SECURITIES PURCHASE
AGREEMENT
This Securities Purchase Agreement (this
“Agreement”) is dated as of May 8, 2009, by and among
Yongye Biotechnology International, Inc., a Nevada corporation (the
“Company”), Inner Mongolia Yongye Nong Feng
Biotechnology Co., Ltd., a cooperative joint venture organized
under the laws of the People’s Republic of China
(“CJV”), and the investors listed on the Schedule of
Investors attached hereto as Appendix A (each, an
“Investor” and collectively, the
“Investors”).
WHEREAS, subject to the terms and conditions set
forth in this Agreement and pursuant to exemptions from
registration under the Securities Act (as defined below), the
Company desires to issue and sell to each Investor, and each
Investor, severally and not jointly, desires to purchase from the
Company, shares of the Company’s Common Stock (as defined
below), as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual
covenants contained in this Agreement, and for other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, the Company and the Investors agree as
follows:
ARTICLE 1.
DEFINITIONS
1.1
Definitions . In addition to the terms defined
elsewhere in this Agreement, for all purposes of this Agreement,
the following terms shall have the meanings indicated in this
Section 1.1:
“ Action ” as to any Person,
means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting
such Person, any of such Person’s Subsidiaries or any of such
Person’s or such Subsidiaries’ respective properties,
before or by any court, arbitrator, governmental or administrative
agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading
facility.
“ Affiliate ” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 144.
“ Agreement ” has the meaning
set forth in the preamble to this Agreement.
“ Available Undersubscription
Amount ” has the meaning set forth in Section
4.12(c).
“ Basic Amount ” has the
meaning set forth in Section 4.12(b).
“ Business Day ” means any
day except Saturday, Sunday and any day which is a federal legal
holiday or a day on which banking institutions in the State of New
York or State of Nevada are authorized or required by law or other
governmental action to close.
“ Buy-In ” has
the meaning set forth in Section 4.1(c).
“ BVI ” means Fullmax Pacific
Limited, an international business company incorporated in the
British Virgin Islands.
“ CJV ” has the meaning set
forth in the recitals to this Agreement.
“ Closing ” means the closing
of the purchase and sale of the Shares pursuant to Article
II.
“ Closing Date ” means the
Business Day on which all of the conditions set forth in Sections
5.1 and 5.2 hereof are satisfied, or such other date as the parties
may agree.
“ Closing Escrow Agreement ”
means the Closing Escrow Agreement, dated as of the date hereof,
among the Company, the ROTH Capital Partners, LLC, the Investors
and the Escrow Agent (defined below), in the form of Exhibit
A hereto, as may be amended from time to time pursuant to
Section 6.4 of this Agreement.
“ Commission ” means the
Securities and Exchange Commission.
“ Common Stock ” means the
common stock of the Company, par value $0.001 per share, and any
securities into which such common stock may hereafter be
reclassified or for which it may be exchanged as a
class.
“ Company ” has
the meaning set forth in the recitals to this Agreement.
“ Company Deliverables ” has
the meaning set forth in Section 2.2(a).
“ Company Entities ” means
the Company, BVI, CJV and all existing Subsidiaries of any such
entities and any other entities which hereafter become Subsidiaries
of any such entities.
“ Common Stock Equivalents ”
means any securities of the Company or any Subsidiary which entitle
the holder thereof to acquire Common Stock at any time, including
without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into
or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock or other securities that entitle the holder
to receive, directly or indirectly, Common Stock.
“ Company NY Counsel ” means
Loeb & Loeb LLP, having an address at 345 Park Avenue, New
York, NY 10154, Attention: Mitchell S. Nussbaum, Esq., with a Fax
No. of (212) 407-4990.
“ Disclosure Materials ” has
the meaning set forth in Section 3.1(h).
“ Effective Date ” means the
date that the Registration Statement required by Section 2(a) of
the Registration Rights Agreement is first declared effective by
the Commission.
“ Escrow Agent ” means Loeb
& Loeb LLP with an address at 345 Park Avenue, New York, NY
10154-1895.
