STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (hereinafter referred to as this
"Agreement"), is entered into as of this 14th day of July, 2006, by and among
Earth Products & Technologies, Inc., a Nevada corporation ("EPAT"); American
Federal Mining Group, Inc., ("American"), an Illinois corporation; and the
persons whose signatures appear at the foot of this Agreement, being all of
the equity registered capital stock owners of American (the "Shareholders"),
upon the following premises:
PREMISES
A. EPAT is currently a non-operating public company. EPAT or its
predecessor(s) has been in existence since 1986.
B. American is a holding corporation, which owns all of the issued and
outstanding shares of registered capital of Wu La ▇▇ ▇▇▇ Qi ▇▇▇▇ ▇▇▇▇ Mining
Co., Ltd. (the "Subsidiary" or "▇▇▇▇ ▇▇▇▇"), a limited liability company
organized in the People's Republic of China ("PRC" or "China"), plus 33% of
Inner Mongolia Xiangzhen Mining Industry Group Co., Ltd., a limited liability
company organized in the PRC. ▇▇▇▇ ▇▇▇▇ owns 99% of the issued and
outstanding shares of registered capital of two subsidiaries, Inner Mongolia
▇▇▇▇▇ ▇▇▇▇ Mining Industry Group Co., Ltd., and Xinjiang Tianzhen Mining Co.,
Ltd.
C. The Shareholders of American have agreed to sell to EPAT, and EPAT
has agreed to purchase all of the issued and outstanding capital stock of
American (the "American Stock") from the Shareholders in exchange for
20,000,000 shares representing approximately 93.9%) of the then issued and
outstanding diluted shares of common stock of EPAT after the stock exchange,
on a fully diluted basis, including stock under options and warrants and stock
issuable under consulting arrangements, and the other transactions described
herein, pursuant to the terms and conditions set forth in this Agreement.
D. American will become a subsidiary of EPAT after the closing of the
exchange.
AGREEMENT
NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits
to the parties to be derived here from, it is hereby agreed as follows:
ARTICLE I
PLAN OF EXCHANGE
1.1 The Exchange. At the Closing (as defined in Section 1.3 below),
the Shareholders of American hereby agree to assign, transfer, and deliver to
EPAT, free and clear of all liens, pledges, encumbrances, charges,
restrictions, or known claims of any kind, nature, or description, the
certificates evidencing the American Stock duly endorsed for transfer to EPAT
or accompanied by stock powers executed in blank by the Shareholders, and EPAT
agrees to
acquire such shares on such date by issuing and delivering in exchange
therefore solely shares of EPAT common stock, in the amount of 20,000,000
shares of its common voting stock, par value $0.001 (the "EPAT Stock") to be
issued to the Shareholders of American and their designees as listed on
Schedule 1 in full satisfaction of any right or interest which the
Shareholders held in the American Stock. As a result of the exchange of the
American Stock in exchange for the EPAT Stock, American will become a
subsidiary of EPAT and the Shareholders of American and its designees will own
approximately 93.9% of the then issued and outstanding common stock of EPAT.
1.2 Anti-Dilution. For all relevant purposes of this Agreement, the
20,000,000 shares of EPAT Stock to be issued and delivered pursuant to this
Agreement to the Shareholders of American, will not be subject to further
change or adjustment. The number of shares of EPAT Stock and all shares of
stock covered by existing options shall be appropriately adjusted to take into
account any other stock split, stock dividend, reverse stock split,
recapitalization, or similar change in the EPAT common stock, par value
$0.001, which may occur between the date of the execution of this Agreement
and the date of delivery of such shares.
1.3 Closing. Subject to the conditions of Section 5.1, the closing
("Closing") of the transactions contemplated by this Agreement shall be at
10:00 AM Salt Lake City time on the fifth business day (a day on which banks
are open in the State of Utah) following the date on which American delivers
to EPAT the Consolidated US Financial Statements (as that term is defined in
Section 5.1) at the offices of EPAT, 2157 Lincoln Street, Salt Lake City,
Utah, or on a date and at such time and place as the parties may agree
("Closing Date").
1.4 Closing Events. At the Closing, each of the respective parties
hereto shall execute, acknowledge, and deliver (or shall cause to be executed,
acknowledged, and delivered) any and all certificates, opinions, financial
statements, schedules, agreements, resolutions, rulings, or other instruments
required by this Agreement to be so delivered at or prior to the Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transactions contemplated hereby if agreed to by the parties.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF AMERICAN
As an inducement to, and to obtain the reliance of, EPAT, American
represents and warrants as follows:
2.1 Organization. American is a company duly organized, validly
existing, and in good standing under the laws of the State of Illinois. ▇▇▇▇
▇▇▇▇, a wholly-owned subsidiary of American, is a company duly organized,
validly existing, and in good standing under the laws of the PRC. Each of
American and its Subsidiary has the power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances,
and orders of public authorities to own all of its properties and assets and
to carry on their respective businesses in all material respects as it is now
being conducted, including qualification to do business as a foreign
corporation in the states in which the character and location of the assets
owned by it or the
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nature of the business transacted by it requires qualification. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of any of American's and its
Subsidiary's charters, articles of formation, bylaws or other organizational
documents. American has taken all action required by laws, its articles of
incorporation, its bylaws, or otherwise to authorize the execution and
delivery of this Agreement. American has full power, authority, and legal
right and has taken all action required by law, its certificate of
incorporation, bylaws, and otherwise to consummate the transactions herein
contemplated.
2.2 Capitalization. The authorized capitalization of American consists
of 1,000,000 shares of ordinary stock, no par value, of which 300,000 shares
are currently issued and outstanding. All issued and outstanding shares are
legally issued, fully paid, and non-assessable and not issued in violation of
the pre-emptive or other rights of any person. American has not granted to
any person any options, warrants, or rights to purchase any shares of its
registered capital or issued any securities convertible to shares of its
registered capital.
2.3 Subsidiaries and Predecessor Corporations. American owns 100% of
the Subsidiary. ▇▇▇▇ ▇▇▇▇ has two wholly-owned subsidiaries, Inner Mongolia
▇▇▇▇▇ ▇▇▇▇ Mining Industry Group Co., Ltd., and Xinjiang Tianzhen Mining Co.,
Ltd. (the "▇▇▇▇ ▇▇▇▇ Subsidiaries"). Except as the context may otherwise
indicate, any reference to ▇▇▇▇ ▇▇▇▇ in this Agreement shall refer to ▇▇▇▇
▇▇▇▇ and both of its subsidiaries combined. Except as indicated in this
paragraph, neither American nor ▇▇▇▇ ▇▇▇▇ own, beneficially or of record, any
shares of any other corporation, partnership, company, limited company, or
other business entity.
2.4 Financial Statements.
(a) On or before June 30, 2006, American will provide to EPAT: (i) its
consolidated audited balance sheet as of December 31, 2005 of American, and
the related audited statements of operations, stockholders' equity and cash
flows for the years ended December 31, 2005 and 2004, together with notes to
such statements and the opinion of e-Fang Accountancy Corp., independent
certified public accountants, with respect thereto; (ii) the audited balance
sheet of ▇▇▇▇ ▇▇▇▇ as of December 31, 2004 (the most recent ▇▇▇▇ ▇▇▇▇ balance
sheet), and the related statements of operations, condensed consolidated
stockholders' equity, and consolidated cash flow for the twelve (12) months
ended December 31, 2004, or as of a subsequent date, together with the notes
thereto; and (iii) the unaudited consolidated balance sheet as of March 31,
2006, of American, and the statement of operations and cash flows for the
quarter ended March 31, 2006, together with the notes thereto. All of these
consolidated financial statements (the "Financial Statements") are included in
the American Schedules.
