SECURITIES PURCHASE AGREEMENT Dated as of February 5, 2009 By and Between Sunwin International Neutraceuticals, Inc. and Wild Flavors, Inc.
Exhibit 10.1
Dated
as of February 5, 2009
By
and Between
and
Wild
Flavors, Inc.
This
Securities Purchase Agreement (this “Agreement”)
is made and entered into as of the 5th day of February, 2009, by and between
Sunwin International Neutraceuticals, Inc., a Nevada corporation (the “Corporation”)
and Wild Flavors, Inc., a Delaware corporation (“Wild”).
R
E C I T A L S
A. The
Corporation desires to sell 20,000,000 newly issued shares of common stock,
$0.001 par value per share (the “Purchased
Shares”) to Wild, at a price of $0.15 per share, in exchange for cash
consideration of Three Million Dollars ($3,000,000) (the “Consideration”).
B. Additionally
and also in
exchange for the Consideration, the Corporation agreed to issue a warrant to
Wild for the purchase of up to 26,666,666 newly issued shares of common stock,
$0.001 par value per share, in the Corporation (the “Warrant
Shares”), at an exercise price of $0.35 per share, in the form of Exhibit A attached
hereto (the “Warrant”).
C. Wild
desires to purchase all of the Purchased Shares and to acquire the Warrant from
the Corporation, and the Corporation desires to sell and issue all of the
Purchased Shares and issue the Warrant to the Corporation, in consideration for
the payment of the Consideration by Wild to the Corporation, upon the terms and
subject to the conditions set forth in this Agreement.
D. The
Corporation owns all of the issued and outstanding shares of stock in Sunwin
Stevia International Corp., a Florida corporation, free and clear of any and all
liens or other encumbrances, whatsoever (the “Subsidiary”).
E. Wild,
the Corporation and the Subsidiary desire that the Corporation and the
Subsidiary enter into a Distribution Agreement in the form of Exhibit B attached
hereto (the “Distribution
Agreement”) that provides the Subsidiary with certain rights regarding
the sale, marketing and distribution of steviaside and the OnlySweet® product
worldwide.
F. In
order to provide for the rights of the parties relating to their respective
ownership interests in the Corporation and the governance of the Corporation, at
the Closing, the parties, along with ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ (“Chairman
Zhang”), shall execute and deliver to each other a Stockholders Agreement
in the form of Exhibit
C attached hereto (the “Stockholders
Agreement”).
G. Immediately
following the Closing (as defined below), the Corporation shall take and cause
to have taken the actions necessary to cause the Subsidiary (i) to convert from
a Florida corporation to a Delaware limited liability company (the “Conversion”),
and (ii) to adopt the Limited Liability Company Agreement in the form of Exhibit D attached
hereto (the “Subsidiary
Operating Agreement”), pursuant to which Wild will be appointed as the
sole Manager of the Subsidiary and given other rights and authority regarding
the management of the Subsidiary for as long as the Distribution Agreement is in
effect.
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H. In
exchange for certain services to be provided by Wild to the Corporation and the
Subsidiary during the two year period following the Closing (as defined below),
as more specifically set forth on Exhibit E attached
hereto (the “Services”),
immediately following the Conversion, the Subsidiary shall issue 4,500
membership units in the Subsidiary to Wild (the “Initial Sub
Units”), such that Wild will own 45% of the outstanding membership
interests of the Subsidiary. The parties hereby agree that the fair market value
of the Services at the time the same shall be provided by Wild will be valued in
the aggregate amount of One Million Dollars ($1,000,000).
I. The
Corporation and Wild desire that Wild shall have the option (the “Exchange
Option”), expiring December 31, 2010, to exchange the Initial Sub Units
for 6,666,666 newly issued shares of common stock, $0.001 par value per share,
in the Corporation (the “Exchange
Shares”).
J. The
Corporation and Wild further desire that Wild shall have a conditional option to
acquire from the Subsidiary a certain number of membership units in the
Subsidiary (the “Bonus
Option”). The number of membership units of the Subsidiary
that Wild may earn (the “Bonus
Option Units”) would be the greater of (a) the number of membership units
necessary such that Wild would own 51% of the issued and outstanding membership
units of the Subsidiary after exercise of the Bonus Option and (b) the number of
membership units equal to 6% of the then issued and outstanding membership units
of the Subsidiary. In order to exercise the Bonus Option, (i) Wild must not have
exercised the Exchange Option and (ii) the Subsidiary must have achieved
cumulative pre-tax profits of $3,000,000 on or before December 31, 2011 computed
in accordance with Generally Accepted Accounting Principles in the United States
(“GAAP”) except that the cost of insurance required to be purchased by the
Subsidiary pursuant to the terms of the Distribution Agreement shall not be
included as an expense or cost when calculating such pre-tax profit
calculation Upon exercise of the Bonus Option, Wild would pay to the
Subsidiary an aggregate exercise price of $1,000.00.
A
G R E E M E N T
For good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Authorization,
Sale and Issuance of the Purchased Shares and the Warrant Shares and Issuance of
the Warrant.
1.1 Closing. The closing (the “Closing”)
of all of the transactions contemplated hereunder (the “Contemplated
Transactions”), shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ LLC,
2200 PNC Center, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, on February 5,
2009, or on such other day as may be mutually agreed upon by the parties (the
“Closing
Date”).
1.2 Authorization
by the Corporation. At or prior to the Closing, the Corporation shall
have authorized (a) the sale and issuance to Wild of all of the Purchased
Shares, (b) the issuance to Wild of the Warrant, and (c) the reservation for
future issuance to Wild of all of the Warrant Shares and the Exchange Shares. On
or prior to the Closing, the
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Corporation
shall have duly reserved sufficient shares of Common Stock to be issued upon the
exercise of the Warrant and the Exchange Option.
1.3 Purchase
and Sale of the Purchased Shares and Issuance of the Warrant; Issuance of
Exchange Option and Bonus Option; Payment of the
Consideration.
(a) At
the Closing, Wild shall purchase from the Corporation and the Corporation shall
issue and sell to Wild, all of the Purchased Shares, free and clear of any and
all liens or other encumbrances, whatsoever, and the Corporation shall issue to
Wild the Warrant, all in exchange for the delivery by Wild of the Consideration,
in the manner set forth hereunder. At the Closing, Wild shall deliver to the
Corporation the Consideration, by way of wire transfer of immediately available
funds, to an account to be designated by the Corporation in writing at least two
business days prior to the Closing. In addition, the Corporation shall grant to
Wild the Exchange Option effective upon the issuance of the Initial Sub
Units.
(b) Concurrently
with the completion of the Conversion, the Corporation shall cause the
Subsidiary to issue to Wild the Initial Sub Units in exchange for Wild’s
agreement to perform the Services set forth on Exhibit E or as may
otherwise be agreed upon by the parties in writing during the two-year period
following the Closing.
1.4 Other
Agreements. As further consideration for each party’s obligations under
this Agreement and as specifically bargained for inducements to enter into this
Agreement, at the Closing, the parties shall deliver to each other each of the
following agreements:
(a) Stockholders
Agreement. A duly executed copy of the Stockholders Agreement,
which the Corporation shall cause Chairman Zhang and certain other shareholders
of the Corporation to execute and deliver a copy of the same at the
Closing.
(b) Subsidiary Operating
Agreement. The Corporation shall deliver to Wild a copy of the
Subsidiary Operating Agreement to be executed upon the Conversion.
(c) Distribution
Agreement. The Corporation shall deliver to Wild a duly
executed copy of the Distribution Agreement, in a form acceptable to the
Corporation, Wild and the Subsidiary.
2. Closing
Deliveries.