“ Evaluation Date ”
has the meaning set forth in Section
3.1(s).
“ Exchange Act ” means the
Securities Exchange Act of 1934, as amended.
“ Existing Company Entities ”
means the Company and CJV and their respective
Subsidiaries.
“ Full Alliance ” means Full
Alliance International Limited, a company incorporated in the
British Virgin Islands.
“ GAAP ” means U.S. generally
accepted accounting principles.
“ IMGYY ” has the meaning set
forth in Section 6.7.
“ Intellectual Property Rights
” has the meaning set forth in Section 3.1(p).
“ Investment Amount ” means,
with respect to each Investor, the Investment Amount indicated on
such Investor’s signature page to this Agreement, which is
also reflected on the Schedule of Investors attached hereto as
Appendix A .
“ Investor ” has the meaning
set forth in the preamble.
“ Investor Deliverables ” has
the meaning set forth in Section 2.2(b).
“ Investor Party ” has the
meaning set forth in Section 4.7.
“ Lien ” means any lien,
charge, encumbrance, security interest, right of first refusal,
right of participation or other restrictions of any
kind.
“ Losses ” has the meaning
set forth in Section 4.7.
“ Material Adverse Effect ”
means any of (i) a material and adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets,
properties, prospects, business or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) a material and adverse impairment to the Company’s
ability to perform on a timely basis its obligations under any
Transaction Document.
“ Money Laundering Laws ” has
the meaning set forth in Section 3.1(ee).
“ New York Courts ” means the
state and federal courts sitting in the City of New York, Borough
of Manhattan.
“ Notice of Acceptance ” has
the meaning set forth in Section 4.12(c).
“ Offer ” has the meaning set
forth in Section 4.12(b).
“ Offer Notice ” has the
meaning set forth in Section 4.12(b).
“ Offer Period ” has the
meaning set forth in Section 4.12(c).
“ Offered Securities ” has
the meaning set forth in Section 4.12(b).
“ OFAC ” has the meaning set
forth in Section 3.1(dd).
“ Outside Date ” means the
fifteenth calendar day (if such calendar day is a Trading Day and
if not, then the first Trading Day following such fifteenth
calendar day) following the date of this Agreement.
“ Per Share Purchase Price ”
equals $1.54.
“ Person ” means an
individual or 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.
“ Placement Agent Warrant ”
shall mean the warrant certificate issued to ROTH Capital Partners,
LLC in the form of Exhibit C , attached hereto and made a
part hereof, representing the warrant holder’s right to
purchase 246,224 shares of Common Stock at a price per share of
$1.848.
“ PRC ” means, for the
purpose of this Agreement, the People’s Republic of China,
not including Taiwan, Hong Kong and Macau.
“ PRC Escrow Agreement ” has
the meaning set forth in Section 2.2.
“ Proceeding ” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or, to the knowledge of the
Company, threatened.
“ Refused Securities ” has
the meaning set forth in Section 4.12(d).
“ Registrable Securities ”
shall mean the Shares and the Warrant Shares.
“ Registration Rights Agreement
” means the Registration Rights Agreement, dated as of the
date hereof, among the Company and the Investors, in the form of
Exhibit B hereto.
“ Registration Statement ”
means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale by the
Investors of the Shares.
“ Responding Investor ” has
the meaning set forth in Section 4.12(a).
“ 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.
“ SEC Reports ” has the
meaning set forth in Section 3.1(h).
“ Securities ” has the
meaning set forth in Section 4.1(c).
“ Securities Act ” means the
Securities Act of 1933, as amended.
“ Share Delivery Date ” has
the meaning set forth in Section 4.1(c).
“ Shares ” means the
5,834,083 shares of Common Stock being issued and sold to the
Investors by the Company hereunder.
“ Short Sales ” include,
without limitation, all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act
and all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, swaps and similar arrangements
(including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated
brokers.
“ Subsequent Placement ” has
the meaning set forth in Section 4.12(a).
“ Subsequent Placement Agreement
” has the meaning set forth in Section 4.12(f).
