Exhibit 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement") made this 15th day of August,
2008 by and among Aspen Racing Stables, Inc., a Nevada corporation ("Parent"),
Trixy Sasyniuk-▇▇▇▇, the principal shareholder of the Parent ("▇▇▇▇") KUN RUN
Biotechnology LTD, a Hong Kong holding company ("the Company"), and Cui Xueyun
and ▇▇▇▇ ▇▇▇▇▇▇▇, the shareholders of the Company ("Sellers").
R E C I T A L S:
A. The respective Boards of Directors of Parent and the Company have
determined that an acquisition of the Company by Parent, upon the terms and
subject to the conditions set forth in this Agreement, would be fair and in the
best interests of their respective shareholders, and such Boards of Directors
have approved such transaction, pursuant to which all shares of Ordinary Shares
of the Company ("Company Ordinary Shares") issued and outstanding immediately
prior to the Closing (as defined in Section 1.03) will be exchanged for the
right to receive shares of Common Stock of Parent representing a controlling
interest outstanding after the sale hereby (the "Sale").
B. Parent, ▇▇▇▇▇▇▇, ▇▇▇▇ and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Sale and also to prescribe various conditions to the Sale.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE SALE
1.01 Transfer of Stock. Following the execution of this Agreement, the
Board of Directors and a majority of stockholders of Parent will effect a
reverse stock split of the Parent's common stock, in which one new share will be
issued for each 3.42857 shares outstanding upon such execution, and after the
reverse split there will remain 100,000,000 authorized shares of Common Stock.
All share members set forth in this Agreement are expressed in post-reverse
split numbers of shares. At the Closing, the Sellers will transfer to Parent
10,000 shares of the Company Ordinary Shares, representing 100% of the issued
and outstanding shares of the Ordinary Shares of the Company free and clear of
all liens, claims and encumbrances. In exchange therefor, the Parent will issue
and convey to Sellers 24,250,000 shares of common stock (the "Purchase Price
Shares"). Such shares shall be restricted from transfer under the rules and
interpretations of the United States Securities and Exchange Commission ("SEC").
The numbers of shares and relative percentages of ownership of the Common Stock
of Parent owned by ▇▇▇▇▇▇▇, ▇▇▇▇ and their designees after the Closing is set
for in Exhibit A attached hereto.
1.02 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.01 and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing of the Sale (the "Closing") will take place at 10:00
a.m. on the business day after satisfaction of the conditions set forth in
Article VI (or as soon as practicable thereafter) (the "Closing Date"), at the
offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP, Dallas, Texas, unless another date, time or place
is agreed to in writing by the parties hereto. The Sale and all other
transactions contemplated hereby shall become effective on the Closing Date.
ARTICLE II
PURCHASE PRICE ADJUSTMENT
2.01 Reservation of Shares. On the Closing, Sellers will cause
1,000,000 of shares issuable hereunder to be transferred to Securities Transfer
Corporation (the "Escrow Agent") to be held in escrow pursuant to this Article
II (the "Escrow Shares") and to be released and issued pursuant to the Make Good
Escrow Agreement attached hereto as Exhibit B.
2.02 Escrow Agreement. The parties agree to sign the Make Good Escrow
Agreement. The costs and fee of the Make Good Escrow Agreement shall be borne
and paid by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company. Except as set forth
in the Company Disclosure Schedule delivered by the Company to the Parent at the
time of execution of this Agreement, the Company represents and warrants to
Parent as follows:
(a) Organization, Standing and Corporate Power. The Company is
duly organized, validly existing and in good standing under the laws of
Hong Kong and has the requisite corporate power and authority to carry
on its business as now being conducted. The Company is duly qualified
or licensed to do business and is in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than
in such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse
effect with respect to the Company.
(b) Subsidiaries. The Company owns 99.12% of its subsidiary,
Hainan Zhonghe Pharmaceuticals Co., Ltd. (the "Company Sub").
(c) Capital Structure. The authorized capital stock of the
Company consists of 10,000 authorized shares of Company Ordinary
Shares. There are 10,000 shares of Ordinary Shares outstanding, all of
which are owned by Sellers. Except as set forth above, no shares of
capital stock or other equity securities of the Company are issued,
reserved for issuance or outstanding. All outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. There are no
outstanding bonds, debentures, notes or other indebtedness or other
securities of the Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any
matters on which shareholders of the Company may vote. Except as set
forth above, there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of
any kind to which the Company is a party or by which it is bound
obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
equity or voting securities of the Company or obligating the Company to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. There
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are no outstanding contractual obligations, commitments, understandings
or arrangements of the Company to repurchase, redeem or otherwise
acquire or make any payment in respect of any shares of capital stock
of the Company. There are no agreements or arrangements pursuant to
which the Company is or could be required to register shares of Company
Ordinary Shares or other securities under the Securities Act of 1933,
as amended (the "Securities Act") or other agreements or arrangements
with or among any security holders of the Company with respect to
securities of the Company.
(d) Authority; Noncontravention. The Company has the requisite
corporate and other power and authority to enter into this Agreement
and to consummate the transactions hereby to which it is a party. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of the Company. This Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions hereof will not, conflict with, or
result in any breach or violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right with
respect to any obligation or to loss of a material benefit under, or
result in the creation of any lien upon any of the properties or assets
of the Company under, (i) the Articles of Incorporation or Bylaws of
the Company, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company, its properties or
assets, or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule, regulation or arbitration award
applicable to the Company, its properties or assets. No consent,
approval, order or authorization of, or registration, declaration or
filing with, or notice to, any federal, state or local government or
any court, administrative agency or commission or other governmental
authority, agency, domestic or foreign (a "Governmental Entity"), is
required by or with respect to the Company in connection with the
execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby.