(b) All the Financial Statements have been prepared in accordance with
generally accepted accounting principles of the United States. The balance
sheets included in the Financial Statements present fairly as of their date
the consolidated financial condition of American and ▇▇▇▇ ▇▇▇▇, respectively.
American and ▇▇▇▇ ▇▇▇▇ did not have, as of the respective date of such
consolidated 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 the
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consolidated balance sheets or the notes thereto, prepared in accordance with
generally accepted accounting principles, and all assets reflected therein
will be properly reported and present fairly the value of the assets of
American or ▇▇▇▇ ▇▇▇▇, respectively, in accordance with such generally
accepted accounting principles. The statements of income, condensed
stockholders' equity, and cash flows will reflect fairly the information
required to be set forth therein by generally accepted accounting principles.
(c) Each of American and ▇▇▇▇ ▇▇▇▇ has filed all income tax returns
required to be filed by them from inception to the date hereof and all taxes
have been paid. Each of American and ▇▇▇▇ ▇▇▇▇ have filed all national,
province, and local income tax returns required to be filed by them from
inception to the date hereof and all taxes have been paid. None of such income
tax returns have been examined or audited in the PRC.
(d) Neither American nor ▇▇▇▇ ▇▇▇▇ owe any unpaid national, province,
county, local, or other taxes (including any deficiencies, interest, or
penalties), except for taxes accrued but not yet due and payable for which
American and/or ▇▇▇▇ ▇▇▇▇ may be liable in their own right or as a transferee
of the assets of, or as a successor to, any other corporation or entity.
Furthermore, except as accruing in the normal course of business, neither
American nor ▇▇▇▇ ▇▇▇▇ owes any accrued and unpaid taxes to the date of this
Agreement.
(e) The books and records, financial and otherwise, of each of American
and ▇▇▇▇ ▇▇▇▇ are in all material respects complete and correct and have been
maintained in accordance with good business and accounting practices.
(f) Each of American and ▇▇▇▇ ▇▇▇▇ has good and marketable title to
their assets and, except as set forth in the American Schedules or the most
recent American balance sheet or the notes thereto, has no material contingent
liabilities, direct or indirect, matured or unmatured.
2.5 Information. The information concerning American and ▇▇▇▇ ▇▇▇▇ set
forth in this Agreement and in the American Schedules is complete and accurate
in all material respects and does not contain any untrue statement of a
material fact or omit to state a material fact required to make the statements
made, in light of the circumstances under which they were made, not
misleading.
2.6 Options or Warrants. There are no existing options, warrants,
calls, or commitments of any character relating to the authorized and unissued
American common stock, nor are there any existing options, warrants, calls or
commitments of any character relating to the ownership of ▇▇▇▇ ▇▇▇▇.
2.7 Absence of Certain Changes or Events. Except as set forth in this
Agreement or the American Schedules, from the date of the most recent American
balance sheet to the Closing:
(a) except in the normal course of business, there will not be (i) any
material adverse change in the business, operations, properties, assets, or
condition of American and ▇▇▇▇ ▇▇▇▇, individually or taken as a whole; or (ii)
any damage, destruction, or loss to any of American and ▇▇▇▇ ▇▇▇▇ (whether or
not covered by insurance) materially and adversely affecting the business,
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operations, properties, assets, or condition of American and ▇▇▇▇ ▇▇▇▇,
individually or taken as a whole;
(b) Neither American nor ▇▇▇▇ ▇▇▇▇ will have (i) amended their charter
or organizational documents; (ii) declared or made, or agreed to declare or
make, any payment of dividends or distributions of any assets of any kind
whatsoever to stockholders or purchased or redeemed, or agreed to purchase or
redeem, any of its capital stock; (iii) waived any rights of value which in
the aggregate are extraordinary or material considering the business of
American and its Subsidiary; (iv) made any material change in its method of
management, operation, or accounting (other than as contemplated in Section
5.1 for the Consolidated US Financial Statements); (v) entered into any other
material transaction which is not in the ordinary course of business; (vi)
made any accrual or arrangement for payment of bonuses or special compensation
of any kind or any severance or termination pay to any present or former
officer or employee; (vii) increased the rate of compensation payable or to
become payable by it to any of its officers or directors or any of its
employees whose monthly compensation exceeds $10,000 (US); or (viii) made any
increase in any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or arrangement
made to, for, or with its officers, directors, or employees; and
(c) Neither American nor ▇▇▇▇ ▇▇▇▇ will have (i) borrowed or agreed to
borrow any funds or incurred, or become subject to, any material obligation or
liability (absolute or contingent) except borrowings in the ordinary course of
business or borrowings involving one or a series of related borrowings
exceeding $1,000,000 (US) in the aggregate; (ii) paid any material obligation
or liability not otherwise in the ordinary course of business (absolute or
contingent) other than current liabilities reflected in or shown on the most
recent American balance sheet, and current liabilities incurred since that
date in the ordinary course of business; (iii) sold or transferred, or agreed
to sell or transfer, any of its assets, properties, or rights not otherwise in
the ordinary course of business (except assets, properties, or rights not used
or useful in its business which, in the aggregate have a value of less than
$100,000), or canceled, or agreed to cancel, any debts or claims (except debts
or claims which in the aggregate are of a value of less than $100,000); (iv)
made or permitted any amendment or termination of any contract, agreement, or
license to which any of them is a party, except for any such contracts, or
amendments or terminations, in the ordinary course of business or any such
contracts or amendments or terminations that provide for aggregate
consideration over the terms of the contract in excess of $1,000,000; or (v)
issued, delivered, or agreed to issue or deliver any stock, bonds or other
corporate securities including debentures (whether authorized and unissued or
held as treasury stock).
For purposes of this Agreement the terms "Material Adverse Change" and
"Material Adverse Effect" mean an adverse change or effect that a reasonable
person would attach importance to in evaluating the party to which it relates,
the party's business or financial condition, or the transactions herein
contemplated.
2.8 Title and Related Matters. American and ▇▇▇▇ ▇▇▇▇ have good and
marketable title to all of their respective properties, inventory, interests
in properties, and assets, real and personal, which will be reflected in the
most recent American balance sheet free and clear of all
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liens, pledges, charges, or encumbrances. At Closing, American and ▇▇▇▇ ▇▇▇▇
will have good and marketable title to all of its properties, inventory,
interests in properties, and assets, real and personal, reflected in the
Consolidated US Balance Sheet (as that term is defined in Section 5.1) or
acquired after that date (except properties, interests in properties, and
assets sold or otherwise disposed of since such date in the ordinary course of
business), free and clear of all liens, pledges, charges, or encumbrances
except
(a) as such assets may be affected by laws of the Hong Kong Special
Administrative Region and The People's Republic of China or province thereof;
(b) statutory liens or claims not yet delinquent; and
(c) such imperfections of title and easements as do not and will not
materially detract from or interfere with the present or proposed use of the
properties subject thereto or affected thereby or otherwise materially impair
present business operations on such properties;
Except as set forth in the American Schedules, each of American and ▇▇▇▇
▇▇▇▇ own, free and clear of any liens, claims, encumbrances, royalty
interests, or other restrictions or limitations of any nature whatsoever, any
and all properties it is currently constructing and all procedures,
techniques, marketing plans, business plans, methods of management, or other
information utilized in connection with its or their business. Except as set
forth in the American Schedules, no third party has any right to, and neither
American nor its Subsidiary has received any notice of infringement of or
conflict with asserted rights of others with respect to any product,
technology, data, trade secrets, know-how, proprietary techniques, trademarks,
service marks, trade names, or copyrights which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling, or finding, would have a
materially adverse affect on the business, operations, financial condition,
income, or business prospects of American or ▇▇▇▇ ▇▇▇▇ or any material portion
of its or their properties, assets, or rights, individually or taken as a
whole.