“ Subsidiary ” of any Person
means any “subsidiary” as defined in Rule 1-02(x) of
the Regulation S-X promulgated by the Commission under the Exchange
Act of such Person. Notwithstanding anything to the
contrary set forth in any Transaction Document, BVI, CJV and their
respective subsidiaries are each considered a Subsidiary of the
Company.
“ Trading Day ” means (i) a
day on which the Common Stock is traded on a Trading Market or (ii)
if the Common Stock is not listed or quoted on any Trading Market,
a day on which the Common Stock is quoted in the over-the-counter
market as reported by the Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting
prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i) or (ii) hereof, then Trading
Day shall mean a Business Day.
“ Trading Market ” means
whichever of the New York Stock Exchange, NYSE Amex, the NASDAQ
Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market or OTC Bulletin Board on which the Common Stock is listed or
quoted for trading on the date in question.
“ Transaction Documents ”
means this Agreement, the Registration Rights Agreement, the
Closing Escrow Agreement and any other documents or agreements
executed in connection with the transactions contemplated
hereunder.
“ Transfer Agent ” means
Empire Stock Transfer Inc., the current transfer agent of the
Company with a mailing address of 2470 Saint Rose Parkway, Suite
304, Henderson, NV 89074 and a facsimile number of (702) 974-1444,
and any successor transfer agent of the Company.
“ Trigger Date ” has the
meaning set forth in Section 4.12(a).
“ Undersubscription Amount ”
has the meaning set forth in Section 4.12(a).
“ Warrant Shares ” shall mean
the Common Stock to be issued under the Placement Agent
Warrant.
ARTICLE 2.
PURCHASE AND SALE
2.1
Closing . Subject to the terms and conditions set
forth in this Agreement, at the Closing the Company shall issue and
sell to each Investor, and each Investor shall, severally and not
jointly, purchase from the Company, the Shares representing such
Investor’s Investment Amount, calculated as the quotient of
such Investor’s Investment Amount divided by the Per Share
Purchase Price. The Closing shall take place at the
offices of Loeb & Loeb LLP on the Closing Date or at such other
location or time as the parties may agree.
2.2
Closing Deliveries . (a) At the
Closing, the Company shall deliver or cause to be delivered to each
Investor the following (the “Company
Deliverables”):
(i) a
single certificate, dated the Closing Date, issued to each
Investor, respectively, representing that number of aggregate
Shares to be issued and sold at Closing to such Investor,
determined under Section 2.1, registered in the name of such
Investor;
(ii)
the Placement Agent Warrant, dated the Closing Date;
(iii)
the Closing Escrow
Agreement, dated the Closing Date;
(iv) the
legal opinion of Company NY Counsel, in agreed form, addressed to
the Investors;
(v) the
legal opinion of Company Nevada counsel, in agreed form, addressed
to the Investors; and
(vi) the
legal opinion of special PRC counsel to CJV, in agreed form,
addressed to the Investors; and
(vii) the
PRC Escrow Agreement, dated as of May 6, 2009, by and among the
Company, the CJV and China Citic Bank, substantially in the form
attached hereto as Exhibit D .
(b) By
the Closing, each Investor shall deliver or cause to be delivered
the agreements specified in Section 5.2(d), each duly signed by
such Investor (collectively, the “Investor
Deliverables”).
(c) Within
two (2) Trading Days following the date of this Agreement, other
than in the case of Full Alliance, each Investor shall deliver to
the Escrow Agent for deposit and disbursement in accordance with
the Closing Escrow Agreement, its Investment Amount, in United
States Dollars and in immediately available funds, by wire transfer
to an account designated in writing by the Company for such
purpose, and, in the case of Full Alliance, make arrangements to
fund the Full Alliance Investment Amount to the account of the CJV
as contemplated by Section 6.7 herein.
ARTICLE 3.
