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EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
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China Evergreen Environmental Corp.
5/F, Guowei Building
73 Xianlie Middle Road
Guangzhou, Guangdong
People's Republic of China
Ladies and Gentlemen:
The undersigned (the "Investor") is writing to advise you of
the
following terms and conditions under which
the Investor hereby offers to
subscribe (the "Offer") for the securities
of this bridge financing (the
"Offering") offered by China Evergreen
Environmental Corp., a Nevada corporation
(the "Company"). The exclusive placement
agent for the Offering is Westminster
Securities Corporation (the "Placement
Agent"). The Company is issuing
investment units at the rate of $25,000 per
unit, consisting of (a) $25,000 of
12% convertible debentures (the
"Debentures"), convertible into shares
("Shares") of the Company's common stock,
par value $0.001 ("Common Stock") at
the rate of the lesser of (i) $0.20 per
Share or (ii) a 10% discount to the
price per share of common stock (or
conversion price per share of common stock)
of the next private placement conducted by
the Company and (b) 125,000
detachable warrants (the "Warrants") to
purchase one share each of Common Stock
at an exercise price of $0.20 per share
(the "Warrant Shares"), expiring ten
years from their date of issuance. The
Debentures and the Warrants shall be
collectively referred to as the "Units".
The Shares and Warrant Shares shall be
collectively referred to as the "Underlying
Shares".
The Company may issue up to $500,000 of Units (the "Maximum
Offering")
in this Offering. The Company and the
Placement Agent, upon mutual agreement,
may also sell up to an additional $100,000
of Units, representing an
over-allotment allowance in the event the
Offering is oversubscribed. The
Investor understands that the Units are
being issued pursuant to the exemption
from registration requirements of the
Securities Act of 1933, as amended (the
"Securities Act" or the "Act"), in a
private placement pursuant to an exemption
from registration under Regulation D
promulgated under Section 4(2) and Rule 506
of the Act. As such, the Units and the
Underlying Shares are "restricted
securities".
The Units are being offered on a "best efforts" basis by the
Company
through the Placement Agent, during an
offering period commencing on February 7,
2005 (the "Commencement Date") and
continuing until April 15, 2005 (the
"Offering Period"). The Offering will
continue until the earlier of (i) the
close of business (5:00 p.m. EST) on April
15, 2005, (ii) termination by mutual
agreement of the Company and the Placement
Agent, or (iii) completion of the
sale of the Maximum Offering, including any
over-allotment sales to which the
Company and Placement Agent may agree
("Final Closing"). Any subscription
documents or funds received after the Final
Closing will be returned.
All proceeds received from subscribers for the Units offered
hereby
will be deposited by the Placement Agent in
a special non-interest bearing
escrow account (the "Escrow Account") with
Signature Bank and will be released
to the Company against delivery by the
Company to the Placement Agent of
certificates representing the Debentures
and the Warrants comprising the Units
(each a "Closing" and each such date,
"Closing Date").
1.
SUBSCRIPTION.
Subject to the terms and conditions hereinafter set forth in
this Subscription Agreement, the Investor
hereby offers to purchase Units as set
forth in the Investor Signature Page
attached hereto.
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If the Offer is accepted, the Units shall be paid for by the
delivery of such amount by wire transfer
payable to the order of "Signature
Bank, as Escrow Agent for China Evergreen
Environmental Corp." or check payable
to the order of "Signature Bank as Escrow
Agent for China Evergreen", which is
being delivered contemporaneously
herewith.
Closings will be held, at the discretion of the Company and
the Placement Agent, at reasonable
intervals during the Offering Period, but in
no event later than the Final Closing.
2.
CONDITIONS TO OFFER.
The Offering is made subject to the following conditions: (i)
that the Company shall have the right to
accept or reject this Offer, in whole
or in part, for any reason whatsoever; and
(ii) that the Investor agrees to
comply with the terms of this Subscription
Agreement.
