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SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this
“Agreement” )
is dated as of February 25, 2008, by and among China Solar &
Clean Energy Solutions, Inc., a Nevada corporation (collectively
with its predecessors, the
“Company” ),
and the investors listed on the Schedule of Buyers attached hereto
as
Annex A and
identified on the signature pages hereto (each, an
“Investor” and
collectively, the
“Investors” ).
WHEREAS,
subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act
(as defined below) and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Investor, and each
Investor, severally and not jointly, desires to purchase from
the Company certain securities of the Company, 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:
“2008
Annual Report
”
means the
Annual Report of the Company for the fiscal year ending December
31, 2008, as filed with the Commission on Form 10-K (or such other
form appropriate for such purpose as promulgated by the
Commission).
“2008
Guaranteed
ATNI”
has the meaning set forth in Section 4.11.
“2008 Make Good Shares”
has
the meaning set forth in Section 4.11.
“2009
Annual Report
”
means the
Annual Report of the Company for the fiscal year ending December
31, 2009, as filed with the Commission on Form 10-K (or such other
form appropriate for such purpose as promulgated by the
Commission).
“2009
Guaranteed
ATNI”
has the meaning set forth in Section 4.11.
“2009 Make Good Shares”
has
the meaning set forth in Section 4.11.
“Action” 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
the Company, any Subsidiary or any of their 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.
“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 are authorized or required by law or other governmental
action to close.
“
Buy-In ”
has the meaning set forth in Section 4.1(c).
“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.
“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.
“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 Counsel” means
Guzov Ofsink, LLC.
“Company Deliverables” has
the meaning set forth in Section 2.2(a).
“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 Agreement" means
the Escrow Agreement, dated as of the date hereof, between the
Company and the escrow agent (the
“Escrow Agent” )
set forth therein, in the form of
Exhibit A hereto.
“Evaluation Date” has
the meaning set forth in Section 3.1(s).
“Exchange Act” means
the Securities Exchange Act of 1934, as amended.
“GAAP” means
U.S. generally accepted accounting principles.
“Intellectual Property Rights”
has
the meaning set forth in Section 3.1(p).
“
Intellectual Property Rights Licensing Agreements
”
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.
“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 or other restrictions of any kind.
“Losses” has
the meaning set forth in Section 4.7.
“Make Good Escrow Agreement”
means
the Make Good Escrow Agreement, dated as of the date hereof, among
the Company, the escrow agent identified therein (the
“Make Good Escrow Agent” )
and the Investors, in the form of
Exhibit C hereto.
“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, prospects,
business or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole, or (iii) an 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.
“OFAC” has
the meaning set forth in Section 3.1(dd).
“Outside Date” means
the thirtieth (30
th )
calendar day following the date of this Agreement;
provided ,
that if such day should fall on a day that is not a Business Day,
the Outside Date shall be deemed the next day that is a Business
Day.
"Per Share Purchase Price" equals
$2.40.
“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.
“
PRC ”
means the People’s Republic of China, not including Taiwan,
Hong Kong and Macau.
“Proceeding” means
an action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
“Registration Rights Agreement”
means
the Registration Rights Agreement, dated as of the date of this
Agreement, 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.
“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 shares of Common Stock issued or issuable to the Investors
pursuant to this Agreement.
“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.
“Subsidiary” means,
as to the Company, any “subsidiary” as defined in Rule
1-02(x) of the Regulation S-X promulgated by the Commission under
the Exchange Act.
“Trading Day” means
(i) a day on which the Common Stock is traded on a Trading Market
(other than the OTC Bulletin Board), or (ii) if the Common Stock is
not listed on a Trading Market (other than the OTC Bulletin Board),
a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not 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), (ii) and (iii) hereof, then Trading Day shall
mean a Business Day.
“Trading Market” means
whichever of the New York Stock Exchange, the American Stock
Exchange, 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 Escrow
Agreement, the Make Good Escrow Agreement and any other documents
or agreements executed in connection with the transactions
contemplated hereunder.
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. The Closing shall take place at the offices of Winston
& Strawn LLP, 200 Park Avenue, New York, NY 10166 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
certificate evidencing a number of Shares equal to such
Investor’s Investment Amount divided by the Per Share
Purchase Price, registered in the name of such Investor;
and
(ii)
the
legal opinion of Company Counsel, in agreed form, addressed to
the Investors.