REPRESENTATIONS AND
WARRANTIES
3.1
Representations and Warranties of the Company
. The Company and CJV hereby jointly and severally make
the following representations and warranties to each
Investor:
(a)
Subsidiaries . None of the Existing Company
Entities have any direct or indirect Subsidiaries other than as
disclosed in Schedule 3.1(a) hereto. Except as
disclosed in Schedule 3.1(a) hereto, (i) the Company owns,
directly or indirectly, all of the capital stock of each other
Existing Company Entity, and each other Existing Company Entity
alone or together with other Existing Company Entities owns,
directly or indirectly, all of the capital stock of its respective
Subsidiaries, in each case free and clear of any and all Liens, and
(ii) all the issued and outstanding shares of capital stock of each
Existing Company Entity and each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar
rights.
(b)
Organization and Qualification . Each Existing
Company Entity is 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 respective
properties and assets and to carry on its respective business as
currently conducted. No Existing Company Entity is in
violation of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or
charter documents. Each Existing Company Entity is duly
qualified to conduct its respective businesses 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, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse
Effect.
(c)
Authorization; Enforcement . Each Existing
Company Entity which is or is to become party to any Transaction
Document has the requisite corporate and other power and authority
to enter into and to consummate the transactions contemplated by
each such Transaction Document to which it is a party and otherwise
to carry out its obligations thereunder. The execution
and delivery of the Transaction Documents by each Existing Company
Entity to be party thereto and the consummation by each of them of
the transactions contemplated thereby have been duly authorized by
all necessary action on the part of such Existing Company Entity,
and no further action is required by any of them in connection with
such authorization. Each Transaction Document has been
(or upon delivery will have been) duly executed by the Company and
each other Existing Company Entity required to execute the same and
each Subsidiary (to the extent any of them is a party thereto) and,
when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company, such Existing
Company Entity, and such Subsidiary, enforceable against the
Company, the Existing Company Entity, and the Subsidiary, as the
case may be, each in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
(d)
No Conflicts . The execution, delivery and
performance of the Transaction Documents by the Company, and each
other Existing Company Entity and Subsidiary and the consummation
by the Company, and such other Existing Company Entities and
Subsidiaries, of the transactions contemplated thereby do not and
will not (i) conflict with or violate any provision of the
Company’s, such Existing Company Entity’s or any
Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) 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 an Existing Company Entity or Subsidiary debt or
otherwise) or other understanding to which any Existing Company
Entity or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any United
States or PRC court or governmental authority to which the Company
or a Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of
each of clauses (ii) and (iii), such as could not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
(e)
Filings, Consents and Approvals . No Existing
Company Entity is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any United States or PRC court or other
federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance
by the Company, and each Subsidiary, to the extent such Subsidiary
is a party thereto, of the Transaction Documents, other than (i)
the filing with the Commission of one or more Registration
Statements in accordance with the requirements of the Registration
Rights Agreement, (ii) filings required by state securities laws,
(iii) the filing of a Notice of Sale of Securities on Form D with
the Commission under Regulation D of the Securities Act, (iv) the
filings required in accordance with Section 4.5, (v) filings,
consents and approvals required by the rules and regulations of the
applicable Trading Market, (vi) those that have been made or
obtained prior to the date of this Agreement, (vii) registrations,
notices or filings required to be made in order to comply with the
currency and exchange control requirements imposed by the Chinese
government and/or Chinese law, if any, and (vii) other post closing
securities filings or notifications required to be made under
federal or state securities laws.
(f)
Issuance of the Shares . The Shares and the
Warrant Shares have been duly authorized and, when issued and paid
for in accordance with the Transaction Documents, will be duly and
validly issued, fully paid and nonassessable, free and clear of all
Liens. As of the Closing, the Company has reserved from
its duly authorized capital stock the shares of Common Stock
issuable pursuant to this Agreement in order to issue 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, and all shares of Common Stock reserved for issuance under
the Company’s various option and incentive plans, is
specified in Schedule 3.1(g) . Except as
specified in Schedule 3.1(g) , no securities of any Existing
Company Entity are entitled to preemptive or similar rights, and no
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by the Transaction
Documents. Except as specified in Schedule 3.1(g)
, there are no outstanding options, warrants, scrip 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 any right to subscribe
for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary 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 issue and sale of the
Shares hereunder will not, immediately or with the passage of time,
obligate the Company or any Subsidiary to issue shares of Common
Stock or other securities to any Person (other than the Investors)
and will not result in a right of any holder of Company or
Subsidiary securities to adjust the exercise, conversion, exchange
or reset price under such securities. Except as set
forth in Schedule 3.1(g) , no Existing Company Entity has
issued any capital stock in a private placement transaction,
including, without limitation, in a transaction commonly referred
to in the PRC as a “1 ½ transaction.”
