EXHIBIT 10.2
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") has been made as of
December 21, 2005, by and among China 3C Group, a Nevada corporation ("CHINA 3C
GROUP"), YX Acquisition Corporation, a Nevada corporation and a wholly-owned
Subsidiary of China 3C Group ("SUB"), Capital Future Development Limited, a
British Virgin Islands corporation ("CFDL"), and the shareholders of CFDL, each
of whom is identified on Schedule A to this Agreement (the "CFDL SHAREHOLDERS").
WHEREAS, the respective Boards of Directors of China 3C Group, Sub and
CFDL have approved the merger, pursuant and subject to the terms and conditions
of this Agreement, of Sub with and into CFDL (the "MERGER"), whereby
substantially all of the issued and outstanding shares of the Common Stock of
CFDL (the "CFDL COMMON STOCK) will be converted into the right to receive a
specified number of shares of the Common Stock of China 3C Group (the "CHINA 3C
GROUP COMMON STOCK"); and the parties each desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and covenants herein contained, the parties agree to effect the
Merger on the terms and conditions herein provided and further agree as follows:
ARTICLE 1. DEFINITIONS
1.1 DEFINITIONS.
In addition to the other definitions contained in this Agreement, the
following terms will, when used in this Agreement, have the following respective
meanings:
"AFFILIATE" means a Person that, directly or indirectly, controls, is
controlled by, or is under common control with, the referenced party.
"CLAIM" means any contest, claim, demand, assessment, action, suit, cause
of action, complaint, litigation, proceeding, hearing, arbitration,
investigation or notice of any of the foregoing involving any Person.
"CLOSING" means the consummation of the Merger.
"CODE" means the Internal Revenue Code of 1986, as amended, together with
all rules and regulations promulgated thereunder.
"CONSTITUENT CORPORATIONS" means CFDL and Sub, as the constituent
corporations of the Merger.
"GAAP" means United States generally accepted accounting practices.
"GCL" means the Nevada General Corporation Law.
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"PERSON" means and includes any individual, partnership, corporation,
trust, company, unincorporated organization, joint venture or other entity, and
any Governmental Entity.
"RECORD HOLDER" means a holder of record of CFDL Common Stock as shown on
the regularly maintained stock transfer records of CFDL.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, joint venture, trust or other entity of which such Person, directly
or indirectly through an Affiliate, owns an amount of voting securities, or
possesses other ownership interests, having the power, direct or indirect, to
elect a majority of the Board of Directors or other governing body thereof.
"SURVIVING CORPORATION" means CFDL, as the surviving corporation of the
Merger.
"U.S" means the United States of America.
1.2 INTERPRETATION.
In this Agreement, unless the express context otherwise requires:
(a) the words "HEREIN," "HEREOF" and "HEREUNDER and words of similar
import refer to this Agreement as a whole and not to any particular provision of
this Agreement;
(b) references to "ARTICLE" or "SECTION" are to the respective Articles
and Sections of this Agreement, and references to "EXHIBIT" or "SCHEDULE" are to
the respective Exhibits and Schedules annexed hereto;
(c) references to a "PARTY" means a party to this Agreement and include
references to such party's successors and permitted assigns;
(d) references to a "THIRD PARTY" means a Person that is neither a
Party to this Agreement nor an Affiliate thereof;
(e) the terms "DOLLARS" and "$" means U.S. dollars;
(f) terms defined in the singular have a comparable meaning when used
in the plural, and vice versa;
(g) the masculine pronoun includes the feminine and the neuter, and
vice versa, as appropriate in the context; and
(h) wherever the word "INCLUDE," "INCLUDES" or "INCLUDING is used in
this Agreement, it will be deemed to be followed by the words "without
limitation."
ARTICLE 2. THE MERGER
2.1 EFFECTIVE TIME OF THE MERGER.
Subject to the provisions of this Agreement, the Merger will be
consummated by the filing by the Secretary of State of the State of Nevada of
articles of merger, in such form as
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required by, and signed and attested in accordance with, the relevant provisions
of the GCL (the time of such filing or such later time and date as is specified
in such filing being the "EFFECTIVE TIME").
2.2 CLOSING.
The Closing will take place at 10:00 a.m., local time, on the earliest
date practicable after all of the conditions set forth in Article 9 are
satisfied or waived by the appropriate party, but in no event later than the
applicable date referred to in Section 10.1(d) (the "CLOSING DATE"), at the
offices of Xxxxxx, Xxxxxxx & Xxxxx LLP, Rochester, New York, unless another
time, date or place is agreed to in writing by the parties.
2.3 EFFECTS OF THE MERGER.
By virtue of the Merger and without the necessity of any action by or on
behalf of the Constituent Corporations, or either of them:
(a) at the Effective Time, (i) the separate existence of Sub will
cease, and Sub will be merged with and into CFDL, and (ii) the certificate of
incorporation and bylaws of CFDL as in effect immediately prior to the Effective
Time will be the certificate of incorporation and bylaws of the Surviving
Corporation until thereafter amended; and
(b) at and after the Effective Time, the Surviving Corporation will
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties, of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well for stock subscriptions as all other things in
action or belonging to each of the Constituent Corporations will be vested in
the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest will be thereafter as effectually
be the property of the Surviving Corporation as they were of the respective
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations, will not revert or be in
any way impaired; but all rights of creditors and all liens upon any property of
either of the Constituent Corporations will be preserved unimpaired, and all
debts, liabilities and duties of the respective Constituent Corporations will
thereafter attach to the Surviving Corporation, and may be enforced against it
to the same extent as if such debts and liabilities had been incurred or
contracted by it.
