Share Exchange Agreement
Β
Β
This
Share Exchange Agreement, dated as of September 6, 2006, is made by and among
General Components, Inc., a Nevada corporation (the βAcquiror Companyβ), each of
the Persons listed on Exhibit B hereto (collectively, the βShareholdersβ, and
individually a βShareholderβ) and Magical Insight Investments Ltd., a British
Virgin Islands corporation (the βCompanyβ).
Β
BACKGROUND
Β
The
Shareholders have agreed to transfer to the Acquiror Company, and the Acquiror
Company has agreed to acquire from the Shareholders, all of the Shares, which
Shares constitute 100% of the outstanding capital stock of the Company, in
exchange for (i) 179,970,000 shares of the Acquiror Companyβs Common Stock (the
βAcquiror Company Sharesβ), and (ii) 280,030,000 warrants to purchase shares of
the Acquiror Companyβs Common Stock (the βAcquiror Company Warrantsβ), which
Acquiror Company Shares and Acquiror Company Warrants shall together constitute
approximately 82.14% of the fully diluted outstanding shares of Acquiror
Companyβs Common Stock immediately after the closing of the transactions
contemplated herein, in each case, on the terms and conditions as set forth
herein.
Β
SECTION
I
DEFINITIONS
Β
Unless
the context otherwise requires, the terms defined in this Section 1 will have
the meanings herein specified for all purposes of this Agreement, applicable
to
both the singular and plural forms of any of the terms herein
defined.
Β
1.1Β βAccredited
Investorβ has the meaning set forth in Regulation D under the Securities Act and
set forth on Exhibit C.
Β
1.2Β βAcquiror
Company Balance Sheetβ means the Acquiror Companyβs audited balance sheet at
December 31, 2005.
Β
1.3Β βAcquiror
Company Boardβ means the Board of Directors of the Acquiror
Company.
Β
1.4Β βAcquiror
Company Common Stockβ means the Acquiror Companyβs common stock, $.001 par value
per share.
Β
1.5Β βAcquiror
Company SEC Reportsβ means, collectively, the registration statements and
periodic reports filed by the Acquiror Company with the Commission.
Β
1.6Β βAcquiror
Company Sharesβ means the Acquiror Company Common Stock being issued to the
Shareholders pursuant hereto.
Β
1.7Β βAcquiror
Company Subsidiariesβ means all of the direct and indirect Subsidiaries of the
Acquiror Company.
Β
Β
1.8Β βAcquiror
Company Warrantsβ means the five year warrants to purchase shares of Acquiror
Company Common Stock at an exercise price of $.000001 per share exercisable
immediately following the reverse split of the Acquiror Companyβs Common Stock
referred to in Section 7.2 being issued to the Shareholders pursuant hereto.
Β
1.9Β βAffiliateβ
means any Person that directly or indirectly controls, is controlled by or
is
under common control with the indicated Person.
Β
1.10Β βAgreementβ
means this Share Exchange Agreement, including all Schedules and Exhibits
hereto, as this Share Exchange Agreement may be from time to time amended,
modified or supplemented.
Β
1.11Β βApproved
Plansβ means a stock option or similar plan for the benefit of employees or
others which has been approved by the stockholders of the Acquiror
Company.
Β
1.12Β βClosing
Acquiror Company Sharesβ means the aggregate number of Acquiror Company Shares
issuable to the Shareholders at the Closing Date.
Β
1.13Β βClosing
Dateβ has the meaning set forth in Section 3.
Β
1.14Β βCodeβ
means the Internal Revenue Code of 1986, as amended.
Β
1.15Β βCommon
Stockβ means the Companyβs common shares, US$1.00 nominal or par value per
share.
Β
1.16Β βCommissionβ
means the Securities and Exchange Commission or any other federal agency then
administering the Securities Act.
Β
1.17Β βCompany
Boardβ means the Board of Directors of the Company.
Β
1.18Β βCompany
Subsidiaryβ means Beihai Hi-Tech Wealth Technology Development Co., Ltd., a
Sino-Foreign joint venture company registered in Beihai City, Guangxi Province,
Peopleβs Republic of China. Unless the context otherwise requires, the term
βCompanyβ shall include the Company Subsidiary.
Β
1.19Β βCovered
Personsβ means all Persons, other than Acquiror Company, who are parties to
indemnification and employment agreements with Acquiror Company existing on
or
before the Closing Date.
Β
1.20Β βDistributorβ
means any underwriter, dealer or other Person who participates, pursuant to
a
contractual arrangement, in the distribution of the securities offered or sold
in reliance on Regulation S.
Β
1.21Β βEnvironmental
Lawsβ means any Law or other requirement relating to the environment, natural
resources, or public or employee health and safety.
Β
1.22Β βEnvironmental
Permitβ means all licenses, permits, authorizations, approvals, franchises and
rights required under any applicable Environmental Law or
Order.
2
Β
Β
1.23Β βEquity
Securityβ means any stock or similar security, including, without limitation,
securities containing equity features and securities containing profit
participation features, or any security convertible into or exchangeable for,
with or without consideration, any stock or similar security, or any security
carrying any warrant, right or option to subscribe to or purchase any shares
of
capital stock, or any such warrant or right.
Β
1.24Β βERISAβ
means the Employee Retirement Income Security Act of 1974, as
amended.
Β
1.25Β βExchangeβ
has the meaning set forth in Section 2.1.
Β
1.26Β βExchange
Actβ means the Securities Exchange Act of 1934 or any similar federal statute,
and the rules and regulations of the Commission thereunder, all as the same
will
then be in effect.
Β
1.27Β βExhibitsβ
means the several exhibits referred to and identified in this
Agreement.
Β
1.28Β βExisting
Businessesβ has the meaning set forth in Section 7.3.
Β
1.29Β βGAAPβ
means, with respect to any Person, United States generally accepted accounting
principles applied on a consistent basis with such Personβs past
practices.
Β
1.30Β βGovernmental
Authorityβ means any federal or national, state or provincial, municipal or
local government, governmental authority, regulatory or administrative agency,
governmental commission, department, board, bureau, agency or instrumentality,
political subdivision, commission, court, tribunal, official, arbitrator or
arbitral body, in each case whether U.S. or non-U.S.
Β
1.31Β βIndebtednessβ
means any obligation, contingent or otherwise. Any obligation secured by a
Lien
on, or payable out of the proceeds of, or production from, property of the
relevant party will be deemed to be Indebtedness.
Β
1.32Β βIndemnified
Personsβ has the meaning set forth in Section 7.1.1.
Β
1.33Β βIntellectual
Propertyβ means all industrial and intellectual property, including, without
limitation, all U.S. and non-U.S. patents, patent applications, patent rights,
trademarks, trademark applications, common law trademarks, Internet domain
names, trade names, service marks, service xxxx applications, common law service
marks, and the goodwill associated therewith, copyrights, in both published
and
unpublished works, whether registered or unregistered, copyright applications,
franchises, licenses, know-how, trade secrets, technical data, designs, customer
lists, confidential and proprietary information, processes and formulae, all
computer software programs or applications, layouts, inventions, development
tools and all documentation and media constituting, describing or relating
to
the above, including manuals, memoranda, and records, whether such intellectual
property has been created, applied for or obtained anywhere throughout the
world.
3
Β
Β
1.34Β βLawsβ
means, with respect to any Person, any U.S. or non-U.S. federal, national,
state, provincial, local, municipal, international, multinational or other
law
(including common law), constitution, statute, code, ordinance, rule, regulation
or treaty applicable to such Person.
Β
1.35Β βLienβ
means any mortgage, pledge, security interest, encumbrance, lien or charge
of
any kind, including, without limitation, any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of or
agreement to give any financing statement under the Uniform Commercial Code
or
similar statute of any jurisdiction and including any lien or charge arising
by
Law.
Β
1.36Β βLicensed
Intellectual Propertyβ means all Intellectual Property licensed or sublicensed
to the Company or any Subsidiary from a third party
Β
1.37Β βMaterial
Acquiror Company Contractβ means any and all agreements, contracts,
arrangements, leases, commitments or otherwise, of the Acquiror Company, of
the
type and nature that the Acquiror Company is required to file with the
Commission.
Β
1.38Β βMaterial
Adverse Effectβ means, when used with respect to the Acquiror Company or the
Company, as the case may be, any change, effect or circumstance which,
individually or in the aggregate, would reasonably be expected to (a) have
a
material adverse effect on the business, assets, financial condition or results
of operations of the Acquiror Company or the Company, as the case may be, in
each case taken as a whole or (b)Β materially impair the ability of the
Acquiror Company or the Company, as the case may be, to perform their
obligations under this Agreement, excluding any change, effect or circumstance
resulting from (i) the announcement, pendency or consummation of the
transactions contemplated by this Agreement, (ii) changes in the United States
securities markets generally, or (iii) changes in general economic, currency
exchange rate, political or regulatory conditions in industries in which the
Acquiror Company or the Company, as the case may be, operate.
Β
1.39Β βOrderβ
means any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any Governmental
Authority.
Β
1.40Β βOrganizational
Documentsβ means (a) the articles or certificate of incorporation and the
by-laws or code of regulations of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the articles or certificate of formation and operating
agreement of a limited liability company; (e) any other document performing
a
similar function to the documents specified in clauses (a), (b), (c) and (d)
adopted or filed in connection with the creation, formation or organization
of a
Person; and (f) any and all amendments to any of the
foregoing.Authority.
Β
1.41Β βOwned
Intellectual Propertyβ means all Intellectual Property in and to which the
Company or any Subsidiary holds, or has a right to hold, right, title and
interest.
4
Β
Β
1.42Β βPermitted
Liensβ means (a) Liens for Taxes not yet payable or in respect of which the
validity thereof is being contested in good faith by appropriate proceedings
and
for the payment of which the relevant party has made adequate reserves; (b)
Liens in respect of pledges or deposits under workmenβs compensation laws or
similar legislation, carriers, warehousemen, mechanics, laborers and materialmen
and similar Liens, if the obligations secured by such Liens are not then
delinquent or are being contested in good faith by appropriate proceedings
conducted and for the payment of which the relevant party has made adequate
reserves; (c)Β statutory Liens incidental to the conduct of the business of
the relevant party which were not incurred in connection with the borrowing
of
money or the obtaining of advances or credits and that do not in the aggregate
materially detract from the value of its property or materially impair the
use
thereof in the operation of its business; and (d) Liens that would not have
a
Material Adverse Effect.
Β
1.43Β βPersonβ
means all natural persons, corporations, business trusts, associations,
companies, partnerships, limited liability companies, joint ventures and other
entities, governments, agencies and political subdivisions.
Β
1.44Β βProceedingβ
means any action, arbitration, audit, hearing, investigation, litigation, or
suit (whether civil, criminal, administrative or investigative) commenced,
brought, conducted, or heard by or before, or otherwise involving, any
Governmental Authority.
Β
1.45Β βRegulation
Sβ means Regulation S under the Securities Act, as the same may be amended from
time to time, or any similar rule or regulation hereafter adopted by the
Commission.
Β
1.46Β βRule
144β means Rule 144 under the Securities Act, as the same may be amended from
time to time, or any successor statute.
Β
1.47Β βSchedule
14(f) Filingβ means an information statement filed by the Acquiror Company on
Schedule 14f-1 under the Exchange Act.
Β
1.48Β βSchedulesβ
means the several schedules referred to and identified herein, setting forth
certain disclosures, exceptions and other information, data and documents
referred to at various places throughout this Agreement.
Β
1.49Β βSection
4(2)β means Section 4(2) under the Securities Act, as the same may be amended
from time to time, or any successor statute.
Β
1.50Β βSecurities
Actβ means the Securities Act of 1933, as amended, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as
the
same will be in effect at the time.
Β
1.51Β βSharesβ
means the 1 issued and outstanding ordinary shares of the Company.
Β
1.52Β βSubsidiaryβ
means, with respect to any Person, any corporation, limited liability company,
joint venture or partnership of which such Person (a) beneficially owns, either
directly or indirectly, more than 50% of (i) the total combined voting power
of
all classes of voting securities of such entity, (ii) the total combined equity
interests, or (iii) the capital or profit interests, in the case of a
partnership; or (b) otherwise has the power to vote or to direct the voting
of
sufficient securities to elect a majority of the board of directors or similar
governing body.
5
Β
1.53Β βSurvival
Periodβ has the meaning set forth in Section 10.1.
Β
1.54Β βTaxesβ
means all foreign, federal, state or local taxes, charges, fees, levies,
imposts, duties and other assessments, as applicable, including, but not limited
to, any income, alternative minimum or add-on, estimated, gross income, gross
receipts, sales, use, transfer, transactions, intangibles, ad valorem,
value-added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, payroll, employment, unemployment, excise, severance,
stamp, occupation, premium, real property, recording, personal property, federal
highway use, commercial rent, environmental (including, but not limited to,
taxes under Section 59A of the Code) or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalties or additions to tax with
respect to any of the foregoing; and βTaxβ means any of the foregoing
Taxes.
Β
1.55Β βTax
Groupβ means any federal, state, local or foreign consolidated, affiliated,
combined, unitary or other similar group of which the Acquiror Company is now
or
was formerly a member.
Β
1.56Β βTax
Returnβ means any return, declaration, report, claim for refund or credit,
information return, statement or other similar document filed with any
Governmental Authority with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Β
1.57Β βTransaction
Documentsβ means, collectively, all agreements, instruments and other documents
to be executed and delivered in connection with the transactions contemplated
by
this Agreement.
Β
1.58Β βU.S.β
means the United States of America.
Β
1.59Β βU.S.
Dollarsβ or βUS $β means the currency of the United States of
America.
Β
1.60Β βU.S.
Personβ has the meaning set forth in Regulation S under the Securities Act and
set forth on Exhibit D hereto.
Β
Β
SECTION
II
EXCHANGE
OF SHARES AND SHARE CONSIDERATION
Β
2.1Β Share
Exchange.
At the
Closing, each Shareholder shall transfer to the Acquiror Company the number
of
Shares set forth in Exhibit B, and, in consideration therefor, subject to
Section 2.2, the Acquiror Company shall issue to such Shareholder the number
of
shares of Acquiror Company Common Stock and the number of Acquiror Company
Warrants so set forth (the βExchangeβ). The
Shares
to
be transferred by the Shareholders to the Acquiror Company will constitute
all
issued and outstanding shares of the capital stock of the Company. The total
amount of Acquiror Company Common Stock to be issued to the Shareholders shall
be 179,970,000 shares and the total number of Acquiror Company Warrants shall
be
280,030,000; provided however, that the number of shares of Acquiror Company
Warrants shall be subject to adjustment in the event the net income of the
Acquiror Company for 2006 as reflected in the Acquiror Companyβs audited
financial statements for such period prepared in accordance with GAAP exceeds
$10 million, in which case the number of Acquiror Company Warrants issued in
the
Exchange shall be increased by ten warrants to purchase share of Acquiror
Company Common Stock for every $1 that the net income of the Acquiror Company
so
exceeds $10 million. In addition, the Acquiror Company shall issue to Xx. Xxxxx
Xxxxxxx, Chairman and CEO of the post merger company or any entity he
designated, up to an aggregate of 400,000,000 shares of the Acquiror Companyβs
Common Stock (βContingent Sharesβ), which shall be issuable without the payment
of any additional consideration in the amounts and under the circumstances
described below:
6
Β
2.1.1Β 100,000,000
Contingent Shares shall be issued in the event the Companyβs solar-powered
mobile phones are launched by March 31, 2007;
Β
2.1.2Β 100,000,000
Contingent Shares shall be issued in the event the filing of the Acquiror
Companyβs Quarterly Report on Form 10-Q or 10-QSB for the first quarter of 2007
reflects net income of not less than $8,000,000 (excluding any results of
operations of the Existing Businesses);
Β
2.1.3Β 100,000,000
Contingent Shares shall be issued in the event the development of the Companyβs
mobile digital TV chip has been completed by June 30,Β 2007;
Β
2.1.4Β 100,000,000
Contingent Shares shall be issued in the event the Acquiror Companyβs Annual
Report on Form 10-K or 10-KSB for 2007 reflects net income of not less than
$40,000,000, with the actual number of Contingent Shares to be issued equal
to
10 million Contingent Shares issuable for each $1 million in net income exceeds
$40 million (excluding any results of operations of the Existing
Businesses).