2.1 Closing
Deliverables of Wild. At the Closing, Wild shall deliver to the
Corporation each of the following items:
(a) the
Consideration;
(b) a
duly executed copy of the Stockholders Agreement;
(c) a
duly executed certificate of an officer of Wild certifying, as complete and
accurate as of the Closing, to the incumbency and signatures of the officers of
Wild executing this Agreement and any other document relating to the
transactions contemplated by this Agreement (the “Contemplated
Transactions”);
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(d) a
duly executed certificate of an officer of Wild certifying as to the
satisfaction of the conditions set forth in Sections 5.2(a) and
5.2(b);
2.2 Closing
Deliverables of the Corporation. At the Closing, the Corporation shall
deliver to Wild each of the following items:
(a) a
certificate representing all of the Purchased Shares, duly issued in the name of
Wild;
(b) a
duly executed copy of the Warrant;
(c) a
copy of the Stockholders Agreement, duly executed by the Corporation and
Chairman Zhang;
(d) a
duly executed copy of the Subsidiary Operating Agreement;
(e) a
duly executed copy of the Distribution Agreement;
(f) a
duly executed certificate of an officer of the Corporation certifying, as
complete and accurate as of the Closing, to the incumbency and signatures of the
officers of the Corporation executing this Agreement and any other document
relating to the Contemplated Transactions;
(g) a
duly executed certificate of an officer of the Corporation certifying as to the
satisfaction of the conditions set forth in Sections 5.1(a) and
5.1(b);
(h) any
and all consents or approvals which may be necessary to allow the Corporation to
consummate the Contemplated Transactions, all of which are listed on Schedule 2.2(g) (the
“Consents”),
in a form and substance reasonably satisfactory to Wild and its counsel;
and
(i) resolutions
of the Corporation’s Board of Directors and stockholders (the “Resolutions”),
authorizing the Corporation’s consummation of all of the Contemplated
Transactions and the performance by the Corporation of all of its obligations
hereunder, and certified by an officer of the Corporation.
3. Representations
and Warranties of the Corporation. In order to induce Wild to enter into
this Agreement, the Corporation hereby represents and warrants to Wild as
follows:
3.1 Organization;
Capitalization; and Authority.
(a) The
Corporation is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. The Corporation is duly
qualified as a foreign corporation to do business and is in good standing in
each jurisdiction where the nature of the business conducted or property owned
by it makes such qualification necessary, other than those jurisdictions in
which failure to so qualify would not have a Material Adverse Effect. For
purpose of this Agreement, a “Material
Adverse Effect” shall mean a material adverse effect on the financial
condition, results of operations, properties or business of the
Corporation
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taken
individually, or in the aggregate, as a whole. The Subsidiary is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Florida. The Subsidiary is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which failure to so qualify would not have a
Material Adverse Effect. All the Corporation’s subsidiaries, including the
Subsidiary, as of the Closing Date are set forth on Schedule
3.1(a).
(b) As
of January 9, 2009, the issued and outstanding shares of stock in the
Corporation consist of 106,182,416 shares of common stock, par value $0.001 per
share (the “Common
Stock”), and no shares of preferred stock (together, “Shares”).
The Shares represent all of the issued and outstanding shares of stock in the
Corporation immediately prior to the Closing. Immediately following the Closing,
26,666,666 shares of Common Stock in the Corporation will be reserved for
issuance to Wild, pursuant to the Warrant, and 6,666,666 shares of Common Stock
in the Corporation will be reserved for issuance to Wild, pursuant to the
Exchange Option. All of the Shares have been duly authorized and issued by and
on behalf of the Corporation. Except as set forth on Schedule 3.1(b) or as
provided in this Agreement, there are no options, warrants or other rights
issued or outstanding giving any party the right to purchase any additional
shares of stock in the Corporation or any membership units in the Subsidiary.
The Corporation owns all of the issued and outstanding capital stock in the
Subsidiary, free and clear of any and all liens of other encumbrances,
whatsoever.
(c) The
Corporation has the full corporate power and authority to execute, deliver and
perform this Agreement, the Distribution Agreement, and the Stockholders
Agreement, to conduct its business, to own its properties and to consummate all
of the Contemplated Transactions. This Agreement, the Distribution Agreement,
and the Stockholders Agreement have been duly authorized by all necessary
corporate action of the Corporation and constitute legal, valid and binding
obligations of the Corporation, enforceable against it in accordance with their
respective terms. The Subsidiary Operating Agreement will be duly adopted by the
Corporation, as a member of the Subsidiary, promptly after the
Conversion.
3.2 No
Conflicts. Neither the execution and delivery of this Agreement, the
Distribution Agreement or the Stockholders Agreement, nor the performance by the
Corporation or the Subsidiary of any or all of the Contemplated Transactions
will violate, conflict with, give rise to any termination right or result in (a)
the creation or imposition of any lien, charge or encumbrance upon the Purchased
Shares, the Warrant Shares or the Exchange Shares or any of the assets of the
Corporation or any of its affiliates or subsidiaries, except as contemplated
herein; or (b) the activation of any anti-dilution rights or a reset or
repricing of any debt or security instrument of any other creditor or equity
holder of the Corporation, nor result in the acceleration of the due date of any
obligation of the Corporation; or (c) the activation of any piggy-back
registration rights of any person or entity holding securities or debt of the
Corporation or having the right to receive securities of the Corporation under
(x) any provision of the Articles of Incorporation or Bylaws of the Corporation,
(y) any agreement or commitment to which the Corporation or one of its
affiliates is a party, or (z) any law, rule, regulation or order of any court or
China, the United States, any state or municipality, any subdivision of any of
the foregoing or any subdivision, authority, department, commission, board,
bureau, agency, court or
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instrumentality
of any of the foregoing (each, a “Governmental
Agency”) applicable to the Corporation or its affiliates.
3.3 Approvals
of Governmental Agencies. No approval or authorization of, or filing or
registration with, or notice to, any Governmental Agency is required to be
obtained or made by the Corporation or the Subsidiary in connection with this
Agreement or the Contemplated Transactions.
3.4 Other
Consents. No consent of or notice to any Person is required to be
obtained or made by the Corporation or the Subsidiary in connection with this
Agreement or the Contemplated Transactions.
3.5 Securities
Issuance and Compliance.
(a) Securities
Issuance. Upon their issuance, the Purchased Shares, the
Warrant and the Warrant Shares, the Exchange Option and the Exchange Shares and
the Initial Sub Units (i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to restrictions upon
transfer under the Securities Act of 1933, as amended (the “1933
Act”) and any applicable state securities laws; (ii) have been, or will
be, duly and validly authorized and on the date of issuance of the Purchased
Shares, and upon exercise of the Warrant and the exercise of the Exchange
Option, the Purchased Shares, Warrant Shares and Exchange Shares, will be duly
and validly issued, fully paid and nonassessable or if registered pursuant to
the 1933 Act and resold pursuant to an effective registration statement will be
free trading and unrestricted; (iii) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Corporation; (iv) will not subject the holders thereof to
personal liability by reason of being such holders, provided Wild’s
representations herein are true and accurate; and (v) provided Wild’s
representations herein are true and accurate, will have been issued in reliance
upon an exemption from the registration requirements of and will not result in a
violation of Section 5 under the 1933 Act.
(b) Reporting
Corporation. Pursuant to the provisions of the Securities
Exchange Act of 1934 Act (the “1934 Act”), the Corporation has filed all reports
and other materials required to be filed thereunder with the United States
Securities and Exchange Commission (the “Commission”)
during the preceding 12 months.
(c)
No Market
Manipulation. The Corporation and its affiliates have not taken, and will
not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Corporation’s common stock to facilitate the sale or resale of
the Purchased Shares, the Warrant Shares or the Exchange Shares or affect the
price at which the Purchased Shares, Warrant Shares and Exchange Shares may be
issued or resold, provided, however, that this provision shall not prevent the
Corporation from engaging in investor relations/public relations activities
consistent with past practices.
(d) Information Concerning
Corporation. The Corporation has furnished Wild with or has confirmed
that Wild has had access at the ▇▇▇▇▇ Website of the Commission to the
Corporation’s Form 10-K (and any amendments thereto) for the year
ended
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April 30,
2008 and all periodic and current reports filed with the Commission thereafter,
but not later than five business days before the Closing Date (hereinafter
referred to as the “Reports”).
The Reports contain all material information relating to the Corporation and its
operations and financial condition as of their respective dates and all the
information required to be disclosed therein. Since the last day of the fiscal
year of the most recent audited financial statements included in the Reports
(“Latest
Financial Date”), and except as modified in the Schedules hereto, there
has been no Material Adverse Effect relating to the Corporation’s business,
financial condition or affairs not disclosed in the Reports. The Reports
including the financial statements therein, do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances when made.
