as
determined by an Independent Appraiser mutually agreed upon by the Issuer
and
the Holder) of any and all such evidences of indebtedness, shares of stock,
other securities or property or warrants or other subscription or purchase
rights so distributable , and (2) the Warrant Price then in effect shall
be
adjusted to equal (A) the Warrant Price then in effect multiplied by the
number
of shares of Preferred Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Series B Stock
for which this Warrant is exercisable immediately after such adjustment.
A
reclassification of the Preferred Stock (other than a change in par value,
or
from par value to no par value or from no par value to par value) into shares
of
Preferred Stock and shares of any other class of stock shall be deemed a
distribution by the Issuer to the holders of its Preferred Stock of such
shares
of such other class of stock within the meaning of this Section 4(c) and,
if the
outstanding shares of Preferred Stock shall be changed into a larger or smaller
number of shares of Preferred Stock as a part of such reclassification, such
change shall be deemed a subdivision or combination, as the case may be,
of the
outstanding shares of Preferred Stock within the meaning of Section
4(b).
Section
51.4 Issuance
of Additional Shares of Preferred Stock.
In the
event the Issuer shall issue any Additional Shares of Preferred Stock (otherwise
than as provided in the foregoing subsections (a) through (c) of this Section
4), at a price per share less than the Warrant Price then in effect or without
consideration, then the Warrant Price upon each such issuance shall be adjusted
to the price equal to the consideration per share paid for such Additional
Shares of Preferred Stock.
132
Section
51.5 Issuance
of Preferred Stock Equivalents.
In the
event the Issuer shall take a record of the holders of its Preferred Stock
for
the purpose of entitling them to receive a distribution of, or shall in any
manner (whether directly or by assumption in a merger in which the Issuer
is the
surviving corporation) issue or sell, any Preferred Stock Equivalents, whether
or not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Preferred Stock is issuable upon such
conversion or exchange shall be less than the Warrant Price in effect
immediately prior to the time of such issue or sale, or if, after any such
issuance of Preferred Stock Equivalents, the price per share for which
Additional Shares of Preferred Stock may be issuable thereafter is amended
or
adjusted, and such price as so amended shall be less than the Warrant Price
in
effect at the time of such amendment or adjustment, then the Warrant Price
then
in effect shall be adjusted as provided in Section 4(d). No further adjustments
of the number of shares of Preferred Stock for which this Warrant is exercisable
and the Warrant Price then in effect shall be made upon the actual issue
of such
Preferred Stock upon conversion or exchange of such Preferred Stock
Equivalents.
Section
51.6 Other
Provisions Applicable to Adjustments under this Section.
The
following provisions shall be applicable to the making of adjustments of
the
number of shares of Series B Stock for which this Warrant is exercisable
and the
Warrant Price then in effect provided for in this Section 4:
(a) Computation
of Consideration.
To the
extent that any Additional Shares of Preferred Stock or any Preferred Stock
Equivalents (or any warrants or other rights therefore) shall be issued for
cash
consideration, the consideration received by the Issuer therefore shall be
the
amount of the cash received by the Issuer therefore, or, if such Additional
Shares of Preferred Stock or Preferred Stock Equivalents are offered by the
Issuer for subscription, the subscription price, or, if such Additional Shares
of Preferred Stock or Preferred Stock Equivalents are sold to underwriters
or
dealers for public offering without a subscription offering, the initial
public
offering price (in any such case subtracting any amounts paid or receivable
for
accrued interest or accrued dividends and without taking into account any
compensation, discounts or expenses paid or incurred by the Issuer for and
in
the underwriting of, or otherwise in connection with, the issuance thereof).
In
connection with any merger or consolidation in which the Issuer is the surviving
corporation (other than any consolidation or merger in which the previously
outstanding shares of Preferred Stock of the Issuer shall be changed to or
exchanged for the stock or other securities of another corporation), the
amount
of consideration therefore shall be, deemed to be the fair value, as determined
reasonably and in good faith by the Board, and acceptable to the Holder,
of such
portion of the assets and business of the nonsurviving corporation as the
Board
may determine to be attributable to such shares of Preferred Stock or Preferred
Stock Equivalents, as the case may be. The consideration for any Additional
Shares of Preferred Stock issuable pursuant to any warrants or other rights
to
subscribe for or purchase the same shall be the consideration received by
the
Issuer for issuing such warrants or other rights plus the additional
consideration payable to the Issuer upon exercise of such warrants or other
rights. The consideration for any Additional Shares of Preferred Stock issuable
pursuant to the terms of any Preferred Stock Equivalents shall be the
consideration received by the Issuer for issuing warrants or other rights
to
subscribe for or purchase such Preferred Stock Equivalents, plus the
consideration paid or payable to the Issuer in respect of the subscription
for
or purchase of such Preferred Stock Equivalents, plus the additional
consideration, if any, payable to the Issuer upon the exercise of the right
of
conversion or exchange in such Preferred Stock Equivalents. In the event
of any
consolidation or merger of the Issuer in which the Issuer is not the surviving
corporation or in which the previously outstanding shares of Preferred Stock
of
the Issuer shall be changed into or exchanged for the stock or other securities
of another corporation, or in the event of any sale of all or substantially
all
of the assets of the Issuer for stock or other securities of any corporation,
the Issuer shall be deemed to have issued a number of shares of its
PreferredStock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or
other
property of the other corporation. In the event any consideration received
by
the Issuer for any securities consists of property other than cash, the fair
market value thereof at the time of issuance or as otherwise applicable shall
be
as determined in good faith by the Board. In the event Preferred Stock is
issued
with other shares or securities or other assets of the Issuer for consideration
which covers both, the consideration computed as provided in this Section
4(g)(i) shall be allocated among such securities and assets as determined
in
good faith by the Board.
133
(b) When
Adjustments to Be Made.
The
adjustments required by this Section 4 shall be made whenever and as often
as
any specified event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Series B Stock for which this Warrant
is
exercisable that would otherwise be required may be postponed (except in
the
case of a subdivision or combination of shares of the Preferred Stock, as
provided for in Section 4(b)) up to, but not beyond the date of exercise
if such
adjustment either by itself or with other adjustments not previously made
adds
or subtracts less than one percent (1%) of the shares of Series B Stock for
which this Warrant is exercisable immediately prior to the making of such
adjustment. Any adjustment representing a change of less than such minimum
amount (except as aforesaid) which is postponed shall be carried forward
and
made as soon as such adjustment, together with other adjustments required
by
this Section 4 and not previously made, would result in a minimum adjustment
or
on the date of exercise. For the purpose of any adjustment, any specified
event
shall be deemed to have occurred at the close of business on the date of
its
occurrence.
(c) Fractional
Interests.
In
computing adjustments under this Section 4, fractional interests in Series
BStock shall be taken into account to the nearest one one-hundredth (1/100th)
of
a share.
(d) When
Adjustment Not Required.
If the
Issuer shall take a record of the holders of its Preferred Stock for the
purpose
of entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no adjustment
shall be required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and
annulled.
134
(e) Form
of Warrant after Adjustments.
The
form of this Warrant need not be changed because of any adjustments in the
Warrant Price or the number and kind of Securities purchasable upon the exercise
of this Warrant.
(f) Escrow
of Warrant Stock.
If
after any property becomes distributable pursuant to this Section 4 by reason
of
the taking of any record of the holders of Preferred Stock, but prior to
the
occurrence of the event for which such record is taken, and the Holder exercises
this Warrant, any shares of Series B Stock issuable upon exercise by reason
of
such adjustment shall be deemed the last shares of Preferred Stock for which
this Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the
Holder
by the Issuer to be issued to the Holder upon and to the extent that the
event
actually takes place, upon payment of the current Warrant Price. Notwithstanding
any other provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares shall
be
cancelled by the Issuer and escrowed property returned.
ARTICLE
LIINotice
of Adjustments.
Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
to
Section 4 hereof (for purposes of this Section 5, each an “adjustment”),
the Issuer shall cause its Chief Financial Officer to prepare and execute
a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made
any
determination hereunder), and the Warrant Price and Warrant Share Number
after
giving effect to such adjustment, and shall cause copies of such certificate
to
be delivered to the Holder of this Warrant promptly after each adjustment.
Any
dispute between the Issuer and the Holder of this Warrant with respect to
the
matters set forth in such certificate may at the option of the Holder of
this
Warrant be submitted to an Independent Appraiser, provided that the Issuer
shall
have ten (10) days after receipt of notice from such Holder of its selection
of
such firm to object thereto, in which case such Holder shall select another
such
firm and the Issuer shall have no such right of objection. The Independent
Appraiser selected by the Holder of this Warrant as provided in the preceding
sentence shall be instructed to deliver a written opinion as to such matters
to
the Issuer and such Holder within thirty (30) days after submission to it
of
such dispute. Such opinion shall be final and binding on the parties hereto.
The
reasonable expenses of the Independent Appraiser in making such determination
shall be paid by the Issuer, in the event the Holder's calculation was correct,
or by the Holder, in the event the Issuer’s calculation was correct, or equally
by the Issuer and the Holder in the event that neither the Issuer's or the
Holder's calculation was correct.
ARTICLE
LIIIFractional
Shares.
No fractional shares of Warrant Stock will be issued in connection with any
exercise hereof, but in lieu of such fractional shares, the Issuer shall
round
the number of shares to be issued upon exercise up to the nearest whole number
of shares.
ARTICLE
LIVOwnership
Cap and Exercise Restriction.
Notwithstanding anything to the contrary set forth in this Warrant, at no
time
may a Holder of this Warrant exercise this Warrant if the number of shares
of
Series B Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Series B Stock owned by such Holder at
such
time, the number of shares of Series B Stock which would result in such Holder
beneficially owning, upon conversion of the Series B Stock (as determined
in
accordance with Section 13(d) of the Exchange Act and the rules thereunder)
in
excess of 4.99% of the then issued and outstanding shares of Common Stock;
provided,
however,
that upon a holder of this Warrant providing the Issuer with sixty-one (61)
days
notice (pursuant to Section 13 hereof) (the “Waiver
Notice”)
that such Holder would like to waive this Section 7 with regard to any or
all
shares of Series B Stock issuable upon exercise of this Warrant, this Section
7
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice; provided,
further,
that this provision shall be of no further force or effect during the sixty-one
(61) days immediately preceding the expiration of the term of this
Warrant.
135
ARTICLE
LVRegistration
Rights.
The Holder of this Warrant is entitled to the benefit of certain registration
rights with respect to the shares of Underlying Common Stock issuable upon
the
conversion of the Warrant Stock issuable upon exercise of this Warrant pursuant
to that certain Registration Rights Agreement, of even date herewith, by
and
among the Company and Persons listed on Schedule I thereto (the
“Registration
Rights Agreement”)
and the registration rights with respect to the shares of Warrant Stock issuable
upon the exercise of this Warrant by any subsequent Holder may only be assigned
in accordance with the terms and provisions of the Registrations Rights
Agreement.
ARTICLE
LVIDefinitions.
For the purposes of this Warrant, the following terms have the following
meanings:
“Additional
Shares of Preferred Stock”
means
all shares of Preferred Stock issued by the Issuer after the Original Issue
Date, and all shares of Other Preferred, if any, issued by the Issuer after
the
Original Issue Date, except: (i) securities issued pursuant to a bona fide
firm
underwritten public offering of the Company’s securities, provided such
underwritten public offering has been approved in advance by the holders
of more
than fifty percent (50%) of the then outstanding shares of Series B issued
pursuant to the Purchase Agreement (the “Majority
Holders”),
(ii)
securities issued (other than for cash) in connection with a strategic merger,
acquisition, or consolidation, provided that the issuance of such securities
in
connection with such strategic merger, acquisition, or consolidation has
been
approved in advance by the Majority Holders, (iii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date of the Purchase Agreement (so long as
the
conversion or exercise price in such securities are not amended to lower
such
price and/or adversely affect the Holders) or issued pursuant to the Purchase
Agreement, (iv) the Warrant Stock, (v) securities issued in connection with
bona
fide strategic license agreements or other partnering arrangements so long
as
such issuances are not for the purpose of raising capital and provided that
the
issuance of such securities in connection with such bona fide strategic license
agreements or other partnering arrangements has been approved in advance
by the
Majority Holders, and (vi) any warrants, shares of Preferred Stock or other
securities issued to a placement agent and its designees for the transactions
contemplated by the Purchase Agreement or in any other sales of the Issuer’s
securities and any securities issued in connection with any financial advisory
agreements of the Issuer and the shares of Preferred Stock or Common Stock
issued upon exercise of any such warrants or conversions of any such other
securities.
136
“Articles
of Incorporation”
means
the Articles of Incorporation of the Issuer as in effect on the Original
Issue
Date, and as hereafter from time to time amended, modified, supplemented
or
restated in accordance with the terms hereof and thereof and pursuant to
applicable law.
“Board”
shall
mean the Board of Directors of the Issuer.
“Capital
Stock”
means
and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including,
without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is
a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
“Preferred
Stock”
means
any class or series of Preferred Stock, $0.001 par value per share, of the
Issuer as designated by the Board, and any other Capital Stock into which
such
stock may hereafter be changed.
“Preferred
Stock Equivalent”
means
any Convertible Security or warrant, option or other right to subscribe for
or
purchase any Additional Shares of Preferred Stock or any Convertible
Security.
“Convertible
Securities”
means
evidences of Indebtedness, shares of Capital Stock or other Securities which
are
or may be at any time convertible into or exchangeable for Additional Shares
of
Preferred Stock. The term “Convertible Security” means one of the Convertible
Securities.
“Governmental
Authority”
means
any governmental, regulatory or self-regulatory entity, department, body,
official, authority, commission, board, agency or instrumentality, whether
federal, state or local, and whether domestic or foreign.
“Holders”
mean
the Persons who shall from time to time own any Warrant. The term “Holder” means
one of the Holders.
“Independent
Appraiser”
means
a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may
be
the firm that regularly examines the financial statements of the Issuer)
that is
regularly engaged in the business of appraising the Capital Stock or assets
of
corporations or other entities as going concerns, and which is not affiliated
with either the Issuer or the Holder of any Warrant.
“Issuer”
means
Victory Divide Mining Company, a Nevada corporation, and its
successors.
“Original
Issue Date”
means
October 3, 2007.
137
“OTC
Bulletin Board”
means
the over-the-counter electronic bulletin board.
“Other
Preferred”
means
any other Capital Stock of the Issuer of any class which shall be authorized
at
any time after the date of this Warrant (other than Preferred Stock) and
which
shall have the right to participate in the distribution of earnings and assets
of the Issuer without limitation as to amount.
“Person”
means
an individual, corporation, limited liability company, partnership, joint
stock
company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.
“Per
Share Market Value”
means
on any particular date (a) the last closing price per share of the Common
Stock
on such date on the OTC Bulletin Board or another registered national stock
exchange on which the Common Stock is then listed, or if there is no closing
price on such date, then the closing bid price on such date, or if there
is no
closing bid price on such date, then the closing price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the OTC Bulletin Board or any registered national
stock exchange, the last closing price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business
on
such date, or if there is no closing price on such date, then the closing
bid
price on such date, or (c) if the Common Stock is not then reported by the
OTC
Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then
the average of the “Pink Sheet” quotes for the five (5) Trading Days preceding
such date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by
an
Independent Appraiser selected in good faith by the Majority Holders;
provided,
however,
that
the Issuer, after receipt of the determination by such Independent Appraiser,
shall have the right to select an additional Independent Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Independent Appraiser; and provided,
further,
that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during
such
period. The determination of fair market value by an Independent Appraiser
shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding
on
all parties. In determining the fair market value of any shares of Common
Stock,
no consideration shall be given to any restrictions on transfer of the Common
Stock imposed by agreement or by federal or state securities laws, or to
the
existence or absence of, or any limitations on, voting rights.
“Purchase
Agreement”
means
the Series B Convertible Preferred Stock Purchase Agreement dated as of October
3, 2007, among the Issuer and the Purchasers.
“Purchasers”
means
the purchasers of the Series B Convertible Preferred Stock and the Warrants
issued by the Issuer pursuant to the Purchase Agreement.
138
“Securities”
means
any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities
or a
Security, and any option, warrant or other right to purchase or acquire any
Security. “Security” means one of the Securities.
“Securities
Act”
means
the Securities Act of 1933, as amended, or any similar federal statute then
in
effect.
“Series
B Stock”
means
the Series B convertible preferred stock, par value $0.001 per share of the
Issuer.
“Subsidiary”
means
any corporation at least 50% of whose outstanding Voting Stock shall at the
time
be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.
“Term”
has
the
meaning specified in Section 1 hereof.
“Trading
Day”
means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board,
or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which
the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided,
however,
that in
the event that the Common Stock is not listed or quoted as set forth in (a)
or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any
day which shall be a legal holiday or a day on which banking institutions
in the
State of New York are authorized or required by law or other government action
to close.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or
quoted
for trading on the date in question: the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market, the New York Stock Exchange
or
the OTC Bulletin Board.
“Underlying
Common Stock”,
means
shares of Common Stock issuable upon conversion of the Series B Stock issuable
upon exercise of this Warrant.
“Voting
Stock”
means,
as applied to the Capital Stock of any corporation, Capital Stock of any
class
or classes (however designated) having ordinary voting power for the election
of
a majority of the members of the Board of Directors (or other governing body)
of
such corporation, other than Capital Stock having such power only by reason
of
the happening of a contingency.
“VWAP”
means,
for any date, the price determined by the first of the following clauses
that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date
(or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the
OTC
Bulletin Board is not a Trading Market, the volume weighted average price
of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the "Pink Sheets"
published by Pink Sheets, LLC (or a similar organization or agency succeeding
to
its functions of reporting prices), the most recent bid price per share of
the
Common Stock so reported; or (d) in all other cases, the fair market value
of a
share of Common Stock as determined by an independent appraiser selected
in good
faith by the Holders of a majority in interest of the Warrants then outstanding
and reasonably acceptable to the Company, the fees and expenses of which
shall
be paid by the Company.
139
“Warrants”
means
the Warrants issued and sold pursuant to the Purchase Agreement, including,
without limitation, this Warrant, and any other warrants of like tenor issued
in
substitution or exchange for any thereof pursuant to the provisions of Section
2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
“Warrant
Price”
initially means $ 2.37, as such price may be adjusted from time to time as
shall
result from the adjustments specified in this Warrant, including Section
4
hereto.
“Warrant
Share Number”
means
at any time the aggregate number of shares of Warrant Stock which may at
such
time be purchased upon exercise of this Warrant, after giving effect to all
prior adjustments and increases to such number made or required to be made
under
the terms hereof.
“Warrant
Stock”
means
Series B Stock issuable upon exercise of any Warrant or Warrants or otherwise
issuable pursuant to any Warrant or Warrants.
ARTICLE
LVIIOther
Notices.
In case at any time:
Section
57.1 the
Issuer shall make any distributions to the holders of Preferred Stock;
or
Section
57.2 the
Issuer shall authorize the granting to all holders of its Preferred Stock
of
rights to subscribe for or purchase any shares of Capital Stock of any class
or
other rights; or
Section
57.3 there
shall be any reclassification of the Capital Stock of the Issuer;
or
Section
57.4 there
shall be any capital reorganization by the Issuer; or
Section
57.5 there
shall be any (i) consolidation or merger involving the Issuer or (ii) sale,
transfer or other disposition of all or substantially all of the Issuer’s
property, assets or business (except a merger or other reorganization in
which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or
Section
57.6 there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of
the Issuer or any partial liquidation of the Issuer or distribution to holders
of Preferred Stock Stock;
140
then,
in
each of such cases, the Issuer shall give written notice to the Holder of
the
date on which (i) the books of the Issuer shall close or a record shall be
taken
for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Preferred
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Preferred
Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days
prior
to the record date or the date on which the Issuer’s transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of
all
financial and other information distributed or required to be distributed
to the
holders of the Preferred Stock.
ARTICLE
LVIIIAmendment
and Waiver.
Any term, covenant, agreement or condition in this Warrant may be amended,
or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by a written instrument or written
instruments executed by the Issuer and the Holder; provided,
however,
that no such amendment or waiver shall reduce the Warrant Share Number, increase
the Warrant Price, shorten the period during which this Warrant may be exercised
or modify any provision of this Section 11 without the consent of the Holder
of
this Warrant. No consideration shall be offered or paid to any person to
amend
or consent to a waiver or modification of any provision of this Warrant unless
the same consideration is also offered to all holders of the
Warrants.
ARTICLE
LIXGoverning
Law; Jurisdiction.
This Warrant shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Warrant shall not be interpreted or construed
with
any presumption against the party causing this Warrant to be drafted. The
Issuer
and the Holder agree that venue for any dispute arising under this Warrant
will
lie exclusively in the state or federal courts located in New York County,
New
York, and the parties irrevocably waive any right to raise forum non conveniens
or any other argument that New York is not the proper venue. The Issuer and
the
Holder irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Issuer and the Holder consent to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address in effect for notices to it under this Warrant
and
agree that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 12 shall affect or limit any
right
to serve process in any other manner permitted by law. The Issuer and the
Holder
hereby agree that the prevailing party in any suit, action or proceeding
arising
out of or relating to this Warrant or the Purchase Agreement, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.
The
parties hereby waive all rights to a trial by jury.
ARTICLE
LXNotices.
All notices, demands, consents, requests, instructions and other communications
to be given or delivered or permitted under or by reason of the provisions
of
this Agreement or in connection with the transactions contemplated hereby
shall
be in writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of
such
delivery (as evidenced by the receipt of the personal delivery service),
(ii) if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing),
or (iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance
with
this Section 13), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit
of the
sender). All such notices, demands, consents, requests, instructions and
other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
141
If
to the Issuer:
|
Victory
Divide Mining Company
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group
Xx.
00 Xxxxxxx Xxxxxx
Jixian
Town Heilongjiang
People’x
Xxxxxxxx xx Xxxxx 000000
Tel:
00-000-000-0000
Fax:
00-000-000-0000
|
with
copies (which copies
shall
not constitute notice)
to:
|
Gusov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.: (000) 000-0000, ext. 127
Fax
No.: (000) 000-0000
|
If
to any Holder:
|
To
the address set forth in Schedule I
|
with
copies (which copies
shall
not constitute notice)
to:
|
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
Facsimile:
212-407-4000
|
Any
party
hereto may from time to time change its address for notices by giving at
least
ten (10) days written notice of such changed address to the other party
hereto.
142
ARTICLE
LXIWarrant
Agent.
The Issuer may, by written notice to the Holder of this Warrant, appoint
an
agent having an office in New York, New York for the purpose of issuing shares
of Warrant Stock on the exercise of this Warrant pursuant to subsection (b)
of
Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section
2 hereof or replacing this Warrant pursuant to subsection (d) of Section
3
hereof, or any of the foregoing, and thereafter any such issuance, exchange
or
replacement, as the case may be, shall be made at such office by such
agent.
ARTICLE
LXIIRemedies.
The Issuer stipulates that the remedies at law of the Holder of this Warrant
in
the event of any default or threatened default by the Issuer in the performance
of or compliance with any of the terms of this Warrant are not and will not
be
adequate and that, to the fullest extent permitted by law, such terms may
be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
ARTICLE
LXIIISuccessors
and Assigns.
This Warrant and the rights evidenced hereby shall inure to the benefit of
and
be binding upon the successors and assigns of the Issuer, the Holder hereof
and
(to the extent provided herein) the Holders of Warrant Stock issued pursuant
hereto, and shall be enforceable by any such Holder or Holder of Warrant
Stock.
ARTICLE
LXIVModification
and Severability.
If, in any action before any court or agency legally empowered to enforce
any
provision contained herein, any provision hereof is found to be unenforceable,
then such provision shall be deemed modified to the extent necessary to make
it
enforceable by such court or agency. If any such provision is not enforceable
as
set forth in the preceding sentence, the unenforceability of such provision
shall not affect the other provisions of this Warrant, but this Warrant shall
be
construed as if such unenforceable provision had never been contained
herein.
ARTICLE
LXVHeadings.
The headings of the Sections of this Warrant are for convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
143
IN
WITNESS WHEREOF, the Issuer has executed this Series J Warrant as of the
day and
year first above written.
VICTORY
DIVIDE MINING COMPANY
By:
__/s/
Shulin Liu___
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
144
Schedule
I
Purchasers
Investor
|
Investment
|
Common
Stock
|
Series
A Shares Purchased
|
Series
A Warrants
|
Series
B Warrants
|
Series
J Warrants
|
Series
C
Warrants
|
Series
D
Warrants
|
|||||||||||||||||
Vision
Opportunity Master Fund Ltd.
|
$
|
8,000,000
|
525,000
|
3,720,930
|
3,720,930
|
1,860,465
|
3,382,664
|
3,382,664
|
1,691,332
|
||||||||||||||||
Sansar
Capital Special Opportunity Master Fund, LP (Cayman
Master)
|
$
|
5,950,000
|
--
|
2,767,442
|
2,767,442
|
1,383,721
|
2,515,856
|
2,515,856
|
1,257,928
|
||||||||||||||||
Vicis
Capital Master Fund
|
$
|
4,500,000
|
--
|
2,093,023
|
2,093,023
|
1,046,512
|
1,902,748
|
1,902,748
|
951,374
|
||||||||||||||||
Precept
Capital Master Fund, GP
|
$
|
500,000
|
--
|
232,558
|
232,558
|
116,279
|
--
|
--
|
--
|
||||||||||||||||
Penn
Footwear
|
$
|
250,000
|
--
|
116,279
|
116,279
|
58,140
|
--
|
--
|
--
|
||||||||||||||||
Crescent
International Limited
|
$
|
300,000
|
--
|
139,353
|
139,353
|
69,767
|
--
|
--
|
--
|
||||||||||||||||
Benefit
Grand Investments
|
$
|
500,000
|
--
|
232,558
|
232,558
|
116,279
|
--
|
--
|
--
|
||||||||||||||||
Golden
Bridge Asset Management
|
$
|
1,000,000
|
--
|
465,116
|
465,116
|
232,558
|
--
|
--
|
--
|
||||||||||||||||
Xxxxxx
X Xxxxxxxx
|
$
|
250,000
|
--
|
116,279
|
116,279
|
58,140
|
--
|
--
|
--
|
||||||||||||||||
Xxxxxxx
Road Partners, LP
|
$
|
250,000
|
--
|
116,279
|
116,279
|
58,140
|
--
|
--
|
--
|
145
EXERCISE
FORM
SERIES
J
WARRANT
[_________________________________________]
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of
________________________________ covered by the within Warrant.
Dated:
|
|
|
Signature
|
|
Address
|
|
|||
|
||||
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by
the
Holder on the date of Exercise: _________________________
The
undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
Dated:
|
|
|
Signature
|
|
Address
|
|
|||
|
||||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
Dated:
|
|
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Signature
|
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Address
|
|
|||
|
||||
146
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefore in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
147
EXHIBIT
C-4 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
____________________________________________________
FORM
OF SERIES C WARRANT
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
SERIES
C
WARRANT TO PURCHASE
SHARES
OF
COMMON STOCK
OF
VICTORY
DIVIDE MINING COMPANY
Expires
on October 2, 2012
No.:
W-C-07- Number
of
Shares: Up to __________
Date
of
Issuance: October 3, 2007
FOR
VALUE
RECEIVED, the undersigned, Victory Divide Mining Company, a Nevada corporation
(together with its successors and assigns, the “Issuer”),
hereby certifies that _____________
or
its
registered assigns (the “Holder”)
is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to __________
shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however,
to
the provisions and upon the terms and conditions hereinafter set forth.
ARTICLE
LXVITerm.
The term of this Warrant shall commence on October 3, 2007 and shall expire
at
6:00 p.m., Eastern Time, on October 2, 2012 (such period being the
“Term”
and such date, the “Termination
Date”).
ARTICLE
LXVIIMethod
of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
148
Section
67.1 Time
of Exercise.
The
purchase rights represented by this Warrant may be exercised in whole or
in part
during the Term for such number of shares of Common Stock into which the
Series B Convertible Preferred Stock that have been exercised by the Holder
pursuant to the Series J Warrant issued by the Issuer to the Holder pursuant
to
the Purchase Agreement may be converted.
Section
67.2 Method
of Exercise.
The
Holder hereof may exercise this Warrant, in whole or in part, by the surrender
of this Warrant (with the exercise form attached hereto duly executed) at
the
principal office of the Issuer, and by the payment to the Issuer of an amount
of
consideration therefor equal to the Warrant Price in effect on the date of
such
exercise multiplied by the number of shares of Warrant Stock with respect
to
which this Warrant is then being exercised, payable at such Holder’s election
(i) by certified or official bank check or by wire transfer to an account
designated by the Issuer, (ii) by “cashless exercise” in accordance with Section
2(c), but only when a registration statement under the Securities Act providing
for the resale of the Warrant Stock is not then in effect, or (iii) by a
combination of the foregoing methods of payment selected by the Holder of
this
Warrant.
Section
67.3 Cashless
Exercise.
Notwithstanding any provision herein to the contrary, and (i) the volume
weighted average price of one share of Common Stock on the OTC Bulletin Board
or
such other securities exchange on which the Common Stock is then traded or
included for quotation, for any ten (10) consecutive Trading Days is greater
than the Warrant Price (at or prior to the date of calculation as set forth
below) and (ii) commencing eighteen (18) months following the Original Issue
Date if a registration statement under the Securities Act providing for the
resale of the Warrant Stock (A) has not been declared effective by the
Securities and Exchange Commission by the date such registration statement
is
required to be effective pursuant to the Registration Rights Agreement (as
defined in Section 8), or (B) is not effective at the time of exercise of
this
Warrant, unless the registration statement is not effective as a result of
the
Issuer exercising its rights under Section 3(n) of the Registration Rights
Agreement, in lieu of exercising this Warrant by payment of cash, the Holder
may
exercise this Warrant by a cashless exercise and shall receive the number
of
shares of Common Stock equal to an amount (as determined below) by surrender
of
this Warrant at the principal office of the Issuer together with the properly
endorsed Notice of Exercise in which event the Issuer shall issue to the
Holder
a number of shares of Common Stock computed using the following
formula:
X
=
Y - (A)(Y)
|
||
B
|
||
Where
|
X
=
|
the
number of shares of Common Stock to be issued to the
Holder.
|
Y
=
|
the
number of shares of Common Stock purchasable upon exercise of all
of the
Warrant or, if only a portion of the Warrant is being exercised,
the
portion of the Warrant being exercised.
|
|
A
=
|
the
Warrant Price.
|
|
B
=
|
the
Per Share Market Value of one share of Common
Stock.
|
149
Section
67.4 Issuance
of Stock Certificates.
In the
event of any exercise of this Warrant in accordance with and subject to the
terms and conditions hereof, certificates for the shares of Warrant Stock
so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
such
exercise (the “Delivery
Date”)
or, at
the request of the Holder (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Stock is then in effect
or that the shares of Warrant Stock are otherwise exempt from registration),
issued and delivered to the Depository Trust Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”)
within
a reasonable time, not exceeding three (3) Trading Days after such exercise,
and
the Holder hereof shall be deemed for all purposes to be the holder of the
shares of Warrant Stock so purchased as of the date of such exercise.
Notwithstanding the foregoing to the contrary, the Issuer or its transfer
agent
shall only be obligated to issue and deliver the shares to the DTC on a holder’s
behalf via DWAC if such exercise is in connection with a sale or other exemption
from registration by which the shares may be issued without a restrictive
legend
and the Issuer and its transfer agent are participating in DTC through the
DWAC
system. The Holder shall deliver this original Warrant, or an indemnification
undertaking with respect to such Warrant in the case of its loss, theft or
destruction, at such time that this Warrant is fully exercised. With respect
to
partial exercises of this Warrant, the Issuer shall keep written records
for the
Holder of the number of shares of Warrant Stock exercised as of each date
of
exercise.
Section
67.5 Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if the Issuer fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Stock pursuant to an exercise on or before the Delivery
Date, and if after such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Stock which the Holder
anticipated receiving upon such exercise (a “Buy-In”),
then
the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was
required to deliver to the Holder in connection with the exercise at issue
times
(B) the price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the portion
of the Warrant and equivalent number of shares of Warrant Stock for which
such
exercise was not honored or deliver to the Holder the number of shares of
Common
Stock that would have been issued had the Issuer timely complied with its
exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover
a
Buy-In with respect to an attempted exercise of shares of Common Stock with
an
aggregate sale price giving rise to such purchase obligation of $10,000,
under
clause (1) of the immediately preceding sentence the Issuer shall be required
to
pay the Holder $1,000. The Holder shall provide the Issuer written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by
the
Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation,
a
decree of specific performance and/or injunctive relief with respect to the
Issuer’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of this Warrant as required pursuant to the terms
hereof.
150
Section
67.6 Transferability
of Warrant.
Subject
to Section 2(h) hereof, this Warrant may be transferred by a Holder, in whole
or
in part, without the consent of the Issuer. If transferred pursuant to this
paragraph, this Warrant may be transferred on the books of the Issuer by
the
Holder hereof in person or by duly authorized attorney, upon surrender of
this
Warrant at the principal office of the Issuer, properly endorsed (by the
Holder
executing an assignment in the form attached hereto) and upon payment of
any
necessary transfer tax or other governmental charge imposed upon such transfer.
This Warrant is exchangeable at the principal office of the Issuer for Warrants
to purchase the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange.
All
Warrants issued on transfers or exchanges shall be dated the Original Issue
Date
and shall be identical with this Warrant except as to the number of shares
of
Warrant Stock issuable pursuant thereto.
Section
67.7 Continuing
Rights of Holder.
The
Issuer will, at the time of or at any time after each exercise of this Warrant,
upon the request of the Holder hereof, acknowledge in writing the extent,
if
any, of its continuing obligation to afford to such Holder all rights to
which
such Holder shall continue to be entitled after such exercise in accordance
with
the terms of this Warrant, provided that if any such Holder shall fail to
make
any such request, the failure shall not affect the continuing obligation
of the
Issuer to afford such rights to such Holder.
Section
67.8 Compliance
with Securities Laws.
(i) The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and
the shares of Warrant Stock to be issued upon exercise hereof are being acquired
solely for the Holder’s own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement, or
an
exemption from registration, under the Securities Act and any applicable
state
securities laws.
(ii) Except
as
provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following
form:
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
151
(iii) The
Issuer agrees to reissue this Warrant or certificates representing any of
the
Warrant Stock, without the legend set forth above if at such time, prior
to
making any transfer of any such securities, the Holder shall give written
notice
to the Issuer describing the manner and terms of such transfer. Such proposed
transfer will not be effected until: (a) either (i) the Issuer has received
an
opinion of counsel reasonably satisfactory to the Issuer, to the effect that
the
registration of such securities under the Securities Act is not required
in
connection with such proposed transfer, (ii) a registration statement under
the
Securities Act covering such proposed disposition has been filed by the Issuer
with the Securities and Exchange Commission and has become effective under
the
Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under
the
Securities Act and state securities laws are not required, or (iv) the Holder
provides the Issuer with reasonable assurances that such security can be
sold
pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer
has
received an opinion of counsel reasonably satisfactory to the Issuer, to
the
effect that registration or qualification under the securities or “blue sky”
laws of any state is not required in connection with such proposed disposition,
or (ii) compliance with applicable state securities or “blue sky” laws has been
effected or a valid exemption exists with respect thereto. The Issuer will
respond to any such notice from a holder within three (3) Trading Days. In
the
case of any proposed transfer under this Section 2(h), the Issuer will use
reasonable efforts to comply with any such applicable state securities or
“blue
sky” laws, but shall in no event be required, (x) to qualify to do business in
any state where it is not then qualified, (y) to take any action that would
subject it to tax or to the general service of process in any state where
it is
not then subject, or (z) to comply with state securities or “blue sky” laws of
any state for which registration by coordination is unavailable to the Issuer.
The restrictions on transfer contained in this Section 2(h) shall be in addition
to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant. Whenever a certificate
representing the Warrant Stock is required to be issued to the Holder without
a
legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall cause its transfer agent to electronically transmit
the
Warrant Stock to the Holder by crediting the account of the Holder or Holder’s
Prime Broker with DTC through its DWAC system (to the extent not inconsistent
with any provisions of this Warrant or the Purchase Agreement).
Section
67.9 Accredited
Investor Status.
In no
event may the Holder exercise this Warrant in whole or in part unless the
Holder
is an “accredited investor” as defined in Regulation D under the Securities
Act.
ARTICLE
LXVIIIStock
Fully Paid; Reservation and Listing of Shares;
Covenants.
Section
68.1 Stock
Fully Paid.
The
Issuer represents, warrants, covenants and agrees that all shares of Warrant
Stock which may be issued upon the exercise of this Warrant or otherwise
hereunder will, when issued in accordance with the terms of this Warrant,
be
duly authorized, validly issued, fully paid and non-assessable and free from
all
taxes, liens and charges created by or through the Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may
be
exercised, the Issuer will at all times have authorized and reserved for
the
purpose of the issuance upon exercise of this Warrant a number of authorized
but
unissued shares of Common Stock equal to at least one hundred percent (100%)
of
the number of shares of Common Stock issuable upon exercise of this Warrant
without regard to any limitations on exercise.
152
Section
68.2 Reservation.
If any
shares of Common Stock required to be reserved for issuance upon exercise
of
this Warrant or as otherwise provided hereunder require registration or
qualification with any Governmental Authority under any federal or state
law
before such shares may be so issued, the Issuer will in good faith use its
best
efforts as expeditiously as possible at its expense to cause such shares
to be
duly registered or qualified. If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, and maintain and increase when necessary such listing, of, all shares
of Warrant Stock from time to time issued upon exercise of this Warrant or
as
otherwise provided hereunder (provided that such Warrant Stock has been
registered pursuant to a registration statement under the Securities Act
then in
effect), and, to the extent permissible under the applicable securities exchange
rules, all unissued shares of Warrant Stock which are at any time issuable
hereunder, so long as any shares of Common Stock shall be so listed. The
Issuer
will also so list on each securities exchange or market, and will maintain
such
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange
or
market by the Issuer.
Section
68.3 Covenants.
The
Issuer shall not by any action including, without limitation, amending the
Articles of Incorporation or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other action, avoid or seek to avoid the observance
or
performance of any of the terms of this Warrant, but will at all times in
good
faith assist in the carrying out of all such terms and in the taking of all
such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against dilution (to the extent specifically provided herein) or
impairment. Without limiting the generality of the foregoing, the Issuer
will
(i) not permit the par value, if any, of its Common Stock to exceed the then
effective Warrant Price, (ii) not amend or modify any provision of the Articles
of Incorporation or by-laws of the Issuer in any manner that would adversely
affect the rights of the Holders of the Warrants, (iii) take all such action
as
may be reasonably necessary in order that the Issuer may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear
of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (iv) use its best efforts to obtain
all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be reasonably necessary to enable the
Issuer
to perform its obligations under this Warrant.
Section
68.4 Loss,
Theft, Destruction of Warrants.
Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss,
theft, destruction or mutilation of any Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security satisfactory
to the Issuer or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Issuer will make and deliver, in lieu of
such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and
representing the right to purchase the same number of shares of Common
Stock.
153
Section
68.5 Payment
of Taxes.
The
Issuer will pay any documentary stamp taxes attributable to the initial issuance
of the Warrant Stock issuable upon exercise of this Warrant; provided,
however,
that
the Issuer shall not be required to pay any tax or taxes which may be payable
in
respect of any transfer involved in the issuance or delivery of any certificates
representing Warrant Stock in a name other than that of the Holder in respect
to
which such shares are issued.
ARTICLE
LXIXAdjustment
of Warrant Price.
The price at which such shares of Warrant Stock may be purchased upon exercise
of this Warrant shall be subject to adjustment from time to time as set forth
in
this Section 4. The Issuer shall give the Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 in accordance
with
the notice provisions set forth in Section 5.
Section
69.1 Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale.