(e) Financial Statements (i) The Parent has received a copy of
the audited consolidated financial statements of the Company and
Company Sub for the fiscal years ended December 31, 2007 and 2006
("Financial Statements"). The Financial Statements fairly present the
financial condition of the Company at the dates indicated and its
results of their operations and cash flows for the periods then ended
and, except as indicated therein, reflect all claims against, debts and
liabilities of the Company, fixed or contingent, and of whatever
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nature. (ii) Since December 31, 2007 (the "Balance Sheet Date"), there
has been no material adverse change in the assets or liabilities, or in
the business or condition, financial or otherwise, or in the results of
operations of the Company, whether as a result of any legislative or
regulatory change, revocation of any license or rights to do business,
fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation, act of God, public force or otherwise and no
material adverse change in the assets or liabilities, or in the
business or condition, financial or otherwise, or in the results of
operation or prospects, of the Company except in the ordinary course of
business. (iii) Since the Balance Sheet Date, the Company has not
suffered any damage, destruction or loss of physical property (whether
or not covered by insurance) affecting its condition (financial or
otherwise) or operations (present or prospective), nor has the Company
issued, sold or otherwise disposed of, or agreed to issue, sell or
otherwise dispose of, any capital stock or any other security of the
Company and has not granted or agreed to grant any option, warrant or
other right to subscribe for or to purchase any capital stock or any
other security of the Company or has incurred or agreed to incur any
indebtedness for borrowed money.
(f) Absence of Certain Changes or Events. Since December 31,
2007, the Company has conducted its business only in the ordinary
course consistent with past practice, and there is not and has not
been: (i) any material adverse change with respect to the Company; (ii)
any condition, event or occurrence which individually or in the
aggregate could reasonably be expected to have a material adverse
effect or give rise to a material adverse change with respect to the
Company; (iii) any event which, if it had taken place following the
execution of this Agreement, would not have been permitted by Section
4.01 without prior consent of Parent; or (iv) any condition, event or
occurrence which could reasonably be expected to prevent, hinder or
materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement.
(g) Litigation; Labor Matters; Compliance with Laws.
(i) There is no suit, action or proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any basis for
any such suit, action, proceeding or investigation that,
individually or in the aggregate, could reasonably be expected
to have a material adverse effect with respect to the Company
or prevent, hinder or materially delay the ability of the
Company to consummate the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator outstanding
against the Company having, or which, insofar as reasonably
could be foreseen by the Company, in the future could have,
any such effect.
(ii) The Company is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor
is it the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions
of employment nor is there any strike, work stoppage or other
labor dispute involving it pending or, to its knowledge,
4
threatened, any of which could have a material adverse effect
with respect to the Company.
(iii) The conduct of the business of the Company
complies in all material aspects with all statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees or
arbitration awards applicable thereto.
(h) Benefit Plans. The Company is not a party to any
collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) under which the Company
currently has an obligation to provide benefits to any current or
former employee, officer or director of the Company (collectively,
"Benefit Plans").
(i) Certain Employee Payments. The Company is not a party to
any employment agreement which could result in the payment to any
current, former or future director or employee of the Company of any
money or other property or rights or accelerate or provide any other
rights or benefits to any such employee or director as a result of the
transactions contemplated by this Agreement, whether or not (i) such
payment, acceleration or provision would constitute a "parachute
payment" (within the meaning of Section 280G of the Code), or (ii) some
other subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered.
(j) Tax Returns and Tax Payments. The Company has timely filed
all Tax Returns required to be filed by it, has paid all Taxes shown
thereon to be due and has provided adequate reserves in its financial
statements for any Taxes that have not been paid, whether or not shown
as being due on any returns. No material claim for unpaid Taxes has
been made or become a lien against the property of the Company or is
being asserted against the Company, no audit of any Tax Return of the
Company is being conducted by a tax authority, and no extension of the
statute of limitations on the assessment of any Taxes has been granted
by the Company and is currently in effect. As used herein, "taxes"
shall mean all taxes of any kind, including, without limitation, those
on or measured by or referred to as income, gross receipts, sales, use,
ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium value added,
property or windfall profits taxes, customs, duties or similar fees,,
assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts
imposed by any governmental authority, domestic or foreign. As used
herein, "Tax Return" shall mean any return, report or statement
required to be filed with any governmental authority with respect to
Taxes.
(k) Environmental Matters. The Company is in compliance with
all applicable Environmental Laws. "Environmental Laws" means all
applicable federal, state and local statutes, rules, regulations,
ordinances, orders, decrees and common law relating in any manner to
contamination, pollution or protection of human health or the
environment, and similar state laws.
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(l) Material Contract Defaults. The Company is not, or has not
received any notice or has any knowledge that any other party is, in
default in any respect under any Material Contract; and there has not
occurred any event that with the lapse of time or the giving of notice
or both would constitute such a material default. For purposes of this
Agreement, a Material Contract means any contract, agreement or
commitment that is effective as of the Closing Date to which the
Company is a party (i) with expected receipts or expenditures in excess
of $100,000, (ii) requiring the Company to indemnify any person, (iii)
granting exclusive rights to any party, (iv) evidencing indebtedness
for borrowed or loaned money in excess of $100,000 or more, including
guarantees of such indebtedness, or (v) which, if breached by the
Company in such a manner would (A) permit any other party to cancel or
terminate the same (with or without notice of passage of time) or (B)
provide a basis for any other party to claim money damages (either
individually or in the aggregate with all other such claims under that
contract) from the Company or (C) give rise to a right of acceleration
of any material obligation or loss of any material benefit under any
such contract, agreement or commitment.
(m) Properties. The Company has good, clear and marketable
title to all the tangible properties and tangible assets reflected in
the latest balance sheet as being owned by the Company or acquired
after the date thereof which are, individually or in the aggregate,
material to the Company's business (except properties sold or otherwise
disposed of since the date thereof in the ordinary course of business),
free and clear of all material liens.