Acceptance of this Offer shall be deemed given by the
countersigning of this Subscription
Agreement on behalf of the Company and
inclusion of this Subscription Agreement in
a Closing.
3.
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor, in order to induce the Company to accept this
Offer, hereby warrants and represents as
follows:
(a) ORGANIZATION; AUTHORITY. The Investor, if not an
individual, is an entity duly organized, validly existing and in
good
standing under the laws of the jurisdiction of its organization
with
the requisite power and authority to enter into and to consummate
the
transactions contemplated by this Subscription Agreement and
otherwise
to carry out its obligations hereunder. The purchase by Investor of
the
Units hereunder has been duly authorized by all necessary action on
the
part of Investor. This Subscription Agreement has been duly
executed by
Investor, and when delivered by Investor in accordance with the
terms
hereof, will constitute the valid and legally binding obligation
of
Investor, enforceable against it in accordance with its terms,
except
(i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
of
general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability
of
specific performance, injunctive relief or other equitable remedies
and
(iii) insofar as indemnification and contribution provisions may
be
limited by applicable law. Investor agrees that the Investor's
subscription shall be irrevocable by Investor, and that, except
as
required by applicable law, Investor shall not be otherwise
entitled to
cancel, terminate or revoke this Subscription Agreement or any
of
Investor's obligations hereunder.
(b) INVESTOR REPRESENTATION. Investor understands that the
Units and Underlying Shares each are "restricted securities" and
have
not been registered under the Securities Act or any applicable
state
securities law. The Investor hereby agrees that the Company may
insert
the following or similar legend on the face of the certificates
evidencing the Units and Underlying Shares, if required in
compliance
with federal and state securities laws:
"These securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") or under
the
securities laws of any state. They may not be sold, offered for
sale,
or hypothecated in the absence of a registration statement in
effect
with respect to the securities under such act or an opinion of
counsel
reasonably satisfactory to the company that such registration is
not
required pursuant to a valid exemption therefrom under the
Securities
Act."
(c) NO DISTRIBUTION. Investor is acquiring the Units as
principal for its own account, in the ordinary course of its
business,
and not with a view to or for distributing or reselling such Units
or
any part thereof. Investor has no present intention of distributing
any
of such Units or Underlying Shares and has no agreement or
understanding, directly or indirectly, with any other
individual,
corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint
stock
company, government (or an agency or subdivision thereof) or
other
entity of any kind (each, a "PERSON") regarding the distribution
of
such Units or Underlying Shares (this representation and warranty
not
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limiting such Investor's right to sell the Debentures, Shares,
Warrants
or Warrant Shares pursuant to a Registration Statement or otherwise
in
compliance with applicable federal and state securities laws).
(d) INVESTOR STATUS. Investor is, and on each date on which it
converts any Debentures and exercises any Warrants it will be
an
"Accredited Investor" as defined in Rule 501(a)(1), (a)(2),
(a)(3),
(a)(7) or (a)(8) under the Securities Act. In general, an
"Accredited
Investor" is deemed to be an institution with assets in excess
of
$5,000,000 or individuals with net worth in excess of $1,000,000
or
annual income exceeding $200,000 or $300,000 jointly with their
spouse.
In connection with a subscription hereunder, Investor will
complete,
execute and return the Statement of Accredited Investor attached
hereto
as Exhibit A certifying such status.
(e) EXPERIENCE OF INVESTOR. Investor, either alone or together
with its representatives, has such knowledge, sophistication
and
experience in business and financial matters so as to be capable
of
evaluating the merits and risks of the prospective investment in
the
Units, and has so evaluated the merits and risks of such
investment.
The Investor has not authorized any Person to act as his
Purchaser
Representative (as that term is defined in Regulation D of the
General
Rules and Regulations under the Act) in connection with this
transaction. Investor is able to bear the economic risk of an
investment in the Units and, at the present time, is able to afford
a
complete loss of such investment.