(i) In
case
the Issuer after the Original Issue Date shall do any of the following (each,
a
“Triggering
Event”):
(a)
consolidate or merge with or into any other Person and the Issuer shall not
be
the continuing or surviving corporation of such consolidation or merger,
or (b)
permit any other Person to consolidate with or merge into the Issuer and
the
Issuer shall be the continuing or surviving Person but, in connection with
such
consolidation or merger, any Capital Stock of the Issuer shall be changed
into
or exchanged for Securities of any other Person or cash or any other property,
or (c) transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or reclassification
of its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made to the Warrant Price and the number of shares of
Warrant
Stock that may be purchased upon exercise of this Warrant so that, upon the
basis and the terms and in the manner provided in this Warrant, the Holder
of
this Warrant shall be entitled upon the exercise hereof at any time after
the
consummation of such Triggering Event, to the extent this Warrant is not
exercised prior to such Triggering Event, to receive at the Warrant Price
in
effect at the time immediately prior to the consummation of such Triggering
Event, in lieu of the Common Stock issuable upon such exercise of this Warrant
prior to such Triggering Event, the Securities, cash and property to which
such
Holder would have been entitled upon the consummation of such Triggering
Event
if such Holder had exercised the rights represented by this Warrant immediately
prior thereto (including the right of a shareholder to elect the type of
consideration it will receive upon a Triggering Event), subject to adjustments
(subsequent to such corporate action) as nearly equivalent as possible to
the
adjustments provided for elsewhere in this Section 4; provided,
however,
the
Holder at its option may elect to receive an amount in unregistered shares
of
the common stock of the surviving entity equal to the value of this Warrant
calculated in accordance with the Black-Scholes formula; provided,
further,
such
shares of Common Stock shall be valued at a twenty percent (20%) discount
to the
VWAP of the Common Stock for the twenty (20) Trading Days immediately prior
to
the Triggering Event. Immediately upon the occurrence of a Triggering Event,
the
Issuer shall notify the Holder in writing of such Triggering Event and provide
the calculations in determining the number of shares of Warrant Stock issuable
upon exercise of the new warrant and the adjusted Warrant Price. Upon the
Holder’s request, the continuing or surviving corporation as a result of such
Triggering Event shall issue to the Holder a new warrant of like tenor
evidencing the right to purchase the adjusted number of shares of Warrant
Stock
and the adjusted Warrant Price pursuant to the terms and provisions of this
Section 4(a)(i). Notwithstanding the foregoing to the contrary, this Section
4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
Event is a company that has a class of equity securities registered pursuant
to
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
its common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board. In the event that the
surviving entity pursuant to any such Triggering Event is not a public company
that is registered pursuant to the Exchange Act or its common stock is not
listed or quoted on a national securities exchange, national automated quotation
system or the OTC Bulletin Board, then the Holder shall have the right to
demand
that the Issuer pay to the Holder an amount in cash equal to the value of
this
Warrant calculated in accordance with the Black-Scholes
formula.
154
(ii) In
the
event that the Holder has elected not to exercise this Warrant prior to the
consummation of a Triggering Event and has also elected not to receive an
amount
in cash equal to the value of this Warrant calculated in accordance with
the
Black-Scholes formula pursuant to the provisions of Section 4(a)(i) above,
so
long as the surviving entity pursuant to any Triggering Event is a company
that
has a class of equity securities registered pursuant to the Exchange Act
and its
common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board, the surviving entity
and/or each Person (other than the Issuer) which may be required to deliver
any
Securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not
release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a),
such Holder shall be entitled to receive, and the surviving entity and/or
each
such Person shall have similarly delivered to such Holder an opinion of counsel
for the surviving entity and/or each such Person, which counsel shall be
reasonably satisfactory to such Holder, or in the alternative, a written
acknowledgement executed by the President or Chief Financial Officer of the
Issuer, stating that this Warrant shall thereafter continue in full force
and
effect and the terms hereof (including, without limitation, all of the
provisions of this subsection (a)) shall be applicable to the Securities,
cash
or property which the surviving entity and/or each such Person may be required
to deliver upon any exercise of this Warrant or the exercise of any rights
pursuant hereto.
Section
69.2 Stock
Dividends, Subdivisions and Combinations.
If at
any time the Issuer shall:
155
(a) make
or
issue or set a record date for the holders of the Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of,
shares of Common Stock,
(b) subdivide
its outstanding shares of Common Stock into a larger number of shares of
Common
Stock, or
(c) combine
its outstanding shares of Common Stock into a smaller number of shares of
Common
Stock,
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of
shares of Common Stock for which this Warrant is exercisable immediately
prior
to the occurrence of such event would own or be entitled to receive after
the
happening of such event, and (2) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the
number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Common Stock
for
which this Warrant is exercisable immediately after such
adjustment.
Section
69.3 Certain
Other Distributions.
If at
any time the Issuer shall make or issue or set a record date for the holders
of
the Common Stock for the purpose of entitling them to receive any dividend
or
other distribution of:
(a) cash,
(b) any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common
Stock
Equivalents or Additional Shares of Common Stock), or
(c) any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents
or
Additional Shares of Common Stock),
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
shall
be adjusted to equal the product of the number of shares of Common Stock
for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Per Share
Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable
and of
the fair value (as determined in good faith by the Board of Directors of
the
Issuer and supported by an opinion from an investment banking firm mutually
agreed upon by the Issuer and the Holder) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or
other
subscription or purchase rights so distributable, and (2) the Warrant Price
then
in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant
is
exercisable immediately prior to the adjustment divided by (B) the number
of
shares of Common Stock for which this Warrant is exercisable immediately
after
such adjustment. A reclassification of the Common Stock (other than a change
in
par value, or from par value to no par value or from no par value to par
value)
into shares of Common Stock and shares of any other class of stock shall
be
deemed a distribution by the Issuer to the holders of its Common Stock of
such
shares of such other class of stock within the meaning of this Section 4(c)
and,
if the outstanding shares of Common Stock shall be changed into a larger
or
smaller number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may
be, of
the outstanding shares of Common Stock within the meaning of Section
4(b).
156
Section
69.4 Issuance
of Additional Shares of Common Stock.
(a) For
the
period commencing on the Original Issue Date and ending on the two (2) year
anniversary of the Original Issue Date, in the event the Issuer shall issue
any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less
than
the Warrant Price then in effect or without consideration, then the Warrant
Price upon each such issuance shall be adjusted to the price equal to the
consideration per share paid for such Additional Shares of Common
Stock.
(b) For
the
period commencing on the two (2) year anniversary of the Original Issue Date
and
ending on the Termination Date, in the event the Issuer shall issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less
than
the Warrant Price then in effect or without consideration, then the Warrant
Price then in effect shall multiplied by a fraction (a) the numerator of
which
shall be equal to the sum of (x) the number of shares of outstanding Common
Stock immediately prior to the issuance of such Additional Shares of Common
Stock plus (y) the number of shares of Common Stock (rounded to the nearest
whole share) which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price per
share
equal to the Warrant Price then in effect and (b) the denominator of which
shall
be equal to the number of shares of outstanding Common Stock immediately
after
the issuance of such Additional Shares of Common Stock. For purposes of this
Section, all shares of Common Stock issuable upon exercise of options
outstanding immediately prior to such issue or upon conversion of Convertible
Securities (as defined below) (including Series A Convertible Preferred Stock
of
the Company, par value $.001 per share) outstanding immediately prior to
such
issue are deemed outstanding. No adjustment of the number of shares of Common
Stock for which this Warrant shall be exercisable shall be made pursuant
to this
Section 4(d)(ii) upon the issuance of any Additional Shares of Common Stock
which are issued pursuant to the exercise of any Common Stock Equivalents,
if
any such adjustment shall previously have been made upon the issuance of
such
Common Stock Equivalents (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4(e).
Section
69.5 Issuance
of Common Stock Equivalents.
In the
event the Issuer shall take a record of the holders of its Common Stock for
the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Issuer is the
surviving corporation) issue or sell, any Common Stock Equivalents, whether
or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange shall be less than the Warrant Price in effect immediately prior
to
the time of such issue or sale, or if, after any such issuance of Common
Stock
Equivalents, the price per share for which Additional Shares of Common Stock
may
be issuable thereafter is amended or adjusted, and such price as so amended
shall be less than the Warrant Price in effect at the time of such amendment
or
adjustment, then the Warrant Price then in effect shall be adjusted as provided
in Section 4(d)(i) or (ii), as applicable. No further adjustments of the
number
of shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Common Stock Equivalents.
157
Section
69.6 Other
Provisions Applicable to Adjustments under this Section.
The
following provisions shall be applicable to the making of adjustments of
the
number of shares of Common Stock for which this Warrant is exercisable and
the
Warrant Price then in effect provided for in this Section 4:
(i) Computation
of Consideration.
To the
extent that any Additional Shares of Common Stock or any Common Stock
Equivalents (or any warrants or other rights therefor) shall be issued for
cash
consideration, the consideration received by the Issuer therefor shall be
the
amount of the cash received by the Issuer therefor, or, if such Additional
Shares of Common Stock or Common Stock Equivalents are offered by the Issuer
for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Common Stock Equivalents are sold to underwriters or dealers for
public
offering without a subscription offering, the initial public offering price
(in
any such case subtracting any amounts paid or receivable for accrued interest
or
accrued dividends and without taking into account any compensation, discounts
or
expenses paid or incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). In connection with any
merger or consolidation in which the Issuer is the surviving corporation
(other
than any consolidation or merger in which the previously outstanding shares
of
Common Stock of the Issuer shall be changed to or exchanged for the stock
or
other securities of another corporation), the amount of consideration therefore
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board, and acceptable to the Holder, of such portion of the
assets
and business of the nonsurviving corporation as the Board may determine to
be
attributable to such shares of Common Stock or Common Stock Equivalents,
as the
case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration received by the Issuer for issuing such
warrants or other rights plus the additional consideration payable to the
Issuer
upon exercise of such warrants or other rights. The consideration for any
Additional Shares of Common Stock issuable pursuant to the terms of any Common
Stock Equivalents shall be the consideration received by the Issuer for issuing
warrants or other rights to subscribe for or purchase such Common Stock
Equivalents, plus the consideration paid or payable to the Issuer in respect
of
the subscription for or purchase of such Common Stock Equivalents, plus the
additional consideration, if any, payable to the Issuer upon the exercise
of the
right of conversion or exchange in such Common Stock Equivalents. In the
event
of any consolidation or merger of the Issuer in which the Issuer is not the
surviving corporation or in which the previously outstanding shares of Common
Stock of the Issuer shall be changed into or exchanged for the stock or other
securities of another corporation, or in the event of any sale of all or
substantially all of the assets of the Issuer for stock or other securities
of
any corporation, the Issuer shall be deemed to have issued a number of shares
of
its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or
other
property of the other corporation. In the event any consideration received
by
the Issuer for any securities consists of property other than cash, the fair
market value thereof at the time of issuance or as otherwise applicable shall
be
as determined in good faith by the Board. In the event Common Stock is issued
with other shares or securities or other assets of the Issuer for consideration
which covers both, the consideration computed as provided in this Section
4(g)(i) shall be allocated among such securities and assets as determined
in
good faith by the Board.
158
(b) When
Adjustments to Be Made.
The
adjustments required by this Section 4 shall be made whenever and as often
as
any specified event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Common Stock for which this Warrant
is
exercisable that would otherwise be required may be postponed (except in
the
case of a subdivision or combination of shares of the Common Stock, as provided
for in Section 4(b)) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made
adds
or subtracts less than one percent (1%) of the shares of Common Stock for
which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except
as
aforesaid) which is postponed shall be carried forward and made as soon as
such
adjustment, together with other adjustments required by this Section 4 and
not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed
to have occurred at the close of business on the date of its
occurrence.
(c) Fractional
Interests.
In
computing adjustments under this Section 4, fractional interests in Common
Stock
shall be taken into account to the nearest one one-hundredth (1/100th) of
a
share.
(d) When
Adjustment Not Required.
If the
Issuer shall take a record of the holders of its Common Stock for the purpose
of
entitling them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously
made
in respect thereof shall be rescinded and annulled.
Section
69.7 Form
of Warrant after Adjustments.
The
form of this Warrant need not be changed because of any adjustments in the
Warrant Price or the number and kind of Securities purchasable upon the exercise
of this Warrant.
159
Section
69.8 Escrow
of Warrant Stock.
If
after any property becomes distributable pursuant to this Section 4 by reason
of
the taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, and the Holder exercises
this Warrant, any shares of Common Stock issuable upon exercise by reason
of
such adjustment shall be deemed the last shares of Common Stock for which
this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the
Holder
by the Issuer to be issued to the Holder upon and to the extent that the
event
actually takes place, upon payment of the current Warrant Price. Notwithstanding
any other provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares shall
be
cancelled by the Issuer and escrowed property returned.
ARTICLE
LXXNotice
of Adjustments.
Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
to
Section 4 hereof (for purposes of this Section 5, each an “adjustment”),
the Issuer shall cause its Chief Financial Officer to prepare and execute
a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made
any
determination hereunder), and the Warrant Price and Warrant Share Number
after
giving effect to such adjustment, and shall cause copies of such certificate
to
be delivered to the Holder of this Warrant promptly after each adjustment.
Any
dispute between the Issuer and the Holder of this Warrant with respect to
the
matters set forth in such certificate may at the option of the Holder of
this
Warrant be submitted to a national or regional accounting firm reasonably
acceptable to the Issuer and the Holder (the “Independent
Appraiser”),
provided
that the Issuer shall have ten (10) days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right
of
objection. The Independent Appraiser selected by the Holder of this Warrant
as
provided in the preceding sentence shall be instructed to deliver a written
opinion as to such matters to the Issuer and such Holder within thirty (30)
days
after submission to it of such dispute. Such opinion shall be final and binding
on the parties hereto. The reasonable expenses of the Independent Appraiser
in
making such determination shall be paid by the Issuer, in the event the Holder's
calculation was correct, or by the Holder, in the event the Issuer’s calculation
was correct, or equally by the Issuer and the Holder in the event that neither
the Issuer's or the Holder's calculation was correct.
ARTICLE
LXXIFractional
Shares.
No fractional shares of Warrant Stock will be issued in connection with any
exercise hereof, but in lieu of such fractional shares, the Issuer shall
round
the number of shares to be issued upon exercise up to the nearest whole number
of shares.
ARTICLE
LXXIIOwnership
Cap and Exercise Restriction.
Notwithstanding anything to the contrary set forth in this Warrant, at no
time
may a Holder of this Warrant exercise this Warrant if the number of shares
of
Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock beneficially owned by such
Holder at such time, the number of shares of Common Stock which would result
in
such Holder beneficially owning (as determined in accordance with Section
13(d)
of the Exchange Act and the rules thereunder) in excess of 4.99% of the then
issued and outstanding shares of Common Stock; provided,
however,
that upon a holder of this Warrant providing the Issuer with sixty-one (61)
days
notice (pursuant to Section 13 hereof) (the “Waiver
Notice”)
that such Holder would like to waive this Section 7 with regard to any or
all
shares of Common Stock issuable upon exercise of this Warrant, this Section
7
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice; provided,
further,
that this provision shall be of no further force or effect during the sixty-one
(61) days immediately preceding the expiration of the term of this
Warrant.
160
ARTICLE
LXXIIIRegistration
Rights.
The Holder of this Warrant is entitled to the benefit of certain registration
rights with respect to the shares of Warrant Stock issuable upon the exercise
of
this Warrant pursuant to that certain Registration Rights Agreement, of even
date herewith, by and among the Company and Persons listed on Schedule I
thereto
(the “Registration
Rights Agreement”)
and the registration rights with respect to the shares of Warrant Stock issuable
upon the exercise of this Warrant by any subsequent Holder may only be assigned
in accordance with the terms and provisions of the Registrations Rights
Agreement.
ARTICLE
LXXIVDefinitions.
For the purposes of this Warrant, the following terms have the following
meanings:
“Additional
Shares of Common Stock”
means
all shares of Common Stock issued by the Issuer after the Original Issue
Date,
and all shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) securities issued pursuant to a bona fide firm
underwritten public offering of the Company’s securities, provided such
underwritten public offering has been approved in advance by the holders
of more
than fifty percent (50%) of the then outstanding shares of Series A (the
“Majority
Holders”),
(ii)
securities issued (other than for cash) in connection with a strategic merger,
acquisition, or consolidation, provided that the issuance of such securities
in
connection with such strategic merger, acquisition, or consolidation has
been
approved in advance by the Majority Holders, (iii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date of the Purchase Agreement or issued pursuant
to the Purchase Agreement (so long as the conversion or exercise price in
such
securities are not amended to lower such price and/or adversely affect the
Holders), (iv) the Warrant Stock, (v) securities issued in connection with
bona
fide strategic license agreements or other partnering arrangements so long
as
such issuances are not for the purpose of raising capital and provided that
the
issuance of such securities in connection with such bona fide strategic license
agreements or other partnering arrangements has been approved in advance
by the
Majority Holders, (vi) Common Stock issued or the issuance or grants of options
to purchase Common Stock pursuant to the Issuer’s equity incentive plans
outstanding as they exist on the date of the Purchase Agreement, (vii) the
issuance or grants of options to purchase Common Stock to employees, officers
or
directors of the Issuer pursuant to any equity incentive plan duly adopted
by
the Board or a committee thereof established for such purpose so long as
such
issuances in the aggregate do not exceed ten percent (10)% of the issued
and
outstanding shares of Common Stock as of the Original Issue Date and the
specified price at which the options may be exercised is equal to or greater
than the Per Share Market Value as of the date of such grant, and (viii)
any
warrants, shares of Common Stock or other securities issued to a placement
agent
and its designees for the transactions contemplated by the Purchase Agreement
or
in any other sales of the Issuer’s securities and any securities issued in
connection with any financial advisory agreements of the Issuer and the shares
of Common Stock issued upon exercise of any such warrants or conversions
of any
such other securities.
161
“Articles
of Incorporation”
means
the Articles of Incorporation of the Issuer as in effect on the Original
Issue
Date, and as hereafter from time to time amended, modified, supplemented
or
restated in accordance with the terms hereof and thereof and pursuant to
applicable law.
“Board”
shall
mean the Board of Directors of the Issuer.
“Capital
Stock”
means
and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including,
without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is
a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
“Common
Stock”
means
the Common Stock, $0.001 par value per share, of the Issuer and any other
Capital Stock into which such stock may hereafter be changed.
“Common
Stock Equivalent”
means
any Convertible Security or warrant, option or other right to subscribe for
or
purchase any Additional Shares of Common Stock or any Convertible
Security.
“Convertible
Securities”
means
evidences of Indebtedness, shares of Capital Stock or other Securities which
are
or may be at any time convertible into or exchangeable for Additional Shares
of
Common Stock. The term “Convertible Security” means one of the Convertible
Securities.
“Governmental
Authority”
means
any governmental, regulatory or self-regulatory entity, department, body,
official, authority, commission, board, agency or instrumentality, whether
federal, state or local, and whether domestic or foreign.
“Holders”
mean
the Persons who shall from time to time own any Warrant. The term “Holder” means
one of the Holders.
“Independent
Appraiser”
means
a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may
be
the firm that regularly examines the financial statements of the Issuer)
that is
regularly engaged in the business of appraising the Capital Stock or assets
of
corporations or other entities as going concerns, and which is not affiliated
with either the Issuer or the Holder of any Warrant.
162
“Issuer”
means
Victory Divide Mining Company, a Nevada corporation, and its
successors.
“Majority
Holders”
means
at any time the Holders of Warrants exercisable for a majority of the shares
of
Warrant Stock issuable under the Warrants at the time outstanding.
“Original
Issue Date”
means
October 3, 2007.
“OTC
Bulletin Board”
means
the over-the-counter electronic bulletin board.
“Other
Common”
means
any other Capital Stock of the Issuer of any class which shall be authorized
at
any time after the date of this Warrant (other than Common Stock) and which
shall have the right to participate in the distribution of earnings and assets
of the Issuer without limitation as to amount.
“Outstanding
Common Stock”
means,
at any given time, the aggregate amount of outstanding shares of Common Stock,
assuming full exercise, conversion or exchange (as applicable) of all options,
warrants and other Securities which are convertible into or exercisable or
exchangeable for, and any right to subscribe for, shares of Common Stock
that
are outstanding at such time.
“Person”
means
an individual, corporation, limited liability company, partnership, joint
stock
company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.
“Per
Share Market Value”
means
on any particular date (a) the last closing price per share of the Common
Stock
on such date on the OTC Bulletin Board or another registered national stock
exchange on which the Common Stock is then listed, or if there is no closing
price on such date, then the closing bid price on such date, or if there
is no
closing bid price on such date, then the closing price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the OTC Bulletin Board or any registered national
stock exchange, the last closing price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business
on
such date, or if there is no closing price on such date, then the closing
bid
price on such date, or (c) if the Common Stock is not then reported by the
OTC
Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then
the average of the “Pink Sheet” quotes for the five (5) Trading Days preceding
such date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by
an
Independent Appraiser selected in good faith by the Majority Holders;
provided,
however,
that
the Issuer, after receipt of the determination by such Independent Appraiser,
shall have the right to select an additional Independent Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Independent Appraiser; and provided,
further,
that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during
such
period. The determination of fair market value by an Independent Appraiser
shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding
on
all parties. In determining the fair market value of any shares of Common
Stock,
no consideration shall be given to any restrictions on transfer of the Common
Stock imposed by agreement or by federal or state securities laws, or to
the
existence or absence of, or any limitations on, voting rights.
163
“Purchase
Agreement”
means
the Series A Convertible Preferred Stock Purchase Agreement dated as of October
3, 2007, among the Issuer and the Purchasers.
“Purchasers”
means
the purchasers of the Series A Convertible Preferred Stock and the Warrants
issued by the Issuer pursuant to the Purchase Agreement.
“Securities”
means
any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities
or a
Security, and any option, warrant or other right to purchase or acquire any
Security. “Security” means one of the Securities.
“Securities
Act”
means
the Securities Act of 1933, as amended, or any similar federal statute then
in
effect.
“Subsidiary”
means
any corporation at least 50% of whose outstanding Voting Stock shall at the
time
be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.
“Term”
has
the
meaning specified in Section 1 hereof.
“Trading
Day”
means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board,
or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which
the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided,
however,
that in
the event that the Common Stock is not listed or quoted as set forth in (a)
or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any
day which shall be a legal holiday or a day on which banking institutions
in the
State of New York are authorized or required by law or other government action
to close.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or
quoted
for trading on the date in question: the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market, the New York Stock Exchange
or
the OTC Bulletin Board.
“Voting
Stock”
means,
as applied to the Capital Stock of any corporation, Capital Stock of any
class
or classes (however designated) having ordinary voting power for the election
of
a majority of the members of the Board of Directors (or other governing body)
of
such corporation, other than Capital Stock having such power only by reason
of
the happening of a contingency.
164
“VWAP”
means,
for any date, the price determined by the first of the following clauses
that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date
(or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the
OTC
Bulletin Board is not a Trading Market, the volume weighted average price
of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the "Pink Sheets"
published by Pink Sheets, LLC (or a similar organization or agency succeeding
to
its functions of reporting prices), the most recent bid price per share of
the
Common Stock so reported; or (d) in all other cases, the fair market value
of a
share of Common Stock as determined by an independent appraiser selected
in good
faith by the Holders of a majority in interest of the Warrants then outstanding
and reasonably acceptable to the Company, the fees and expenses of which
shall
be paid by the Company.
“Warrants”
means
the Warrants issued and sold pursuant to the Purchase Agreement, including,
without limitation, this Warrant, and any other warrants of like tenor issued
in
substitution or exchange for any thereof pursuant to the provisions of Section
2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
“Warrant
Price”
initially means $3.03, as such price may be adjusted from time to time as
shall
result from the adjustments specified in this Warrant, including Section
4
hereto.
“Warrant
Share Number”
means
at any time the aggregate number of shares of Warrant Stock which may at
such
time be purchased upon exercise of this Warrant, after giving effect to all
prior adjustments and increases to such number made or required to be made
under
the terms hereof.
“Warrant
Stock”
means
Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
issuable pursuant to any Warrant or Warrants.
ARTICLE
LXXVOther
Notices.
In case at any time:
Section
75.1 the
Issuer shall make any distributions to the holders of Common Stock;
or
Section
75.2 the
Issuer shall authorize the granting to all holders of its Common Stock of
rights
to subscribe for or purchase any shares of Capital Stock of any class or
other
rights; or
Section
75.3 there
shall be any reclassification of the Capital Stock of the Issuer;
or
Section
75.4 there
shall be any capital reorganization by the Issuer; or
165
Section
75.5 there
shall be any (i) consolidation or merger involving the Issuer or (ii) sale,
transfer or other disposition of all or substantially all of the Issuer’s
property, assets or business (except a merger or other reorganization in
which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or
Section
75.6 there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of
the Issuer or any partial liquidation of the Issuer or distribution to holders
of Common Stock;
then,
in
each of such cases, the Issuer shall give written notice to the Holder of
the
date on which (i) the books of the Issuer shall close or a record shall be
taken
for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common
Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock
for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days
prior
to the record date or the date on which the Issuer’s transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of
all
financial and other information distributed or required to be distributed
to the
holders of the Common Stock.
ARTICLE
LXXVIAmendment
and Waiver.
Any term, covenant, agreement or condition in this Warrant may be amended,
or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by a written instrument or written
instruments executed by the Issuer and the Majority Holders;
provided,
however,
that no such amendment or waiver shall reduce the Warrant Share Number, increase
the Warrant Price, shorten the period during which this Warrant may be exercised
or modify any provision of this Section 11 without the consent of the Holder
of
this Warrant. No consideration shall be offered or paid to any person to
amend
or consent to a waiver or modification of any provision of this Warrant unless
the same consideration is also offered to all holders of the
Warrants.
ARTICLE
LXXVIIGoverning
Law; Jurisdiction.
This Warrant shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Warrant shall not be interpreted or construed
with
any presumption against the party causing this Warrant to be drafted. The
Issuer
and the Holder agree that venue for any dispute arising under this Warrant
will
lie exclusively in the state or federal courts located in New York County,
New
York, and the parties irrevocably waive any right to raise forum non conveniens
or any other argument that New York is not the proper venue. The Issuer and
the
Holder irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Issuer and the Holder consent to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address in effect for notices to it under this Warrant
and
agree that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 12 shall affect or limit any
right
to serve process in any other manner permitted by law. The Issuer and the
Holder
hereby agree that the prevailing party in any suit, action or proceeding
arising
out of or relating to this Warrant or the Purchase Agreement, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.
The
parties hereby waive all rights to a trial by jury.
166
ARTICLE
LXXVIIINotices.
All notices, demands, consents, requests, instructions and other communications
to be given or delivered or permitted under or by reason of the provisions
of
this Agreement or in connection with the transactions contemplated hereby
shall
be in writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of
such
delivery (as evidenced by the receipt of the personal delivery service),
(ii) if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing),
or (iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance
with
this Section 13), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit
of the
sender). All such notices, demands, consents, requests, instructions and
other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
If
to the Issuer:
|
Victory
Divide Mining Company
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group
Xx.
00 Xxxxxxx Xxxxxx
Jixian
Town Heilongjiang
People’x
Xxxxxxxx xx Xxxxx 000000
Tel:
00-000-000-0000
Fax:
00-000-000-0000
|
with
copies (which copies
shall
not constitute notice)
to:
|
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.: (000) 000-0000, ext. 127
Fax
No.: (000) 000-0000
|
If
to any Holder:
|
At
the address of such Holder set forth on Exhibit A to this Agreement,
with
copies to Holder’s counsel as set forth on Exhibit A or as specified in
writing by such Holder with copies to:
|
167
with
copies (which copies
shall
not constitute notice)
to:
|
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
Facsimile:
212-407-4000
|
Any
party
hereto may from time to time change its address for notices by giving at
least
ten (10) days written notice of such changed address to the other party
hereto.
ARTICLE
LXXIXWarrant
Agent.
The Issuer may, by written notice to the Holder of this Warrant, appoint
an
agent having an office in New York, New York for the purpose of issuing shares
of Warrant Stock on the exercise of this Warrant pursuant to subsection (b)
of
Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section
2 hereof or replacing this Warrant pursuant to subsection (d) of Section
3
hereof, or any of the foregoing, and thereafter any such issuance, exchange
or
replacement, as the case may be, shall be made at such office by such
agent.
ARTICLE
LXXXRemedies.
The Issuer stipulates that the remedies at law of the Holder of this Warrant
in
the event of any default or threatened default by the Issuer in the performance
of or compliance with any of the terms of this Warrant are not and will not
be
adequate and that, to the fullest extent permitted by law, such terms may
be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
ARTICLE
LXXXISuccessors
and Assigns.
This Warrant and the rights evidenced hereby shall inure to the benefit of
and
be binding upon the successors and assigns of the Issuer, the Holder hereof
and
(to the extent provided herein) the Holders of Warrant Stock issued pursuant
hereto, and shall be enforceable by any such Holder or Holder of Warrant
Stock.
ARTICLE
LXXXIIModification
and Severability.
If, in any action before any court or agency legally empowered to enforce
any
provision contained herein, any provision hereof is found to be unenforceable,
then such provision shall be deemed modified to the extent necessary to make
it
enforceable by such court or agency. If any such provision is not enforceable
as
set forth in the preceding sentence, the unenforceability of such provision
shall not affect the other provisions of this Warrant, but this Warrant shall
be
construed as if such unenforceable provision had never been contained
herein.
ARTICLE
LXXXIIIHeadings.
The headings of the Sections of this Warrant are for convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
168
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
169
IN
WITNESS WHEREOF, the Issuer has executed this Series C Warrant as of the
day and
year first above written.
VICTORY
DIVIDE MINING COMPANY
By:
__/s/
Shulin Liu_________
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
170
EXERCISE
FORM
SERIES
C
WARRANT
VICTORY
DIVIDE MINING COMPANY
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of
________________________________ covered by the within Warrant.
Dated:
|
|
|
Signature
|
|
Address
|
|
|||
|
||||
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by
the
Holder on the date of Exercise: _________________________
The
undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
The
undersigned intends that payment of the Warrant Price shall be made as (check
one):
Cash
Exercise_______
Cashless
Exercise_______
If
the
Holder has elected a Cash Exercise, the Holder shall pay the sum of $________
by
certified or official bank check (or via wire transfer) to the Issuer in
accordance with the terms of the Warrant.
If
the
Holder has elected a Cashless Exercise, a certificate shall be issued to
the
Holder for the number of shares equal to the whole number portion of the
product
of the calculation set forth below, which is ___________. The Company shall
pay
a cash adjustment in respect of the fractional portion of the product of
the
calculation set forth below in an amount equal to the product of the fractional
portion of such product and the Per Share Market Value on the date of exercise,
which product is ____________.
X
= Y -
(A)(Y)
B
Where:
The
number of shares of Common Stock to be issued to the Holder
__________________(“X”).
171
The
number of shares of Common Stock purchasable upon exercise of all of the
Warrant
or, if only a portion of the Warrant is being exercised, the portion of the
Warrant being exercised ___________________________ (“Y”).
The
Warrant Price ______________ (“A”).
The
Per
Share Market Value of one share of Common Stock _______________________
(“B”).
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
Dated:
|
|
|
Signature
|
|
Address
|
|
|||
|
||||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
Dated:
|
|
|
Signature
|
|
Address
|
|
|||
|
||||
This
Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
172
EXHIBIT
C-5 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
____________________________________________________
FORM
OF SERIES D WARRANT
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
SERIES
D
WARRANT TO PURCHASE
SHARES
OF
COMMON STOCK
OF
VICTORY
DIVIDE MINING COMPANY
Expires
October 2, 2012
No.:
W-D-07- Number
of Shares: Up to
________
Date
of
Issuance: October 3, 2007
FOR
VALUE
RECEIVED, the undersigned, Victory Divide Mining Company, a Nevada corporation
(together with its successors and assigns, the “Issuer”),
hereby certifies that _____________
or
its
registered assigns (the “Holder”)
is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________
shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however,
to
the provisions and upon the terms and conditions hereinafter set forth.
ARTICLE
LXXXIVTerm.
The term of this Warrant shall commence on October 3, 2007 and shall expire
at
6:00 p.m., Eastern Time, on October 2, 2012 (such period being the
“Term”
and such date, the “Termination
Date”).
ARTICLE
LXXXVMethod
of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
173
Section
85.1 Time
of Exercise.
The
purchase rights represented by this Warrant may be exercised in whole or
in part
during the Term for fifty percent (50%) of such number of shares of Common
Stock into which the Series B Convertible Preferred Stock that have
been exercised by the Holder pursuant to the Series J Warrant issued by the
Issuer to the Holder pursuant to the Purchase Agreement may
be converted.
Section
85.2 Method
of Exercise.
The
Holder hereof may exercise this Warrant, in whole or in part, by the surrender
of this Warrant (with the exercise form attached hereto duly executed) at
the
principal office of the Issuer, and by the payment to the Issuer of an amount
of
consideration therefor equal to the Warrant Price in effect on the date of
such
exercise multiplied by the number of shares of Warrant Stock with respect
to
which this Warrant is then being exercised, payable at such Holder’s election
(i) by certified or official bank check or by wire transfer to an account
designated by the Issuer, (ii) by “cashless exercise” in accordance with Section
2(c), but only when a registration statement under the Securities Act providing
for the resale of the Warrant Stock is not then in effect, or (iii) by a
combination of the foregoing methods of payment selected by the Holder of
this
Warrant.
Section
85.3 Cashless
Exercise.
Notwithstanding any provision herein to the contrary, and (i) the volume
weighted average price of one share of Common Stock on the OTC Bulletin Board
or
such other securities exchange on which the Common Stock is then traded or
included for quotation, for any ten (10) consecutive Trading Days is greater
than the Warrant Price (at or prior to the date of calculation as set forth
below) and (ii) commencing eighteen (18) months following the Original Issue
Date if a registration statement under the Securities Act providing for the
resale of the Warrant Stock (A) has not been declared effective by the
Securities and Exchange Commission by the date such registration statement
is
required to be effective pursuant to the Registration Rights Agreement (as
defined in Section 8), or (B) is not effective at the time of exercise of
this
Warrant, unless the registration statement is not effective as a result of
the
Issuer exercising its rights under Section 3(n) of the Registration Rights
Agreement, in lieu of exercising this Warrant by payment of cash, the Holder
may
exercise this Warrant by a cashless exercise and shall receive the number
of
shares of Common Stock equal to an amount (as determined below) by surrender
of
this Warrant at the principal office of the Issuer together with the properly
endorsed Notice of Exercise in which event the Issuer shall issue to the
Holder
a number of shares of Common Stock computed using the following
formula:
X
=
Y - (A)(Y)
|
||
B
|
||
Where
|
X
=
|
the
number of shares of Common Stock to be issued to the
Holder.
|
Y
=
|
the
number of shares of Common Stock purchasable upon exercise of all
of the
Warrant or, if only a portion of the Warrant is being exercised,
the
portion of the Warrant being exercised.
|
|
A
=
|
the
Warrant Price.
|
|
B
=
|
the
Per Share Market Value of one share of Common
Stock.
|
174
Section
85.4 Issuance
of Stock Certificates.
In the
event of any exercise of this Warrant in accordance with and subject to the
terms and conditions hereof, certificates for the shares of Warrant Stock
so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
such
exercise (the “Delivery
Date”)
or, at
the request of the Holder (provided that a registration statement under the
Securities Act providing for the resale of the Warrant Stock is then in effect
or that the shares of Warrant Stock are otherwise exempt from registration),
issued and delivered to the Depository Trust Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”)
within
a reasonable time, not exceeding three (3) Trading Days after such exercise,
and
the Holder hereof shall be deemed for all purposes to be the holder of the
shares of Warrant Stock so purchased as of the date of such exercise.
Notwithstanding the foregoing to the contrary, the Issuer or its transfer
agent
shall only be obligated to issue and deliver the shares to the DTC on a holder’s
behalf via DWAC if such exercise is in connection with a sale or other exemption
from registration by which the shares may be issued without a restrictive
legend
and the Issuer and its transfer agent are participating in DTC through the
DWAC
system. The Holder shall deliver this original Warrant, or an indemnification
undertaking with respect to such Warrant in the case of its loss, theft or
destruction, at such time that this Warrant is fully exercised. With respect
to
partial exercises of this Warrant, the Issuer shall keep written records
for the
Holder of the number of shares of Warrant Stock exercised as of each date
of
exercise.
Section
85.5 Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.
In
addition to any other rights available to the Holder, if the Issuer fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Stock pursuant to an exercise on or before the Delivery
Date, and if after such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Stock which the Holder
anticipated receiving upon such exercise (a “Buy-In”),
then
the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was
required to deliver to the Holder in connection with the exercise at issue
times
(B) the price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate the portion
of the Warrant and equivalent number of shares of Warrant Stock for which
such
exercise was not honored or deliver to the Holder the number of shares of
Common
Stock that would have been issued had the Issuer timely complied with its
exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover
a
Buy-In with respect to an attempted exercise of shares of Common Stock with
an
aggregate sale price giving rise to such purchase obligation of $10,000,
under
clause (1) of the immediately preceding sentence the Issuer shall be required
to
pay the Holder $1,000. The Holder shall provide the Issuer written notice
indicating the amounts payable to the Holder in respect of the Buy-In, together
with applicable confirmations and other evidence reasonably requested by
the
Issuer. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation,
a
decree of specific performance and/or injunctive relief with respect to the
Issuer’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of this Warrant as required pursuant to the terms
hereof.
175
Section
85.6 Transferability
of Warrant.
Subject
to Section 2(h) hereof, this Warrant may be transferred by a Holder, in whole
or
in part, without the consent of the Issuer. If transferred pursuant to this
paragraph, this Warrant may be transferred on the books of the Issuer by
the
Holder hereof in person or by duly authorized attorney, upon surrender of
this
Warrant at the principal office of the Issuer, properly endorsed (by the
Holder
executing an assignment in the form attached hereto) and upon payment of
any
necessary transfer tax or other governmental charge imposed upon such transfer.
This Warrant is exchangeable at the principal office of the Issuer for Warrants
to purchase the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange.
All
Warrants issued on transfers or exchanges shall be dated the Original Issue
Date
and shall be identical with this Warrant except as to the number of shares
of
Warrant Stock issuable pursuant thereto.
Section
85.7 Continuing
Rights of Holder.
The
Issuer will, at the time of or at any time after each exercise of this Warrant,
upon the request of the Holder hereof, acknowledge in writing the extent,
if
any, of its continuing obligation to afford to such Holder all rights to
which
such Holder shall continue to be entitled after such exercise in accordance
with
the terms of this Warrant, provided that if any such Holder shall fail to
make
any such request, the failure shall not affect the continuing obligation
of the
Issuer to afford such rights to such Holder.
Section
85.8 Compliance
with Securities Laws.
(i) The
Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and
the shares of Warrant Stock to be issued upon exercise hereof are being acquired
solely for the Holder’s own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement, or
an
exemption from registration, under the Securities Act and any applicable
state
securities laws.
(ii) Except
as
provided in paragraph (iii) below, this Warrant and all certificates
representing shares of Warrant Stock issued upon exercise hereof shall be
stamped or imprinted with a legend in substantially the following
form:
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
LAWS
IS NOT REQUIRED.
176
(iii) The
Issuer agrees to reissue this Warrant or certificates representing any of
the
Warrant Stock, without the legend set forth above if at such time, prior
to
making any transfer of any such securities, the Holder shall give written
notice
to the Issuer describing the manner and terms of such transfer. Such proposed
transfer will not be effected until: (a) either (i) the Issuer has received
an
opinion of counsel reasonably satisfactory to the Issuer, to the effect that
the
registration of such securities under the Securities Act is not required
in
connection with such proposed transfer, (ii) a registration statement under
the
Securities Act covering such proposed disposition has been filed by the Issuer
with the Securities and Exchange Commission and has become effective under
the
Securities Act, (iii) the Issuer has received other evidence reasonably
satisfactory to the Issuer that such registration and qualification under
the
Securities Act and state securities laws are not required, or (iv) the Holder
provides the Issuer with reasonable assurances that such security can be
sold
pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer
has
received an opinion of counsel reasonably satisfactory to the Issuer, to
the
effect that registration or qualification under the securities or “blue sky”
laws of any state is not required in connection with such proposed disposition,
or (ii) compliance with applicable state securities or “blue sky” laws has been
effected or a valid exemption exists with respect thereto. The Issuer will
respond to any such notice from a holder within three (3) Trading Days. In
the
case of any proposed transfer under this Section 2(h), the Issuer will use
reasonable efforts to comply with any such applicable state securities or
“blue
sky” laws, but shall in no event be required, (x) to qualify to do business in
any state where it is not then qualified, (y) to take any action that would
subject it to tax or to the general service of process in any state where
it is
not then subject, or (z) to comply with state securities or “blue sky” laws of
any state for which registration by coordination is unavailable to the Issuer.