(n) Trademarks and Related Contracts. To the knowledge of the
Company:
(i) As used in this Agreement, the term "Trademarks"
means trademarks, service marks, trade names, Internet domain
names, designs, slogans, and general intangibles of like
nature; the term "Trade Secrets" means technology; trade
secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, and
methodologies; the term "Intellectual Property" means patents,
copyrights, Trademarks, applications for any of the foregoing,
and Trade Secrets; the term "Company License Agreements" means
any license agreements granting any right to use or practice
any rights under any Intellectual Property (except for such
agreements for off-the-shelf products that are generally
available or less than $25,000), and any written settlements
relating to any Intellectual Property, to which the Company is
a party or otherwise bound; and the term "Software" means any
and all computer programs, including any and all software
implementations of algorithms, models and methodologies,
whether in source code or object code.
(ii) To the knowledge of the Company, none of the
Company's Intellectual Property or Company License Agreements
infringe upon the rights of any third party that may give rise
to a cause of action or claim against the Company or its
successors.
(o) Board Recommendation. The Board of Directors of the
Company has unanimously determined that the terms of the Sale are fair
6
to and in the best interests of the shareholders of the Company and
recommended that the Sellers execute this Agreement.
3.02 Representations and Warranties of Company Sub. Except as set forth
in the Company Disclosure Schedule delivered by the Company to the Parent at the
time of execution of this Agreement, the Company represents and warrants to
Parent as follows:
(a) Organization, Standing and Corporate Power. Company Sub is
duly organized, validly existing and in good standing under the laws of
The People's Republic of China ("PRC") and has the requisite corporate
power and authority to carry on its business as now being conducted.
Company Sub is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure
to be so qualified or licensed (individually or in the aggregate) would
not have a material adverse effect (as defined in Section 9.02) with
respect to Company Sub.
(b) Subsidiaries. The Company Sub is 99.12% owned by the
Company and shall remain a subsidiary of the Company following the
Sale.
(c) Capital Structure. Except as set forth in the Financial
Statements, no shares of capital stock or other equity securities of
Company Sub are issued, reserved for issuance or outstanding. All
outstanding equity ownership interest in Company Sub are duly
authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are no outstanding bonds,
debentures, notes or other indebtedness or other securities of Company
Sub having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which
shareholders of Company Sub may vote. The Company Disclosure Schedule
sets forth the outstanding Capitalization of Company Sub. Except as set
forth above, there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of
any kind to which Company Sub is a party or by which it is bound
obligating Company Sub to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
equity or voting securities of Company Sub or obligating Company Sub to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding contractual obligations, commitments, understandings
or arrangements of Company Sub to repurchase, redeem or otherwise
acquire or make any payment in respect of any shares of capital stock
of Company Sub. There are no agreements or arrangements pursuant to
which Company Sub is or could be required to register shares of Company
Ordinary Shares or other securities under the Securities Act of 1933,
as amended (the "Securities Act") or other agreements or arrangements
with or among any security holders of Company Sub with respect to
securities of Company Sub.
(d) Authority; Noncontravention. Company Sub has the requisite
corporate and other power and authority to enter into this Agreement
and to make the representations contained herein. This Agreement has
been duly executed and delivered by Company Sub and constitutes a valid
and binding obligation of Company Sub, enforceable against Company Sub
7
in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions hereof will not,
conflict with, or result in any breach or violation of, or default
(with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of or "put"
right with respect to any obligation or to loss of a material benefit
under, or result in the creation of any lien upon any of the properties
or assets of Company Sub under, (i) the Articles of Incorporation or
Bylaws of Company Sub, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Company Sub, its
properties or assets, or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule, regulation or arbitration
award applicable to Company Sub, its properties or assets. No consent,
approval, order or authorization of, or registration, declaration or
filing with, or notice to, any federal, state or local government or
any court, administrative agency or commission or other governmental
authority, agency, domestic or foreign (a "Governmental Entity"), is
required by or with respect to Company Sub in connection with the
execution and delivery of this Agreement by Company Sub or the
consummation by Company Sub of the transactions contemplated hereby,
except, as set forth in the Company Disclosure Schedule.
(e) Absence of Certain Changes or Events. Since December 31,
2007, other than the ownership interest transfer to the Company, if
applicable, Company Sub has conducted its business only in the ordinary
course consistent with past practice, and there is not and has not
been: (i) any material adverse change with respect to Company Sub; (ii)
any condition, event or occurrence which individually or in the
aggregate could reasonably be expected to have a material adverse
effect or give rise to a material adverse change with respect to
Company Sub; (iii) any event which, if it had taken place following the
execution of this Agreement, would not have been permitted by Section
4.01 without prior consent of Parent; or (iv) any condition, event or
occurrence which could reasonably be expected to prevent, hinder or
materially delay the ability of Company Sub to consummate the
transactions contemplated by this Agreement.
(f) Litigation; Labor Matters; Compliance with Laws.
(i) There is no suit, action or proceeding or
investigation pending or, to the knowledge of Company Sub,
threatened against or affecting Company Sub or any basis for
any such suit, action, proceeding or investigation that,
individually or in the aggregate, could reasonably be expected
to have a material adverse effect with respect to Company Sub
or prevent, hinder or materially delay the ability of Company
Sub to consummate the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator outstanding
against Company Sub having, or which, to the knowledge of the
Company Sub, in the future could have, any such effect.
(ii) Company Sub is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor
8
is it the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions
of employment nor is there any strike, work stoppage or other
labor dispute involving it pending or, to its knowledge,
threatened, any of which could have a material adverse effect
with respect to Company Sub.
(iii) The conduct of the business of Company Sub
complies with all statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees or arbitration awards
applicable thereto.
(g) Benefit Plans. Company Sub is not a party to any
collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) under which it currently
has an obligation to provide benefits to any current or former
employee, officer or director of Company Sub (collectively, "Benefit
Plans").
(h) Certain Employee Payments. Company Sub is not a party to
any employment agreement which could result in the payment to any
current, former or future director or employee of Company Sub of any
money or other property or rights or accelerate or provide any other
rights or benefits to any such employee or director as a result of the
transactions contemplated by this Agreement, whether or not (i) such
payment, acceleration or provision would constitute a "parachute
payment" (within the meaning of Section 280G of the Code), or (ii) some
other subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered.