ARTICLE 3. EFFECT OF MERGER ON CAPITAL STOCK
3.1 EFFECT ON CAPITAL STOCK.
As of the Effective Time, by virtue of the Merger and without any action
on the part of any holder of shares of CFDL Common Stock or of shares of the
capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the
capital stock of Sub will be converted into the right to receive one fully paid
and non-assessable share of the capital stock of the Surviving Corporation.
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(b) CANCELLATION OF TREASURY STOCK. Shares of CFDL Common Stock, if
any, that are held by CFDL as treasury stock will be cancelled and retired and
will cease to exist, and no Merger Consideration will be delivered in exchange
therefor. Shares of Xxxxx 0X Group Common Stock, if any, owned by CFDL as of the
Effective Time will remain unaffected by the Merger.
(c) EXCHANGED SHARES; MERGER CONSIDERATION.
(i) "EXCHANGED SHARES" means all shares of CFDL Common Stock issued
and outstanding immediately prior to the Effective Time other than shares of
CFDL Common Stock, if any, held by CFDL as treasury stock.
(ii) The consideration payable in the Merger will consist of (1)
five hundred thousand dollars ($500,000), which shall be distributed among the
CFDL Shareholders in accordance with Schedule A hereto and which shall be
payable by one or more promissory notes in the form attached hereto as Exhibit A
(the "NOTE MERGER CONSIDERATION") and (2) thirty-five million (35,000,000)
shares of Xxxxx 0X Group Common Stock, which shall be distributed among the CFDL
Shareholders in accordance with Schedule A hereto (the "STOCK MERGER
CONSIDERATION").
(iii) "MERGER CONSIDERATION" means the Stock Merger Consideration
and the Note Merger Consideration.
(d) EXCHANGE OF EXCHANGED SHARES FOR MERGER CONSIDERATION. As of the
Effective Time, by virtue of the Merger, each issued and outstanding Exchanged
Share will be converted into the right to receive the Merger Consideration,
payable, to the Record Holders of Exchanged Shares at the Effective Time. As of
the Effective Time, all shares of CFDL Common Stock will no longer be
outstanding and will automatically be cancelled and retired and will cease to
exist, and each holder of a certificate representing any such shares will cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor, without interest, upon the surrender of such certificate
in accordance with Section 3.2.
3.2 EXCHANGE OF MERGER CONSIDERATION FOR EXCHANGED SHARES.
(a) EXCHANGE. On the Closing Date, the holders of all of the CFDL
Common Stock shall deliver to Xxxxx 0X Group certificates or other documents
evidencing all of the issued and outstanding CFDL Common Stock, duly endorsed in
blank or with executed power attached thereto in transferable form. In exchange
for all of the CFDL Common Stock tendered pursuant hereto, China 3C Group shall
issue to CFDL Shareholders the Stock Merger Consideration and the Note Merger
Consideration.
(b) NO FURTHER OWNERSHIP RIGHTS IN CFDL COMMON STOCK. All shares of
China 3C Group Common Stock issued upon the surrender for exchange of shares of
CFDL Common Stock in accordance with the terms hereof will be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of CFDL
Common Stock, and there will be no further registration of transfers of the
shares of CFDL Common Stock (other than shares held directly or indirectly by
China 3C Group) after the Effective Time. If, after the Effective Time,
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Certificates are presented to the Surviving Corporation or its transfer agent
for any reason, such Certificates will be cancelled and exchanged as provided by
this Article 3.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CFDL
CFDL represents and warrants to Xxxxx 0X Group and to Sub as follows, as
of the date hereof and as of the Closing Date:
4.1 ORGANIZATION.
CFDL is a corporation duly organized, validly existing and in good
standing under the laws of British Virgin Island and has the corporate power and
is duly authorized, qualified, franchised and licensed under all applicable
laws, regulations, ordinances and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects as
it is now being conducted, including qualification to do business as a foreign
entity in the country or states in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification. Included in the Attached Schedules (as hereinafter defined) are
complete and correct copies of the articles of incorporation, bylaws and
amendments thereto as in effect on the date hereof. The execution and delivery
of this Agreement does not and the consummation of the transactions contemplated
by this Agreement in accordance with the terms hereof will not, violate any
provision of CFDL's certificate of incorporation or bylaws. CFDL has full power,
authority and legal right and has taken all action required by law, its articles
of incorporation, bylaws or otherwise to authorize the execution and delivery of
this Agreement.
4.2 CAPITALIZATION.
The authorized capitalization of CFDL consists of 50,000 shares of common
stock, no par value and no preferred shares. As of the date hereof, there are
50,000 shares of common stock issued and outstanding. All issued and outstanding
common shares have been legally issued, fully paid, are nonassessable and not
issued in violation of the preemptive rights of any other person. CFDL has no
other securities, warrants or options authorized or issued.
4.3 SUBSIDIARIES.
CFDL owns 100% of Zhejiang Yong Xin Digital Technology Company Limited, a
China corporation.
4.4 TAX MATTERS; BOOKS & RECORDS
(a) The books and records, financial and others, of CFDL are in all
material respects complete and correct and have been maintained in accordance
with good business accounting practices; and
(b) CFDL has no liabilities with respect to the payment of any country,
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties).
(c) CFDL shall remain responsible for all debts incurred prior to the
closing.
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4.5 INFORMATION.
The information concerning CFDL as set forth in this Agreement and in the
attached Schedules is complete and accurate in all material respects and does
not contain any untrue statement of a material fact or omit to state a material
fact required to make the statements made, in light of the circumstances under
which they were made, not misleading.