(f) GENERAL SOLICITATION. Investor is not purchasing the Units
as a result of any advertisement, article, notice or other
communication regarding the Units published in any newspaper,
magazine
or similar media or broadcast over television or radio or presented
at
any seminar or any other general solicitation or general
advertisement.
(g) ACCESS TO INFORMATION. The Investor has reviewed the SEC
Reports (as hereinafter defined) and the Company has not made any
other
representations or warranties to the Investor with respect to
the
Company except as contained herein or in the SEC Reports. The
Investor
has also been afforded the opportunity to ask questions of, and
receive
answers from, the officers and/or directors of the Company
concerning
the terms and conditions of the Offering and to obtain any
additional
information, to the extent that the Company possesses such
information
or can acquire it without unreasonable effort or expense, necessary
to
verify the accuracy of the information furnished; and has
availed
himself of such opportunity to the extent he considers appropriate
in
order to permit him to evaluate the merits and risks of an
investment
in the Units. It is understood that all documents, records and
books
pertaining to this investment have been made available for
inspection
by the Investor during reasonable business hours at its principal
place
of business. Notwithstanding the foregoing, it is understood that
the
Investor is purchasing the Units without being furnished any
prospectus
setting forth all of the information that would be required to
be
furnished under the Act and this Offering has not been passed upon
or
the merits thereof endorsed or approved by any state or federal
authorities.
(h) SUBSCRIPTIONS BY PLACEMENT AGENT. The Investor hereby
acknowledges that the Placement Agent, its affiliates and/or
its
beneficial owners may subscribe for Units.
The Investor certifies that each of the foregoing
representations and warranties set forth in subsection (a) through
(h)
inclusive of this Section 3 are true as of the date hereof and
shall
survive such date.
4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and
warranties
to the Investor. Exceptions to the below, if any, shall be set
forth in
a disclosure schedule, attached hereto, each such disclosure
schedule
numbered in accordance with the section and paragraph number below
to
which it relates.
(a) SUBSIDIARIES. The Company, through its wholly-owned
subsidiary Evergreen Asset Group Limited, owns a majority interest
in
Guangdong Xinxinmei Environmental Protection Co. Limited,
Beijing
Haotai Shiyuan Water Purification Co. Limited, Shangdong
Haiyang
Shenshi Environmental Protection Co. Limited (each wholly-owned
or
majority-owned subsidiary individually a "Subsidiary" and
collectively,
"Subsidiaries"). All capital stock owned by the Company directly
or
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through one or more Subsidiaries in each such Subsidiary is
validly
issued and is fully paid, non-assessable and free of preemptive
and
similar rights.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and
its Subsidiaries is an entity duly incorporated or otherwise
organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable),
with
the requisite power and authority to own and use its properties
and
assets and to carry on its business as currently conducted. Neither
the
Company nor any Subsidiary is in violation or default of any of
the
provisions of its respective certificate or articles of
incorporation,
bylaws or other organizational or charter documents. Each of
the
Company and the Subsidiaries is duly qualified to conduct business
and
is in good standing as a foreign corporation or other entity in
each
jurisdiction in which the nature of the business conducted or
property
owned by it makes such qualification necessary, except where
the
failure to be so
qualified or in good standing, as the case may be,
could not have or reasonably be expected to result in (i) a
material
adverse effect on the legality, validity or enforceability of
this
Subscription Agreement, (ii) a material adverse effect on the
results
of operations, assets, business, prospects or financial condition
of
the Company and the Subsidiaries, taken as a whole, or (iii) a
material
adverse effect on the Company's ability to perform in any
material
respect on a timely basis its obligations under this
Subscription
Agreement (any of (i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT")
and
no action, claim, suit, investigation or proceeding (including,
without
limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened ("PROCEEDING") has
been
instituted in any such jurisdiction revoking, limiting or
curtailing or
seeking to revoke, limit or curtail such power and authority or
qualification.