(i) Tax Returns and Tax Payments. Company Sub has timely filed
all Tax Returns required to be filed by it, has paid all Taxes shown
thereon to be due and has provided adequate reserves in its financial
statements for any Taxes that have not been paid, whether or not shown
as being due on any returns, except where the failure to file Tax
Returns, individually or in the aggregate, would not have a Material
Adverse Effect. No material claim for unpaid Taxes has been made or
become a lien against the property of Company Sub or is being asserted
against Company Sub, no audit of any Tax Return of Company Sub is being
conducted by a tax authority, and no extension of the statute of
limitations on the assessment of any Taxes has been granted by Company
Sub and is currently in effect. As used herein, "taxes" shall mean all
taxes of any kind, including, without limitation, those on or measured
by or referred to as income, gross receipts, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium value added, property or windfall
profits taxes, customs, duties or similar fees,, assessments or charges
of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental
authority, domestic or foreign. As used herein, "Tax Return" shall mean
any return, report or statement required to be filed with any
governmental authority with respect to Taxes.
9
(j) Environmental Matters. Company Sub is in material
compliance with all applicable Environmental Laws. "Environmental Laws"
means all applicable federal, state and local statutes, rules,
regulations, ordinances, orders, decrees and common law relating in any
manner to contamination, pollution or protection of human health or the
environment, and similar state laws.
(k) Material Contract Defaults. Company Sub is not, nor has it
they received any notice or has any knowledge that any other party is,
in default in any respect under any Material Contract; and there has
not occurred any event that with the lapse of time or the giving of
notice or both would constitute such a material default. For purposes
of this Agreement, a Material Contract means any contract, agreement or
commitment that is effective as of the Closing Date to which Company
Sub is a party (i) with expected receipts or expenditures in excess of
$100,000, (ii) requiring Company Sub to indemnify any person, (iii)
granting exclusive rights to any party, (iv) evidencing indebtedness
for borrowed or loaned money in excess of $100,000 or more, including
guarantees of such indebtedness, or (v) which, if breached by Company
Sub in such a manner would (A) permit any other party to cancel or
terminate the same (with or without notice of passage of time), or (B)
provide a basis for any other party to claim money damages (either
individually or in the aggregate with all other such claims under that
contract) from Company Sub, or (C) give rise to a right of acceleration
of any material obligation or loss of any material benefit under any
such contract, agreement or commitment.
(l) Properties. Company Sub has good, clear and marketable
title or land use rights, as the case may be, to all the tangible
properties and tangible assets reflected in the latest balance sheet as
being owned by Company Sub or acquired after the date thereof which
are, individually or in the aggregate, material to Company Sub's
business (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), free and clear of all
material liens.
(m) Trademarks and Related Contracts. To the knowledge of
Company Sub:
(i) As used in this Agreement, the term "Trademarks"
means trademarks, service marks, trade names, Internet domain
names, designs, slogans, and general intangibles of like
nature; the term "Trade Secrets" means technology; trade
secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, and
methodologies; the term "Intellectual Property" means patents,
copyrights, Trademarks, applications for any of the foregoing,
and Trade Secrets; the term "Company License Agreements" means
any license agreements granting any right to use or practice
any rights under any Intellectual Property (except for such
agreements for off-the-shelf products that are generally
available or less than $25,000), and any written settlements
relating to any Intellectual Property, to which Company Sub is
a party or otherwise bound; and the term "Software" means any
and all computer programs, including any and all software
implementations of algorithms, models and methodologies,
whether in source code or object code.
(ii) To the knowledge of Company Sub, none of Company
Sub's Intellectual Property or Company License Agreements
infringe materially upon the rights of any third party that
10
may give rise to a cause of action or claim against Company
Sub or their successors.
3.03 Representations and Warranties of Parent. Except as set forth in
the disclosure schedule delivered by Parent to the Company at the time of
execution of this Agreement (the "Parent Disclosure Schedule"), Parent
represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power. Parent is duly
organized, validly existing and in good standing under the laws of the
State of Nevada, and has the requisite corporate power and authority to
carry on its business as now being conducted. Parent is duly qualified
or licensed to do business and is in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than
in such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse
effect with respect to Parent.
(b) Subsidiaries; Equity Interests. The Parent does not own
directly or indirectly, any capital stock, membership interest,
partnership interest, joint venture interest or other equity interest
in any person.
(c) Capital Structure. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock, par value
$0.001, of which 750,000 shares are issued and outstanding (the "Parent
Common Stock"). No shares of Parent Common Stock are issuable upon the
exercise of outstanding warrants, convertible notes, options and
otherwise. Except as set forth above, no shares of capital stock or
other equity securities of Parent are issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of Parent are, and
all shares which may be issued pursuant to this Agreement will be, when
issued, duly authorized, validly issued, fully paid and nonassessable,
not subject to preemptive rights, and issued in compliance with all
applicable state and federal laws concerning the issuance of
securities. There are no outstanding bonds, debentures, notes or other
indebtedness or other securities of Parent having the right to vote (or
convertible into, or exchangeable for, securities having the right to
vote) on any matters on which shareholders of Parent may vote. Except
as set forth above, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Parent is a party or by which it is
bound obligating Parent to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
equity securities of Parent or obligating Parent to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity securities of Parent or obligating Parent
to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. There are no outstanding contractual obligations,
commitments, understandings or arrangements of Parent to repurchase,
redeem or otherwise acquire or make any payment in respect of any
shares of capital stock of Parent.