The restrictions on transfer contained in this Section 2(h) shall be in addition
to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant. Whenever a certificate
representing the Warrant Stock is required to be issued to the Holder without
a
legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall cause its transfer agent to electronically transmit
the
Warrant Stock to the Holder by crediting the account of the Holder or Holder’s
Prime Broker with DTC through its DWAC system (to the extent not inconsistent
with any provisions of this Warrant or the Purchase Agreement).
Section
85.9 Accredited
Investor Status.
In no
event may the Holder exercise this Warrant in whole or in part unless the
Holder
is an “accredited investor” as defined in Regulation D under the Securities
Act.
ARTICLE
LXXXVIStock
Fully Paid; Reservation and Listing of Shares;
Covenants.
Section
86.1 Stock
Fully Paid.
The
Issuer represents, warrants, covenants and agrees that all shares of Warrant
Stock which may be issued upon the exercise of this Warrant or otherwise
hereunder will, when issued in accordance with the terms of this Warrant,
be
duly authorized, validly issued, fully paid and non-assessable and free from
all
taxes, liens and charges created by or through the Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may
be
exercised, the Issuer will at all times have authorized and reserved for
the
purpose of the issuance upon exercise of this Warrant a number of authorized
but
unissued shares of Common Stock equal to at least one hundred percent (100%)
of
the number of shares of Common Stock issuable upon exercise of this Warrant
without regard to any limitations on exercise.
177
Section
86.2 Reservation.
If any
shares of Common Stock required to be reserved for issuance upon exercise
of
this Warrant or as otherwise provided hereunder require registration or
qualification with any Governmental Authority under any federal or state
law
before such shares may be so issued, the Issuer will in good faith use its
best
efforts as expeditiously as possible at its expense to cause such shares
to be
duly registered or qualified. If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, and maintain and increase when necessary such listing, of, all shares
of Warrant Stock from time to time issued upon exercise of this Warrant or
as
otherwise provided hereunder (provided that such Warrant Stock has been
registered pursuant to a registration statement under the Securities Act
then in
effect), and, to the extent permissible under the applicable securities exchange
rules, all unissued shares of Warrant Stock which are at any time issuable
hereunder, so long as any shares of Common Stock shall be so listed. The
Issuer
will also so list on each securities exchange or market, and will maintain
such
listing of, any other securities which the Holder of this Warrant shall be
entitled to receive upon the exercise of this Warrant if at the time any
securities of the same class shall be listed on such securities exchange
or
market by the Issuer.
Section
86.3 Covenants.
The
Issuer shall not by any action including, without limitation, amending the
Articles of Incorporation or the by-laws of the Issuer, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other action, avoid or seek to avoid the observance
or
performance of any of the terms of this Warrant, but will at all times in
good
faith assist in the carrying out of all such terms and in the taking of all
such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against dilution (to the extent specifically provided herein) or
impairment. Without limiting the generality of the foregoing, the Issuer
will
(i) not permit the par value, if any, of its Common Stock to exceed the then
effective Warrant Price, (ii) not amend or modify any provision of the Articles
of Incorporation or by-laws of the Issuer in any manner that would adversely
affect the rights of the Holders of the Warrants, (iii) take all such action
as
may be reasonably necessary in order that the Issuer may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear
of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (iv) use its best efforts to obtain
all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be reasonably necessary to enable the
Issuer
to perform its obligations under this Warrant.
Section
86.4 Loss,
Theft, Destruction of Warrants.
Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss,
theft, destruction or mutilation of any Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security satisfactory
to the Issuer or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Issuer will make and deliver, in lieu of
such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and
representing the right to purchase the same number of shares of Common
Stock.
178
Section
86.5 Payment
of Taxes.
The
Issuer will pay any documentary stamp taxes attributable to the initial issuance
of the Warrant Stock issuable upon exercise of this Warrant; provided,
however,
that
the Issuer shall not be required to pay any tax or taxes which may be payable
in
respect of any transfer involved in the issuance or delivery of any certificates
representing Warrant Stock in a name other than that of the Holder in respect
to
which such shares are issued.
ARTICLE
LXXXVIIAdjustment
of Warrant Price.
The price at which such shares of Warrant Stock may be purchased upon exercise
of this Warrant shall be subject to adjustment from time to time as set forth
in
this Section 4. The Issuer shall give the Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 in accordance
with
the notice provisions set forth in Section 5.
Section
87.1 Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale.
(i) In
case
the Issuer after the Original Issue Date shall do any of the following (each,
a
“Triggering
Event”):
(a)
consolidate or merge with or into any other Person and the Issuer shall not
be
the continuing or surviving corporation of such consolidation or merger,
or (b)
permit any other Person to consolidate with or merge into the Issuer and
the
Issuer shall be the continuing or surviving Person but, in connection with
such
consolidation or merger, any Capital Stock of the Issuer shall be changed
into
or exchanged for Securities of any other Person or cash or any other property,
or (c) transfer all or substantially all of its properties or assets to any
other Person, or (d) effect a capital reorganization or reclassification
of its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made to the Warrant Price and the number of shares of
Warrant
Stock that may be purchased upon exercise of this Warrant so that, upon the
basis and the terms and in the manner provided in this Warrant, the Holder
of
this Warrant shall be entitled upon the exercise hereof at any time after
the
consummation of such Triggering Event, to the extent this Warrant is not
exercised prior to such Triggering Event, to receive at the Warrant Price
in
effect at the time immediately prior to the consummation of such Triggering
Event, in lieu of the Common Stock issuable upon such exercise of this Warrant
prior to such Triggering Event, the Securities, cash and property to which
such
Holder would have been entitled upon the consummation of such Triggering
Event
if such Holder had exercised the rights represented by this Warrant immediately
prior thereto (including the right of a shareholder to elect the type of
consideration it will receive upon a Triggering Event), subject to adjustments
(subsequent to such corporate action) as nearly equivalent as possible to
the
adjustments provided for elsewhere in this Section 4; provided,
however,
the
Holder at its option may elect to receive an amount in unregistered shares
of
the common stock of the surviving entity equal to the value of this Warrant
calculated in accordance with the Black-Scholes formula; provided,
further,
such
shares of Common Stock shall be valued at a twenty percent (20%) discount
to the
VWAP of the Common Stock for the twenty (20) Trading Days immediately prior
to
the Triggering Event. Immediately upon the occurrence of a Triggering Event,
the
Issuer shall notify the Holder in writing of such Triggering Event and provide
the calculations in determining the number of shares of Warrant Stock issuable
upon exercise of the new warrant and the adjusted Warrant Price. Upon the
Holder’s request, the continuing or surviving corporation as a result of such
Triggering Event shall issue to the Holder a new warrant of like tenor
evidencing the right to purchase the adjusted number of shares of Warrant
Stock
and the adjusted Warrant Price pursuant to the terms and provisions of this
Section 4(a)(i). Notwithstanding the foregoing to the contrary, this Section
4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
Event is a company that has a class of equity securities registered pursuant
to
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
its common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board. In the event that the
surviving entity pursuant to any such Triggering Event is not a public company
that is registered pursuant to the Exchange Act or its common stock is not
listed or quoted on a national securities exchange, national automated quotation
system or the OTC Bulletin Board, then the Holder shall have the right to
demand
that the Issuer pay to the Holder an amount in cash equal to the value of
this
Warrant calculated in accordance with the Black-Scholes
formula.
179
(ii) In
the
event that the Holder has elected not to exercise this Warrant prior to the
consummation of a Triggering Event and has also elected not to receive an
amount
in cash equal to the value of this Warrant calculated in accordance with
the
Black-Scholes formula pursuant to the provisions of Section 4(a)(i) above,
so
long as the surviving entity pursuant to any Triggering Event is a company
that
has a class of equity securities registered pursuant to the Exchange Act
and its
common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board, the surviving entity
and/or each Person (other than the Issuer) which may be required to deliver
any
Securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not
release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a),
such Holder shall be entitled to receive, and the surviving entity and/or
each
such Person shall have similarly delivered to such Holder an opinion of counsel
for the surviving entity and/or each such Person, which counsel shall be
reasonably satisfactory to such Holder, or in the alternative, a written
acknowledgement executed by the President or Chief Financial Officer of the
Issuer, stating that this Warrant shall thereafter continue in full force
and
effect and the terms hereof (including, without limitation, all of the
provisions of this subsection (a)) shall be applicable to the Securities,
cash
or property which the surviving entity and/or each such Person may be required
to deliver upon any exercise of this Warrant or the exercise of any rights
pursuant hereto.
Section
87.2 Stock
Dividends, Subdivisions and Combinations.
If at
any time the Issuer shall:
180
(a) make
or
issue or set a record date for the holders of the Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of,
shares of Common Stock,
(b) subdivide
its outstanding shares of Common Stock into a larger number of shares of
Common
Stock, or
(c) combine
its outstanding shares of Common Stock into a smaller number of shares of
Common
Stock,
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of
shares of Common Stock for which this Warrant is exercisable immediately
prior
to the occurrence of such event would own or be entitled to receive after
the
happening of such event, and (2) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the
number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Common Stock
for
which this Warrant is exercisable immediately after such
adjustment.
Section
87.3 Certain
Other Distributions.
If at
any time the Issuer shall make or issue or set a record date for the holders
of
the Common Stock for the purpose of entitling them to receive any dividend
or
other distribution of:
(a) cash,
(b) any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common
Stock
Equivalents or Additional Shares of Common Stock), or
(c) any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents
or
Additional Shares of Common Stock),
then
(1)
the number of shares of Common Stock for which this Warrant is exercisable
shall
be adjusted to equal the product of the number of shares of Common Stock
for
which this Warrant is exercisable immediately prior to such adjustment
multiplied by a fraction (A) the numerator of which shall be the Per Share
Market Value of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Per Share Market Value minus the amount
allocable to one share of Common Stock of any such cash so distributable
and of
the fair value (as determined in good faith by the Board of Directors of
the
Issuer and supported by an opinion from an investment banking firm mutually
agreed upon by the Issuer and the Holder) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or
other
subscription or purchase rights so distributable, and (2) the Warrant Price
then
in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant
is
exercisable immediately prior to the adjustment divided by (B) the number
of
shares of Common Stock for which this Warrant is exercisable immediately
after
such adjustment. A reclassification of the Common Stock (other than a change
in
par value, or from par value to no par value or from no par value to par
value)
into shares of Common Stock and shares of any other class of stock shall
be
deemed a distribution by the Issuer to the holders of its Common Stock of
such
shares of such other class of stock within the meaning of this Section 4(c)
and,
if the outstanding shares of Common Stock shall be changed into a larger
or
smaller number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may
be, of
the outstanding shares of Common Stock within the meaning of Section
4(b).
181
Section
87.4 Issuance
of Additional Shares of Common Stock.
(a) For
the
period commencing on the Original Issue Date and ending on the two (2) year
anniversary of the Original Issue Date, in the event the Issuer shall issue
any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less
than
the Warrant Price then in effect or without consideration, then the Warrant
Price upon each such issuance shall be adjusted to the price equal to the
consideration per share paid for such Additional Shares of Common
Stock.
(b) For
the
period commencing on the two (2) year anniversary of the Original Issue Date
and
ending on the Termination Date, in the event the Issuer shall issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
subsections (a) through (c) of this Section 4), at a price per share less
than
the Warrant Price then in effect or without consideration, then the Warrant
Price then in effect shall multiplied by a fraction (a) the numerator of
which
shall be equal to the sum of (x) the number of shares of outstanding Common
Stock immediately prior to the issuance of such Additional Shares of Common
Stock plus (y) the number of shares of Common Stock (rounded to the nearest
whole share) which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price per
share
equal to the Warrant Price then in effect and (b) the denominator of which
shall
be equal to the number of shares of outstanding Common Stock immediately
after
the issuance of such Additional Shares of Common Stock. For purposes of this
Section, all shares of Common Stock issuable upon exercise of options
outstanding immediately prior to such issue or upon conversion of Convertible
Securities (as defined below) (including Series A Convertible Preferred Stock
of
the Company, par value $.001 per share) outstanding immediately prior to
such
issue are deemed outstanding. No adjustment of the number of shares of Common
Stock for which this Warrant shall be exercisable shall be made pursuant
to this
Section 4(d)(ii) upon the issuance of any Additional Shares of Common Stock
which are issued pursuant to the exercise of any Common Stock Equivalents,
if
any such adjustment shall previously have been made upon the issuance of
such
Common Stock Equivalents (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4(e).
Section
87.5 Issuance
of Common Stock Equivalents.
In the
event the Issuer shall take a record of the holders of its Common Stock for
the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Issuer is the
surviving corporation) issue or sell, any Common Stock Equivalents, whether
or
not the rights to exchange or convert thereunder are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange shall be less than the Warrant Price in effect immediately prior
to
the time of such issue or sale, or if, after any such issuance of Common
Stock
Equivalents, the price per share for which Additional Shares of Common Stock
may
be issuable thereafter is amended or adjusted, and such price as so amended
shall be less than the Warrant Price in effect at the time of such amendment
or
adjustment, then the Warrant Price then in effect shall be adjusted as provided
in Section 4(d)(i) or (ii), as applicable. No further adjustments of the
number
of shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Common Stock Equivalents.
182
Section
87.6 Other
Provisions Applicable to Adjustments under this Section.
The
following provisions shall be applicable to the making of adjustments of
the
number of shares of Common Stock for which this Warrant is exercisable and
the
Warrant Price then in effect provided for in this Section 4:
(i) Computation
of Consideration.
To the
extent that any Additional Shares of Common Stock or any Common Stock
Equivalents (or any warrants or other rights therefor) shall be issued for
cash
consideration, the consideration received by the Issuer therefor shall be
the
amount of the cash received by the Issuer therefor, or, if such Additional
Shares of Common Stock or Common Stock Equivalents are offered by the Issuer
for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Common Stock Equivalents are sold to underwriters or dealers for
public
offering without a subscription offering, the initial public offering price
(in
any such case subtracting any amounts paid or receivable for accrued interest
or
accrued dividends and without taking into account any compensation, discounts
or
expenses paid or incurred by the Issuer for and in the underwriting of, or
otherwise in connection with, the issuance thereof). In connection with any
merger or consolidation in which the Issuer is the surviving corporation
(other
than any consolidation or merger in which the previously outstanding shares
of
Common Stock of the Issuer shall be changed to or exchanged for the stock
or
other securities of another corporation), the amount of consideration therefore
shall be, deemed to be the fair value, as determined reasonably and in good
faith by the Board, and acceptable to the Holder, of such portion of the
assets
and business of the nonsurviving corporation as the Board may determine to
be
attributable to such shares of Common Stock or Common Stock Equivalents,
as the
case may be. The consideration for any Additional Shares of Common Stock
issuable pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration received by the Issuer for issuing such
warrants or other rights plus the additional consideration payable to the
Issuer
upon exercise of such warrants or other rights. The consideration for any
Additional Shares of Common Stock issuable pursuant to the terms of any Common
Stock Equivalents shall be the consideration received by the Issuer for issuing
warrants or other rights to subscribe for or purchase such Common Stock
Equivalents, plus the consideration paid or payable to the Issuer in respect
of
the subscription for or purchase of such Common Stock Equivalents, plus the
additional consideration, if any, payable to the Issuer upon the exercise
of the
right of conversion or exchange in such Common Stock Equivalents. In the
event
of any consolidation or merger of the Issuer in which the Issuer is not the
surviving corporation or in which the previously outstanding shares of Common
Stock of the Issuer shall be changed into or exchanged for the stock or other
securities of another corporation, or in the event of any sale of all or
substantially all of the assets of the Issuer for stock or other securities
of
any corporation, the Issuer shall be deemed to have issued a number of shares
of
its Common Stock for stock or securities or other property of the other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated, and for a consideration equal to the fair market
value on the date of such transaction of all such stock or securities or
other
property of the other corporation. In the event any consideration received
by
the Issuer for any securities consists of property other than cash, the fair
market value thereof at the time of issuance or as otherwise applicable shall
be
as determined in good faith by the Board. In the event Common Stock is issued
with other shares or securities or other assets of the Issuer for consideration
which covers both, the consideration computed as provided in this Section
4(g)(i) shall be allocated among such securities and assets as determined
in
good faith by the Board.
183
(b) When
Adjustments to Be Made.
The
adjustments required by this Section 4 shall be made whenever and as often
as
any specified event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Common Stock for which this Warrant
is
exercisable that would otherwise be required may be postponed (except in
the
case of a subdivision or combination of shares of the Common Stock, as provided
for in Section 4(b)) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made
adds
or subtracts less than one percent (1%) of the shares of Common Stock for
which
this Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount (except
as
aforesaid) which is postponed shall be carried forward and made as soon as
such
adjustment, together with other adjustments required by this Section 4 and
not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed
to have occurred at the close of business on the date of its
occurrence.
(c) Fractional
Interests.
In
computing adjustments under this Section 4, fractional interests in Common
Stock
shall be taken into account to the nearest one one-hundredth (1/100th) of
a
share.
(d) When
Adjustment Not Required.
If the
Issuer shall take a record of the holders of its Common Stock for the purpose
of
entitling them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously
made
in respect thereof shall be rescinded and annulled.
Section
87.7 Form
of Warrant after Adjustments.
The
form of this Warrant need not be changed because of any adjustments in the
Warrant Price or the number and kind of Securities purchasable upon the exercise
of this Warrant.
184
Section
87.8 Escrow
of Warrant Stock.
If
after any property becomes distributable pursuant to this Section 4 by reason
of
the taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, and the Holder exercises
this Warrant, any shares of Common Stock issuable upon exercise by reason
of
such adjustment shall be deemed the last shares of Common Stock for which
this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for the
Holder
by the Issuer to be issued to the Holder upon and to the extent that the
event
actually takes place, upon payment of the current Warrant Price. Notwithstanding
any other provision to the contrary herein, if the event for which such record
was taken fails to occur or is rescinded, then such escrowed shares shall
be
cancelled by the Issuer and escrowed property returned.
ARTICLE
LXXXVIIINotice
of Adjustments.
Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
to
Section 4 hereof (for purposes of this Section 5, each an “adjustment”),
the Issuer shall cause its Chief Financial Officer to prepare and execute
a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board made
any
determination hereunder), and the Warrant Price and Warrant Share Number
after
giving effect to such adjustment, and shall cause copies of such certificate
to
be delivered to the Holder of this Warrant promptly after each adjustment.
Any
dispute between the Issuer and the Holder of this Warrant with respect to
the
matters set forth in such certificate may at the option of the Holder of
this
Warrant be submitted to a national or regional accounting firm reasonably
acceptable to the Issuer and the Holder (the “Independent
Appraiser”),
provided
that the Issuer shall have ten (10) days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right
of
objection. The Independent Appraiser selected by the Holder of this Warrant
as
provided in the preceding sentence shall be instructed to deliver a written
opinion as to such matters to the Issuer and such Holder within thirty (30)
days
after submission to it of such dispute. Such opinion shall be final and binding
on the parties hereto. The reasonable expenses of the Independent Appraiser
in
making such determination shall be paid by the Issuer, in the event the Holder's
calculation was correct, or by the Holder, in the event the Issuer’s calculation
was correct, or equally by the Issuer and the Holder in the event that neither
the Issuer's or the Holder's calculation was correct.
ARTICLE
LXXXIXFractional
Shares.
No fractional shares of Warrant Stock will be issued in connection with any
exercise hereof, but in lieu of such fractional shares, the Issuer shall
round
the number of shares to be issued upon exercise up to the nearest whole number
of shares.
ARTICLE
XCOwnership
Cap and Exercise Restriction.
Notwithstanding anything to the contrary set forth in this Warrant, at no
time
may a Holder of this Warrant exercise this Warrant if the number of shares
of
Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock beneficially owned by such
Holder at such time, the number of shares of Common Stock which would result
in
such Holder beneficially owning (as determined in accordance with Section
13(d)
of the Exchange Act and the rules thereunder) in excess of 4.99% of the then
issued and outstanding shares of Common Stock; provided,
however,
that upon a holder of this Warrant providing the Issuer with sixty-one (61)
days
notice (pursuant to Section 13 hereof) (the “Waiver
Notice”)
that such Holder would like to waive this Section 7 with regard to any or
all
shares of Common Stock issuable upon exercise of this Warrant, this Section
7
will be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice; provided,
further,
that this provision shall be of no further force or effect during the sixty-one
(61) days immediately preceding the expiration of the term of this
Warrant.
185
ARTICLE
XCIRegistration
Rights.
The Holder of this Warrant is entitled to the benefit of certain registration
rights with respect to the shares of Warrant Stock issuable upon the exercise
of
this Warrant pursuant to that certain Registration Rights Agreement, of even
date herewith, by and among the Company and Persons listed on Schedule I
thereto
(the “Registration
Rights Agreement”)
and the registration rights with respect to the shares of Warrant Stock issuable
upon the exercise of this Warrant by any subsequent Holder may only be assigned
in accordance with the terms and provisions of the Registrations Rights
Agreement.
ARTICLE
XCIIDefinitions.
For the purposes of this Warrant, the following terms have the following
meanings:
“Additional
Shares of Common Stock”
means
all shares of Common Stock issued by the Issuer after the Original Issue
Date,
and all shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) securities issued pursuant to a bona fide firm
underwritten public offering of the Company’s securities, provided such
underwritten public offering has been approved in advance by the holders
of more
than fifty percent (50%) of the then outstanding shares of Series A (the
“Majority
Holders”),
(ii)
securities issued (other than for cash) in connection with a strategic merger,
acquisition, or consolidation, provided that the issuance of such securities
in
connection with such strategic merger, acquisition, or consolidation has
been
approved in advance by the Majority Holders, (iii) securities issued pursuant
to
the conversion or exercise of convertible or exercisable securities issued
or
outstanding on or prior to the date of the Purchase Agreement or issued pursuant
to the Purchase Agreement (so long as the conversion or exercise price in
such
securities are not amended to lower such price and/or adversely affect the
Holders), (iv) the Warrant Stock, (v) securities issued in connection with
bona
fide strategic license agreements or other partnering arrangements so long
as
such issuances are not for the purpose of raising capital and provided that
the
issuance of such securities in connection with such bona fide strategic license
agreements or other partnering arrangements has been approved in advance
by the
Majority Holders, (vi) Common Stock issued or the issuance or grants of options
to purchase Common Stock pursuant to the Issuer’s equity incentive plans
outstanding as they exist on the date of the Purchase Agreement, (vii) the
issuance or grants of options to purchase Common Stock to employees, officers
or
directors of the Issuer pursuant to any equity incentive plan duly adopted
by
the Board or a committee thereof established for such purpose so long as
such
issuances in the aggregate do not exceed ten percent (10)% of the issued
and
outstanding shares of Common Stock as of the Original Issue Date and the
specified price at which the options may be exercised is equal to or greater
than the Per Share Market Value as of the date of such grant, and (viii)
any
warrants, shares of Common Stock or other securities issued to a placement
agent
and its designees for the transactions contemplated by the Purchase Agreement
or
in any other sales of the Issuer’s securities and any securities issued in
connection with any financial advisory agreements of the Issuer and the shares
of Common Stock issued upon exercise of any such warrants or conversions
of any
such other securities.
186
“Articles
of Incorporation”
means
the Articles of Incorporation of the Issuer as in effect on the Original
Issue
Date, and as hereafter from time to time amended, modified, supplemented
or
restated in accordance with the terms hereof and thereof and pursuant to
applicable law.
“Board”
shall
mean the Board of Directors of the Issuer.
“Capital
Stock”
means
and includes (i) any and all shares, interests, participations or other
equivalents of or interests in (however designated) corporate stock, including,
without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is
a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
“Common
Stock”
means
the Common Stock, $0.001 par value per share, of the Issuer and any other
Capital Stock into which such stock may hereafter be changed.
“Common
Stock Equivalent”
means
any Convertible Security or warrant, option or other right to subscribe for
or
purchase any Additional Shares of Common Stock or any Convertible
Security.
“Convertible
Securities”
means
evidences of Indebtedness, shares of Capital Stock or other Securities which
are
or may be at any time convertible into or exchangeable for Additional Shares
of
Common Stock. The term “Convertible Security” means one of the Convertible
Securities.
“Governmental
Authority”
means
any governmental, regulatory or self-regulatory entity, department, body,
official, authority, commission, board, agency or instrumentality, whether
federal, state or local, and whether domestic or foreign.
“Holders”
mean
the Persons who shall from time to time own any Warrant. The term “Holder” means
one of the Holders.
“Independent
Appraiser”
means
a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may
be
the firm that regularly examines the financial statements of the Issuer)
that is
regularly engaged in the business of appraising the Capital Stock or assets
of
corporations or other entities as going concerns, and which is not affiliated
with either the Issuer or the Holder of any Warrant.
187
“Issuer”
means
Victory Divide Mining Company, a Nevada corporation, and its
successors.
“Majority
Holders”
means
at any time the Holders of Warrants exercisable for a majority of the shares
of
Warrant Stock issuable under the Warrants at the time outstanding.
“Original
Issue Date”
means
October 3, 2007.
“OTC
Bulletin Board”
means
the over-the-counter electronic bulletin board.
“Other
Common”
means
any other Capital Stock of the Issuer of any class which shall be authorized
at
any time after the date of this Warrant (other than Common Stock) and which
shall have the right to participate in the distribution of earnings and assets
of the Issuer without limitation as to amount.
“Outstanding
Common Stock”
means,
at any given time, the aggregate amount of outstanding shares of Common Stock,
assuming full exercise, conversion or exchange (as applicable) of all options,
warrants and other Securities which are convertible into or exercisable or
exchangeable for, and any right to subscribe for, shares of Common Stock
that
are outstanding at such time.
“Person”
means
an individual, corporation, limited liability company, partnership, joint
stock
company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.
“Per
Share Market Value”
means
on any particular date (a) the last closing price per share of the Common
Stock
on such date on the OTC Bulletin Board or another registered national stock
exchange on which the Common Stock is then listed, or if there is no closing
price on such date, then the closing bid price on such date, or if there
is no
closing bid price on such date, then the closing price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the OTC Bulletin Board or any registered national
stock exchange, the last closing price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business
on
such date, or if there is no closing price on such date, then the closing
bid
price on such date, or (c) if the Common Stock is not then reported by the
OTC
Bulletin Board or the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices),
then
the average of the “Pink Sheet” quotes for the five (5) Trading Days preceding
such date of determination, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by
an
Independent Appraiser selected in good faith by the Majority Holders;
provided,
however,
that
the Issuer, after receipt of the determination by such Independent Appraiser,
shall have the right to select an additional Independent Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Independent Appraiser; and provided,
further,
that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during
such
period. The determination of fair market value by an Independent Appraiser
shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding
on
all parties. In determining the fair market value of any shares of Common
Stock,
no consideration shall be given to any restrictions on transfer of the Common
Stock imposed by agreement or by federal or state securities laws, or to
the
existence or absence of, or any limitations on, voting rights.
188
“Purchase
Agreement”
means
the Series A Convertible Preferred Stock Purchase Agreement dated as of October
3, 2007, among the Issuer and the Purchasers.
“Purchasers”
means
the purchasers of the Series A Convertible Preferred Stock and the Warrants
issued by the Issuer pursuant to the Purchase Agreement.
“Securities”
means
any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities
or a
Security, and any option, warrant or other right to purchase or acquire any
Security. “Security” means one of the Securities.
“Securities
Act”
means
the Securities Act of 1933, as amended, or any similar federal statute then
in
effect.
“Subsidiary”
means
any corporation at least 50% of whose outstanding Voting Stock shall at the
time
be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.
“Term”
has
the
meaning specified in Section 1 hereof.
“Trading
Day”
means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board,
or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which
the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided,
however,
that in
the event that the Common Stock is not listed or quoted as set forth in (a)
or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any
day which shall be a legal holiday or a day on which banking institutions
in the
State of New York are authorized or required by law or other government action
to close.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or
quoted
for trading on the date in question: the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market, the New York Stock Exchange
or
the OTC Bulletin Board.
“Voting
Stock”
means,
as applied to the Capital Stock of any corporation, Capital Stock of any
class
or classes (however designated) having ordinary voting power for the election
of
a majority of the members of the Board of Directors (or other governing body)
of
such corporation, other than Capital Stock having such power only by reason
of
the happening of a contingency.
189
“VWAP”
means,
for any date, the price determined by the first of the following clauses
that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date
(or
the nearest preceding date) on the Trading Market on which the Common Stock
is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day
from
9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the
OTC
Bulletin Board is not a Trading Market, the volume weighted average price
of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the "Pink Sheets"
published by Pink Sheets, LLC (or a similar organization or agency succeeding
to
its functions of reporting prices), the most recent bid price per share of
the
Common Stock so reported; or (d) in all other cases, the fair market value
of a
share of Common Stock as determined by an independent appraiser selected
in good
faith by the Holders of a majority in interest of the Warrants then outstanding
and reasonably acceptable to the Company, the fees and expenses of which
shall
be paid by the Company.
“Warrants”
means
the Warrants issued and sold pursuant to the Purchase Agreement, including,
without limitation, this Warrant, and any other warrants of like tenor issued
in
substitution or exchange for any thereof pursuant to the provisions of Section
2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
“Warrant
Price”
initially means $3.85, as such price may be adjusted from time to time as
shall
result from the adjustments specified in this Warrant, including Section
4
hereto.
“Warrant
Share Number”
means
at any time the aggregate number of shares of Warrant Stock which may at
such
time be purchased upon exercise of this Warrant, after giving effect to all
prior adjustments and increases to such number made or required to be made
under
the terms hereof.
“Warrant
Stock”
means
Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
issuable pursuant to any Warrant or Warrants.
ARTICLE
XCIIIOther
Notices.
In case at any time:
Section
93.1 the
Issuer shall make any distributions to the holders of Common Stock;
or
Section
93.2 the
Issuer shall authorize the granting to all holders of its Common Stock of
rights
to subscribe for or purchase any shares of Capital Stock of any class or
other
rights; or
Section
93.3 there
shall be any reclassification of the Capital Stock of the Issuer;
or
Section
93.4 there
shall be any capital reorganization by the Issuer; or
190
Section
93.5 there
shall be any (i) consolidation or merger involving the Issuer or (ii) sale,
transfer or other disposition of all or substantially all of the Issuer’s
property, assets or business (except a merger or other reorganization in
which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or
Section
93.6 there
shall be a voluntary or involuntary dissolution, liquidation or winding-up
of
the Issuer or any partial liquidation of the Issuer or distribution to holders
of Common Stock;
then,
in
each of such cases, the Issuer shall give written notice to the Holder of
the
date on which (i) the books of the Issuer shall close or a record shall be
taken
for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common
Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock
for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
(20) days prior to the action in question and not less than ten (10) days
prior
to the record date or the date on which the Issuer’s transfer books are closed
in respect thereto. This Warrant entitles the Holder to receive copies of
all
financial and other information distributed or required to be distributed
to the
holders of the Common Stock.
ARTICLE
XCIVAmendment
and Waiver.
Any term, covenant, agreement or condition in this Warrant may be amended,
or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), by a written instrument or written
instruments executed by the Issuer and the Majority Holders;
provided,
however,
that no such amendment or waiver shall reduce the Warrant Share Number, increase
the Warrant Price, shorten the period during which this Warrant may be exercised
or modify any provision of this Section 11 without the consent of the Holder
of
this Warrant. No consideration shall be offered or paid to any person to
amend
or consent to a waiver or modification of any provision of this Warrant unless
the same consideration is also offered to all holders of the
Warrants.
ARTICLE
XCVGoverning
Law; Jurisdiction.
This Warrant shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Warrant shall not be interpreted or construed
with
any presumption against the party causing this Warrant to be drafted. The
Issuer
and the Holder agree that venue for any dispute arising under this Warrant
will
lie exclusively in the state or federal courts located in New York County,
New
York, and the parties irrevocably waive any right to raise forum non conveniens
or any other argument that New York is not the proper venue. The Issuer and
the
Holder irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Issuer and the Holder consent to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address in effect for notices to it under this Warrant
and
agree that such service shall constitute good and sufficient service of process
and notice thereof. Nothing in this Section 12 shall affect or limit any
right
to serve process in any other manner permitted by law. The Issuer and the
Holder
hereby agree that the prevailing party in any suit, action or proceeding
arising
out of or relating to this Warrant or the Purchase Agreement, shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.
The
parties hereby waive all rights to a trial by jury.
191
ARTICLE
XCVINotices.
All notices, demands, consents, requests, instructions and other communications
to be given or delivered or permitted under or by reason of the provisions
of
this Agreement or in connection with the transactions contemplated hereby
shall
be in writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of
such
delivery (as evidenced by the receipt of the personal delivery service),
(ii) if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing), or (iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance
with
this Section 13), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit
of the
sender). All such notices, demands, consents, requests, instructions and
other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
If
to the Issuer:
|
Victory
Divide Mining Company
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group
Xx.
00 Xxxxxxx Xxxxxx
Jixian
Town Heilongjiang
People’x
Xxxxxxxx xx Xxxxx 000000
Tel:
00-000-000-0000
Fax:
00-000-000-0000
|
with
copies (which copies
shall
not constitute notice)
to:
|
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.: (000) 000-0000, ext. 127
Fax
No.: (000) 000-0000
|
If
to any Holder:
|
At
the address of such Holder set forth on Exhibit A to this Agreement,
with
copies to Holder’s counsel as set forth on Exhibit A or as specified in
writing by such Holder with copies
to:
|
192
with
copies (which copies
shall
not constitute notice)
to:
|
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
Facsimile:
212-407-4000
|
Any
party
hereto may from time to time change its address for notices by giving at
least
ten (10) days written notice of such changed address to the other party
hereto.
ARTICLE
XCVIIWarrant
Agent.
The Issuer may, by written notice to the Holder of this Warrant, appoint
an
agent having an office in New York, New York for the purpose of issuing shares
of Warrant Stock on the exercise of this Warrant pursuant to subsection (b)
of
Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of Section
2 hereof or replacing this Warrant pursuant to subsection (d) of Section
3
hereof, or any of the foregoing, and thereafter any such issuance, exchange
or
replacement, as the case may be, shall be made at such office by such
agent.
ARTICLE
XCVIIIRemedies.
The Issuer stipulates that the remedies at law of the Holder of this Warrant
in
the event of any default or threatened default by the Issuer in the performance
of or compliance with any of the terms of this Warrant are not and will not
be
adequate and that, to the fullest extent permitted by law, such terms may
be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
ARTICLE
XCIXSuccessors
and Assigns.
This Warrant and the rights evidenced hereby shall inure to the benefit of
and
be binding upon the successors and assigns of the Issuer, the Holder hereof
and
(to the extent provided herein) the Holders of Warrant Stock issued pursuant
hereto, and shall be enforceable by any such Holder or Holder of Warrant
Stock.
ARTICLE
CModification
and Severability.
If, in any action before any court or agency legally empowered to enforce
any
provision contained herein, any provision hereof is found to be unenforceable,
then such provision shall be deemed modified to the extent necessary to make
it
enforceable by such court or agency. If any such provision is not enforceable
as
set forth in the preceding sentence, the unenforceability of such provision
shall not affect the other provisions of this Warrant, but this Warrant shall
be
construed as if such unenforceable provision had never been contained
herein.
ARTICLE
CIHeadings.
The headings of the Sections of this Warrant are for convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
193
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
194
IN
WITNESS WHEREOF, the Issuer has executed this Series D Warrant as of the
day and
year first above written.
VICTORY
DIVIDE MINING COMPANY
By:
___/s/
Shulin Liu_________
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
195
EXERCISE
FORM
SERIES
D
WARRANT
VICTORY
DIVIDE MINING COMPANY
The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of
________________________________ covered by the within Warrant.
Dated:
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Signature
|
|
Address
|
|
|||
|
||||
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by
the
Holder on the date of Exercise: _________________________
The
undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
The
undersigned intends that payment of the Warrant Price shall be made as (check
one):
Cash
Exercise_______
Cashless
Exercise_______
If
the
Holder has elected a Cash Exercise, the Holder shall pay the sum of $________
by
certified or official bank check (or via wire transfer) to the Issuer in
accordance with the terms of the Warrant.
If
the
Holder has elected a Cashless Exercise, a certificate shall be issued to
the
Holder for the number of shares equal to the whole number portion of the
product
of the calculation set forth below, which is ___________. The Company shall
pay
a cash adjustment in respect of the fractional portion of the product of
the
calculation set forth below in an amount equal to the product of the fractional
portion of such product and the Per Share Market Value on the date of exercise,
which product is ____________.
X
= Y -
(A)(Y)
B
Where:
The
number of shares of Common Stock to be issued to the Holder
__________________(“X”).
196
The
number of shares of Common Stock purchasable upon exercise of all of the
Warrant
or, if only a portion of the Warrant is being exercised, the portion of the
Warrant being exercised ___________________________ (“Y”).
The
Warrant Price ______________ (“A”).
The
Per
Share Market Value of one share of Common Stock _______________________
(“B”).
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and
does
irrevocably constitute and appoint _____________, attorney, to transfer the
said
Warrant on the books of the within named corporation.
Dated:
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Signature
|
|
Address
|
|
|||
|
||||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
Dated:
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Signature
|
|
Address
|
|
|||
|
||||
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock
in
the name of _______________.
197
EXHIBIT
D-1 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
_________________________________________________
FORM
OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”)
is
made and entered into as of October 3, 2007, by and among Victory Divide
Mining
Company, a Nevada corporation (the “Company”),
and
the purchasers listed on Schedule I hereto (the “Purchasers”).
This
Agreement is being entered into pursuant to the Series A Convertible Preferred
Stock Purchase Agreement dated as of the date hereof among the Company and
the
Purchasers (the “Purchase
Agreement”).
The
Company and the Purchasers hereby agree as follows:
ARTICLE
CIIDefinitions.
Capitalized
terms used and not otherwise defined herein shall have the meanings given
such
terms in the Purchase Agreement. As used in this Agreement, the following
terms
shall have the following meanings:
“Additional
Filing Date”
shall
mean the thirtieth (30th)
day
following the date on which a Demand Notice is received by the Company;
provided
that if
any Additional Filing Date falls on a Saturday, Sunday or any other day which
shall be a legal holiday or a day on which the Commission is authorized by
law
or other government actions to close, the Additional Filing Date shall be the
following Business Day.
“Advice”
shall
have meaning set forth in Section 3(m).
“Affiliate”
means,
with respect to any Person, any other Person that directly or indirectly
controls or is controlled by or under common control with such Person. For
the
purposes of this definition, “control,” when used with respect to any Person,
means the possession, direct or indirect, of the power to direct or cause
the
direction of the management and policies of such Person, whether through
the
ownership of voting securities, by contract or otherwise; and the terms of
“affiliated,”
“controlling”
and
“controlled”
have
meanings correlative to the foregoing.
“Board”
shall
have meaning set forth in Section 3(n).
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a legal holiday
or a
day on which banking institutions in the state of New York generally are
authorized or required by law or other government actions to
close.
198
“Closing
Date”
means
the date of the Closing of the purchase and sale of the Preferred Stock and
the
Warrants pursuant to the Purchase Agreement.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the Company’s Common Stock, par value $0.001 per share.
“Demand
Notice”
shall
have the meaning set forth in Section 2A.
“Effectiveness
Date”
means,
with respect to any Registration Statement the earlier of (A) the one hundred
twentieth (120th)
day
following the Filing Date or any Additional Filing Dates, as applicable,
or (B)
in the event the Registration Statement receives a “full review” by the
Commission, the one hundred fiftieth (150th)
day
following the Filing Date or any Additional Filing Dates, as applicable,
which
shall be extended for an additional thirty (30) days in the event the Commission
provides comments solely on the issues related to Rule 415, or (C) the date
which is within three (3) Business Days after the date on which the Commission
informs the Company the (i) the Commission will not review a Registration
Statement or (ii) the Company may request the acceleration of the effectiveness
of a Registration Statement and the Company makes such request; provided,
that,
if the Effectiveness Date falls on a Saturday, Sunday or any other day which
shall be a legal holiday or a day on which the Commission is authorized or
required by law or other government actions to close, the Effectiveness Date
shall be the following Business Day.
“Effectiveness
Period”
shall
have the meaning set forth in Section 2.
“Event”
shall
have the meaning set forth in Section 7(e).