4.6 TITLE AND RELATED MATTERS.
CFDL has good and marketable title to and is the sole and exclusive owner
of all of its properties, inventory, interests in properties and assets, real
and personal (collectively, the "Assets") free and clear of all liens, pledges,
charges or encumbrances. Except as set forth in the Schedules attached hereto,
CFDL owns free and clear of any liens, claims, encumbrances, royalty interests
or other restrictions or limitations of any nature whatsoever and all
procedures, techniques, marketing plans, business plans, methods of management
or other information utilized in connection with CFDL's business. Except as set
forth in the attached Schedules, no third party has any right to, and CFDL has
not received any notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade secrets, know-how,
proprietary techniques, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a materially adverse affect on the business,
operations, financial conditions or income of CFDL or any material portion of
its properties, assets or rights.
4.7 LITIGATION AND PROCEEDINGS
There are no actions, suits or proceedings pending or threatened by or
against or affecting CFDL, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign or before any
arbitrator of any kind that would have a material adverse effect on the
business, operations, financial condition, income or business prospects of CFDL.
CFDL does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or instrumentality.
4.8 CONTRACTS.
On the Closing Date:
(a) There are no material contracts, agreements, franchises, license
agreements, or other commitments to which CFDL is a party or by which it or any
of its properties are bound;
(b) CFDL is not a party to any contract, agreement, commitment or
instrument or subject to any charter or other corporate restriction or any
judgment, order, writ, injunction, decree or award which materially and
adversely affects, or in the future may (as far as CFDL can now foresee)
materially and adversely affect, the business, operations, properties, assets or
conditions of CFDL; and
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(c) CFDL is not a party to any material oral or written: (i) contract
for the employment of any officer or employee; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension, benefit or
retirement plan, agreement or arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended; (iii) agreement, contract or
indenture relating to the borrowing of money; (iv) guaranty of any obligation
for the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties of obligations, which, in the aggregate exceeds
$1,000; (v) consulting or other contract with an unexpired term of more than one
year or providing for payments in excess of $10,000 in the aggregate; (vi)
collective bargaining agreement; (vii) contract, agreement, or other commitment
involving payments by it for more than $10,000 in the aggregate.
4.9 NO CONFLICT WITH OTHER INSTRUMENTS.
The execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, or constitute an event of default under, any material indenture,
mortgage, deed of trust or other material contract, agreement or instrument to
which CFDL is a party or to which any of its properties or operations are
subject.
4.10 MATERIAL CONTRACT DEFAULTS.
To the best of CFDL's knowledge and belief, it is not in default in any
material respect under the terms of any outstanding contract, agreement, lease
or other commitment which is material to the business, operations, properties,
assets or condition of CFDL, and there is no event of default in any material
respect under any such contract, agreement, lease or other commitment in respect
of which CFDL has not taken adequate steps to prevent such a default from
occurring.
4.11 GOVERNMENTAL AUTHORIZATIONS.
To the best of CFDL's knowledge, CFDL has all licenses, franchises,
permits and other governmental authorizations that are legally required to
enable it to conduct its business operations in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities or corporation laws, no authorization, approval, consent or order of,
or registration, declaration or filing with, any court or other governmental
body is required in connection with the execution and delivery by CFDL of the
transactions contemplated hereby.
4.12 COMPLIANCE WITH LAWS AND REGULATIONS.
To the best of CFDL's knowledge and belief, CFDL has complied with all
applicable statutes and regulations of any federal, state or other governmental
entity or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets or
condition of CFDL or would not result in CFDL's incurring any material
liability.
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4.13 INSURANCE.
All of the insurable properties of CFDL are insured for CFDL's benefit
under valid and enforceable policy or policies containing substantially
equivalent coverage and will be outstanding and in full force at the Closing
Date.
4.14 APPROVAL OF AGREEMENT.
The directors of CFDL have authorized the execution and delivery of the
Agreement and have approved the transactions contemplated hereby.
4.15 MATERIAL TRANSACTIONS OR AFFILIATIONS.
As of the Closing Date, there will exist no material contract, agreement
or arrangement between CFDL and any person who was at the time of such contract,
agreement or arrangement an officer, director or person owning of record, or
known by CFDL to own beneficially, ten percent (10%) or more of the issued and
outstanding Common Shares of CFDL and which is to be performed in whole or in
part after the date hereof except with regard to an agreement with the CFDL
shareholders providing for the distribution of cash to provide for payment of
federal and state taxes on Subchapter S income. CFDL has no commitment, whether
written or oral, to lend any funds to, borrow any money from or enter into any
other material transactions with, any such affiliated person.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF CHINA 3C GROUP
China 3C Group represents and warrants to CFDL, as of the date hereof and
as of the Closing Date, as follows:
5.1 ORGANIZATION.
Xxxxx 0X Group is a corporation duly organized, validly existing, and in
good standing under the laws of Nevada and has the corporate power and is duly
authorized, qualified, franchised and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects as
it is now being conducted, including qualification to do business as a foreign
corporation in the jurisdiction in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification. The execution and delivery of this Agreement does not and the
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof will not violate any provision of China 3C Group's
articles of incorporation or bylaws. China 3C Group has full power, authority
and legal right and has taken all action required by law, its articles of
incorporation, its bylaws or otherwise to authorize the execution and delivery
of this Agreement.
5.2 CAPITALIZATION.
The authorized capitalization of China 3C Group consists of 100,000,000
shares of common stock, $0.001 par value per share. As of the date hereof, China
3C Group has 2,613,251 shares of common stock issued and outstanding. All issued
and outstanding shares are legally
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issued, fully paid and nonassessable and are not issued in violation of the
preemptive or other rights of any person.
5.3 SUBSIDIARIES.
Xxxxx 0X Group has no subsidiaries other than Sub.