(d) Authority; Noncontravention. Parent has all requisite
corporate authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery
of this Agreement by Parent and the consummation by Parent of the
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transactions contemplated by this Agreement have been (or at Closing
will have been) duly authorized by all necessary corporate action on
the part of Parent. This Agreement has been duly executed and delivered
by and constitutes a valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms. The execution
and delivery of this agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
breach or violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of or "put" right with respect to any
obligation or to loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of Parent
under (i) the articles of incorporation or bylaws of Parent, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to Parent or its respective properties or assets, or (iii)
subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law,
ordinance, rule, regulation or arbitration award applicable to Parent
or its respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, breaches, violations,
defaults, rights, losses or liens that individually or in the aggregate
could not have a material adverse effect with respect to Parent or
could not prevent, hinder or materially delay the ability of Parent to
consummate the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Governmental Entity is required by or
with respect to Parent in connection with the execution and delivery of
this Agreement by Parent or the consummation by Parent of any of the
transactions contemplated by this Agreement.
(e) SEC Documents; Undisclosed Liabilities. Parent has filed
all reports, schedules, forms, statements and other documents as
required by the Securities and Exchange Commission (the "SEC"), and
Parent has delivered or made available to the Company all reports,
schedules, forms, statements and other documents filed with the SEC
(collectively, and in each case including all exhibits and schedules
thereto and documents incorporated by reference therein, the "Parent
SEC Documents"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC documents, and none of the Parent SEC
Documents (including any and all consolidated financial statements
included therein) as of such date contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Except
to the extent revised or superseded by a subsequent filing with the SEC
(a copy of which has been provided to the Company prior to the date of
this Agreement), none of the Parent SEC Documents, to the knowledge of
Parent's management, contains any untrue statement of a material fact
or omits to state any material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of Parent
included in such Parent SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published
12
rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited consolidated quarterly statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of Parent and
its consolidated subsidiaries as of the dates thereof and the
consolidated results of operations and changes in cash flows for the
periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments as determined by
Parent's independent accountants). Except as set forth in the
Disclosure Schedule, since the date of the most recent financial
statements of Parent included in the Parent SEC Documents, Parent had
not incurred any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which, individually or in
the aggregate, could reasonably be expected to have a material adverse
effect with respect to Parent.
(f) Absence of Certain Changes or Events. Except as disclosed
in the Parent SEC Documents, since the date of the most recent
financial statements included in the Parent SEC Documents, Parent has
conducted its business only in the ordinary course consistent with past
practice in light of its current business circumstances, and there is
not and has not been: (i) any change in the assets, liabilities,
financial condition or operating results of the Parent from that
reflected in the Parent SEC Documents, except changes in the ordinary
course of business that have not caused, in the aggregate, a Material
Adverse Effect; (ii) any damage, destruction or loss, whether or not
covered by insurance, that would have a Material Adverse Effect; (iii)
any waiver or compromise by the Parent of a valuable right or of a
material debt owed to it; (iv) any satisfaction or discharge of any
lien, claim, or encumbrance or payment of any obligation by the Parent,
except in the ordinary course of business and the satisfaction or
discharge of which would not have a Material Adverse Effect; (v) any
material change to a material Contract by which the Parent or any of
its assets is bound or subject; (vi) any material change in any
compensation arrangement or agreement with any employee, officer,
director or stockholder; (vii) any resignation or termination of
employment of any officer of the Parent; (viii) any mortgage, pledge,
transfer of a security interest in, or lien, created by the Parent,
with respect to any of its material properties or assets, except liens
for taxes not yet due or payable and liens that arise in the ordinary
course of business and do not materially impair the Parent's ownership
or use of such property or assets; (ix) any loans or guarantees made by
the Parent to or for the benefit of its employees, officers or
directors, or any members of their immediate families, other than
travel advances and other advances made in the ordinary course of its
business; (x) any declaration, setting aside or payment or other
distribution in respect of any of the Parent's capital stock, or any
direct or indirect redemption, purchase, or other acquisition of any of
such stock by the Parent; or (xi) any alteration of the Parent's method
of accounting or the identity of its auditors; or (xii) any issuance of
equity securities to an officer, director or affiliate, except pursuant
to existing Parent stock option plans; or (xiii) any arrangement or
commitment by the Parent to do any of the things described in Section
3.03(f).
13
(g) Litigation; Labor Matters; Compliance with Laws.
(i) There is no suit, action or proceeding or
investigation pending or, to the knowledge of Parent,
threatened against or affecting Parent or any basis for any
such suit, action, proceeding or investigation that,
individually or in the aggregate, could reasonably be expected
to have a material adverse effect with respect to Parent or
prevent, hinder or materially delay the ability of Parent to
consummate the transactions contemplated by this Agreement,
nor is there any judgment, decree, injunction, rule or order
of any Governmental Entity or arbitrator outstanding against
Parent having, or which, insofar as reasonably could be
foreseen by Parent, in the future could have, any such effect.
(ii) Parent is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor
is it the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions
of employment nor is there any strike, work stoppage or other
labor dispute involving it pending or, to its knowledge,
threatened, any of which could have a material adverse effect
with respect to Parent.
(iii) The conduct of the business of Parent complies
with all statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees or arbitration awards applicable
thereto.
(h) Benefit Plans. Parent is not a party to any Benefit Plan
under which Parent currently has an obligation to provide benefits to
any current or former employee, officer or director of Parent.
(i) Certain Employee Payments. Parent is not a party to any
employment agreement which could result in the payment to any current,
former or future director or employee of Parent of any money or other
property or rights or accelerate or provide any other rights or
benefits to any such employee or director as a result of the
transactions contemplated by this Agreement, whether or not (i) such
payment, acceleration or provision would constitute a "parachute
payment" (within the meaning of Section 280G of the Code), or (ii) some
other subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered.
(j) Tax Returns and Tax Payments. Parent has timely filed all
Tax Returns required to be filed by it, has paid all Taxes shown
thereon to be due and has provided adequate reserves in its financial
statements for any Taxes that have not been paid, whether or not shown
as being due on any returns. No material claim for unpaid Taxes has
been made or become a lien against the property of Parent or is being
asserted against Parent, no audit of any Tax Return of Parent is being
conducted by a tax authority, and no extension of the statute of
limitations on the assessment of any Taxes has been granted by Parent
and is currently in effect.