2.9 Litigation and Proceedings. Except as set forth in the American
Schedules, there are no actions, suits, proceedings, or investigations pending
or, to the knowledge of either American or the Shareholders after reasonable
investigation, threatened by or against American and/or ▇▇▇▇ ▇▇▇▇ (including
the ▇▇▇▇ ▇▇▇▇ Subsidiaries), or affecting any of American and ▇▇▇▇ ▇▇▇▇, or
their respective properties, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind. Neither American nor the Shareholders have any
knowledge of any default on the part of any of American and/or ▇▇▇▇ ▇▇▇▇ with
respect to any judgment, order, writ, injunction, decree, award, rule, or
regulation of any court, arbitrator, or governmental agency or instrumentality
or of any circumstances which, after reasonable investigation, would result in
the discovery of such a default.
2.10 Contracts.
(a) Included in the American Schedules are, copies of all material
contracts, agreements, franchises, license agreements, or other commitments to
which American and/or ▇▇▇▇ ▇▇▇▇ (including the ▇▇▇▇ ▇▇▇▇ Subsidiaries) is a
party or by which any of them or their
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respective assets, products, technology, or properties are bound, that have
been reasonably requested by EPAT;
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which any of American and its Subsidiary are parties or
by which their respective properties are bound and which are material to the
operations of them individually or taken as a whole are valid and enforceable
in all respects by the one or more of American and its Subsidiary that is a
party thereto, except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally; and
(c) Except as described in the American Schedules, none of American and
its Subsidiary is a party to or bound by, and none of the properties of any of
American and its Subsidiary is subject to, any contract, agreement, other
commitment or instrument; any charter or other corporate restriction; or any
judgment, order, writ, injunction, decree, or award which materially and
adversely affects, or in the future may (as far as American or the
Shareholders can now foresee) materially and adversely affect, the business,
operations, properties, assets, or condition of any of American and its
Subsidiary, individually or taken as a whole.
2.11 Material Contract Defaults. None of American and its Subsidiary
is in default in any material respect under the terms of any outstanding
contract, agreement, lease, or other commitment which is material to its or
their business, operations, properties, assets, or condition of American and
its Subsidiary and there is no event that has occurred which presently or with
the passage of time, could result in a material default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which any of American and its Subsidiary have not taken adequate
steps to prevent such a default from occurring.
2.12 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed
of trust, or other material contract, agreement, or instrument to which any of
American and its Subsidiary is a party or to which any of their respective
properties or operations are subject.
2.13 Compliance With Laws and Regulations. Each of American and its
Subsidiary have complied with all applicable statutes and regulations of any
national, province, county, city, local or other governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets, or condition of
any of American and its Subsidiary or except to the extent that noncompliance
would not result in the incurrence of any material liability for any of
American or its Subsidiary.
2.14 Approval of Agreement. The board of directors of American has
authorized the execution and delivery of this Agreement by American, and has
or will have approved the transactions contemplated hereby.
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2.15 Foreign Person and Activity Regulations.
(a) None of American, any of the Subsidiary, the Shareholders, or any
other person who otherwise controls any of American and the Subsidiary is or
shall be (i) listed on the Specially Designated Nationals and Blocked Persons
List maintained by the Office of Foreign Assets Control ("OFAC"), Department
of the Treasury, and/or on any other similar list maintained by OFAC pursuant
to any authorizing statute, Executive Order or regulation (collectively, "OFAC
Laws and Regulations"), (ii) a "Designated National" as defined in the Cuban
Assets Control Regulations, 31 C.F.R. Part 515, or (iii) a person designated
under Paragraph 1 (b), (c) or (d) of Executive Order No. 13224 (September 23,
2001), any related enabling legislation or any other similar Executive Orders
(collectively, the "Executive Orders"); and each of American and the
Subsidiary and the Shareholders are in compliance with all OFAC Laws and
Regulations, Executive Orders and related government guidance;
(b) None of American, the Subsidiary, the Shareholders, or any other
person who otherwise controls any of American and the Subsidiary (i) is under
investigation by any governmental authority for, or has been charged with, or
convicted of, money laundering (under either 18 U.S.C. Paragraph 1956 or
1957), or drug trafficking, terrorist-related activities or other money
laundering predicate crimes or a violation of the Bank Secrecy Act laws (31
U.S.C. Paragraphs 5311, et seq.), (ii) has been assessed civil penalties under
these or related laws (collectively, "Anti-Money Laundering Laws"), or (iii)
has had any of its funds seized or forfeited in an action under Anti-Money
Laundering Laws; and
(c) None of American, the Subsidiary, the Shareholders, or any other
person who is or was affiliated or associated as an officer, employee, agent,
consultant, or in any other capacity with any of American and the Subsidiary
has, during the five-year period ended December 31, 2004 and from that date to
the Closing engaged in any act or practice that could reasonably be construed
as a violation of any of the provisions of the Foreign Corrupt Practices Act,
15 U.S.C. 78dd-1 et seq. or any rule or regulation pertaining thereto.
2.16 American Schedules. American has delivered to EPAT or will
deliver, as soon as practicable but in no event prior to Closing, the
following schedules, which are collectively referred to as the "American
Schedules" and which consist of separate schedules, all of which are complete,
true, and correct in all material respects.
(a) a schedule containing complete and correct copies of the
organizational documents, as amended, of each American and ▇▇▇▇ ▇▇▇▇, and the
▇▇▇▇ ▇▇▇▇ Subsidiaries in effect as of the date of this Agreement;
(b) a schedule containing the financial statements of American and its
Subsidiary identified in paragraph 2.4(c);
(c) a schedule if requested by EPAT, containing true and correct
copies of all material contracts, agreements, or other instruments to which
American, ▇▇▇▇ ▇▇▇▇ and/or the ▇▇▇▇ ▇▇▇▇ Subsidiaries is a party or by which
any of them or their properties is bound, specifically including all
contracts, agreements, or arrangements referred to in Section 2.10;
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(d) a schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or condition
of American or ▇▇▇▇ ▇▇▇▇ since the date of the most recent American Balance
Sheet, required to be provided pursuant to section 2.7 hereof; and
(e) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the American
Schedules by sections 2.1 through 2.16.
Each of the American Schedules shall be produced through delivery of a hard
paper copy of the original and an electronic Microsoft Word or HTML formatted
copy of the original, and if the original is in a language other than English,
shall be produced through delivery of a hard paper copy of the original and an
electronic Microsoft Word or HTML formatted copy of the original foreign
language version and an English translation, certified by the translator as a
complete and accurate translation from the original. American and the
Shareholders shall cause the American Schedules and the instruments and data
delivered to EPAT hereunder to be updated after the date hereof up to and
including the Closing Date.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE SHAREHOLDERS OF AMERICAN
As an inducement to, and to obtain reliance of EPAT, the Shareholders
further represent and warrant as follows:
3.1 Ownership of American Shares. The American Shareholders hereby
represent and warrant with respect to themselves that they are the legal and
beneficial owners of all of the issued and outstanding shares of American's
registered capital and ordinary shares free and clear of any claims, charges,
equities, liens, security interests, and encumbrances whatsoever, and that
such Shareholders have full right, power, and authority to transfer, assign,
convey, and deliver their American shares; and delivery of such shares at the
Closing will convey to EPAT good and marketable title to such shares free and
clear of any claims, charges, equities, liens, security interests, and
encumbrances whatsoever.