Β
provided,
however, that the total number of Contingent Shares that shall be issued in
accordance with the preceding four clauses shall be subject to reduction in
the
event the net income of the Acquiror Company for 2006 is less than $10 million,
in which case the total number of Contingent Shares so issuable shall be reduced
(pro rata by triggering event) by ten shares for every $1 such net income is
below $10 million. The net income of the Acquiror Company shall be determined
on
a consolidated basis in accordance with GAAP (excluding any results of
operations of the Existing Businesses) and determined by the accountants for
the
Acquiror Company as soon as practicable after the end of the relevant fiscal
period.Β In
the
event that at any time subsequent to the date hereof and prior to the issuance
of the Contingent Shares, the Acquiror Company shall (a) issue additional shares
of Acquiror Company Common Stock as a dividend or other distribution on
outstanding Acquiror Company Common Stock, (b) subdivide the outstanding shares
of Acquiror Company Common Stock, or (c) combine the outstanding shares of
the
Acquiror Company Common Stock into a smaller number of shares (including
pursuant to the reverse split of the Acquiror Company Common Stock described
in
Sectin 7.2), then, in each such event, the number of Contingent Shares that
the
Shareholders shall thereafter be entitled to receive shall be adjusted to a
number determined by multiplying the number of Contingent Shares that would
otherwise (but for these adjustment provisions) be issuable by a fraction of
which the numerator of which shall be the number of shares of Acquiror Company
Common Stock outstanding immediately after such event and the denominator of
which shall be the number of shares of Acquiror Company Common Stock outstanding
immediately prior to such event.
7
Β
Β
2.2Β Withholding.
The
Acquiror Company shall be entitled to deduct and withhold from the Acquiror
Company Shares otherwise payable pursuant to this Agreement to any Shareholder
such amounts as it is required to deduct and withhold with respect to the making
of such payment under the Code or any provision of state, local, provincial
or
foreign tax Law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid
to the Shareholder in respect of which such deduction and withholding was
made.
Β
2.3Β Section
368 Reorganization.
For
U.S. federal income tax purposes, the Exchange is intended to constitute a
βreorganizationβ within the meaning of Section 368(a)(1)(B) of the Code. The
parties to this Agreement hereby adopt this Agreement as a βplan of
reorganizationβ within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations. Notwithstanding the foregoing or anything
else to the contrary contained in this Agreement, the parties acknowledge and
agree that no party is making any representation or warranty as to the
qualification of the Exchange as a reorganization under Section 368 of the
Code
or as to the effect, if any, that any transaction consummated prior to the
Closing Date has or may have on any such reorganization status. The parties
acknowledge and agree that each (i) has had the opportunity to obtain
independent legal and tax advice with respect to the transaction contemplated
by
this Agreement, and (ii) is responsible for paying its own Taxes, including
without limitation, any adverse Tax consequences that may result if the
transaction contemplated by this Agreement is not determined to qualify as
a
reorganization under Section 368 of the Code.
Β
2.4Β Directors
of Acquiror Company at Closing Date.
By the
Closing Date the current directors of the Acquiror Company shall appoint Xx.
XXXXX Zhengyu, Xx. XX Ming and Mr. MA Qing, as additional members of the
Acquiror Company Board. Immediately thereafter, each current director of the
Acquiror Company other than Simon Mu shall resign as directors of the Acquiror
Company Board.
Β
Β
SECTION
III
CLOSING
DATE
Β
3.1Β Closing
Date.
The
closing of the Exchange will occur within twenty (20) business days following
the date on which all of the closing conditions set forth in Sections 8 and
9
have been satisfied or waived (the βClosing Dateβ), subject to extension by
mutual agreement of the Company and the Acquiror Company.
Β
Β
SECTION
IV
REPRESENTATIONS
AND WARRANTIES OF SHAREHOLDERS
Β
4.1Β Generally.
Each
Shareholder, severally and not jointly, hereby represents and warrants to the
Acquiror Company:
Β
4.1.1Β Authority.
Such
Shareholder has the right, power, authority and capacity to execute and deliver
this Agreement and each of the Transaction Documents to which such Shareholder
is a party, to consummate the transactions contemplated by this Agreement and
each of the Transaction Documents to which such Shareholder is a party, and
to
perform such Shareholderβs obligations under this Agreement and each of the
Transaction Documents to which such Shareholder is a party. This Agreement
has
been, and each of the Transaction Documents to which such Shareholder is a
party
will be, duly and validly authorized and approved, executed and delivered by
such Shareholder. Assuming this Agreement and the Transaction Documents have
been duly and validly authorized, executed and delivered by the parties thereto
other than such Shareholder, this Agreement is, and each of the Transaction
Documents to which such Shareholder is a party have been, duly authorized,
executed and delivered by such Shareholder and constitutes the legal, valid
and
binding obligation of such Shareholder, enforceable against such Shareholder
in
accordance with their respective terms, except as such enforcement is limited
by
general equitable principles, or by bankruptcy, insolvency and other similar
Laws affecting the enforcement of creditors rights generally.
8
Β
Β
4.1.2Β No
Conflict.
Neither
the execution or delivery by such Shareholder of this Agreement or any
Transaction Document to which such Shareholder is a party, nor the consummation
or performance by such Shareholder of the transactions contemplated hereby
or
thereby will, directly or indirectly, (a) contravene, conflict with, or result
in a violation of any provision of the Organization Documents of such
Shareholder (if such Shareholder is not a natural person); (b) contravene,
conflict with, constitute a default (or an event or condition which, with notice
or lapse of time or both, would constitute a default) under, or result in the
termination or acceleration of, any agreement or instrument to which such
Shareholder is a party or by which the properties or assets of such Shareholder
are bound; or (c) contravene, conflict with, or result in a violation of, any
Law or Order to which such Shareholder, or any of the properties or assets
of
such Shareholder, may be subject.
Β
4.1.3Β Ownership
of Shares.
Such
Shareholder owns, of record and beneficially, and has good, valid and
indefeasible title to and the right to transfer to the Acquiror Company pursuant
to this Agreement, such Shareholderβs Shares free and clear of any and all
Liens. There are no options, rights, voting trusts, stockholder agreements
or
any other contracts or understandings to which such Shareholder is a party
or by
which such Shareholder or such Shareholderβs Shares are bound with respect to
the issuance, sale, transfer, voting or registration of such Shareholderβs
Shares. At the Closing Date, the Acquiror Company will acquire good, valid
and
marketable title to such Shareholderβs Shares free and clear of any and all
Liens.
Β
4.1.4Β Litigation.
There
is no pending Proceeding against such Shareholder that involves the Shares
or
that challenges, or may have the effect of preventing, delaying or making
illegal, or otherwise interfering with, any of the transactions contemplated
by
this Agreement and, to the knowledge of such Shareholder, no such Proceeding
has
been threatened, and no event or circumstance exists that is reasonably likely
to give rise to or serve as a basis for the commencement of any such
Proceeding.
Β
4.1.5Β No
Brokers or Finders.
Except
as disclosed in Schedule 4.1.5, no Person has, or as a result of the
transactions contemplated herein will have, any right or valid claim against
such Shareholder for any commission, fee or other compensation as a finder
or
broker, or in any similar capacity, and such Shareholder will indemnify and
hold
the Acquiror Company harmless against any liability or expense arising out
of,
or in connection with, any such claim.
9
Β
Β
4.2Β Investment
Representations.
Each
Shareholder, severally and not jointly, hereby represents and warrants to the
Acquiror Company:
Β
4.2.1Β Acknowledgment.
Each
Shareholder understands and agrees that the Acquiror Company Shares to be issued
pursuant to this Agreement and the Exchange have not been registered under
the
Securities Act or the securities laws of any state of the U.S. and that the
issuance of the Acquiror Company Shares is being effected in reliance upon
an
exemption from registration afforded either under Section 4(2) of the Securities
Act for transactions by an issuer not involving a public offering or Regulation
S for offers and sales of securities outside the U.S.
Β
4.2.2Β Status.
By its
execution of this Agreement, each Shareholder, severally and not jointly,
represents and warrants to the Acquiror Company as indicated on its signature
page to this Agreement, either that:
Β
(a)Β such
Shareholder is an Accredited Investor; or
Β
(b)Β such
Shareholder is not a U.S. Person.
Β
Each
Shareholder severally understands that the Acquiror Company Shares are being
offered and sold to such Shareholder in reliance upon the truth and accuracy
of
the representations, warranties, agreements, acknowledgments and understandings
of such Shareholder set forth in this Agreement, in order that the Acquiror
Company may determine the applicability and availability of the exemptions
from
registration of the Acquiror Company Shares on which the Acquiror Company is
relying.
Β
4.2.3Β Additional
Representations and Warranties of Accredited Investors.
Each
Shareholder indicating that such Shareholder is an Accredited Investor on its
signature page to this Agreement, severally and not jointly, further makes
the
representations and warranties to the Acquiror Company set forth on Exhibit
E.
Β
4.2.4Β Additional
Representations and Warranties of Non-U.S. Persons.
Each
Shareholder indicating that it is not a U.S. person on its signature page to
this Agreement, severally and not jointly, further makes the representations
and
warranties to the Acquiror Company set forth on Exhibit F.
Β
4.2.5Β Stock
Legends.
Each
Shareholder hereby agrees with the Acquiror Company as follows:
Β
(a)Β Securities
Act Legend - Accredited Investors.
The
certificates evidencing the Acquiror Company Shares issued to those Shareholders
who are Accredited Investors, and each certificate issued in transfer thereof,
will bear the following legend:
Β
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE βACTβ), OR ANY STATE SECURITIES LAWS AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN
WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY
AN
OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.
10
Β
Β
(b)Β Securities
Act Legend - Non-U.S. Persons.
The
certificates evidencing the Acquiror Company Shares issued to those Shareholders
who are not U.S. Persons, and each certificate issued in transfer thereof,
will
bear the following legend:
Β
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE βACTβ), OR ANY STATE SECURITIES LAWS AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS
OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, AND BASED ON AN OPINION
OF
COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY,
THAT THE PROVISIONS OF REGULATION S HAVE BEEN SATISFIED (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN
WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY
AN
OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE SECURITIES ACT.
Β
(c)Β Other
Legends.
The
certificates representing such Acquiror Company Shares, and each certificate
issued in transfer thereof, will also bear any other legend required under
any
applicable Law, including, without limitation, any U.S. state corporate and
state securities law, or contract.
11
Β
Β
(d)Β Opinion.
No
Shareholder will transfer any or all of the Acquiror Company Shares pursuant
to
Regulation S or absent an effective registration statement under the Securities
Act and applicable state securities law covering the disposition of such
Shareholderβs Acquiror Company Shares, without first providing the Acquiror
Company with an opinion of counsel (which counsel and opinion are reasonably
satisfactory to the Acquiror Company) to the effect that such transfer will
be
made in compliance with Regulation S or will be exempt from the registration
and
the prospectus delivery requirements of the Securities Act and the registration
or qualification requirements of any applicable U.S. state securities
laws.
Β
(e)Β Consent.
Each
Shareholder understands and acknowledges that the Acquiror Company may refuse
to
transfer the Acquiror Company Shares, unless such Shareholder complies with
this
Section 4.2.5 and any other restrictions on transferability set forth in
Exhibits E and F. Each Shareholder consents to the Acquiror Company making
a
notation on its records or giving instructions to any transfer agent of the
Acquiror Companyβs Common Stock in order to implement the restrictions on
transfer of the Acquiror Company Shares.
Β
SECTION
V
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Β
The
Company represents and warrants to the Acquiror Company as follows:
Β
5.1Β Organization
and Qualification.
Β
5.1.1Β The
Company is duly incorporated, validly existing and in good standing under the
laws of the British Virgin Islands, has all requisite authority and power
(corporate and other), governmental licenses, authorizations, consents and
approvals to carry on its business as presently conducted and as contemplated
to
be conducted, to own, hold and operate its properties and assets as now owned,
held and operated by it, to enter into this Agreement, to carry out the
provisions hereof except where the failure to be so organized, existing and
in
good standing or to have such authority and power, governmental licenses,
authorizations, consents or approvals would not have a Material Adverse Effect.
The Company is duly qualified, licensed or domesticated as a foreign corporation
in good standing in each jurisdiction wherein the nature of its activities
or
its properties owned or leased makes such qualification, licensing or
domestication necessary, except where the failure to be so qualified, licensed
or domesticated will not have a Material Adverse Effect. Schedule 5.1.1 sets
forth a true and complete list of the jurisdictions in which the Company
presently conducts its business or owns, holds and operates its properties
and
assets.
Β
5.1.2Β The
Company Subsidiary is duly organized, validly existing and in good standing
under the laws of the Peopleβs Republic of China, has all requisite authority
and power (corporate and other), governmental licenses, authorizations, consents
and approvals to carry on its business as presently conducted and as
contemplated to be conducted, to own, hold and operate its properties and assets
as now owned, held and operated by it, except where the failure to be so
organized, existing and in good standing or to have such authority and power,
governmental licenses, authorizations, consents or approvals would not have
a
Material Adverse Effect. The Company Subsidiary is duly qualified, licensed
or
domesticated as a foreign corporation in good standing in each jurisdiction
wherein the nature of its activities or its properties owned or leased makes
such qualification, licensing or domestication necessary, except where the
failure to be so qualified, licensed or domesticated will not have a Material
Adverse Effect. Schedule 5.1.2 sets forth a true and complete list of the
jurisdictions in which the Company Subsidiary presently conducts its business
or
owns, holds and operates its properties and assets.
12
Β
Β
5.2Β Subsidiaries.
Except
for the Company Subsidiary, the Company does not own directly or indirectly,
any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise.
Β
5.3Β Articles
of Incorporation and Bylaws.
The
copies of the Memorandum and Articles of Association of the Company adopted
on
2, June 1999, as amended, and the documents which constitute all other
Organization Documents of the Company, that have been delivered to the Acquiror
Company prior to the execution of this Agreement are true and complete and
have
not been amended or repealed. The Company is not in violation or breach of
any
of the provisions of its Organizational Documents, except for such violations
or
breaches as, in the aggregate, will not have a Material Adverse
Effect.
Β
5.4Β Authorization
and Validity of this Agreement.
The
Company has all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to enter into
this
Agreement and each of the Transaction Documents to which the Company is a party,
to consummate the transactions contemplated by this Agreement and each of the
Transaction Documents to which the Company is a party, to perform its
obligations under this Agreement and each of the Transaction Documents to which
the Company is a party, and to record the transfer of the Shares and the
delivery of the new certificates representing the Shares registered in the
name
of the Acquiror Company. The execution, delivery and performance by the Company
of this Agreement and each of the Transaction Documents to which the Company
is
a party have been duly authorized by all necessary corporate action and do
not
require from the Company Board or the Shareholders any consent or approval
that
has not been validly and lawfully obtained. The execution, delivery and
performance by the Company of this Agreement and each of the Transaction
Documents to which the Company is a party requires no authorization, consent,
approval, license, exemption of or filing or registration with any Governmental
Authority or other Person.
Β
5.5Β No
Violation.