(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
one Business Day following the date of this Agreement, each
Investor shall cause to be delivered to the Escrow Agent, 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 in accordance with the
terms of the Escrow Agreement.
ARTICLE
3.
REPRESENTATIONS
AND WARRANTIES
3.1.
Representations and Warranties of the Company
.
The Company hereby makes the following representations and
warranties to each Investor:
(a)
Subsidiaries .
The Company has no direct or indirect Subsidiaries other than as
specified in the SEC Reports. Except as disclosed in
Schedule 3.1(a) ,
the Company owns, directly or indirectly, all of the capital stock
of each Subsidiary free and clear of any and all Liens, and all the
issued and outstanding shares of capital stock of each Subsidiary
are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.
(b)
Organization and Qualification .
The Company and each Subsidiary are 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
of any of the provisions of its respective certificate or articles
of incorporation, bylaws or other organizational or charter
documents. The Company and each Subsidiary are duly qualified to
conduct its respective businesses and are 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 .
The Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of
the transactions contemplated thereby have been duly authorized by
all necessary action on the part of the Company and no further
action is required by the Company or any Subsidiary in connection
therewith. Each Transaction Document has been (or upon delivery
will have been) duly executed by the Company and, when 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 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 the consummation by the Company of the
transactions contemplated thereby 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) except as set
forth in
Schedule 3.1(d)(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 a Company or Subsidiary debt or otherwise) or other
understanding to which the Company 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 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 .
Except as set forth in
Schedule 3.1(e) ,
neither the Company nor any Subsidiary 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 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
hereof and (v) those that have been made or obtained prior to the
date of this Agreement.
(f)
Issuance of the Shares .
The 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. 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, the 2008 Make Good Shares
and the 2009 Make Good 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 the Company 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 will
not, immediately or with the passage of time, obligate the Company
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 securities to adjust the exercise, conversion,
exchange or reset price under such securities. Except for the
private placement disclosed in the Current Report on Form 8-K filed
by the Company on June 19, 2007 (the "
June 2007 Financing "),
or as set forth in
Schedule 3.1(g) ,
during the twelve months preceding the date hereof neither the
Company nor any Subsidiary has issued any capital stock in a
private placement transaction in the PRC, including, without
limitation, in a transaction commonly referred to in the PRC as a
“1 ½ transaction.”
(h)
SEC Reports; Financial Statements .
Except as set forth in
Schedule 3.1(h) ,
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 the Schedules to this Agreement (if any), 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 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 .
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 .
Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in the SEC
Reports, (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) neither the Company nor any
Subsidiary has incurred any liabilities (direct, indirect,
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
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, (iv) the
Company has not 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) the Company has not issued any equity
securities to any Company or Subsidiary 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) except as specifically disclosed in
the SEC Reports, 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 (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 the Company or any
current or former director or officer of the Company (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 the
Company or any Subsidiary.
(m)
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 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 Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate United States
and PRC 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 neither the
Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such
permits.
(o)
Title to Assets .
The Company and the Subsidiaries have valid land use rights for all
real property that is material to their respective businesses and
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 the
Company and the Subsidiaries. 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, 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 .
Schedule 3.1(p)
sets forth all of the patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that the Company and its
Subsidiaries owns or has 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 for use by the Company and its Subsidiaries in
connection with their respective businesses as described in the SEC
Reports. Neither the Company nor any of its Subsidiaries has
received a written or oral notice that the Intellectual Property
Rights used by any of them violates or infringes upon the rights of
any Person. Except as set forth in
Schedule 3.1(p)
, all such Intellectual Property Rights are enforceable and to the
knowledge of the Company and its Subsidiaries, there is no existing
infringement by another Person of any of the Intellectual Property
Rights. To the knowledge of the Company and its Subsidiaries, no
former or current employee, no former or current consultant, and no
third-party joint developer of the Company or its Subsidiaries has
any Intellectual Property Rights 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 Company or Subsidiary
which can be asserted against any of the Company or any such
Subsidiary. The
Intellectual Property Rights and the owner thereof or agreement
through which they are licensed to any of
the Company or its Subsidiaries are
set forth on
Schedule 3.1(p) .