(h)
SEC Reports; Financial Statements . The Company
has filed all reports required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the twelve months preceding the date
hereof (or such shorter period as the Company was required by law
to file such reports), (the foregoing materials being collectively
referred to herein as the “SEC Reports” and, together
with Appendix B hereto and the schedules to this Agreement,
the “Disclosure Materials”) on a timely basis or has
timely filed a valid extension of such time of filing and has filed
any such SEC Reports prior to the expiration of any such
extension. 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 financial statements of the Company and
each Subsidiary 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 GAAP applied on a consistent basis
during the periods involved, 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, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments.
(i)
Press Releases . To the knowledge of the Company,
the press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made and when made, not misleading.
(j)
Material Changes . Except as specified on
Schedule 3.1(j) or in the Disclosure Materials, since
December 31, 2008 (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) no Existing Company
Entity has incurred any liabilities (contingent or otherwise) other
than (A) trade payables, accrued expenses and other liabilities
incurred in the ordinary course of business consistent with past
practice, and (B) liabilities not in excess of $100,000 in the
aggregate not required to be reflected in the Company’s or
its Subsidiaries’ financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission, (iii)
no Existing Company Entity has altered its method of accounting or
the identity of its auditors, (iv) no Existing Company Entity has
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock,
and (v) no Existing Company Entity has issued any equity securities
to any officer, director or Affiliate, except pursuant to existing
Company stock option plans. The Company does not have
pending before the Commission any request for confidential
treatment of information.
(k)
Litigation . There is no Action which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Shares or
(ii) if there were an unfavorable decision, individually or in the
aggregate, result in a loss or liability in an amount in excess of
$10,000 or have or reasonably be expected to result in a Material
Adverse Effect. No Existing Company Entity, nor any
director or officer thereof (in his or her capacity as such), 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 breach of fiduciary duty, except as specifically disclosed in
the SEC Reports. There has not been, and to the
knowledge of the Company, there is not pending any investigation by
the Commission involving any Existing Company Entity or any of
their respective current or former directors or officers (in his or
her capacity as such). The Commission has not issued any
stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under
the Exchange Act or the Securities Act.
(l)
Labor Relations . No material labor dispute
exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of any Existing Company
Entity. No Existing Company Entity has any employment or
labor contracts, agreements or other understandings with any
Person.
(m)
Indebtedness; Compliance . Except as disclosed on
Schedule 3.1(m) , no Existing Company Entity is a party to
any indenture, debt, capital lease obligations, mortgage, loan or
credit agreement by which it or any of its properties is
bound. No Existing Company Entity is (i) 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 such entity under), nor has any Existing
Company Entity 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) in violation
of any order of any court, arbitrator or governmental body, or
(iii) in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. The
Company is in compliance with all effective requirements of the
Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations thereunder that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in
a Material Adverse Effect.
(n)
Regulatory Permits . The Existing Company
Entities possess all certificates, authorizations and permits
issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect, and no Existing Company Entity has received any
notice of proceedings relating to the revocation or modification of
any such permits.