(e) Stop Transfer. The
Corporation will not issue any stop transfer order or other order impeding the
sale, resale or delivery of any of the Purchased Shares, the Warrant Shares or
the Exchange Shares, except as may be required by any applicable federal or
state securities laws (and, if so required, unless contemporaneous notice of
such instruction is given to Wild).
(f) Not an Integrated
Offering. Neither the Corporation, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offer of the Purchased Shares, Warrant
Shares or Exchange Shares pursuant to this Agreement to be integrated with prior
offerings by the Corporation for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the OTC Bulletin Board (“Bulletin
Board”) or any Principal Market which would impair the exemptions relied
upon in this Agreement or the Corporation’s ability to timely comply with its
obligations hereunder. Nor will the Corporation or any of its affiliates take
any action or steps that would cause the offer or issuance of the Purchased
Shares or the Warrant Shares, the Exchange Shares to be integrated with other
offerings which would impair the exemptions relied upon in this Agreement or the
Corporation’s ability to timely comply with its obligations hereunder. The
Corporation will not conduct any offering other than the transactions
contemplated hereby that will be integrated with the offer or issuance of the
Purchased Shares, Warrant Shares or Exchange Shares, which would impair the
exemptions relied upon in this Agreement or the Corporation’s ability to timely
comply with its obligations hereunder.
(g) No General
Solicitation. Neither the Corporation, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale
of the Purchased Shares, the Warrant Shares or the Exchange Shares.
(h) Listing. The
Corporation’s common stock is quoted on the Bulletin Board under the symbol:
SUWN. The Corporation has not received any oral or written notice that its
common stock is not eligible nor will become ineligible for quotation on the
Bulletin Board nor that the common stock does not meet all requirements for the
continuation of such quotation.
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(i) Investment
Company. Neither the Corporation nor any affiliate is an
“investment company” within the meaning of the Investment Corporation Act of
1940, as amended.
3.6 Litigation.
Except as set forth in Schedule 3.6, there
is no pending or threatened action, suit, proceeding or investigation before any
court, Governmental Agency or body, or arbitrator having jurisdiction over the
Corporation, the Subsidiary or any of its affiliates that would affect the
execution by the Corporation or the performance by the Corporation of its
obligations under this Agreement. There is no pending, or, to the knowledge of
the Corporation, basis for any, action, suit, proceeding or investigation before
any court, Governmental Agency or body, or arbitrator having jurisdiction over
the Corporation, the Subsidiary or any of its affiliates which litigation if
adversely determined would have a Material Adverse Effect.
3.7 Dilution. The
Corporation’s executive officers and directors understand the nature of the
securities being sold hereby and recognize that the issuance of the Purchased
Shares, the Warrant Shares and the Exchange Shares will have a potential
dilutive effect on the equity holdings of other holders of the Corporation’s
equity or rights to receive equity of the Corporation. The board of directors of
the Corporation has concluded, in its good faith business judgment that the
issuance of the Purchased Shares, the Warrant and the Warrant Shares, the
Exchange Option and the Exchange Shares is in the best interests of the
Corporation. The Corporation specifically acknowledges that its obligations to
issue the Warrant Shares upon exercise of the Warrants and the Exchange Shares
upon exercise of the Exchange Option are binding upon the Corporation and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Corporation or parties entitled to
receive equity of the Corporation.
3.8 Insurance.
The Corporation has provided to Wild an accurate and complete description of all
policies of insurance, and copies of such policies if requested by Wild,
covering the Corporation and/or the Subsidiary or all or any portion of their
property and assets necessary for the Corporation to satisfy its obligations
under the Distribution Agreement. All such policies are in full force and
effect, all premiums covering all periods up to the date hereof have been paid
and no notice of cancellation or termination has been received with respect to
any such policy. Such policies are in compliance with all agreements to which
the Corporation or the Subsidiary is a party, are valid and enforceable, will
remain in full force and effect through the term of the Distribution Agreement,
and will not be affected by the Contemplated Transactions.
3.9 No
Undisclosed Liabilities. The Corporation has no liabilities or
obligations which are material, individually or in the aggregate, which are not
disclosed in the Reports, other than those incurred in the ordinary course of
the Corporation’s businesses since the Latest Financial Date and which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, except as disclosed on Schedule
3.9.
3.10 No
Disagreements With Accountants or Lawyers. There are no disagreements of
any kind presently existing or reasonably anticipated between the Corporation
and the Subsidiary, on the one hand, and any accountants, lawyers or other
services providers employed or engaged by the Corporation or the Subsidiary at
any point in the past, including, but
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not
limited to the payment of any amounts claimed owed by the Corporation or the
Subsidiary to any such service provider, nor have there been any such agreements
during the past three years.
3.11 Taxes.
The Corporation and the Subsidiary have each filed on a timely basis all Tax
Returns required to be filed on or before the date hereof pursuant to all
applicable laws or regulations of each Governmental Agency having jurisdiction
over either of them. The Corporation and the Subsidiary have each paid, or
established a reserve set forth in the Reports to the extent required by United
States generally accepted accounting principles consistently applied for, all
Taxes due, including, without limitation, pursuant to those Tax Returns, or
pursuant to any assessment received by either of them. Neither the Corporation
nor the Subsidiary has requested any extension of time for the payment of Taxes.
To the best of the Corporation’s knowledge, there exists no proposed tax
assessment or tax audit against or affecting the Corporation or the Subsidiary,
except as disclosed in the Balance Sheet. All Taxes that the Corporation or the
Subsidiary has been required by law to withhold or collect have been duly
withheld or collected and paid or will be timely paid to the proper Governmental
Agency. All Tax Returns filed by the Corporation and/or the Subsidiary are true,
correct and complete in all material respects. For purposes of this
Agreement, “Taxes”
shall mean all taxes, penalties, interest, or other assessments or charges
including, without limitation, income, transfer, excise, franchise, sales, use,
property, employment, withholding, social security, workers’ compensation, and
value added taxes and customs duties, imposed by any Governmental
Agency. For purposes of this Agreement, “Tax
Returns” shall mean any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Governmental Agency in connection with any Taxes.
3.12 No
Undisclosed Events or Circumstances. Except as set forth in Schedule 3.12, since
the Latest Financial Date, no event or circumstance has occurred or exists with
respect to the Corporation or its businesses, properties, operations or
financial condition, that, under applicable law, rule or regulation, requires
public disclosure or announcement prior to the date hereof by the Corporation
but which has not been so publicly announced or disclosed in the
Reports.
3.13 Affiliated
Transactions. Except as set forth in Schedule 3.13 or in
the Reports, none of the officers, directors, stockholders, or relatives of any
of the foregoing, nor any person controlled by any of them, has any interest
(other than as a non-controlling holder of securities of a publicly-traded
company), either directly or indirectly, in any person (whether as an employee,
officer, director, shareholder, agent, independent contractor, security holder,
creditor, consultant or otherwise) that currently (i) provides any services or
designs, produces or sells any products or product lines, or engages in any
activity which is the same, similar to or competitive with any activity or
business in which the Corporation or the Subsidiary is now engaged; (ii) is a
supplier of, customer of, creditor of, or has an existing contractual
relationship with, the Corporation or the Subsidiary; or (iii) has any direct or
indirect interest in any asset or property used by the Corporation or the
Subsidiary or any property, real or personal, tangible or intangible, that is
necessary or desirable for the conduct of the business of the Corporation or the
Subsidiary.
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3.14 Brokerage
Fees, Etc. No
person has any claim for any brokerage fees, commissions or similar payments
with respect to the Contemplated Transactions, based upon any agreement or
understanding made by the Corporation.
3.15 Compliance with
Laws.
(a) Except
as set forth on Schedule 3.15, the
operations of the Corporation and the Subsidiary have been conducted in all
material respects in accordance with, and the Corporation and the Subsidiary are
each in compliance in all material respects with, all applicable laws and
regulations, whether legislated or enacted in the United States, China or
elsewhere in the world, including, without limitation those which relate
to:
(i) giving
or agreeing to give any gift or similar benefit of more than nominal value on
behalf of the Corporation or the Subsidiary to any customer, supplier, employee
or official of any Governmental Agency (domestic or foreign), to induce the
recipient or his employer to do business, grant favorable treatment or
compromise or forego any claim;
(ii) making
any payment which might be improper under prevailing laws (regardless of the
jurisdiction in which such payment was made) to promote or retain sales or to
help, procure or maintain good relations with suppliers;
(iii) engaging
in any activity which would constitute a violation of the federal or applicable
state antitrust laws;
(iv) dealings
with the United States or Chinese government or any agency or department
thereof, including, but not limited to, any law with respect to conspiracy to
defraud, false claims, conspiracy to defraud the United States, embezzlement or
theft of public money, fraud and false statements, false demands against the
United States, mail fraud, wire fraud, RICO and truth in negotiations;
or
(v) pollution
or protection of the environment, including emissions, discharges or releases of
contaminants, or hazardous or toxic materials or wastes into air, water or land,
or otherwise relating to the distribution, use, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic material or
waste.