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate
the
Offering. The execution and delivery of this Subscription Agreement
by
the Company and the consummation by it of the transactions
contemplated
hereby have been duly authorized by all necessary action on the
part of
the Company and no further consent or action is required by the
Company, other than the Required Approvals (as defined below).
This
Subscription Agreement, when executed and delivered in accordance
with
the terms hereof, will constitute the valid and binding obligation
of
the Company enforceable against the Company in accordance with
its
terms, except (i) as limited by applicable bankruptcy,
insolvency,
reorganization, moratorium and other laws of general
application
affecting enforcement of creditors' rights generally and (ii)
as
limited by laws relating to the availability of specific
performance,
injunctive relief or other equitable remedies.
(d) NO CONFLICTS. The execution, delivery and performance of
this Subscription Agreement by the Company and the consummation by
the
Company of the Offering do not and will not: (i) conflict with
or
violate any provision of the Company's or any Subsidiary's
certificate
or articles of incorporation, bylaws or other organizational or
charter
documents, or (ii) subject to obtaining the Required Approvals
(as
defined below), conflict with, or constitute a default (or an
event
that with notice or lapse of time or both would become a
default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time
or
both) of any agreement, credit facility, debt or other
instrument
(evidencing a Company or Subsidiaries' debt or otherwise) or
other
understanding to which the Company or either of the Subsidiaries is
a
party or by which any property or asset of the Company or its
Subsidiaries is bound or affected, or (iii) result in a violation
of
any law, rule, regulation, order, judgment, injunction, decree or
other
restriction of any court or governmental authority as currently
in
effect to which the Company or either of the Subsidiaries is
subject
(including federal and state securities laws and regulations), or
by
which any property or asset of the Company or either of the
Subsidiaries is bound or affected; except in the case of each
of
clauses (ii) and (iii), such as could not, individually or in
the
aggregate (a) adversely affect the legality, validity or
enforceability
of the Offering, (b) have or result in or be reasonably likely to
have
or result
in a material adverse effect on the results of operations,
assets, prospects, business or condition (financial or otherwise)
of
the Company and the Subsidiaries, taken as a whole, or (c)
adversely
impair the Company's ability to perform fully on a timely basis
its
obligations under this Subscription Agreement (any of (a), (b) or
(c),
a "MATERIAL ADVERSE EFFECT").
(e) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor
the
Subsidiaries is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or
registration with, any court or other federal, state, local or
other
governmental authority or other Person in connection with the
execution, delivery and performance by the Company of this
Subscription
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Agreement, other than: (i) the filing with the Securities and
Exchange
Commission ("COMMISSION") of the Registration Statement, (ii)
the
filing with the Commission of a Form D pursuant to Commission
Regulation D, and (iii) applicable Blue Sky filings (collectively,
the
"REQUIRED APPROVALS")
(f) ISSUANCE OF THE SECURITIES. The Units, and each component
or underlying security, are duly authorized and, when issued and
paid
for in accordance with this Subscription Agreement, will be duly
and
validly issued, fully paid and nonassessable, free and clear of
all
liens, and not subject to any preemptive rights. The Company
has
reserved from its duly authorized capital stock a number of shares
of
Common Stock required for issuance of the Shares and the
Warrant
Shares.