3.2 Exemption From Registration. The Shareholders represent that the
Shares are being acquired without a view to, or for, resale in connection with
any public distribution of the Shares or any interest therein without
registration or other compliance under the Securities Act of 1933, as amended
(the "1933 Act") and that the Shareholder has no direct or indirect
participation in any such undertaking or in the underwriting of such an
undertaking. The Shareholders understand that the Shares to be acquired
pursuant to this Agreement have not been registered under the 1933 Act with
the Securities and Exchange Commission (the "SEC") in reliance upon the
exemptions from the registration requirements thereof afforded by Section 4(2)
of the 1933 Act and/ or Rule 506 of Regulation D adopted thereunder, nor with
any state securities commission or agency. The Shareholders agree and
acknowledge that the Shares will be "restricted securities" within the meaning
of Rule 144 adopted under the 1933 Act, and EPAT will issue stop transfer
instructions to its registrar and transfer agent prohibiting the transfer of
the Shares of EPAT delivered under this Agreement. The Shareholders
acknowledge that the
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Shares must be held and may not be sold, transferred, or otherwise disposed of
for value unless they are subsequently registered under the 1933 Act or an
exemption from such registration is available. The certificates representing
the Shares will bear a legend restricting transfer, except in compliance with
applicable federal and state securities statutes.
3.3 Investor Status. Each Shareholder is an "accredited investor" as
defined in Rule 501(a) under the 1933 Act.
ARTICLE IV
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF EPAT
As an inducement to, and to obtain the reliance of American and the
Shareholders, EPAT represents and warrants as follows:
4.1 Organization. EPAT is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada, and has
the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, and there is
no jurisdiction in which it is not qualified in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification. Included in the EPAT Schedules (as hereinafter
defined) are complete and correct copies of the articles of incorporation and
bylaws of EPAT, and all amendments thereto, as in effect on the date hereof.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby will not, violate any provision of EPAT's
articles of incorporation or bylaws. EPAT has taken all action required by
law, its articles of incorporation, its bylaws, or otherwise to authorize the
execution and delivery of this Agreement, and EPAT has full power, authority,
and legal right to consummate the transactions herein contemplated.
4.2 Capitalization. EPAT's authorized capitalization consists of
50,000,000 shares of common stock, par value $0.001, of which 1,296,700 shares
are issued and outstanding. All issued and outstanding shares are legally
issued, fully paid, and non-assessable and not issued in violation of the
pre-emptive or other rights of any person.
4.3 Subsidiaries. EPAT does not have any Subsidiaries and does not
own, beneficially or of record, any shares of any other corporation.
4.4 Financial Statements.
(a) Included in the EPAT Schedules and the audited balance sheets of
EPAT as of December 31, 2005 and 2004, and the audited statements of
operations, stockholders' equity, and cash flow for the two fiscal years ended
December 31, 2005 together with the notes to such statements and the opinion
of ▇▇▇▇▇▇▇▇, Bierwolf & ▇▇▇▇▇▇, LLC, independent certified public accountants,
with respect thereto; and the unaudited balance sheet of EPAT as of May 31,
2006 (the "most recent EPAT balance sheet"), and the related unaudited
statements of operations,
10
stockholders' equity, and cash flow for the five-month period ended May 31,
2006, together with the notes to such statements.
(b) All such financial statements have been prepared in accordance with
generally accepted accounting principles in the United States consistently
applied throughout the periods involved. The EPAT balance sheets present
fairly as of their respective dates the financial condition of EPAT. EPAT did
not have as of the date of any such EPAT balance sheet, except as and to the
extent reflected or reserved against therein, any liabilities or obligations
(absolute or contingent) which should be reflected in a balance sheet or the
notes thereto prepared in accordance with generally accepted accounting
principles, and all assets reflected therein are properly reported and present
fairly the value of the assets of EPAT, in accordance with generally accepted
accounting principles. The statements of operations, stockholders' equity, and
cash flow reflect fairly the information required to be set forth therein by
generally accepted accounting principles.
(c) EPAT has no liabilities with respect to the payment of any federal,
state, county, local, or other taxes (including any deficiencies, interest, or
penalties), except for taxes accrued but not yet due and payable.
(d) EPAT has filed all federal, state, or local income tax returns
required to be filed by it for the years ended December 31, 2005, 2004, and
2003 and included in the EPAT Schedules are true and correct copies of said
federal income tax returns of EPAT filed. None of such federal income tax
returns have been examined by the Internal Revenue Service. Each of such
income tax returns reflects the taxes due for the period covered thereby,
except for amounts which, in the aggregate, are immaterial.
(e) The books and records, financial and otherwise, of EPAT are in all
material respects complete and correct and have been maintained in accordance
with good business and accounting practices.
(f) EPAT has good and marketable title to its assets and, except as set
forth in the EPAT Schedules or the Financial Statements of EPAT or the notes
thereto, has no material contingent liabilities, direct or indirect, matured
or unmatured.
4.5 Information. The information concerning EPAT set forth in this
Agreement and the EPAT Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit
to state a material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
4.6 Options or Warrants. Except as set forth in the EPAT Schedules,
there are no existing options, warrants, calls, convertible notes, derivative
securities or commitments of any character relating to authorized and unissued
stock of EPAT, except options, warrants, calls, convertible notes, derivative
securities or commitments, if any, to which EPAT is not a party and by which
it is not bound.
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4.7 Absence of Certain Changes or Events. Except as described herein
or in the EPAT Schedules, since the date of the most recent EPAT balance
sheet:
(a) there has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of EPAT (whether or not covered
by insurance) materially and adversely affecting the business, operations,
properties, assets, or condition of EPAT;
(b) EPAT has not (i) recently amended its articles of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make any payment of
dividends or distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed, or agreed to purchase or redeem, any of
its capital stock; (iii) waived any rights of value which in the aggregate are
extraordinary or material considering the business of EPAT; (iv) made any
material change in its method of management, operation, or accounting; (v)
entered into any other material transactions; (vi) made any accrual or
arrangement for or payment of bonuses or special compensation of any kind or
any severance or termination pay to any present or former officer or employee;
(vii) increased the rate of compensation payable or to become payable by it to
any of its officers or directors or any of its employees whose monthly
compensation exceeds $1,000; or (viii) made any increase in any profit
sharing, bonus, deferred compensation, insurance, pension, retirement, or
other employee benefit plan, payment, or arrangement, made to, for, or with
its officers, directors, or employees;
(c) EPAT has not (i) granted or agreed to grant any options, warrants,
or other rights for its stocks, bonds, or other corporate securities calling
for the issuance thereof; (ii) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability (absolute
or contingent) except liabilities incurred in the ordinary course of business;
(iii) paid or agreed to pay any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the most
recent EPAT balance sheet and current liabilities incurred since that date in
the ordinary course of business and professional and other fees and expenses
incurred in connection with the preparation of this Agreement and the
consummation of the transactions contemplated hereby; (iv) sold or
transferred, or agreed to sell or transfer, any of its assets, property, or
rights (except assets, property, or rights not used or useful in its business
which, in the aggregate have a value of less than $1,000), or canceled, or
agreed to cancel, any debts or claims (except debts or claims which in the
aggregate are of a value of less than $1,000); (v) made or permitted any
amendment or termination of any contract, agreement, or license to which it is
a party if such amendment or termination is material, considering the business
of EPAT; or (vi) issued, delivered, or agreed to issue or deliver any stock,
bonds, or other corporate securities including debentures (whether authorized
and unissued or held as treasury stock), except in connection with this
Agreement or as reflected in the most recent unaudited balance sheet; and
(d) to the best knowledge of EPAT, it has not become subject to any law
or regulation which materially and adversely affects, or in the future may
adversely affect, the business, operations, properties, assets, or condition
of EPAT.