“Event
Date”
shall
have the meaning set forth in Section 7(e).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Filing
Date”
means,
the thirtieth (30th)
day
following the Closing Date; provided,
that,
if the Filing Date falls on a Saturday, Sunday or any other day which shall
be a
legal holiday or a day on which the Commission is authorized or required
by law
or other government actions to close, the Filing Date shall be the following
Business Day.
“Holder”
or
“Holders”
means
the holder or holders, as the case may be, from time to time of Registrable
Securities.
“Indemnified
Party”
shall
have the meaning set forth in Section 5(c).
“Indemnifying
Party”
shall
have the meaning set forth in Section 5(c).
“Initiating
Holders”
shall
have the meaning set forth in Section 2A.
“Little
Shares”
means
the shares of Common Stock listed in Schedule II hereto.
199
“Losses”
shall
have the meaning set forth in Section 5(a).
“Person”
means
an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof)
or
other entity of any kind.
“Preferred
Stock”
means
shares of the Company’s Series A Convertible Preferred Stock issued to the
Purchasers pursuant to the Purchase Agreement.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted
from a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such
Prospectus.
“Registrable
Securities”
means
(i) the shares of Common Stock issuable upon conversion of the Preferred
Stock
(“Conversion Shares”), (ii) the shares of Common Stock issuable upon exercise of
the Warrants (collectively, the “Warrant Shares”) and (iii) the shares of Common
Stock that may be acquired by the Purchasers either (x) upon their release
from
escrow on the terms and subject to the conditions set forth in the Securities
Escrow Agreement (the “Escrow Shares”) and (y) pursuant to Section 3.25 of the
Purchase Agreement (the “Principal Stockholder Shares”).
“Registration
Statement”
means
the registration statements and any additional registration statements
contemplated by Section 2, including (in each case) the Prospectus, amendments
and supplements to such registration statement or Prospectus, including pre-
and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference in such registration statement.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“Rule
158”
means
Rule 158 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“Rule
415”
means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
200
“Rule
424”
means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Securities
Escrow Agreement”
means
the Securities Escrow Agreement dated as of October 3, 2007 by and among
the
Company, Vision Opportunity Master Fund, Ltd, as purchaser representative
Winner
State International Limited, a British Virgin Islands company and Loeb &
Loeb LLP.
“Series
J Warrant”
means
the Series J Warrant of the Company dated October 3, 2007.
“Series
B Convertible Preferred Stock”
means
the $0.001 par value per share Series B Convertible Preferred Stock of the
Company.
“Special
Counsel”
means
____________________, for which the Holders will be reimbursed by the Company
pursuant to Section 4.
“2008
Escrow Shares”
shall
have the meaning ascribed to such term in the Securities Escrow
Agreement.
“2007
Escrow Shares”
shall
have the meaning ascribed to such term in the Securities Escrow
Agreement.
“Warrants”
means
the warrants to purchase shares of Common Stock issued to the Purchasers
pursuant to the Purchase Agreement.
ARTICLE
CIIIResale Registrations.
Section
103.1 On
or
prior to the Filing Date, the Company shall prepare and file with the Commission
a “resale” Registration Statement providing for the resale of all Conversion
Shares for an offering to be made on a continuous basis pursuant to Rule
415.
Such Registration Statement shall be on Form SB-2 (except if the Company
is not
then eligible to register for resale the Conversion Shares on Form SB-2,
in
which case such registration shall be on another appropriate form in accordance
herewith and the Securities Act and the rules promulgated thereunder). Such
Registration Statement shall cover to the extent allowable under the Securities
Act and the rules promulgated thereunder (including Rules 415 and 416), such
indeterminate number of additional shares of Common Stock resulting from
stock
splits, stock dividends or similar transactions with respect to the Conversion
Shares. The Company shall (i) not permit any securities other than the
Conversion Shares to be included in such Registration Statement and (ii)
use its
best efforts to cause such Registration Statement to be declared effective
under
the Securities Act as promptly as possible after the filing thereof, but
in any
event prior to the applicable Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until such date
as is
the earlier of (x) the date when all Conversion Shares covered by such
Registration Statement have been sold or (y) the date on which the Conversion
Shares may be sold without any restriction pursuant to Rule 144(k) as determined
by the counsel to the Company pursuant to a written opinion letter, addressed
to
the Company’s transfer agent to such effect (the “Effectiveness Period”). The
Company shall request that the effective time of any such Registration Statement
is 5:00 p.m. Eastern Time on the effective date.
201
Section
103.2 In
the
event that the Company is unable to register for resale under Rule 415 all
of
the Conversion Shares and Little Shares on the Registration Statement that
it
has agreed to file pursuant to the first sentence of this Section 2(a) due
to
limits imposed by the Commission’s interpretation of Rule 415, the Company will
file a Registration Statement under the Securities Act with the Commission
covering the resale by the Purchasers of such lesser amount of the Conversion
Shares and the Little Shares as the Company is able to register pursuant
to the
Commission’s interpretation of Rule 415 of Regulation C under the Securities Act
and use its reasonable best efforts to have such Registration Statement become
effective as promptly as possible and, when permitted to do so by the
Commission, to file subsequent registration statement(s) under the Securities
Act with the Commission covering the resale of any Conversion Shares and
Little
Shares that were omitted from previous registration statement(s) and use
its
reasonable best efforts to have such registration declared effective as promptly
as possible. In furtherance of the Company’s obligations set forth in the
preceding sentence, the parties hereby agree that in the event that any Holder
shall deliver to the Company a written notice at any time after the later
of (x)
the date which is six months after the Effectiveness Date of the latest
Registration Statement that was filed pursuant to Section 2(a) or 2(b) hereof,
as applicable, or (y) the date on which all Conversion Shares registered
on all
of the prior Registration Statements filed pursuant to Section 2(a) and 2(b)
hereof are sold, that the Company shall file, within 30 days following the
date
of receipt of such written notice, an additional Registration Statement
registering any Conversion Shares that were omitted from the initial
Registration Statement.
2A. Demand
Registrations.
(a) At
any
time following the date on which all Conversion Shares have been registered
for
resale pursuant to Section 2 hereof (the “Permitted Request Date”), (i) a Holder
or Holders owning 25% or more in interest of the Registrable Securities (other
than the Conversion Shares) (the “Initiating Holders”) may request that the
Company file a Registration Statement providing for the resale of all
Registrable Securities then held by the Initiating Holders by giving written
notice (a “Demand Notice”) of such demand to the Company. The Demand Notice
shall describe the number of Registrable Securities intended to be disposed
of
and the intended method of disposition. The Company shall then prepare and
file
with the Commission on or prior to the Additional Filing Date, a “resale”
Registration Statement providing for the resale of all Registrable Securities
included in the Demand Notice for an offering to be made on a continuous
basis
pursuant to Rule 415. Any such Registration Statements shall be on Form SB-2
(except if the Company is not then eligible to register for resale such
Registrable Securities on Form SB-2, in which case such registrations shall
be
on another appropriate form in accordance herewith and the Securities Act
and
the rules promulgated thereunder). Each such Registration Statement shall
cover
to the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rules 415 and 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities. The Company
shall (i) not permit any securities other than the Registrable Securities
to be
included in any such Registration Statement and (ii) use its reasonable best
efforts to cause any such Registration Statement to be declared effective
under
the Securities Act as promptly as possible after the filing thereof, but
in any
event prior to the applicable Effectiveness Date, and to keep any such
Registration Statement continuously effective under the Securities Act until
such date as is the earlier of (x) the date when all Registrable Securities
covered by such Registration Statement have been sold or (y) the date on
which
the Registrable Securities may be sold without any restriction pursuant to
Rule
144(k) as determined by the counsel to the Company pursuant to a written
opinion
letter, addressed to the Company’s transfer agent to such effect (the
“Effectiveness Period”). The Company shall request that the effective time of
any such Registration Statement is 5:00 p.m. Eastern Time on the effective
date.
202
(b) In
the
event that the Company is unable to register for resale under Rule 415 all
of
the Registrable Securities on any of the Registration Statements that it
has
agreed to file pursuant to the first sentence of this Section 2A(a) due to
limits imposed by the Commission’s interpretation of Rule 415 of Regulation C,
the Company will file a Registration Statement under the Securities Act with
the
Commission covering the resale by the Purchasers of such lesser amount of
the
Registrable Securities (in the proportions set forth in the last sentence
of
this Section 2A(b)) as the Company is able to register pursuant to the
Commission’s interpretation of Rule 415 and use its reasonable best efforts to
have such Registration Statement become effective as promptly as possible,
and,
when permitted to do so by the Commission, to file subsequent registration
statement(s) under the Securities Act with the Commission covering the resale
of
any Registrable Securities that were omitted from its prior Registration
Statements filed with the Commission pursuant to this Section 2A(b) and use
its
reasonable best efforts to have such registration declared effective as promptly
as possible. In furtherance of the Company’s obligations set forth in the
preceding sentence, the parties hereby agree that in the event that any Holder
shall deliver to the Company a written notice at any time after the later
of (x)
the date which is six months after the Effectiveness Date of the latest
Registration Statement filed pursuant to Section 2A(a) or 2A(b) hereof, as
applicable, or (y) the date on which all Registrable Securities registered
on
all of the prior Registration Statements filed pursuant to Section 2A(a)
and
2A(b) hereof are sold, that the Company shall file, within 30 days following
the
date of receipt of such written notice, an additional Registration Statement
registering any Registrable Securities that were the subject of the applicable
Demand Notice that were omitted from such prior Registration Statements.
ARTICLE
CIVRegistration Procedures.
In
connection with the Company’s registration obligations hereunder, the Company
shall:
Section
104.1 Prepare
and file with the Commission, on or prior to each of the Filing Date and
each
Additional Filing Date, a Registration Statement on Form SB-2 (or if the
Company
is not then eligible to register for resale the Registrable Securities on
Form
SB-2 such registration shall be on another appropriate form in accordance
herewith and the Securities Act and the rules promulgated thereunder) in
accordance with the plan of distribution as set forth on Exhibit
A
hereto
and in accordance with applicable law, and cause such Registration Statement
to
become effective and remain effective as provided herein; provided,
however,
that
not less than five (5) Business Days prior to the filing of such Registration
Statement or any related Prospectus or any amendment or supplement thereto,
the
Company shall (i) furnish to the Holders and any Special Counsel, copies
of all
such documents proposed to be filed, which documents will be subject to the
review of such Holders and such Special Counsel, and (ii) cause its officers
and
directors, counsel and independent certified public accountants to respond
to
such inquiries as shall be necessary, in the reasonable opinion of Special
Counsel, to conduct a reasonable review of such documents. The Company shall
not
file any Registration Statement or any such Prospectus or any amendments
or
supplements thereto to which the Holders of a majority of the Registrable
Securities or any Special Counsel shall reasonably object in writing within
three (3) Business Days of their receipt thereof.
203
Section
104.2 (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective as to the applicable Registrable
Securities for the applicable Effectiveness Period and prepare and file with
the
Commission such additional Registration Statements as necessary in order
to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause any related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant
to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible, but in no event later
than ten (10) Business Days, to any comments received from the Commission
with
respect to any such Registration Statement or any amendment thereto and as
promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to any such Registration
Statement; (iv) file the final prospectus pursuant to Rule 424 of the Securities
Act no later than 9:00 a.m. Eastern Time on the Business Day following the
date
any such Registration Statement is declared effective by the Commission;
and (v)
comply in all material respects with the provisions of the Securities Act
and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by any such Registration Statement during the Effectiveness Period
in
accordance with the intended methods of disposition by the Holders thereof
set
forth in such Registration Statement as so amended or in such Prospectus
as so
supplemented.
Section
104.3 Notify
the Holders of Registrable Securities and any Special Counsel as promptly
as
possible (and, in the case of (i)(A) below, not less than three (3) Business
Days prior to such filing, and in the case of (iii) below, on the same day
of
receipt by the Company of such notice from the Commission) and (if requested
by
any such Person) confirm such notice in writing no later than one (1) Business
Day following the day (i)(A) when a Prospectus or any Prospectus supplement
or
post-effective amendment to any Registration Statement is filed; (B) when
the
Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on
such
Registration Statement and (C) with respect to any Registration Statement
or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to any Registration Statement or Prospectus
or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any Registration Statement covering
any or
all of the Registrable Securities or the initiation or threatening of any
Proceedings for that purpose; (iv) if at any time any of the representations
and
warranties of the Company contained in any agreement contemplated hereby
ceases
to be true and correct in all material respects; (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for
sale in
any jurisdiction, or the initiation or threatening of any Proceeding for
such
purpose; and (vi) of the occurrence of any event that makes any statement
made
in any Registration Statement or Prospectus or any document incorporated
or
deemed to be incorporated therein by reference untrue in any material respect
or
that requires any revisions to such Registration Statement, Prospectus or
other
documents so that, in the case of any Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material
fact
or omit to state any material fact required to be stated therein or necessary
to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading.
204
Section
104.4 Use
its
best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of,
as promptly as possible, (i) any order suspending the effectiveness of any
such
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction.
Section
104.5 If
requested by the Holders of a majority in interest of the Registrable
Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to any Registration Statement such information as
the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as
soon
as practicable after the Company has received notification of the matters
to be
incorporated in such Prospectus supplement or post-effective
amendment.
Section
104.6 If
requested by any Holder, furnish to such Holder and any Special Counsel,
without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished
or
incorporated by reference) promptly after the filing of such documents with
the
Commission.
Section
104.7 Promptly
deliver to each Holder and any Special Counsel, without charge, as many copies
of the Prospectus or Prospectuses (including each form of prospectus) and
each
amendment or supplement thereto as such Persons may reasonably request; and
subject to the provisions of Sections 3(m) and 3(n), the Company hereby consents
to the use of such Prospectus and each amendment or supplement thereto by
each
of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
Section
104.8 Prior
to
any public offering of Registrable Securities, use its best efforts to register
or qualify or cooperate with the selling Holders and any Special Counsel
in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Holder requests in writing, to keep each such registration
or
qualification (or exemption therefrom) effective during the Effectiveness
Period
and to do any and all other acts or things necessary or advisable to enable
the
disposition in such jurisdictions of the Registrable Securities covered by
a
Registration Statement; provided,
however,
that
the Company shall not be required to qualify generally to do business in
any
jurisdiction where it is not then so qualified or to take any action that
would
subject it to general service of process in any such jurisdiction where it
is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
205
Section
104.9 Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates, to the extent permitted by the
Purchase Agreement and applicable federal and state securities laws, shall
be
free of all restrictive legends, and to enable such Registrable Securities
to be
in such denominations and registered in such names as any Holder may request
in
connection with any sale of Registrable Securities.
Section
104.10 Upon
the
occurrence of any event contemplated by Section 3(c)(vi), as promptly as
possible, prepare a supplement or amendment, including a post-effective
amendment, to a Registration Statement or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered, neither
such Registration Statement nor such Prospectus will contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Section
104.11 Use
its
best efforts to cause all Registrable Securities relating to any Registration
Statement to be listed or quoted on the OTC Bulletin Board or any other
securities exchange, quotation system or market, if any, on which similar
securities issued by the Company are then listed or traded as and when required
pursuant to the Purchase Agreement.
Section
104.12 Comply
in
all material respects with all applicable rules and regulations of the
Commission and make generally available to its security holders all documents
filed or required to be filed with the Commission, including, but not limited,
to, earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any three
month period (or 90 days after the end of any 12-month period if such period
is
a fiscal year) commencing on the first day of the first fiscal quarter of
the
Company after the effective date of each of the Registration Statements,
which
statement shall conform to the requirements of Rule 158.
Section
104.13 The
Company may require each selling Holder to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities
as is
required by law to be disclosed in any Registration Statement, Prospectus,
or
any amendment or supplement thereto, and the Company may exclude from such
registration the Registrable Securities of any such Holder who unreasonably
fails to furnish such information within a reasonable time after receiving
such
request.
If
any
Registration Statement refers to any Holder by name or otherwise as the holder
of any securities of the Company, then such Holder shall have the right to
require (if such reference to such Holder by name or otherwise is not required
by the Securities Act or any similar federal statute then in force) the deletion
of the reference to such Holder in any amendment or supplement to such
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
206
Each
Holder covenants and agrees that it will not sell any Registrable Securities
under any Registration Statement until the Company has electronically filed
the
Prospectus as then amended or supplemented as contemplated in Section 3(g)
and
notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section
3(c).
Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the
kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v), 3(c)(vi) or
3(n),
such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder’s receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the
“Advice”)
by the
Company that the use of the applicable Prospectus may be resumed, and, in
either
case, has received copies of any additional or supplemental filings that
are
incorporated or deemed to be incorporated by reference in such Prospectus
or
Registration Statement.
Section
104.14 If
(i)
there is material non-public information regarding the Company which the
Company’s Board of Directors (the “Board”)
determines not to be in the Company’s best interest to disclose and which the
Company is not otherwise required to disclose, (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or
any
merger, consolidation, tender offer or other similar transaction) available
to
the Company which the Board determines not to be in the Company’s best interest
to disclose, or (iii) the Company is required to file a post-effective amendment
to a Registration Statement to incorporate the Company’s quarterly and annual
reports and audited financial statements on Forms 10-QSB and 10-KSB, then
the
Company may (x) postpone or suspend filing of a registration statement for
a
period not to exceed thirty (30) consecutive days or (y) postpone or suspend
effectiveness of a registration statement for a period not to exceed twenty
(20)
consecutive days; provided,
that
the Company may not postpone or suspend effectiveness of a registration
statement under this Section 3(n) for more than forty-five (45) days in the
aggregate during any three hundred sixty (360) day period; provided,
however,
that no
such postponement or suspension shall be permitted for consecutive twenty
(20)
day periods arising out of the same set of facts, circumstances or
transactions.
ARTICLE
CVRegistration Expenses.
All
fees
and expenses incident to the performance of or compliance with this Agreement
by
the Company, except as and to the extent specified in this Section 4, shall
be
borne by the Company whether or not a Registration Statement is filed or
becomes
effective and whether or not any Registrable Securities are sold pursuant
to
such Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the OTC Bulletin Board and each other securities
exchange or market on which Registrable Securities are required hereunder
to be
listed, if any, (B) with respect to filing fees required to be paid to the
National Association of Securities Dealers, Inc. and the NASD Regulation,
Inc.
(including, without limitation, pursuant to NASD Rule 2710) and (C) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection
with
Blue Sky qualifications of the Registrable Securities and determination of
the
eligibility of the Registrable Securities for investment under the laws of
such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses
of
printing certificates for Registrable Securities and of printing prospectuses
if
the printing of prospectuses is requested by the holders of a majority of
the
Registrable Securities included in a Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for
the
Company and Special Counsel for the Holders, in the case of the Special Counsel,
up to a maximum amount of $7,500, (v) Securities Act liability insurance,
if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation,
the
Company’s independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with
the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit,
the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange if required hereunder. The Company
shall
not be responsible for any discounts, commissions, transfer taxes or other
similar fees incurred by the Holders in connection with the sale of the
Registrable Securities.
207
ARTICLE
CVIIndemnification.
Section
106.1 Indemnification
by the Company.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless each Holder, the officers, directors, managers, partners, members,
shareholders, agents, brokers, investment advisors and employees of each
of
them, each Person who controls any such Holder (within the meaning of Section
15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses,
claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys’ fees) and expenses (collectively, “Losses”),
as
incurred, arising out of or relating to any violation of securities laws
or
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the
case of
any Prospectus or form of prospectus or supplement thereto, in the light
of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder or such other Indemnified Party
furnished in writing to the Company by such Holder expressly for use therein.
The Company shall notify the Holders promptly of the institution, threat
or
assertion of any Proceeding of which the Company is aware in connection with
the
transactions contemplated by this Agreement.
208
Section
106.2 Indemnification
by Holders.
Each
Holder shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents and employees
of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses (as determined by a court of competent jurisdiction
in a final judgment not subject to appeal or review), as incurred, arising
solely out of or based solely upon any untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely
out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent,
but
only to the extent, that such untrue statement or omission is contained in
any
information so furnished in writing by such Holder or other Indemnifying
Party
to the Company specifically for inclusion in any Registration Statement or
such
Prospectus. Notwithstanding anything to the contrary contained herein, each
Holder shall be liable under this Section 5(b) for only that amount as does
not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
Section
106.3 Conduct
of Indemnification Proceedings.
If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified
Party”),
such
Indemnified Party promptly shall notify the Person from whom indemnity is
sought
(the “Indemnifying
Party”)
in
writing, and the Indemnifying Party shall be entitled to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only)
to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any
such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees
and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume
the
defense of such Proceeding and to employ counsel reasonably satisfactory
to such
Indemnified Party in any such Proceeding; or (3) the named parties to any
such
Proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such parties shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case,
if
such Indemnified Party notifies the Indemnifying Party in writing that it
elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof
and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld or delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened Proceeding in respect of which any Indemnified Party is a party
and
indemnity has been sought hereunder, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
209
All
fees
and expenses of the Indemnified Party (including reasonable fees and expenses
to
the extent incurred in connection with investigating or preparing to defend
such
Proceeding in a manner not inconsistent with this Section) shall be paid
to the
Indemnified Party, as incurred, within ten (10) Business Days of written
notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided,
that
the Indemnified Party shall reimburse all such fees and expenses to the extent
it is finally judicially determined that such Indemnified Party is not entitled
to indemnification hereunder).
Section
106.4 Contribution.
If a
claim for indemnification under Section 5(a) or 5(b) is due but unavailable
to
an Indemnified Party because of a failure or refusal of a governmental authority
to enforce such indemnification in accordance with its terms (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid
or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other from the offering
of the Preferred Stock and the Warrants. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate
to
reflect not only the relative benefits referred to in the foregoing sentence
but
also the relative fault, as applicable, of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall
be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to
information supplied by, such Indemnifying Party or Indemnified Party, and
the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject
to the limitations set forth in Section 5(c), any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such
fees or
expenses if the indemnification provided for in this Section was available
to
such party in accordance with its terms. In no event shall any selling Holder
be
required to contribute an amount under this Section 5(d) in excess of the
net
proceeds received by such Holder upon the sale of such Holder’s Registrable
Securities pursuant to a Registration Statement giving rise to such contribution
obligation.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by
any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of
the Securities Act) shall be entitled to contribution from any Person who
was
not guilty of such fraudulent misrepresentation.
210
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties pursuant to the law.
ARTICLE
CVIIRule 144.
As
long
as any Holder owns Preferred Stock, Warrants or Registrable Securities, the
Company covenants to timely file (or obtain extensions in respect thereof
and
file within the applicable grace period) all reports required to be filed
by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act. As long as any Holder owns Preferred Stock, Warrants or Registrable
Securities, if the Company is not required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders
and make publicly available in accordance with Rule 144(c) promulgated under
the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well
as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable
such
Person to sell Conversion Shares and Warrant Shares without registration
under
the Securities Act within the limitation of the exemptions provided by Rule
144
promulgated under the Securities Act, including providing any legal opinions
reasonably requested relating to such sale pursuant to Rule 144. Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied
with
such requirements.
ARTICLE
CVIIIMiscellaneous.
Section
108.1 Remedies.
In the
event of a breach by the Company or by a Holder, of any of their obligations
under this Agreement, such Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under
this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense
that
a remedy at law would be adequate.
Section
108.2 No
Inconsistent Agreements.
Neither
the Company nor any of its subsidiaries has, as of the date hereof entered
into
and currently in effect, nor shall the Company or any of its subsidiaries,
on or
after the date of this Agreement, enter into any agreement with respect to
its
securities that is inconsistent with the rights granted to the Holders in
this
Agreement or otherwise conflicts with the provisions hereof. Except as disclosed
on Schedule 2.1(c) of the Purchase Agreement or Schedule II hereto, neither
the
Company nor any of its subsidiaries has previously entered into any agreement
currently in effect granting any registration rights with respect to any
of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any Person the right
to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to
the
prior rights in full of the Holders set forth herein, and are not otherwise
in
conflict with the provisions of this Agreement.
211
Section
108.3 No
Piggyback on Registrations.
Neither
the Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in any
Registration Statement, and the Company shall not after the date hereof enter
into any agreement providing such right to any of its securityholders, unless
the right so granted is subject in all respects to the prior rights in full
of
the Holders set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.
Section
108.4 Piggy-Back
Registrations.
If at
any time when there is not an effective Registration Statement providing
for the
resale of all of the Registrable Securities, the Company shall determine
to
prepare and file with the Commission a registration statement relating to
an
offering for its own account or the account of others under the Securities
Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each
as
promulgated under the Securities Act) or their then equivalents relating
to
equity securities to be issued solely in connection with any acquisition
of any
entity or business or equity securities issuable in connection with stock
option
or other employee benefit plans, the Company shall send to each holder of
Registrable Securities written notice of such determination and, if within
thirty (30) days after receipt of such notice, or within such shorter period
of
time as may be specified by the Company in such written notice as may be
necessary for the Company to comply with its obligations with respect to
the
timing of the filing of such registration statement, any such holder shall
so
request in writing, (which request shall specify the Registrable Securities
intended to be disposed of by the Purchasers), the Company will cause the
registration under the Securities Act of all Registrable Securities which
the
Company has been so requested to register by the holder, to the extent requisite
to permit the disposition of the Registrable Securities so to be registered,
provided that if at any time after giving written notice of its intention
to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation
to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of
a
determination to delay registering, shall be permitted to delay registering
any
Registrable Securities being registered pursuant to this Section 7(d) for
the
same period as the delay in registering such other securities. The Company
shall
include in such registration statement all or any part of such Registrable
Securities such holder requests to be registered; provided,
however,
that
the Company shall not be required to register any Registrable Securities
pursuant to this Section 7(d) that are eligible for sale pursuant to Rule
144(k)
of the Securities Act. In the case of an underwritten public offering, if
the
managing underwriter(s) or underwriter(s) should reasonably object to the
inclusion of the Registrable Securities in such registration statement, then
if
the Company after consultation with the managing underwriter should reasonably
determine that the inclusion of such Registrable Securities would materially
adversely affect the offering contemplated in such registration statement,
and
based on such determination recommends inclusion in such registration statement
of fewer or none of the Registrable Securities of the Holders, then (x) the
number of Registrable Securities of the Holders included in such registration
statement shall be reduced pro-rata among such Holders (based upon the number
of
Registrable Securities requested to be included in the registration), if
the
Company after consultation with the underwriter(s) recommends the inclusion
of
fewer Registrable Securities, or (y) none of the Registrable Securities of
the
Holders shall be included in such registration statement, if the Company
after
consultation with the underwriter(s) recommends the inclusion of none of
such
Registrable Securities; provided,
however,
that if
securities are being offered for the account of other persons or entities
as
well as the Company, such reduction shall not represent a greater fraction
of
the number of Registrable securities intended to be offered by the Holders
than
the fraction of similar reductions imposed on such other persons or entities
(other than the Company).
212
Section
108.5 Failure
to File Registration Statement and Other Events.
The
Company and the Purchasers agree that the Holders will suffer damages if
a
Registration Statement is not filed on or prior to the Filing Date or any
Additional Filing Date, as applicable, or after notice from the Holders,
as set
forth in Section 2(b) hereto or Section 2A(b) hereto, and, in each case,
not
declared effective by the Commission on or prior to the applicable Effectiveness
Date and maintained in the manner contemplated herein during the applicable
Effectiveness Period or if certain other events occur. The Company and the
Holders further agree that it would not be feasible to ascertain the extent
of
such damages with precision. Accordingly, if (A) a Registration Statement
is not
filed on or prior to the Filing Date, any Additional Filing Date or after
notice
from the Holders, as set forth in Section 2(b) hereof or Section 2A(b) hereof,
or (B) a Registration Statement is not declared effective by the
Commission on or prior to the applicable Effectiveness Date, or (C) the Company
fails to file with the Commission a request for acceleration in accordance
with
Rule 461 promulgated under the Securities Act within three (3) Business Days
of
the date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that a Registration Statement will not be “reviewed,”
or not subject to further review, or (D) any Registration Statement is filed
with and declared effective by the Commission but thereafter ceases to be
effective as to all Registrable Securities at any time prior to the expiration
of the Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with and declared effective by the Commission,
or
(E) the Company has breached Section 3(n), or (F) trading in the Common Stock
shall be suspended or if the Common Stock is no longer quoted on or is delisted
from the OTC Bulletin Board (or other principal exchange on which the Common
Stock is listed or traded) for any reason for more than three (3) Business
Days
in the aggregate (any such failure or breach being referred to as an
“Event,”
and
for purposes of clauses (A) and (B) the date on which such Event occurs,
or for
purposes of clause (C) the date on which such three (3) Business Day period
is
exceeded, or for purposes of clause (D) after more than fifteen (15) Business
Days, or for purposes of clause (F) the date on which such three (3) Business
Day period is exceeded, being referred to as “Event
Date”),
the
Company shall pay an amount in cash as liquidated damages to each Holder
equal
to one and one-half percent (1.5%) of the amount of the Holder’s initial
investment in the Preferred Stock for each calendar month or portion thereof
thereafter from the Event Date until the applicable Event is cured; provided,
however,
that in
no event shall the amount of liquidated damages payable at any time and from
time to time to any Holder pursuant to this Section 7(e) exceed an aggregate
of
fifteen percent (15%) of the amount of the Holder’s initial investment in the
Preferred Stock; and provided,
further,
that
notwithstanding the foregoing, in the event the Commission does not permit
all
of the Registrable Securities to be included in a Registration Statement
because
of its application of Rule 415, no liquidated damages shall be payable pursuant
to this Section by the Company with respect to any Registrable Securities
that
the Company was not permitted to include on such Registration Statement and
provided
further,
that
notwithstanding the foregoing, no liquidated damages shall be payable with
respect to the occurrence of an Event described in clauses (A) and (B) above
for
any Warrant Shares other than the Warrant Shares issuable upon exercise of
the
Series J Warrant. Notwithstanding anything to the contrary in this paragraph
(e), if (a) any of the Events described in clauses (A), (B), (C), (D) or
(F)
shall have occurred, (b) on or prior to the applicable Event Date, the Company
shall have exercised its rights under Section 3(n) hereof and (c) the
postponement or suspension permitted pursuant to such Section 3(n) shall
remain
effective as of such applicable Event Date, then the applicable Event Date
shall
be deemed instead to occur on the second Business Day following the termination
of such postponement or suspension. Liquidated damages payable by the Company
pursuant to this Section 7(d) shall be payable on the first (1st) Business
Day
of each thirty (30) day period following the Event Date. The parties agree
that
the liquidated damages set forth in this Section 7(e) shall be the exclusive
remedy of the parties hereto with respect to the breaches by the Company
of this
Section 7(e).
213
Section
108.6 Amendments
and Waivers.
The
provisions of this Agreement, including the provisions of this sentence,
may not
be amended, modified or supplemented, and waivers or consents to departures
from
the provisions hereof may not be given, unless the same shall be in writing
and
signed by the Company and the Holders of a majority of the Registrable
Securities outstanding.
ARTICLE
CIXNotices. All notices, demands, consents, requests, instructions and other
communications to be given or delivered or permitted under or by reason of
the
provisions of this Agreement or in connection with the transactions contemplated
hereby shall be in writing and shall be deemed to be delivered and received
by
the intended recipient as follows: (i) if personally delivered, on the business
day of such delivery (as evidenced by the receipt of the personal delivery
service), (ii) if mailed certified or registered mail return receipt requested,
two (2) business days after being mailed, (iii) if delivered by overnight
courier (with all charges having been prepaid), on the business day of such
delivery (as evidenced by the receipt of the overnight courier service of
recognized standing), or (iv) if delivered by facsimile transmission, on
the
business day of such delivery if sent by 6:00 p.m. in the time zone of the
recipient, or if sent after that time, on the next succeeding business day
(as
evidenced by the printed confirmation of delivery generated by the sending
party’s telecopier machine). If any notice, demand, consent, request,
instruction or other communication cannot be delivered because of a changed
address of which no notice was given (in accordance with this Section 4),
or the
refusal to accept same, the notice, demand, consent, request, instruction
or
other communication shall be deemed received on the second business day the
notice is sent (as evidenced by a sworn affidavit of the sender). All such
notices, demands, consents, requests, instructions and other communications
will
be sent to the following addresses or facsimile numbers as
applicable.
214
If
to the Company:
|
Victory
Divide Mining Company
Victory
Divide Mining Company
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group
Xx.
00 Xxxxxxx Xxxxxx
Jixian
Town Heilongjiang
People’x
Xxxxxxxx xx Xxxxx 000000Xxx:
Fax:
00-000-000-0000
Email: xxxxxxxx0@000.xxx
|
with
copies (which copies
shall
not constitute notice)
to:
|
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.: (000) 000-0000, ext. 102
Fax
No.: (000) 000-0000
|
If
to any Purchaser:
|
To
the addresses set forth on Schedule I
|
with
copies (which copies
shall
not constitute notice)
to:
|
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
Facsimile:
212-407-4000
|
Any
party
hereto may from time to time change its address for notices by giving at
least
ten (10) days written notice of such changed address to the other party
hereto.
Section
109.1 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns and shall inure to the benefit of
each
Holder and its successors and assigns. The Company may not assign this Agreement
or any of its rights or obligations hereunder without the prior written consent
of each Holder. Each Purchaser may assign its rights hereunder in the manner
and
to the Persons as permitted under the Purchase Agreement.
Section
109.2 Assignment
of Registration Rights.
The
rights of each Holder hereunder, including the right to have the Company
register for resale Registrable Securities in accordance with the terms of
this
Agreement, shall be automatically assignable by each Holder to any Person
to
whom all or a portion of the Preferred Stock, the Warrants or the Registrable
Securities are transferred if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement
is
furnished to the Company within a reasonable time after such assignment,
(ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee
or
assignee, and (b) the securities with respect to which such registration
rights
are being transferred or assigned, (iii) following such transfer or assignment
the further disposition of such securities by the transferee or assignees
is
restricted under the Securities Act and applicable state securities laws
unless
such securities are registered in a Registration Statement under this Agreement
(in which case the Company shall be obligated to amend such Registration
Statement to reflect such transfer or assignment) or are otherwise exempt
from
registration, (iv) at or before the time the Company receives the written
notice
contemplated by clause (ii) of this Section, the transferee or assignee agrees
in writing with the Company to be bound by all of the provisions of this
Agreement, and (v) such transfer shall have been made in accordance with
the
applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Holders (and to subsequent) successors and
assigns.
215
Section
109.3 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement and shall become effective when
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties need not sign the same counterpart.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing
(or on
whose behalf such signature is executed) the same with the same force and
effect
as if such facsimile signature were the original thereof.
Section
109.4 Governing
Law; Jurisdiction.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Agreement shall not be interpreted or construed
with
any presumption against the party causing this Agreement to be drafted. The
Company and the Holders agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in
New
York County, New York, and the parties irrevocably waive any right to raise
forum
non conveniens
or any
other argument that New York is not the proper venue. The Company and the
Holders irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Company and the Holders consent to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address in effect for notices to it under this Agreement
and
agrees that such service shall constitute good and sufficient service of
process
and notice thereof. Nothing in this Section 7(k) shall affect or limit any
right
to serve process in any other manner permitted by law. The Company and the
Holders hereby agree that the prevailing party in any suit, action or proceeding
arising out of or relating to this Agreement or the Purchase Agreement, shall
be
entitled to reimbursement for reasonable legal fees from the non-prevailing
party. The parties hereby waive all rights to a trial by jury.
Section
109.5 Cumulative
Remedies.
The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section
109.6 Severability.
If any
term, provision, covenant or restriction of this Agreement is held to be
invalid, illegal, void or unenforceable in any respect, the remainder of
the
terms, provisions, covenants and restrictions set forth herein shall remain
in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ
an
alternative means to achieve the same or substantially the same result as
that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would
have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void
or
unenforceable.
216
Section
109.7 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section
109.8 Shares
Held by the Company and its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held
by the
Company or its Affiliates (other than any Holder or transferees or successors
or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason
of
its holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
Section
109.9 Independent
Nature of Purchasers.
The
Company acknowledges that the obligations of each Purchaser under the
Transaction Documents are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under the Transaction
Documents. The Company acknowledges that the decision of each Purchaser to
purchase Securities pursuant to the Purchase Agreement has been made by such
Purchaser independently of any other Purchaser and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its Subsidiaries
which may have made or given by any other Purchaser or by any agent or employee
of any other Purchaser, and no Purchaser or any of its agents or employees
shall
have any liability to any Purchaser (or any other person) relating to or
arising
from any such information, materials, statements or opinions. The Company
acknowledges that nothing contained herein, or in any Transaction Document,
and
no action taken by any Purchaser pursuant hereto or thereto (including, but
not
limited to, the (i) inclusion of a Purchaser in a Registration Statement
and
(ii) review by, and consent to, such Registration Statement by a Purchaser)
shall be deemed to constitute the Purchasers as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to
such
obligations or the transactions contemplated by the Transaction Documents.
The
Company acknowledges that each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation, the rights
arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Purchaser to be joined as an additional party
in
any proceeding for such purpose. The Company acknowledges that for reasons
of
administrative convenience only, the Transaction Documents have been prepared
by
counsel for one of the Purchasers and such counsel does not represent all
of the
Purchasers. The Company acknowledges that it has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience
of
the Company and not because it was required or requested to do so by the
Purchasers. The Company acknowledges that such procedure with respect to
the
Transaction Documents in no way creates a presumption that the Purchasers
are in
any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated hereby or thereby.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
217
IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of
the
date first indicated above.
VICTORY
DIVIDE MINING COMPANY
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
PURCHASER
BENEFIT
GRAND INVESTMENTS LIMITED
By:
/s/
Xiangxu Zhang
Name:
Xiangxu Zhang
Title:
President
CRESCENT
INTERNATIONAL LTD.
By:
/s/
Xxxxxx Xxxxx-Xxxxxxxx
Name:
Xxxxxx Xxxxx-Xxxxxxxx
Title:
Authorized Signatory
GOLDEN
BRIDGE ASSET MANAGEMENT
By:
/s/
Xxxxx Xxxx
Name:
Xxxxx Xxxx
Title:
Director, authorized signatory
By:
/s/
Xxxxxx X. Xxxxxxxx
Name:
Xxxxxx X. Acerley
XXXXXXX
ROAD PARTNERS, LP
By:
/s/
Xxxxxx X. Xxxxxxxx
Name:
Xxxxxx X. Xxxxxxxx
Title:
Manager, RGA Ventures, LLC
General
Partner of Xxxxxxx Road Partners, XX
XXXX
FOOTWEAR
By:
/s/
Xxxx Xxxxxxxxxx
Name:
Xxxx Xxxxxxxxxx
Title:
President
218
PRECEPT
CAPITAL MASTER FUND, G.P.
By:
/s/
D.
Xxxxx Xxxxx
Name:
D.
Xxxxx Xxxxx
Title:
Managing Member
SANSAR
CAPITAL SPECIAL OPPORTUNITY MASTER FUND, LP (CAYMAN MASTER)
By:
/s/
Xxxxxx Xxxxxxx
Name:
Xxxxxx Xxxxxxx
Title:
President
VICIS
CAPITAL MASTER FUND
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx X. Xxxxxx
Title:
Chief Financial Officer
VISION
OPPORTUNITY MASTER FUND, LTD.