Neither
the Corporation nor the Subsidiary has received any notification of any asserted
present or past failure to comply with any such laws or regulations. No gift or
benefit is required in connection with the operations of the Corporation or the
Subsidiary or their respective businesses, to avoid any fine, penalty, cost,
expense or Material Adverse Effect. The Corporation and the Subsidiary have all
licenses, permits and approvals from Governmental Agencies required under all
applicable laws and regulations for the conduct of their respective businesses
and neither is in violation of any of them, other than violations, individually
or in the aggregate, which will not have a Material Adverse Effect. Each
license, permit and approval is in full force and effect, and, to the best of
the Corporation’s knowledge, no suspension or cancellation has been
threatened.
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(b) To
the Corporation’s knowledge, none of the directors, officers, managers or key
employees of the Corporation or the Subsidiary have been (i) arrested for or
convicted of any material crime, including any felony or crime of moral
turpitude (whether material or not), (ii) indicted or (iii) adjudged bankrupt,
and none of them has served as an officer or director of a bankrupt entity and
none has been restricted in any way from bidding on contracts with the
government of the United States or China.
(c) The
Corporation and the Subsidiary are in full compliance with the Immigration
Reform and Control Act of 1986, as amended, and all employees or independent
contractors who are not United States citizens and who work in the United States
are (i) named in Schedule 3.15, (ii)
currently authorized under United States immigration laws to hold United States
employment as described in Schedule 3.15, (iii)
will continue to have such employment authorization throughout the term of this
Agreement and (iv) otherwise in compliance with United States immigration
laws.
3.16 Absence
of Certain Corporation Control Person Actions or Events. The term “Corporation
Control Person” means each director, executive officer, promoter, and
such other persons as may be deemed in control of the Corporation pursuant to
Rule 405 under the 1933 Act or Section 20 of the ▇▇▇▇ ▇▇▇. To the Corporation’s
knowledge, none of the following has occurred during the past five years with
respect to a Corporation Control Person:
(a) a
petition under the federal bankruptcy laws or any state insolvency law was filed
by or against, or a receiver, fiscal agent or similar officer was appointed by a
court for the business or property of such Corporation Control Person, or any
partnership in which he was a general partner at or within two years before the
time of such filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such
filing;
(b) such
Corporation Control Person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses);
(c) such
Corporation Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:
(i) acting,
as an investment advisor, underwriter, broker or dealer
in securities, or as an affiliated person, director or employee of
any investment company, bank, savings and loan association or insurance company,
as a futures commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other person regulated by the
Commodity Futures Trading Commission (“CFTC”) or engaging in or
continuing any conduct or practice in connection with such
activity;
(ii) engaging
in any type of business practice; or
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(iii) engaging
in any activity in connection with the purchase or sale of any security or
commodity or in connection with any violation of federal or state securities
laws or federal commodities laws;
(d) such
Corporation Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such Corporation Control Person to engage in any activity described in Section
3.16(c), or to be associated with persons engaged in any such activity;
or
(e) such
Corporation Control Person was found by a court of competent jurisdiction in a
civil action or by the CFTC or Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by the CFTC or
Commission has not been subsequently reversed, suspended, or
vacated.
3.17 Disclosure.
Each of the Corporation and the Subsidiary have, to the knowledge of the
Corporation, fully responded to all requests by Wild for information. No
information in this Agreement or in any Schedule or Exhibit attached to this
Agreement contains or will contain any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements made
in the light of the circumstances under which they were made, when taken as a
whole, not misleading. The disclosures made in writing by the Corporation in
connection with this Agreement when read in the light of the circumstances when
made and taken as a whole, did not when made contain any untrue statement of a
material fact nor omit to state a material fact necessary to make the statements
made therein not misleading.
4. Representations
of Wild. In order to induce the Corporation to enter into this Agreement,
Wild represents as to itself to the Corporation as follows:
4.1 Organization
of Wild; Authorization. Wild is validly existing under the laws of
Delaware, with full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement and the Stockholders Agreement have been duly
authorized by all necessary action of Wild and this Agreement and the
Stockholders Agreement constitute the legal, valid and binding obligations of
Wild, enforceable against it in accordance with their terms.
4.2 No
Conflict as to Wild. Neither the execution and delivery of this Agreement
or the Stockholders Agreement by Wild nor the performance of its obligations
hereunder and thereunder will violate (a) any provision of its Certificate of
Incorporation or Bylaws, (b) any material agreement or commitment to which Wild
is a party, or (c) to Wild’s knowledge, any law or order of any court or other
Governmental Agency applicable to Wild.
4.3 Acquisition
for Investment. Wild is acquiring the Purchased Shares, the Warrant, the
Initial Sub Units and the Exchange Option for its own account for investment and
without any intent to dispose of them in violation of applicable securities
laws. Wild is a sophisticated investor and has had an opportunity to investigate
the business and affairs of the Corporation and the Subsidiary. Wild is an
“accredited investor” as defined in Regulation D under the Securities
Act.
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4.4 Investment
Representations. Wild understands that neither the Purchased Shares, the
Warrant, the Initial Sub Units nor the Exchange Option (collectively referred to
hereinafter as the “Securities”) have been registered under the Securities Act.
Wild also understands that the Securities are being offered and sold pursuant to
an exemption from registration contained in the Securities Act based in part
upon Wild’s representations contained in this Agreement. Wild hereby further
represents and warrants as follows:
(a) Wild
Bears Economic Risk. Wild is capable of evaluating the merits and risks
of its investment in the Corporation and the Subsidiary and has the capacity to
protect its own interest. Wild must bear the economic risk of this investment
indefinitely unless the Securities are registered pursuant to the Securities
Act, or an exemption from registration is available. Wild understands that the
Corporation has no present intention of registering the Securities. Wild also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow Wild to transfer all or any portion of the Purchased
Shares, the Warrant Shares or the Exchange Shares under the circumstances, in
the amounts or at the times Wild might propose.
(b) Wild Can
Protect Its Interest. Wild represents that by reason of its, or of its
management’s business or financial experience, Wild has the ability to protect
its own interests in connection with the transactions contemplated in this
Agreement and the agreement attached hereto as Exhibits. Further, Wild is aware
of no publication of any advertisement in connection with the transactions
contemplated in this Agreement.
(c) Corporation
Information. Wild has received and read the financial statements and
other publicly available information of the Corporation and has had an
opportunity to discuss the Corporation’s business, management and financial
affairs with directors, officers and management of the Corporation. Wild has
also had the opportunity to ask questions or and receive answers from, the
Corporation and its management regarding the terms and conditions of this
investment.
(d) Rule
144. Wild acknowledges and agrees that the Securities must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Wild has been advised or is
aware of the provisions of Rule 144 promulgated under the Securities Act as in
effect from time to time, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things: the availability of certain current public information about
the Corporation, the resale occurring following the required holding period
under Rule 144 and the number of shares being sold during any three-month period
not exceeding specified limitations.
5. Conditions
to Closing.
5.1 Conditions
to Wild’s Obligation to Close the Contemplated Transactions. As a
condition to Wild’s obligations to close the Contemplated Transactions, the
Corporation shall have satisfied each of the following items as of the Closing
and in the event that the Corporation has not timely satisfied each such
condition to Closing, the Corporation shall be deemed to be in breach of this
Agreement.
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(a) Representations
and Warranties True and Correct. The representations and
warranties of the Corporation contained in this Agreement shall have been true
and correct on the date of this Agreement and shall be true and correct in all
respects as of the Closing.