5.4 TAX MATTERS: BOOKS AND RECORDS.
(a) The books and records, financial and others, of Xxxxx 0X Group are
in all material respects complete and correct and have been maintained in
accordance with good business accounting practices; and
(b) China 3C Group has no liabilities with respect to the payment of
any country, federal, state, county, or local taxes (including any deficiencies,
interest or penalties).
(c) China 3C Group shall remain responsible for all debts incurred by
Xxxxx 0X Group prior to the date of closing.
5.5 LITIGATION AND PROCEEDINGS.
There are no actions, suits, proceedings or investigations pending or
threatened by or against or affecting Xxxxx 0X Group or its properties, at law
or in equity, before any court or other governmental agency or instrumentality,
domestic or foreign or before any arbitrator of any kind that would have a
material adverse affect on the business, operations, financial condition or
income of China 3C Group. China 3C Group is not in default with respect to any
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or instrumentality or of any
circumstances which, after reasonable investigation, would result in the
discovery of such a default.
5.6 MATERIAL CONTRACT DEFAULTS.
China 3C Group is not in default in any material respect under the terms
of any outstanding contract, agreement, lease or other commitment which is
material to the business, operations, properties, assets or condition of China
3C Group, and there is no event of default in any material respect under any
such contract, agreement, lease or other commitment in respect of which Xxxxx 0X
Group has not taken adequate steps to prevent such a default from occurring.
5.7 INFORMATION.
The information concerning China 3C Group as set forth in this Agreement
and in the attached Schedules is complete and accurate in all material respects
and does not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made in light of the circumstances
under which they were made, not misleading.
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5.8 TITLE AND RELATED MATTERS.
China 3C Group has good and marketable title to and is the sole and
exclusive owner of all of its properties, inventory, interest in properties and
assets, real and personal (collectively, the "Assets") free and clear of all
liens, pledges, charges or encumbrances. Xxxxx 0X Group owns free and clear of
any liens, claims, encumbrances, royalty interests or other restrictions or
limitations of any nature whatsoever and all procedures, techniques, marketing
plans, business plans, methods of management or other information utilized in
connection with China 3C Group's business. No third party has any right to, and
Xxxxx 0X Group has not received any notice of infringement of or conflict with
asserted rights of other with respect to any product, technology, data, trade
secrets, know-how, proprietary techniques, trademarks, service marks, trade
names or copyrights which, singly on in the aggregate, if the subject of an
unfavorable decision ruling or finding, would have a materially adverse affect
on the business, operations, financial conditions or income of Xxxxx 0X Group or
any material portion of its properties, assets or rights.
5.9 CONTRACTS.
On the Closing Date:
(a) There are no material contracts, agreements franchises, license
agreements, or other commitments to which Xxxxx 0X Group is a party or by which
it or any of its properties are bound:
(b) Xxxxx 0X Group is not a party to any contract, agreement,
commitment or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree or award materially
and adversely affects, or in the future may (as far as Xxxxx 0X Group can now
foresee) materially and adversely affect, the business, operations, properties,
assets or conditions of China 3C Group; and
(c) Xxxxx 0X Group is not a party to any material oral or written: (I)
contract for the employment of any officer or employee; (ii) profit sharing,
bonus, deferred compensation, stock option, severance pay, pension benefit or
retirement plan, agreement or arrangement covered by Title IV of the Employee
Retirement Income Security Act, as amended; (iii) agreement, contract or
indenture relating to the borrowing of money; (iv) guaranty of any obligation
for the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties, of obligations, which, in the aggregate exceeds
$1,000; (v) consulting or other contract with an unexpired term of more than one
year or providing for payments in excess of $10,000 in the aggregate; (vi)
collective bargaining agreement; (vii) contract, agreement or other commitment
involving payments by it for more than $10,000 in the aggregate.
5.10 COMPLIANCE WITH LAWS AND REGULATIONS.
To the best of China 3C Group's knowledge and belief, China 3C Group has
complied with all applicable statutes and regulations of any federal, state or
other governmental entity or agency thereof, except to the extent that
noncompliance would not materially and adversely affect the business,
operations, properties, assets or condition of Xxxxx 0X Group or would not
result in China 3C Group incurring material liability.
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5.11 INSURANCE.
All of the insurable properties of Xxxxx 0X Group are insured for China 3C
Group's benefit under valid and enforceable policy or policies containing
substantially equivalent coverage and will be outstanding and in full force at
the Closing Date.
5.12 APPROVAL OF AGREEMENT.
The directors of China 3C Group have authorized the execution and delivery
of the Agreement by and have approved the transactions contemplated hereby.
5.13 MATERIAL TRANSACTIONS OR AFFILIATIONS.
There are no material contracts or agreements of arrangement between Xxxxx
0X Group and any person, who was at the time of such contract, agreement or
arrangement an officer, director or person owning of record, or known to
beneficially own ten percent (10%) or more of the issued and outstanding Common
Shares of China 3C Group and which is to be performed in whole or in part after
the date hereof. China 3C Group has no commitment, whether written or oral, to
lend any funds to, borrow any money from or enter into material transactions
with any such affiliated person.
5.14 NO CONFLICT WITH OTHER INSTRUMENTS.
The execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, or constitute an event of default under, any material indenture,
mortgage, deed of trust or other material contract, agreement or instrument to
which Xxxxx 0X Group is a party or to which any of its properties or operations
are subject.
5.15 GOVERNMENTAL AUTHORIZATIONS.
Xxxxx 0X Group has all licenses, franchises, permits or other governmental
authorizations legally required to enable it to conduct its business in all
material respects as conducted on the date hereof. Except for compliance with
federal and state securities and corporation laws, as hereinafter provided, no
authorization, approval, consent or order of, or registration, declaration or
filing with, any court or other governmental body is required in connection with
the execution and delivery by Xxxxx 0X Group of this Agreement and the
consummation of the transactions contemplated hereby.