By:
/s/
Xxxx Xxxxxxxx
Name:
Xxxx Xxxxxxxx
Title:
Director
219
Schedule
I
Purchasers
Investor
|
Investment
|
Common
Stock
|
Series
A Shares Purchased
|
Series
A Warrants
|
Series
B Warrants
|
Series
J Warrants
|
Series
C
Warrants
|
Series
D
Warrants
|
|||||||||||||||||
Vision
Opportunity Master Fund Ltd.
|
$
|
8,000,000
|
525,000
|
3,720,930
|
3,720,930
|
1,860,465
|
3,382,664
|
3,382,664
|
1,691,332
|
||||||||||||||||
Sansar
Capital Special Opportunity Master Fund, LP (Cayman
Master)
|
$
|
5,950,000
|
--
|
2,767,442
|
2,767,442
|
1,383,721
|
2,515,856
|
2,515,856
|
1,257,928
|
||||||||||||||||
Vicis
Capital Master Fund
|
$
|
4,500,000
|
--
|
2,093,023
|
2,093,023
|
1,046,512
|
1,902,748
|
1,902,748
|
951,374
|
||||||||||||||||
Precept
Capital Master Fund, GP
|
$
|
500,000
|
--
|
232,558
|
232,558
|
116,279
|
--
|
--
|
--
|
||||||||||||||||
Penn
Footwear
|
$
|
250,000
|
--
|
116,279
|
116,279
|
58,140
|
--
|
--
|
--
|
||||||||||||||||
Crescent
International Limited
|
$
|
300,000
|
--
|
139,353
|
139,353
|
69,767
|
--
|
--
|
--
|
||||||||||||||||
Benefit
Grand Investments
|
$
|
500,000
|
--
|
232,558
|
232,558
|
116,279
|
--
|
--
|
--
|
||||||||||||||||
Golden
Bridge Asset Management
|
$
|
1,000,000
|
--
|
465,116
|
465,116
|
232,558
|
--
|
--
|
--
|
||||||||||||||||
Xxxxxx
X Xxxxxxxx
|
$
|
250,000
|
--
|
116,279
|
116,279
|
58,140
|
--
|
--
|
--
|
||||||||||||||||
Xxxxxxx
Road Partners, LP
|
$
|
250,000
|
--
|
116,279
|
116,279
|
58,140
|
--
|
--
|
--
|
220
Schedule
II
The
following individuals hold piggyback registration rights for an aggregate
of
451,500 shares of Common Stock.
Xxxxx
X. Little
|
399,
000
|
Xxxxx
Xxxx
|
10,000
|
Xxxxxxxx
Xxxxxxx
|
10,000
|
Xxxxx
Xxxxxx
|
10,000
|
Xxxxxx
Xxxxxxx
|
10,000
|
Xxxxxx
Xxxxx
|
10,000
|
Xxxxx
Xxxxxxxx
|
2,500
|
221
Exhibit
A
Plan
of Distribution
The
selling security holders and any of their pledgees, donees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock being offered under this prospectus on any stock exchange,
market or trading facility on which shares of our common stock are traded
or in
private transactions. These sales may be at fixed or negotiated prices. The
selling security holders may use any one or more of the following methods
when
disposing of shares:
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resales by the broker-dealer
for its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
to
cover short sales made after the date that the registration statement
of
which this prospectus is a part is declared effective by the
Commission;
|
·
|
broker-dealers
may agree with the selling security holders to sell a specified
number of
such shares at a stipulated price per
share;
|
·
|
a
combination of any of these methods of sale;
and
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
shares may also be sold under Rule 144 under the Securities Act of 1933,
as
amended (“Securities Act”), if available, rather than under this prospectus. The
selling security holders have the sole and absolute discretion not to accept
any
purchase offer or make any sale of shares if they deem the purchase price
to be
unsatisfactory at any particular time.
The
selling security holders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling security holder defaults
on a margin loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers
engaged by the selling security holders may arrange for other broker-dealers
to
participate in sales. Broker-dealers may receive commissions or discounts
from
the selling security holders (or, if any broker-dealer acts as agent for
the
purchaser of shares, from the purchaser) in amounts to be negotiated, which
commissions as to a particular broker or dealer may be in excess of customary
commissions to the extent permitted by applicable law.
222
If
sales
of shares offered under this prospectus are made to broker-dealers as
principals, we would be required to file a post-effective amendment to the
registration statement of which this prospectus is a part. In the post-effective
amendment, we would be required to disclose the names of any participating
broker-dealers and the compensation arrangements relating to such
sales.
The
selling security holders and any broker-dealers or agents that are involved
in
selling the shares offered under this prospectus may be deemed to be
“underwriters” within the meaning of the Securities Act in connection with these
sales. Commissions received by these broker-dealers or agents and any profit
on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Any broker-dealers or
agents
that are deemed to be underwriters may not sell shares offered under this
prospectus unless and until we set forth the names of the underwriters and
the
material details of their underwriting arrangements in a supplement to this
prospectus or, if required, in a replacement prospectus included in a
post-effective amendment to the registration statement of which this prospectus
is a part.
The
selling security holders and any other persons participating in the sale
or
distribution of the shares offered under this prospectus will be subject
to
applicable provisions of the Exchange Act, and the rules and regulations
under
that act, including Regulation M. These provisions may restrict activities
of,
and limit the timing of purchases and sales of any of the shares by, the
selling
security holders or any other person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from simultaneously
engaging in market making and other activities with respect to those securities
for a specified period of time prior to the commencement of such distributions,
subject to specified exceptions or exemptions. All of these limitations may
affect the marketability of the shares.
If
any of
the shares of common stock offered for sale pursuant to this prospectus are
transferred other than pursuant to a sale under this prospectus, then subsequent
holders could not use this prospectus until a post-effective amendment or
prospectus supplement is filed, naming such holders. We offer no assurance
as to
whether any of the selling security holders will sell all or any portion
of the
shares offered under this prospectus.
We
have
agreed to pay all fees and expenses we incur incident to the registration
of the
shares being offered under this prospectus. However, each selling security
holder and purchaser is responsible for paying any discounts, commissions
and
similar selling expenses they incur.
We
and
the selling security holders have agreed to indemnify one another against
certain losses, damages and liabilities arising in connection with this
prospectus, including liabilities under the Securities Act.
223
EXHIBIT
D-2 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
_________________________________________________
FORM
OF SERIES J REGISTRATION RIGHTS AGREEMENT
SERIES
J - REGISTRATION
RIGHTS AGREEMENT
This
Series J Registration Rights Agreement (this “Agreement”)
is
made and entered into as of October 3, 2007, by and among Victory Divide
Mining
Company, a Nevada corporation (the “Company”),
and
the holders listed on Schedule I hereto (the “Holders”).
This
Agreement is being entered into pursuant to the Series A Convertible Preferred
Stock Purchase Agreement dated as of the date hereof among the Company and
the
Holders (the “Purchase
Agreement”).
The
Company and the Holders hereby agree as follows:
ARTICLE
CXDefinitions.
Capitalized
terms used and not otherwise defined herein shall have the meanings given
such
terms in the Purchase Agreement. As used in this Agreement, the following
terms
shall have the following meanings:
“Additional
Filing Date”
shall
mean the thirtieth (30th)
day
following the date on which the Company is permitted by the Commission to
file a
subsequent registration statement under the Securities Act covering the resale
of any Registrable Securities that were omitted from any prior Registration
Statement(s); provided
that if
any Additional Filing Date falls on a Saturday, Sunday or any other day which
shall be a legal holiday or a day on which the Commission is authorized by
law
or other government actions to close, the Additional Filing Date shall be
the
following Business Day.
“Affiliate”
means,
with respect to any Person, any other Person that directly or indirectly
controls or is controlled by or under common control with such Person. For
the
purposes of this definition, “control,” when used with respect to any Person,
means the possession, direct or indirect, of the power to direct or cause
the
direction of the management and policies of such Person, whether through
the
ownership of voting securities, by contract or otherwise; and the terms of
“affiliated,”
“controlling”
and
“controlled”
have
meanings correlative to the foregoing.
“Board”
shall
have meaning set forth in Section 3(n).
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a legal holiday
or a
day on which banking institutions in the state of New York generally are
authorized or required by law or other government actions to
close.
224
“Exercise
Date”
means
the date of the exercise of any or all of the Series J Warrant into shares
of
Preferred Stock.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the Company’s Common Stock, par value $0.001 per share.
“Demand
Notice”
shall
have the meaning set forth in Section 2.
“Effectiveness
Date”
means,
with respect to any Registration Statement the earlier of (A) the one hundred
twentieth (120th)
day
following the Filing Date or any Additional Filing Dates, as applicable,
or (B)
in the event the Registration Statement receives a “full review” by the
Commission, the one hundred fiftieth (150th)
day
following the Filing Date or any Additional Filing Dates, as applicable,
which
shall be extended for an additional thirty (30) days in the event the Commission
provides comments solely on the issues related to Rule 415, or (C) the date
which is within three (3) Business Days after the date on which the Commission
informs the Company the (i) the Commission will not review a Registration
Statement or (ii) the Company may request the acceleration of the effectiveness
of a Registration Statement and the Company makes such request; provided,
that,
if the Effectiveness Date falls on a Saturday, Sunday or any other day which
shall be a legal holiday or a day on which the Commission is authorized or
required by law or other government actions to close, the Effectiveness Date
shall be the following Business Day.
“Effectiveness
Period”
shall
have the meaning set forth in Section 2.
“Event”
shall
have the meaning set forth in Section 7(e).
“Event
Date”
shall
have the meaning set forth in Section 7(e).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Filing
Date”
means,
the thirtieth (30th)
day
following the date on which a Demand Notice is received by the Company;
provided,
that,
if the Filing Date falls on a Saturday, Sunday or any other day which shall
be a
legal holiday or a day on which the Commission is authorized or required
by law
or other government actions to close, the Filing Date shall be the following
Business Day.
“Holder”
or
“Holders”
means
the holder or holders, as the case may be, from time to time of Registrable
Securities.
“Indemnified
Party”
shall
have the meaning set forth in Section 5(c).
“Indemnifying
Party”
shall
have the meaning set forth in Section 5(c).
“Initiating
Holders”
shall
have the meaning set forth in Section 2(a).
“Losses”
shall
have the meaning set forth in Section 5(a).
225
“Person”
means
an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof)
or
other entity of any kind.
“Preferred
Stock”
means
shares of the Company’s Series B Convertible Preferred Stock issuable to the
Holders upon exercise of the Series J Warrant.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted
from a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such
Prospectus.
“Registrable
Securities”
means
(i) the shares of Common Stock issuable upon conversion of the Preferred
Stock
(“Conversion Shares”), and (ii) the shares of common stock issuable upon
exercise of the Warrants (collectively, the “Warrant Shares”).
“Registration
Statement”
means
the registration statements and any additional registration statements
contemplated by Section 2, including (in each case) the Prospectus, amendments
and supplements to such registration statement or Prospectus, including pre-
and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference in such registration statement.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“Rule
158”
means
Rule 158 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“Rule
415”
means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“Rule
424”
means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“Securities
Act”
means
the Securities Act of 1933, as amended.
226
“Series
J Warrant”
means
the Series J Warrant of the Company dated ________ ___, 2007.
“Special
Counsel”
means
Loeb & Loeb LLP, for which the Holders will be reimbursed by the Company
pursuant to Section 4.
“Warrants”
means
the Series C and Series D warrants to purchase shares of Common Stock issued
to
the Holders upon exercise of the Series J Warrant.
ARTICLE
CXIDemand Registrations.
Section
111.1 At
any
time following the Exercise Date (the “Permitted
Request Date”),
(i) a
Holder or Holders owning 25% or more in interest of the Registrable Securities
(the “Initiating
Holders”)
may
request that the Company file a Registration Statement providing for the
resale
of all Registrable Securities then held by the Initiating Holders by giving
written notice (a “Demand
Notice”)
of
such demand to the Company. The Demand Notice shall describe the number of
Registrable Securities intended to be disposed of and the intended method
of
disposition. The Company shall then prepare and file with the Commission
a
“resale” Registration Statement providing for the resale of all Registrable
Securities included in the Demand Notice for an offering to be made on a
continuous basis pursuant to Rule 415. Such Registration Statement shall
be on
Form SB-2 (except if the Company is not then eligible to register for resale
such Registrable Securities on Form SB-2, in which case such registrations
shall
be on another appropriate form in accordance herewith and the Securities
Act and
the rules promulgated thereunder). Such Registration Statement shall cover
to
the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rules 415 and 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities. The Company
shall (i) not permit any securities other than the Registrable Securities
to be
included in any such Registration Statement and (ii) use its reasonable best
efforts to cause any such Registration Statement to be declared effective
under
the Securities Act as promptly as possible after the filing thereof, but
in any
event prior to the applicable Effectiveness Date, and to keep any such
Registration Statement continuously effective under the Securities Act until
such date as is the earlier of (x) the date when all Registrable Securities
covered by such Registration Statement have been sold or (y) the date on
which
the Registrable Securities may be sold without any restriction pursuant to
Rule
144(k) as determined by the counsel to the Company pursuant to a written
opinion
letter, addressed to the Company’s transfer agent to such effect (the
“Effectiveness
Period”).
The
Company shall request that the effective time of any such Registration Statement
is 5:00 p.m. Eastern Time on the effective date.
Section
111.2 In
the
event that the Company is unable to register for resale under Rule 415 all
of
the Registrable Securities on the Registration Statement that it has agreed
to
file pursuant to the first sentence of this Section 2(a) due to limits imposed
by the Commission’s interpretation of Rule 415 of Regulation C, the Company will
file a Registration Statement under the Securities Act with the Commission
covering the resale by the Holders of such lesser amount of the Registrable
Securities as the Company is able to register pursuant to the Commission’s
interpretation of Rule 415 and use its reasonable best efforts to have such
Registration Statement become effective as promptly as possible, and, when
permitted to do so by the Commission, to file subsequent registration
statement(s) under the Securities Act with the Commission covering the resale
of
any Registrable Securities that were omitted from its prior Registration
Statements filed with the Commission pursuant to this Section 2(b) and use
its
reasonable best efforts to have such registration declared effective as promptly
as possible. In furtherance of the Company’s obligations set forth in the
preceding sentence, the parties hereby agree that in the event that any Holder
shall deliver to the Company a written notice at any time after the later
of (x)
the date which is six months after the Effectiveness Date of the latest
Registration Statement filed pursuant to Section 2(a) or 2(b) hereof, as
applicable, or (y) the date on which all Registrable Securities registered
on
all of the prior Registration Statements filed pursuant to Section 2(a) and
2(b)
hereof are sold, that the Company shall file, within 30 days following the
date
of receipt of such written notice, an additional Registration Statement
registering any Registrable Securities that were the subject of the applicable
Demand Notice that were omitted from such prior Registration Statements.
227
ARTICLE
CXIIRegistration Procedures.
In
connection with the Company’s registration obligations hereunder, the Company
shall:
Section
112.1 Prepare
and file with the Commission, on or prior to each of the Filing Date and
each
Additional Filing Date, a Registration Statement on Form SB-2 (or if the
Company
is not then eligible to register for resale the Registrable Securities on
Form
SB-2 such registration shall be on another appropriate form in accordance
herewith and the Securities Act and the rules promulgated thereunder) in
accordance with the plan of distribution as set forth on Exhibit
A
hereto
and in accordance with applicable law, and cause such Registration Statement
to
become effective and remain effective as provided herein; provided,
however,
that
not less than five (5) Business Days prior to the filing of such Registration
Statement or any related Prospectus or any amendment or supplement thereto,
the
Company shall (i) furnish to the Holders and any Special Counsel, copies
of all
such documents proposed to be filed, which documents will be subject to the
review of such Holders and such Special Counsel, and (ii) cause its officers
and
directors, counsel and independent certified public accountants to respond
to
such inquiries as shall be necessary, in the reasonable opinion of Special
Counsel, to conduct a reasonable review of such documents. The Company shall
not
file any Registration Statement or any such Prospectus or any amendments
or
supplements thereto to which the Holders of a majority of the Registrable
Securities or any Special Counsel shall reasonably object in writing within
three (3) Business Days of their receipt thereof.
Section
112.2 (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective as to the applicable Registrable
Securities for the applicable Effectiveness Period and prepare and file with
the
Commission such additional Registration Statements as necessary in order
to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause any related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant
to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible, but in no event later
than ten (10) Business Days, to any comments received from the Commission
with
respect to any such Registration Statement or any amendment thereto and as
promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to any such Registration
Statement; (iv) file the final prospectus pursuant to Rule 424 of the Securities
Act no later than 9:00 a.m. Eastern Time on the Business Day following the
date
any such Registration Statement is declared effective by the Commission;
and (v)
comply in all material respects with the provisions of the Securities Act
and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by any such Registration Statement during the Effectiveness Period
in
accordance with the intended methods of disposition by the Holders thereof
set
forth in such Registration Statement as so amended or in such Prospectus
as so
supplemented.
228
Section
112.3 Notify
the Holders of Registrable Securities and any Special Counsel as promptly
as
possible (and, in the case of (i)(A) below, not less than three (3) Business
Days prior to such filing, and in the case of (iii) below, on the same day
of
receipt by the Company of such notice from the Commission) and (if requested
by
any such Person) confirm such notice in writing no later than one (1) Business
Day following the day (i)(A) when a Prospectus or any Prospectus supplement
or
post-effective amendment to any Registration Statement is filed; (B) when
the
Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on
such
Registration Statement and (C) with respect to any Registration Statement
or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to any Registration Statement or Prospectus
or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any Registration Statement covering
any or
all of the Registrable Securities or the initiation or threatening of any
Proceedings for that purpose; (iv) if at any time any of the representations
and
warranties of the Company contained in any agreement contemplated hereby
ceases
to be true and correct in all material respects; (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for
sale in
any jurisdiction, or the initiation or threatening of any Proceeding for
such
purpose; and (vi) of the occurrence of any event that makes any statement
made
in any Registration Statement or Prospectus or any document incorporated
or
deemed to be incorporated therein by reference untrue in any material respect
or
that requires any revisions to such Registration Statement, Prospectus or
other
documents so that, in the case of any Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material
fact
or omit to state any material fact required to be stated therein or necessary
to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading.
Section
112.4 Use
its
best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of,
as promptly as possible, (i) any order suspending the effectiveness of any
such
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction.
Section
112.5 If
requested by the Holders of a majority in interest of the Registrable
Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to any Registration Statement such information as
the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as
soon
as practicable after the Company has received notification of the matters
to be
incorporated in such Prospectus supplement or post-effective
amendment.
229
Section
112.6 If
requested by any Holder, furnish to such Holder and any Special Counsel,
without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished
or
incorporated by reference) promptly after the filing of such documents with
the
Commission.
Section
112.7 Promptly
deliver to each Holder and any Special Counsel, without charge, as many copies
of the Prospectus or Prospectuses (including each form of prospectus) and
each
amendment or supplement thereto as such Persons may reasonably request; and
subject to the provisions of Sections 3(m) and 3(n), the Company hereby consents
to the use of such Prospectus and each amendment or supplement thereto by
each
of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
Section
112.8 Prior
to
any public offering of Registrable Securities, use its best efforts to register
or qualify or cooperate with the selling Holders and any Special Counsel
in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Holder requests in writing, to keep each such registration
or
qualification (or exemption therefrom) effective during the Effectiveness
Period
and to do any and all other acts or things necessary or advisable to enable
the
disposition in such jurisdictions of the Registrable Securities covered by
a
Registration Statement; provided,
however,
that
the Company shall not be required to qualify generally to do business in
any
jurisdiction where it is not then so qualified or to take any action that
would
subject it to general service of process in any such jurisdiction where it
is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
Section
112.9 Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates, to the extent permitted by the
Purchase Agreement and applicable federal and state securities laws, shall
be
free of all restrictive legends, and to enable such Registrable Securities
to be
in such denominations and registered in such names as any Holder may request
in
connection with any sale of Registrable Securities.
Section
112.10 Upon
the
occurrence of any event contemplated by Section 3(c)(vi), as promptly as
possible, prepare a supplement or amendment, including a post-effective
amendment, to a Registration Statement or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered, neither
such Registration Statement nor such Prospectus will contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
230
Section
112.11 Use
its
best efforts to cause all Registrable Securities relating to any Registration
Statement to be listed or quoted on the OTC Bulletin Board or any other
securities exchange, quotation system or market, if any, on which similar
securities issued by the Company are then listed or traded as and when required
pursuant to the Purchase Agreement.
Section
112.12 Comply
in
all material respects with all applicable rules and regulations of the
Commission and make generally available to its security holders all documents
filed or required to be filed with the Commission, including, but not limited,
to, earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any three
month period (or 90 days after the end of any 12-month period if such period
is
a fiscal year) commencing on the first day of the first fiscal quarter of
the
Company after the effective date of each of the Registration Statements,
which
statement shall conform to the requirements of Rule 158.
Section
112.13 The
Company may require each selling Holder to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities
as is
required by law to be disclosed in any Registration Statement, Prospectus,
or
any amendment or supplement thereto, and the Company may exclude from such
registration the Registrable Securities of any such Holder who unreasonably
fails to furnish such information within a reasonable time after receiving
such
request.
If
any
Registration Statement refers to any Holder by name or otherwise as the holder
of any securities of the Company, then such Holder shall have the right to
require (if such reference to such Holder by name or otherwise is not required
by the Securities Act or any similar federal statute then in force) the deletion
of the reference to such Holder in any amendment or supplement to such
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each
Holder covenants and agrees that it will not sell any Registrable Securities
under any Registration Statement until the Company has electronically filed
the
Prospectus as then amended or supplemented as contemplated in Section 3(g)
and
notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section
3(c).
Each
Holder agrees by its acquisition of such Registrable Securities that, upon
receipt of a notice from the Company of the occurrence of any event of the
kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v), 3(c)(vi) or
3(n),
such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder’s receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing by the Company
that the use of the applicable Prospectus may be resumed, and, in either
case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus
or
Registration Statement.
231
Section
112.14 If
(i)
there is material non-public information regarding the Company which the
Company’s Board of Directors (the “Board”)
determines not to be in the Company’s best interest to disclose and which the
Company is not otherwise required to disclose, (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or
any
merger, consolidation, tender offer or other similar transaction) available
to
the Company which the Board determines not to be in the Company’s best interest
to disclose, or (iii) the Company is required to file a post-effective amendment
to a Registration Statement to incorporate the Company’s quarterly and annual
reports and audited financial statements on Forms 10-QSB and 10-KSB, then
the
Company may (x) postpone or suspend filing of a registration statement for
a
period not to exceed thirty (30) consecutive days or (y) postpone or suspend
effectiveness of a registration statement for a period not to exceed twenty
(20)
consecutive days; provided,
that
the Company may not postpone or suspend effectiveness of a registration
statement under this Section 3(n) for more than forty-five (45) days in the
aggregate during any three hundred sixty (360) day period; provided,
however,
that no
such postponement or suspension shall be permitted for consecutive twenty
(20)
day periods arising out of the same set of facts, circumstances or
transactions.
ARTICLE
CXIIIRegistration Expenses.
All
fees
and expenses incident to the performance of or compliance with this Agreement
by
the Company, except as and to the extent specified in this Section 4, shall
be
borne by the Company whether or not a Registration Statement is filed or
becomes
effective and whether or not any Registrable Securities are sold pursuant
to
such Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the OTC Bulletin Board and each other securities
exchange or market on which Registrable Securities are required hereunder
to be
listed, if any, (B) with respect to filing fees required to be paid to the
National Association of Securities Dealers, Inc. and the NASD Regulation,
Inc.
(including, without limitation, pursuant to NASD Rule 2710) and (C) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection
with
Blue Sky qualifications of the Registrable Securities and determination of
the
eligibility of the Registrable Securities for investment under the laws of
such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses
of
printing certificates for Registrable Securities and of printing prospectuses
if
the printing of prospectuses is requested by the holders of a majority of
the
Registrable Securities included in a Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for
the
Company and Special Counsel for the Holders, in the case of the Special Counsel,
up to a maximum amount of $7,500, (v) Securities Act liability insurance,
if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation,
the
Company’s independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with
the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit,
the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange if required hereunder. The Company
shall
not be responsible for any discounts, commissions, transfer taxes or other
similar fees incurred by the Holders in connection with the sale of the
Registrable Securities.
232
ARTICLE
CXIVIndemnification.
Section
114.1 Indemnification
by the Company.
The
Company shall, notwithstanding any termination of this Agreement, indemnify
and
hold harmless each Holder, the officers, directors, managers, partners, members,
shareholders, agents, brokers, investment advisors and employees of each
of
them, each Person who controls any such Holder (within the meaning of Section
15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses,
claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys’ fees) and expenses (collectively, “Losses”),
as
incurred, arising out of or relating to any violation of securities laws
or
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the
case of
any Prospectus or form of prospectus or supplement thereto, in the light
of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder or such other Indemnified Party
furnished in writing to the Company by such Holder expressly for use therein.
The Company shall notify the Holders promptly of the institution, threat
or
assertion of any Proceeding of which the Company is aware in connection with
the
transactions contemplated by this Agreement.
Section
114.2 Indemnification
by Holders.
Each
Holder shall, severally and not jointly, indemnify and hold harmless the
Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents and employees
of
such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses (as determined by a court of competent jurisdiction
in a final judgment not subject to appeal or review), as incurred, arising
solely out of or based solely upon any untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely
out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent,
but
only to the extent, that such untrue statement or omission is contained in
any
information so furnished in writing by such Holder or other Indemnifying
Party
to the Company specifically for inclusion in any Registration Statement or
such
Prospectus. Notwithstanding anything to the contrary contained herein, each
Holder shall be liable under this Section 5(b) for only that amount as does
not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
233
Section
114.3 Conduct
of Indemnification Proceedings.
If any
Proceeding shall be brought or asserted against any Person entitled to indemnity
hereunder (an “Indemnified
Party”),
such
Indemnified Party promptly shall notify the Person from whom indemnity is
sought
(the “Indemnifying
Party”)
in
writing, and the Indemnifying Party shall be entitled to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only)
to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any
such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees
and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume
the
defense of such Proceeding and to employ counsel reasonably satisfactory
to such
Indemnified Party in any such Proceeding; or (3) the named parties to any
such
Proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and such parties shall have been advised by counsel
that a conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case,
if
such Indemnified Party notifies the Indemnifying Party in writing that it
elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof
and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld or delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened Proceeding in respect of which any Indemnified Party is a party
and
indemnity has been sought hereunder, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All
fees
and expenses of the Indemnified Party (including reasonable fees and expenses
to
the extent incurred in connection with investigating or preparing to defend
such
Proceeding in a manner not inconsistent with this Section) shall be paid
to the
Indemnified Party, as incurred, within ten (10) Business Days of written
notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided,
that
the Indemnified Party shall reimburse all such fees and expenses to the extent
it is finally judicially determined that such Indemnified Party is not entitled
to indemnification hereunder).
Section
114.4 Contribution.
If a
claim for indemnification under Section 5(a) or 5(b) is due but unavailable
to
an Indemnified Party because of a failure or refusal of a governmental authority
to enforce such indemnification in accordance with its terms (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid
or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other from the offering
of the Preferred Stock and the Warrants. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate
to
reflect not only the relative benefits referred to in the foregoing sentence
but
also the relative fault, as applicable, of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall
be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to
information supplied by, such Indemnifying Party or Indemnified Party, and
the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject
to the limitations set forth in Section 5(c), any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such
fees or
expenses if the indemnification provided for in this Section was available
to
such party in accordance with its terms. In no event shall any selling Holder
be
required to contribute an amount under this Section 5(d) in excess of the
net
proceeds received by such Holder upon the sale of such Holder’s Registrable
Securities pursuant to a Registration Statement giving rise to such contribution
obligation.
234
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by
any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of
the Securities Act) shall be entitled to contribution from any Person who
was
not guilty of such fraudulent misrepresentation.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties pursuant to the law.
ARTICLE
CXVRule 144.
As
long
as any Holder owns Preferred Stock, Warrants or Registrable Securities, the
Company covenants to timely file (or obtain extensions in respect thereof
and
file within the applicable grace period) all reports required to be filed
by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act. As long as any Holder owns Preferred Stock, Warrants or Registrable
Securities, if the Company is not required to file reports pursuant to Section
13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders
and make publicly available in accordance with Rule 144(c) promulgated under
the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well
as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable
such
Person to sell Conversion Shares and Warrant Shares without registration
under
the Securities Act within the limitation of the exemptions provided by Rule
144
promulgated under the Securities Act, including providing any legal opinions
reasonably requested relating to such sale pursuant to Rule 144. Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied
with
such requirements.
235
ARTICLE
CXVIMiscellaneous.
Section
116.1 Remedies.
In the
event of a breach by the Company or by a Holder, of any of their obligations
under this Agreement, such Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under
this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense
that
a remedy at law would be adequate.
Section
116.2 No
Inconsistent Agreements.
Neither
the Company nor any of its subsidiaries has, as of the date hereof entered
into
and currently in effect, nor shall the Company or any of its subsidiaries,
on or
after the date of this Agreement, enter into any agreement with respect to
its
securities that is inconsistent with the rights granted to the Holders in
this
Agreement or otherwise conflicts with the provisions hereof. Except as disclosed
on Schedule 2.1(c) of the Purchase Agreement or Schedule II hereto, neither
the
Company nor any of its subsidiaries has previously entered into any agreement
currently in effect granting any registration rights with respect to any
of its
securities to any Person, except for the Registration Rights Agreement entered
into as of even date herewith, under the Purchase Agreement. Without limiting
the generality of the foregoing, without the written consent of the Holders
of a
majority of the then outstanding Registrable Securities, the Company shall
not
grant to any Person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are
subject
in all respects to the prior rights in full of the Holders set forth herein,
and
are not otherwise in conflict with the provisions of this
Agreement.
Section
116.3 No
Piggyback on Registrations.
Neither
the Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in any
Registration Statement, and the Company shall not after the date hereof enter
into any agreement providing such right to any of its securityholders, unless
the right so granted is subject in all respects to the prior rights in full
of
the Holders set forth herein, and is not otherwise in conflict with the
provisions of this Agreement.
Section
116.4 Piggy-Back
Registrations.
If at
any time when there is not an effective Registration Statement providing
for the
resale of all of the Registrable Securities, the Company shall determine
to
prepare and file with the Commission a registration statement relating to
an
offering for its own account or the account of others under the Securities
Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each
as
promulgated under the Securities Act) or their then equivalents relating
to
equity securities to be issued solely in connection with any acquisition
of any
entity or business or equity securities issuable in connection with stock
option
or other employee benefit plans, the Company shall send to each holder of
Registrable Securities written notice of such determination and, if within
thirty (30) days after receipt of such notice, or within such shorter period
of
time as may be specified by the Company in such written notice as may be
necessary for the Company to comply with its obligations with respect to
the
timing of the filing of such registration statement, any such holder shall
so
request in writing, (which request shall specify the Registrable Securities
intended to be disposed of by the Holders), the Company will cause the
registration under the Securities Act of all Registrable Securities which
the
Company has been so requested to register by the holder, to the extent requisite
to permit the disposition of the Registrable Securities so to be registered,
provided that if at any time after giving written notice of its intention
to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation
to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of
a
determination to delay registering, shall be permitted to delay registering
any
Registrable Securities being registered pursuant to this Section 7(d) for
the
same period as the delay in registering such other securities. The Company
shall
include in such registration statement all or any part of such Registrable
Securities such holder requests to be registered; provided,
however,
that
the Company shall not be required to register any Registrable Securities
pursuant to this Section 7(d) that are eligible for sale pursuant to Rule
144(k)
of the Securities Act. In the case of an underwritten public offering, if
the
managing underwriter(s) or underwriter(s) should reasonably object to the
inclusion of the Registrable Securities in such registration statement, then
if
the Company after consultation with the managing underwriter should reasonably
determine that the inclusion of such Registrable Securities would materially
adversely affect the offering contemplated in such registration statement,
and
based on such determination recommends inclusion in such registration statement
of fewer or none of the Registrable Securities of the Holders, then (x) the
number of Registrable Securities of the Holders included in such registration
statement shall be reduced pro-rata among such Holders (based upon the number
of
Registrable Securities requested to be included in the registration), if
the
Company after consultation with the underwriter(s) recommends the inclusion
of
fewer Registrable Securities, or (y) none of the Registrable Securities of
the
Holders shall be included in such registration statement, if the Company
after
consultation with the underwriter(s) recommends the inclusion of none of
such
Registrable Securities; provided,
however,
that if
securities are being offered for the account of other persons or entities
as
well as the Company, such reduction shall not represent a greater fraction
of
the number of Registrable securities intended to be offered by the Holders
than
the fraction of similar reductions imposed on such other persons or entities
(other than the Company).
236
Section
116.5 Failure
to File Registration Statement and Other Events.
The
Company and the Holders agree that the Holders will suffer damages if a
Registration Statement is not filed on or prior to the Filing Date or any
Additional Filing Date, as applicable, or after notice from the Holders,
as set
forth in Section 2(b) hereto, and, in each case, not declared effective by
the
Commission on or prior to the applicable Effectiveness Date and maintained
in
the manner contemplated herein during the applicable Effectiveness Period
or if
certain other events occur. The Company and the Holders further agree that
it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) a Registration Statement is not filed on or prior to
the
Filing Date, any Additional Filing Date or after notice from the Holders,
as set
forth in Section 2(b) hereof, or (B) a Registration Statement is not
declared effective by the Commission on or prior to the applicable Effectiveness
Date, or (C) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities
Act
within three (3) Business Days of the date that the Company is notified (orally
or in writing, whichever is earlier) by the Commission that a Registration
Statement will not be “reviewed,” or not subject to further review, or (D) any
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities at
any
time prior to the expiration of the Effectiveness Period, without being
succeeded immediately by a subsequent Registration Statement filed with and
declared effective by the Commission, or (E) the Company has breached Section
3(n), or (F) trading in the Common Stock shall be suspended or if the Common
Stock is no longer quoted on or is delisted from the OTC Bulletin Board (or
other principal exchange on which the Common Stock is listed or traded) for
any
reason for more than three (3) Business Days in the aggregate (any such failure
or breach being referred to as an “Event,”
and
for purposes of clauses (A) and (B) the date on which such Event occurs,
or for
purposes of clause (C) the date on which such three (3) Business Day period
is
exceeded, or for purposes of clause (D) after more than fifteen (15) Business
Days, or for purposes of clause (F) the date on which such three (3) Business
Day period is exceeded, being referred to as “Event
Date”),
the
Company shall pay an amount in cash as liquidated damages to each Holder
equal
to one and one-half percent (1.5%) of the amount of the Holder’s initial
investment in the Preferred Stock for each calendar month or portion thereof
thereafter from the Event Date until the applicable Event is cured; provided,
however,
that in
no event shall the amount of liquidated damages payable at any time and from
time to time to any Holder pursuant to this Section 7(e) exceed an aggregate
of
fifteen percent (15%) of the amount of the aggregate consideration paid by
the
Holder upon exercise of the Series J Warrant. Notwithstanding anything to
the
contrary in this paragraph (e), if (a) any of the Events described in clauses
(A), (B), (C), (D) or (F) shall have occurred, (b) on or prior to the applicable
Event Date, the Company shall have exercised its rights under Section 3(n)
hereof and (c) the postponement or suspension permitted pursuant to such
Section
3(n) shall remain effective as of such applicable Event Date, then the
applicable Event Date shall be deemed instead to occur on the second Business
Day following the termination of such postponement or suspension. Liquidated
damages payable by the Company pursuant to this Section 7(d) shall be payable
on
the first (1st) Business Day of each thirty (30) day period following the
Event
Date. The parties agree that the liquidated damages set forth in this Section
7(e) shall be the exclusive remedy of the parties hereto with respect to
the
breaches by the Company of this Section 7(e).
237
Section
116.6 Amendments
and Waivers.
The
provisions of this Agreement, including the provisions of this sentence,
may not
be amended, modified or supplemented, and waivers or consents to departures
from
the provisions hereof may not be given, unless the same shall be in writing
and
signed by the Company and the Holders of a majority of the Registrable
Securities outstanding.
238
ARTICLE
CXVIINotices. All notices, demands, consents, requests, instructions and
other
communications to be given or delivered or permitted under or by reason of
the
provisions of this Agreement or in connection with the transactions contemplated
hereby shall be in writing and shall be deemed to be delivered and received
by
the intended recipient as follows: (i) if personally delivered, on the business
day of such delivery (as evidenced by the receipt of the personal delivery
service), (ii) if mailed certified or registered mail return receipt requested,
two (2) business days after being mailed, (iii) if delivered by overnight
courier (with all charges having been prepaid), on the business day of such
delivery (as evidenced by the receipt of the overnight courier service of
recognized standing), or (iv) if delivered by facsimile transmission, on
the
business day of such delivery if sent by 6:00 p.m. in the time zone of the
recipient, or if sent after that time, on the next succeeding business day
(as
evidenced by the printed confirmation of delivery generated by the sending
party’s telecopier machine). If any notice, demand, consent, request,
instruction or other communication cannot be delivered because of a changed
address of which no notice was given (in accordance with this Section 4),
or the
refusal to accept same, the notice, demand, consent, request, instruction
or
other communication shall be deemed received on the second business day the
notice is sent (as evidenced by a sworn affidavit of the sender). All such
notices, demands, consents, requests, instructions and other communications
will
be sent to the following addresses or facsimile numbers as
applicable.
If
to the Company:
|
Victory
Divide Mining Company
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group
Xx.
00 Xxxxxxx Xxxxxx
Jixian
Town Heilongjiang
People’x
Xxxxxxxx xx Xxxxx 000000Xxx:
Fax:
00-000-000-0000
Email: xxxxxxxx0@000.xxx
|
with
copies (which copies
shall
not constitute notice)
to:
|
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.: (000) 000-0000, ext. 127
Fax
No.: (000) 000-0000
|
If
to any Holder:
|
To
the address set forth in Schedule I
|
with
copies (which copies
shall
not constitute notice)
to:
|
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
Facsimile:
212-407-4000
|
Any
party
hereto may from time to time change its address for notices by giving at
least
ten (10) days written notice of such changed address to the other party
hereto.
239
Section
117.1 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns and shall inure to the benefit of
each
Holder and its successors and assigns. The Company may not assign this Agreement
or any of its rights or obligations hereunder without the prior written consent
of each Holder. Each Holder may assign its rights hereunder in the manner
and to
the Persons as permitted under the Purchase Agreement.
Section
117.2 Assignment
of Registration Rights.
The
rights of each Holder hereunder, including the right to have the Company
register for resale Registrable Securities in accordance with the terms of
this
Agreement, shall be automatically assignable by each Holder to any Person
to
whom all or a portion of the Preferred Stock, the Warrants or the Registrable
Securities are transferred if: (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement
is
furnished to the Company within a reasonable time after such assignment,
(ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee
or
assignee, and (b) the securities with respect to which such registration
rights
are being transferred or assigned, (iii) following such transfer or assignment
the further disposition of such securities by the transferee or assignees
is
restricted under the Securities Act and applicable state securities laws
unless
such securities are registered in a Registration Statement under this Agreement
(in which case the Company shall be obligated to amend such Registration
Statement to reflect such transfer or assignment) or are otherwise exempt
from
registration, (iv) at or before the time the Company receives the written
notice
contemplated by clause (ii) of this Section, the transferee or assignee agrees
in writing with the Company to be bound by all of the provisions of this
Agreement, and (v) such transfer shall have been made in accordance with
the
applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Holders (and to subsequent) successors and
assigns.
Section
117.3 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement and shall become effective when
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties need not sign the same counterpart.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing
(or on
whose behalf such signature is executed) the same with the same force and
effect
as if such facsimile signature were the original thereof.
Section
117.4 Governing
Law; Jurisdiction.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Agreement shall not be interpreted or construed
with
any presumption against the party causing this Agreement to be drafted. The
Company and the Holders agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts located in
New
York County, New York, and the parties irrevocably waive any right to raise
forum
non conveniens
or any
other argument that New York is not the proper venue. The Company and the
Holders irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Company and the Holders consent to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address in effect for notices to it under this Agreement
and
agrees that such service shall constitute good and sufficient service of
process
and notice thereof. Nothing in this Section 7(k) shall affect or limit any
right
to serve process in any other manner permitted by law. The Company and the
Holders hereby agree that the prevailing party in any suit, action or proceeding
arising out of or relating to this Agreement or the Purchase Agreement, shall
be
entitled to reimbursement for reasonable legal fees from the non-prevailing
party. The parties hereby waive all rights to a trial by jury.
240
Section
117.5 Cumulative
Remedies.
The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section
117.6 Severability.
If any
term, provision, covenant or restriction of this Agreement is held to be
invalid, illegal, void or unenforceable in any respect, the remainder of
the
terms, provisions, covenants and restrictions set forth herein shall remain
in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ
an
alternative means to achieve the same or substantially the same result as
that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would
have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void
or
unenforceable.
Section
117.7 Headings.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section
117.8 Shares
Held by the Company and its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held
by the
Company or its Affiliates (other than any Holder or transferees or successors
or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason
of
its holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
241
Section
117.9 Independent
Nature of Holders.
