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Exhibit 10.1
FORM OF SUBSCRIPTION AGREEMENT
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China Evergreen Environmental
Corporation
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 private placement (the
"Offering") offered by China Evergreen
Environmental Corporation, 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
$30,000 per unit, consisting of (a)
200,000 shares ("Shares") of the Company's
common stock, par value $0.001
("Common Stock") at the rate of $0.15 per
Share and (b) 200,000 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 five years
from their date of issuance. The Shares and
the Warrants shall be collectively
referred to as the "Units".
The Company may issue up to $4,020,000 of Units (the "Maximum
Offering") in this Offering. The Company
and the Placement Agent, upon mutual
agreement, may also sell up to an
additional $810,000 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 Shares, Warrants
and the Warrant Shares are "restricted
securities".
The Units are being offered on a "best efforts, all or none" basis
by
the Company through the Placement Agent
with respect to the initial $1,020,000
of Units (the "Minimum Offering"), during
an offering period commencing on
August 25, 2005 (the "Commencement Date"),
which is the date of the Company's
Private Placement Memorandum (together with
all exhibits and supplements
thereto, the "Memorandum") and continuing
until September 30, 2005 (the
"Offering Period"). If the Minimum Offering
is not reached, the Offering will
terminate on September 30, 2005 (unless
earlier terminated by the Company and
the Placement Agent) and all funds will be
returned without interest or
deduction. In the event the Minimum
Offering is reached, the Offering will
continue on a "best efforts" basis until
the earlier of (i) the close of
business (5:00 p.m. EST) on October 20,
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, within
ten (10) calendar days of each such
release, of certificates representing the
Shares 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 or
check payable to the order of
"Signature Bank as EA for CEEC", 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
Shares, Warrants and Warrant 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 Shares, Warrants and Warrant 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 Shares, Warrants or Warrant 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 Warrant Shares (this representation and warranty
not
limiting such Investor's right to sell the Shares, Warrants or
Warrant
Shares pursuant to a Registration Statement or otherwise in
compliance
with applicable federal and state securities laws).
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(d) INVESTOR STATUS. Investor is, and on each date on which it
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. Investor has provided on the signature page to this
Agreement
its correct address.
(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
Memorandum 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 Memorandum. 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 ("Company 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,
directly or indirectly, in multiple subsidiaries through which
it
conducts its operations (each wholly-owned or majority-owned
subsidiary
of the Company individually a "Subsidiary" and collectively,
"Subsidiaries"). All capital stock owned by the Company directly
or
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.
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(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 the Memorandum. 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 the Memorandum, 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. Except as set forth in
the
Company Disclosure Schedule, 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 Warrant 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 the Memorandum.
(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. Except as
set
forth in the Company Disclosure Schedule, 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.
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(i) MATERIAL CHANGES. Except as disclosed in the Company
Disclosure Schedule, 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 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.
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(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
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.
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 June 30, 2005 (such date, the "EVALUATION DATE"). The
Company
presented in the Form 10-QSB for the quarter ended June 30, 2005
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, 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
7
<PAGE>
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
Warrant Shares.
(u) DISCLOSURE. The Company confirms that 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 in a manner that would require the registration under
the
Securities Act of the Offering or, if then listed or quoted on
a
trading market, that would be integrated with the Offering for
purposes
of the rules and regulations of any trading market.
(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 (which does not include
the
Placement Agent for purposes of this subpart (y)) 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
8
<PAGE>
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.
(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. Except as set forth in the Company
Disclosure Schedule, 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, that
would,
individually or in the aggregate, have or reasonably be expected
to
result in a Material Adverse Effect.
(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) The Company shall prepare and file, at its own expense,
within
thirty (30) days of the Final Closing, a
registration statement under the
Securities Act (the "REGISTRATION
STATEMENT") with the Commission sufficient to
permit the non-underwritten public offering
and resale of all of the Shares and
Warrant Shares (as subject to adjustment)
and the shares of common stock
issuable upon exercise of the Green Shoe
Option (defined in Section 6(o) below)
(the "Registrable Securities") through the
facilities of all appropriate
securities exchanges, if any, on which the
Company's Common Stock is being sold
or on the over-the-counter market if the
Company's Common Stock is traded
thereon.
(b) The Company will use its reasonable best efforts to cause
such
Registration Statement to become effective
within one hundred and twenty (120)
days from the Final Closing or, if earlier,
within three (3) business days of
Commission clearance to request
acceleration of effectiveness. The number of
shares designated in the Registration
Statement to be registered shall include
all of the Registrable Securities and shall
include appropriate language
regarding reliance upon Rule 416 to the
extent permitted by the Commission. The
Company will notify the Investor of the
date of effectiveness of the Demand
Registration within two (2) business days
of such event. In the event that the
number of shares so registered shall prove
to be insufficient to register the
resale of all of the Registrable
Securities, then the Company shall be obligated
to file, within thirty (30) days of notice
from any Investor, a further
Registration Statement registering such
remaining shares and shall use its
reasonable best efforts to prosecute such
additional Registration Statement to
effectiveness within ninety (90) days of
the date of such notice.
(c) The Company will maintain the Registration Statement or
post-effective amendment filed under the
terms of this Subscription Agreement
effective under the Securities Act until
the earlier of (i) the date that all of
the Registrable Securities have been sold
pursuant to such Registration
Statement, (ii) all Registrable Securities
have been otherwise transferred to
Persons who may trade such shares without
restriction under the Securities Act,
and the Company has delivered a new
certificate or other evidence of ownership
for such securities not bearing a
restrictive legend, or (iii) all Registrable
Securities may be sold at any time, without
volume or manner of sale limitations
pursuant to Rule 144(k) or any similar
provision then in effect under the
Securities Act in the opinion of counsel to
the Company, which counsel shall be
reasonably acceptable to the Investor (the
"EFFECTIVENESS PERIOD").
(d) If, at any time during which the Registration Statement
required by
Section 5(a) and 5(b) above is not
effective, 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
9
<PAGE>
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