ARTICLE 6. SPECIAL COVENANTS
6.1 ACCESS TO PROPERTIES AND RECORDS.
Prior to closing, China 3C Group and CFDL will each afford to the officers
and authorized representatives of the other full access to the properties, books
and records of each other, in order that each may have full opportunity to make
such reasonable investigation as it shall desire to make of the affairs of the
other and each will furnish the other with such additional
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financial and operating data and other information as to the business and
properties of each other, as the other shall from time to time reasonably
request.
6.2 AVAILABILITY OF RULE 144.
Xxxxx 0X Group and CFDL shareholders holding "restricted securities, " as
that term is defined in Rule 144 promulgated pursuant to the Securities Act will
remain as "restricted securities". China 3C Group is under no obligation to
register such shares under the Securities Act, or otherwise. The stockholders of
China 3C Group and CFDL holding restricted securities of China 3C Group and CFDL
as of the date of this Agreement and their respective heirs, administrators,
personal representatives, successors and assigns, are intended third party
beneficiaries of the provisions set forth herein. The covenants set forth in
this Section 4.2 shall survive the Closing and the consummation of the
transactions herein contemplated.
6.3 THE STOCK MERGER CONSIDERATION.
The consummation of this Agreement, including the issuance of the China 3C
Group Common Shares to the Shareholders of CFDL as contemplated hereby,
constitutes the offer and sale of securities under the Securities Act, and
applicable state statutes. Such transaction shall be consummated in reliance on
exemptions from the registration and prospectus delivery requirements of such
statutes that depend, inter alia, upon the circumstances under which the CFDL
Shareholders acquire such securities.
6.4 THIRD PARTY CONSENTS.
China 3C Group and CFDL agree to cooperate with each other in order to
obtain any required third party consents to this Agreement and the transactions
herein contemplated.
6.5 ACTIONS PRIOR AND SUBSEQUENT TO CLOSING.
(a) From and after the date of this Agreement until the Closing Date,
except as permitted or contemplated by this Xxxxxxxxx, Xxxxx 0X Group and CFDL
will each use its best efforts to:
(i) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary wear and tear
and damage due to casualty;
(ii) maintain in full force and effect insurance comparable in
amount and in
(iii) scope of coverage to that now maintained by it; and
(iv) perform in all material respects all of its obligations under
material contracts, leases and instruments relating to or affecting its assets,
properties and business.
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(b) From and after the date of this Agreement until the Closing Date,
China 3C Group will not, without the prior consent of CFDL:
(i) except as otherwise specifically set forth herein, make any
change in its articles of incorporation or bylaws;
(ii) declare or pay any dividend on its outstanding Common Shares,
except as may otherwise be required by law, or effect any stock split or
otherwise change its capitalization, except as provided herein;
(iii) enter into or amend any employment, severance or agreements or
arrangements with any directors or officers;
(iv) grant, confer or award any options, warrants, conversion rights
or other rights not existing on the date hereof to acquire any Common Shares; or
(v) purchase or redeem any Common Shares.
6.6 INDEMNIFICATION.
(a) Xxxxx 0X Group hereby agrees to indemnify CFDL, each of the
officers, agents and directors and current shareholders of CFDL as of the
Closing Date against any loss, liability, claim, damage or expense (including,
but not limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened or any claim whatsoever), to which it or they may become subject to
or rising out of or based on any inaccuracy appearing in or misrepresentation
made in this Agreement. The indemnification provided for in this paragraph shall
survive the Closing and consummation of the transactions contemplated hereby and
termination of this Agreement; and
(b) CFDL hereby agrees to indemnify China 3C Group, each of the
officers, agents, directors and current shareholders of Xxxxx 0X Group as of the
Closing Date against any loss, liability, claim, damage or expense (including,
but not limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened or any claim whatsoever), to which it or they may become subject
arising out of or based on any inaccuracy appearing in or misrepresentation made
in this Agreement. The indemnification provided for in this paragraph shall
survive the Closing and consummation of the transactions contemplated hereby and
termination of this Agreement.
ARTICLE 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF CHINA 3C GROUP AND SUB
The obligations of China 3C Group and Sub under this Agreement are subject
to the satisfaction, at or before the Closing Date, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS.
The representations and warranties made by China 3C Group in this
Agreement were true when made and shall be true at the Closing Date with the
same force and effect as if such
13
representations and warranties were made at the Closing Date (except for changes
therein permitted by this Agreement), and Xxxxx 0X Group shall have performed or
compiled with all covenants and conditions required by this Agreement to be
performed or complied with by Xxxxx 0X Group prior to or at the Closing CFDL
shall be furnished with a certificate, signed by a duly authorized officer of
Xxxxx 0X Group and dated the Closing Date, to the foregoing effect.
7.2 DIRECTOR APPROVAL.
The Board of Directors of China 3C Group shall have approved this
Agreement and the transactions contemplated herein.
7.3 OFFICER'S CERTIFICATE.
CFDL shall have been furnished with a certificate dated the Closing Date
and signed by a duly authorized officer of Xxxxx 0X Group to the effect that:
(a) the representations and warranties of CFDL set forth in the Agreement and in
all exhibits, schedules and other documents furnished in connection herewith are
in all material respects true and correct as if made on the Effective Date; (b)
CFDL has performed all covenants, satisfied all conditions, and complied with
all other terms and provisions of this Agreement to be performed, satisfied or
complied with by it as of the Effective Date; (c) since such date and other than
as previously disclosed to China 3C Group, CFDL has not entered into any
material transaction other than transactions which are usual and in the ordinary
course if its business; and (d) no litigation, proceeding, investigation or
inquiry is pending or, to the best knowledge of CFDL, threatened, which might
result in an action to enjoin or prevent the consummation of the transactions
contemplated by this Agreement or, to the extent not disclosed in the China 3C
Group Schedules, by or against China 3C Group which might result in any material
adverse change in any of the assets, properties, business or operations of Xxxxx
0X Group.