(b) Performance
of All Covenants By the Corporation. Each of the covenants, agreements
and obligations to be performed by the Corporation at or prior to the Closing
pursuant to the terms of this Agreement shall have been duly
performed.
(c) Authority.
All actions required to be taken by the Corporation to authorize the execution,
delivery and performance of this Agreement and the consummation of the
Contemplated Transactions, including the approval of all of the Resolutions,
shall have been duly and validly taken.
(d) Consents.
All of the Consents shall have been obtained, in form and substance reasonably
acceptable to Wild.
(e) Absence
of Litigation. No action, suit or proceeding relating to the consummation
of the transactions contemplated under this Agreement shall be pending or
threatened. No preliminary or permanent injunction or other order shall have
been issued by any court of competent jurisdiction or governmental agency or
commission which prevents or hinders the consummation of the transactions
contemplated hereby and no such injunction or order shall remain in effect, and
no action shall have been taken nor shall any statute, rule or regulation have
been enacted by any governmental, regulatory or administrative body or authority
of China, the United States or any state thereof that makes consummation of the
transactions contemplated hereby illegal.
(f) No
Material Adverse Change. Since the Latest Financial Date, there shall not
have been any Material Adverse Effect in the condition (financial or otherwise),
assets, properties, businesses, prospects or operations of the Corporation or
the Subsidiary nor shall any event or circumstance have occurred which is likely
to result in any such change.
(g) Closing
Deliveries. The Corporation shall have tendered delivery of all of the
items set forth under Section 2.2.
5.2 Conditions
to the Corporation’s Obligation to Close the Transactions Contemplated
Hereunder. As a condition to the Corporation’s obligation to close the
Contemplated Transactions, Wild shall have satisfied each of the following items
as of the Closing and in the event that Wild has not timely satisfied each such
condition to Closing, Wild shall be deemed to be in breach of this
Agreement.
(a) Representations
and Warranties True and Correct. The representations and
warranties of Wild contained in this Agreement shall have been true and correct
on the date of this Agreement and shall be true and correct in all respects as
of the Closing.
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(b) Performance
of All Covenants By Wild. Each of the covenants, agreements and
obligations to be performed by Wild at or prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed.
(c) Authority.
All actions required to be taken by Wild to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
6. Covenants.
6.1 Conduct
of the Business. The Corporation agrees that, from the date
hereof through the Closing, except to the extent otherwise permitted by this
Agreement or consented to in writing by Wild, the Corporation shall and shall
cause the Subsidiary to:
(a) operate
their respective businesses only in the ordinary course consistent with the past
practices and operations of each company’s business, during the year period
prior to the Closing Date;
(b) use
their commercially reasonable efforts to preserve the Corporation’s and the
Subsidiary’s business organizations intact, to retain the services of their
respective employees and to preserve their respective goodwill and relationships
with customers, suppliers, creditors and others having business relationships
with either or both of them;
(c) take
such action as may be reasonably necessary to preserve their respective
properties and assets and to maintain their respective permits and
licenses;
(d) maintain
in full force and effect the insurance policies presently maintained by either
of them;
(e) comply
with all applicable laws except for any law the violation of which will not have
a material adverse effect on the Corporation’s or the Subsidiary’s condition
(financial or otherwise), assets, properties, business, prospects or
operations;
(f) promptly
advise Wild in writing of any Material Adverse Effect in the condition
(financial or otherwise), assets, properties, businesses, prospects or
operations of the Corporation or the Subsidiary and of any event or circumstance
which will, or with reasonable certainty may, result in any such change or which
will, or with reasonable certainty may, constitute a violation or breach of any
representation, warranty or covenant contained in this Agreement;
(g) review
with Wild all decisions regarding material vendor contracts, material equipment
purchases and sales and other material operational decisions regarding the
Subsidiary;
(h) not
sell, transfer or otherwise dispose of or encumber any of the Corporation’s
assets or properties used in the extraction, manufacture and sale of its
steviaside products except in the ordinary course of business; and
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(i) not
make any agreement or commitment to take any action referred to in Subsections
6.1(a) through 6.1(i) above.
6.2 Further
Assurances. After the Closing, the Corporation and the Subsidiary will,
at Wild’s reasonable request from time to time and without further
consideration, execute and deliver or cause to be executed and delivered to Wild
such other instruments, documents of sale, transfer, conveyance, assignment and
confirmation and take such other actions as Wild may reasonably request to carry
out and effectuate the provisions hereof and the Contemplated
Transactions.
6.3 Preemptive
Rights; Right of First Refusal..
(a) During
the period from the Closing Date through and including the date occurring 24
months after the Closing Date, Wild shall be given not less than 15 business
days’ prior written notice of any proposed sale by the Corporation to any party
of its common stock or other securities or debt obligations of the Corporation,
except in connection with (1) full or partial consideration in connection with a
strategic merger, acquisition, consolidation or purchase of substantially all of
the securities or assets of corporation or other entity which holders of such
securities or debt are not at any time granted registration rights, (2) the
Corporation’s issuance of securities in connection with strategic license
agreements and other partnering arrangements so long as such issuances are not
for the purpose of raising capital and which holders of such securities or debt
are not at any time granted registration rights, (iii) the Corporation’s
issuance of common stock or the issuances or grants of options to purchase
common stock pursuant to stock option plans and employee stock purchase plans,
if any, at prices equal to or higher than the closing price of the common stock
on the issue date of any of the foregoing, and (iv) as a result of the exercise
of Warrants or conversion of which are granted or issued pursuant to this
Agreement or that have been issued prior to the Closing Date all on the original
terms thereof, the issuance of which has been disclosed in a Report filed not
less than five days prior to the Closing Date (collectively the foregoing are
“Excepted
Issuances”). Wild, upon exercise its rights pursuant to this Section 6.3
shall have the right during the seven business days following receipt of the
notice to purchase such offered common stock or preferred stock, debt or other
securities in accordance with the terms and conditions set forth in the notice
of sale into and up to the amount which would permit Wild to own the same
percentage of issued and outstanding common stock of the Corporation as Wild
owns on the Closing Date (after the acquisition of the Securities). In the event
such terms and conditions are modified during the notice period, Wild shall be
given prompt notice of such modification and shall have the right during the
seven business days following the notice of modification to exercise such
right.
(b) In
addition, the only officer, director, employee and consultant stock option or
stock incentive plan currently in effect or contemplated by the Corporation has
been submitted to Wild or filed with the Reports.
6.4 Public
Company; Securities.
(a) Stop Orders. The
Corporation will advise Wild, within two hours after the Corporation receives
notice of issuance by the Commission, any state securities commission or any
other regulatory authority of any stop order or of any order preventing
or
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suspending
any offering of any securities of the Corporation, or of the suspension of the
qualification of the common stock of the Corporation for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such
purpose.
(b) Listing. The
Corporation shall promptly secure the listing of the Purchased Shares, Warrant
Shares and the Exchange Shares upon each national securities exchange, or
electronic or automated quotation system upon which they are or become eligible
for listing and shall use commercially reasonable efforts to maintain such
listing so long as Wild owns any of the Securities. The Corporation will
maintain the listing of its common stock on the American Stock Exchange, Nasdaq
Capital Market, Nasdaq National Market System, Bulletin Board, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the common stock (the “Principal
Market”)), and will comply in all respects with the Corporation’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Market, as applicable. The Corporation will provide Wild with copies
of all notices it receives notifying the Corporation of the threatened and
actual delisting of the common stock from any Principal Market. As of the date
of this Agreement, the Bulletin Board is the Principal Market.
(c) Market Regulations.
The Corporation shall notify the Commission, the Principal Market and applicable
state authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Purchased Shares, Warrant,
Warrant Shares, Exchange Option and Exchange Shares to Wild and promptly provide
copies thereof to Wild.