The
Company acknowledges that the obligations of each Holder under the Transaction
Documents are several and not joint with the obligations of any other Holder,
and no Holder shall be responsible in any way for the performance of the
obligations of any other Holder under the Transaction Documents. The Company
acknowledges that the decision of each Holder to purchase Securities pursuant
to
the Purchase Agreement and to exercise its rights under the Series J Warrant
has
been made by such Holders independently of any other Holder and independently
of
any information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its Subsidiaries
which may have made or given by any other Holder or by any agent or employee
of
any other Holder, and no Holderr or any of its agents or employees shall
have
any liability to any Holderr (or any other person) relating to or arising
from
any such information, materials, statements or opinions. The Company
acknowledges that nothing contained herein, or in any Transaction Document,
and
no action taken by any Holder pursuant hereto or thereto (including, but
not
limited to, the (i) inclusion of a Holder in a Registration Statement and
(ii)
review by, and consent to, such Registration Statement by a Holder) shall
be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. The Company
acknowledges that each Holder shall be entitled to independently protect
and
enforce its rights, including without limitation, the rights arising out
of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that for reasons of
administrative convenience only, the Transaction Documents have been prepared
by
counsel for one of the Holders and such counsel does not represent all of
the
Holders. The Company acknowledges that it has elected to provide all Holders
with the same terms and Transaction Documents for the convenience of the
Company
and not because it was required or requested to do so by the Holders. The
Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Holders are in any way
acting
in concert or as a group with respect to the Transaction Documents or the
transactions contemplated hereby or thereby.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
242
IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed by their respective authorized persons as of
the
date first indicated above.
VICTORY
DIVIDE MINING COMPANY
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
HOLDER
SANSAR
CAPITAL SPECIAL OPPORTUNITY MASTER FUND, LP (CAYMAN MASTER)
By:
/s/
Xxxxxx Xxxxxxx
Name:
Xxxxxx Xxxxxxx
Title:
President
VICIS
CAPITAL MASTER FUND
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx X. Xxxxxx
Title:
Chief Financial Officer
VISION
OPPORTUNITY MASTER FUND, LTD.
By:
/s/
Xxxx Xxxxxxxx
Name:
Xxxx Xxxxxxxx
Title:
Director
243
Schedule
I
Holders
Investor
|
Investment
|
|
Series
J Warrants
|
|
Series
C
Warrants
|
|
Series
D
Warrants
|
||||||
Vision
Opportunity Master Fund Ltd.
|
$
|
8,000,000
|
3,382,664
|
3,382,664
|
1,691,332
|
||||||||
Sansar
Capital Special Opportunity Master Fund, LP (Cayman
Master)
|
$
|
5,950,000
|
2,515,856
|
2,515,856
|
1,257,928
|
||||||||
Vicis
Capital Master Fund
|
$
|
4,500,000
|
1,902,748
|
1,902,748
|
951,374
|
||||||||
Precept
Capital Master Fund, GP
|
$
|
500,000
|
--
|
--
|
--
|
||||||||
Penn
Footwear
|
$
|
250,000
|
--
|
--
|
--
|
||||||||
Crescent
International Limited
|
$
|
300,000
|
--
|
--
|
--
|
||||||||
Benefit
Grand Investments
|
$
|
500,000
|
--
|
--
|
--
|
||||||||
Golden
Bridge Asset Management
|
$
|
1,000,000
|
--
|
--
|
--
|
||||||||
Xxxxxx
X Xxxxxxxx
|
$
|
250,000
|
--
|
--
|
--
|
||||||||
Xxxxxxx
Road Partners, LP
|
$
|
250,000
|
--
|
--
|
--
|
244
Schedule
II
Refer
to
Schedule 2.1(c) Purchase Agreement
245
Exhibit
A
Plan
of
Distribution
The
selling security holders and any of their pledgees, donees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock being offered under this prospectus on any stock exchange,
market or trading facility on which shares of our common stock are traded
or in
private transactions. These sales may be at fixed or negotiated prices. The
selling security holders may use any one or more of the following methods
when
disposing of shares:
ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
block
trades in which the broker-dealer will attempt to sell the shares as agent
but
may position and resell a portion of the block as principal to facilitate
the
transaction;
purchases
by a broker-dealer as principal and resales by the broker-dealer for its
account;
an
exchange distribution in accordance with the rules of the applicable
exchange;
privately
negotiated transactions;
to
cover
short sales made after the date that the registration statement of which
this
prospectus is a part is declared effective by the Commission;
broker-dealers
may agree with the selling security holders to sell a specified number of
such
shares at a stipulated price per share;
a
combination of any of these methods of sale; and
any
other
method permitted pursuant to applicable law.
The
shares may also be sold under Rule 144 under the Securities Act of 1933,
as
amended (“Securities Act”), if available, rather than under this prospectus. The
selling security holders have the sole and absolute discretion not to accept
any
purchase offer or make any sale of shares if they deem the purchase price
to be
unsatisfactory at any particular time.
The
selling security holders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling security holder defaults
on a margin loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers
engaged by the selling security holders may arrange for other broker-dealers
to
participate in sales. Broker-dealers may receive commissions or discounts
from
the selling security holders (or, if any broker-dealer acts as agent for
the
purchaser of shares, from the purchaser) in amounts to be negotiated, which
commissions as to a particular broker or dealer may be in excess of customary
commissions to the extent permitted by applicable law.
246
If
sales
of shares offered under this prospectus are made to broker-dealers as
principals, we would be required to file a post-effective amendment to the
registration statement of which this prospectus is a part. In the post-effective
amendment, we would be required to disclose the names of any participating
broker-dealers and the compensation arrangements relating to such
sales.
The
selling security holders and any broker-dealers or agents that are involved
in
selling the shares offered under this prospectus may be deemed to be
“underwriters” within the meaning of the Securities Act in connection with these
sales. Commissions received by these broker-dealers or agents and any profit
on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Any broker-dealers or
agents
that are deemed to be underwriters may not sell shares offered under this
prospectus unless and until we set forth the names of the underwriters and
the
material details of their underwriting arrangements in a supplement to this
prospectus or, if required, in a replacement prospectus included in a
post-effective amendment to the registration statement of which this prospectus
is a part.
The
selling security holders and any other persons participating in the sale
or
distribution of the shares offered under this prospectus will be subject
to
applicable provisions of the Exchange Act, and the rules and regulations
under
that act, including Regulation M. These provisions may restrict activities
of,
and limit the timing of purchases and sales of any of the shares by, the
selling
security holders or any other person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from simultaneously
engaging in market making and other activities with respect to those securities
for a specified period of time prior to the commencement of such distributions,
subject to specified exceptions or exemptions. All of these limitations may
affect the marketability of the shares.
If
any of
the shares of common stock offered for sale pursuant to this prospectus are
transferred other than pursuant to a sale under this prospectus, then subsequent
holders could not use this prospectus until a post-effective amendment or
prospectus supplement is filed, naming such holders. We offer no assurance
as to
whether any of the selling security holders will sell all or any portion
of the
shares offered under this prospectus.
We
have
agreed to pay all fees and expenses we incur incident to the registration
of the
shares being offered under this prospectus. However, each selling security
holder and purchaser is responsible for paying any discounts, commissions
and
similar selling expenses they incur.
We
and
the selling security holders have agreed to indemnify one another against
certain losses, damages and liabilities arising in connection with this
prospectus, including liabilities under the Securities Act.
247
EXHIBIT
E TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
__________________________________________
FORM
OF LOCK-UP AGREEMENT
LOCK-UP
AGREEMENT
THIS
AGREEMENT (this “Agreement”)
is
dated as of October 3, 2007 by and between Victory Divide Mining Company,
a
Nevada corporation (the “Company”),
and
Winner State Investments Limited (“Shareholder”).
WHEREAS,
the Company intends to enter into a share exchange transaction with Shareholder
whereby Shareholder will exchange all its equity interest in Faith Winner
International Limited, a British Virgin Islands company and a wholly-owned
subsidiary of Shareholder, for the issuance of shares of Common Stock of
the
Company, par value $0.001 per share (the “Common
Stock”)
and a
private placement financing transaction with certain accredited investors
(the
“Investors”)
whereby the Company will issue shares of a newly-designated Series A Convertible
Preferred Stock, par value $0.001 per share (the “Series
A Stock”)
and
related warrants (the “Warrants”)
to
purchase shares of Common Stock of the Company (the “Financing
Transaction”).
WHEREAS,
to induce the Company and the Investors to enter into the Financing Transaction
pursuant to the Series A Convertible Preferred Stock Purchase Agreement dated
October 3, 2007 by and among the Company and the Investors (the “Purchase
Agreement”),
Shareholder has agreed not to sell any shares of the Company’s Common Stock that
Shareholder presently owns or may acquire after the date hereof, except in
accordance with the terms and conditions set forth herein (collectively,
the
“Lock-Up
Shares”).
Capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Purchase Agreement.
NOW,
THEREFORE, in consideration of the covenants and conditions hereinafter
contained, the parties hereto agree as follows:
ARTICLE
CXVIIIRestriction
on Transfer; Term.
The Shareholder hereby agrees with the Company that such Shareholder will
not
offer, sell, contract to sell, assign, transfer, hypothecate, pledge or grant
a
security interest in, or otherwise dispose of, or enter into any transaction
which is designed to, or might reasonably be expected to, result in the
disposition of (whether by actual disposition or effective economic disposition
due to cash settlement or otherwise, directly or indirectly (each, a
“transfer”), any of the shares of Common Stock owned by such Shareholder at any
time from the period commencing on the Closing Date and expiring on the date
that is twelve (12) months following the effective date of the registration
statement (the “Effective
Date”)
filed by the Company with the Securities and Exchange Commission providing
for
the resale of the shares of Common Stock issuable upon conversion of the
Preferred Shares issued pursuant to the Purchase Agreement (the
“Period”),
the Shareholder agrees that, during the twenty four (24) months immediately
following the Period that such Shareholder shall not transfer more than one
twelfth (1/12) of such Shareholder’s total holdings of Common Stock during any
one (1) month.
248
ARTICLE
CXIXOwnership.
During the Period, Shareholder shall retain all rights of ownership in the
Lock-Up Shares, including, without limitation, voting rights and the right
to
receive any dividends, if any, that may be declared in respect
thereof.
ARTICLE
CXXCompany
and Transfer Agent.
The Company is hereby authorized to disclose the existence of this Agreement
to
its transfer agent. The Company and its transfer agent are hereby authorized
to
decline to make any transfer of the Common Stock if such transfer would
constitute a violation or breach of this Agreement and/or the Purchase
Agreement.
ARTICLE
CXXINotices.
All notices, demands, consents, requests, instructions and other communications
to be given or delivered or permitted under or by reason of the provisions
of
this Agreement or in connection with the transactions contemplated hereby
shall
be in writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of
such
delivery (as evidenced by the receipt of the personal delivery service),
(ii) if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing),
or (iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance
with
this Section 4), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit
of the
sender). All such notices, demands, consents, requests, instructions and
other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
If
to the Company:
Victory
Divide Mining Company
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group Co., Ltd
No.
99 Fanrong Street,
Jixian
Town, Heilongjiang, PRC
Attention:
Xx. Xxxxxx Xxx
Tel:
000-00-000-0000000
Fax:
000-00-000-0000000
with
copies (which copies shall not constitute notice to the Issuer)
to:
|
249
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.: (000) 000-0000, ext. 127
Fax
No.: (000) 000-0000
and
to:
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxxxx Xxxxxxxx
Facsimile:
212-407-4000
If
to Shareholder,
Winner
State Investments Limited
PO
Box 957, Offshore Incorporations Center,
Road
Town, Tortola, British Virgin Islands
Attention:
Xx. Xxxxxx Xxx
Tel:
000-00-000-0000000
Fax:
000-00-000-0000000
|
or
to
such other address as any party may specify by notice given to the other
party
in accordance with this Section 4.
ARTICLE
CXXIIAmendment.
This Agreement may not be modified, amended, altered or supplemented, except
by
a written agreement executed by each of the parties
hereto.
ARTICLE
CXXIIIEntire
Agreement.
This Agreement contains the entire understanding and agreement of the parties
relating to the subject matter hereof and supersedes all prior and/or
contemporaneous understandings and agreements of any kind and nature (whether
written or oral) among the parties with respect to such subject matter, all
of
which are merged herein.
ARTICLE
CXXIVGoverning
Law.
This Agreement shall be governed by and construed in accordance with the
laws of
the State of New York applicable to agreements made and to be performed in
that
state, without regard to any of its principles of conflicts of laws or other
laws which would result in the application of the laws of another jurisdiction.
This Agreement shall be construed and interpreted without regard to any
presumption against the party causing this Agreement to be
drafted.
250
ARTICLE
CXXVWaiver
of Jury Trial.
EACH OF THE PARTIES HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES THE RIGHT
TO A
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING
TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES
UNCONDITIONALLY AND IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF
THE
COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY AND THE FEDERAL
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK WITH RESPECT TO ANY
SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, AND EACH OF THE PARTIES HEREBY UNCONDITIONALLY
AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN NEW YORK COUNTY OR SUCH
DISTRICT, AND AGREES THAT SERVICE OF ANY SUMMONS, COMPLAINT, NOTICE OR OTHER
PROCESS RELATING TO SUCH SUIT, ACTION OR OTHER PROCEEDING MAY BE EFFECTED
IN THE
MANNER PROVIDED IN SECTION 4.
ARTICLE
CXXVISeverability.
The parties agree that if any provision of this Agreement be held to be invalid,
illegal or unenforceable in any jurisdiction, that holding shall be effective
only to the extent of such invalidity, illegally or unenforceability without
invalidating or rendering illegal or unenforceable the remaining provisions
hereof, and any such invalidity, illegally or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision
in any
other jurisdiction. It is the intent of the parties that this Agreement be
fully
enforced to the fullest extent permitted by applicable
law.
ARTICLE
CXXVIIBinding
Effect; Assignment.
This Agreement and the rights and obligations hereunder may not be assigned
by
any party hereto without the prior written consent of the other parties hereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
ARTICLE
CXXVIIIHeadings.
The section headings contained in this Agreement (including, without limitation,
section headings and headings in the exhibits and schedules) are inserted
for
reference purposes only and shall not affect in any way the meaning,
construction or interpretation of this Agreement. Any reference to the
masculine, feminine, or neuter gender shall be a reference to such other
gender
as is appropriate. References to the singular shall include the plural and
vice
versa.
ARTICLE
CXXIXCounterparts.
This Agreement may be executed in two or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, and all of which, when taken together, shall
constitute one and the same document. This Agreement shall become effective
when
one or more counterparts, taken together, shall have been executed and delivered
by all of the parties.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
251
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date
first
written above herein.
VICTORY
DIVIDE MINING COMPANY
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
[SHAREHOLDER]
WINNER
STATE INVESTMENTS LIMITED
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
NUMBER
OF
SHARES SUBJECT TO
LOCK
UP:
18,200,000__
252
EXHIBIT
F-1 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
_______________________________________
ESCROW
AGREEMENT
This
Escrow Agreement, dated as of August 30, 2007 (this “Agreement”),
is
entered into by and among Heilongjiang Yanglin Soybean Group Co. Ltd, a PRC
corporation, (the “Company)
and
Tri-State Title & Escrow, LLC (the “Escrow
Agent”).
The
principal address of each party hereto is set forth on Exhibit
A.
The
Company may be sometimes referred to herein as the Escrowing Party.
WITNESSETH:
WHEREAS,
the Company, through Xxxxx Brothers, the Placement Agent, proposes to make
a
private offering to accredited institutional investors (the “Offering”) of
shares of $0.001 par value preferred stock with attached warrants (the
“Securities”) of Victory Divide Mining Company or such other “shell company” as
the Company may so decide in reliance upon available exemptions from the
registration requirements of the U.S. Securities Act of 1933, as amended
(the
“Act”) and pursuant to a Stock Purchase Agreement or Stock Purchase Agreements
(collectively and individually, the “Stock Purchase Agreement”), in an aggregate
amount of no less than Twenty-One Million Five Hundred Thousand ($21,500,000);
and
WHEREAS,
the Company desires to deposit all proceeds received from subscriptions made
by
accredited institutional investors (“Subscribers”) for the Securities in the
Offering (the “Escrowed Funds”) with the Escrow Agent, to be held in escrow
until written instructions are received by the Escrow Agent from the Company,
at
which time and from time to time the Escrow Agent will disburse the Escrowed
Funds in accordance with such instructions (the “Closing”); and
WHEREAS,
Escrow Agent is willing to hold the Escrowed Funds in escrow subject to the
terms and conditions of this Agreement.
NOW,
THEREFORE, in consideration of the mutual promises herein contained and
intending to be legally bound, the parties hereby agree as follows:
1.
Appointment
of Escrow Agent.
The
Company hereby appoints Escrow Agent as escrow agent in accordance with the
terms and conditions set forth herein and the Escrow Agent hereby accepts
such
appointment.
2.
Delivery
of the Escrowed Funds.
2.1
The
Company will direct Subscribers in the Offering to deliver the Escrowed Funds
to
the Escrow Agent’s account as follows:
253
Trust
Account ABA #000000000
Xxxxxxxx
Xxxx
XxXxxx,
XX 00000
Account
#
5060024931
Account
Name: Tri-State Title & Escrow, LLC
2.2 Escrowed
Funds shall be forwarded to the Escrow Agent by check or by wire transfer,
together with the written account of subscription (the “Subscription”) in the
form attached hereto as Exhibit B (the “Subscription Information”), in
accordance with the following:
(a)
Escrowed Funds to be deposited by check shall be made payable to “TRI-STATE
TITLE & ESCROW, LLC” and shall be delivered to the Escrow Agent at the
address set forth on Exhibit
A
hereto
and shall be
accompanied by a Subscription. The
Escrow
Agent shall, upon receipt of a Subscription, together with the related Purchase
Price therefore (as such term is defined in the Stock Purchase Agreement),
deposit the related Purchase Price of said Subscription in the Escrow Account
for collection.
(b)
Escrowed Funds to be wired shall be wired to the account set forth in Section
2.1 above and the Subscription shall be faxed or emailed to the Escrow Agent
in
accordance with the information provided on Exhibit
A.
2.3 Any
checks which are received by the Escrow Agent that are made payable to a
party
other than the Escrow Agent shall be returned directly to the sender together
with any documents delivered therewith. Simultaneously with each deposit,
the
Placement Agent shall provide the Escrow Agent with the Subscription
Information, including the name, address and taxpayer identification number
of
each Subscriber and of the aggregate principal amount of Securities subscribed
for by such Subscriber. The Escrow Agent is not obligated, and may refuse,
to
accept checks that are not accompanied by a Subscription containing the
requisite information.
2.4 In
the
event a wire transfer is received by the Escrow Agent and the Escrow Agent
has
not received Subscription Information, the Escrow Agent shall notify the
Placement Agent. If the Escrow Agent does not receive the Subscription
Information by such Subscriber prior to close of business on the fifth business
day (days other than a Saturday or Sunday or other day on which the Escrow
Agent
is not open for business in the State of Virginia) after notifying Placement
Agent of receipt of said wire, the Escrow Agent shall return the funds to
the
Subscriber.
3.
Escrow
Agent to Hold and Disburse Escrowed Funds.
The
Escrow Agent will hold and disburse the Escrowed Funds received by it pursuant
to the terms of this Escrow Agreement, as follows:
3.1 Upon
receipt of instructions from the Company, in substantially the form of
Exhibit
C
hereto,
the Escrow Agent shall release the Escrowed Funds as directed in such
instructions.
254
3.2 In
the
event this Agreement, the Escrowed Funds or the Escrow Agent becomes the
subject
of litigation, or if the Escrow Agent shall desire to do so for any other
reason, the Company authorizes the Escrow Agent, at its option, to deposit
the
Escrowed Funds with the clerk of the court in which the litigation is pending,
or a court of competent jurisdiction if no litigation is pending, and thereupon
the Escrow Agent shall be fully relieved and discharged of any further
responsibility with regard thereto. The Company also authorizes the Escrow
Agent, if it receives conflicting claims to the Escrow Funds, is threatened
with
litigation or if the Escrow Agent shall desire to do so for any other reason,
to
interplead all interested parties in any court of competent jurisdiction
and to
deposit the Escrowed Funds with the clerk of that court and thereupon the
Escrow
Agent shall be fully relieved and discharged of any further responsibility
hereunder to the parties from which they were received.
3.3 In
the
event that the Escrow Agent does not receive any instructions by a date that
is
90 days from the date of this Agreement (the “Escrow Termination Date”), all
Escrowed Funds shall be returned to the parties from which they were received,
without interest thereon or deduction therefrom.
4.
Exculpation
and Indemnification of Escrow Agent
4.1
The
Escrow Agent shall have no duties or responsibilities other than those expressly
set forth herein. The Escrow Agent shall have no duty to enforce any obligation
of any person to make any payment or delivery, or to direct or cause any
payment
or delivery to be made, or to enforce any obligation of any person to perform
any other act. The Escrow Agent shall be under no liability to the other
parties
hereto or anyone else, by reason of any failure, on the part of any party
hereto
or any maker, guarantor, endorser or other signatory of a document or any
other
person, to perform such person’s obligations under any such document. Except for
amendments to this Escrow Agreement referenced below, and except for written
instructions given to the Escrow Agent by the Company relating to the Escrowed
funds, the Escrow Agent shall not be obligated to recognize any other agreement
between or among the Company, notwithstanding that references hereto may
be made
herein and whether or not it has knowledge thereof.
4.2 The
Escrow Agent shall not be liable to the Company or to anyone else for any
action
taken or omitted by it, or any action suffered by it to be taken or omitted,
in
good faith and acting upon any order, notice, demand, certificate, opinion
or
advice of counsel (including counsel chosen by the Escrow Agent), statement,
instrument, report, or other paper or document (not only as to its due execution
and the validity and effectiveness of its provisions, but also as to the
truth
and acceptability of any information therein contained), which is believed
by
the Escrow Agent to be genuine and to be signed or presented by the proper
person or persons. The Escrow Agent shall not be bound by any of the terms
thereof, unless evidenced by written notice delivered to the Escrow Agent
signed
by the proper party or parties and, if the duties or rights of the Escrow
Agent
are affected, unless it shall give its prior written consent
thereto.
4.3 The
Escrow Agent shall not be responsible for the sufficiency or accuracy of
the
form, or of the execution, validity, value or genuineness of, any document
or
property received, held or delivered to it hereunder, or of any signature
or
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable
to the
Company or to anyone else in any respect on account of the identity, authority
or rights, of the person executing or delivering or purporting to execute
or
deliver any document or property or this Escrow Agreement. The Escrow Agent
shall have no responsibility with respect to the use or application of the
Escrowed Funds pursuant to the provisions hereof.
255
4.4 The
Escrow Agent shall have the right to assume, in the absence of written notice
to
the contrary from the proper person or persons, that a fact or an event,
by
reason of which an action would or might be taken by the Escrow Agent, does
not
exist or has not occurred, without incurring liability to the Company or
to
anyone else for any action taken or omitted to be taken or omitted, in good
faith and in the exercise of its own best judgment, in reliance upon such
assumption.
4.5 To
the
extent that the Escrow Agent becomes liable for the payment of taxes, including
withholding taxes, in respect of income derived from the investment of the
Escrowed Funds, or any payment made hereunder, the Escrow Agent may pay such
taxes; and the Escrow Agent may withhold from any payment of the Escrowed
Funds
such amount as the Escrow Agent estimates to be sufficient to provide for
the
payment of such taxes not yet paid, and may use the sum withheld for that
purpose. The Escrow Agent shall be indemnified and held harmless against
any
liability for taxes and for any penalties in respect of taxes, on such
investment income or payments in the manner provided in Section 4.6
4.6 The
Escrow Agent will be indemnified and held harmless by the Company from and
against all expenses, including all counsel fees and disbursements, or loss
suffered by the Escrow Agent in connection with any action, suit or proceedings
involving any claim, or in connection with any claim or demand, which in
any
way, directly or indirectly, arises out of or relates to this Escrow Agreement,
the services of the Escrow Agent hereunder, except for claims relating to
gross
negligence by Escrow Agent or breach of this Escrow Agreement by the Escrow
Agent, or the monies or other property held by it hereunder. Promptly after
the
receipt of the Escrow Agent of notice of any demand or claim or the commencement
of any action, suit or proceeding, the Escrow Agent shall, if a claim in
respect
thereof is to be made against the Company, notify it thereof in writing,
but the
failure by the Escrow Agent to give such notice shall not relieve any such
party
from any liability which the Company may have to the Escrow Agent hereunder.
Notwithstanding any obligation to make payments and deliveries hereunder,
the
Escrow Agent may retain and hold for such time as it deems necessary such
amount
of monies or property as it shall, from time to time, in its sole discretion,
seem sufficient to indemnify itself for any such loss or expense and for
any
amounts due it under Section 7.
4.7 For
purposes hereof, the term “expense or loss” shall include all amounts paid or
payable to satisfy any claim, demand or liability, or in settlement of any
claim, demand, action, suit or proceeding settled with the express written
consent of the Escrow Agent, and all costs and expenses, including, but not
limited to, counsel fees and disbursements, paid or incurred in investigating
or
defending against any such claim, demand, action, suit or proceeding.
5.
Termination
of Agreement and Resignation of Escrow Agent
256
5.1 This
Escrow Agreement shall terminate upon disbursement of all of the Escrowed
Funds,
provided that the rights of the Escrow Agent and the obligations of the Company
under Section 4 shall survive the termination hereof.
5.2 The
Escrow Agent may resign at any time and be discharged from its duties as
Escrow
Agent hereunder by giving the Company at least five (5) business days written
notice thereof (the “Notice Period”). As soon as practicable after its
resignation, the Escrow Agent shall, if it receives notice from the Company
within the Notice Period, turn over to a successor escrow agent appointed
by the
Company all Escrowed Funds (less such amount as the Escrow Agent is entitled
to
retain pursuant to Section 7) upon presentation of the document appointing
the
new escrow agent and its acceptance thereof. If no new agent is so appointed
within the Notice Period, the Escrow Agent shall return the Escrowed Funds
to
the parties from which they were received without interest or decuction.
6.
Form
of Payments by Escrow Agent
6.1 Any
payments of the Escrowed Funds by the Escrow Agent pursuant to the terms
of this
Escrow Agreement shall be made by wire transfer unless directed to be made
by
check by the Company.
6.2
All
amounts referred to herein are expressed in United States Dollars and all
payments by the Escrow Agent shall be made in such dollars.
7. Compensation.
Escrow
Agent shall be entitled to the following compensation from the
Company:
7.1 Documentation
Fee:
The
Company shall pay a documentation fee to the Escrow Agent of $2,000.00 receipt
of which is hereby acknowledged by Escrow Agent.
7.2 Closing
Fee:
The
Company shall pay a fee of $500 to the Escrow Agent at each Closing. For
purposes of this Section 7.2, a Closing shall mean each time the Escrow Agent
receives instructions from the Company to disburse Escrowed Funds in accordance
with the terms of this Agreement.
7.2 Interest :
The
Escrowed Funds shall accrue interest (the “Accrued Interest”) at the available
rate obtained by the Escrow Agent with respect to the period during which
such
funds are held in the Escrow Agent’s account set forth in Section 2.1 above. In
connection with a Closing, the Company shall be paid Accrued Interest of
2.5%
per annum on the aggregate amount of Escrowed Funds in the Escrow Agent’s
account on the date of such Closing and the balance of Accrued Interest,
if any,
shall be retained by the Escrow Agent.
8. Notices.
All
notices, requests, demands, and other communications provided herein shall
be in
writing, shall be delivered by hand or by first-class mail, shall be deemed
given when received and shall be addressed to parties hereto at their respective
addresses first set forth on Exhibit
A
hereto.
257
9. Further
Assurances. From
time
to time on and after the date hereof, the Company shall deliver or cause
to be
delivered to the Escrow Agent such further documents and instruments and
shall
do and cause to be done such further acts as the Escrow Agent shall reasonably
request (it being understood that the Escrow Agent shall have no obligation
to
make any such request) to carry out more effectively the provisions and purposes
of this Escrow Agreement, to evidence compliance herewith or to assure itself
that it is protected in acting hereunder.
10. Consent
to Service of Process .
The
Company hereby irrevocably consents to the jurisdiction of the courts of
the
State of Virginia and of any Federal court located in such state in connection
with any action, suit or proceedings arising out of or relating to this Escrow
Agreement or any action taken or omitted hereunder, and waives personal service
of any summons, complaint or other process and agrees that the service thereof
may be made by certified or registered mail directed to it at the address
listed
on Exhibit A hereto.
11. Miscellaneous
11.1 This
Escrow Agreement shall be construed without regard to any presumption or
other
rule requiring construction against the party causing such instrument to
be
drafted. The terms “hereby,” “hereof,” “hereunder,” and any similar terms, as
used in this Escrow Agreement, refer to the Escrow Agreement in its entirety
and
not only to the particular portion of this Escrow Agreement where the term
is
used. The word “person” shall mean any natural person, partnership, corporation,
government and any other form of business of legal entity. All words or terms
used in this Escrow Agreement, regardless of the number or gender in which
they
were used, shall be deemed to include any other number and any other gender
as
the context may require. This Escrow Agreement shall not be admissible in
evidence to construe the provisions of any prior agreement.
11.2 This
Escrow Agreement and the rights and obligations hereunder of the Company
may not
be assigned. This Escrow Agreement and the rights and obligations hereunder
of
the Escrow Agent may be assigned by the Escrow Agent, with the prior consent
of
the Company. This Escrow Agreement shall be binding upon and inure to the
benefit of each party’s respective successors, heirs and permitted assigns. No
other person shall acquire or have any rights under or by virtue of this
Escrow
Agreement. This Escrow Agreement may not be changed orally or modified, amended
or supplemented without an express written agreement executed by the Escrow
Agent and the Company. This Escrow Agreement is intended to be for the sole
benefit of the parties hereto and their respective successors, heirs and
permitted assigns, and none of the provisions of this Escrow Agreement are
intended to be, nor shall they be construed to be, for the benefit of any
third
person.
11.3 This
Escrow Agreement shall be governed by, and construed in accordance with,
the
internal laws of the State of Virginia. The representations and warranties
contained in this Escrow Agreement shall survive the execution and delivery
hereof and any investigations made by any party. The headings in this Escrow
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms thereof.
258
12.
Execution
of Counterparts This
Escrow Agreement may be executed in a number of counterparts, by facsimile,
each
of which shall be deemed to be an original as of those whose signature appears
thereon, and all of which shall together constitute one and the same instrument.
This Escrow Agreement shall become binding when one or more of the counterparts
hereof, individually or taken together, are signed by all the
parties.
259
IN
WITNESS WHEREOF, the parties have executed and delivered this Escrow Agreement
on the day and year first above written.
ESCROW
AGENT:
TRI-STATE
TITLE & ESCROW, LLC
By: ___/s/_Gui
W. Turner______________
Name:
Gui
X. Xxxxxx
Title:
President
HEILONGJIANG
YANGLIN SOYBEAN GROUP CO., LTD.
By:
____/s/
Shulin Liu______________
Name:
Xxxxxx Xxx
Title:
President & CEO
260
EXHIBIT
A
PARTIES
TO AGREEMENT
Tri-State
Title & Escrow, LLC
000
Xxxx
Xxxxxx
X.X.
Xxx
000
Xxxxxxxxxx,
XX 00000
(000)
000-0000
Attention:
Xxxxxxx X. Xxxxxxx
Telephone:
(000) 000-0000
Fax: (000)
000-0000
Email
xxxxxx@xxxxxxxxxxxxx.xxx
Heilongjiang
Yanglin Soybean Group Co., Ltd
00
Xxxxxxx Xxxxxx
Xxxxxx
Xxxxxx, Xxxxxxxxxxxx Xxxxxxxx
The
People’s Republic of China
Tele:
x0-00-000-0000000
Fax:
x0-00-000-0000000
Attention:
Xx. Xxxxxx Xxx
Email:
xxxxxxxx0@000.xxx
261
EXHIBIT
B
SUBCRIPTION
INFORMATION
Name
of Subscriber
|
________________________________
|
Address
of Subscriber
|
________________________________
|
|
________________________________
|
|
________________________________
|
Amount
of Securities
|
|
Subscribed
(US$)
|
________________________________
|
Subscription
Amount
|
|
Submitted
Herewith
|
________________________________
|
Taxpayer
ID Number/
|
|
Social
Security Number
|
________________________________
|
262
EXHIBIT
C
DISBURSEMENT
REQUEST
Pursuant
to that certain Escrow Agreement dated effective as of August __, 2007, among
Heilongjiang Yanglin Soybean Group Co., Ltd and Tri-State Title & Escrow,
LLC, the Escrowing Party hereby requests disbursement of funds in the amount
and
manner described below from account number 5060024931, styled Tri-State Title
& Escrow, LLC Escrow Account.
Please
disburse to:
|
________________________________
|
Amount
to disburse:
|
________________________________
|
Form
of distribution:
|
________________________________
|
Payee:
|
|
Name:
|
________________________________
|
Address:
|
________________________________
|
City/State:
|
________________________________
|
Zip:
|
________________________________
|
Please
disburse to:
|
________________________________
|
Amount
to disburse:
|
________________________________
|
Form
of distribution:
|
________________________________
|
Payee:
|
|
Name:
|
________________________________
|
Address:
|
________________________________
|
City/State:
|
________________________________
|
Zip:
|
________________________________
|
Subscriptions
Accepted From
Subscriber
|
Amount
|
|
___________________________
|
__________________________
|
|
___________________________
|
__________________________
|
|
___________________________
|
__________________________
|
|
___________________________
|
__________________________
|
|
Total:
|
__________________________
|
Statement
of event or condition which calls for this request for
disbursement:
_______________________________________________________________
_______________________________________________________________
Heilongjiang
Yanglin Soybean Group Co. Ltd
263
Date: _________________________ | By: ____________________ | |
Name: Xxxxxx Xxx | Title: President & CEO |
264
EXHIBIT
F-2 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
_______________________________________
ESCROW
AGREEMENT
INVESTOR
AND PUBLIC RELATIONS
THIS
ESCROW AGREEMENT (this “Agreement”)
is
made as of October 3, 2007, by and among Victory Divide Mining Company, a
Nevada
corporation (the “Company”),
Vision Opportunity Master Fund, Ltd., a Cayman Islands company, as
representative of the Purchasers (“Vision”) and Loeb & Loeb LLP (the
“Escrow
Agent”).
ARTICLE
CXXX
ESTABLISHMENT
OF THE ESCROW AGENCY AND ESCROW ACCOUNT
Section
130.1 The
parties hereby appoint the Escrow Agent, and the Escrow Agent hereby accepts,
the escrow agency established under this Agreement.
Section
130.2 The
Escrow Agent shall establish an account to be maintained as an escrow account
(the “Escrow
Account”)
pursuant to and under this Agreement.
Section
130.3 On
the
date hereof, the Company shall instruct Tri-State Title & Escrow, LLC to
disburse $500,000 (the “Escrow
Funds”)
to be
transferred to the Escrow Account.
ARTICLE
CXXXI
INVESTMENT
OF ESCROW FUNDS
The
Escrow Agent shall invest the Escrow Funds in a non-interest bearing bank
account with a U.S. commercial bank or such other bank or other financial
institution as it normally holds such funds.
ARTICLE
CXXXII
DISBURSEMENTS
FROM ESCROW FUNDS
Upon
the
receipt by the Company of a xxxx or statement for fees or expenses in connection
with investor or public relations and the receipt by the Escrow Agent of
the
release notice in the form attached hereto as Exhibit
A
(the
“Release Notice”) executed by the Company and Vision, the Escrow Agent shall
disburse the Escrow Funds in the amount provided in, and in accordance with,
such Release Notice.
265
ARTICLE
CXXXIII
TERMINATION
OF ESCROW AGREEMENT
This
Escrow Agreement shall terminate upon disbursement of all Escrow Funds in
accordance with Article III, provided, that,
the
rights of the Escrow Agent and the obligations of the Company under Article
V
shall survive the termination hereof. Notwithstanding the foregoing, in the
event that the Escrow Agent does not receive any instructions with respect
to
the disbursement of the Escrow Funds by a date that is 90 days from the date
of
this Agreement, this Agreement shall terminate as of such date and the Escrow
Funds shall be transferred directly to the Company.
ARTICLE
CXXXIV
MISCELLANEOUS
Section
134.1 The
Company shall pay the Escrow Agent a one-time fee of $500 for all services
rendered by the Escrow Agent hereunder.
Section
134.2 For
purposes of U.S. federal and other taxes based on income, the Company shall
be
treated as the owner of the Escrow Funds and shall report all income, if
any,
that is earned on, or derived from, the Escrow Funds as its income, in the
taxable year or years in which such income is properly includible and pay
any
taxes attributable thereto. The Escrow Agent shall for each appropriate year,
prepare tax reports on Form 1099 as to the Company’s income and deliver the same
to the Company promptly after the calendar year involved.
Section
134.3 No
waiver
or any breach of any covenant or provision herein contained shall be deemed
a
waiver of any preceding or succeeding breach thereof, or of any other covenant
or provision herein contained. No extension of time for performance of any
obligation or act shall be deemed an extension of the time for performance
of
any other obligation or act.
Section
134.4 All
notices, demands, consents, requests, instructions and other communications
to
be given or delivered or permitted under or by reason of the provisions of
this
Agreement or in connection with the transactions contemplated hereby shall
be in
writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of
such
delivery (as evidenced by the receipt of the personal delivery service),
(ii) if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing),
or (iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance
with
this Section 5.4), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit
of the
sender). All such notices, demands, consents, requests, instructions and
other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
266
If
to the Company:
|
Victory
Divide Mining Company
|
x/x
Xxxxxxxxxxxx Xxxxxxx Soybean Group
|
|
Xx.
00 Xxxxxxx Xxxxxx
|
|
Jixian
Town Heilongjiang
|
|
People’s
Republic of China 155900
|
|
Attention:
Xxxxxx Xxx
|
|
Tel.
No.: 00-000-000-0000
|
|
Fax
No.: 00-000-000-0000
|
|
with
copies to:
|
Guzov
Ofsink, LLC
|
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
|
|
Xxx
Xxxx, XX 00000
|
|
Attention:
Xxxxxx Xxxxxx
|
|
Tel.
No.: (212) 371-8008 ext. 127
|
|
Fax
No.: (000) 000-0000
|
|
If
to Vision to:
|
Vision
Opportunity Master Fund, Ltd.
|
00
X. 00xx
Xxxxxx, 0xx
Xxxxx
|
|
Xxx
Xxxx, XX 00000
|
|
Attention:
Yi Fing Liu
|
|
Tel.
No.: (000) 000-0000
|
|
Fax
No.: (000) 000-0000
|
|
If
to the Escrow Agent:
|
Loeb
& Loeb LLP
|
000
Xxxx Xxxxxx
|
|
Xxx
Xxxx, XX 00000
|
|
Attention:
Xxxxxxxx X. Xxxxxxxx
|
|
Tel.
No.: 000-000-0000
|
|
Fax
No.: 000-000-0000
|
|
Any
party
hereto may from time to time change its address for notices by giving at
least
ten (10) days written notice of such changed address to the other party
hereto.
Section
134.5 This
Escrow Agreement shall be binding upon and shall inure to the benefit of
the
permitted successors and permitted assigns of the parties hereto.
Section
134.6 This
Escrow Agreement is the final expression of, and contains the entire agreement
between, the parties with respect to the subject matter hereof and supersedes
all prior understandings with respect thereto. This Escrow Agreement may
not be
modified, changed, supplemented or terminated, nor may any obligations hereunder
be waived, except by written instrument signed by the parties to be charged
or
by its agent duly authorized in writing or as otherwise expressly permitted
herein.
267
Section
134.7 Whenever
required by the context of this Escrow Agreement, the singular shall include
the
plural and masculine shall include the feminine. This Escrow Agreement shall
not
be construed as if it had been prepared by one of the parties, but rather
as if
both parties had prepared the same. Unless otherwise indicated, all references
to Articles or Sections are to this Escrow Agreement.
Section
134.8 The
parties hereto expressly agree that this Escrow Agreement shall be governed
by,
interpreted under and construed and enforced in accordance with the laws
of the
State of New York, without regard to conflicts of law principles that would
result in the application of the substantive laws of another jurisdiction.
Any
action to enforce, arising out of, or relating in any way to, any provisions
of
this Escrow Agreement shall only be brought in a state or Federal court sitting
in New York City, Borough of Manhattan.
Section
134.9 The
Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
only by a writing signed by each of the parties hereto.