(g) CAPITALIZATION. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is
as
set forth in Schedule 4(g) attached hereto. No Person has any right
of
first refusal, preemptive right, right of participation, or any
similar
right to participate in the Offering. Except for options and shares
of
capital stock issued or issuable under the Company's stock option
plan
or disclosed in Schedule 4(g), there are no outstanding
options,
warrants, script rights to subscribe to, calls or commitments of
any
character whatsoever relating to, or securities, rights or
obligations
convertible into or exchangeable for, or giving any Person or
entity
any right to subscribe for or acquire, any shares of Common Stock,
or
contracts, commitments, understandings or arrangements by which
the
Company or either of the Subsidiaries is or may become bound to
issue
additional shares of Common Stock, or securities or rights
convertible
or exchangeable into shares of Common Stock. The issuance and sale
of
the Units will not obligate the Company to issue shares of Common
Stock
or other securities to any Person (other than pursuant to this
Offering) and will not result in a right of any holder of
Company
securities to adjust the exercise, conversion, exchange or reset
price
under such securities. All of the outstanding shares of capital
stock
of the Company are validly issued, fully paid and nonassessable,
have
been issued in compliance with all federal and state securities
laws,
and none of such outstanding shares was issued in violation of
any
preemptive rights or similar rights to subscribe for or
purchase
securities. No further approval or authorization of any
stockholder,
the Board of Directors of the Company or others is required for
the
issuance and sale of the Units and the Underlying Shares. There are
no
stockholders agreements, voting agreements or other similar
agreements
with respect to the Company's capital stock to which the Company is
a
party or, to the knowledge of the Company, between or among any of
the
Company's stockholders. A complete list of stockholders of the
Company
that are officers, directors and individuals holding more than 5%
of
the outstanding Common Stock is included in Schedule 4(g).
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
all reports required to be filed by it under the Securities Act and
the
Securities Exchange Act of 1934, as amended ("EXCHANGE ACT"),
including
pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding
the date hereof (or such shorter period as the Company was required
by
law to file such material) (the foregoing materials being
collectively
referred to herein as the "SEC REPORTS") in accordance with the
time
requirements of the Securities Act and the Exchange Act. As of
their
respective dates, the SEC Reports complied in all material
respects
with the requirements of the Securities Act and the Exchange Act
and
the rules and regulations of the Commission promulgated thereunder,
and
none of the SEC Reports, when filed, contained any untrue statement
of
a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements
therein, in
light of the circumstances under which they were made, not
misleading.
The Company has advised Investor that a correct and complete copy
of
each of the SEC Reports (together with all exhibits and
schedules
thereto and as amended to date) is available at HTTP://WWW.SEC.GOV,
a
website maintained by the Commission where Investor may view the
SEC
Reports. The financial statements of the Company included in the
SEC
Reports comply in all material respects with applicable
accounting
requirements and the rules and regulations of the Commission
with
respect thereto as in
effect at the time of filing. Such financial
statements have been prepared in accordance with generally
accepted
accounting principles applied on a consistent basis during the
periods
involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in
all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and
the
results of operations and cash flows for the periods then
ended.
(i) MATERIAL CHANGES. Since the date of the latest audited
financial statements included in the SEC Reports: (i) there has
been no
event, occurrence or development that has had a Material
Adverse
Effect, (ii) the Company has not incurred any liabilities
(contingent
or otherwise) other than (A) trade payables and accrued
expenses
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incurred in the ordinary course of business consistent with
past
practice and (B) liabilities not required to be reflected in
the
Company's financial statements pursuant to GAAP or required to
be
disclosed in filings made with the Commission, (iii) the Company
has
not altered its method of accounting or the identity of its
auditors,
except as disclosed in the SEC Reports (iv) the Company has not
declared or made any dividend or distribution of cash or other
property
to its stockholders except in the ordinary course of business
consistent with prior practice, or purchased, redeemed or made
any
agreements to purchase or redeem any shares of its capital stock
except
consistent with prior practice or pursuant to existing Company
stock
option or similar plans, and (v) the Company has not issued any
equity
securities to any officer, director or Affiliate, except pursuant
to
existing Company stock option or similar plans or as disclosed in
the
SEC Reports.
(j) LITIGATION. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge
of
the Company, threatened against or affecting the Company, the
Subsidiaries or any of its properties before or by any court,
arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively,
an
"ACTION") which: (i) adversely affects or challenges the
legality,
validity or enforceability of this Subscription Agreement or the
Units
or (ii) could, if there were an unfavorable decision, individually
or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary,
nor
any director or officer thereof, is or has been the subject of
any
Action involving a claim of violation of or liability under federal
or
state securities laws or a claim of a breach of fiduciary duty.