4.8 Title and Related Matters. EPAT has good and marketable title to
all of its properties, interest in properties, and assets, real and personal,
which are reflected in the EPAT
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balance sheet or acquired after that date (except properties, interest in
properties, and assets sold or otherwise disposed of since such date in the
ordinary course of business), free and clear of all liens, pledges, charges,
or encumbrances except
(a) statutory liens or claims not yet delinquent;
(b) such imperfections of title and easements as do not and will not
materially detract from or interfere with the present or proposed use of the
properties subject thereto or affected thereby or otherwise materially impair
present business operations on such properties; and
(c) as described in the EPAT Schedules.
4.9 Litigation and Proceedings. There are no actions, suits, or
proceedings pending or, to the knowledge of EPAT, threatened by or against or
affecting EPAT, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of
any kind. EPAT does not have any knowledge of any default on its part with
respect to any judgment, order, writs, injunction, decree, award, rule, or
regulation of any court, arbitrator, or governmental agency or
instrumentality.
4.10 Contracts. EPAT is not a party to any material contract,
agreement, or other commitment, except as specifically disclosed in its
schedules to this Agreement.
4.11 No Conflict With Other Instruments. The consummation of the
transactions contemplated by this Agreement will not result in the breach of
any term or provision of, or constitute a default under, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which
EPAT is a party or to which it or any of its assets or operations are subject.
4.12 Governmental Authorizations. EPAT has all licenses, franchises,
permits, and other government authorizations, that are legally required to
enable it to conduct its business operations in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities or corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by EPAT of this Agreement and the consummation by EPAT
of the transactions contemplated hereby.
4.13 Compliance With Laws and Regulations. To the best of its
knowledge, EPAT has complied with all applicable statutes and regulations of
any federal, state, or other applicable governmental entity or agency thereof,
except to the extent that noncompliance would not materially and adversely
affect the business, operations, properties, assets, or conditions of EPAT or
except to the extent that noncompliance would not result in the incurrence of
any material liability. This compliance includes, but is not limited to, the
filing of all reports to date with the U.S. Securities and Exchange Commission
and state securities authorities.
4.14 Insurance. EPAT owns no insurable properties and carries no
casualty or liability insurance.
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4.15 Approval of Agreement. The board of directors of EPAT has
authorized the execution and delivery of this Agreement by EPAT and has
approved this Agreement and the transactions contemplated hereby.
4.16 Continuity of Business Enterprises. EPAT has no commitment or
present intention to liquidate EPAT or sell or otherwise dispose of a material
portion of its business or assets following the consummation of the
transactions contemplated hereby.
4.17 Material Transactions of Affiliations. Except as disclosed
herein and in the EPAT Schedules, there exists no material contract,
agreement, or arrangement between EPAT and any person who was at the time of
such contract, agreement, or arrangement an officer, director, or person
owning of record or known by EPAT to own beneficially, 10% or more of the
issued and outstanding common stock of EPAT and which is to be performed in
whole or in part after the date hereof or was entered into not more than three
years prior to the date hereof. Neither any officer, director, nor 10%
shareholders of EPAT has, or has had during the last preceding full fiscal
year, any known interest in any material transaction with EPAT which was
material to the business of EPAT. EPAT has no commitment, whether written or
oral, to lend any funds to, borrow any money from, or enter into any other
material transaction with any such affiliated person.
4.18 Employment Matters. EPAT has no employees other than its
executive officers.
4.19 EPAT Schedules. EPAT has delivered to American, or will deliver
as soon as practicable at its request, the following schedules, which are
collectively referred to as the "EPAT Schedules," and which consist of
separate schedules, all of which are complete, true, and correct in all
material respects.:
(a) a schedule containing complete and accurate copies of the articles
of incorporation and bylaws, as amended, of EPAT as in effect as of the date
of this Agreement;
(b) a schedule containing any filings made by EPAT with the "SEC" since
January 1, 2002 not available on ▇▇▇▇▇;
(c) a schedule containing a copy of the federal income tax returns of
EPAT identified in paragraph 4.4(d);
(d) a schedule setting forth the description of any material adverse
change in the business, operations, property, assets, or condition of EPAT
since the date of the most recent EPAT balance sheet, required to be provided
pursuant to section 4.7 hereof; and
(e) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the EPAT Schedules
by sections 4.1 through 4.17.
4.20 Updated Schedules. EPAT shall cause the EPAT Schedules and the
instruments and data delivered to American hereunder to be updated after the
date hereof up to and including the Closing Date.
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ARTICLE V
SPECIAL COVENANTS
5.1 American Consolidated US Financial Statements. On or before June
30, 2006, American shall deliver to EPAT the "Consolidated US Financial
Statements," which shall consist of the consolidated audited balance sheets of
American and the Subsidiary at December 31, 2005 and 2004 (the balance sheet
at December 31, 2005 is referred to herein as the "Consolidated US Balance
Sheet"), and the related audited consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 2005 and
2004 (consolidating American and the Subsidiary), together with notes to such
statements and the opinion of e-Fang Accountancy Corp., independent certified
public accountants, with respect thereto. All of the Consolidated US Financial
Statements will be in United States Dollars and be prepared in accordance with
generally accepted accounting principles in the United States (consistently
applied during each of the periods) and the requirements of Regulation S-X
adopted by the SEC. The Consolidated US Financial Statements will be part of
the American Schedules. Each of American and the Shareholder represents and
warrants that the Consolidated US Balance Sheet presents fairly the
consolidated financial condition of American and its Subsidiary; American and
its Subsidiary will not have, as of the date of the Consolidated US Balance
Sheet, except as and to the extent reflected or reserved against therein, any
liabilities or obligations (absolute or contingent) that should be reflected
in the Consolidated US Balance Sheet or the notes thereto; all assets
reflected in the Consolidated US Balance Sheet will be properly reported and
present fairly the value of the assets of American and its Subsidiary; and
consolidated statements of income, stockholders' equity, and cash flows
presented in the Consolidated US Financial Statements will reflect fairly the
information required to be set forth therein.
5.2 Access to Properties and Records. EPAT and American will each
afford to the officers and authorized representatives of the other full access
to the properties, books, and records of EPAT or American and its Subsidiary
as the case may be, in order that each may have full opportunity to make such
reasonable investigation as it shall desire to make of the affairs of the
other, and each will furnish the other with such additional financial and
operating data and other information as to the business and properties of EPAT
or American and its Subsidiary as the case may be, as the other shall from
time to time reasonably request.
5.3 Delivery of Books and Records. At the Closing, EPAT shall deliver
to American, the corporate minute books, books of account, records, and all
other books or documents of EPAT now in the possession or control of EPAT.
5.4 EPAT Board of Directors. At the Closing, EPAT shall deliver or
cause to be delivered the resignation of Ariika ▇. ▇▇▇▇▇▇ from the board of
directors of EPAT, together with a unanimous written consent of the EPAT board
of directors providing for: the appointment of a person designated by the
Shareholders for election to the board of directors to fill the vacancy left
by the resignation; the election of persons designated by the Shareholders to
all executive officer positions of EPAT in replacement of all the executive
officers serving prior to the Closing; and, prior to the effective date of the
resignation of Ariika ▇. ▇▇▇▇▇▇ as a director of EPAT, all actions taken by
the board of directors will require the approval and consent of the
15
director elected to the board to fill the vacancy left by the resignation of
Ariika ▇. ▇▇▇▇▇▇. Immediately following the action above, and at the Closing,
▇▇▇▇ ▇. ▇▇▇▇▇▇ will deliver to American and EPAT his signed resignations as a
director of EPAT and a unanimous written consent of the directors of EPAT
appointing as a director to fill the vacancies left by his resignation the
person designated by the Shareholders. EPAT will take all action required to
prepare a Form 8-K reporting the transaction, and to issue a press release
and/or letter to the shareholders reporting the transaction.