7.4 NO MATERIAL ADVERSE CHANGE.
Prior to the Closing Date, there shall not have occurred any material
adverse change in the financial condition, business or operations of nor shall
any event have occurred which, with the lapse of time or the giving of notice,
may cause or create any material adverse change in the financial condition,
business or operations of China 3C Group.
7.5 OTHER ITEMS.
China 3C Group shall have received such further documents, certificates or
instruments relating to the transactions contemplated hereby as Xxxxx 0X Group
may reasonably request.
ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF CFDL AND THE CFDL SHAREHOLDERS
The obligations of CFDL and the CFDL Shareholders under this Agreement are
subject to the satisfaction, at or before the Closing date (unless otherwise
indicated herein), of the following conditions:
14
8.1 ACCURACY OF REPRESENTATIONS.
The representations and warranties made by China 3C Group in this
Agreement were true when made and shall be true as of the Closing Date (except
for changes therein permitted by this Agreement) with the same force and effect
as if such representations and warranties were made at and as of the Closing
Date, and Xxxxx 0X Group shall have performed and complied with all covenants
and conditions required by this Agreement to be performed or complied with by
Xxxxx 0X Group prior to or at the Closing. CFDL shall have been furnished with a
certificate, signed by a duly authorized executive officer of Xxxxx 0X Group and
dated the Closing Date, to the foregoing effect.
8.2 DIRECTOR APPROVAL.
The Board of Directors of China 3C Group shall have approved this
Agreement and the transactions contemplated herein.
8.3 NO MATERIAL ADVERSE CHANGE.
Prior to the Closing Date, there shall not have occurred any material
adverse change in the financial condition, business or operations of nor shall
any event have occurred which, with the lapse of time or the giving of notice,
may cause or create any material adverse change in the financial condition,
business or operations of China 3C Group.
ARTICLE 9. TERMINATION
9.1 TERMINATION RIGHTS.
(a) This Agreement may be terminated by the board of directors or
majority interest of Shareholders of either China 3C Group or CFDL,
respectively, at any time prior to the Closing Date if:
(i) there shall be any action or proceeding before any court or any
governmental body which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement and which, in the judgment of such
board of directors, made in good faith and based on the advice of its legal
counsel, makes it inadvisable to proceed with the exchange contemplated by this
Agreement; or
(ii) any of the transactions contemplated hereby are disapproved by
any regulatory authority whose approval is required to consummate such
transactions.
In the event of termination pursuant to this paragraph (a), no obligation,
right, or liability shall arise hereunder and each party shall bear all of the
expenses incurred by it in connection with the negotiation, drafting and
execution of this Agreement and the transactions herein contemplated.
(b) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of Xxxxx 0X Group if CFDL shall fail to
comply in any material respect with any of its covenants or agreements contained
in this Agreement or if any of
15
the representations or warranties of CFDL contained herein shall be inaccurate
in any material respect, which noncompliance or inaccuracy is not cured after 20
days written notice thereof is given to CFDL. If this Agreement is terminated
pursuant to this paragraph (b), this Agreement shall be of no further force or
effect and no obligation, right or liability shall arise hereunder.
(c) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of CFDL if Xxxxx 0X Group shall fail to
comply in any material respect with any of its covenants or agreements contained
in this Agreement or if any of the representations or warranties of China 3C
Group contained herein shall be inaccurate in any material respect, which
noncompliance or inaccuracy is not cured after 20 days written notice thereof is
given to Xxxxx 0X Group. If this Agreement is terminated pursuant to this
paragraph (d), this Agreement shall be of no further force or effect and no
obligation, right or liability shall arise hereunder.
(d) In the event of termination pursuant to paragraph (b) and (c)
hereof, the breaching party shall bear all of the expenses incurred by the other
party in connection with the negotiation, drafting and execution of this
Agreement and the transactions herein contemplated.
ARTICLE 10. MISCELLANEOUS
10.1 BROKERS AND FINDERS.
Each party hereto hereby represents and warrants that it is under no
obligation, express or implied, to pay certain finders in connection with the
bringing of the parties together in the negotiation, execution, or consummation
of this Agreement. The parties each agree to indemnify the other against any
claim by any third person for any commission, brokerage or finder's fee or other
payment with respect to this Agreement or the transactions contemplated hereby
based on any alleged agreement or understanding between the indemnifying party
and such third person, whether express or implied from the actions of the
indemnifying party.
10.2 LAW, FORUM AND JURISDICTION.
This Agreement shall be construed and interpreted in accordance with the
laws of the State of New York, United States of America, except for applicable
provisions of the Nevada General Corporation Law, which shall control to the
extent applicable.
10.3 NOTICES.
Any notices or other communications required or permitted hereunder shall
be sufficiently given if personally delivered to it or sent by registered mail
or certified mail, postage prepaid, or by prepaid telegram addressed as follows:
If to Xxxxx 0X Group: 00000 Xxxxxxxx Xxxx Xxxxx 0000, Xxx Xxxxxxx, XX
00000
If to CFDL: Xx. 000, Xx Xxx Xxx Xxxx, Xxxxxxxx Xxxx, Xxxxxxxx Xxxxxxxx,
P.R. China 310014
16
or such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed or
telegraphed.