By the Closing, the Company shall have entered into agreements by
which it is granted irrevocable, exclusive, royalty-free licenses
on all Intellectual Property Rights that are registered to or owned
by any Person other than the Company or its predecessor. Such
agreements together with the agreements referenced in
Schedule 3.1(p) are
collectively the “
Intellectual Property Rights Licensing Agreements
.”
The
Company and its Subsidiaries will
take such action as may be required, including making
and maintaining the filings set forth in
Schedule 3.1(p) and
shall cause any such transfers of Intellectual Property Rights to
the Company to be granted as is required in order for the
Company to become the registered owner (in its current name) of all
such Intellectual Property Rights (including, without limitation,
the entering into of any Intellectual Property Rights Licensing
Agreements as may be necessary and the filing and maintaining of
any information with the relevant PRC authority which relate to the
change of name for those Intellectual Property Rights currently in
the name of an entity other than the Company).
(q)
Insurance .
Except as disclosed in
Schedule 3.1(q) ,
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. The Company
has no reason to believe that it will not be able to renew its and
the Subsidiaries’ 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 on terms
consistent with market for the Company’s and such
Subsidiaries’ respective lines of business.
(r)
Transactions With Affiliates and Employees .
Except as set forth in the SEC Reports, 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.
(s)
Internal Accounting Controls .
The Company and the Subsidiaries 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 has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) 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,
particularly during the period in which the Company’s Form
10-KSB or 10-QSB, 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-B 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-KSB or
Form 10-QSB 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 308(c) of
Regulation S-B under the Exchange Act) or, to the Company’s
knowledge, in other factors that could significantly affect the
Company’s internal controls.
(t)
Solvency .
Based on the financial condition of the Company as of the Closing
Date (and assuming that the Closing shall have occurred), (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).
(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 the Company 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 Section 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 set forth on
Schedule 3.1(v) ,
the Company has not granted or agreed to grant to any Person 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 shareholders of the Company
thereunder is required for the Company to issue and deliver to the
Investors the Shares contemplated by 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 Articles 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 .
The Company does not have 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 .
Neither the Company nor any Subsidiary, nor to the knowledge of the
Company, any agent or other person acting on behalf of any of the
Company or any Subsidiary, 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 Subsidiary (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 .
Neither the Company nor any Subsidiary is or intends 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 .
Neither the Company nor any Subsidiary nor, to the knowledge of the
Company, any director, officer, agent, employee, Affiliate or
Person acting on behalf of the Company or any Subsidiary 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 of the Company and any Subsidiary 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
the Company and/or any Subsidiary with respect to the Money
Laundering Laws is pending or, to the best knowledge of the
Company, threatened.
(ff)
Additional PRC Representations and Warranties
.
(i)
All
material consents, approvals, authorizations or licenses
requisite under PRC law for the due and proper establishment
and operation of the Company
and the Subsidiaries have
been duly obtained from the relevant PRC governmental
authorities and are in full force and effect.
(ii)
All
filings and registrations with the PRC governmental
authorities required in respect of the Company and the
Subsidiaries and their operations including, without
limitation, the registration with the Ministry of Commerce,
the State Administration of Industry and Commerce, the State
Administration for Foreign Exchange, tax bureau and customs
authorities have been duly completed in accordance with the
relevant PRC rules and regulations, except where, the failure
to complete such filings and registrations does not, and would
not, individually or in the aggregate, have a Material Adverse
Effect.
(iii)
The
Company and the Subsidiaries have complied with all relevant
PRC laws and regulations regarding the contribution and
payment of its registered share capital, the payment schedule
of which has been approved by the relevant PRC governmental
authorities. There are no outstanding rights of, or
commitments made by the Company or any Subsidiary to sell any
of their respective equity interests.
(iv)
Neither
the Company nor any Subsidiary is in receipt of any letter or
notice from any relevant PRC governmental authority notifying
it of the revocation, or otherwise questioning the validity,
of any licenses or qualifications issued to it or any subsidy
granted to it by any PRC governmental authority for
non-compliance with the terms thereof or with applicable PRC
laws, or the need for compliance or remedial actions in
respect of the activities carried out by the Company or such
Subsidiary, except such revocation as does not, and would not,
individually or in the aggregate, have a Material Adverse
Effect.
(v)
The
Company and the Subsidiaries have conducted their respective
business activities within their permitted scope
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