(o)
Title to Assets . There is no real property that
is material to the respective businesses of the Existing Company
Entities, except as disclosed in the Disclosure
Materials. The Existing Entities have good and
marketable title in all personal property owned by them that is
material to their respective businesses, in each case free and
clear of all Liens, except for Liens as do not materially affect
the value of such property and do not materially interfere with the
use made and proposed to be made of such property by such Existing
Company Entity. Any real property and facilities held under lease
by any Existing Company Entity are held by them under valid,
subsisting and enforceable leases of which such Existing Company
Entity is in compliance, except as could not, individually or in
the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
(p)
Patents and Trademarks . Set forth on Schedule
3.1(p) is a list of patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that the Existing Company
Entities own or have the rights to use (collectively, the
“Intellectual Property Rights”). The
Intellectual Property Rights constitute all of the patents, patent
applications, trademarks, trademark applications, service marks,
trade names, copyrights, licenses and other similar rights that are
necessary and material to the business of the Existing Company
Entities in connection with their respective businesses as
described in the Disclosure Materials. No Existing Company Entity
has received a written notice that the Intellectual Property Rights
used by any of them violates or infringes upon the rights of any
Person. Except as otherwise disclosed in the Disclosure
Materials, to the knowledge of the Existing Company Entities, all
such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual
Property Rights. To the knowledge of the Existing
Company Entities, no former or current employee, no former or
current consultant, and no third-party joint developer of any
Existing Company Entity has any Intellectual Property Rights that
are necessary and material to the business of the Existing Company
Entities made, developed, conceived, created or written by the
aforesaid employee, consultant or third-party joint developer
during the period of his or her retention by, or joint venture
with, such Existing Company Entity which has been asserted against
any Existing Company Entity. The Intellectual Property Rights and
the owner thereof or agreement through which they are licensed to
any of the Existing Company Entities are set forth in the
Disclosure Materials.
(q)
Insurance . Each Existing Company Entity is
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and
customary in the businesses it is engaged and in the country in
which the Existing Company Entities operate. The Company
has no reason to believe that it or any Existing Company Entity
will not be able to renew its existing respective insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business on terms consistent with market for the Company’s
and such other Existing Company Entity’s respective lines of
business.
(r)
Transactions With Affiliates and Employees; Customers
. Except as set forth in the Disclosure Materials, none
of the officers, directors or 5% or more shareholders of any
Existing Company Entity, and, to the knowledge of the Company, none
of the employees of any Existing Company Entity, is presently a
party to any transaction with any Existing Company Entity (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 such Person or, to the knowledge of the Company, any
entity in which any officer, director, or such employee or 5% or
more shareholder has a substantial interest or is an officer,
director, trustee or partner. None of the Existing
Company Entities owes any money or other compensation to any of
their respective officers or directors or shareholders, except to
extent of contracts and ordinary course compensation arrangements
specified in Schedule 3.1(r) . No material
customer of any Existing Company Entity has indicated their
intention to diminish their relationship with such Existing Company
Entity and no Existing Company Entity has any knowledge from which
it could reasonably conclude that any such customer relationship
may be adversely affected.
(s)
Internal Accounting Controls . The Existing
Company Entities maintain 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 is establishing
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the Company Entities and
designed such disclosure controls and procedures to ensure that
material information relating to the Company Entities is made known
to the certifying officers by others within those entities,
particularly during the period in which the Company’s Form
10-K or 10-Q, as the case may be, is being prepared. The
Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures in
accordance with Item 307 of Regulation S-K under the Exchange Act
for the Company’s most recently ended fiscal quarter or
fiscal year-end (such date, the “Evaluation
Date”). The Company presented in its most recently
filed Form 10-K or Form 10-Q the conclusions of the certifying
officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation
Date.
(t)
Solvency . Based on the financial condition of
the Company, including the Existing Company Entities, as of the
Closing Date (and assuming that the Closing shall have occurred),
(i) each Existing Company Entity’s assets do not constitute
unreasonably small capital to carry on their respective 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 such
Existing Company Entity, and projected capital requirements and
capital availability thereof and (ii) the current cash flow of such
Existing Company Entity, together with the proceeds such Existing
Company Entities would receive, were they to liquidate all of their
respective 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 Existing Company Entities do not intend to
incur debts beyond their respective 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).