Neither
the execution nor the delivery by the Company of this Agreement or any
Transaction Document to which the Company is a party, nor the consummation
or
performance by the Company of the transactions contemplated hereby or thereby
will, directly or indirectly, (a) contravene, conflict with, or result in a
violation of any provision of the Organizational Documents of the Company;
(b)
contravene, conflict with, constitute a default (or an event or condition which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination or acceleration of, or result in the imposition or
creation of any Lien under, any agreement or instrument to which the Company
is
a party or by which the properties or assets of the Company are bound;
(c)Β contravene, conflict with, or result in a violation of, any Law or
Order to which the Company, or any of the properties or assets owned or used
by
the Company, may be subject; or (d) contravene, conflict with, or result in
a
violation of, the terms or requirements of, or give any Governmental Authority
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
licenses, permits, authorizations, approvals, franchises or other rights held
by
the Company or that otherwise relate to the business of, or any of the
properties or assets owned or used by, the Company, except, in the case of
clause (b), (c), or (d), for any such contraventions, conflicts, violations,
or
other occurrences as would not have a Material Adverse Effect.
13
Β
Β
5.6Β Binding
Obligations.
Assuming this Agreement and the Transaction Documents have been duly and validly
authorized, executed and delivered by the parties thereto other than the
Company, this Agreement and each of the Transaction Documents to which the
Company is a party are duly authorized, executed and delivered by the Company
and constitutes the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforcement is limited by general equitable principles, or by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors rights generally.
Β
5.7Β Capitalization
and Related Matters.
Β
5.7.1Β Capitalization.
The
authorized capital stock of the Company consists of 50,000 shares of Common
Stock, of which 1 share of Common Stock is issued and outstanding. Except as
set
forth in Schedule 5.7.1, there are no outstanding or authorized options,
warrants, calls, purchase agreements, participation agreements, subscription
rights, conversion rights, exchange rights or other securities or contracts
that
could require the Company to issue, sell or otherwise cause to become
outstanding any of its authorized but unissued shares of capital stock or any
securities convertible into, exchangeable for or carrying a right or option
to
purchase shares of capital stock or to create, authorize, issue, sell or
otherwise cause to become outstanding any new class of capital stock. There
are
no outstanding stockholdersβ agreements, voting trusts or arrangements,
registration rights agreements, rights of first refusal or other contracts
pertaining to the capital stock of the Company. The issuance of all of the
shares of Acquiror Companyβs Common Stock described in this Section 5.7.1 have
been in compliance with the laws of the British Virgin Islands. All issued
and
outstanding shares of the Companyβs capital stock are duly authorized, validly
issued, fully paid and nonassessable and have not been issued in violation
of
any preemptive or similar rights.
Β
5.7.2Β No
Redemption Requirements.
Except
as set forth in Schedule 5.7.2, there are no outstanding contractual obligations
(contingent or otherwise) of the Company to retire, repurchase, redeem or
otherwise acquire any outstanding shares of capital stock of, or other ownership
interests in, the Company or to provide funds to or make any investment (in
the
form of a loan, capital contribution or otherwise) in any other
Person.
Β
5.7.3Β Duly
Authorized.
The
Exchange has been duly authorized, and the Shares have been validly issued
and
are fully paid and nonassessable.
Β
5.8Β Shareholders.
Exhibit
B contains a true and complete list of the names and addresses of the record
and
beneficial holders of all of the outstanding capital stock of the Company.
Except as expressly provided in this Agreement, no holder of Shares or any
other
security of the Company or any other Person is entitled to any preemptive right,
right of first refusal or similar right as a result of the issuance of the
shares or otherwise. There is no voting trust, agreement or arrangement among
any of the Shareholders of any capital stock of the Company affecting the
exercise of the voting rights of any such capital stock.
14
Β
Β
5.9Β Compliance
with Laws and Other Instruments.
Except
as would not have a Material Adverse Effect, the business and operations of
the
Company have been and are being conducted in accordance with all applicable
Laws
and Orders. Except as would not have a Material Adverse Effect, the Company
has
not received notice of any violation (or any Proceeding involving an allegation
of any violation) of any applicable Law or Order by or affecting the Company
and, to the knowledge of the Company, no Proceeding involving an allegation
of
violation of any applicable Law or Order is threatened or contemplated. Except
as would not have a Material Adverse Effect, the Company is not, and is not
alleged to be, in violation of, or (with or without notice or lapse of time
or
both) in default under, or in breach of, any term or provision of its
Organizational Documents or of any indenture, loan or credit agreement, note,
deed of trust, mortgage, security agreement or other material agreement, lease,
license or other instrument, commitment, obligation or arrangement to which
the
Company is a party or by which any of the Companyβs properties, assets or rights
are bound or affected. To the knowledge of the Company, no other party to any
material contract, agreement, lease, license, commitment, instrument or other
obligation to which the Company is a party is (with or without notice or lapse
of time or both) in default thereunder or in breach of any term thereof. The
Company is not subject to any obligation or restriction of any kind or
character, nor is there, to the knowledge of the Company, any event or
circumstance relating to the Company that materially and adversely affects
in
any way its business, properties, assets or prospects or that prohibits the
Company from entering into this Agreement or would prevent or make burdensome
its performance of or compliance with all or any part of this Agreement or
the
consummation of the transactions contemplated hereby or thereby.
Β
5.10Β Certain
Proceedings.
There
is no pending Proceeding that has been commenced against the Company and that
challenges, or may have the effect of preventing, delaying, making illegal,
or
otherwise interfering with, any of the transactions contemplated in this
Agreement. To the Companyβs knowledge, no such Proceeding has been
threatened.
Β
5.11Β No
Brokers or Finders.
Except
as disclosed in Schedule 5.11, no person has, or as a result of the transactions
contemplated herein will have, any right or valid claim against the Company
for
any commission, fee or other compensation as a finder or broker, or in any
similar capacity, and the Company will indemnify and hold the Acquiror Company
harmless against any liability or expense arising out of, or in connection
with,
any such claim.
Β
5.12Β Title
to and Condition of Properties.
Except
as would not have a Material Adverse Effect, the Company owns (with good and
marketable title in the case of real property) or holds under valid leases
or
other rights to use all real property, plants, machinery and equipment necessary
for the conduct of the business of the Company as presently conducted, free
and
clear of all Liens, except Permitted Liens. The material buildings, plants,
machinery and equipment necessary for the conduct of the business of the Company
as presently conducted are structurally sound, are in good operating condition
and repair and are adequate for the uses to which they are being put, in each
case, taken as a whole, and none of such buildings, plants, machinery or
equipment is in need of maintenance or repairs, except for ordinary, routine
maintenance and repairs that are not material in nature or cost.Β
15
Β
Β
5.13Β Compliance
with Laws.
Except
as would not have a Material Adverse Effect, the business and operations of
the
Company have been and are being conducted in accordance with all applicable
Laws
and Orders. Except as would not have a Material Adverse Effect, the Company
has
not received notice of any violation (or any Proceeding involving an allegation
of any violation) of any applicable Law or Order by or affecting such Company
and, to the knowledge of the Company, no Proceeding involving an allegation
of
violation of any applicable Law or Order is threatened or contemplated. Except
as would not have a Material Adverse Effect, the Company is not subject to
any
obligation or restriction of any kind or character, nor is there, to the
knowledge of the Company, any event or circumstance relating to the Company
that
materially and adversely affects in any way its business, properties, assets
or
prospects or that prohibits the Company from entering into this Agreement or
would prevent or make burdensome its performance of or compliance with all
or
any part of this Agreement or the consummation of the transactions contemplated
hereby.
Β
5.14Β Absence
of Undisclosed Liabilities.
Except
as set forth on Schedule 5.14, the Company does not have any debt, obligation
or
liability (whether accrued, absolute, contingent, liquidated or otherwise,
whether due or to become due, whether or not known to the Company) arising
out
of any transaction entered into at or prior to the Closing Date or any act
or
omission at or prior to the Closing Date, except to the extent set forth on
or
reserved against on the unaudited balance sheet of the Company at December
31,
2005 (subject to audit adjustments). Except as set forth on Schedule 5.14,
the
Company has not incurred any liabilities or obligations under agreements entered
into, in the usual and ordinary course of business since December 31, 2005.
Β
5.15Β Changes.
Except
as set forth on Schedule 5.15, the Company has not, since December 31,
2005:
Β
5.15.1Β Ordinary
Course of Business.
Conducted its business or entered into any transaction other than in the usual
and ordinary course of business, except for this Agreement;
Β
5.15.2Β Adverse
Changes.
Suffered or experienced any change in, or affecting, its condition (financial
or
otherwise), properties, assets, liabilities, business, operations, results
of
operations or prospects other than changes, events or conditions in the usual
and ordinary course of its business, none of which would have a Material Adverse
Effect;
Β
5.15.3Β Loans.
Made
any loans or advances to any Person other than travel advances and reimbursement
of expenses made to employees, officers and directors in the ordinary course
of
business;
Β
5.15.4Β Liens.
Created
or permitted to exist any Lien on any material property or asset of the Company,
other than Permitted Liens;
Β
5.15.5Β Capital
Stock.
Issued,
sold, disposed of or encumbered, or authorized the issuance, sale, disposition
or encumbrance of, or granted or issued any option to acquire any shares of
its
capital stock or any other of its securities or any Equity Security, or altered
the term of any of its outstanding securities or made any change in its
outstanding shares of capital stock or its capitalization, whether by reason
of
reclassification, recapitalization, stock split, combination, exchange or
readjustment of shares, stock dividend or otherwise;
16
Β
Β
5.15.6Β Dividends.
Declared, set aside, made or paid any dividend or other distribution to any
of
its stockholders;
Β
5.15.7Β Material
Company Contracts.
Terminated or modified any Material Company Contract, except for termination
upon expiration in accordance with the terms thereof;
Β
5.15.8Β Claims.
Released, waived or cancelled any claims or rights relating to or affecting
the
Company in excess of US $10,000 in the aggregate or instituted or settled any
Proceeding involving in excess of US $10,000 in the aggregate;
Β
5.15.9Β Discharged
Liabilities.
Paid,
discharged or satisfied any claim, obligation or liability in excess of US
$10,000 in the aggregate, except for liabilities incurred prior to the date
of
this Agreement in the ordinary course of business;
Β
5.15.10Β Indebtedness.
Created, incurred, assumed or otherwise become liable for any Indebtedness
in
excess of US $10,000 in the aggregate, other than professional
fees;
Β
5.15.11Β Guarantees.
Guaranteed or endorsed in a material amount any obligation or net worth of
any
Person;
Β
5.15.12Β Acquisitions.
Acquired the capital stock or other securities or any ownership interest in,
or
substantially all of the assets of, any other Person;
Β
5.15.13Β Accounting.
Changed
its method of accounting or the accounting principles or practices utilized
in
the preparation of its financial statements, other than as required by
GAAP;
Β
5.15.14Β Agreements.
Except
as set forth on Schedule 5.15.14, entered into any agreement, or otherwise
obligated itself, to do any of the foregoing.
Β
5.16Β Material
Company Contracts.
The
Company has provided to the Acquiror Company, prior to the date of this
Agreement, true, correct and complete copies of each written Company Contract
that would be required to be filed by the Company with the SEC if it filed
reports with the SEC pursuant to sections 13(d) or 15(d) of the Exchange Act,
including each amendment, supplement and modification thereto, which contracts,
amendments and supplements are listed on Schedule 5.16 (the βCompany Material
Contractsβ). The Company has also provided English translations of all such
Company Material Contracts where applicable.
Β
5.16.1Β No
Defaults.
Each
Material Company Contract is a valid and binding agreement of each company
that
is a party thereto, and is in full force and effect. Except as would not have
a
Material Adverse Effect, the Company is not in breach or default of any Material
Company Contract to which it is a party and, to the knowledge of the Company,
no
other party to any Material Company Contract is in breach or default thereof.
Except as would not have a Material Adverse Effect, no event has occurred or
circumstance exists that (with or without notice or lapse of time) would (a)
contravene, conflict with or result in a violation or breach of, or become
a
default or event of default under, any provision of any Material Company
Contract or (b) permit the Company or any other Person the right to declare
a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify any Material Company Contract.
The Company has not received notice of the pending or threatened cancellation,
revocation or termination of any Material Company Contract to which it is a
party. There are no renegotiations of, or attempts to renegotiate, or
outstanding rights to renegotiate any material terms of any Material Company
Contract.
17
Β
Β
5.17Β Employees.
Β
5.17.1Β Except
as
set forth on Schedule 5.17.1, the Company has no employees, independent
contractors or other Persons providing research or other services to it. Except
as would not have a Material Adverse Effect, the Company is in full compliance
with all Laws regarding employment, wages, hours, benefits, equal opportunity,
collective bargaining, the payment of social security and other similar taxes,
occupational safety and health and plant closing. The Company is not liable
for
the payment of any compensation, damages, taxes, fines, penalties or other
amounts, however designated, for failure to comply with any of the foregoing
Laws.
Β
5.17.2Β No
director, officer or employee of the Company is a party to, or is otherwise
bound by, any contract (including any confidentiality, noncompetition or
proprietary rights agreement) with any other Person that in any way adversely
affects or will materially affect (a) the performance of his or her duties
as a
director, officer or employee of the Company or (b) the ability of the Company
to conduct its business. Except as set forth on Schedule 5.17.2, each employee
of each Company is employed on an at-will basis and the Company does not have
any contract with any of its employees which would interfere with such Companyβs
ability to discharge its employees.
Β
5.18Β Tax
Returns and Audits.
Β
5.18.1Β Tax
Returns.
The
Company has filed all material Tax Returns required to be filed by or on behalf
of the Company and has paid all material Taxes required to have been paid
(whether or not reflected on any Tax Return). Except as set forth on Schedule
5.18.1, (a) no Governmental Authority in any jurisdiction has made a claim,
assertion or threat to the Company that the Company is or may be subject to
taxation by such jurisdiction; (b) there are no Liens with respect to Taxes
on
any of the Companyβs property or assets other than Permitted Liens; and (c)
there are no Tax rulings, requests for rulings, or closing agreements relating
to the Company for any period (or portion of a period) that would affect any
period after the date hereof.
Β
5.18.2Β No
Adjustments, Changes.
Neither
the Company nor any other Person on behalf of the Company (a) has executed
or
entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; or (b) has agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of state, local
or foreign law.
18
Β
Β
5.18.3Β No
Disputes.
There
is no pending audit, examination, investigation, dispute, proceeding or claim
with respect to any Taxes of the Company, nor is any such claim or dispute
pending or contemplated. The Company has delivered to the Acquiror Company
true,
correct and complete copies of all Tax Returns and all examination reports
and
statements of deficiencies assessed or asserted against or agreed to by the
Company since its inception and any and all correspondence with respect to
the
foregoing.
Β
5.19Β Material
Assets.
The
unaudited balance sheet of the Company at December 31, 2005 reflects the
material properties and assets (real and personal) owned or leased by the
Company (subject to audit adjustments).
Β
5.20Β Insurance
Coverage.
The
Company has made available to the Acquiror Company, prior to the date of this
Agreement, true, correct and complete copies of any insurance policies
maintained by the Company on its properties and assets. Except as would not
have
a Material Adverse Effect, all of such policies (a) taken together, provide
adequate insurance coverage for the properties, assets and operations of the
Company for all risks normally insured against by a Person carrying on the
same
business as the Company, and (b) are sufficient for compliance with all
applicable Laws and Material Company Contracts. Except as would not have a
Material Adverse Effect, all of such policies are valid, outstanding and in
full
force and effect and, by their express terms, will continue in full force and
effect following the consummation of the transactions contemplated by this
Agreement. Except as set forth on Schedule 5.21, the Company has not received
(a) any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (b) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not
be
renewed or that the issuer of any policy is not willing or able to perform
its
obligations thereunder. All premiums due on such insurance policies on or prior
to the date hereof have been paid. There are no pending claims with respect
to
any Company or its properties or assets under any such insurance policies,
and
there are no claims as to which the insurers have notified the Company that
they
intend to deny liability. There is no existing default under any such insurance
policies.
Β
5.21Β Litigation;
Orders.