(d) Filing
Requirements. From the date of this Agreement and until the
earliest of
(i) the
date which is two years after the date (the “Last
Exercise Date”) on which the Warrants have been exercised in full other
than by way of a cashless exercise (which Last Exercise Date shall be deemed to
occur no later than the date occurring on the fifth anniversary of the issuance
date of the Warrant (the “Warrant
Expiration Date”)),
(ii) the
date on which all of the Purchased Shares, the Warrant Shares and the Exchange
Shares have been resold or transferred by Wild pursuant to the Registration
Statement, or
(iii) the
date on which all of the Purchased Shares and the Warrant Shares, which were
issued other than by way of cashless exercise of the Warrant, and the Exchange
Shares may be resold or transferred pursuant to Rule 144, without regard to
volume limitations;
provided,
however, that if the Warrant is outstanding and may still be exercised, such
date shall not be determined until the earlier of the date such Warrant has been
exercised in full or the Warrant Expiration Date, the Corporation will (A) cause
its common stock to continue to be registered under Section 12(b) or 12(g) of
the 1934 Act, (B) comply in all respects with its
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reporting
and filing obligations under the 1934 Act, (C) voluntarily comply with all
reporting requirements that are applicable to an issuer with a class of shares
registered pursuant to Section 12(g) of the 1934 Act, if Corporation is not
subject to such reporting requirements, and (D) comply with all requirements
related to any registration statement filed pursuant to this
Agreement.
The
Corporation will use its commercially reasonable efforts not to take any action
or file any document (whether or not permitted by the 1933 Act or the 1934 Act
or the rules thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said acts until
seven years after the Closing Date. Until the earlier of the resale of the
Purchased Shares, the Warrant Shares and the Exchange Shares by Wild or two
years after the Warrant has been exercised, the Corporation will use its
commercially reasonable efforts to continue the listing or quotation of the
common stock on a Principal Market and will comply in all respects with the
Corporation’s reporting, filing and other obligations under the bylaws or rules
of the Principal Market. The Corporation agrees to timely file a Form D with
respect to the Securities if required under Regulation D and to provide a copy
thereof to Wild promptly after such filing.
(e) Non-Public
Information. The Corporation covenants and agrees that neither it nor any
other person acting on its behalf will provide to Wild or its agents or counsel
with any information that the Corporation believes constitutes material
non-public information, unless prior thereto in each instance Wild shall have
agreed in writing to receive such information. The Corporation understands and
confirms that Wild shall be relying on the foregoing representations in
effecting transactions in securities of the Corporation. The Corporation will
offer to ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ LLC, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., as counsel to
Wild, an opportunity to review and comment on the Registration Statement and all
amendments and supplements thereto between three and five business days prior to
the proposed filing date thereof, and not file any document in a form to which
such counsel reasonably objects.
6.5 Use of
Proceeds. The Consideration received by the Corporation
pursuant to this Agreement will be employed by the Corporation for the purposes
of repayment of a loan from China Direct, Inc. in the principal amount of
$100,000 and accrued interest in the amount of $4,200 (the “China
Direct Loan”) and those further purposes set forth on Schedule 6.5 hereto.
Except for repayment of the China Direct Loan and as set forth on Schedule 6.5, the
Consideration may not and will not be used for accrued and unpaid officer and
director salaries, payment of financing related debt, redemption of outstanding
or equity instruments of the Corporation, litigation related expenses or
settlements, brokerage fees, nor non-trade obligations outstanding on the
Closing Date. The Corporation shall cause the China Direct Loan to be
repaid within 10 days after Closing.
6.6 Taxes. From
the date of this Agreement and until the sooner of (a) the date which is two
years after the Closing Date, or (b) the date as of which all of the Purchased
Shares, Warrant Shares and Exchange Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Corporation will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Corporation; provided,
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however,
that any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Corporation shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Corporation will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.
6.7 Books and
Records. From the date of this Agreement and until the sooner
of (a) the date which is two years after the Closing Date, or (b) the date as of
which all of the Purchased Shares, Warrant Shares and Exchange Shares have been
resold or transferred by Wild pursuant to the Registration Statement or pursuant
to Rule 144, without regard to volume limitations, the Corporation will keep
true records and books of account in which full, true and correct entries will
be made of all dealings or transactions in relation to its business and affairs
in accordance with generally accepted accounting principles applied on a
consistent basis.
6.8 Governmental
Authorities. From the date of this Agreement and until the
sooner of (a) the date which is two years after the Closing Date, or (b) the
date as of which all of the Purchased Shares, Warrant Shares and Exchange Shares
have been resold or transferred by Wild pursuant to the Registration Statement
or pursuant to Rule 144, without regard to volume limitations, the Corporation
shall duly observe and conform in all material respects to all valid
requirements of governmental authorities relating to the conduct of its business
or to its properties or assets.
6.9 Intellectual
Property. From the date of this Agreement and until the sooner
of (a) the date which is two years after the Closing Date, or (b) the date as of
which all of the Purchased Shares, Warrant Shares and Exchange Shares have been
resold or transferred by Wild pursuant to the Registration Statement or pursuant
to Rule 144, without regard to volume limitations, the Corporation shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use intellectual property owned or
possessed by it and reasonably deemed to be necessary to the conduct of its
business, unless it is sold for value and such sale is approved by the Board
that includes the Wild Directors.
6.10 Properties.
From the date of this Agreement and until the sooner of (a) the date which is
two years after the Closing Date, or (b) the date as of which all of the
Purchased Shares, Warrant Shares and Exchange Shares have been resold or
transferred by Wild pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Corporation will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Corporation will at
all times comply with each provision of all leases to which it is a party or
under which it occupies property if the breach of such provision could
reasonably be expected to have a material adverse effect.
6.11 Additional
Negative Covenants. From the date of this Agreement and until
the sooner of (a) the date which is two years after the Closing Date, or (b) the
date as of which all of the Purchased Shares, Warrant Shares and Exchange Shares
have been resold or transferred by Wild pursuant to the Registration Statement
or pursuant to Rule 144, without
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regard to
volume limitations, without the written consent of Wild, the Corporation will
not and will not permit any of its subsidiaries to directly or
indirectly:
(a) amend
its certificate of incorporation, bylaws or its charter documents so as to
adversely affect any rights of Wild or the obligations of the Subsidiary under
the Distribution Agreement;
(b) transfer,
sell, dispose or remove any of its assets reasonably necessary for the
Corporation to satisfy its obligations under the Distribution Agreement to any
person who is not under the direct control of the Corporation;
(c) repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its common stock, preferred stock,
or other equity securities other than to the extent permitted or required under
the this Agreement; or
(d) prepay
any financing related or other outstanding debt obligations.
6.12 Conversion;
Issuance of Initial Sub Units; Exchange Option; Bonus
Option.
(a) The
Corporation shall complete the Conversion of the Subsidiary from a Florida
corporation into a Delaware limited liability company within 30 days after the
Closing, including the execution of the Subsidiary Operating Agreement and the
appointment of Wild as manager of the Subsidiary. Concurrently with
the execution of the Subsidiary Operating Agreement by Wild and the Corporation,
the Subsidiary shall issue the Initial Sub Units to Wild. The
Corporation hereby covenants that the Initial Sub Units shall constitute 45% of
the issued and outstanding membership interests of the Subsidiary following the
Conversion.
(b) Concurrently
with the issuance of the Initial Sub Units, the Corporation shall grant to Wild
the Exchange Option. The Exchange Option may be exercised by Wild at
any time from the date of issuance of the Initial Sub Units until December 31,
2010. In the event that Wild desires to exercise the Exchange Option,
Wild shall deliver written notice to the Corporation that it desires to exchange
the Initial Sub Units for the Exchange Shares. Within 10 days of receipt of such
notice, the Corporation shall issue to Wild the Exchange Shares, Wild shall
assign the Initial Sub Units to the Corporation and, if necessary, Wild and the
Corporation shall execute a revised Subsidiary Operating Agreement.
(c) In
addition, concurrently with the consummation of the Conversion, the Subsidiary
shall grant the Bonus Option to Wild. The Bonus Option shall provide
to Wild the right to acquire the Bonus Option Units from the
Subsidiary. The number of membership units of the Subsidiary (i.e., the Bonus Option Units)
that would be issued by the Subsidiary to Wild upon exercise of the Bonus Option
would be the greater of (1) the number of membership units necessary such that
Wild would own 51% of the issued and outstanding membership units of the
Subsidiary after exercise of the Bonus Option and (2) the number of membership
units equal to 6% of the then issued and outstanding membership units of the
Subsidiary. In order to exercise the Bonus Option, the following
conditions must be met:
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(i) Wild
must not have exercised the Exchange Option;
(ii) the
Subsidiary must have achieved cumulative pre-tax profits of $3,000,000 on or
before December 31, 2011 computed in accordance with GAAP, except that,
notwithstanding GAAP, the cost of insurance required to be purchased by the
Subsidiary pursuant to the terms of the Distribution Agreement shall not be
included as an expense or cost when calculating such pre-tax profit calculation;
and
(iii) Wild
must pay to the Subsidiary the aggregate exercise price of
$1,000.00.