5.5 Third Party Consents and Certificates. EPAT and American agree to
cooperate with each other in order to obtain any required third party consents
to this Agreement and the transactions herein and therein contemplated.
5.6 Actions Prior to Closing.
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the EPAT or American Schedules or as permitted or
contemplated by this Agreement, EPAT and American and its Subsidiary
respectively, will each: (i) carry on its business in substantially the same
manner as it has heretofore; (ii) maintain and keep its properties in states
of good repair and condition as at present, except for depreciation due to
ordinary wear and tear and damage due to casualty; (iii) maintain in full
force and effect insurance comparable in amount and in scope of coverage to
that now maintained by it; (iv) perform in all material respects all of its
obligation under material contracts, leases, and instruments relating to or
affecting its assets, properties, and business; (v) use its best efforts to
maintain and preserve its business organization intact, to retain its key
employees, and to maintain its relationship with its material suppliers and
customers; and (vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws and all
rules, regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither EPAT nor American and its Subsidiary will: (i) make any change in
their organizational documents, articles of incorporation or bylaws; (ii) take
any action described in section 2.7 in the case of American and its Subsidiary
or in section 4.7, in the case of EPAT (all except as permitted therein or as
disclosed in the applicable party's schedules); or (iii) enter into or amend
any contract, agreement, or other instrument of any of the types described in
such party's schedules, except that a party may enter into or amend any
contract, agreement, or other instrument in the ordinary course of business
involving the sale of goods or services.
5.7 Sales Under Rules 144 or 145, If Applicable.
(a) EPAT will use its best efforts to at all times to comply with the
reporting requirements of the Exchange Act, including timely filing of all
periodic reports required under the provisions of the Exchange Act and the
rules and regulations promulgated thereunder.
(b) Upon being informed in writing by any person holding restricted
stock of EPAT as of the date of this Agreement that such person intends to
sell any shares under Rule 144 or Rule 145 promulgated under the Securities
Act (including any rule adopted in substitution or
16
replacement thereof), EPAT will notify such person that it has filed all of
the reports required to be filed by it under the Exchange Act to enable such
person to sell such person's restricted stock under Rule 144 or 145, as may be
applicable in the circumstances.
(c) If any certificate representing any such restricted stock is
presented to EPAT's transfer agent for registration of transfer in connection
with any sale theretofore made under Rule 144 or 145, provided such
certificate is duly endorsed for transfer by the appropriate person(s) or
accompanied by a separate stock power duly executed by the appropriate
person(s) in each case with reasonable assurances that such endorsements are
genuine and effective, and is accompanied by an opinion of counsel
satisfactory to EPAT and its counsel, at the sole expense of the transferee,
that such transfer has complied with the requirements of Rule 144 or 145, as
the cases may be, EPAT will promptly instruct its transfer agent to register
such transfer and to issue one or more new certificates representing such
shares to the transferee and, if appropriate under the provisions of Rule 144
or 145, as the case may be, free of any stop transfer order or restrictive
legend. The provisions of this Section 5.7 shall survive the Closing and the
consummation of the transactions contemplated by this Agreement.
5.8 Indemnification.
(a) Each of American and the Shareholders hereby agree, jointly and
severally, to indemnify EPAT and each of the officers, agents and directors of
EPAT as of the date of execution of this Agreement against any loss,
liability, claim, damage, or expense (including, but not limited to, any and
all expense whatsoever reasonably incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever), to which it or they may become subject arising out of or based on
any inaccuracy appearing in or misrepresentation made under Article II,
Article III, or Section 5.1 of this Agreement. The indemnification provided
for in this paragraph shall survive the Closing and consummation of the
transactions contemplated hereby and termination of this Agreement.
(b) EPAT hereby agrees to indemnify American and each of the officers,
agents and directors of American as of the date of execution of this Agreement
and the Shareholders against any loss, liability, claim, damage, or expense
(including, but not limited to, any and all expense whatsoever reasonably
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever), to which it or they may
become subject arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article IV of this Agreement. The indemnification
provided for in this paragraph shall survive the Closing and consummation of
the transactions contemplated hereby and termination of this Agreement.
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF EPAT
The obligations of EPAT under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
6.1 Accuracy of Representations. The representations and warranties
made by American and the Shareholders in this Agreement were true when made
and shall be true at the Closing Date with the same force and effect as if
such representations and warranties were made at and as of the Closing Date
(except for changes therein permitted by this Agreement), and American and the
Shareholders shall have performed or complied with all covenants and
conditions required by this Agreement to be performed or complied with by
American and the Shareholders prior to or at the Closing. EPAT shall be
furnished with a certificate, signed by a duly authorized officer of American
and the Shareholders and dated the Closing Date, to the foregoing effect.
6.2 Officer's Certificates. EPAT shall have been furnished with a
certificate dated the Closing Date and signed by a duly authorized officer of
American and the Shareholders to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of American or
the Shareholders threatened, which might result in an action to enjoin or
prevent the consummation of the transactions contemplated by this Agreement,
or, to the extent not disclosed in the American Schedules, by or against the
Shareholders or any of American and its Subsidiary which might result in any
material adverse change in any of the assets, properties, business, or
operations of any of American and its Subsidiary, individually or taken as a
whole.
6.3 No Material Adverse Change. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial
condition, business, or operations of any of American and its Subsidiary,
individually or taken as a whole, nor shall any event have occurred which,
with the lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business, or operations of
any of American and its Subsidiary.
6.4 Officer and Director Questionnaires. EPAT shall have received
officer and director questionnaires completed and signed by each executive
officer and director to be designated and elected as officers and directors of
EPAT in form and substance reasonably satisfactory to EPAT and its counsel
which shall contain information for use by EPAT in reporting the transaction
contemplated hereby on Form 8-K and other documents to be filed with the SEC.
6.5 Other Items.
(a) EPAT shall have received a Shareholders list of American containing
the name, address, and number of shares held by the American Shareholders as
of the date of Closing certified by an executive officer of American as being
true, complete, and accurate.
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(b) EPAT shall have received a certificate of good standing from the
Secretary of State of the State of Illinois or other appropriate office, dated
as of a date within ten days prior to the Closing Date certifying that
American is in good standing as a corporation in the State of Illinois.
(c) EPAT shall have received such further documents, certificates, or
instruments relating to the transactions contemplated hereby as EPAT may
reasonably request.
(d) EPAT shall have been furnished with the Consolidated US Financial
Statements not less than five days prior to the Closing.
(e) EPAT shall have received a certificate signed by an officer of
American in which American represents and warrants that there has been no
material change in the assets, liabilities, or financial condition of American
and its Subsidiary during the period from December 31, 2005 to the Closing
Date from the assets, liabilities, and financial condition of American and its
Subsidiary as of December 31, 2005 as shown in the Consolidated US Financial
Statements.
(f) EPAT shall have received a certificate signed by the principal
shareholder(s) of American, in which he (they) represent(s) and warrant(s)
that there has been no material change in the assets, liabilities, or
financial condition of American and its Subsidiary during the period from
December 31, 2005 to the Closing Date from the assets, liabilities, and
financial condition of American and its Subsidiary as of December 31, 2005 as
shown in the Consolidated US Financial Statements.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF
AMERICAN AND THE SHAREHOLDERS
The obligations of American and the Shareholders under this Agreement are
subject to the satisfaction, at or before the Closing Date, of the following
conditions:
7.1 Accuracy of Representations. The representations and warranties
made by EPAT in this Agreement were true when made and shall be true as of the
Closing Date (except for changes therein permitted by this Agreement) with the
same force and effect as if such representations and warranties were made at
and as of the Closing Date, and EPAT shall have performed and complied with
all covenants and conditions required by this Agreement to be performed or
complied with by EPAT prior to or at the Closing. American shall have been
furnished with a certificate, signed by a duly authorized executive officer of
EPAT and dated the Closing Date, to the foregoing effect.