The
Company does not have pending before the Commission any request
for
confidential treatment of information. There has not been, and to
the
knowledge of the Company, there is not pending or contemplated,
any
investigation by the Commission involving the Company or any
current or
former director or officer of the Company. The Commission has
not
issued any stop order or other order suspending the effectiveness
of
any registration statement filed by the Company or any
Subsidiaries
under the Exchange Act or the Securities Act.
(k) LABOR RELATIONS. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of
the
employees of the Company or any Subsidiary which could reasonably
be
expected to result in a Material Adverse Effect.
(l) COMPLIANCE. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that
has
not been waived that, with notice or lapse of time or both,
would
result in a default by the Company or any Subsidiary under), nor
has
the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any indenture, loan
or
credit agreement or any other agreement or instrument to which it
is a
party or by which it or any of its properties is bound (whether or
not
such default or violation has been waived), (ii) is in violation of
any
order of any court, arbitrator or governmental body, or (iii) is or
has
been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all
foreign,
federal, state and local laws applicable to its business except in
each
case as could not have a Material Adverse Effect.
(m) REGULATORY PERMITS. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by
the
appropriate federal, state, local or foreign regulatory
authorities
necessary to conduct its business as currently conducted, except
where
the failure to possess such permits would not, individually or in
the
aggregate, have or reasonably be expected to result in a
Material
Adverse Effect ("MATERIAL PERMITS"), and the Company has not
received
any notice of proceedings relating to the revocation or
modification of
any Material Permit.
(n) TITLE TO ASSETS. The Company and the Subsidiaries have
good and marketable title in all real and personal property owned
by
them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of any liens,
encumbrances or
other
restrictions. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under
valid,
subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
(o) PATENTS AND TRADEMARKS. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights necessary or material
for
use in connection with their respective businesses as currently
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conducted and which the failure to so have could have a
Material
Adverse Effect (collectively, the "INTELLECTUAL PROPERTY
RIGHTS").
Neither the Company nor any Subsidiary has received a written
notice
that the Intellectual Property Rights used by the Company or
any
Subsidiary violates or infringes upon the rights of any Person. To
the
knowledge of the Company, all such Intellectual Property Rights
are
enforceable and there is no existing infringement by another Person
of
any of the Intellectual Property Rights of others.
(p) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses
and
risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are
engaged,
including directors and officers insurance. To the best of
Company's
knowledge, such insurance contracts and policies are accurate
and
complete. Neither the Company nor any Subsidiary has any reason
to
believe that it will not be able to renew its existing
insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue
its
business without a significant increase in cost.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. None of the
officers or directors of the Company and, to the knowledge of
the
Company, none of the employees of the Company is presently a party
to
any transaction with the Company or any Subsidiary (other than
for
services as employees, officers and directors), including any
contract,
agreement or other arrangement providing for the furnishing of
services
to or by, providing for rental of real or personal property to or
from,
or otherwise requiring payments to or from any officer, director
or
such employee or, to the knowledge of the Company, any entity in
which
any officer, director, or any such employee has a substantial
interest
or is an officer, director, trustee or partner, in each case in
excess
of $60,000 other than (i) for payment of salary or consulting fees
for
services rendered, (ii) reimbursement for expenses incurred on
behalf
of the Company and (iii) for other employee benefits, including
stock
option agreements under any stock option plan of the Company.
(r) INTERNAL ACCOUNTING CONTROLS. Each of the Company and the
Subsidiaries is in material compliance with all provisions of
the
Sarbanes Oxley Act of 2002 which are presently applicable to it.