Except
as set forth on Schedule 5.21, there is no Proceeding (whether federal, state,
local or foreign) pending or, to the knowledge of the Company, threatened
against or affecting the Company or the Companyβs properties, assets, business
or employees. To the knowledge of the Company, there is no fact that might
result in or form the basis for any such Proceeding. The Company is not subject
to any Orders.
19
Β
Β
5.22Β Licenses.
Except
as would not have a Material Adverse Effect, the Company possesses from the
appropriate Governmental Authority all licenses, permits, authorizations,
approvals, franchises and rights that are necessary for the Company to engage
in
its business as currently conducted and to permit the Company to own and use
its
properties and assets in the manner in which it currently owns and uses such
properties and assets (collectively, βCompany Permitsβ). The Company has not
received notice from any Governmental Authority or other Person that there
is
lacking any license, permit, authorization, approval, franchise or right
necessary for the Company to engage in its business as currently conducted
and
to permit the Company to own and use its properties and assets in the manner
in
which it currently owns and uses such properties and assets. Except as would
not
have a Material Adverse Effect, the Company Permits are valid and in full force
and effect. Except as would not have a Material Adverse Effect, no event has
occurred or circumstance exists that may (with or without notice or lapse of
time): (a) constitute or result, directly or indirectly, in a violation of
or a
failure to comply with any Company Permit; or (b) result, directly or
indirectly, in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Company Permit. The Company has
not
received notice from any Governmental Authority or any other Person regarding:
(a) any actual, alleged, possible or potential contravention of any Company
Permit; or (b) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to, any
Company Permit. All applications required to have been filed for the renewal
of
such Company Permits have been duly filed on a timely basis with the appropriate
Persons, and all other filings required to have been made with respect to such
Company Permits have been duly made on a timely basis with the appropriate
Persons. All Company Permits are renewable by their terms or in the ordinary
course of business without the need to comply with any special qualification
procedures or to pay any amounts other than routine fees or similar charges,
all
of which have, to the extent due, been duly paid.
Β
5.23Β Interested
Party Transactions.
Except
as disclosed in Schedule 5.23, no officer, director or stockholder of the
Company or any Affiliate or βassociateβ (as such term is defined in Rule 405 of
the Commission under the Securities Act) of any such Person, has or has had,
either directly or indirectly, (1) an interest in any Person which (a) furnishes
or sells services or products which are furnished or sold or are proposed to
be
furnished or sold by the Company, or (b) purchases from or sells or furnishes
to, or proposes to purchase from, sell to or furnish the Company any goods
or
services; or (2) a beneficial interest in any contract or agreement to which
the
Company is a party or by which it may be bound or affected.
Β
5.24Β Governmental
Inquiries.
The
Company has provided to the Acquiror Company a copy of each material written
inspection report, questionnaire, inquiry, demand or request for information
received by the Company from any Governmental Authority, and the Companyβs
response thereto, and each material written statement, report or other document
filed by the Company with any Governmental Authority.
Β
5.25Β Intellectual
Property.
Section
5.25.1 of the Disclosure Schedule sets forth a true and complete list and a
brief description, including a complete identification of each patent and patent
application and each registration or application for registration thereof,
of
all Owned Intellectual Property and Section 5.25.2 of the Disclosure Schedule
sets forth a true and complete list and a brief description, including a
description of any license or sublicense thereof, of all Licensed Intellectual
Property. Except
as
disclosed in Schedule 5.25,
in each
case where a registration or patent or application for registration or patent
listed in Section 5.25.1 of the Disclosure Schedule is held by assignment,
the
assignment has been duly recorded with the State or national Trademark Office
from which the original registration issued or before which the application
for
registration is pending. Except as disclosed in Section 5.25.3 of the Disclosure
Schedule, the rights of the Company or any Subsidiary, as the case may be,
in or
to such Intellectual Property do not conflict with or infringe on the rights
of
any other Person, and none of the Seller, the Company nor any Subsidiary has
received any claim or written notice from any Person, to such
effect.
20
Β
Β
5.25.1Β Owned
Intellectual Property.
Except
as disclosed in Schedule 5.25 of the Disclosure Schedule: (i) all the Owned
Intellectual Property is owned by either the Company or a Subsidiary, as the
case may be, free and clear of any Encumbrance and (ii) no Proceedings have
been
made or asserted or are pending (nor, to the best knowledge of the Company
after
due inquiry, has any such Proceeding been threatened) against the Company or
any
Subsidiary either (A) based upon or challenging or seeking to deny or restrict
the use by the Company or any Subsidiary of any of the Owned Intellectual
Property or (B) alleging that any services provided, or products manufactured
or
sold by the Company or any Subsidiary are being provided, manufactured or sold
in violation of any patents or trademarks, or any other rights of any Person.
To
the best knowledge of the Company after due inquiry, no Person is using any
patents, copyrights, trademarks, service marks, trade names, trade secrets
or
similar property that are confusingly similar to the Owned Intellectual Property
or that infringe upon the Owned Intellectual Property or upon the rights of
the
Company or any Subsidiary therein. Except as disclosed in Schedule 5.25 of
the
Disclosure Schedule, none of the Company nor any Subsidiary has granted any
license or other right to any other Person with respect to the Owned
Intellectual Property. The consummation of the transactions contemplated by
this
Agreement will not result in the termination or impairment of any of the Owned
Intellectual Property.
Β
5.25.2Β Registered
User Provisions.
With
respect to all Licensed Intellectual Property and Owned Intellectual Property,
the registered user provisions of all nations requiring such registrations
have
been complied with.
Β
5.25.3Β Licensed
Intellectual Property.
The
Company has, or has caused to be, delivered to the Acquiror Company correct
and
complete copies of all the licenses and sublicenses for Licensed Intellectual
Property listed in Section 5.25.2 of the Disclosure Schedule and any and all
ancillary documents pertaining thereto (including, but not limited to, all
amendments, consents and evidence of commencement dates and expiration dates).
With respect to each of such licenses and sublicenses:
Β
(a)Β such
license or sublicense, together with all ancillary documents delivered pursuant
to the first sentence of this Section 5.25.3, is valid and binding and in full
force and effect and represents the entire agreement between the respective
licensor and licensee with respect to the subject matter of such license or
sublicense;
Β
(b)Β except
as
otherwise set forth in Section 5.25 of the Disclosure Schedule, such license
or
sublicense will not cease to be valid and binding and in full force and effect
on terms identical to those currently in effect as a result of the consummation
of the transactions contemplated by this Agreement, nor will the consummation
of
the transactions contemplated by this Agreement constitute a breach or default
under such license or sublicense or otherwise give the licensor or sublicensor
a
right to terminate such license or sublicense;
Β
(c)Β except
as
otherwise disclosed in Section 5.25 of the Disclosure Schedule, with respect
to
each such license or sublicense: (A) none of the Company nor any Subsidiary
has
received any notice of termination or cancellation under such license or
sublicense and no licensor or sublicensor has any right of termination or
cancellation under such license or sublicense except in connection with the
default of the Company or any Subsidiary thereunder, (B) none of the Company
nor
any Subsidiary has received any notice of a breach or default under such license
or sublicense, which breach or default has not been cured, and (C) none of
the
Company nor any Subsidiary has granted to any other Person any rights, adverse
or otherwise, under such license or sublicense;
21
Β
Β
(d)Β none
of
the Company, any Subsidiary nor (to the best knowledge of the Company after
due
inquiry) any other party to such license or sublicense is in breach or default
in any material respect, and, to the best knowledge of the Seller after due
inquiry, no event has occurred that, with notice or lapse of time would
constitute such a breach or default or permit termination, modification or
acceleration under such license or sublicense;
Β
(e)Β no
Proceedings have been made or asserted or are pending (nor, to the best
knowledge of the Company after due inquiry, has any such Proceeding been
threatened) against the Company or any Subsidiary either (A) based upon or
challenging or seeking to deny or restrict the use by the Company or any
Subsidiary of any of the Licensed Intellectual Property or (B) alleging that
any
Licensed Intellectual Property is being licensed, sublicensed or used in
violation of any patents or trademarks, or any other rights of any Person;
and
Β
(f)Β to
the
best knowledge of the Company after due inquiry, no Person is using any patents,
copyrights, trademarks, service marks, trade names, trade secrets or similar
property that are confusingly similar to the Licensed Intellectual Property
or
that infringe upon the Licensed Intellectual Property or upon the rights of
the
Company or any Subsidiary therein.
Β
5.25.4Β Except
as
set forth in Section 3.20(e) of the Disclosure Schedule, the Seller is not
aware
of any reason that would prevent any pending applications to register
trademarks, service marks or copyrights or any pending patent applications
from
being granted.
Β
5.25.5Β The
Intellectual Property described in Sections 5.25.1 and 5.25.2 of the Disclosure
Schedule constitutes all the Intellectual Property used or held or intended
to
be used by the Company or any Subsidiary or forming a part of, used, held or
intended to be used in, and all such Intellectual Property necessary in the
conduct of, the business of the Company and there are no other items of
Intellectual Property that are material to the Company, any Subsidiary or their
respective businesses.
Β
5.26Β Financial
Statements.
Β
5.26.1Β Audited
Financial Statements.
Included in Schedule 5.26 are the audited balance sheets of the Company
Subsidiary as of December 31, 2005 and 2004, and the related statements of
operations, cash flows and stockholders equity for the years ended December
31,
2005 and 2004, together with notes and the report of the independent auditor
with respect thereto and
the
unaudited consolidated balance sheet of the Company as of August 30, 2006,
and
the related consolidated statements of income, retained earnings, stockholders'
equity and changes in financial position of the Company, together with all
related notes and schedules thereto (collectively referred to herein as the
βInterim
Financial Statementsβ).
All
such financial statements comply in all material respects with applicable
accounting requirements, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in
the
notes thereto, or, in the case of the Interim Financial Statements as would
be
permitted by the Commission if the Company were required to file periodic
reports with the Commission), and fairly present in all material respects
(subject in the case of the Interim Financial Statements, to normal, recurring
audit adjustments) the financial position of the Company as at the dates thereof
and the results of its operations and cash flows for the periods then ended.
The
Company did
not
have, as of the date of any such balance sheets, except as and to the extent
reflected or reserved against therein, any liabilities or obligations (absolute
or contingent) which should be reflected in any financial statements or the
notes thereto prepared in accordance with generally accepted accounting
principles, and all assets reflected therein present fairly the assets of the
Company, in accordance with generally accepted accounting principles. The
statements of revenue and expenses and cash flows present fairly the financial
position and result of operations of the Company as of their respective dates
and for the respective periods covered thereby.
22
Β
Β
5.26.2Β Financial
Projections.
True
and complete copies of projected balance sheet as of December 31, 2006 for
the
Company Subsidiary, and the related statements of operations, cash flows and
stockholders equity for the four months then ended, prepared by senior
management of the Company (the βProjectionsβ)
and
the assumptions and supplemental data used in preparing the Projections
(collectively, the βSupplemental
Dataβ)
have
been delivered by the Company to the Acquiror Company. The Projections were
prepared on the basis of the Supplemental Data which represent a reasonable
basis for such preparation. The Projections and the Supplemental Data reflect
the best currently available estimates and judgment of the Company's senior
management as to the expected future financial performance of the Company
Subsidiary.
Β
5.27Β Stock
Option Plans; Employee Benefits.
Β
5.27.1Β Except
as
set forth on Schedule 5.27.1 the Company does not have any stock option plans
providing for the grant by the Company of stock options to directors, officers,
employees, consultants or other Persons.
Β
5.27.2Β Except
as
set forth on Schedule 5.27.2, the Company does not have any employee benefit
plans or arrangements covering its present and former employees or providing
benefits to such persons in respect of services provided the
Company.
Β
5.27.3Β Neither
the consummation of the transactions contemplated hereby alone, nor in
combination with another event, with respect to each director, officer, employee
and consultant of the Company, will result in (a) any payment (including,
without limitation, severance, unemployment compensation or bonus payments)
becoming due from the Company, (b) any increase in the amount of compensation
or
benefits payable to any such individual or (c)Β any acceleration of the
vesting or timing of payment of compensation payable to any such individual.
No
agreement, arrangement or other contract of the Company provides benefits or
payments contingent upon, triggered by, or increased as a result of a change
in
the ownership or effective control of the Company.
23
Β
Β
5.28Β Environmental
and Safety Matters.
Except
as set forth on Schedule 5.28 and except as would not have a Material Adverse
Effect:
Β
5.28.1Β The
Company has at all times been and is in compliance with all Environmental Laws
applicable to the Company.
Β
5.28.2Β There
are
no Proceedings pending or threatened against the Company alleging the violation
of any Environmental Law or Environmental Permit applicable to the Company
or
alleging that the Company is a potentially responsible party for any
environmental site contamination.
Β
5.28.3Β Neither
this Agreement nor the consummation of the transactions contemplated by this
Agreement shall impose any obligations to notify or obtain the consent of any
Governmental Authority or third Persons under any Environmental Laws applicable
to the Company.
Β
5.29Β Board
Recommendation.
The
Companyβs Board has, by unanimous written consent, or by other action valid
under the laws of the jurisdiction in which the Company is organized, determined
that this Agreement and the transactions contemplated by this Agreement, are
advisable and in the best interests of the Shareholders and has duly authorized
this Agreement and the transactions contemplated by this Agreement.
Β
Β
SECTION
VI
REPRESENTATIONS
AND WARRANTIES OF THE ACQUIROR COMPANY
Β
The
Acquiror Company represents and warrants to the Shareholders and the Company
as
follows:
Β
6.1Β Organization
and Qualification.
The
Acquiror Company is duly organized, validly existing and in good standing under
the laws of Nevada, has all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to carry on its
business as presently conducted and to own, hold and operate its properties
and
assets as now owned, held and operated by it, except where the failure to be
so
organized, existing and in good standing, or to have such authority and power,
governmental licenses, authorizations, consents or approvals would not have
a
Material Adverse Effect. The Acquiror Company is duly qualified, licensed or
domesticated as a foreign corporation in good standing in each jurisdiction
wherein the nature of its activities or its properties owned, held or operated
makes such qualification, licensing or domestication necessary, except where
the
failure to be so duly qualified, licensed or domesticated and in good standing
would not have a Material Adverse Effect. Schedule 6.1 sets forth a true,
correct and complete list of the Acquiror Companyβs jurisdiction of organization
and each other jurisdiction in which the Acquiror Company presently conducts
its
business or owns, holds and operates its properties and assets.
Β
6.2Β Subsidiaries.
The
Acquiror Company does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise.
24
Β
Β
6.3Β Organizational
Documents.
True,
correct and complete copies of the Organizational Documents of the Acquiror
Company have been included in the Acquiror Company SEC Reports, and no action
has been taken to amend or repeal such Organizational Documents. The Acquiror
Company is not in violation or breach of any of the provisions of its
Organizational Documents, except for such violations or breaches as would not
have a Material Adverse Effect.
Β
6.4Β Authorization.
Subject
to its receipt of stockholder approval in the manner required by law, the
Acquiror Company has all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to enter into
this
Agreement and each of the Transaction Documents to which the Acquiror Company
is
a party, to consummate the transactions contemplated by this Agreement and
each
of the Transaction Documents to which the Acquiror Company is a party and to
perform its obligations under this Agreement and each of the Transaction
Documents to which the Acquiror Company is a party. The execution, delivery
and
performance by the Acquiror Company of this Agreement and each of the
Transaction Documents to which the Acquiror Company is a party have been duly
authorized by the Board and do not require from the Acquiror Company Board
any
consent or approval that has not been validly and lawfully obtained except
for
approval by the Acquiror Company stockholders. The execution, delivery and
performance by the Acquiror Company of this Agreement and each of the
Transaction Documents to which the Acquiror Company is a party requires no
authorization, consent, approval, license, exemption of or filing or
registration with any Governmental Authority or other Person.