The Bonus
Option expires upon the earlier of the date when one of the above conditions can
no longer be satisfied and July 1, 2012.
In the
event that Wild desires to exercise the Bonus Option, Wild shall deliver written
notice to the Corporation and the Subsidiary that it desires to obtain the Bonus
Option Units from the Subsidiary. Within 10 days of receipt of such notice, the
Subsidiary shall issue to Wild the Bonus Option Units and, if necessary, Wild
and the Corporation shall execute a revised Subsidiary Operating
Agreement.
6.13 Additional
Capital Contributions to Subsidiary. If, after the Conversion,
the Corporation and Wild jointly determine (the “ACC
Determination Date”) that Subsidiary requires additional capital (“Additional
Capital Contribution”), then the Subsidiary shall request in writing that
the Additional Capital Contribution be made (the “ACC Request”) and Wild shall
have the initial option to make and provide such Additional Capital Contribution
to the Subsidiary. If Wild does not, or will not, make all of the
determined Additional Capital Contribution within 10 days of the ACC
Determination Date, then the Corporation shall have the option and the
opportunity to make and provide a capital contribution to the Subsidiary in the
maximum amount such that Wild’s capital contribution and the Corporation’s
capital contribution in the aggregate are equal to the Additional Capital
Contribution set forth in the ACC Request. If, and only if, the
Corporation and Wild do not in the aggregate provide the entire amount of the
determined and requested within 25 days of the ACC Determination Date, then the
Corporation and Wild shall seek one or more third parties to make and provide
capital contributions to the Subsidiary in the maximum amount such that Wild’s
capital contribution, the Corporation’s capital contribution and all capital
contributions made by parties other than Wild or the Corporation in the
aggregate are equal to the Additional Capital Contribution set forth in the ACC
Request. The Corporation and Wild hereby agree that the value of each
membership units of the Subsidiary to be received by the Corporation, Wild and
other third parties making a capital contribution to the Subsidiary pursuant to
an ACC Request shall be $222.22 per membership unit. The Corporation
and Wild further agree to amend the Subsidiary Operating Agreement, to the
extent necessary as a result of satisfaction of the investment of the Additional
Capital Contribution and in a form acceptable to Wild, within 10 days after the
Subsidiary’s receipt of such Additional Capital Contribution.
6.14 .Resale of
Purchased Shares. Wild covenants and agrees that it will hold
the Purchased Shares, and will not sell the Purchased Shares, until the second
anniversary of the
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Closing
Date. Other than as provided by securities laws, Wild shall have no
restriction on its resale of Warrant Shares.
6.15 D&O
Insurance. Within 90 days after the Closing Date, the
Corporation, at its own expense, agrees to purchase a D&O insurance policy
(the “D&O
Policy”) that provides protection to the officers, directors and manager
of the Corporation and the Subsidiary. The D&O Policy shall have
the limits and amounts reasonably acceptable to Wild and the
Corporation.
6.16 Corporation
Board Meetings. The Corporation agrees to hold at least two
meetings of the Board each fiscal year of the Corporation. For as
long as the Wild Directors are members of the Board, at least half of the
Board’s meetings shall be held within the United States of America, as a
location determined by the Board, and the remaining meetings may be held
anywhere else in the world desired and determined by the Board, including but
not limited to the United States or China.
6.17 Cap on
Shandong Consulting Fees. Wild understands that the
Corporation pays certain fees to Shandong Shengwang Pharmaceutical Co., Ltd
(“Shandong”),
for Shandong to provide consulting services to certain subsidiaries of the
Corporation, including maintaining infrastructure and covering utility expenses,
etc. The Corporation covenants that Shandong has agreed to waive, and has
waived, such fees for calendar year 2009. The Corporation further covenants that
Shandong has agreed that starting January 2010, the maximum consulting fee that
will be charged by Shandong will be approximately $14,626 (RMB100,000) monthly,
or in other words, $175,508 (RMB1,200,000) in the aggregate
annually.
6.18 Wild
Liaison in China. Wild covenants and agrees that it shall
appoint a senior level manager from its Beijing facility to serve as a liaison
between Wild and the Corporation.
7. Registration
Rights
7.1 Piggyback
Registration.
(a) If
at any time during the two year period after the Closing Date (but on no more
than one occasion), the Corporation proposes to register (for its own account,
on behalf of its existing stockholders, or a combination of the foregoing) any
of its common stock under the 1933 Act in connection with a public offering of
such common stock solely for cash (other than a registration relating primarily
to the sale of securities to participants in a Corporation stock plan or
employee benefit plan, a transaction covered by Rule 145 under the 1933 Act or
the resale of securities issued in such a transaction, a registration in which
the only stock being registered is Common Stock issuable upon conversion or
exchange of debt securities which are also being registered, any registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Warrant Shares) the Corporation shall, at such time, give Wild notice of such
registration. Upon the written request of Wild, given within five (5) days after
notice has
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been
given by the Corporation, the Corporation shall, subject to Section 7.1(b),
cause to be registered under the 1933 Act all of the Warrant Shares that Wild
has requested to be registered.
(b) In
connection with any underwritten public offering, the Corporation shall not be
required to include any of Wild Warrant Shares in such underwriting
unless Wild accepts the terms of the underwriting as agreed upon between the
Corporation and the underwriters for the offering (which underwriters shall be
selected by the Corporation). If the total amount of securities,
including Warrant Shares, requested to be included in an underwritten public
offering exceeds the amount of securities that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Corporation shall be required to include in the offering only that number of
such securities, including Warrant Shares, which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering. In such event, the Corporation may reduce the number of Warrant Shares
to be included in the offering prior to reducing or excluding the shares
proposed to be offered by the Corporation.
7.2 Demand
Registration Rights. If, at any time after two years after the
Closing Date (but on no more than one occasion), Wild requests the Corporation
to effect the registration of the Purchased Shares, the Warrant Shares and the
Exchange Shares under the Securities Act, the Corporation (i) will as
expeditiously as possible use its best efforts to effect registration under the
Securities Act of the security which the Corporation has been requested to
register; (ii) use its best efforts to have such Registration Statement declared
effective; (iii) notify Wild promptly after it shall receive notice thereof, of
the time when such Registration Statement has become effective or any supplement
to any prospectus forming a part of such Registration Statement has been filed;
(iv) notify Wild promptly of any request by the Securities and Exchange
Commission (hereinafter referred to as the “Commission”) for the amending or
supplementing of such Registration Statement or prospectus or for additional
information; (v) prepare and file with the Commission, promptly upon Wild’s
request any amendments or supplements to such Registration Statement or
prospectus which, in the opinion of counsel for Wild, may be necessary or
advisable in connection with the distribution of the securities by Wild; (vi)
prepare and promptly file with the Commission and promptly notify Wild of the
filing of any required amendment or supplement to such Registration Statement or
prospectus; (vii) in case Wild or any underwriter for Wild is required to
deliver a prospectus, at a time when the prospectus then in effect may no longer
be used under the Securities Act, prepare promptly upon request such amendment
or amendments to such Registration Statement and such prospectus or prospectuses
as may be necessary to permit compliance with the requirements of Section 10 of
the Securities Act; (viii) not file any amendment or supplement to the
Registration Statement or prospectus to which Wild shall reasonably object after
having been furnished a copy at a reasonable time prior to the filing thereof;
(ix) advise Wild promptly after it shall receive notice or obtain knowledge
thereof of the issuance of any stop order by the Commission suspending the
effectiveness of any Registration Statement or of the initiation or threatening
of any proceeding for that purpose and promptly use its best efforts to prevent
the issuance of any stop order or to obtain its withdrawal if such stop order
should be issued; and (x) furnish to Wild as soon as available a copy of any
such Registration Statement and each preliminary or final prospectus, or
supplement.