(u)
Certain Fees . Except as described in Schedule
3.1(u) , no brokerage or finder’s fees or commissions are
or will be payable by any Existing Company Entity to any broker,
financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The
Investors shall have no obligation with respect to any fees or with
respect to any claims (other than such fees or commissions owed by
an Investor pursuant to written agreements executed by such
Investor which fees or commissions shall be the sole responsibility
of such Investor) made by or on behalf of other Persons for fees of
a type contemplated in this Section that may be due in connection
with the transactions contemplated by this Agreement.
(v)
Certain Registration Matters . Assuming the accuracy of the
Investors’ representations and warranties set forth in
Sections 3.2(b)-(e), no registration under the Securities Act is
required for the offer and sale of the Shares by the Company to the
Investors under the Transaction Documents. The Company
is eligible to register its Common Stock for resale by the
Investors under Form S-1 promulgated under the Securities
Act. Except as specified in Schedule 3.1(v) , no
Existing Company Entity has granted or agreed to grant to any
Person other than the Investors pursuant to the Registration Rights
Agreement any rights (including “piggy-back”
registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority
that have not been satisfied.
(w)
Listing and Maintenance Requirements . Except as
specified in the SEC Reports, the Company has not, in the two years
preceding the date hereof, received notice from any Trading Market
to the effect that the Company is not in compliance with the
listing or maintenance requirements thereof. The Company
is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with the listing
and maintenance requirements for continued listing of the Common
Stock on the Trading Market on which the Common Stock is currently
listed or quoted. The issuance and sale of the Shares
under the Transaction Documents does not contravene the rules and
regulations of the Trading Market on which the Common Stock is
currently listed or quoted, and no approval of the stockholders of
the Company thereunder is required for the Company to issue and
deliver to the Investors the Shares as contemplated by the
Transaction Documents.
(x)
Investment Company . The Company is not, and is
not an Affiliate of, and immediately following the Closing will not
have become, an “investment company” within the meaning
of the Investment Company Act of 1940, as amended.
(y)
Application of Takeover Protections . The Company
has 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 the Transaction Documents, including, without limitation, the
Company’s issuance of the Shares and the Investors’
ownership of the Shares.
(z)
No Additional Agreements . No Existing Company
Entity has any agreement or understanding with any Investor with
respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction
Documents.
(aa)
Consultation with Auditors . The Company has
consulted its independent auditors concerning the accounting
treatment of the transactions contemplated by the Transaction
Documents, and in connection therewith has furnished such auditors
complete copies of the Transaction Documents.
(bb)
Foreign Corrupt Practices Act . No Existing
Company Entity, nor to the knowledge of the Company, any agent or
other person acting on behalf of any Existing Company Entity, has,
directly or indirectly, (i) used any funds, or will use any
proceeds from the sale of the Shares, 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 any such Existing Company Entity (or made by any Person
acting on their behalf of which the Company is aware) which is in
violation of law, or (iv) has violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder.
(cc)
PFIC . The Company is not, and does not intend to
become a “passive foreign investment company” within
the meaning of Section 1297 of the U.S. Internal Revenue Code of
1986, as amended.
(dd)
OFAC . No Existing Company Entity nor, to the knowledge of
the Company, any director, officer, agent, employee, Affiliate or
Person acting on behalf of any Existing Company Entity, is
currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”); and the Company will not directly or
indirectly use the proceeds of the sale of the Shares, or lend,
contribute or otherwise make available such proceeds to any
Subsidiary, joint venture partner or other Person or entity,
towards any sales or operations in Cuba, Iran, Syria, Sudan,
Myanmar or any other country sanctioned by OFAC or for the purpose
of financing the activities of any Person currently subject to any
U.S. sanctions administered by OFAC.
(ee)
Money Laundering Laws . The operations of each Existing
Company Entity are and have been conducted at all times in
compliance with the money laundering statutes of applicable
jurisdictions, the rules and regulations thereunder and any related
or similar rules, regulations or guidelines, issued, administered
or enforced by any applicable governmental agency (collectively,
the “Money Laundering Laws”) and no action, suit or
proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving any Existing Company Entity
with respect to the Money Laundering Laws is pending or, to the
best knowledge of the Company, threatened.
(ff)
Other Representations and Warranties Relating to CJV
.
(i) All
material