Each
of the Company and the Subsidiaries maintains a system of
internal
accounting controls sufficient to provide reasonable assurance that
(i)
transactions are executed in accordance with management's general
or
specific authorizations, (ii) transactions are recorded as
necessary to
permit preparation of financial statements in conformity with GAAP
and
to maintain asset accountability, (iii) access to assets is
permitted
only in accordance with management's general or specific
authorization,
and (iv) the recorded accountability for assets is compared with
the
existing assets at reasonable intervals and appropriate action is
taken
with respect to any differences. The Company has established
disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14
and
15d-14) for the Company and designed such disclosure controls
and
procedures to ensure that material information relating to the
Company,
including its Subsidiaries, is made known to the certifying
officers by
others within those entities. The Company's certifying officers
have
evaluated the effectiveness of the Company's controls and
procedures as
of September 30, 2004 (such date, the "EVALUATION DATE"). The
Company
presented in the Form 10-QSB for the quarter ended September 30,
2004
the conclusions of the certifying officers about the effectiveness
of
the disclosure controls and procedures based on their evaluations
as of
the Evaluation Date. Since the Evaluation Date, there have been
no
significant changes in the Company's internal controls (as such
term is
defined in Item 307(b) of Regulation S-B under the Exchange
Act),
except with respect to the acquisition of Evergreen Asset Group
Limited, as disclosed in the SEC Reports.
(s) PRIVATE PLACEMENT. Assuming the accuracy of the Investor
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer
and
sale of the Units by the Company to the Investors as
contemplated
hereby.
(t) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
Board of Directors have taken all necessary action, if any, in
order to
render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a
rights
agreement) or other similar anti-takeover provision under the
Company's
Certificate of Incorporation (or similar charter documents) or the
laws
of its state of incorporation that is or could become applicable to
the
Investors as a result of the Investors and the Company fulfilling
their
obligations or exercising their rights under this Subscription
Agreement, including without limitation as a result of the
Company's
issuance of the Units and the Investor's ownership of the Units
and
Underlying Shares.
7
<PAGE>
(u) DISCLOSURE. The Company confirms that neither it nor any
other Person acting on its behalf has provided the Investor or
its
agents or counsel with any information that constitutes or
might
constitute material, nonpublic information. The Company understands
and
confirms that the Investor will rely on the foregoing
representations
and covenants in effecting transactions in securities of the
Company.
All written statements provided to the Investor regarding the
Company,
its business and the transactions contemplated hereby, furnished by
or
on behalf of the Company with respect to the representations
and
warranties made herein are true and correct with respect to
such
representations and warranties and do not contain any untrue
statement
of a material fact or omit to state any material fact necessary
in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The
Company
acknowledges and agrees that the Investor makes or has made no
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in
this
Subscription Agreement.
(v) NO INTEGRATED OFFERING. Assuming the accuracy of the
Investor's representations and warranties set forth in this
Subscription Agreement, 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
this
Offering to be integrated with prior offerings by the Company
for
purposes of the Securities Act or any applicable shareholder
approval
provisions.
(w) SOLVENCY. Based on the financial condition of the Company
as of each Closing Date after giving effect to the receipt by
the
Company of the proceeds from the sale of the Units hereunder, (i)
the
Company's fair saleable value of its assets exceeds the amount
that
will be required to be paid on or in respect of the Company's
existing
debts and other liabilities (including known contingent
liabilities) as
they mature; (ii) the Company's assets do not constitute
unreasonably
small capital to carry on its business for the current fiscal year
as
now conducted and as proposed to be conducted including its
capital
needs taking into account the particular capital requirements of
the
business conducted by the Company, and projected capital
requirements
and capital availability thereof; and (iii) the current cash flow
of
the Company, together with the proceeds the Company would receive,
were
it to liquidate all of its assets, after taking into account
all
anticipated uses of the cash, would be sufficient to pay all
amounts on
or in respect of its debt when such amounts are required to be
paid.
The Company does not intend to incur debts beyond its ability to
pay
such debts as they mature (taking into account the timing and
amounts
of cash to be payable on or in respect of its debt).