Section
134.10 The
Escrow Agent shall be obligated only for the performance of such duties as
are
specifically set forth herein and may rely and shall be protected in relying
or
refraining from acting on any instrument reasonably believed by the Escrow
Agent
to be genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent shall not be personally liable for any act the
Escrow
Agent may do or omit to do hereunder as the Escrow Agent while acting in
good
faith and in the absence of gross negligence, fraud or willful misconduct,
and
any act done or omitted by the Escrow Agent pursuant to the advice of the
Escrow
Agent’s attorneys-at-law shall be conclusive evidence of such good faith, in the
absence of gross negligence, fraud or willful misconduct.
Section
134.11 The
Escrow Agent is hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In
case the Escrow Agent obeys or complies with any such order, judgment or
decree,
the Escrow Agent shall not be liable to any of the parties hereto or to any
other person, firm or corporation by reason of such decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction.
Section
134.12 The
Escrow Agent shall not be liable in any respect on account of the identity,
authorization or rights of the parties executing or delivering or purporting
to
execute or deliver any documents or papers deposited or called for thereunder
in
the absence of gross negligence, fraud or willful misconduct.
Section
134.13 The
Escrow Agent’s responsibilities as escrow agent hereunder shall terminate if the
Escrow Agent shall resign by giving written notice to the Company and Vision.
In
the event of any such resignation, Vision and the Company shall appoint a
successor Escrow Agent and the Escrow Agent shall deliver to such successor
Escrow Agent any Escrow Funds and other documents held by the Escrow
Agent.
268
Section
134.14 If
the
Escrow Agent reasonably requires other or further instruments in connection
with
this Escrow Agreement or obligations in respect hereto, the necessary parties
hereto shall join in furnishing such instruments.
Section
134.15 It
is
understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the documents or the Escrow Funds
held by the Escrow Agent hereunder, the Escrow Agent is authorized and directed
in the Escrow Agent’s sole discretion (i) to retain in the Escrow Agent’s
possession without liability to anyone all or any part of said documents
or the
Escrow Funds until such disputes shall have been settled either by mutual
written agreement of the parties concerned by a final order, decree or judgment
or a court of competent jurisdiction after the time for appeal has expired
and
no appeal has been perfected, but the Escrow Agent shall be under no duty
whatsoever to institute or defend any such proceedings or (ii) to deliver
the
Escrow Funds and any other property and documents held by the Escrow Agent
hereunder to a state or Federal court having competent subject matter
jurisdiction and located in the City of New York, Borough of Manhattan, in
accordance with the applicable procedure therefor.
Section
134.16 The
Company agrees to indemnify and hold harmless the Escrow Agent and its partners,
employees, agents and representatives from any and all claims, liabilities,
costs or expenses in any way arising from or relating to the duties or
performance of the Escrow Agent hereunder other than any such claim, liability,
cost or expense to the extent the same shall have been determined by final,
unappealable judgment of a court of competent jurisdiction to have resulted
from
the gross negligence, fraud or willful misconduct of the Escrow
Agent.
[SIGNATURE
PAGE FOLLOWS]
269
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first written above.
VICTORY
DIVIDE MINING COMPANY
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
VISION
OPPORTUNITY MASTER FUND, LTD.
By:
/s/
Xxxx Xxxxxxxx
Name:
Xxxx Xxxxxxxx
Title:
Director
ESCROW
AGENT:
LOEB
& LOEB LLP
By:
/s/
Xxxxxxxx X. Xxxxxxxx
Name:
Xxxxxxxx X. Xxxxxxxx
Title:
Partner
270
Exhibit
A
to
Escrow
Agreement
RELEASE
NOTICE
Pursuant
to the Escrow Agreement - Investor and Public Relations, dated as of October
3,
2007 (the “Escrow
Agreement”),
by
and among Victory Divide Mining Company (the “Company”),
Vision Opportunity Master Fund, Ltd. (“Vision”)
and
Loeb & Loeb LLP (the “Escrow
Agent”),
the
Company hereby instructs the Escrow Agent to release Escrow Funds in accordance
with the following instructions:
Recipient
of
Escrow
Funds
|
Amount
of Escrow Funds to be Disbursed
|
Date
of Disbursement
|
Transfer
Instructions
|
Capitalized
terms used herein and not defined shall have the meanings ascribed to such
terms
in the Escrow Agreement.
VICTORY
DIVIDE MINING COMPANY
By:
Name:
Title:
VISION
OPPORTUNITY MASTER FUND, LTD.
By:
Name:
Title:
Date:
271
EXHIBIT
F-3 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
_______________________________________
SECURITIES
ESCROW AGREEMENT
THIS
SECURITIES ESCROW AGREEMENT (the “Agreement”),
dated
as of October 3, 2007, is entered into by and among Victory Divide Mining
Company., a Nevada corporation (the “Company”),
Vision Opportunity Master Fund, Ltd., a Cayman Islands company, as
representative of the Purchasers (the “Purchaser
Representative”),
Winner State International Limited, a British Virgin Islands company (the
“Principal
Stockholder”),
and
Loeb & Loeb LLP, with an address at 000 Xxxx Xxxxxx Xxx Xxxx, XX 00000 (the
“Escrow
Agent”).
Capitalized terms used but not defined herein shall have the meanings set
forth
in the Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS,
the Purchasers will be purchasing from the Company shares of the Company’s
Series A Convertible Preferred Stock, par value $0.001 per share (the
“Series
A Preferred”),
convertible into shares of the Company’s common stock, par value $0.001 per
share (the “Common
Stock”),
and
certain common stock purchase warrants (the “Warrants”)
pursuant to a Series A Convertible Preferred Stock Purchase Agreement dated
as
of the date hereof (the “Closing
Date”)
by and
among the Company and the Purchasers (the “Purchase
Agreement”);
and
WHEREAS,
the Company and the Purchasers agree that the capitalization table upon which
the transactions contemplated by this Agreement and the Purchase Agreement
are
based is set forth as Schedule
A
hereto;
and
WHEREAS,
as an inducement to the Purchasers to enter into the Purchase Agreement,
the
Principal Stockholder has agreed to place the Escrow Shares (as hereinafter
defined) into escrow for the benefit of the Purchasers in the event the Company
fails to achieve the following financial performance thresholds for the 12-month
periods ending December 31, 2007 (“2007”)
and
December 31, 2008 (“2008”):
(a) In
2007,
(i) Earnings Per Share of $0.34, such “Earnings Per Share” to be calculated by
dividing (A) Net Income, as defined in accordance with US GAAP and reported
by
the Company in its audited financial statements for 2007 (the “2007
financial statements”)
plus
any
amounts that may have been recorded as charges or liabilities on the 2007
financial statements due to the application of EITF No. 00-19 that are
associated with (1) any outstanding Warrants of the Company, (2) any issuance
under a performance based stock incentive plan that was in existence on the
Closing Date or (3) the transactions contemplated by this Agreement and Section
7.1 of the Share Exchange Agreement dated as of the date hereof by and between
the Company and Winner State (the “Share
Exchange Agreement”)
(“2007
Net Income”)
by the
Outstanding Shares (as hereinafter defined) and (ii) Cash Earnings Per Share
of
$0.27, such “Cash Earnings Per Share” to be calculated by dividing cash from
operations reported by the Company on the 2007 financial statements, by the
aggregate number of shares of then outstanding Common Stock on a fully-diluted
basis, which number shall include, without limitation, the number of shares
of
Common Stock issuable upon conversion of the Company’s then outstanding shares
of Preferred Stock, par value $0.001 per share and the number of shares of
Common Stock issuable upon the exercise of any then outstanding warrants
or
options of the Company, provided,
however,
that
such number shall not include (X) shares of the Company’s Series A Convertible
Preferred Stock, par value $0.001 per share (“Series
A Preferred”)
or
Common Stock issued to the Principal Stockholder pursuant to Section 7.1
of the
Share Exchange Agreement and (Y) shares of Common Stock issuable upon exercise
of the Company’s Series A Warrants, Series B Warrants, Series C Warrants and
Series D Warrants and issuable upon conversion of the Series B Convertible
Preferred Stock, par value $0.001 that is issuable upon exercise of the
Company’s Series J Warrants, and warrants issued to the Company’s placement
agent in connection with the transactions contemplated by the Purchase
Agreement, dated the date hereof (such number shall be referred to herein
as the
“Outstanding
Shares”)
(the
performance thresholds set forth in (i) and (ii) above shall be collectively
referred to herein as the “2007
Performance Threshold”);
272
(b) In
2008,
(i) Earnings Per Share of $0.43, such “Earnings Per Share” to be calculated by
dividing (A) Net Income, as defined in accordance with US GAAP and reported
by
the Company in its audited financial statements for 2008 (the “2008
financial statements”)
plus
any
amounts that may have been recorded as charges or liabilities on the 2008
financial statements due to the application of EITF No. 00-19 that are
associated with (1) any outstanding Warrants of the Company, (2) any issuance
under a performance based stock incentive plan that was in existence on the
Closing Date or (3) the transactions contemplated by this Agreement and Section
7.1 of the Share Exchange Agreement (“2008
Net Income”)
by the
Outstanding Shares and (ii) Cash Earnings Per Share of $0.37, such “Cash
Earnings Per Share to be calculated by dividing cash from operations reported
by
the Company on the 2008 financial statements by the Outstanding Shares (the
performance thresholds set forth in (i) and (ii) above shall be collectively
referred to herein as the “2008
Performance Threshold”);
and
WHEREAS,
the Company, the Purchaser Representative and the Purchasers have requested
that
the Escrow Agent hold the Escrow Shares on the terms and conditions set forth
in
this Agreement and the Escrow Agent has agreed to act as escrow agent pursuant
to the terms and conditions of this Agreement.
NOW,
THEREFORE, in consideration of the covenants and mutual promises contained
herein and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged and intending to be legally
bound
hereby, the parties agree as follows:
ARTICLE
I
TERMS
OF THE ESCROW
Section
1.1 The
parties hereby agree to establish an escrow account with the Escrow Agent
whereby the Escrow Agent shall hold the Escrow Shares as contemplated by
this
Agreement.
273
Section
1.2 Upon
the
execution of this Agreement, the Principal Stockholder shall deliver to the
Escrow Agent stock certificates evidencing one hundred percent (100%) of
the
shares of Common Stock underlying the Preferred Shares issuable under the
Purchase Agreement (such shares of Common Stock plus such additional number
of
shares of Common Stock as may be required to be deposited hereunder pursuant
to
Section 1.3(i) or 1.3(ii) hereof shall be collectively referred to in this
Agreement as the “Escrow
Shares”),
along
with updated stock powers executed in blank with signature medallion
guaranteed.
Section
1.3 The
parties hereby agree that the 2007 Escrow Shares (as hereinafter defined)
shall
be delivered based on the achievement of the 2007 Performance Threshold as
set
forth below:
(i) If
the
Company’s Earnings Per Share and Cash Earnings Per Share for 2007 is less than
50% of the 2007 Performance Threshold, then all of the Escrow Shares (the
“2007
Escrow Shares”)
shall
be distributed on a pro rata basis to the Purchasers based on the number
of
shares of Series A Preferred owned by such Purchasers as of the date thereof.
Within five (5) business days of the Purchaser Representative’s receipt of the
2007 financial statements, the Company and the Purchaser Representative shall
provide written instruction to the Escrow Agent instructing the Escrow Agent
to
issue and deliver the 2007 Escrow Shares to the Purchasers on a pro rata
basis
to the Purchasers based on the number of shares of Series A Preferred owned
by
such Purchasers as of the date thereof. Within five (5) business days after
the
release of the 2007 Escrow Shares to the Purchasers, the Principal Stockholder
shall deposit into the escrow account maintained by the Escrow Agent, stock
certificates evidencing one hundred percent (100%) of the shares of Common
Stock
underlying the Preferred Shares issuable under the Purchase Agreement.
(ii) If
the
Company’s Earnings Per Share for 2007 is greater than or equal to 50% but less
than 95% of the 2007 Performance Threshold, the Escrow Agent shall deliver
to
the Purchasers, on a pro rata basis based on the number of shares of Series
A
Preferred owned by such Purchasers as of the date thereof, the number of
2007
Escrow Shares multiplied by the percentage by which the 2007 Performance
Threshold was not achieved and multiplied by 200%. By way of example, if
the
Company’s Earnings Per Share for 2007 is an amount equal to 60% of the 2007
Performance Threshold, the Purchasers shall receive 200% of the product of
40%
of the 2007 Escrow Shares (100% -60%) and, the remaining Escrow Shares shall
continue to be held in escrow hereunder. Within five (5) business days of
the
Purchaser Representative’s receipt of the 2007 financial statements, the Company
and the Purchaser Representative shall provide written instructions to the
Escrow Agent instructing the Escrow Agent to deliver the applicable number
of
2007 Escrow Shares to the Purchasers and to hold the remaining Escrow Shares
in
escrow. Within five (5) business days after the release of the 2007 Escrow
Shares to the Purchasers, the Principal Stockholder shall deposit into the
escrow account maintained by the Escrow Agent, stock certificates evidencing
such number of shares of Common Stock so that the number of Escrow Shares
shall
equal the number of shares of Common Stock initially deposited pursuant to
Section 1.2.
(iii) If
the
Company’s Earnings Per Share for 2007 equals or exceeds 95% of the 2007
Performance Threshold, then the Escrow Shares shall continue to be held in
escrow hereunder.
274
Notwithstanding
anything to the contrary set forth herein, only those Purchasers who own
shares
of Series A Preferred acquired under the Purchase Agreement and remain
shareholders of the Company at the time that any 2007 Escrow Shares become
deliverable hereunder shall be entitled to their pro rata portion of such
2007
Escrow Shares calculated based on their ownership interest at the time when
the
2007 Escrow Shares become deliverable hereunder. Any 2007 Escrow Shares not
delivered to Purchasers because the Purchasers no longer hold shares of Series
A
Preferred acquired under the Purchase Agreement shall remain in escrow with
the
Escrow Agent.
Section
1.4 The
parties hereby agree that the 2008 Escrow Shares (as hereinafter defined)
shall
be delivered based on achievement of the 2008 Performance Threshold as set
forth
below:
(i) If
the
Company’s Earnings Per Share for 2008 is less than 50% of the 2008 Performance
Threshold, then all of the Escrow Shares (the “2008
Escrow Shares”),
shall
be distributed on a pro rata basis to the Purchasers based on the number
of
shares of Series A Preferred owned by such Purchasers as of the date thereof.
Within five (5) business days of the Purchaser Representative’s receipt of the
2008 financial statements, the Company and the Purchaser Representative shall
provide written instruction to the Escrow Agent instructing the Escrow Agent
to
issue and deliver the 2008 Escrow Shares to the Purchasers on a pro rata
basis
based on the number of shares of Series A Preferred owned by such Purchasers
as
of the date thereof.
(ii) If
the
Company’s Earnings Per Share for 2008 is greater than or equal to 50% but less
than 95% of the 2008 Performance Threshold, (a) the Escrow Agent shall deliver
to the Purchasers, on a pro rata basis based on the number of shares of Series
A
Preferred owned by such Purchasers as of the date thereof, the number of
2008
Escrow Shares equal to the number of 2008 Escrow Shares multiplied by the
percentage by which the 2008 Performance Threshold was not achieved and
multiplied by 200% and (b) the remaining 2008 Escrow Shares shall be returned
to
the Principal Stockholder. By way of example, if the Company’s Earnings Per
Share for 2008 is an amount equal to 60% of the 2008 Performance Threshold,
the
Purchasers shall receive 200% of 40% of the 2008 Escrow Shares (100% - 60%)
and
the remaining 2008 Escrow Shares shall be returned to the Principal Stockholder.
Within five (5) business days of the Purchaser Representative’s receipt of the
2008 financial statements, the Company and the Purchaser Representative shall
provide written instructions to the Escrow Agent instructing the Escrow Agent
to
deliver the applicable number of 2008 Escrow Shares to the Purchasers and
to the
Principal Stockholder.
(iii) In
the
event the Company equals or exceeds 95% of the 2008 Performance Threshold,
all
of the 2008 Escrow Shares shall be returned to the Principal Stockholder-
at the
address set forth in Section 5.3 hereof.
Notwithstanding
anything to the contrary set forth herein, only those Purchasers who own
shares
of Series A Preferred acquired under the Purchase Agreement and remain
shareholders of the Company at the time that the 2008 Escrow Shares become
deliverable hereunder shall be entitled to their pro rata portion of such
2008
Escrow Shares calculated based on their ownership interest at the time when
such
2008 Escrow Shares become deliverable hereunder. Any 2008 Escrow Shares not
delivered to Purchasers because the Purchasers no longer hold shares of Series
A
Preferred acquired under the Purchase Agreement will be delivered to the
Company.
275
Section
1.5 If
the
Company fails to timely comply with its obligations set forth in Section
3.25 of
the Purchase Agreement (the “Listing
Obligation”),
then
1,000,000 shares of Common Stock owned by the Principal Stockholder (the
“Penalty
Shares”)
shall
be distributed to the Purchasers on a pro rata basis as set forth in Section
3.25 of the Purchase Agreement.
Section
1.6 If
the
Company does not achieve the 2007 Performance Threshold for 2007 or the 2008
Performance Threshold and/or if the Company does not comply with the Listing
Obligation, the Company shall use best efforts to promptly cause the 2007
Escrow
Shares, the 2008 Escrow Shares or the Penalty Shares, as applicable, to be
delivered to the Purchasers, including causing its transfer agent promptly
to
issue the certificates in the names of the Purchasers and causing its securities
counsel to provide any written instruction required by the Escrow Agent in
a
timely manner so that the issuances and delivery contemplated above can be
achieved within five business days following delivery of the 2007 financial
statements or 2008 financial statements in the case of the 2007 Escrow Shares
or
the 2008 Escrow Shares, as applicable, to the Purchaser Representative, or,
within five business days of December 31, 2008, in the case of the Penalty
Shares.
Section
1.7 The
Company will provide the Purchaser Representative with (i) the Company’s audited
financial statements for 2007, prepared in accordance with US GAAP, on or
before
March 31, 2008 and (ii) the Company’s audited financial statements for 2008,
prepared in accordance with US GAAP, on or before March 31, 2009, so as to
allow
the Purchaser Representative the opportunity to evaluate whether the 2007
Performance Threshold and the 2008 Performance Threshold were
attained.
Section
1.8 Upon
the
written request of the Company and Purchaser Representative, the Escrow Agent
shall deliver the 2007 Escrow Shares and the 2008 Escrow Shares, as applicable,
to each Purchaser and/or the Principal Stockholder pursuant to the written
instructions of the Company and Purchaser Representative.
ARTICLE
II
REPRESENTATIONS
OF THE PRINCIPAL STOCKHOLDER
Section
2.1 The
Principal Stockholder hereby represents and warrants to the Purchasers and
the
Purchaser Representative as follows:
(i) The
Escrow Shares placed into escrow hereunder by the Principal Stockholder are
validly issued, fully paid and nonassessable shares of the Company. The
Principal Stockholder is the record and beneficial owner of the Escrow Shares
placed into escrow pursuant to this Agreement by the Principal Stockholder
and
has good title to such Escrow Shares, free and clear of all pledges, liens,
claims and encumbrances, except encumbrances created by this Agreement. There
are no restrictions on the ability of the Principal Stockholder to transfer
the
Escrow Shares placed into escrow pursuant to this Agreement by the Principal
Stockholder or to enter into this Agreement other than transfer restrictions
under applicable federal and state securities laws. Upon any delivery of
Escrow
Shares placed into escrow pursuant to this Agreement by the Principal
Stockholder to the Purchasers hereunder, the Purchasers will acquire good
and
valid title to such Escrow Shares, free and clear of any pledges, liens,
claims
and encumbrances.
276
(ii) The
performance of this Agreement and compliance with the provisions hereof will
not
violate any provision of any law applicable to the Principal Stockholder
and
will not conflict with or result in any breach of any of the terms, conditions
or provisions of, or constitute a default under, or result in the creation
or
imposition of any lien, charge or encumbrance upon, any of the properties
or
assets of the Principal Stockholder pursuant to the terms of the certificate
of
incorporation or by-laws of the Company or any indenture, mortgage, deed
of
trust or other agreement or instrument binding upon the Principal Stockholder
or
affecting the Escrow Shares. No notice to, filing with, or authorization,
registration, consent or approval of any governmental authority or other
person
is necessary for the execution, delivery or performance of this Agreement
or the
consummation of the transactions contemplated hereby by the Principal
Stockholder.
ARTICLE
III
COVENANTS
Section
3.1 [Intentionally
Omitted.]
Section
3.2 [Intentionally
Omitted.]
ARTICLE
IV
MISCELLANEOUS
Section
4.1 The
Company will pay Escrow Agent a total of $1,000 for all services rendered
by
Escrow Agent hereunder.
Section
4.2 No
waiver
or any breach of any covenant or provision herein contained shall be deemed
a
waiver of any preceding or succeeding breach thereof, or of any other covenant
or provision herein contained. No extension of time for performance of any
obligation or act shall be deemed an extension of the time for performance
of
any other obligation or act.
All
notices, demands, consents, requests, instructions and other communications
to
be given or delivered or permitted under or by reason of the provisions of
this
Agreement or in connection with the transactions contemplated hereby shall
be in
writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of
such
delivery (as evidenced by the receipt of the personal delivery service),
(ii) if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing),
or (iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance
with
this Section 4), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit
of the
sender). All such notices, demands, consents, requests, instructions and
other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
277
If
to
Escrow Agent: Loeb & Loeb LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxxx Xxxxxxxx, Esq
Tel
No.:000-000-0000
Fax
No.:
000-000-0000
If
to the
Company or the Principal Stockholder:
Victory
Divide Mining Company.
c/o
Winner State International Limited
Attention:
Xxxxxx Xxx
Tel:
00-000-000-0000
Fax:
00-000-000-0000
With
a
copy to:
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.:
(000) 000-0000, ext. 127
Fax
No.:
(000) 000-0000
If
to the
Purchaser
Vision
Opportunity Master Fund, Ltd.
Representative:
00
X.
00xx Xxxxxx, 0xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxx
Tel.
No.:
(000) 000-0000
Fax
No.:
(000) 000-0000
or
to
such other address and to the attention of such other person as any of the
above
may have furnished to the other parties in writing and delivered in accordance
with the provisions set forth above.
Section
4.3 This
Escrow Agreement shall be binding upon and shall inure to the benefit of
the
permitted successors and permitted assigns of the parties hereto.
Section
4.4 This
Escrow Agreement is the final expression of, and contains the entire agreement
between, the parties with respect to the subject matter hereof and supersedes
all prior understandings with respect thereto. This Escrow Agreement may
not be
modified, changed, supplemented or terminated, nor may any obligations hereunder
be waived, except by written instrument signed by the parties to be charged
or
by its agent duly authorized in writing or as otherwise expressly permitted
herein.
278
Section
4.5 Whenever
required by the context of this Escrow Agreement, the singular shall include
the
plural and masculine shall include the feminine. This Escrow Agreement shall
not
be construed as if it had been prepared by one of the parties, but rather
as if
both parties had prepared the same. Unless otherwise indicated, all references
to Articles are to this Escrow Agreement.
Section
4.6 The
parties hereto expressly agree that this Escrow Agreement shall be governed
by,
interpreted under and construed and enforced in accordance with the laws
of the
State of New York, without regard to conflicts of law principles that would
result in the application of the substantive laws of another jurisdiction.
Any
action to enforce, arising out of, or relating in any way to, any provisions
of
this Escrow Agreement shall only be brought in a state or Federal court sitting
in New York City, Borough of Manhattan.
Section
4.7 The
Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
only by a writing signed by the Company, the Principal Stockholder, the
Purchaser Representative and the Escrow Agent.
Section
4.8 The
Escrow Agent shall be obligated only for the performance of such duties as
are
specifically set forth herein and may rely and shall be protected in relying
or
refraining from acting on any instrument reasonably believed by the Escrow
Agent
to be genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent shall not be personally liable for any act the
Escrow
Agent may do or omit to do hereunder as the Escrow Agent while acting in
good
faith and in the absence of gross negligence, fraud and willful misconduct,
and
any act done or omitted by the Escrow Agent pursuant to the advice of the
Escrow
Agent’s attorneys-at-law shall be conclusive evidence of such good faith, in the
absence of gross negligence, fraud and willful misconduct.
Section
4.9 The
Escrow Agent is hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In
case the Escrow Agent obeys or complies with any such order, judgment or
decree,
the Escrow Agent shall not be liable to any of the parties hereto or to any
other person, firm or corporation by reason of such decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction.
Section
4.10 The
Escrow Agent shall not be liable in any respect on account of the identity,
authorization or rights of the parties executing or delivering or purporting
to
execute or deliver any documents or papers deposited or called for thereunder
in
the absence of gross negligence, fraud and willful misconduct.
279
Section
4.11 The
Escrow Agent shall be entitled to employ such legal counsel and other experts
as
the Escrow Agent may deem necessary properly to advise the Escrow Agent in
connection with the Escrow Agent’s duties hereunder, may rely upon the advice of
such counsel, and may pay such counsel reasonable compensation therefor which
shall be paid by the Escrow Agent. The
Escrow Agent has acted as legal counsel for one of the Purchasers and may
continue to act as legal counsel for such Purchaser from time to time,
notwithstanding its duties as the Escrow Agent hereunder. The Company and
the
Purchasers consent to the Escrow Agent in such capacity as legal counsel
for one
of the Purchasers and waive any claim that such representation represents
a
conflict of interest on the part of the Escrow Agent. The Company and the
Purchasers understand that the Escrow Agent is relying explicitly on the
foregoing provision in entering into this Escrow
Agreement.
Section
4.12 The
Escrow Agent’s responsibilities as escrow agent hereunder shall terminate if the
Escrow Agent shall resign by giving written notice to the Company and the
Purchasers. In the event of any such resignation, the Purchasers and the
Company
shall appoint a successor Escrow Agent and the Escrow Agent shall deliver
to
such successor Escrow Agent any escrow funds and other documents held by
the
Escrow Agent.
Section
4.13 If
the
Escrow Agent reasonably requires other or further instruments in connection
with
this Escrow Agreement or obligations in respect hereto, the necessary parties
hereto shall join in furnishing such instruments.
Section
4.14 It
is
understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the documents or the Escrow Shares
held by the Escrow Agent hereunder, the Escrow Agent is authorized and directed
in the Escrow Agent’s sole discretion (1) to retain in the Escrow Agent’s
possession without liability to anyone all or any part of said documents
or the
Escrow Shares until such disputes shall have been settled either by mutual
written agreement of the parties concerned by a final order, decree or judgment
or a court of competent jurisdiction after the time for appeal has expired
and
no appeal has been perfected, but the Escrow Agent shall be under no duty
whatsoever to institute or defend any such proceedings or (2) to deliver
the
Escrow Shares and any other property and documents held by the Escrow Agent
hereunder to a state or Federal court having competent subject matter
jurisdiction and located in the City of New York, Borough of Manhattan, in
accordance with the applicable procedure therefor.
Section
4.15 The
Company agrees to indemnify and hold harmless the Escrow Agent and its partners,
employees, agents and representatives from any and all claims, liabilities,
costs or expenses in any way arising from or relating to the duties or
performance of the Escrow Agent hereunder or the transactions contemplated
hereby or by the Purchase Agreement other than any such claim, liability,
cost
or expense to the extent the same shall have been determined by final,
unappealable judgment of a court of competent jurisdiction to have resulted
from
the gross negligence, fraud or willful misconduct of the Escrow
Agent.
[Signature
Page Follows]
280
[SIGNATURE
PAGE TO SECURITIES ESCROW AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
3rd
day of October, 2007.
VICTORY
DIVIDE MINING COMPANY
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
PURCHASER
REPRESENTATIVE:
VISION
OPPORTUNITY MASTER FUND, LTD.
By:
/s/
Xxxx Xxxxxxxx
Name:
Xxxx Xxxxxxxx
Title:
Director
ESCROW
AGENT:
Loeb
& Loeb LLP
By:
/s/
Xxxxxxxx X. Xxxxxxxx
Name:
Xxxxxxxx X. Xxxxxxxx
Title:
Partner
PRINCIPAL
STOCKHOLDER:
WINNER
STATE INTERNATIONAL LIMITED
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
281
Schedule
A
Capitalization
Table
Yanglin
Capitalization Table
|
|||||||||||||||||||||||||||||||||||||||||||
Post
Deal Shares in Victory Divide Mining Company
|
Amount
Invested
|
|
Common
Stock
|
|
Series
A Preferred
|
Series
B Preferred potentially issuable if Series J Exercised
|
|
Series
A Warrants
|
|
Series
B Warrants
|
|
Setries
J Warrants
|
|
Series
C Warrants
|
|
Series
D Warrants
|
|
Series
E Warrants
|
|
Series
F Warrants
|
|
%
of Outstanding Common
|
|
%
of Outstanding Assuming Preferred is Converted
|
|
%
Fully Diluted
|
||||||||||||||||||
Winner
State International Limited
|
18,200,000
|
91.00
|
%
|
60.67
|
%
|
24.66
|
%
|
||||||||||||||||||||||||||||||||||||
Beneficial
Ownership
|
|||||||||||||||||||||||||||||||||||||||||||
Xxxxxx
Xxx
|
9,100,000
|
||||||||||||||||||||||||||||||||||||||||||
Huanqin
Ding
|
9,100,000
|
||||||||||||||||||||||||||||||||||||||||||
Investors
|
$
|
21,500,000.00
|
525,000
|
10,000,000
|
7,801,268
|
10,000,000
|
5,000,000
|
7,801,268
|
7,801,268
|
3,900,634
|
0
|
0
|
2.63
|
%
|
35.08
|
%
|
71.58
|
%
|
|||||||||||||||||||||||||
Vision
Opportunity Master Fund, Ltd.
|
$
|
8,000,000.00
|
525,000
|
3,720,930
|
3,382,664
|
3,720,930
|
1,860,465
|
3,382,664
|
3,382,664
|
1,691,332
|
2.63
|
%
|
14.15
|
%
|
29.36
|
%
|
|||||||||||||||||||||||||||
Sansar
Capital Special Opportunity Master Fund, LP (Cayman
Master)
|
$
|
5,950,000.00
|
2,767,442
|
2,515,856
|
2,767,442
|
1,383,721
|
2,515,856
|
2,515,856
|
1,257,928
|
0.00
|
%
|
9.22
|
%
|
21.31
|
%
|
||||||||||||||||||||||||||||
Vicis
Capital Master Fund
|
$
|
4,500,000.00
|
2,093,023
|
1,902,748
|
2,093,023
|
1,046,512
|
1,902,748
|
1,902,748
|
951,374
|
0.00
|
%
|
6.98
|
%
|
16.11
|
%
|
||||||||||||||||||||||||||||
Precept
Capital Master Fund, GP
|
$
|
500,000.00
|
232,558
|
232,558
|
116,279
|
0.00
|
%
|
0.78
|
%
|
0.79
|
%
|
||||||||||||||||||||||||||||||||
Penn
Footwear
|
$
|
250,000.00
|
116,279
|
116,279
|
58,140
|
0.00
|
%
|
0.39
|
%
|
0.39
|
%
|
||||||||||||||||||||||||||||||||
Crescent
International Ltd.
|
$
|
300,000.00
|
139,535
|
139,535
|
69,767
|
0.00
|
%
|
0.47
|
%
|
0.47
|
%
|
||||||||||||||||||||||||||||||||
Benefit
Grand Investments Limited
|
$
|
500,000.00
|
232,558
|
232,558
|
116,279
|
0.00
|
%
|
0.78
|
%
|
0.79
|
%
|
||||||||||||||||||||||||||||||||
Golden
Bridge Asset Management
|
$
|
1,000,000.00
|
465,116
|
465,116
|
232,558
|
0.00
|
%
|
1.55
|
%
|
1.58
|
%
|
||||||||||||||||||||||||||||||||
Xxxxxx
X Xxxxxxxx
|
$
|
250,000.00
|
116,279
|
116,279
|
58,140
|
0.00
|
%
|
0.39
|
%
|
0.39
|
%
|
||||||||||||||||||||||||||||||||
Xxxxxxx
Road Partners, LP
|
$
|
250,000.00
|
116,279
|
116,279
|
58,140
|
0.00
|
%
|
0.39
|
%
|
0.39
|
%
|
||||||||||||||||||||||||||||||||
Xxxxx
Brothers Securities, Inc.
|
487,500
|
1,000,000
|
2.44
|
%
|
1.63
|
%
|
2.02
|
%
|
|||||||||||||||||||||||||||||||||||
Public
Shareholders//Xxxxx Xxxxxx
|
487,500
|
2.44
|
%
|
1.63
|
%
|
0.66
|
%
|
||||||||||||||||||||||||||||||||||||
Mass
Harmony Assets
|
300,000
|
500,000
|
1.50
|
%
|
1.00
|
%
|
1.08
|
%
|
|||||||||||||||||||||||||||||||||||
Totals
|
$
|
21,500,000
|
20,000,000
|
10,000,000
|
7,801,268
|
10,000,000
|
5,000,000
|
7,801,268
|
7,801,268
|
3,900,634
|
1,000,000
|
500,000
|
100.00
|
%
|
100.00
|
%
|
100.00
|
%
|
Legend
|
||||
Series
A Convertible Preferred Stock - Convertible into common at
the option of
the holder 1:1. Price per share
|
$
|
2.15
|
||
Series
A Warrants - five year term with an exercise price of
|
$
|
2.75
|
||
Series
B Warrants - five year term with an exercise price of
|
$
|
3.50
|
||
Series
J Warrants - 18 month term with an exercise price of
|
$
|
2.37
|
||
Series
C Warrants - five year term with an exercise price of
|
$
|
3.03
|
||
Series
D Warrants - five year term with an exercise price of
|
$
|
3.85
|
||
Series
E Warrants - only for the placement agent - five year term
with an
exercise price of
|
$
|
2.58
|
||
Series
F Warrants - only for Mass Harmony Assets, the financial cousulting
firm -
five year term with an exercise price of
|
$
|
3.01
|
||
Total
Common Outstanding Post-Reverse and Post-Finacing
|
20,000,000
|
|||
Total
Series A Preferred Stock to be sold
|
10,000,000
|
|||
Fully
Diluted Calculation Assumes the Conversion of all preferred
and exercise
of all warrant for outstanding shares of
|
73,804,440
|
282
EXHIBIT
G TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
____________________________________________
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
__________________________________________
as
of
October 3, 2007
PacWest
Transfer LLC
000
Xxx
Xxxxxx
Xxxxxxxxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxxxxx
Ladies
and Gentlemen:
Reference
is made to that certain Series A Convertible Preferred Stock Purchase Agreement
(the “Purchase
Agreement”),
dated
as of October 3, 2007, by and among Victory Divide Mining Company, a Nevada
corporation (the “Company”),
and
the purchasers named therein (collectively, the “Purchasers”)
pursuant to which the Company is issuing to the Purchasers shares of its
Series
A Convertible Preferred Stock, par value $0.001 per share, (the “Preferred
Shares”)
and
warrants (the “Warrants”)
to
purchase shares of the Company’s common stock, par value $0.001 per share (the
“Common
Stock”).
This
letter shall serve as our irrevocable authorization and direction to you
provided that you are the transfer agent of the Company at such time) to
issue
shares of Common Stock upon conversion of the Preferred Shares (the
“Conversion
Shares”)
and
exercise of the Warrants (the “Warrant
Shares”)
to or
upon the order of a Purchaser from time to time upon (i) surrender to you
of a properly completed and duly executed Conversion Notice or Exercise Notice,
as the case may be, in the form attached hereto as Exhibit I and Exhibit
II,
respectively, (ii) in the case of the conversion of Preferred Shares, a
copy of the certificates (with the original certificates delivered to the
Company) representing Preferred Shares being converted or, in the case of
Warrants being exercised, a copy of the Warrants (with the original Warrants
delivered to the Company) being exercised (or, in each case, an indemnification
undertaking with respect to such share certificates or the warrants in the
case
of their loss, theft or destruction), and (iii) delivery of a treasury
order or other appropriate order duly executed by a duly authorized officer
of
the Company. So long as you have previously received (x) written confirmation
from counsel to the Company that a registration statement covering resales
of
the Conversion Shares or Warrant Shares, as applicable, has been declared
effective by the Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “1933
Act”),
and
no subsequent notice by the Company or its counsel of the suspension or
termination of its effectiveness and (y) a copy of such registration statement,
and if the Purchaser represents in writing that the Conversion Shares or
the
Warrant Shares, as the case may be, were sold pursuant to the Registration
Statement, then certificates representing the Conversion Shares and the Warrant
Shares, as the case may be, shall not bear any legend restricting transfer
of
the Conversion Shares and the Warrant Shares, as the case may be, thereby
and
should not be subject to any stop-transfer restriction. Provided, however,
that
if you have not previously received those items and representations listed
above, then the certificates for the Conversion Shares and the Warrant Shares
shall bear the following legend:
283
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS
REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS,
OR THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF
SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE
SECURITIES LAWS IS NOT REQUIRED.”
and,
provided, further, that the Company may from time to time notify you to place
stop-transfer restrictions on the certificates for the Conversion Shares
and the
Warrant Shares in the event a registration statement covering the Conversion
Shares and the Warrant Shares is subject to amendment for events then
current.
A
form of
written confirmation from counsel to the Company that a registration statement
covering resales of the Conversion Shares and the Warrant Shares has been
declared effective by the SEC under the 1933 Act is attached hereto as Exhibit
III.
Please
be
advised that the Purchasers are relying upon this letter as an inducement
to
enter into the Purchase Agreement and, accordingly, each Purchaser is a third
party beneficiary to these instructions.
Please
execute this letter in the space indicated to acknowledge your agreement
to act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at x00-00000000000.
Very
truly yours,
By:
__/s/
Shulin Liu________________________
VICTORY
DIVIDE MINING COMPANY
Name:
Xxxxxx
Xxx
Title:
Chief
Executive Officer
284
ACKNOWLEDGED
AND AGREED:
[TRANSFER
AGENT]
By:
PacWest
Transfer, LLC
Name:
Xxxxxx
Xxxxxxxxxx
Title:
President
Date:
October 3, 2007
EXHIBIT
I
_____________________________________________
CONVERSION
NOTICE
Reference
is made to the Series A Certificate of Designation of the Relative Rights
and
Preferences of the Series A Preferred Stock of
______________________________________ (the “Series A Certificate of
Designation”). In accordance with and pursuant to the Series A Certificate of
Designation, the undersigned hereby elects to convert the number of shares
of
Series A Preferred Stock, par value $________ per share (the “Preferred
Shares”), [ ], a ________ corporation (the “Company”), indicated below into
shares of Common Stock, par value $_________ per share (the “Common Stock”), of
the Company, by tendering the stock certificate(s) representing the share(s)
of
Preferred Shares specified below as of the date specified below.
Date
of
Conversion: ______________________________________
Number
of
Preferred Shares to be converted: _________
Stock
certificate no(s). of Preferred Shares to be converted: _______
The
Common Stock have been sold pursuant to the Registration Statement (as defined
in the Registration Rights Agreement): YES _______ NO______
Please
confirm the following information:
Conversion
Price: _______________________________________
Number
of
shares of Common Stock
to
be
issued: _______________________________________
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by
the
Holder on the Date of Conversion: _____________________
Please
issue the Common Stock into which the Preferred Shares are being converted
and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
285
Issue
to:
|
|
Facsimile
Number:
|
|
Authorization:
|
|
By:
|
|
Title:
|
|
Dated:
|
286
EXHIBIT
II
FORM
OF EXERCISE NOTICE
EXERCISE
FORM
____________________________________________
The
undersigned____________, pursuant to the provisions of the within Warrant,
hereby elects to purchase ______ shares of Common Stock of
______________________________________ covered by the within
Warrant.
Dated:
|
|
Signature
|
|
|
Address
|
|
|||
|
||||
|
Number
of
shares of Common Stock beneficially owned or deemed beneficially owned by
the
Holder on the date of Exercise: _______________________
ASSIGNMENT
FOR
VALUE
RECEIVED, ________________ hereby sells, assigns and transfers unto
_______________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint ______________, attorney, to transfer
the
said Warrant on the books of the within named corporation.