7.2 Officer's Certificate. American shall have been furnished with a
certificate dated the Closing Date and signed by a duly authorized executive
officer of EPAT to the effect that no litigation, proceeding, investigation,
or inquiry is pending or, to the best knowledge of EPAT threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement.
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7.3 No Material Adverse Change. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial
condition, business, or operations of EPAT nor shall any event have occurred
which, with the lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business, or operations of
EPAT.
7.4 Good Standing. American shall have received a certificate of good
standing from the Secretary of State of the state of Nevada or other
appropriate office, dated as of a date within ten days prior to the Closing
Date certifying that EPAT is in good standing as a corporation in the State of
Nevada.
7.5 Other Items.
(a) American shall have received a Shareholders' list of EPAT from its
transfer agent, current at least within thirty (30) days prior to Closing,
containing the name, address and number of shares held by each such EPAT
Shareholders.
(b) American shall have received such further documents, certificates,
or instruments relating to the transactions contemplated hereby as American
may reasonably request.
ARTICLE VIII
TERMINATION
8.1 Termination.
(a) This Agreement may be terminated by the board of directors of
either EPAT or American at any time prior to the Closing Date if: (i) there
shall be any actual or threatened action or proceeding before any court or any
governmental body which shall seek to restrain, prohibit, or invalidate the
transactions contemplated by this Agreement and which, in the judgment of such
board of directors, made in good faith and based on the advice of its legal
counsel, makes it inadvisable to proceed with the exchange contemplated by
this Agreement; (ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is required to
consummate such transactions or in the judgment of such board of directors,
made in good faith and based on the advice of counsel, there is substantial
likelihood that any such approval will not be obtained or will be obtained
only on a condition or conditions which would be unduly burdensome, making it
inadvisable to proceed with the exchange; (iii) either party is not reasonably
satisfied with the results of its business, legal, and accounting due
diligence regarding the other conducted up to the Closing Date, or (iv) there
shall have been any change after the date of the latest unaudited balance
sheet dated May 31, 2006 of EPAT in the assets, properties, business, or
financial condition of EPAT, which could have a materially adverse affect on
the value of the business of EPAT, except any changes disclosed in the EPAT
Schedules. In the event of termination pursuant to this paragraph (a) of
Section 8.1, no obligation, right, or liability shall arise hereunder, and
each party shall bear, except as provided in Section 8.1(e), all of the
expenses incurred by it in connection with the negotiation, drafting, and
execution of this Agreement and the transactions herein contemplated.
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(b) This Agreement may be terminated at any time prior to the Closing
by action of the board of directors of EPAT if: (i) American shall fail to
comply in any material respect with any of its covenants or agreements
contained in this Agreement or if any of the representations or warranties of
American contained herein shall be inaccurate in any material respect; or (ii)
there shall have been any change after the date of the Consolidated US Balance
Sheet in the assets, properties, business, or financial condition of any of
American and its Subsidiary, which could have a materially adverse affect on
the value of the business of any of American and its Subsidiary, individually
and taken as a whole, except any changes disclosed in the American Schedules.
If this Agreement is terminated pursuant to this paragraph (b) of section 8.1,
this Agreement shall be of no further force or effect, and no obligation,
right, or liability shall arise hereunder, except that American and the
Shareholders shall bear their own costs as well as the costs incurred by EPAT
in connection with the negotiation, preparation, and execution of this
Agreement and qualifying the offer and sale of securities contemplated hereby
for exemption from the registration requirements of state and federal
securities laws.
(c) This Agreement will terminate at the sole election of EPAT if:
(i) American or the Shareholders fail to comply with its
delivery and any other requirements or representations of Section 5.1
pertaining to the US Consolidated Financial Statements;
(ii) EPAT does not receive at Closing the certificates
described in Sections 6.2 and 6.5 (e) and (f) containing the unqualified
representations and warranties required by those sections; and
(iii) The Closing does not occur on or before July 31, 2006
because American or the Shareholders fail to deliver at the time and
place of Closing the certificates evidencing the American Stock duly
endorsed for transfer to EPAT or accompanied by stock powers executed in
blank by the Shareholders or any of the certificates, instruments, or
documents required by Article VI, above.
(d) This Agreement may be terminated at any time prior to the Closing
by action of the board of directors of American if EPAT shall fail to comply
in any material respect with any of its covenants or agreements contained in
this Agreement or if any of the representations or warranties of EPAT
contained herein shall be inaccurate in any material respect. If this
Agreement is terminated pursuant to this paragraph (c) of section 8.1, this
Agreement shall be of no further force or effect, and no obligation, right, or
liability shall arise hereunder, except that EPAT shall bear its own costs as
well as the costs of American incurred in connection with the negotiation,
preparation, and execution of this Agreement.
(e) This Agreement will terminate at the sole election of American if:
(i) American does not receive at Closing the certificates
described in Section 7.2 containing the unqualified representations and
warranties required by those sections; and
21
(ii) the Closing does not occur on or before July 20, 2006,
because EPAT fails to deliver at the time and place of Closing the
certificates evidencing the 20,000,000 shares of EPAT Stock issued in
the names and amounts set forth on Schedule 1 to this Agreement (or in
lieu thereof irrevocable instructions to the transfer agent of EPAT to
issue and deliver said certificates) or any of the certificates,
instruments, or documents required by Article VII, above.
ARTICLE IX
MISCELLANEOUS
9.1 Brokers. EPAT, the Shareholders and American agree that, except
for First Equity Holdings Corp., referenced in Section 6.5(g) above, there
were no finders or brokers involved in bringing the parties together or who
were instrumental in the negotiation, execution, or consummation of this
Agreement. EPAT, on one hand, and American and the Shareholders on the other,
agree to indemnify the other against any claim by any third person for any
commission, brokerage, or finders' fee arising from the transactions
contemplated hereby based on any alleged agreement or understanding between
the indemnifying party and such third person, whether express or implied from
the actions of the indemnifying party.
9.2 Governing Law. This Agreement shall be governed by, enforced, and
construed under and in accordance with the laws of the United States of
America and, with respect to matters of state law, with the laws of Nevada.
Any dispute arising under or in any way related to this Agreement will be
submitted to binding arbitration before a single arbitrator by the American
Arbitration Association in accordance with the Association's commercial rules
then in effect. The arbitration will be conducted in Salt Lake City, Utah. The
decision of the arbitrator will set forth in reasonable detail the basis for
the decision and will be binding on the parties. The arbitration award may be
confirmed by any court of competent jurisdiction.
9.3 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it
or sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to EPAT: Earth Products & Technologies, Inc.
Attn: ▇▇▇▇ ▇▇▇▇▇▇, President
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
22
With copies to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to American or
the Shareholders
of American: American Federal Mining Group, Inc.
Attn: ▇▇. ▇▇ ▇▇▇▇ ▇▇▇▇, President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇, L.C.
10 West ▇▇▇ ▇▇▇▇▇ #▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
9.4 Attorney's Fees. In the event that any party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the breaching party or parties shall reimburse the
non-breaching party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
9.5 Confidentiality. Each party hereto agrees with the other parties
that, unless and until the transactions contemplated by this Agreement have
been consummated, each party and their representatives will hold in strict
confidence all data and information obtained with respect to another party or
any subsidiary thereof from any representative, officer, director, or
employee, or from any books or records or from personal inspection, or such
other party, and shall not use such data or information or disclose the same
to others, except (i) to the extent such data or information is published, is
a matter of public knowledge, or is required by law to be published; and (ii)
to the extent that such data or information must be used or disclosed in order
to consummate the transactions contemplated by this Agreement.