10.4 ATTORNEYS' FEES.
In the event that any party institutes any action or suit to enforce this
Agreement or to secure relief from any default hereunder or breach hereof, the
breaching party or parties shall reimburse the non-breaching party or parties
for all costs, including reasonable attorneys' fees, incurred in connection
therewith and in enforcing or collecting any judgment rendered therein.
10.5 CONFIDENTIALITY.
Each party hereto agrees with the other party that, unless and until the
transactions contemplated by this Agreement have been consummated, they and
their representatives will hold in strict confidence all data and information
obtained with respect to another party or any subsidiary thereof from any
representative, officer, director or employee, or from any books or records or
from personal inspection, of such other party, and shall not use such data or
information or disclose the same to others, except: (i) to the extent such data
is a matter of public knowledge or is required by law to be published; and (ii)
to the extent that such data or information must be used or disclosed in order
to consummate the transactions contemplated by this Agreement.
10.6 SCHEDULES; KNOWLEDGE.
Each party is presumed to have full knowledge of all information set forth
in the other party's schedules delivered pursuant to this Agreement.
10.7 THIRD PARTY BENEFICIARIES.
This contract is solely among the parties hereto and except as
specifically provided, no director, officer, stockholder, employee, agent,
independent contractor or any other person or entity shall be deemed to be a
third party beneficiary of this Agreement.
10.8 ENTIRE AGREEMENT.
This Agreement represents the entire agreement between the parties
relating to the subject matter hereof. This Agreement alone fully and completely
expresses the agreement of the parties relating to the subject matter hereof.
There are no other courses of dealing, understanding, agreements,
representations or warranties, written or oral, except as set forth herein. This
Agreement may not be amended or modified, except by a written agreement signed
by all parties hereto.
17
10.9 SURVIVAL; TERMINATION.
The representations, warranties and covenants of the respective parties
shall survive the Closing Date and the consummation of the transactions herein
contemplated for 18 months.
10.10 COUNTERPARTS.
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which taken together shall be but a
single instrument.
10.11 AMENDMENT OR WAIVER.
Every right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in equity, and may
be enforced concurrently herewith, and no waiver by any party of the performance
of any obligation by the other shall be construed as a waiver of the same or any
other default then, theretofore, or thereafter occurring or existing. At any
time prior to the Closing Date, this Agreement may be amended by a by all
parties hereto, with respect to any of the terms contained herein, and any term
or condition of this Agreement may be waived or the time for performance hereof
may be extended by the party or parties for whose benefit the provision is
intended.
10.12 EXPENSES.
Each party herein shall bear all of their respective cost s and expenses
incurred in connection with the negotiation of this Agreement and in the
consummation of the transactions provided for herein and the preparation
thereof.
10.13 HEADINGS; CONTEXT.
The headings of the sections and paragraphs contained in this Agreement
are for convenience of reference only and do not form a part hereof and in no
way modify, interpret or construe the meaning of this Agreement.
10.14 BENEFIT.
This Agreement shall be binding upon and shall inure only to the benefit
of the parties hereto, and their permitted assigns hereunder. This Agreement
shall not be assigned by any party without the prior written consent of the
other party.
10.15 PUBLIC ANNOUNCEMENTS.
Except as may be required by law, neither party shall make any public
announcement or filing with respect to the transactions provided for herein
without the prior consent of the other party hereto.
18
10.16 SEVERABILITY.
In the event that any particular provision or provisions of this Agreement
or the other agreements contained herein shall for any reason hereafter be
determined to be unenforceable, or in violation of any law, governmental order
or regulation, such unenforceability or violation shall not affect the remaining
provisions of such agreements, which shall continue in full force and effect and
be binding upon the respective parties hereto.
10.17 FAILURE OF CONDITIONS; TERMINATION.
In the event of any of the conditions specified in this Agreement shall
not be fulfilled on or before the Closing Date, either of the parties have the
right either to proceed or, upon prompt written notice to the other, to
terminate and rescind this Agreement. In such event, the party that has failed
to fulfill the conditions specified in this Agreement will liable for the other
parties legal fees. The election to proceed shall not affect the right of such
electing party reasonably to require the other party to continue to use its
efforts to fulfill the unmet conditions.
10.18 NO STRICT CONSTRUCTION.
The language of this Agreement shall be construed as a whole, according to
its fair meaning and intendment, and not strictly for or against either party
hereto, regardless of who drafted or was principally responsible for drafting
the Agreement or terms or conditions hereof.
10.19 EXECUTION KNOWING AND VOLUNTARY.
In executing this Agreement, the parties severally acknowledge and
represent that each: (a) has fully and carefully read and considered this
Agreement; (b) has been or has had the opportunity to be fully apprized by its
attorneys of the legal effect and meaning of this document and all terms and
conditions hereof; (c) is executing this Agreement voluntarily, free from any
influence, coercion or duress of any kind.
10.20 AMENDMENT.
At any time after the Closing Date, this Agreement may be amended by both
parties, with respect to any of the terms contained herein, and any term or
condition of this Agreement may be waived or the time for performance hereof may
be extended by the party or parties for whose benefit the provision is intended.
[Signature page follows]
19
IN WITNESS WHEREOF, China 3C Group, Sub and CFDL, each pursuant to the
approval and authority duly given, as well as the CFDL Shareholders, have caused
this Agreement and Plan of Merger to be executed as of the date first above
written.