Β
6.5Β No
Violation.
Neither
the execution nor the delivery by the Acquiror Company of this Agreement or
any
Transaction Document to which the Acquiror Company is a party, nor the
consummation or performance by the Acquiror Company of the transactions
contemplated hereby or thereby will, directly or indirectly, (a) contravene,
conflict with, or result in a violation of any provision of the Organizational
Documents of the Acquiror Company; (b) contravene, conflict with, constitute
a
default (or an event or condition which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or acceleration
of, or result in the imposition or creation of any Lien under, any agreement
or
instrument to which the Acquiror Company is a party or by which the properties
or assets of the Acquiror Company is bound; (c)Β contravene, conflict with,
or result in a violation of, any Law or Order to which the Acquiror Company,
or
any of the properties or assets owned or used by the Acquiror Company, may
be
subject; or (d) contravene, conflict with, or result in a violation of, the
terms or requirements of, or give any Governmental Authority the right to
revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits,
authorizations, approvals, franchises or other rights held by the Acquiror
Company or that otherwise relate to the business of, or any of the properties
or
assets owned or used by, the Acquiror Company, except, in the case of clause
(b), (c), or (d), for any such contraventions, conflicts, violations, or other
occurrences as would not have a Material Adverse Effect.
Β
6.6Β Binding
Obligations.
Assuming this Agreement and the Transaction Documents have been duly and validly
authorized, executed and delivered by the parties thereto other than the
Acquiror Company, this Agreement and each of the Transaction Documents to which
the Acquiror Company is a party are duly authorized, executed and delivered
by
the Acquiror Company and constitutes the legal, valid and binding obligations
of
the Acquiror Company, enforceable against the Acquiror Company in accordance
with their respective terms, except as such enforcement is limited by general
equitable principles, or by bankruptcy, insolvency and other similar Laws
affecting the enforcement of creditors rights generally.
25
Β
Β
6.7Β Securities
Laws.
Assuming the accuracy of the representations and warranties of the Shareholders
contained in Section 4 and Exhibits E and F, the issuance of the Acquiror
Company Shares pursuant to this Agreement will be when issued and paid for
in
accordance with the terms of this Agreement issued in accordance with exemptions
from the registration and prospectus delivery requirements of the Securities
Act
and the registration permit or qualification requirements of all applicable
state securities laws.
Β
6.8Β Capitalization
and Related Matters.
Β
6.8.1Β Capitalization.
The
authorized capital stock of the Acquiror Company consists of 280 million shares,
consisting of 280 million shares of Acquiror Company Common Stock and 10 million
shares of preferred stock, of which approximately 100,030,000 shares of Acquiror
Company Common Stock are issued and outstanding and no shares of preferred
stock
are outstanding. All issued and outstanding shares of the Acquiror Companyβs
Common Stock are duly authorized, validly issued, fully paid and nonassessable,
and have not been issued in violation of any preemptive or similar rights.
At
the Closing Date, the Acquiror Company will have sufficient authorized and
unissued Acquiror Companyβs Common Stock to consummate the transactions
contemplated hereby. There are no outstanding options, warrants, purchase
agreements, participation agreements, subscription rights, conversion rights,
exchange rights or other securities or contracts that could require the Acquiror
Company to issue, sell or otherwise cause to become outstanding any of its
authorized but unissued shares of capital stock or any securities convertible
into, exchangeable for or carrying a right or option to purchase shares of
capital stock or to create, authorize, issue, sell or otherwise cause to become
outstanding any new class of capital stock. There are no outstanding
stockholdersβ agreements, voting trusts or arrangements, registration rights
agreements, rights of first refusal or other contracts pertaining to the capital
stock of the Acquiror Company. To the best knowledge of the Acquiror Company,
the issuance of all of the shares of Acquiror Companyβs Common Stock described
in this Section 6.8.1 have been in compliance with U.S. federal and state
securities laws.
Β
6.8.2Β No
Redemption Requirements.
Except
as set forth in Schedule 6.8.2 or in the Acquiror Company SEC Reports, there
are
no outstanding contractual obligations (contingent or otherwise) of the Acquiror
Company to retire, repurchase, redeem or otherwise acquire any outstanding
shares of capital stock of, or other ownership interests in, the Acquiror
Company or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any other Person.
Β
6.8.3Β Duly
Authorized.
The
issuance of the Acquiror Company Shares has been duly authorized and, upon
delivery to the Shareholders of certificates therefor in accordance with the
terms of this Agreement, the Acquiror Company Shares will have been validly
issued and fully paid, and will be nonassessable, have the rights, preferences
and privileges specified, will be free of preemptive rights and will be free
and
clear of all Liens and restrictions, other than Liens created by the
Shareholders and restrictions on transfer imposed by this Agreement and the
Securities Act.
26
Β
Β
6.8.4Β Subsidiaries.
There
are no Acquiror Company Subsidiaries other than as disclosed in the Acquiror
Company SEC Reports.
Β
6.9Β Compliance
with Laws.
Except
as would not have a Material Adverse Effect, the business and operations of
the
Acquiror Company have been and are being conducted in accordance with all
applicable Laws and Orders. Except as would have a Material Adverse Effect,
the
Acquiror Company has not received notice of any violation (or any Proceeding
involving an allegation of any violation) of any applicable Law or Order by
or
affecting such Acquiror Company and, to the knowledge of the Acquiror Company,
no Proceeding involving an allegation of violation of any applicable Law or
Order is threatened or contemplated. Except as would have a Material Adverse
Effect, the Acquiror Company is not subject to any obligation or restriction
of
any kind or character, nor is there, to the knowledge of the Acquiror Company,
any event or circumstance relating to the Acquiror Company that materially
and
adversely affects in any way its business, properties, assets or prospects
or
that prohibits the Acquiror Company from entering into this Agreement or would
prevent or make burdensome its performance of or compliance with all or any
part
of this Agreement or the consummation of the transactions contemplated
hereby.
Β
6.10Β Certain
Proceedings.
There
is no pending Proceeding that has been commenced against the Acquiror Company
and that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions contemplated
by
this Agreement. To the knowledge of the Acquiror Company, no such Proceeding
has
been threatened.
Β
6.11Β No
Brokers or Finders.
Except
as disclosed in Schedule 6.11, no Person has, or as a result of the transactions
contemplated herein will have, any right or valid claim against the Acquiror
Company for any commission, fee or other compensation as a finder or broker,
or
in any similar capacity, and the Acquiror Company will indemnify and hold the
Company harmless against any liability or expense arising out of, or in
connection with, any such claim.
Β
6.12Β Absence
of Undisclosed Liabilities.
Except
as set forth on Schedule 6.12 or in the Acquiror Company SEC Reports, the
Acquiror Company does not have any debt, obligation or liability (whether
accrued, absolute, contingent, liquidated or otherwise, whether due or to become
due, whether or not known to the Acquiror Company) arising out of any
transaction entered into at or prior to the Closing Date or any act or omission
at or prior to the Closing Date, except to the extent set forth on or reserved
against on the Acquiror Company Balance Sheet. Except as set forth on Schedule
6.12 or in the Acquiror Company SEC Reports, the Acquiror Company has not
incurred any liabilities or obligations under agreements entered into, in the
usual and ordinary course of business since December 31, 2003.
Β
6.13Β Changes.
Except
as set forth on Schedule 6.13 or in the Acquiror Company SEC Reports, the
Acquiror Company has not, since December 31, 2005:
Β
6.13.1Β Ordinary
Course of Business.
Conducted its business or entered into any transaction other than in the usual
and ordinary course of business, except for this Agreement;
27
Β
Β
6.13.2Β Adverse
Changes.
Suffered or experienced any change in, or affecting, its condition (financial
or
otherwise), properties, assets, liabilities, business, operations, results
of
operations or prospects other than changes, events or conditions in the usual
and ordinary course of its business, none of which would have a Material Adverse
Effect;
Β
6.13.3Β Loans.
Made
any loans or advances to any Person other than travel advances and reimbursement
of expenses made to employees, officers and directors in the ordinary course
of
business;
Β
6.13.4Β Liens.
Created
or permitted to exist any Lien on any material property or asset of the Acquiror
Company, other than Permitted Liens;
Β
6.13.5Β Capital
Stock.
Issued,
sold, disposed of or encumbered, or authorized the issuance, sale, disposition
or encumbrance of, or granted or issued any option to acquire any shares of
its
capital stock or any other of its securities or any Equity Security, or altered
the term of any of its outstanding securities or made any change in its
outstanding shares of capital stock or its capitalization, whether by reason
of
reclassification, recapitalization, stock split, combination, exchange or
readjustment of shares, stock dividend or otherwise;
Β
6.13.6Β Dividends.
Declared, set aside, made or paid any dividend or other distribution to any
of
its stockholders;
Β
6.13.7Β Material
Acquiror Company Contracts.
Terminated or modified any Material Acquiror Company Contract, except for
termination upon expiration in accordance with the terms thereof;
Β
6.13.8Β Claims.
Released, waived or cancelled any claims or rights relating to or affecting
the
Acquiror Company in excess of US $10,000 in the aggregate or instituted or
settled any Proceeding involving in excess of US $10,000 in the
aggregate;
Β
6.13.9Β Discharged
Liabilities.
Paid,
discharged or satisfied any claim, obligation or liability in excess of US
$10,000 in the aggregate, except for liabilities incurred prior to the date
of
this Agreement in the ordinary course of business;
Β
6.13.10Β Indebtedness.
Created, incurred, assumed or otherwise become liable for any Indebtedness
in
excess of US $10,000 in the aggregate, other than professional
fees;
Β
6.13.11Β Guarantees.
Guaranteed or endorsed in a material amount any obligation or net worth of
any
Person;
Β
6.13.12Β Acquisitions.
Acquired the capital stock or other securities or any ownership interest in,
or
substantially all of the assets of, any other Person;
Β
6.13.13Β Accounting.
Changed
its method of accounting or the accounting principles or practices utilized
in
the preparation of its financial statements, other than as required by
GAAP;
28
Β
Β
6.13.14Β Agreements.
Except
as set forth on Schedule 6.13.14, entered into any agreement, or otherwise
obligated itself, to do any of the foregoing.
Β
6.14Β Material
Acquiror Company Contracts.
The
Acquiror Company has provided to the Company, prior to the date of this
Agreement, true, correct and complete copies of each written Material Acquiror
Company Contract, including each amendment, supplement and modification thereto,
that has not previously been filed as part of the Acquiror Company SEC Reports.
Β
6.14.1Β No
Defaults.
Each
Material Acquiror Company Contract is a valid and binding agreement of the
Acquiror Company that is party thereto, and is in full force and effect. Except
as would not have a Material Adverse Effect, the Acquiror Company is not in
breach or default of any Material Acquiror Company Contract to which it is
a
party and, to the knowledge of the Acquiror Company, no other party to any
Material Acquiror Company Contract is in breach or default thereof. Except
as
would not have a Material Adverse Effect, no event has occurred or circumstance
exists that (with or without notice or lapse of time) would (a) contravene,
conflict with or result in a violation or breach of, or become a default or
event of default under, any provision of any Material Acquiror Company Contract
or (b) permit the Acquiror Company or any other Person the right to declare
a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify any Material Acquiror Company
Contract. The Acquiror Company has not received notice of the pending or
threatened cancellation, revocation or termination of any Material Acquiror
Company Contract to which it is a party. There are no renegotiations of, or
attempts to renegotiate, or outstanding rights to renegotiate any material
terms
of any Material Acquiror Company Contract.
Β
6.15Β Employees.
Β
6.15.1Β Except
as
set forth on Schedule 6.15.1, the Acquiror Company has no employees, independent
contractors or other Persons providing research or other services to them.
Except as would not have a Material Adverse Effect, the Acquiror Company is
in
full compliance with all Laws regarding employment, wages, hours, benefits,
equal opportunity, collective bargaining, the payment of Social Security and
other taxes, occupational safety and health and plant closing. The Acquiror
Company is not liable for the payment of any compensation, damages, taxes,
fines, penalties or other amounts, however designated, for failure to comply
with any of the foregoing Laws.
Β
6.15.2Β No
director, officer or employee of the Acquiror Company is a party to, or is
otherwise bound by, any contract (including any confidentiality, noncompetition
or proprietary rights agreement) with any other Person that in any way adversely
affects or will materially affect (a) the performance of his or her duties
as a
director, officer or employee of the Acquiror Company or (b) the ability of
the
Acquiror Company to conduct its business. Except as set forth on Schedule
6.15.2, each employee of the Acquiror Company is employed on an at-will basis
and the Acquiror Company does not have any contract with any of its employees
which would interfere with its ability to discharge its
employees.
29
Β
Β
6.16Β Tax
Returns and Audits.
Β
6.16.1Β Tax
Returns.
The
Acquiror Company has filed all material Tax Returns required to be filed by
or
on behalf of the Acquiror Company and has paid all material Taxes of the
Acquiror Company required to have been paid (whether or not reflected on any
Tax
Return). Except as set forth on Schedule 6.16.1, (a) no Governmental Authority
in any jurisdiction has made a claim, assertion or threat to such Acquiror
Company that such Acquiror Company is or may be subject to taxation by such
jurisdiction; (b) there are no Liens with respect to Taxes on the Acquiror
Companyβs property or assets other than Permitted Liens; and (c) there are no
Tax rulings, requests for rulings, or closing agreements relating to the
Acquiror Company for any period (or portion of a period) that would affect
any
period after the date hereof.
Β
6.16.2Β No
Disputes.
There
is no pending audit, examination, investigation, dispute, proceeding or claim
with respect to any Taxes of the Acquiror Company, nor is any such claim or
dispute pending or contemplated. The Acquiror Company has delivered to the
Company true, correct and complete copies of all Tax Returns, if any,
examination reports and statements of deficiencies assessed or asserted against
or agreed to by the Acquiror Company since their inception and any and all
correspondence with respect to the foregoing.
Β
6.17Β Insurance
Coverage.
Except
as set forth in Schedule 6.17 or as disclosed in the Acquiror Company SEC
Reports, the Acquiror Company does not maintain any insurance policies.
Β
6.18Β Litigation;
Orders.
There
is no Proceeding (whether federal, state, local or foreign) pending or, to
the
knowledge of the Acquiror Company, threatened against or affecting the Acquiror
Company or any of Acquiror Companyβs properties, assets, business or employees.
To the knowledge of the Acquiror Company, there is no fact that might result
in
or form the basis for any such Proceeding. The Acquiror Company is not subject
to any Orders.
Β
6.19Β Licenses.
Except
as would not have a Material Adverse Effect, the Acquiror Company possesses
from
the appropriate Governmental Authority all licenses, permits, authorizations,
approvals, franchises and rights that are necessary for the Acquiror Company
to
engage in its business as currently conducted and to permit the Acquiror Company
to own and use its properties and assets in the manner in which it currently
owns and uses such properties and assets (collectively, βAcquiror Company
Permitsβ). The Acquiror Company has not received notice from any Governmental
Authority or other Person that there is lacking any license, permit,
authorization, approval, franchise or right necessary for such Acquiror Company
to engage in its business as currently conducted and to permit such Acquiror
Company to own and use its properties and assets in the manner in which it
currently owns and uses such properties and assets. Except as would not have
a
Material Adverse Effect, the Acquiror Company Permits are valid and in full
force and effect. Except as would not have a Material Adverse Effect, no event
has occurred or circumstance exists that may (with or without notice or lapse
of
time): (a) constitute or result, directly or indirectly, in a violation of
or a
failure to comply with any Acquiror Company Permit; or (b) result, directly
or
indirectly, in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Acquiror Company Permit. The
Acquiror Company has not received notice from any Governmental Authority or
any
other Person regarding: (a) any actual, alleged, possible or potential
contravention of any Acquiror Company Permit; or (b) any actual, proposed,
possible or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to, any Acquiror Company Permit. All
applications required to have been filed for the renewal of such Acquiror
Company Permits have been duly filed on a timely basis with the appropriate
Persons, and all other filings required to have been made with respect to such
Acquiror Company Permits have been duly made on a timely basis with the
appropriate Persons. All Acquiror Company Permits are renewable by their terms
or in the ordinary course of business without the need to comply with any
special qualification procedures or to pay any amounts other than routine fees
or similar charges, all of which have, to the extent due, been duly
paid.