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The
Corporation will pay all costs and expenses incident to the performance of its
obligations under this Section 7.2, including the fees and expenses of its
counsel, the fees and expenses of its accountants and all other costs and
expenses incident to the preparation and filing under the Securities Act of any
such Registration Statement, each prospectus and all amendments.
7.3 Reports
under 1933 Act and 1934 Act. With a view to making available
to Wild the benefits of Rule 144 or any other similar rule or regulation of the
Commission that may at any time permit Wild to sell securities of the
Corporation to the public without Registration (“Rule
144”), the Corporation agrees to:
(a) make
and keep public information available, as those terms are understood and defined
in Rule 144;
(b) file
with the Commission in a timely manner all reports and other documents required
of the Corporation under the 1933 Act and the 1934 Act; and
(c) furnish
to Wild so long as the Wild owns the Purchase Shares, the Warrant Shares or the
Exchange Shares (the “Registerable Securities”) or Securities convertible into
Registerable Securities, promptly upon request, (1) a written statement by the
Corporation that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (2) if not available on the Commission’s ▇▇▇▇▇
system, a copy of the most recent annual or quarterly report of the Corporation
and such other reports and documents so filed by the Corporation and (3) such
other information as may be reasonably requested to permit Wild to sell such
securities pursuant to Rule 144 without registration; and
(d) at
the request of Wild, the Corporation shall give its Transfer Agent instructions
(supported by an opinion of counsel to the Corporation, if required or requested
by the Transfer Agent) to the effect that, upon the Transfer Agent’s receipt
from Wild of (1) a certificate (a “Rule 144
Certificate”) certifying (A) that the Wild’s holding period (as
determined in accordance with the provisions of Rule 144) for the shares of
Registerable Securities which Wild proposes to sell (the “Securities
Being Sold”) is not less than required by Rule 144and (B) as to such
other matters as may be appropriate in accordance with Rule 144 under
the 1933 Act, and (2) an opinion of counsel acceptable to the Corporation (for
which purposes it is agreed that the opinion of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ LLC
shall be deemed acceptable if not given by Corporation counsel) that, based on
the Rule 144 Certificate, Securities Being Sold may be sold pursuant to the
provisions of Rule 144, even in the absence of an effective Registration
Statement, the Transfer Agent is to effect the transfer of the Securities Being
Sold and issue to the buyer(s) or transferee(s) thereof one or more stock
certificates representing the transferred Securities Being Sold without any
restrictive legend and without recording any restrictions on the transferability
of such shares on the Transfer Agent’s books and records (except to the extent
any such legend or restriction results from facts other than the identity of the
Wild, as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by Wild). If the Transfer Agent reasonably requires any additional documentation
at the time of the transfer, the Corporation shall deliver or cause to be
delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
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7.4 Assignment
of the Registration Rights. The rights to have the Corporation
register Registerable Securities pursuant to this Agreement and the rights of
the Subscriber under this Section 7 shall be automatically assigned by Wild to
any transferee of the Registerable Securities who is an affiliate of Wild
(excluding any transfer of such Registerable Securities by a sale pursuant to an
effective Registration Statement or pursuant to Rule 144) but, only if the
Corporation is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, (b) the securities with respect to which such registration rights are
being transferred or assigned, and (c) written evidence of the transferee’s
assumption of the Wild’s obligations under Section 7 of this
Agreement.
8. Representations
to Continue in Effect After the Closing; Indemnification.
8.1 Continued
Effect. All representations and warranties contained in this Agreement
shall be true as of the date of each Closing and shall continue in effect
notwithstanding any investigation conducted or knowledge acquired with respect
thereto.
8.2 Indemnification
by the Corporation. The Corporation shall indemnify and hold harmless and
reimburse Wild for any loss, liability, claim, damage, cost, expense (including,
but not limited to, costs of investigation and reasonable attorneys’ fees) or
diminution of value of the Purchased Shares, any Warrant Shares issuable upon
Wild’s exercise of its rights under the Warrant or any Exchange Shares issuable
upon Wild’s exercise of the Exchange Option, but excluding any punitive damages
(collectively, “Damages”),
arising from (a) any breach of any of the representations or warranties of the
Corporation in this Agreement, or (b) any failure by the Corporation to perform
any of its obligations set forth under this Agreement or any document or
agreement contemplated under this Agreement.
8.3 Indemnification
by Wild. Wild shall indemnify and hold harmless and reimburse the
Corporation for any Damages arising from (a) any breach of any of the
representations or warranties of Wild in this Agreement, or (b) any failure by
Wild to perform any of its obligations set forth under this
Agreement.
9. Notices.
All notices, consents and other communications under this agreement shall be in
writing and shall be deemed to have been duly given when (a) sent by Certified
and Registered U.S. Mail, return receipt requested, (b) delivered by hand or (c)
sent by telecopier (with receipt confirmed), provided that a copy is mailed by
an express delivery service, in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses, and telecopier
numbers as a party may designate as to itself by notice to the other
parties):
(a) If
to the Investors:
Wild
Flavors, Inc.
12▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy
No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇
with a
copy to:
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ LLC
20▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
Telecopy
No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) If
to the Corporation or the Subsidiary:
Attention:
▇▇▇▇▇▇▇▇ ▇▇▇, Chief Executive Officer
6
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy
No. ▇▇-▇▇▇-▇▇▇-▇▇▇▇
with a
copy to:
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ & Beilly LLP
22▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy
No. ▇▇▇-▇▇▇-▇▇▇▇
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10. Miscellaneous.
10.1 Expenses.
Each party shall bear its own expenses incident to the preparation, negotiation,
execution and delivery of this Agreement and the performance of its obligations
hereunder.
10.2 Captions.
The captions in this Agreement are for convenience of reference only and shall
not be given any effect in the interpretation of this Agreement.
10.3 No
Waiver. The failure of a party to insist upon strict adherence to any
obligation of this Agreement shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement. Any waiver must be in writing.
10.4 Exclusive
Agreement; Amendment. This Agreement and the other agreements and
documents delivered pursuant hereto supersedes all prior agreements among the
parties with respect to its subject matter (including, but not limited to, the
Summary of Terms among Wild and the Corporation dated December 18,
2008, as amended), is intended (with the documents referred to herein) as a
complete and exclusive statement of the terms of the agreement among the parties
with respect thereto and can be changed or terminated only with the written
consent of the Corporation and a majority in interest of the
Investors.
10.5 Counterparts.
This Agreement may be executed in two or more counterparts each of which shall
be considered an original.
10.6 Governing
Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Kentucky without
regard to principles of the conflicts of laws.
10.7 Attorney’s
Fees. In any action or proceeding brought by a party to enforce any
provision of this Agreement, the prevailing party shall be entitled to recover
the reasonable costs and expenses incurred by it in connection with that action
or proceeding (including, but not limited to, attorneys’ fees). The Corporation
also shall reimburse, without limitation, each of the Investors for all
reasonable legal expenses incurred by them in connection with any amendment or
waiver of any provision of this Agreement.
10.8 Designation
of Forum and Consent to Jurisdiction. The parties hereto (a) designate a
United States District Court located in the Cincinnati, Ohio metropolitan area,
or a state court located in Covington, Kentucky, as the forum where all matters
pertaining to this Agreement may be adjudicated, and (b) by the foregoing
designation, consent to the exclusive jurisdiction and venue of such court for
the purpose of adjudicating all matters pertaining to this Agreement or the
Stockholders Agreement, or any of the Contemplated Transactions.
10.9 Assignment.
No party may assign its rights and obligations under this Agreement without
obtaining the prior written consent of the other parties (which consent may be
withheld by such parties in their sole and absolute discretion).
10.10 Controlling
Language. If this Agreement is written in two or more
languages, the English text thereof will be deemed to be the authoritative
version and will be controlling for all purposes.
Signature
Page Follows
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IN
WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as
of the date and year first above written.
| Corporation: | |||
| SUNWIN INTERNATIONAL NEUTRACEUTICALS, INC. | |||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇ | |
| ▇▇▇▇▇▇▇▇ ▇▇▇ , Chief Executive | |||
| Wild: | |||
| WILD FLAVORS, INC. | |||
|
|
By:
|
/s/ ▇▇▇▇▇ ▇▇▇▇▇ | |
| ▇▇▇▇▇ ▇▇▇▇▇, Chief Operating Officer | |||
Securities
Purchase Agreement – Signature Page
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