Dated:
|
|
Signature
|
|
|
Address
|
|
|||
|
||||
|
FOR
VALUE
RECEIVED, ________________ hereby sells, assigns and transfers unto
_______________ the right to purchase ___________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint __________________, attorney, to transfer
that part of the said Warrant on the books of the within named
corporation.
Dated:
|
|
Signature
|
|
|
Address
|
|
|||
|
||||
|
287
FOR
USE
BY THE ISSUER ONLY:
This
Warrant No. W-_________ canceled (or transferred or exchanged) this _______
day
of __________, _______, shares of Common Stock issued therefor in the name
of
_______________, Warrant No. W-______ issued for _______ shares of Common
Stock
in the name of ________________.
288
EXHIBIT
III
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
[Name
and address of Transfer Agent]
Attn:
_________
Re:
[__________________________________]
Ladies
and Gentlemen:
We
are
counsel to ________________________________, a ___________ corporation (the
“Company”),
and
have represented the Company in connection with that certain Series A
Convertible Preferred Stock Purchase Agreement (the “Purchase
Agreement”),
dated
as of ______________, 2007, by and among the Company and the purchasers named
therein (collectively, the “Purchasers”)
pursuant to which the Company issued to the Purchasers shares of its Series
A
Convertible Preferred Stock, par value $________ per share, (the “Preferred
Shares”)
and
warrants (the “Warrants”)
to
purchase shares of the Company’s common stock, par value $_________ per share
(the “Common
Stock”).
Pursuant to the Purchase Agreement, the Company has also entered into a
Registration Rights Agreement with the Purchasers (the “Registration
Rights Agreement”),
dated
as of _____________, 2007, pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the Registration
Rights Agreement), including the shares of Common Stock issuable upon conversion
of the Preferred Shares and exercise of the Warrants, under the Securities
Act
of 1933, as amended (the “1933
Act”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on ________________, 2007, the Company filed a Registration Statement
on Form SB-2 (File No. 333-________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the resale of the Registrable Securities which names each of
the
present Purchasers as a selling stockholder thereunder.
In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC
and
accordingly, the Registrable Securities are available for resale under the
1933
Act pursuant to the Registration Statement.
Very
truly yours,
[COMPANY
COUNSEL]
By:
cc:
[LIST
NAMES OF PURCHASERS]
289
EXHIBIT
H-1 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
____________________________________________
FORM
OF OPINION OF COUNSEL
1. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada and has the requisite corporate
power to own, lease and operate its properties and assets, and to carry on
its
business as presently conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction
in
which the nature of the business conducted or property owned by it makes
such
qualification necessary.
2. The
Company has the requisite corporate power and authority to enter into and
perform its obligations under the Transaction Documents and to issue the
Preferred Stock, the Warrants, the Series B Preferred Shares issuable upon
exercise of the Series J Warrant and the Common Stock issuable upon conversion
of the Preferred Stock and the Series B Preferred Share and exercise of the
Warrants. The execution, delivery and performance of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action and no further consent or authorization of the Company or
its
Board of Directors or stockholders is required. Each of the Transaction
Documents have been duly executed and delivered, and the Preferred Stock
and the
Warrants have been duly executed, issued and delivered by the Company and
each
of the Transaction Documents constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its respective
terms, except as may be limited by the laws of (i) bankruptcy, insolvency,
reorganization, moratorium and other laws and legal principles of general
application now or hereafter in effect relating to or limiting the rights
of
creditors, as well as general equitable principles.
3. The
Common Stock issuable upon conversion of the Preferred Stock and the Series
B
Preferred Shares and exercise of the Warrants are not subject to any preemptive
rights under the Articles or the Bylaws.
4. The
Preferred Stock and the Warrants have been duly authorized and, when delivered
against payment in full as provided in the Purchase Agreement, will be validly
issued, fully paid and nonassessable. The shares of Common Stock issuable
upon
conversion of the Preferred Stock and exercise of the Warrants and the Series
B
Preferred Shares issuable upon exercise of the Series J Warrants, have been
duly
authorized and reserved for issuance, and, when delivered upon conversion
or
against payment in full as provided in the Series A Certificate of Designation,
the Series B Certificate of Designation and the Warrants, as applicable,
will be
validly issued, fully paid and nonassessable.
5. The
execution, delivery and performance of and compliance with the terms of the
Transaction Documents and the issuance of the Preferred Stock, the Warrants
and
the Common Stock issuable upon conversion of the Preferred Stock and exercise
of
the Warrants do not (i) violate any provision of the Articles of Incorporation
or Bylaws, (ii) conflict with, or constitute a default (or an event which
with
notice or lapse of time or both would become a default) under, or give to
others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party,
(iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or
by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local
or
foreign statute, rule, regulation, order, judgment, injunction or decree
(including Federal and state securities laws and regulations) applicable
to the
Company or by which any property or asset of the Company is bound or affected,
except, in all cases other than violations pursuant to clauses (i) and (iv)
above, for such conflicts, default, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect.
290
6. No
consent, approval or authorization of or designation, declaration or filing
with
any governmental authority on the part of the Company is required under Federal,
state or local law, rule or regulation in connection with the valid execution
and delivery of the Transaction Documents, or the offer, sale or issuance
of the
Preferred Stock, the Warrants or the Common Stock issuable upon conversion
of
the Preferred Stock and exercise of the Warrants other than (i) those
information filings required under the Securities Exchange Act of 1934, as
amended, and being made as a result of the Transactions contemplated in the
Agreement, (ii) the Registration Statement, (iii) any “blue sky” filing required
by states in which the Investors reside and (iv) the Certificate of
Designations.
7. To
the
best of our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of this Agreement or the transactions contemplated hereby or any
action
taken or to be taken pursuant hereto or thereto. There is no action, suit,
claim, investigation or proceeding pending, or to our knowledge, threatened,
against or involving the Company or any of its properties or assets and which,
if adversely determined, is reasonably likely to result in a Material Adverse
Effect. To the best of our knowledge, there are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any officers or directors
of the Company in their capacities as such.
8. Based
upon the representations of the Investors in the Agreement, the offer, issuance
and sale of the Preferred Stock and the Warrants and the offer, issuance
and
sale of the shares of Common Stock issuable upon conversion of the Preferred
Stock and exercise of the Warrants pursuant to the Purchase Agreement, the
Certificates of Designation and the Warrants, as applicable, are exempt from
the
registration requirements of the Securities Act.
9. The
Company is not, and as a result of and immediately upon Closing will not
be, an
“investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
Very
truly yours,
291
EXHIBIT
H-2 TO THE
SERIES
A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR
____________________________________________
FORM
OF OPINION OF PRC COUNSEL
[logo] 北京市德恒律师事务所
Beijing
DeHeng Law Office
Beijing
Deheng Law Office Fax: 0000-00-00000000
12th
Floor,
Tower B Tel: 0000-00-00000000
Focus
Place, Finance Street, Website: xxx.xxxxxxxxx.xxx
Beijing,
P.R. China 100032
October
3rd,
2007
To:
Faith Winner Investment Limited
Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Islands
Heilongjiang
Yanglin Soybean Group Co., Ltd.
Hedong
District, Fuli Town, Jixian County, Shuangyashan City, Heilongjiang
Faith
Winner (Jixian) Agriculture Development Company Limited
Hedong
District, Fuli Town, Jixian County, Shuangyashan City, Heilongjiang
Each
investor listed on Exhibit A to the Series A Convertible Preferred Stock
Purchase Agreement dated as of October 3, 2007 (collectively, the “Investors”),
by and among Victory Divide Mining Company and each of the Investors
From:
Beijing Deheng Law Office, PRC
292
We
are
qualified lawyers of the People’s Republic of China (“PRC”)
and
are qualified to issue this legal opinion based on PRC laws and
regulations.
We
have
acted as PRC legal counsel for Faith Winner Investments Limited (the
“Issuer”),
a
company incorporated under the laws of the British Virgin Islands, Heilongjiang
Yanglin Soybean Group Co., Ltd. (“Yanglin”),
a PRC
company, and together with Faith Winner (Jixian) Agriculture Development
Company
Limited (“Yanglin
China”),
a
PRC
wholly-foreign owned enterprise(“WFOE”),
(Yanglin and Yanglin China are together hereinafter referred to as “PRC
Group Companies”),
incorporated under PRC laws and regulations, in connection with the PRC legal
issues of private placement and proposed reverse takeover of Over the Counter
Bulletin Board (“OTCBB”)
shell
company by the Issuer (“Transaction”).
This
opinion being delivered to you concerns, inter alia: (1) the legal ownership
structure of PRC Group Companies; (2) the legality and validity of the
arrangements under the relevant agreements as referenced in Appendix 1 hereto
(“Restructuring
Agreements”)
among
Yanglin, Yanglin China and the shareholders of Yanglin as applicable, and
the
Transaction Structure under PRC laws.
In
so
acting, we have examined the originals or copies certified or otherwise
identified to our satisfaction, of documents provided to us by PRC Group
Companies, and such other documents, corporate records, certificates issued
by
governmental authorities in the PRC and officers of the PRC Group Companies
and
other instruments as we have deemed necessary or relevant for the purposes
of
rendering this opinion, including without limitation to, copies of the documents
as set out in Appendix 1.
In
connection with this opinion, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with authentic original documents submitted to us as copies. We
have
also assumed the documents as they were presented to us up to the date of
this
legal opinion and that none of the documents has been revoked, amended, varied
or supplemented. We have further assumed the accuracy and completeness of
all
factual statements in the documents. In cases where important facts were
not
independently established to us, we have relied upon certificates issued
by
governmental authorities and representatives of PRC Group Companies with
proper
authority and upon representations, made in or pursuant to the Restructuring
Agreements.
As
used
herein, (a) “PRC
Laws”
means
all laws, regulations, statutes, orders, decrees, guidelines, notices, judicial
interpretations, legislations of the PRC (other than the laws of Hong Kong
Special Administrative Region, Macao Special Administrative Region and Taiwan
Province); (b) “Governmental
Authorizations”
means
all approvals, consents, waivers, sanctions, authorizations, filings,
registrations, exemptions, permissions, endorsements, annual inspections,
qualifications and licenses; (c) “Material
Adverse Effect”
means
a
material adverse effect on condition (financial or other), business, properties
or results of operations of the PRC Group Companies taken as a whole; and
(d)
“Governmental
Authorities”
means
any court or governmental agency or body of any stock exchange
authorities;
Based
on
the foregoing, we are of the opinion that:
293
1.
Yanglin China was incorporated on May 31st,
2007, by the Issuer, it has obtained (1) Approval for its Establishment and
Articles of Association granted by Shuangyashan Municipal Administration
Bureau
of Commerce on May 28th,
2007; (2) Certificate of Approval for Establishment of Enterprise with Foreign
Investment in the People’s Republic of China issued by Heilongjiang Provincial
Government on May 30th,
2007; (3) Business License issued by Heilongjiang Administration Bureau of
Industry and Commerce on May 31st,
2007, and (4) Approval for Amendment of Articles of Association and Extension
of
Capital Contribution Period by the original approval authority on August
28th,
2007. Therefore, Yanglin China has been duly incorporated and validly existing
as a WFOE with limited liability under the PRC Laws and its business license
is
in full force and effect. The business scope of Yanglin China is providing
technical support and consigned management services on agriculture development,
technical support, technical transfer, and information consulting (excluding
the
restricted projects), which is neither categorized as “restricted industries”
nor as “prohibited industries” for foreign investment in accordance with the
provisions of PRC Catalogue of Industries for Guiding Foreign Investment
(“PRC
Catalogue”), it
complies with PRC industrial policy for foreign investment. Yanglin China
is the
wholly owned subsidiary by the Issuer, and such equity interests of Yanglin
China are free from and clear of pledges, and any other encumbrances or claims
or any third-party rights. The approval certificate, business license and
Articles of Association of Yanglin China complies with the requirements of
applicable PRC Laws and are in full force and effect, and it has full power
and
authority to conduct its business operation within its business scopes as
ratified in its business license. The registered capital of Yanglin China
is 15
million US Dollars, 2.25 million US Dollars of which shall be contributed
before
November 30th,
2007 and 12.75 million US Dollars of which should be contributed before May
31st,
2010 in accordance with the approval of competent administration bureau of
commerce.
2.
Yanglin has been duly incorporated and validly existing as a domestic limited
liability company under the PRC Laws and its business license as well as
its
Article of Association are in full force and effect and comply with the
requirements of applicable PRC Laws. The registered capital of Yanglin is
RMB
100 million, 70% and 30% of the equity interest of which are owned by Xx.
Xxxxxx
Xxx and Xx. Xxxxxxx Xxxx (collectively, the “Controlling
Shareholders”),
respectively, and each of the Controlling Shareholders is a PRC citizen and
Yanglin’s registered capital has been fully paid; except for the Consignment
Agreements signed between the Controlling Shareholders and the Issuer dated
on
September 1st,
2007,
such equity interests are free and clear of all pledge, and any other
encumbrances, or claims or any third-party right. It has full power and
authority to conduct its business operation within its business scopes as
ratified in its business license.
3.
Each of the PRC Group Companies is the legal owner of its assets and properties,
and has full power, authority and all Governmental Authorizations to conduct
its
business with its assets and properties within business scope as ratified
in its
business license.
4.
Each of the PRC Group Companies has the corporate power and full capacity
to
enter into and perform its obligations under each of the Restructuring
Agreements to which it is a party and has taken all necessary corporate action
to authorize the execution, delivery and performance of, and has authorized,
executed and delivered, each of the Restructuring Agreements to which it
is a
party.
294
5.
Each of the Controlling Shareholders has full power and capacity to enter
into
and perform its obligations under each of the Restructuring Agreements to
which
it is a party.
6.
The execution and delivery by each of the Controlling Shareholders of the
Consignment Agreements and Exclusive Purchase Option Agreement as required
to
facilitate performance and consummation of the respective obligations of
the
parties thereto, have been duly conducted in accordance with PRC
Laws.
7.
The execution and delivery by PRC Group Companies of the Restructuring
Agreements as required to facilitate performance and consummation of the
respective obligations of the parties under the Restructuring Agreements,
have
been duly authorized or ratified, and no other corporation or shareholder(s)
will be necessary to authorize such execution, delivery, performance and
consummation.
8.
The Parties of the Restructuring Agreements have interested relationship
with
each other and the transactions herein shall be treated as interested
transactions. In accordance with PRC Company Laws, where there are no compulsory
stipulations on interested transactions between or among the non-public listing
companies, and the Articles of Association of each of PRC Group Companies
do not
require the special resolution procedures by Board of Directors or General
Shareholders’ Meeting in respect of interested transactions, therefore, the
execution and delivery of Restructuring Agreements complies with the provisions
of the Articles of Association of each of the PRC Group Companies and has
been
ratified through proper internal approval procedures with respect to interested
transactions. The Restructuring Agreements shall be valid, authentic and
legally
binding upon the parties thereto.
9.
No Governmental Authorizations are required to be obtained for the execution,
delivery and performance by each of the PRC Group Companies of their obligations
and the transactions contemplated under the Restructuring Agreements other
than
those already obtained; provided, however, (1) any exercise by the Issuer
(designated by Yanglin China) of its rights under the Exclusive Purchase
Option
Agreement after the closing of the Transaction, shall be subject to (a) M&A
Rules as demonstrated in Section 10 (3) herein; (b) registration with local
Administration Bureau of Industry and Commerce (“ABIC”)
as well as the registration certificate of foreign exchange with SAFE for
the
equity transfer and with other relevant authorities, such as Taxation Bureau,
Land Management Bureau and Administration Bureau of Customs etc.; (c)
modification registration and filing with SAFE by the ultimate individual
shareholders of the Issuer in accordance with the Exhibit 5 of SAFE No.106
(as
described in Section 15 ); (d) the exercise price for equity transfer thereunder
which must comply with relevant PRC Laws, including the requirement that
the
exercise price for such equity transfer shall reflect the appraised value
at the
time of exercise, as determined by an appraiser qualified to perform such
appraisals; (2) any exercise by Yanglin China of its rights under the Exclusive
Option Purchase Agreement after the closing of the Transaction, shall be
subject
to the provisions of PRC Interim Regulations for Investment in China by Foreign
Funded Enterprise (“Interim Regulations”), in accordance with the Interim
Regulations, where
establishment of enterprise by foreign funded enterprise fall within the
restricted industry sectors, it shall submit to Provincial Administration
Bureau
of Commerce (“PABC”)
for examination and approval,
Yanglin China shall submit to PABC for examination and approval and accordingly
go through the modification registration with local ABIC;
(3)
since there are some items in the approved business scope of Yanglin, which
are
categorized as restricted industry for foreign investment in accordance with
PRC
Catalogue, transactions under above Section 9(1) and (2) shall be subject
to the
restrictions of PRC industrial policy for foreign
investment;
(4) any exercise of Trademark Transfer Contract between PRC Group Companies,
requires the parties
thereunder to
register the title transfer with the competent Government Authorities. Each
of
the PRC Group Companies and the Controlling Shareholders are in compliance
with
the provisions of all such Governmental Authorizations in all material
respects.
295
10.
Despite that Yanglin China was established by the Issuer after the
implementation of PRC Provisions on Merger and Acquisition of Domestic
Enterprises by Foreign Investors (“M&A
Rules”),
and
that its ultimate individual shareholders are PRC residents, Yanglin China
is a
newly incorporated WFOE, which shall be subject to PRC Laws on Foreign-funded
Enterprises and
its
Implementation Rules. The
Issuer neither directly purchases the equities of Yanglin, nor its main
operating assets, the acquisition of equities or main operating assets of
a
domestic company by the foreign investors shall fall within the M&A Rules,
the establishment of Yanglin China shall not be subject to M&A Rules. With
respect to the provisions of Section 3 in
Chapter 4 of M&A Rules (Special
Provisions on the Special Purpose Companies,“Special
Regulations of SPC”),
firstly, it shall apply to overseas public listing rather than private placement
by reverse-takeover of OTCBB, secondly, there is no equities-swap between
the
Issuer and the shareholders of Yanglin, accordingly, the Transaction shall
not
be subject to Special Regulations of SPC, provided, however, it will be subject
to Special Regulations of SPC in the event that the Issuer transfers to the
public listing board. It shall be noted that, any exercise by the Issuer
as
designated by Yanglin China under the Exclusive Option Purchase Agreement
after
the closing of the Transaction will be subject to M&A Rules, in accordance
with Article 11 of M&A Rulesôwhere
a domestic company, enterprise or resident , in the name of an overseas company
legally established or controlled by it, mergers and acquires a domestic
enterprise established which has interest relation with it, it shall submit
to
the Ministry of Commerce (“MOFCOM”)
for examination and approval;
whereas,
the substantial shareholders of the Issuer are the PRC residents, if the
Issuer
mergers and acquires the equities in Yanglin, it shall submit to MOFCOM for
examination and approval.
11.
Each
of the Restructuring Agreements is, and all the Restructuring Agreements
taken
as a whole are, legal, valid, enforceable and admissible as evidence under
PRC
Laws, and constitute(s) valid and legally binding documents on the parties
thereto, and enforceable in accordance with the terms thereunder and relevant
PRC Laws, provided, however, (1) the rights and powers enjoyed by the Issuer
under the Consignment Agreements may not confront with third party with bona
fides; (2) the dividend, bonus and any other economic benefits, if any, derived
from the consigned equities in cash may not be directly paid and remitted
in
foreign currencies to the Issuer by Yanglin. .
296
12.
Each of the Restructuring Agreements is in proper legal form under the PRC
Laws
for the enforcement thereof against each of the PRC Group Companies, any
of the
PRC Group Companies and the Controlling Shareholders, as the case may be,
in the
PRC without further action by any of the PRC Group Companies or the Controlling
Shareholders; and to ensure the legality, validity, enforceability or
admissibility in evidence of each of the Restructuring Agreements in the
PRC,
all required filings and recordings in respect of the Restructuring Agreements
with any Government Authorities have been performed or will be performed
in the
course of implementation as required by PRC Laws.
13.
Each of the Restructuring Agreements does not (1) contravene any provisions
of
applicable PRC Laws, (2) contravene the articles of association, business
license or other constituent documents of each of the PRC Group Companies
or (3)
to the best of our knowledge after due and reasonable inquiries, conflict
with
or result in a breach or violation of any terms or provisions of, or constitute
a default under, any material license, indenture, mortgage, deed of trust,
loan
agreement, note, lease or other agreement or instrument known to us and governed
by PRC Laws to which any of the PRC Group Companies is a party or by which
any
of the PRC Group Companies is bound or to which any of the their properties
or
assets is subject, except for such conflict, breach, violation or default
would
not have a Materia1 Adverse Effect; (4) conflict with or result in a breach
or
violation of the terms or provisions of any agreement known to us and governed
by PRC Laws to which they are expressed to be a party or which is binding
on
them or any of their assets.
14.
The
obligations undertaken by and the rights granted by each party to any of
the
Restructuring Agreements are legally permissible under PRC Laws; to our
knowledge, there are no PRC legal or governmental actions, suits or proceedings
pending or threatened (i) against any of PRC Group Companies or (ii) any
officer
or director of, or property used, possessed or leased by any of PRC Group
Companies.
15.
The ultimate individual shareholders of Yanglin who are qualified PRC residents
filed the foreign exchange registration for domestic individual on February
6th,
2007 in accordance with the Notice on Relevant Issues of PRC State Foreign
Exchange Administration Bureau concerning Foreign Exchange Administration
for
Domestic Residents to Engage in Financing and Reverse Investment via Overseas
Special Purpose Companies (the “SAFE
Circular 75”),
and each of ultimate individual shareholders of Yanglin is in compliance
with
the SAFE Circular 75 and relevant regulations on foreign exchange. Yanglin
China, being the wholly-foreign owned enterprise, has obtained the Registration
Certificate of Foreign Exchange issued by Heilongjiang Branch of SAFE on
June
4th,
2007. It shall be noted that, Implementation Rules (Xxx Xxxx Fa [2007] 106,
“SAFE
No.106”)
with regard to SAFE Circular 75 has been promulgated on May
29th,
2007, pursuant to the provisions of Exhibit 5 of SAFE
No.106,
Foreign Exchange Modification Registration and Filing for Substantial Assets
Change by Overseas Special Purpose Companies,
after closing of the Transaction, the ultimate individual shareholders shall
go
through the formalities of modification registration and filing in accordance
with the requirements of Exhibit 5 of SAFE No.106. All dividends and other
distributions declared and payable upon the equity interests in Yanglin China
may under the current PRC Laws be paid to the Issuer in Renminbi that may
be
converted into US Dollars and freely remitted out of the PRC after completion
of
modification registration of foreign exchange with SAFE.
297
16.
The
Transaction Structure (see Transaction Structure Chart in Appendix 2 hereof)
within the territory of PRC between the PRC Group Companies and the Issuer
which
is based on the Restructuring Agreements and in line with the PRC Laws shall
be
legal and valid under current PRC legal Regime, provided, however, the
Restructuring Agreements may not be as efficient in providing the Issuer
and
Yanglin China with control over Yanglin as direct ownership because the Issuer
and Yanglin China rely on the performance of Yanglin and the respective
stockholders of Yanglin under the Restructuring Agreements. If Yanglin and
the
respective stockholders of Yanglin were to fail to perform their respective
obligations under the Restructuring Agreements, the Issuer and Yanglin China
may
have to incur substantial resources to enforce those Restructuring Agreements.
This
legal opinion is limited to the relevant matters under the PRC Laws, (other
than
the laws of Hong Kong Special Administrative Region and Macau Special
Administrative Region) in effect on the date hereof, and the matters concerning
the laws of other jurisdictions (such as the laws of British Virgin Islands
and
United States of America) are not subject of this opinion.
This
opinion is limited to the legal issues contained herein and is in no way
intended to provide investment advice and should not be relied upon as
investment advice. The attorneys signing below and Beijing DeHeng Law Office
are
not responsible for providing any investment advice to the
Investors.
This
opinion is given solely for the benefit of the persons to whom it is addressed.
It may not, except with our written consent, be partially extracted or cited,
or
be relied upon by anyone else in connection with this opinion or used for
any
other purpose.
This
opinion was issued in Chinese and come into effect from the date Beijing
Deheng
Law Office executed. The English version of this opinion is for the purpose
of
reference.
Yours
Faithfully
Beijing
Deheng Law Office
298
Appendix
1: List of Restructuring Agreements
1.
|
Consignment
Agreements
|
Signed
by
and between Faith Winner Investment Limited (BVI) (the “Issuer”) and Xx. Xxxxxx
Xxx and Xx. Xxxxxxx Xxxx (collectively called “Controlling Shareholders” as
defined in the context hereof”), in which the Controlling shareholders agree to
consign all their equity interests, including but not limited to voting right,
knowing rights and economic rights derived from the equities, to the Issuer,
and
the Issuer agrees that it or its subsidiary incorporated within P.R.C shall
provide financial supports to Yanglin as the consideration of
consignment.
2.
|
Consigned
Management Agreement
|
Signed
by
and between Heilongjiang Yanglin Soybean Group Co., Ltd. (“Yanglin”) and Faith
Winner (Jixian) Agriculture Development Company Limited (“Yanglin China”), in
which Yanglin China provide to Yanglin a comprehensive management service
with
respect to business, finance, administration, HR and etc., and Yanglin China
shall pay the management fee, equal to 5û
of its
annual revenue before December 31st
of each
year.
3.
|
Trademark
Transfer Contract
|
Signed
by
and between Heilongjiang Yanglin Soybean Group Co., Ltd. (“Yanglin”) and Faith
Winner (Jixian) Agriculture Development Company Limited (“Yanglin China”), in
which Yanglin transferred its Trademark to Yanglin China, and the transfer
fee
shall be 1 million US Dollars.
4.
|
Trademark
Licensing Agreement
|
Signed
by
and between Heilongjiang Yanglin Soybean Group Co., Ltd. (“Yanglin”) and Faith
Winner (Jixian) Agriculture Development Company Limited (“Yanglin China”), in
which Yanglin China as the licensor agrees to exclusively grant Yanglin to
use
its trademarks, and Yanglin as the licensee agrees to pay the royalty fee
equal
to 1% of annual revenue in 30 days after the annual audit report is issued
every
year.
5.
|
Loan
Agreement
|
Signed
by
and between Heilongjiang Yanglin Soybean Group Co., Ltd. (“Yanglin”) and Faith
Winner (Jixian) Agriculture Development Company Limited (“Yanglin China”), in
which Yanglin China shall entrust a local bank (the“Lender”)
to
provide 17 million US Dollars loan to Yanglin (the“Borrower”).
6.
|
Exclusive
Purchase Option Agreement
|
Signed
among the following parties:
299
Party
A:
Faith Winner (Jixian) Agriculture Development Company Limited;
Party
B:
Heilongjiang Yanglin Soybean Group Co., Ltd.;
Party
C:
Xx. Xxxxxx Xxx
Party
D:
Xx. Xxxxxxx Xxxx
In
this
agreement, Party C and Party D agree to irrevocably grant Party A or its
designated third party (the “Issuer”) an exclusive purchase option to purchase
all or part of their equity interests in Party B under the conditions as
set out
under the Agreement.
Appendix
2: Transaction Structure Chart
The
Structure upon the Closing:
300
Disclosure
Schedules
Schedule
2.1(a)
Victory
Divide Mining Company has the following subsidiaries (as defined in Section
2.1(g)):
Jurisdiction
of Incorporation
|
|
Faith
Winner Investments Limited
|
The
British Virgin Islands
|
Faith
Winner (Jixian) Agriculture Development Company
|
People’s
Republic of China
|
Heilongjiang
Yanglin Soybean Group Co., Ltd
|
People’s
Republic of China
|
Faith
Winner (Jixian) Agriculture Development Company is a wholly-owned subsidiary
of
Faith Winner International Limited. Faith Winner International Limited is,
in
turn, a wholly-owned subsidiary of Victory Divide Mining Company.
Faith
Winner (Jixian) Agriculture Development Company has entered into a series
of
contractual agreements with Heilongjiang Yanglin Soybean Group Co., Ltd,
which
essentially gives the former control over the latter’s
business.
Schedule
2.1(c)
On
August
31, 2007, the Company amended its Articles of Incorporation to increase the
number of shares of common stock, par value $0.001 per share, that it is
authorized to issue from 100,000,000 shares of common stock, par value $0.001
per share, to 10,000,000,000 shares of common stock, par value $0.001 per
share,
without changing the number of shares of preferred stock authorized therein
or
the per share par value of such preferred stock. The Company is also authorized
to issue 50,000,000 shares of preferred stock, $.001 par value, none of which
have been issued prior to this agreement.
The
Company has, prior to the consummation of this Series A Convertible Preferred
Stock Purchase Agreement, 487,500 shares of common stock issued and
outstanding.
Subscription
Agreements
Each
of
Xxxxx X. Little, Xxxxx Xxxxxxxx, Xxxxx Xxxx, Xxxxxxxx Xxxxxxx, Xxxxx Xxxxxx,
Xxxxxx Xxxxxxx and Xxxxxx Xxxxx (collectively, the “Subscribers”) entered into a
subscription agreements with us to purchase certain shares of our $0.001
par
value common stock. Pursuant to the subscription agreements, we had given
the
Subscribers piggy back registration rights to register an aggregate of 451,000
post-Forward Split shares of our $0.001 par value common stock.
Xxxxx
Brothers Engagement Agreement
On
December 12, 0000, Xxxxxxxxxxxx Xxxxxxx Soybean Group Co., Ltd (“Yanglin”)
entered into an engagement agreement with Xxxxx Brothers, Inc. (“Xxxxx
Agreement”). Pursuant to the Xxxxx Agreement, Xxxxx Brothers, Inc. will be
providing the following services:
1.
|
Financial
Advisory Services;
|
2.
|
Merger
and Acquisition Services; and
|
3.
|
Strategic
Planning Services.
|
With
respect to the Financial Advisory Services, Xxxxx Brothers, Inc. will be
paid
the following:
a.
|
a
non-refundable signing fee of
$50,000,
|
301
b.
|
a
non-refundable documentation fee of $35,000 payable upon the delivery
of
an executive summary and investor powerpoint
presentation;
|
c.
|
a
shell purchase fee of $120,000 payable upon the successful purchase
of a
public shell; and
|
d.
|
a
financing fee equal to the following percentages of the total financing
value - (i)10 % of any public equity offering and warrants to purchase
the
amount of common stock (with attached warrants) equal to 10% if
such
public equity offering and (ii) 10% of the value of warrants or
subscription rights when exercised.
|
With
respect to Merger and Acquisition Services, Xxxxx Brothers, Inc. will be
paid a
fee of not less than 5% the equity of the “clean” shell company. For any other
form of merger and acquisition, a fee equal to the “Xxxxxx Formula” based on $5
million increments will be paid in the form of either cash or equity value
of
the organization being acquired.
With
respect to the Strategic Planning Services, Xxxxx Brothers, Inc. will be
paid a
non-refundable monthly retainer of $10,000 per month, payable in arrears,
prior
to closing of the financing and commencing from the closing of the financing,
a
monthly retainer of $10,000 a month, payable on the first of each month for
24
months.
The
Xxxxx
Agreement also contemplates paying Xxxxx Brothers, Inc. an amount equal to
1% of
the total offering amount with respect to the reasonable expenses to be incurred
by Xxxxx Brothers, Inc. in relation to the financing and an initial retainer
of
$10,000 to Xxxxxxx & Xxxxxxx, Xxxx Brothers, Inc.’s placement
counsel.
Mass
Harmony Financial Consulting Agreement
Pursuant
to a Financial Consulting Agreement (the “MHA Agreement”) between Yanglin and
Mass Harmony Asset Management Limited (“MHA”) dated November 2, 2006, Yanglin is
to pay MHA an aggregate of RMB300,000 (approximately US$39,891), half of
which
is payable within five business days upon the execution of the MHA Agreement,
and the balance is due within five business days after the closing of a reverse
merger.
MHA
is
also to receive 1% of the issued and outstanding common stock of the Company
post-private placement (including the underlying common stock of the Series
A
Preferred Stock) and warrants to purchase common stock of the Company valued
at
5% of the dollar amount of private placement at an exercise price of 140%
of the
Series A Preferred Stock price. i.e. 357,143 warrants.
The
services MHA shall render, pursuant to the MHA Agreement includes initial
due
diligence on Yanglin, preparing Yanglin’s business plan and assisting in the
corporate restructuring and financial documentation.
Schedule
2.1(g)
Please
refer to disclosures for Section 2.1(a) above.
Schedule
2.1(h)
There
is
currently a severe drought in the PRC and the worst-hit regions are Heilongjiang
and Jilin in the northeast, Inner Mongolia in the north , Jiangxi an the
east,
Guangxi in the south and Hunan in central China. It has been reported that
rainfall in Heilongjiang is almost half its normal amount. (Article titled
“Drought affects 7.5m people” dated August 6, 2007 by Zhu Ze for the China
Daily, xxxx://xxx.xxxxxxxxxx.xxx.xx/xxxxx/0000-00/00/xxxxxxx_0000000.xxx).
As the
Company’s supply of soybeans are grown in and obtained from farmers in the
Heilongjiang province, the prolonged drought may lead to a shortage in its
supply of soybeans and consequently adversely affect its
operations.
Schedule
2.1(j)
302
There
is
currently a severe drought in the PRC and the worst-hit regions are Heilongjiang
and Jilin in the northeast, Inner Mongolia in the north , Jiangxi an the
east,
Guangxi in the south and Hunan in central China. It has been reported that
rainfall in Heilongjiang is almost half its normal amount. (Article titled
“Drought affects 7.5m people” dated August 6, 2007 by Zhu Ze for the China
Daily, xxxx://xxx.xxxxxxxxxx.xxx.xx/xxxxx/0000-00/00/xxxxxxx_0000000.xxx).
As the
Company’s supply of soybeans are grown in and obtained from farmers in the
Heilongjiang province, the prolonged drought may lead to a shortage in its
supply of soybeans and consequently adversely affect its
operations.
Schedule
2.1(o)
Victory
Divide Mining Company has not filed any tax returns. They are currently being
prepared.
Schedule
2.1(p)
Xxxxx
Brothers Engagement Agreement
On
December 12, 2006, Yanglin entered into an engagement agreement with Xxxxx
Brothers, Inc. (“Xxxxx Agreement”). Pursuant to the Xxxxx Agreement, Xxxxx
Brothers, Inc. will be providing the following services:
1.
|
Financial
Advisory Services;
|
2.
|
Merger
and Acquisition Services; and
|
3.
|
Strategic
Planning Services.
|
With
respect to the Financial Advisory Services, Xxxxx Brothers, Inc. will be
paid
the following:
a.
|
a
non-refundable signing fee of
$50,000,
|
b.
|
a
non-refundable documentation fee of $35,000 payable upon the delivery
of
an executive summary and investor powerpoint
presentation;
|
c.
|
a
shell purchase fee of $120,000 payable upon the successful purchase
of a
public shell; and
|
d.
|
a
financing fee equal to the following percentages of the total financing
value - (i)10 % of any public equity offering and warrants to purchase
the
amount of common stock (with attached warrants) equal to 10% if
such
public equity offering and (ii) 10% of the value of warrants or
subscription rights when exercised.
|
With
respect to Merger and Acquisition Services, Xxxxx Brothers, Inc. will be
paid a
fee of not less than 5% the equity of the “clean” shell company. For any other
form of merger and acquisition, a fee equal to the “Xxxxxx Formula” based on $5
million increments will be paid in the form of either cash or equity value
of
the organization being acquired.
With
respect to the Strategic Planning Services, Xxxxx Brothers, Inc. will be
paid a
non-refundable monthly retainer of $10,000 per month, payable in arrears,
prior
to closing of the financing and commencing from the closing of the financing,
a
monthly retainer of $10,000 a month, payable on the first of each month for
24
months.
The
Xxxxx
Agreement also contemplates paying Xxxxx Brothers, Inc. an amount equal to
1% of
the total offering amount with respect to the reasonable expenses to be incurred
by Xxxxx Brothers, Inc. in relation to the financing and an initial retainer
of
$10,000 to Xxxxxxx & Xxxxxxx, Xxxx Brothers, Inc.’s placement
counsel.
Mass
Harmony Financial Consulting Agreement
Pursuant
to a Financial Consulting Agreement (the “MHA Agreement”) between Yanglin and
Mass Harmony Asset Management Limited (“MHA”) dated November 2, 2006, Yanglin is
to pay MHA an aggregate of RMB300,000 (approximately US$39,891), half of
which
is payable within five business days upon the execution of the MHA Agreement,
and the balance is due within five business days after the closing of a reverse
merger.
303
MHA
is
also to receive 1% of the issued and outstanding common stock of the Company
post-private placement (including the underlying common stock of the Series
A
Preferred Stock) and warrants to purchase common stock of the Company valued
at
5% of the dollar amount of private placement at an exercise price of 140%
of the
Series A Preferred Stock price. i.e. 357,143 warrants.
The
services MHA shall render, pursuant to the MHA Agreement includes initial
due
diligence on Yanglin, preparing Yanglin’s business plan and assisting in the
corporate restructuring and financial documentation.
Schedule
2.1(z)
There
is
currently a severe drought in the PRC and the worst-hit regions are Heilongjiang
and Jilin in the northeast, Inner Mongolia in the north , Jiangxi an the
east,
Guangxi in the south and Hunan in central China. It has been reported that
rainfall in Heilongjiang is almost half its normal amount. (Article titled
“Drought affects 7.5m people” dated August 6, 2007 by Zhu Ze for the China
Daily, xxxx://xxx.xxxxxxxxxx.xxx.xx/xxxxx/0000-00/00/xxxxxxx_0000000.xxx).
As the
Company’s supply of soybeans are grown in and obtained from farmers in the
Heilongjiang province, the prolonged drought may lead to a shortage in its
supply of soybeans and consequently adversely affect its
operations.
Schedule
2.1(ff)
The
Company’s current transfer agent is:
PacWest
Transfer, LLC
Xxxxxx
Xxxxxxxxxx
000
Xxx
Xxxxxx
Xxxxxxxxxx,
XX 00000
Tel:
000-000-0000
Fax:
000-000-0000
Email:
xxxxxx@xxxxxxxxxxxxxxxxx.xxx
Schedule
2.1(gg)
(i)
Restructuring
Agreements, pursuant to Section 2.1(gg)(i), are as the following:
1.
Consignment Agreements
Signed
by
and between Faith Winner Investments Limited (BVI) and Xx. Xxxxxx Xxx and
Xx.
Xxxxxxx Xxxx (collectively called “Controlling Shareholders” as defined in the
context hereof”);
2.
Consigned Management Agreement
Signed
by
and between Heilongjiang Yanglin Soybean Group Co., Ltd. and Faith Winner
(Jixian) Agriculture Development Company Limited;
3.
Trademark Transfer Agreement
Signed
by
and between Heilongjiang Yanglin Soybean Group Co., Ltd. and Faith Winner
(Jixian) Agriculture Development Company Limited;
4.
Trademark Licensing Agreement
Signed
by
and between Heilongjiang Yanglin Soybean Group Co., Ltd. and Faith Winner
(Jixian) Agriculture Development Company Limited;
5.
Loan
Agreement
Signed
by
and between Heilongjiang Yanglin Soybean Group Co., Ltd. and Faith Winner
(Jixian) Agriculture Development Company Limited;
(iv)
No
governmental authorization is required to be obtained for the transactions
contemplated under the Restructuring Agreements, other than those already
obtained; provided, however, (1) any exercise by Yanglin and the controlling
shareholders of their rights under the exclusive option purchase agreement,
will
be subject to (a) the approval of and/or registration with the government
authorities in the PRC for the equity transfer; and (b) the exercise price
for
the equity transfer thereunder must comply with relevant PRC laws, including
the
requirement that the exercise price for such equity transfer to reflect the
appraised value at the time of exercise, as determined by an appraiser qualified
to perform such appraisals; (2) any exercise of the Trademark Transfer Agreement
between the WFOE and Yanglin, requires the parties to register the title
transfer with competent government authorities.
304
Schedule
2.2(k)
Please
refer to the Xxxxx Brothers Engagement Agreement and Mass Harmony Financial
Consulting Agreement referenced under Schedule 2.1(c) above.
Schedule
3.19
Winner
State Investments Limited - 18,200,000 shares of common stock
Schedule
3.25
Winner
State Investments Limited, which is the principal stockholder, shall pay
the
Listing Penalty Shares in the event that the Company fails to be listed on
a
National Stock Exchange, pursuant to Section 3.25 herein.
305