30
Β
Β
6.20Β Interested
Party Transactions.
Except
as disclosed in Schedule 6.20 or in the Acquiror Company SEC Reports, no
officer, director or stockholder of the Acquiror Company or any Affiliate or
βassociateβ (as such term is defined in Rule 405 of the Commission under the
Securities Act) of any such Person, has or has had, either directly or
indirectly, (1) an interest in any Person which (a) furnishes or sells services
or products which are furnished or sold or are proposed to be furnished or
sold
by the Acquiror Company, or (b) purchases from or sells or furnishes to, or
proposes to purchase from, sell to or furnish the Acquiror Company any goods
or
services; or (2) a beneficial interest in any contract or agreement to which
the
Acquiror Company is a party or by which it may be bound or
affected.
Β
6.21Β SEC
Documents; Financial Statements.
The
Acquiror Company has filed all reports required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
three years preceding the date hereof (or such shorter period as the Acquiror
Company was required by law to file such material) and, while not having filed
all such Acquiror Company SEC Reports prior to the date such filings may have
been due, is nevertheless current with respect to its Exchange Act filing
requirements. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder,
and
none of the SEC Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statement therein, in light of the
circumstances under which they were made, not misleading. All material
agreements to which the Acquiror Company is a party or to which the property
or
assets of the Acquiror Company are subject have been appropriately filed as
exhibits to the Acquiror Company SEC Reports as and to the extent required
under
the Exchange Act. The financial statements of the Acquiror Company included
in
the Acquiror Company SEC Reports comply in all material respects with applicable
accounting requirement and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except
as
may be indicated in the notes thereto, or, in the case of unaudited statements
as permitted by Form 10-QSB of the Commission), and fairly present in all
material respects (subject in the case of unaudited statements, to normal,
recurring audit adjustments) the financial position of the Acquiror Company
as
at the dates thereof and the results of its operations and cash flows for the
periods then ended.
Β
6.22Β Title
to and Condition of Properties.
Except
as
would not have a Material Adverse Effect, the Acquiror Company owns (with good
and marketable title in the case of real property) or holds under valid leases
or other rights to use all real property, plants, machinery, equipment and
other
personal property necessary for the conduct of its business as presently
conducted, free and clear of all Liens, except Permitted Liens. The material
buildings, plants, machinery and equipment necessary for the conduct of the
business of the Acquiror Company as presently conducted are structurally sound,
are in good operating condition and repair and are adequate for the uses to
which they are being put, and none of such buildings, plants, machinery or
equipment is in need of maintenance or repairs, except for ordinary, routine
maintenance and repairs that are not material in nature or
cost.
31
Β
Β
6.23Β Environmental
and Safety Matters.
Except
as set forth on Schedule 6.22 and except as would not have a Material Adverse
Effect:
Β
6.23.1Β The
Acquiror Company has at all time been and is in compliance with all
Environmental Laws applicable to the Acquiror Company.
Β
6.23.2Β There
are
no Proceedings pending or threatened against the Acquiror Company alleging
the
violation of any Environmental Law or Environmental Permit applicable to the
Acquiror Company or alleging that the Acquiror Company is a potentially
responsible party for any environmental site contamination.
Β
6.23.3Β Neither
this Agreement nor the consummation of the transactions contemplated by this
Agreement shall impose any obligations to notify or obtain the consent of any
Governmental Authority or third Persons under any Environmental Laws applicable
to the Acquiror Company.
Β
6.24Β Board
Recommendation.
The
Acquiror Company Board has, by unanimous written consent or other action valid
under the laws of the jurisdiction in which the Acquiror Company is organized,
determined that this Agreement and the transactions contemplated by this
Agreement are advisable and in the best interests of the Acquiror Companyβs
stockholders and has duly authorized this Agreement and the transactions
contemplated by this Agreement, subject to approval by the Acquiror Company
stockholders.
Β
Β
SECTION
VII
COVENANTS
OF THE ACQUIROR COMPANY
Β
7.1Β Indemnification
and Insurance.
Β
7.1.1Β The
Acquiror Company shall to the fullest extent permitted under applicable Law
or
its Organizational Documents, indemnify and hold harmless, each present and
former director, officer or employee of the Acquiror Company (collectively,
the
βIndemnified Partiesβ) against any costs or expenses (including attorneysβ
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any Proceeding (x) arising out of or pertaining
to the transactions contemplated by this Agreement or (y)Β otherwise with
respect to any acts or omissions occurring at or prior to the Closing Date,
to
the same extent as provided in the Acquiror Companyβs Organizational Documents
or any applicable contract or agreement as in effect on the date hereof, in
each
case for a period of five years after the Closing Date. In the event of any
such
Proceeding (whether arising before or after the Closing Date), (i) any counsel
retained by the Indemnified Parties for any period after the Closing Date shall
be reasonably satisfactory to the Acquiror Company, (ii) after the Closing
Date,
the Acquiror Company shall pay the reasonable fees and expenses of such counsel,
promptly after statements therefor are received, provided that the Indemnified
Parties shall be required to reimburse the Acquiror Company for such payments
in
the circumstances and to the extent required by the Acquiror Companyβs
Organizational Documents, any applicable contract or agreement or applicable
Law, and (iii) the Acquiror Company will cooperate in the defense of any such
matter; provided,
however,
that
the Acquiror Company shall not be liable for any settlement effected without
its
written consent (which consent shall not be unreasonably withheld. The
Indemnified Parties as a group may retain only one law firm to represent them
in
each applicable jurisdiction with respect to any single action unless there
is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties,
in which case each Indemnified Person with respect to whom such a conflict
exists (or group of such Indemnified Persons who among them have no such
conflict) may retain one separate law firm in each applicable
jurisdiction.
32
Β
Β
7.1.2Β This
Section 7.1 shall survive the consummation of the transactions contemplated
by
this Agreement and upon the execution hereof, is intended to benefit the
Indemnified Parties and the Covered Persons, shall be binding on all successors
and assigns of the Acquiror Company and shall be enforceable by the Indemnified
Parties.
Β
7.2Β Reverse
Stock Split.
As soon
as practicable following the Closing Date, the Acquiror Company shall undertake
to seek stockholder approval of, and establish a record date with respect to,
a
1 for 10 reverse split of its outstanding common shares. In connection
therewith, the Acquiror Company shall make such filings with the Commission
as
may be required under Regulation 14C of the Exchange Act and consummate such
reverse stock split as soon as possible following the mailing of such documents
as are required to be sent to its shareholders under such Regulation 14C and
receipt of any related approvals as may be necessary under the rules and
regulations (including Rule 10b-17 under the Exchange Act) of the Commission
or
NASD Regulation, Inc. relating thereto. Parties.
Β
7.3Β Disposition
of Existing Businesses.
Within
6 months following the Closing Date, the Acquiror Company shall enter into
one
or more binding agreements to sell the existing businesses of the Acquiror
Company (as disclosed in the Acquiror Company SEC Reports)(the βExisting
Businessesβ) on terms and conditions requiring no ongoing obligations
(indemnification or otherwise) on the part of the Acquiror Company and no
retention of any assets or liabilities of such Existing Businesses by the
Acquiror Company.
Β
Β
SECTION
VIII
CONDITIONS
PRECEDENT OF THE ACQUIROR COMPANY
Β
The
Acquiror Companyβs obligation to acquire the Shares and to take the other
actions required to be taken by the Acquiror Company at the Closing Date is
subject to the satisfaction, at or prior to the Closing Date, of each of the
following conditions (any of which may be waived by the Acquiror Company, in
whole or in part):
Β Β
8.1Β Accuracy
of Representations.
The
representations and warranties of the Company and the Shareholders set forth
in
this Agreement or in any Schedule or certificate delivered pursuant hereto
that
are not qualified as to materiality shall be true and correct in all material
respects as of the date of this Agreement except to the extent a representation
or warranty is expressly limited by its terms to another date and without giving
effect to any supplemental Schedule. The representations and warranties of
the
Company and the Shareholders set forth in this Agreement or in any Schedule
or
certificate delivered pursuant hereto that are qualified as to materiality
shall
be true and correct in all respects as of the date of this Agreement, except
to
the extent a representation or warranty is expressly limited by its terms to
another date and without giving effect to any supplemental
Schedule.
Β
33
8.2Β Performance
by the Company and Shareholders.
Β
8.2.1Β All
of
the covenants and obligations that the Company and Shareholders are required
to
perform or to comply with pursuant to this Agreement (considered collectively),
and each of these covenants and obligations (considered individually), must
have
been duly performed and complied with in all material respects.
Β
8.2.2Β Each
document required to be delivered by the Company and the Shareholders pursuant
to this Agreement must have been delivered.
Β
8.3Β No
Force Majeure Event.
There
shall not have been any delay, error, failure or interruption in the conduct
of
the business of the Company, or any loss, injury, delay, damage, distress,
or
other casualty, due to force majeure including but not limited to (a) acts
of
God; (b) fire or explosion; (c) war, acts of terrorism or other civil unrest;
or
(d) national emergency.
Β
8.4Β Certificate
of Officer.
The
Company will have delivered to the Acquiror Company a certificate executed
by an
officer of the Company, certifying the satisfaction of the conditions specified
in Sections 8.1, 8.2, 8.3 and 8.6.
Β
8.5Β Certificate
of Shareholders.
Each
Shareholder will have delivered to the Acquiror Company a certificate executed
by such Shareholder, if a natural person, or an authorized officer of the
Shareholder, if an entity, certifying the satisfaction of the conditions
specified in Sections 8.1, 8.2 and 8.6.
Β
8.6Β Consents.
Β
8.6.1Β All
material consents, waivers, approvals, authorizations or orders required to
be
obtained, and all filings required to be made, by the Company and/or the
Shareholders for the authorization, execution and delivery of this Agreement
and
the consummation by them of the transactions contemplated by this Agreement,
shall have been obtained and made by the Company or the Shareholders, as the
case may be, except where the failure to receive such consents, waivers,
approvals, authorizations or orders or to make such filings would not have
a
Material Adverse Effect on the Company or the Acquiror Company.
Β
8.6.2Β Without
limiting the foregoing, the Schedule 14(f) Filings shall have been mailed to
the
stockholders of the Acquiror Company within the time periods required by the
Commission. No Proceeding occasioned by the Section 14(f) Filings shall have
been initiated or threatened by the Commission (which Proceeding remains
unresolved as of the Closing Date).
34
Β
Β
8.7Β Documents.
The
Company and the Shareholders must have caused the following documents to be
delivered to the Acquiror Company:
Β
8.7.1Β share
certificates evidencing the number of Shares held by each Shareholder (as set
forth in Exhibit A), along with executed stock powers transferring such Shares
to the Acquiror Company;
Β
8.7.2Β a
Secretaryβs Certificate of the Company, dated the Closing Date, certifying
attached copies of (A) the Organizational Documents of the Company and each
Company Subsidiary, (B) the resolutions of the Company Board and the
Shareholders approving this Agreement and the transactions contemplated hereby;
and (C) the incumbency of each authorized officer of the Company signing this
Agreement and any other agreement or instrument contemplated hereby to which
the
Company is a party;
Β
8.7.3Β a
certified certificate of good standing, or equivalent thereof, of the Company
and the Company Subsidiary;
Β
8.7.4Β each
of
the Transaction Documents to which the Company and/or the Shareholders is a
party, duly executed; and
Β
8.7.5Β such
other documents as the Acquiror Company may reasonably request for the purpose
of (i) evidencing the accuracy of any of the representations and warranties
of
the Company and the Shareholders pursuant to Section 8.1, (ii) evidencing the
performance of, or compliance by the Company and the Shareholders with, any
covenant or obligation required to be performed or complied with by the Company
or the Shareholders, as the case may be, (iii)Β evidencing the satisfaction
of any condition referred to in this Section 8, or (iv) otherwise facilitating
the consummation or performance of any of the transactions contemplated by
this
Agreement.
Β
8.8Β No
Proceedings.
There
must not have been commenced or threatened against the Acquiror Company, the
Company or any Shareholder, or against any Affiliate thereof, any Proceeding
(which Proceeding remains unresolved as of the Closing Date) (a) involving
any
challenge to, or seeking damages or other relief in connection with, any of
the
transactions contemplated by this Agreement, or (b) that may have the effect
of
preventing, delaying, making illegal, or otherwise interfering with any of
the
transactions contemplated by this Agreement.
Β
8.9Β No
Claim Regarding Stock Ownership or Consideration.
There
must not have been made or threatened by any Person any claim asserting that
such Person (a) is the holder of, or has the right to acquire or to obtain
beneficial ownership of the Shares or any other stock, voting, equity, or
ownership interest in, the Company, or (b) is entitled to all or any portion
of
the Acquiror Company Shares.
35
Β
Β
SECTION
IX
CONDITIONS
PRECEDENT OF THE COMPANY
AND
THE SHAREHOLDERS
Β
The
Shareholdersβ obligation to transfer the Shares and the obligations of the
Company to take the other actions required to be taken by the Company in advance
of or at the Closing Date are subject to the satisfaction, at or prior to the
Closing Date, of each of the following conditions (any of which may be waived
by
the Company and the Shareholders, in whole or in part):
Β
9.1Β Accuracy
of Representations.
The
representations and warranties of the Acquiror Company set forth in this
Agreement or in any Schedule or certificate delivered pursuant hereto that
are
not qualified as to materiality shall be true and correct in all material
respects as of the date of this Agreement except to the extent a representation
or warranty is expressly limited by its terms to another date and without giving
effect to any supplemental Schedule. The representations and warranties of
the
Acquiror Company set forth in this Agreement or in any Schedule or certificate
delivered pursuant hereto that are qualified as to materiality shall be true
and
correct in all respects as of the date of this Agreement, except to the extent
a
representation or warranty is expressly limited by its terms to another date
and
without giving effect to any supplemental Schedule.
Β
9.2Β Performance
by the Acquiror Company.
Β
9.2.1Β All
of
the covenants and obligations that the Acquiror Company is required to perform
or to comply with pursuant to this Agreement (considered collectively), and
each
of these covenants and obligations (considered individually), must have been
performed and complied with in all respects.
Β
9.2.2Β Each
document required to be delivered by the Acquiror Company pursuant to this
Agreement must have been delivered.
Β
9.3Β No
Force Majeure Event.
There
shall not have been any delay, error, failure or interruption in the conduct
of
the business of the Acquiror Company, or any loss, injury, delay, damage,
distress, or other casualty, due to force majeure including but not limited
to
(a) acts of God; (b) fire or explosion; (c) war, acts of terrorism or other
civil unrest; or (d) national emergency.
Β
9.4Β Certificate
of Officer.
The
Acquiror Company will have delivered to the Company a certificate, dated the
Closing Date, executed by an officer of the Acquiror Company, certifying the
satisfaction of the conditions specified in Sections 9.1, 9.2, 9.3 and
9.5.
Β
9.5Β Consents.
Β
9.5.1Β All
material consents, waivers, approvals, authorizations or orders required to
be
obtained, and all filings required to be made, by the Acquiror Company for
the
authorization, execution and delivery of this Agreement and the consummation
by
it of the transactions contemplated by this Agreement, shall have been obtained
and made by the Acquiror Company, except where the failure to receive such
consents, waivers, approvals, authorizations or orders or to make such filings
would not have a Material Adverse Effect on the Company or the Acquiror
Company.
36
Β
Β
9.6Β Documents.