9.6 Expenses of Stock Exchange. Except as otherwise provided for in
Section 8.1, EPAT and American agree that they will each bear their own costs
and expenses in negotiating and closing the transactions contemplated by this
Agreement, including but not limited to, attorneys' fees, accounting fees, due
diligence expenses, travel, printing, copying, mail, telephone and other
related expenses.
23
9.7 Third Party Beneficiaries. This contract is solely between EPAT,
the Shareholders and American and, except as specifically provided, no
director, officer, stockholder, employee, agent, independent contractor, or
any other person or entity shall be deemed to be a third party beneficiary of
this Agreement.
9.8 Entire Agreement. This Agreement represents the entire agreement
(including the exhibits or schedules hereto) between the parties relating to
the subject matter hereof, including this Agreement alone fully and completely
expresses the agreement of the parties relating to the subject matter hereof.
There are no other courses of dealing, understandings, agreements,
representations, or warranties, written or oral, except as set forth herein.
9.9 Survival; Termination. The representations, warranties, and
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated.
9.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
9.11 Amendment or Waiver. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and
no waiver by any party of the performance of any obligation by the other shall
be construed as a waiver of the same or any other default then, theretofore,
or thereafter occurring or existing. At any time prior to the Closing Date,
this Agreement may be amended by a writing signed by all parties hereto, with
respect to any of the terms contained herein, and any term or condition of
this Agreement may be waived or the time for performance hereof may be
extended by a writing signed by the party or parties for whose benefit the
provision is intended.
9.12 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules
and regulations promulgated thereunder, unless the context otherwise requires.
The word "including" shall mean including without limitation. Disclosure
schedules delivered by the parties pursuant to this Agreement. All monetary
amounts stated in this Agreement are, unless specifically stated otherwise,
denominated in United States Dollars. The parties acknowledge and agree with
respect to their respective schedules that (i) the schedules may include
certain items and information solely for informational purposes for the
convenience of the parties hereto, (ii) the disclosure of any matter in a
schedule shall not be deemed to constitute an acknowledgment by the party
delivering the schedule that the matter is material or is required to be
disclosed pursuant to the provisions of this Agreement, (iii) any fact or item
disclosed in a schedule and referenced by a particular section in this
Agreement shall, should the existence of the fact or item or its contents be
relevant to any other section in this Agreement, be deemed to be disclosed
with respect to such other section only if a specific cross-
24
reference is made to such other section, (iv) the disclosure of any fact or
item in a schedule shall not represent an admission by the party delivering
the schedule that such fact or item actually constitutes non-compliance with,
or a violation of, any law, regulation or statute to which such disclosure is
applicable as such disclosure has been made for purposes of creating
exceptions to the representations and warranties made by the party, and (v)
each attachment referenced in a schedule shall be deemed incorporated into and
a part of such schedule.
9.13 Tax Disclosure Authorization. Notwithstanding anything herein to
the contrary, the parties (and each affiliate and person acting on behalf of
any party) agree that each party (and each employee, representative, and other
agent of such party) may disclose to any and all persons, without limitation
of any kind, the transaction's tax treatment and tax structure (as such terms
are used in 6011 and 6112 of the Internal Revenue Code of 1986, as amended and
regulations there under) contemplated by this Agreement and all materials of
any kind (including opinions or other tax analyses) provided to such party or
such person relating to such tax treatment and tax structure, subject to
compliance with disclosure obligations under applicable federal or state
securities laws; provided, however, that such disclosure many not be made
until the earlier of date of (a) public announcement of discussions relating
to the transaction, (b) public announcement of the transaction, or (c)
execution of an agreement to enter into the transaction. This authorization is
not intended to permit disclosure of any other information including (without
limitation) (v) any portion of any materials to the extent not related to the
transaction's tax treatment or tax structure, (w) the identities of
participants or potential participants, (x) the existence or status of any
negotiations, (y) any pricing or financial information (except to the extent
such pricing or financial information is related to the transaction's tax
treatment or tax structure), or (z) any other term or detail not relevant to
the transaction's tax treatment or the tax structure.
[Signatures on Following Page.]
25
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly
authorized, as of the date first above-written.
Earth Products and Technologies, Inc.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
By:____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
American Federal Mining Group, Inc.
/s/ ▇▇ ▇▇▇▇ Jing
By:___________________________________
▇▇ ▇▇▇▇ Jing, President
American's Shareholders:
[See Schedule 1]
26
Schedule 1 to
STOCK EXCHANGE AGREEMENT
Dated July 14, 2006
The Common Stock of Earth Products & Technologies, Inc. to be issued
under section 1.1 and section 1.2 of the Stock Exchange Agreement shall be
issued to the following persons with a restrictive legend consistent with the
Securities Act of 1933, as amended:
Common Stock of
Earth Products & Technologies, Inc.
to be issued to the stockholders of
American Federal Mining Group, Inc.
and their designees Number of Shares
--------------------------------------------------- ------------------------
Currently EPAT
American Exchange
----------- ----------
▇▇ ▇▇▇▇▇▇▇▇ 14,917,000
___________________________________________________
Print Name
/s/ ▇▇ ▇▇▇▇▇▇▇▇
___________________________________________________
Signature
▇▇ ▇▇▇▇▇▇▇ 1,870,000
___________________________________________________
Print Name
/s/ ▇▇ ▇▇▇▇▇▇▇
___________________________________________________
Signature
▇▇▇ ▇▇▇▇▇ 200,000
___________________________________________________
Print Name
/s/ ▇▇▇ ▇▇▇▇▇
___________________________________________________
Signature
▇▇▇▇ ▇▇ 213,000
___________________________________________________
Print Name
/s/ ▇▇▇▇ ▇▇
___________________________________________________
Signature
27
▇▇ ▇▇▇▇▇▇▇▇ 600,000
___________________________________________________
Print Name
/s/ ▇▇ ▇▇▇▇▇▇▇▇
___________________________________________________
Signature
▇▇ ▇▇▇▇▇▇▇▇ 100,000
___________________________________________________
Print Name
/s/ ▇▇ ▇▇▇▇▇▇▇▇
___________________________________________________
Signature
Xu Lun 200,000
___________________________________________________
Print Name
/s/ Xu Lun
___________________________________________________
Signature
Yu Long 400,000
___________________________________________________
Print Name
/s/ Yu Long
___________________________________________________
Signature
Song Qijiu 100,000
___________________________________________________
Print Name
/s/ Song Qijiu
___________________________________________________
Signature
▇▇▇▇ ▇▇▇▇▇▇ 100,000
___________________________________________________
Print Name
/s/ ▇▇▇▇ ▇▇▇▇▇▇
___________________________________________________
Signature
▇▇▇▇▇ ▇▇▇▇▇ Hung 120,000
___________________________________________________
Print Name
/s/ ▇▇▇▇▇ ▇▇▇▇▇ Hung
___________________________________________________
Signature
28
American Eastern Group, Inc. 260,000
___________________________________________________
Print Name
/s/ American Eastern Group, Inc.
___________________________________________________
Signature
American Eastern Securities, Inc. 90,000
___________________________________________________
Print Name
/s/ American Eastern Securities, Inc.
___________________________________________________
Signature
EIC Investments, LLC 90,000
___________________________________________________
Print Name
/s/ EIC Investments, LLC
___________________________________________________
Signature
Luminus Capital Management, Ltd. (Hong Kong) 220,000
___________________________________________________
Print Name
/s/ Luminus Capital Management, Ltd. (Hong Kong)
___________________________________________________
Signature
Allied Merit International Investments, Inc. (BVI) 520,000
___________________________________________________
Print Name
/s/ Allied Merit International Investments, Inc. (BVI)
___________________________________________________
Signature
TOTAL SHARES 20,000,000
29