XXXXX 0X GROUP
By: /s/ Xxxxxxxxx Xxxx
---------------------------------------------
Its Chairman of the Board and Chief
Executive Officer
YX ACQUISITION CORPORATION
By: /s/ Xxxxxxxxx Xxxx
---------------------------------------------
Its Chairman of the Board and Chief
Executive Officer
CAPITAL FUTURE DEVELOPMENT LIMITED
By: /s/ Xxxxxxxxx Xxxx
---------------------------------------------
Its Sole Director
CFDL SHAREHOLDERS
/s/ Xxxxxxxxx Xxxx
---------------------------------------------
Xxxxxxxxx Xxxx
/s/ Xxxxx Xxxxx
---------------------------------------------
Xxxxx Xxxxx
/s/ Weiyi Lv
---------------------------------------------
Weiyi Lv
/s/ Xxxxxxxx Xxxx
---------------------------------------------
Xxxxxxxx Xxxx
/s/ Xxxxxxxx Xxxx
---------------------------------------------
Zhongsheng Bao
20
SIMPLE (HONGKONG) INVESTMENT &
MANAGEMENT COMPANY LIMITED
By: /s/ Ji Wen
---------------------------------------------
Its Director
FIRST CAPITAL LIMITED
By: /s/ Kit Tsui
---------------------------------------------
Its Chief Executive Officer
SHENZHEN DINGYI INVESTMENT & CONSULTING
LIMITED
By: /s/ Sun Xxxx Xxx
---------------------------------------------
Its Director
CHINA US BRIDGE CAPITAL LIMITED
By: /s/ Xxxxxxxx Xx
---------------------------------------------
Its Chief Executive Officer
21
SCHEDULE A
CFDL XXXXXXXXXXXX
XXXXXX XX XXXXX 0X
XXXX COMMON STOCK GROUP COMMON STOCK AND AMOUNT
NAME OF CFDL SHAREHOLDER OWNERSHIP % OF PROMISSORY NOTE
------------------------ ----------------- -----------------------------
1. Xxxxxxxxx Xxxx 27.5% 9,625,000 shares;
$137,500
2. Xxxxx Xxxxx 15.7% 5,495,000 shares;
$78,500
3. Weiyi Lv 15.7% 5,495,000 shares;
$78,500
4. Xxxxxxxx Xxxx 11.8% 4,130,000 shares;
$59,000
5. Zhongsheng Bao 7.8% 2,730,000 shares;
$39,000
6. Simple (Hongkong) Investment & 5.7% 1,995,000 shares;
Management Company Limited $28,500
7. First Capital Limited 5.9% 2,065,000 shares;
$29,500
8. Shenzhen Dingyi Investment & Consulting 5.6% 1,960,000 shares;
Limited $28,000
9. China US Bridge Capital Limited 4.3% 1,505,000 shares;
$21,500
1
EXHIBIT A
CHINA 3C GROUP
PROMISSORY NOTE
DECEMBER 21, 2005 PN NO. ___ $__________
FOR VALUE RECEIVED, the undersigned, China 3C Group, a Nevada corporation (the
"Maker"), hereby promises to pay to the order of __________ (the "Payee"), the
principal amount of $___________, all in accordance with the provisions of this
promissory note.
1. Payment of Principal. The full amount of the principal of this promissory
note shall be due and payable on December 20, 2006 (the "Maturity Date").
2. No Interest. Under no circumstances shall interest accrue or be charged on
the unpaid principal balance of this promissory note.
3. Method of Payment. Payments hereunder shall be in lawful money of the United
States and shall be made to Payee at the following address or at such other
place as Payee may designate to Maker in writing: x/x 000 XxXxx Xxx Xxxx,
XxxxXxxx Xxxx, Xxxxxxxx Xxxxxxxx, Xxxxx 310014.
4. Prepayment. This promissory note may be prepaid in whole or in part at any
time without penalty or premium by payment of all or any part of the outstanding
principal amount.
5. Unconditional Payment Obligation. No provision of this promissory note shall
alter or impair the obligation of the Maker, which is absolute and
unconditional, to pay the principal of this promissory note at the time and
place and in the currency herein prescribed.
6. Events of Default. If any of the following events ("Events of Default") shall
occur, Payee may, by notice to Maker, declare this promissory note and all
amounts payable hereunder to be due and payable, whereupon the same shall become
immediately due and payable:
(a) Maker shall become insolvent or admit in writing its inability to pay its
debts as they become due, or shall make a general assignment for the benefit of
creditors;
(b) Any proceedings shall be instituted by or against Maker seeking either (i)
an order for relief with respect to, or reorganization, arrangement, adjustment
or composition of, its debts under the United States Bankruptcy Code or under
any other law relating to bankruptcy, insolvency, reorganization, or relief of
debtors, or (ii) appointment of a trustee, receiver or similar official for
Maker or for any substantial part of its property;
(c) Maker's failure to conduct business in the ordinary course, dissolution or
termination of existence; or
1
(d) Maker's failure after the Maturity Date to repay the amounts due hereunder
within ten (10) days of receiving written notice from Payee that such amounts
are due and payable.
7. Waiver of Notice. Maker hereby waives presentment, demand, notice, protest
and all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this promissory note, and assents to extension of
the time of payment or forbearance or other indulgence without notice.
8. Governing Law. This promissory note shall be construed in accordance with the
laws of the State of New York, without regard to its conflicts of laws rules.
9. Notices. All notices, requests, demands and other communications with respect
to this promissory note shall be given in person or forwarded by first class
United States mail, postage prepaid, registered or certified mail, with return
receipt requested, addressed to the party's address. Any notice, request, demand
or communication shall be deemed validly given and received upon delivery if
given in person, and on the 5th business day after deposit in the United States
mail if given by mail as provided for in the preceding sentence.
IN WITNESS WHEREOF, the Maker has executed and delivered this Note
effective as of December 21, 2005.
XXXXX 0X GROUP
___________________________________
Chairman of the Board and
Chief Executive Officer
2