The
Acquiror Company must have caused the following documents to be delivered to
the
Company and/or the Shareholders:
Β
9.6.1Β share
certificates evidencing each Shareholderβs pro rata share of the Closing
Acquiror Company Shares (as set forth in Exhibit B);
Β
9.6.2Β warrants
evidencing each Shareholderβs pro rata share of the Acquiror Company Warrants
(as set forth in Exhibit B);
Β
9.6.3Β a
Secretaryβs Certificate, dated the Closing Date certifying attached copies of
(A) the Organizational Documents of the Acquiror Company , (B) the resolutions
of the Acquiror Company Board approving this Agreement and the transactions
contemplated hereby; and (C) the incumbency of each authorized officer of the
Acquiror Company signing this Agreement and any other agreement or instrument
contemplated hereby to which the Acquiror Company is a party;
Β
9.6.4Β a
Certificate of Good Standing of the Acquiror Company;
Β
9.6.5Β each
of
the Transaction Documents to which the Acquiror Company is a party, duly
executed; and
Β
9.6.6Β such
other documents as the Company may reasonably request for the purpose of (i)
evidencing the accuracy of any representation or warranty of the Acquiror
Company pursuant to Section 9.1, (ii) evidencing the performance by the Acquiror
Company of, or the compliance by the Acquiror Company with, any covenant or
obligation required to be performed or complied with by the Acquiror Company,
(iii) evidencing the satisfaction of any condition referred to in this Section
9, or (iv) otherwise facilitating the consummation of any of the transactions
contemplated by this Agreement.
Β
9.7Β No
Proceedings.
Since
the date of this Agreement, there must not have been commenced or threatened
against the Acquiror Company, the Company or any Shareholder, or against any
Affiliate thereof, any Proceeding (which Proceeding remains unresolved as of
the
date of this Agreement) (a) involving any challenge to, or seeking damages
or
other relief in connection with, any of the transactions contemplated hereby,
or
(b) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the transactions contemplated
hereby.
Β
9.8Β Financing.
The
Acquiror Company shall be engaged in (and using its best efforts to consummate)
a financing intended to raise $5 million in gross proceeds at the price no
less
than 5 times of audited 2006 eanrings to the Acquiror Company. If the fund
is
not raised within 30 days after the closing, the Company will have right to
re-negitiate for additional shares of the post-merger company for no
consideration.
37
Β
Β
SECTION
X
INDEMNIFICATION;
REMEDIES
Β
10.1Β Survival.
All
representations, warranties, covenants, and obligations in this Agreement shall
expire eighteen (18) months after the date this Agreement is executed (the
βSurvival Periodβ). The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether before
or
after the execution and delivery of this Agreement, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy
of
any representation or warranty, or on the performance of or compliance with
any
covenant or obligation, will not affect the right to indemnification, payment
of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
Β
10.2Β Limitations
on Amount.
No
party hereto shall be entitled to indemnification pursuant to this Section
10,
unless and until the aggregate amount of Damages with respect to such matters
under Section 10.4 exceeds US $50,000, at which time, the such indemnified
party
shall be entitled to indemnification for the total amount of such Damages in
excess of US $50,000.
Β
10.3Β Determining
Damages.
Materiality qualifications to the representations and warranties of the Company
and the Acquiror Company shall not be taken into account in determining the
amount of Damages occasioned by a breach of any such representation and warranty
for purposes of determining whether the baskets set forth in Section 10.3 has
been met.
Β
10.4Β Breach
by Shareholders.
Nothing
in this Section 10 shall limit the Acquiror Companyβs right to pursue any
appropriate legal or equitable remedy against any Shareholder with respect
to
any Damages arising, directly or indirectly, from or in connection with: (a)
any
breach by such Shareholder of any representation or warranty made by such
Shareholder in this Agreement or in any certificate delivered by such
Shareholder pursuant to this Agreement or (b) any breach by such Shareholder
of
its covenants or obligations in this Agreement. All claims of the Acquiror
Company pursuant to this Section 10 shall be brought by the Principal Acquiror
Shareholders on behalf of the Acquiror Company and those Persons who were
stockholders of the Acquiror Company immediately prior to the Closing
Date.
Β
10.5Β Breach
by Acquiror Company.
In the
event the condition described in Section 9.8 shall not have been satisfied
within 30 days of the Closing Date (as such date may be extended by mutual
agreement of the Acquiror Company and Simon Mu), with the result that the
financing described therein shall have been consummated at a per share valuation
representing not less than five times the earnings per share of the Acquiror
Company following the Exchange (excluding any results of operations of the
Existing Businesses), then the Shareholders shall be entitled to receive
liquidated damages in an amount to be agreed between the Shareholders and Simon
Mu. Such liquidated damages may take the form of the issuance of additional
Acquiror Company Warrants (or shares of Acquiror Company Common Stock, in the
event the reverse split of the Acquiror Company Common Stock shall have been
effected by then).
38
Β
Β
SECTION
XI
GENERAL
PROVISIONS
Β
11.1Β Expenses.
Except
as otherwise expressly provided in this Agreement, each party to this Agreement
will bear its respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the transactions contemplated
by this Agreement, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another
party.
Β
11.2Β Public
Announcements.
The
Acquiror Company shall promptly, but no later than three (3) days following
the
effective date of this Agreement, issue a press release disclosing the
transactions contemplated hereby. Prior to the Closing Date, the Company and
the
Acquiror Company shall consult with each other in issuing any other press
releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or stock market
or
trading facility with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, which consent shall not be unreasonably withheld or
delayed, except that no prior consent shall be required if such disclosure
is
required by law, in which case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication
and shall incorporate into such public statement, filing or other communication
the reasonable comments of the other party.
Β
11.3Β Confidentiality.
Β
11.3.1Β Acquiror
Company, the Shareholders and the Company will maintain in confidence, and
will
cause their respective directors, officers, employees, agents, and advisors
to
maintain in confidence, any written, oral, or other information obtained in
confidence from another party in connection with this Agreement or the
transactions contemplated by this Agreement, unless (a) such information is
already known to such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault of such party,
(b) the use of such information is necessary or appropriate in making any
required filing with the Commission, or obtaining any consent or approval
required for the consummation of the transactions contemplated by this
Agreement, or (c) the furnishing or use of such information is required by
or
necessary or appropriate in connection with legal proceedings.
Β
11.3.2Β In
the
event that any party is required to disclose any information of another party
pursuant to clause (b) or (c) of Section 11.3.1, the party requested or required
to make the disclosure (the βdisclosing partyβ) shall provide the party that
provided such information (the βproviding partyβ) with prompt notice of any such
requirement so that the providing party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this Section
11.3. If, in the absence of a protective order or other remedy or the receipt
of
a waiver by the providing party, the disclosing party is nonetheless, in the
opinion of counsel, legally compelled to disclose the information of the
providing party, the disclosing party may, without liability hereunder, disclose
only that portion of the providing partyβs information which such counsel
advises is legally required to be disclosed, provided that the disclosing party
exercises its reasonable efforts to preserve the confidentiality of the
providing partyβs information, including, without limitation, by cooperating
with the providing party to obtain an appropriate protective order or other
relief assurance that confidential treatment will be accorded the providing
partyβs information.
39
Β
Β
11.3.3Β If
the
transactions contemplated by this Agreement are not consummated, each party
will
return or destroy as much of such written information as the other party may
reasonably request.
Β
11.4Β Notices.
All
notices, consents, waivers, and other communications under this Agreement must
be in writing and will be deemed to have been duly given when (a) delivered
by
hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), or (c) when received by the addressee, if
sent
by a nationally recognized overnight delivery service (receipt requested),
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
by
written notice to the other parties):
Β
If
to Acquiror Company:
Xxxxx
0000, 00/X
Xxx
Xxxxxxx Xxxxx
00
Xxxxxxxxx, Xxxx Xxxx
|
Β
with
a copy to
Loeb
& Loeb, LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
|
Β
Attention:
Simon Mu
Telephone
No.: x000 0000 0000
Facsimile
No.: + 0-000-000 3599
|
Β
Attention:
Xxxxxxxx X. Xxxxxxxx, Esq.
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
|
Β
If
to Company:
Magical
Insight Investments Limited
0000,
Xxxx Xxxxx, Xxxxxxxx Xxx, Xxxx Xxxx
|
Β
with
a copy to
Beijing
Hi-Tech Software Technology Ltd
10th
Floor, Block C, Intell-Center, 00 Xxxxxxxxxxxx Xxxx Xxxx, Xxxxxxx
Xxxxxxxx, Xxxxxxx, X.X.X 000000
Β
|
Attention:
: Xx. XX Ming
Telephone
No.: x000 0000 0000
Facsimile
No.: x000 0000 0000
|
Attention:
Xx. XXXX Ping
Telephone
No.: (x00 00) 0000 0000
Facsimile
No.: (x00 00) 0000 0000
|
Β
11.5Β Arbitration.
Any
dispute or controversy under this Agreement shall be settled exclusively by
arbitration in the City of New York, County of New York in accordance with
the
rules of the American Arbitration Association then in effect. Judgment may
be
entered on the arbitration award in any court having
jurisdiction.
40
Β
Β
11.6Β Further
Assurances.
The
parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents,
and
(c)Β to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
Β
11.7Β Waiver.
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to
in
this Agreement will operate as a waiver of such right, power, or privilege,
and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless
in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
Β
11.8Β Entire
Agreement and Modification.
This
Agreement supersedes all prior agreements between the parties with respect
to
its subject matter and constitutes (along with the documents referred to in
this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may
not
be amended except by a written agreement executed by the party against whom
the
enforcement of such amendment is sought.
Β
11.9Β Assignments,
Successors, and No Third-Party Rights.
No
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of
and
be enforceable by the respective successors and permitted assigns of the
parties. Except as set forth in Section 7.1 and Section 10.1, nothing expressed
or referred to in this Agreement will be construed to give any Person other
than
the parties to this Agreement any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement.
This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and
assigns.
Β
11.10Β Severability.
If any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the
extent not held invalid or unenforceable.
Β
11.11Β Section
Headings, Construction.
The
headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to βSectionβ
or βSectionsβ refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word βincludingβ does not limit the preceding words or terms.
41
Β
Β
11.12Β Governing
Law.
This
Agreement will be governed by the laws of the State of New York without regard
to conflicts of laws principles.
Β
11.13Β Counterparts.
This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
Β
42
Β
COUNTERPART
SIGNATURE PAGE
Β
IN
WITNESS WHEREOF, the parties have executed and delivered this Share Exchange
Agreement as of the date first written above.
Β
Acquiror
Company:
Β
Β
Signed:
_____________________________
Β
Printed
name: Simon Mu
Β
Title:
Chief Executive Officer
Β
|
Β |
Company:
Β
MAGICAL
INSIGHT INVESTMENTS LTD.
Β
Signed:
_____________________________
Β
Printed
name: LI Ming
Β
Title:
Chief Executive Officer
|
Β |
Β | Β |
43
Β
SHAREHOLDER
COUNTERPART SIGNATURE PAGE
(FOR
ISSUANCES PURSUANT TO REGULATION S)
Β
IN
WITNESS WHEREOF, the parties have executed and delivered this Share Exchange
Agreement as of the date first written above.
Β
Β |
ENTITY
NAME (IF APPLICABLE):
|
|
Β | Β | Β |
Β | Β | Β |
Β | Β | Β |
Β |
By:
|
Β |
Β | Β |
Name:
|
Β | Β |
Title:
|
Β
OFFSHORE
DELIVERY INSTRUCTIONS:
Β
________________________________
PRINT
EXACT NAME IN WHICH YOU WANT
THE
SECURITIES TO BE REGISTERED
Attn:Β
Address:Β
Β
Phone
No.Β
Β
Facsimile
No.Β
Β
Β
44
Β
SHAREHOLDER
COUNTERPART SIGNATURE PAGE
Β
(FOR
ISSUANCES PURSUANT TO SECTION 4(2))
Β
IN
WITNESS WHEREOF, the parties have executed and delivered this Share Exchange
Agreement as of the date first written above.
Β
Β |
ENTITY
NAME (IF APPLICABLE):
|
|
Β |
By:
|
Β |
Β | Β |
Name:
|
Β | Β |
Title:
|
Β
Circle
the category under which you are an βaccredited investorβ pursuant to Exhibit
C:
Β
Β
Β 1 | Β 2 | Β 3 | Β 4 | Β 5 | Β 6 | Β 7 | Β 8 | Β |
Β
Β
________________________________
PRINT
EXACT NAME IN WHICH YOU WANT
THE
SECURITIES TO BE REGISTERED
Β
Attn:
|
Β | Β |
Β | Β | Β |
Address:
|
Β | Β |
Β | Β | Β |
Β | Β | Β |
Β | Β | Β |
Β | Β | Β |
Β | Β | Β |
Phone
No.
|
Β | Β |
Β | Β | Β |
Facsimile
No.
|
Β | Β |
Β
45
Β
EXHIBIT
A
Β
COMPANY
SHAREHOLDERS
Β |
Name
and Address of Shareholder
|
Β |
Shares
|
Β |
Certificate
No.
|
1
|
LI
MING
|
Β |
1
|
Β | Β |
Β |
Β Β
|
Β Total |
1
|
Β | Β |
LI
MING
is registered shareholder of the Company and declared that the beneficiary
owners of the Company listed as below:-
Β |
Name
and Address of beneficiary owner
|
Β |
Ownership
|
1
|
FULL
TALENT LIMITED
|
Β |
37.95%
|
2
|
FULL
WISDOM INTERNATIONAL LIMITED
|
Β |
8.16%
|
3
|
SMOOTH
WEALTH GROUP LIMITED
|
Β |
20.65%
|
4
|
MARVEL
SIGHT LIMITED
|
Β |
11.96%
|
5
|
BETTER
ABILITY ENTERPRISES LIMITED
|
Β |
0.65%
|
6
|
LUCK
ADVANCE INTERNATIONAL LIMITED
|
Β |
0.65%
|
7
|
RICH
FOREVER INTERNATIONAL LIMITED
|
Β |
0.65%
|
8
|
PLENTY
RICHES INVESTMENTS LIMITED
|
Β |
0.65%
|
9
|
PROFIT
PLENTY INVESTMENTS LIMITED
|
Β |
0.65%
|
10
|
SMART
HONOR GROUP LIMITED
|
Β |
0.65%
|
11
|
BRIGHTCENTER
GROUP LIMITED
|
Β |
3.26%
|
12
|
PROFIT
GLOBE INVESTMENTS LIMITED
|
Β |
3.26%
|
13
|
DEVELOP
GOOD INTERNATIONAL LIMITED
|
Β |
3.26%
|
14
|
GAIN
THOUSAND LIMITED
|
Β |
3.26%
|
15
|
ZUO
WEIQI
|
Β |
2.17%
|
16
|
XXXX
XXXXX
|
Β |
2.17%
|
Β |
Total
|
Β |
100.00%
|
Β
46
Β
EXHIBIT
B
Β
SHARES
AND ACQUIROR COMPANY SHARES AND WARRANTS TO BE EXCHANGED
Β |
Name
and Address of Shareholder
|
Percentage
|
Number
of Acquiror Company Shares to be Issued to
Shareholder
|
Number
of Acquiror Company Warrants to be Issued to
Shareholder
|
1
|
FULL
TALENT LIMITED
|
37.95%
|
68,271,228
|
106,228,772
|
2
|
FULL
WISDOM INTERNATIONAL LIMITED
|
8.16%
|
14,672,812
|
22,827,188
|
3
|
SMOOTH
WEALTH GROUP LIMITED
|
20.65%
|
37,167,717
|
57,832,283
|
4
|
MARVEL
SIGHT LIMITED
|
11.96%
|
21,518,152
|
33,481,848
|
5
|
BETTER
ABILITY ENTERPRISES LIMITED
|
0.65%
|
1,173,825
|
1,826,175
|
6
|
LUCK
ADVANCE INTERNATIONAL LIMITED
|
0.65%
|
1,173,825
|
1,826,175
|
7
|
RICH
FOREVER INTERNATIONAL LIMITED
|
0.65%
|
1,173,825
|
1,826,175
|
8
|
PLENTY
RICHES INVESTMENTS LIMITED
|
0.65%
|
1,173,825
|
1,826,175
|
9
|
PROFIT
PLENTY INVESTMENTS LIMITED
|
0.65%
|
1,173,825
|
1,826,175
|
10
|
SMART
HONOR GROUP LIMITED
|
0.65%
|
1,173,825
|
1,826,175
|
11
|
BRIGHTCENTER
GROUP LIMITED
|
3.26%
|
5,868,587
|
9,131,413
|
12
|
PROFIT
GLOBE INVESTMENTS LIMITED
|
3.26%
|
5,868,587
|
9,131,413
|
13
|
DEVELOP
GOOD INTERNATIONAL LIMITED
|
3.26%
|
5,868,587
|
9,131,413
|
14
|
GAIN
THOUSAND LIMITED
|
3.26%
|
5,868,587
|
9,131,413
|
15
|
ZUO
WEIQI
|
2.17%
|
3,910,000
|
6,090,000
|
16
|
XXXX
XXXXX
|
2.17%
|
3,910,000
|
6,090,000
|
Β |
Total
|
100.00%
|
179,970,000
|
280,030,000
|
Β
47
Β
EXHIBIT
C
Β
Definition
of βAccredited Investorβ
Β
The
term
βaccredited investorβ means:
Β
(1)
|
A
bank as defined in Section 3(a)(2) of the Securities Act, or a savings
and
loan association or other institution as defined in Section 3(a)(5)(A)
of
the Securities Act, whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of
the
Securities Exchange Act of 1934; an insurance company as defined
in
Section 2(13) of the Securities Act; an investment company registered
under the Investment Company Act of 1940 (the βInvestment Company Actβ) or
a business development company as defined in Section 2(a)(48) of
the
Investment Company Act; a Small Business Investment Company licensed
by
the U.S. Small Business Administration under Section 301(c) or (d)
of the
Small Business Investment Act of 1958; a plan established and maintained
by a state, its political subdivisions or any agency or instrumentality
of
a state or its political subdivisions for the benefit of its employees,
if
such plan has total assets in excess of US $5,000,000; an employee
benefit
plan within the meaning of the Employee Retirement Income Security
Act of
1974 (βERISAβ), if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings
and
loan association, insurance company, or registered investment advisor,
or
if the employee benefit plan has total assets in excess of US $5,000,000
or, if a self-directed plan, with investment decisions made solely
by
persons that are accredited
investors.