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(k) Environmental Matters. Parent is in material compliance
with all applicable Environmental Laws.
(l) Material Contract Defaults. Parent is not, or has not,
received any notice or has any knowledge that any other party is, in
default in any respect under any Material Contract; and there has not
occurred any event that with the lapse of time or the giving of notice
or both would constitute such a material default. For purposes of this
Agreement, a Material Contract means any contract, agreement or
commitment that is effective as of the Closing Date to which Parent is
a party (i) with expected receipts or expenditures in excess of $1,000,
(ii) requiring Parent to indemnify any person, (iii) granting exclusive
rights to any party, (iv) evidencing indebtedness for borrowed or
loaned money in excess of $1,000 or more, including guarantees of such
indebtedness, or (v) which, if breached by Parent in such a manner
would (A) permit any other party to cancel or terminate the same (with
or without notice of passage of time) or (B) provide a basis for any
other party to claim money damages (either individually or in the
aggregate with all other such claims under that contract) from Parent
or (C) give rise to a right of acceleration of any material obligation
or loss of any material benefit under any such contract, agreement or
commitment.
(m) Properties. Parent has good, clear and marketable title to
all the tangible properties and tangible assets reflected in the latest
balance sheet as being owned by Parent or acquired after the date
thereof which are, individually or in the aggregate, material to
Parent's business (except properties sold or otherwise disposed of
since the date thereof in the ordinary course of business), free and
clear of all material liens.
(n) Trademarks and Related Contracts. Parent does not hold any
Trademarks, Trade Secrets, or Intellectual Property, and is not party
to any license agreements regarding such.
(o) Board Recommendation. The Board of Directors of Parent has
unanimously determined that the terms of this Agreement are fair to and
in the best interests of the stockholders of Parent.
(p) Information Supplied. None of the information supplied or
to be supplied by Parent, at the date it is first mailed to the
Parent's stockholders, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(q) Labor Matters. There are no collective bargaining or other
labor union agreements to which the Parent is a party or by which it is
bound.
(r) (c) Transactions With Affiliates and Employees. Except as
set forth in the Parent SEC Documents, none of the officers or
directors of the Parent and, to the knowledge of the Parent, none of
the employees of the Parent is presently a party to any transaction
with the Parent or any subsidiary (other than for services as
employees, officers and directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
15
otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Parent, any entity in which any
officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(s) Internal Accounting Controls. The Parent maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally-accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Parent has established disclosure
controls and procedures for the Parent and designed such disclosure
controls and procedures to ensure that material information relating to
the Parent is made known to the officers by others within those
entities. The Parent's officers have evaluated the effectiveness of the
Parent's controls and procedures.
(t) Solvency. Based on the financial condition of the Parent
as of the closing date (and assuming that the closing shall have
occurred), (i) the Parent's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the
Parent's existing debts and other liabilities (including known
contingent liabilities) as they mature, (ii) the Parent's assets do not
constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Parent, and projected
capital requirements and capital availability thereof, and (iii) the
current cash flow of the Parent, together with the proceeds the Parent
would receive, were it to liquidate all of its assets, after taking
into account all anticipated uses of the cash, would be sufficient to
pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Parent does not intend to incur debts beyond
its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).
(u) Application of Takeover Protections. The Parent has taken
all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or other similar
anti-takeover provision under the Parent's charter documents or the
laws of its state of incorporation that is or could become applicable
to the shareholders of the Company as a result of the shareholders and
the Parent fulfilling their obligations or exercising their rights
under this Agreement, including, without limitation, the issuance of
the Shares and the shareholders' ownership of the Shares.
(v) Investment Company. The Parent is not, and is not an
affiliate of, and immediately following the Closing will not have
become, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(w) Shell Company. The Parent is not and has not at any time
since its inception been a shell company as defined under Rule 12b-2.
16
(x) Disclosure. The Parent confirms that neither it nor any
person acting on its behalf has provided the shareholders of the
Company or their respective agents or counsel with any information that
the Parent believes constitutes material, non-public information except
insofar as the existence and terms of the proposed transactions
hereunder may constitute such information and except for information
that will be disclosed by the Parent under a current report on Form 8-K
filed on or one business day after the Closing. The Parent understands
and confirms that the Company and the shareholders of the Company will
rely on the foregoing representations and covenants in effecting
transactions in securities of the Parent. All disclosure provided to
the shareholders of the Company regarding the Parent, its business and
the transactions contemplated hereby, furnished by or on behalf of the
Parent (including the Parent's representations and warranties set forth
in this Agreement) are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(y) Listing and Maintenance Requirements. The Parent is, and
has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with the listing and maintenance
requirements for continued listing of the Parent Stock on the trading
market on which the Parent Stock are currently listed or quoted. The
issuance and sale of the Shares under this Agreement does not
contravene the rules and regulations of the trading market on which the
Parent Stock are currently listed or quoted, and no approval of the
shareholder of the Parent is required for the Parent to issue and
deliver to the shareholder the Shares contemplated by this Agreement.
3.04 Representations and Warranties of the Sellers. Each of the
Sellers, severally but not jointly, represents, warrants and undertakes to the
Parent that, except as set forth in the Disclosure Schedule:
(a) Transfer of Title. Seller shall transfer all right, title
and interest in and to the Company Ordinary Shares to the Parent free
and clear of all liens, security interests, pledges, encumbrances,
charges, restrictions, demands and claims, of any kind or nature
whatsoever, whether direct or indirect or contingent. Seller shall
transfer all right, title and interest in and to the Escrow Shares to
the Escrow Agent free and clear of all liens, security interests,
pledges, encumbrances, charges, restrictions, demands and claims, of
any kind or nature whatsoever, whether direct or indirect or
contingent.
(b) Due Execution. This Agreement has been duly executed and
delivered by the Seller.