(x) TAX STATUS. Except for matters that would not,
individually or in the aggregate, have or reasonably be expected
to
result in a Material Adverse Effect, the Company and each
Subsidiary
has filed all necessary federal, state and foreign income and
franchise
tax returns and has paid or accrued all taxes shown as due thereon,
and
the Company has no knowledge of a tax deficiency which has been
asserted or threatened against the Company or any Subsidiary.
(y) NO GENERAL SOLICITATION. Neither the Company nor any
Person acting on behalf of the Company has offered or sold any of
the
Units by any form of general solicitation or general advertising.
The
Company has offered the Units for sale only to each Investor in
the
Offering and
certain other "accredited investors" within the meaning of
Rule 501 under the Securities Act.
(z) FOREIGN CORRUPT PRACTICES. Neither the Company, nor to the
knowledge of the Company, any agent or other Person acting on
behalf of
the Company, has (i) directly or indirectly, used any corrupt funds
for
unlawful contributions, gifts, entertainment or other unlawful
expenses
related to foreign or domestic political activity, (ii) made
any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns
from corporate funds, (iii) failed to disclose fully any
contribution
made by the Company (or made by any Person acting on its behalf
of
which the Company is aware) which is in violation of law, or
(iv)
violated in any material respect any provision of the Foreign
Corrupt
Practices Act of 1977, as amended.
8
<PAGE>
(aa) ACCOUNTANTS. The Company's accountants are set forth in
the SEC Reports. To the Company's knowledge, such accountants, who
the
Company expects will express their opinion with respect to the
financial statements to be included in the Company's upcoming
annual
report, are a registered public accounting firm as required by
the
Securities Act.
(bb) INDEBTEDNESS. As of each Closing Date, the Company has
not materially increased its indebtedness.
(cc) NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS. There are
no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the accountants
and
lawyers formerly or presently employed by the Company and the
Company
is current with respect to any fees owed to its accountants and
lawyers.
(dd) LISTING AND MAINTENANCE REQUIREMENTS. The Company's
Common Stock currently trades on the Nasdaq Over-the-Counter
Bulletin
Board (OTCBB). The Company is, and has no reason to believe that
it
will not in the foreseeable future continue to be, in compliance
with
the periodic SEC reporting requirements necessary to maintain
trading
on the OTCBB.
5.
REGISTRATION RIGHTS.
The Company grants registration rights to the Investor under
the
following terms and conditions:
(a) If, at any time, the Company shall determine to proceed with
the
preparation and filing of a registration
statement pursuant to the Securities
Act in connection with the proposed offer
and sale of any of its securities by
it or any of its security holders (other
than a registration statement on Form
S-4, S-8, or other limited purpose form),
the Company will give written notice
of its determination to each Investor. Upon
receipt of a written request from
any Investor, within thirty (30) days after
receipt of any such notice from the
Company, the Company will cause all such
Shares and Warrant Shares ("REGISTRABLE
SECURITIES") requested by the Investor to
be included in such registration
statement (a "REGISTRATION STATEMENT"), all
to the extent required to permit the
sale or other disposition by such Investor,
of such shares. The obligation of
the Company under this Section 5(a) shall
be unlimited as to the number of
registration statements to which it
applies, unless the Effectiveness Period
(defined below) has ended, provided that
there shall be no duplication and each
Investor shall only have the right to be
included in one Registration Statement
at any given point in time. The Company
will notify the Investor of the date of
effectiveness of any Registration Statement
within two (2) business days of such
event.
(b) In the event no Registration Statement pursuant to Section
5(a)
above has been filed within 120 days from
the Final Closing or effective within
210 days from Final Closing, and the
Company shall receive a written request
signed by the holders holding the majority
of the Registrable Securities for the
registration of any such shares ("DEMAND
NOTICE"), the Company shall prepare and
file, at its own expense, within thirty
(30) days of receipt of the Demand
Notice, a registration statement under the
Securities Act (the "DEMAND
REGISTRATION" and a "REGISTRATION
STATEMENT") with the Commission sufficient to
permit the non-under