|
Β
(2)
|
A
private business development company as defined in Section 202(a)(22)
of
the Investment Advisers Act of
1940.
|
Β
(3)
|
An
organization described in Section 501(c)(3) of the Internal Revenue
Code,
corporation, Massachusetts or similar business trust, or partnership,
not
formed for the specific purpose of acquiring the securities offered,
with
total assets in excess of US
$5,000,000.
|
Β
(4)
|
A
director or executive officer of the Acquiror
Company.
|
Β
(5)
|
A
natural person whose individual net worth, or joint net worth with
that
personβs spouse, at the time of his or her purchase exceeds US
$1,000,000.
|
Β
(6)
|
A
natural person who had an individual income in excess of US $200,000
in
each of the two most recent years or joint income with that personβs
spouse in excess of US $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current
year.
|
Β
(7)
|
A
trust, with total assets in excess of US $5,000,000, not formed for
the
specific purpose of acquiring the securities offered, whose purchase
is
directed by a sophisticated person as described in Rule 506(b)(2)(ii)
(i.e., a person who has such knowledge and experience in financial
and
business matters that he is capable of evaluating the merits and
risks of
the prospective investment).
|
48
Β
Β
(8)
|
An
entity in which all of the equity owners are accredited investors.
(If
this alternative is checked, the Shareholder must identify each equity
owner and provide statements signed by each demonstrating how each
is
qualified as an accredited
investor.)
|
Β
49
Β
EXHIBIT
D
Β
Definition
of βU.S. Personβ
Β
(1)
|
βU.S.
personβ (as defined in Regulation S)
means:
|
Β
Β |
(i)
|
Any
natural person resident in the United
States;
|
Β
Β |
(ii)
|
Any
partnership or corporation organized or incorporated under the laws
of the
United States;
|
Β
Β |
(iii)
|
Any
estate of which any executor or administrator is a U.S.
person;
|
Β
Β |
(iv)
|
Any
trust of which any trustee is a U.S.
person;
|
Β
Β |
(v)
|
Any
agency or branch of a foreign entity located in the United
States;
|
Β
Β |
(vi)
|
Any
non-discretionary account or similar account (other than an estate
or
trust) held by a dealer or other fiduciary for the benefit or account
of a
U.S. person;
|
Β
Β |
(vii)
|
Any
discretionary account or similar account (other than an estate or
trust)
held by a dealer or other fiduciary organized, incorporated, or (if
an
individual) resident in the United States;
and
|
Β
Β |
(viii)
|
Any
partnership or corporation if: (A) organized or incorporated under
the
laws of any foreign jurisdiction; and (B) formed by a U.S. person
principally for the purpose of investing in securities not registered
under the Securities Act, unless it is organized or incorporated,
and
owned, by accredited investors (as defined in Rule 501(a)) who are
not
natural persons, estates or trusts.
|
Β
(2)
|
Notwithstanding
paragraph (1) above, any discretionary account or similar account
(other
than an estate or trust) held for the benefit or account of a non-U.S.
person by a dealer or other professional fiduciary organized,
incorporated, or (if an individual) resident in the United States
shall
not be deemed a βU.S. person.β
|
Β
(3)
|
Notwithstanding
paragraph (1), any estate of which any professional fiduciary acting
as
executor or administrator is a U.S. person shall not be deemed a
U.S.
person if:
|
Β
Β |
(i)
|
An
executor or administrator of the estate who is not a U.S. person
has sole
or shared investment discretion with respect to the assets of the
estate;
and
|
Β
Β |
(ii)
|
The
estate is governed by foreign law.
|
Β
(4)
|
Notwithstanding
paragraph (1), any trust of which any professional fiduciary acting
as
trustee is a U.S. person shall not be deemed a U.S. person if a trustee
who is not a U.S. person has sole or shared investment discretion
with
respect to the trust assets, and no beneficiary of the trust (and
no
settlor if the trust is revocable) is a U.S.
person.
|
50
Β
Β
(5)
|
Notwithstanding
paragraph (1), an employee benefit plan established and administered
in
accordance with the law of a country other than the United States
and
customary practices and documentation of such country shall not be
deemed
a U.S. person.
|
Β
(6)
|
Notwithstanding
paragraph (1), any agency or branch of a U.S. person located outside
the
United States shall not be deemed a βU.S. personβ
if:
|
Β
Β |
(i)
|
The
agency or branch operates for valid business reasons;
and
|
Β
Β |
(ii)
|
The
agency
or branch is engaged in the business of insurance or banking and
is
subject to substantive insurance
or banking regulation, respectively, in the jurisdiction where
located.
|
Β
(7)
|
The
International Monetary Fund, the International Bank for Reconstruction
and
Development, the Inter-American Development Bank, the Asian Development
Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar
international organizations, their agencies, affiliates and pension
plans
shall not be deemed βU.S. persons.β
|
Β
Β
51
Β
EXHIBIT
E
Β
ACCREDITED
INVESTOR REPRESENTATIONS
Β
Each
Shareholder indicating that it is an Accredited Investor, severally and not
jointly, further represents and warrants to the Acquiror Company as
follows:
Β
1.
|
Such
Shareholder qualifies as an Accredited Investor on the basis set
forth on
its signature page to this
Agreement.
|
Β
2.
|
Such
Shareholder has sufficient knowledge and experience in finance,
securities, investments and other business matters to be able to
protect
such Shareholderβs interests in connection with the transactions
contemplated by this Agreement.
|
Β
3.
|
Such
Shareholder has consulted, to the extent that it has deemed necessary,
with its tax, legal, accounting and financial advisors concerning
its
investment in the Acquiror Company
Shares.
|
Β
4.
|
Such
Shareholder understands the various risks of an investment in the
Acquiror
Company Shares and can afford to bear such risks for an indefinite
period
of time, including, without limitation, the risk of losing its entire
investment in the Acquiror Company
Shares.
|
Β
5.
|
Such
Shareholder has had access to the Acquiror Companyβs publicly filed
reports with the SEC.
|
Β
6.
|
Such
Shareholder has been furnished during the course of the transactions
contemplated by this Agreement with all other public information
regarding
the Acquiror Company that such Shareholder has requested and all
such
public information is sufficient for such Shareholder to evaluate
the
risks of investing in the Acquiror Company
Shares.
|
Β
7.
|
Such
Shareholder has been afforded the opportunity to ask questions of
and
receive answers concerning the Acquiror Company and the terms and
conditions of the issuance of the Acquiror Company
Shares.
|
Β
8.
|
Such
Shareholder is not relying on any representations and warranties
concerning the Acquiror Company made by the Acquiror Company or any
officer, employee or agent of the Acquiror Company, other than those
contained in this Agreement.
|
Β
9.
|
Such
Shareholder is acquiring the Acquiror Company Shares for such
Shareholderβs own account, for investment and not for distribution or
resale to others.
|
Β
10.
|
Such
Shareholder will not sell or otherwise transfer the Acquiror Company
Shares, unless either (a)Β the transfer of such securities is
registered under the Securities Act or (b) an exemption from registration
of such securities is
available.
|
52
Β
Β
11.
|
Such
Shareholder understands and acknowledges that the Acquiror Company
is
under no obligation to register the Acquiror Company Shares for sale
under
the Securities Act.
|
Β
12.
|
Such
Shareholder consents to the placement of a legend on any certificate
or
other document evidencing the Acquiror Company Shares substantially
in the
form set forth in
SectionΒ 4.2.5(a).
|
Β
13.
|
Such
Shareholder represents that the address furnished by such Shareholder
on
its signature page to this Agreement and in Exhibit A is such
Shareholderβs principal residence if he is an individual or its principal
business address if it is a corporation or other
entity.
|
Β
14.
|
Such
Shareholder understands and acknowledges that the Acquiror Company
Shares
have not been recommended by any federal or state securities commission
or
regulatory authority, that the foregoing authorities have not confirmed
the accuracy or determined the adequacy of any information concerning
the
Acquiror Company that has been supplied to such Shareholder and that
any
representation to the contrary is a criminal
offense.
|
Β
15.
|
Such
Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution
and
delivery of this Agreement and the purchase of the Acquiror Company
Shares.
|
Β
53
Β
EXHIBIT
F
Β
NON
U.S. PERSON REPRESENTATIONS
Β
Each
Shareholder indicating that it is not a U.S. person, severally and not jointly,
further represents and warrants to the Acquiror Company as follows:
Β
1.
|
At
the time of (a) the offer by the Acquiror Company and (b) the acceptance
of the offer by such Shareholder, of the Acquiror Company Shares,
such
Shareholder was outside the United
States.
|
Β
2.
|
No
offer to acquire the Acquiror Company Shares or otherwise to participate
in the transactions contemplated by this Agreement was made to such
Shareholder or its representatives inside the United
States.
|
Β
3.
|
Such
Shareholder is not purchasing the Acquiror Company Shares for the
account
or benefit of any U.S. person, or with a view towards distribution
to any
U.S. person, in violation of the registration requirements of the
Securities Act.
|
Β
4.
|
Such
Shareholder will make all subsequent offers and sales of the Acquiror
Company Shares either (x) outside of the United States in compliance
with
Regulation S; (y) pursuant to a registration under the Securities
Act; or
(z) pursuant to an available exemption from registration under the
Securities Act. Specifically, such Shareholder will not resell the
Acquiror Company Shares to any U.S. person or within the United States
prior to the expiration of a period commencing on the Closing Date
and
ending on the date that is one year thereafter (the βDistribution
Compliance Periodβ), except pursuant to registration under the Securities
Act or an exemption from registration under the Securities
Act.
|
Β
5.
|
Such
Shareholder is acquiring the Acquiror Company Shares for such
Shareholderβs own account, for investment and not for distribution or
resale to others.
|
Β
6.
|
Such
Shareholder has no present plan or intention to sell the Acquiror
Company
Shares in the United States or to a U.S. person at any predetermined
time,
has made no predetermined arrangements to sell the Acquiror Company
Shares
and is not acting as a Distributor of such
securities.
|
Β
7.
|
Neither
such Shareholder, its Affiliates nor any Person acting on such
Shareholderβs behalf, has entered into, has the intention of entering
into, or will enter into any put option, short position or other
similar
instrument or position in the U.S. with respect to the Acquiror Company
Shares at any time after the Closing Date through the Distribution
Compliance Period except in compliance with the Securities
Act.
|
Β
8.
|
Such
Shareholder consents to the placement of a legend on any certificate
or
other document evidencing the Acquiror Company Shares substantially
in the
form set forth in
SectionΒ 4.2.5(b).
|
54
Β
Β
9.
|
Such
Shareholder is not acquiring the Acquiror Company Shares in a transaction
(or an element of a series of transactions) that is part of any plan
or
scheme to evade the registration provisions of the Securities Act.
|
Β
10.
|
Such
Shareholder has sufficient knowledge and experience in finance,
securities, investments and other business matters to be able to
protect
such Shareholderβs interests in connection with the transactions
contemplated by this Agreement.
|
Β
11.
|
Such
Shareholder has consulted, to the extent that it has deemed necessary,
with its tax, legal, accounting and financial advisors concerning
its
investment in the Acquiror Company
Shares.
|
Β
12.
|
Such
Shareholder understands the various risks of an investment in the
Acquiror
Company Shares and can afford to bear such risks for an indefinite
period
of time, including, without limitation, the risk of losing its entire
investment in the Acquiror Company
Shares.
|
Β
13.
|
Such
Shareholder has had access to the Acquiror Companyβs publicly filed
reports with the SEC.
|
Β
14.
|
Such
Shareholder has been furnished during the course of the transactions
contemplated by this Agreement with all other public information
regarding
the Acquiror Company that such Shareholder has requested and all
such
public information is sufficient for such Shareholder to evaluate
the
risks of investing in the Acquiror Company
Shares.
|
Β
15.
|
Such
Shareholder has been afforded the opportunity to ask questions of
and
receive answers concerning the Acquiror Company and the terms and
conditions of the issuance of the Acquiror Company
Shares.
|
Β
16.
|
Such
Shareholder is not relying on any representations and warranties
concerning the Acquiror Company made by the Acquiror Company or any
officer, employee or agent of the Acquiror Company, other than those
contained in this Agreement.
|
Β
17.
|
Such
Shareholder will not sell or otherwise transfer the Acquiror Company
Shares, unless either (A)Β the transfer of such securities is
registered under the Securities Act or (B) an exemption from registration
of such securities is available.
|
Β
18.
|
Such
Shareholder understands and acknowledges that the Acquiror Company
is
under no obligation to register the Acquiror Company Shares for sale
under
the Securities Act.
|
Β
19.
|
Such
Shareholder represents that the address furnished by such Shareholder
on
its signature page to this Agreement and in Exhibit A is such
Shareholderβs principal residence if he is an individual or its principal
business address if it is a corporation or other
entity.
|
Β
20.
|
Such
Shareholder understands and acknowledges that the Acquiror Company
Shares
have not been recommended by any federal or state securities commission
or
regulatory authority, that the foregoing authorities have not confirmed
the accuracy or determined the adequacy of any information concerning
the
Acquiror Company that has been supplied to such Shareholder and that
any
representation to the contrary is a criminal
offense.
|
55
Β
Β
21.
|
Such
Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution
and
delivery of this Agreement and the purchase of the Acquiror Company
Shares.
|
56
Β