(c) Valid Agreement. This Agreement constitutes, and upon
execution and delivery thereof by the Seller, will constitute, a valid
and binding agreement of the Seller enforceable against the Seller in
accordance with its terms.
(d) Authorization. The execution, delivery and performance by
the Seller of this Agreement and the delivery by the Seller of the
Company Ordinary Shares have been duly and validly authorized by the
Seller, and no further consent or authorization of the Seller, the
Company, its Board of Directors, or its stockholders is required.
17
(e) Seller's Title to the Company Ordinary Shares; No Liens or
Preemptive Rights; Valid Issuance. Seller has and at the Closing will
have good and valid title and control of the Company Ordinary Shares;
there will be no existing impediment or encumbrance to the sale and
transfer of such Company Ordinary Shares to the Parent; and on delivery
to the Parent of the Company Ordinary Shares, good and valid title to
all the Company Ordinary Shares will pass to Parent and all of the
Company Ordinary Shares will be free and clear of all taxes, liens,
security interests, pledges, rights of first refusal or other
preference rights, encumbrances, charges, restrictions, demands, claims
or assessments of any kind or any nature whatsoever whether direct,
indirect or contingent and shall not be subject to preemptive rights,
tag-along rights, or similar rights of any of the stockholders of the
Company. At the Closing, Seller shall deliver to the Parent
certificates representing the Company Ordinary Shares free and clear of
all liens, security interests, pledges, encumbrances, charges,
restrictions, demands or claims in any other party whatsoever with
appropriate stock powers with medallion guarantees.
(f) No Governmental Action Required. The execution and
delivery by the Seller of this Agreement does not and will not, and the
consummation of the transactions contemplated hereby will not, require
any action by or in respect of, or filing with, any governmental body,
agency or governmental official.
(g) Compliance with Applicable Law and Corporate Documents.
The execution and delivery by the Seller does not and will not, and the
sale by the Seller of the Company Ordinary Shares and the consummation
of the other transactions contemplated by this Agreement does not and
will not contravene or constitute a default under or violation of (i)
any provision of applicable law or regulation, or (ii) any agreement,
judgment, injunction, order, decree or other instrument binding upon
the Seller or the Company's assets, or result in the creation or
imposition of any lien on any asset of the Seller.
(h) Not a Voting Trust: No Proxies. None of the Company
Ordinary Shares is or will be subject to any voting trust or agreement.
No person holds or has the right to receive any proxy or similar
instrument with respect to the Company Ordinary Shares. Except as
provided in this Agreement, the Seller is not a party to any agreement
which offers or grants to any person the right to purchase or acquire
any of the Company Ordinary Shares. There is no applicable local, state
or federal law, rule, regulation, or decree which would, as a result of
the sale contemplated by this Agreement, impair, restrict or delay any
voting rights with respect to the Company Ordinary Shares.
(i) Investment Intent. Seller represents that it is acquiring
and will acquire, as the case may be, the Purchase Price Shares
issuable pursuant hereto solely for its own account for investment
purposes only and not with a view toward resale or distribution thereof
other than pursuant to an effective registration statement or
applicable exemption from the registration requirements of the
Securities Act. Seller understands that such Purchase Price Shares will
be issued in reliance upon an exemption from the registration
requirements of the Securities Act and that subsequent sale or transfer
of such securities is prohibited absent registration or exemption from
the provisions of the Securities Act. Seller hereby agrees that it will
not sell, assign, transfer, pledge or otherwise convey any of the
Purchase Price Shares or Escrow Shares issuable pursuant hereto, except
18
in compliance with the provisions of the Securities Act and in
accordance with any transfer restrictions or similar terms set forth on
the certificates representing such securities or otherwise set forth
herein. Seller acknowledges receiving copies of the most recent Parent
SEC Documents.
3.05 Representations and Warranties of ▇▇▇▇. ▇▇▇▇ represents, warrants
and undertakes to the Seller and Parent that, except as set forth in the
Disclosure Schedule:
(a) Due Execution. This Agreement has been duly executed and
delivered by ▇▇▇▇.
(b) Valid Agreement. This Agreement constitutes, and upon
execution and delivery thereof by ▇▇▇▇, will constitute, a valid and
binding agreement of ▇▇▇▇ enforceable against ▇▇▇▇ in accordance with
its terms.
(c) Authorization. The execution, delivery and performance by
▇▇▇▇ of this Agreement and the delivery by ▇▇▇▇ of the Escrow Shares
have been duly and validly authorized by ▇▇▇▇, and no further consent
or authorization of any party is required.
(d) No Governmental Action Required. The execution and
delivery by ▇▇▇▇ of this Agreement does not and will not, and the
consummation of the transactions contemplated hereby will not, require
any action by or in respect of, or filing with, any governmental body,
agency or governmental official.
(e) Compliance with Applicable Law. The execution and delivery
by ▇▇▇▇ of this Agreement does not and will not, and the consummation
of the other transactions contemplated by this Agreement does not and
will not contravene or constitute a default under or violation of (i)
any provision of applicable law or regulation, or (ii) any agreement,
judgment, injunction, order, decree or other instrument binding upon
▇▇▇▇, or result in the creation or imposition of any lien on any asset
of ▇▇▇▇.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
PRIOR TO CLOSING
4.01 Conduct of Company and Parent. From the date of this Agreement and
until the Closing, or until the prior termination of this Agreement, Company and
Parent shall not, unless mutually agreed to in writing:
(a) engage in any transaction, except in the normal and
ordinary course of business, or create or suffer to exist any Lien or
other encumbrance upon any of their respective assets or which will not
be discharged in full prior to the Closing;
(b) sell, assign or otherwise transfer any of their assets, or
cancel or compromise any debts or claims relating to their assets,
other than for fair value, in the ordinary course of business, and
consistent with past practice;
19
(c) fail to use reasonable efforts to preserve intact their
present business organizations, keep available the services of their
employees and preserve its material relationships with customers,
suppliers, licensors, licensees, distributors and others, to the end
that its good will and on-going business not be impaired prior to the
Closing;
(d) except for matters related to complaints by former
employees related to wages, suffer or permit any material adverse
change to occur with respect to Company and Parent or their business or
assets; or
(e) make any material change with respect to their business in
accounting or bookkeeping methods, principles or practices, except as
required by GAAP.
4.02 Access to Information; Confidentiality.
(a) The Company shall, and shall cause its officers,
employees, counsel, financial advisors and other representatives to,
afford to Parent and its representatives reasonable access during
normal business hours during the period prior to the Closing to its and
to Company Sub's properties, books, contracts, commitments, personnel
and records and, during such period, the Company shall, and shall cause
its and Company Sub's officers, employees and representatives to,
furnish promptly to Parent all information concerning their respective
business, properties, financial condition, operations and personnel as
such other party may from time to time reasonably request. For the
purposes of determining the accuracy of the representations and
warranties of the Parent set forth herein and compliance by the Parent
of its obligations hereunder, during the period prior to the Closing,
Parent shall provide the Company and its representatives with
reasonable access during normal business hours to its properties,
books, contracts, commitments, personnel and records as may be
necessary to enable the Company to confirm the accuracy of the
representations and warranties of Parent set forth herein and
compliance by Parent of its obligations hereunder, and, during such
period, Parent shall, and shall cause its subsidiaries, officers,
employees and representatives to, furnish promptly to the Company upon
its request (i) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other
information concerning its business, properties, financial condition,
operations and personnel as such other party may from time to time
reasonably request. Except as required by law, each of the Company and
Parent will hold, and will cause its respective directors, officers,
employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information in
confidence.
(b) No investigation pursuant to this Section 4.02 shall
affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
4.03 Best Efforts. Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Sale and the other transactions contemplated
20
by this Agreement. Parent and the Company will use their reasonable best efforts
and cooperate with one another (i) in promptly determining whether any filings
are required to be made or consents, approvals, waivers, permits or
authorizations are required to be obtained (or, which if not obtained, would
result in an event of default, termination or acceleration of any agreement or
any put right under any agreement) under any applicable law or regulation or
from any governmental authorities or third parties, including parties to loan
agreements or other debt instruments and promptly making any such filings, in
furnishing information required in connection therewith and in timely seeking to
obtain any such consents, approvals, permits or authorizations and (ii) in
facilitating each other's due diligence investigations. Parent and the Company
shall mutually cooperate in order to facilitate the achievement of the benefits
reasonably anticipated from the Sale.
4.04 Public Announcements. Parent, on the one hand, and the Company, on
the other hand, will consult with each other before issuing, and provide each
other the opportunity to review and comment upon, any press release or other
public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law or court process. The parties agree that the initial press release or
releases to be issued with respect to the transactions contemplated by this
Agreement shall be mutually agreed upon prior to the issuance thereof.
Notwithstanding the foregoing, Company may disclose the contemplated Sale as
required in filings with the SEC.
4.05 No Solicitation. Except as previously agreed to in writing by the
other party, neither Company or Parent shall authorize or permit any of its
officers, directors, agents, representatives, or advisors to (a) solicit,
initiate or encourage or take any action to facilitate the submission of
inquiries, proposals or offers from any person relating to any matter concerning
any merger, consolidation, business combination, recapitalization or similar
transaction involving Company or Parent, respectively, other than the
transaction contemplated by this Agreement or any other transaction the
consummation of which would or could reasonably be expected to impede, interfere
with, prevent or delay the Sale or which would or could be expected to dilute
the benefits to the Company of the transactions contemplated hereby. Company or
Parent will immediately cease and cause to be terminated any existing
activities, discussions and negotiations with any parties conducted heretofore
with respect to any of the foregoing.
ARTICLE V
OTHER AGREEMENTS
5.01 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
5.02 Directors and Officers. Upon the Closing, all officers and
directors of the Parent shall resign and Parent shall have taken all action to
cause the people nominated by the Company to be elected as and to serve in their
capacity as the Chairman of its Board of Directors, the Chief Executive Officer,
the Chief Financial Officer, as the Chief Operation Officer, and as the
Directors of the Parent.
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5.03 Registration Rights. Parent shall include ▇▇▇▇ and her designees
as selling shareholders in any registration statements filed during the three
years following the Closing that register for resale shares of Parent Common
Stock issued in private placement financing transactions during such period.
▇▇▇▇ shall be entitled to all of the rights and remedies as shall be set forth
in a registration rights agreement and/or subscription agreement executed
between the Parent and the investors in such placements. Notwithstanding the
foregoing, such registration rights shall not apply to the extent ▇▇▇▇ is
eligible to sell her shares under Rule 144.
5.04 Transfer Agent. Following the Closing, the Parent shall retain
Securities Transfer Corporation for a period of one year as the transfer agent
and registrar for the Parent.
ARTICLE VI
CONDITIONS PRECEDENT
6.01 Conditions to Each Party's Obligation to Close. The respective
obligation of each party hereto is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Opinions of Counsel. Execution and delivery of the
following: (i) to the Company, an opinion of counsel from Parent's
legal counsel that the terms, conditions and structure of the Sale
satisfy Nevada law; (ii) to the Parent, an opinion of counsel from the
Company's legal counsel that the terms, conditions and structure of the
Sale satisfy Hong Kong law; and (iii) to the Parent, an opinion of
counsel from Company Sub's legal counsel that the terms, conditions and
structure of the Sale satisfy Chinese law.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Sale shall be in effect.
6.02 Conditions to Obligations of Parent. The obligations of Parent to
effect the Sale are further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company and Sellers set forth in this Agreement shall
be true and correct in all material respects, in each case as of the
date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date. Parent shall have received a certificate signed
on behalf of the Company by the president of the Company to such
effect.
(b) Performance of Obligations of the Company. The Company and
Sellers shall have performed the obligations required to be performed
by it under this Agreement at or prior to the Closing Date (except for
such failures to perform as have not had or could not reasonably be
expected, either individually or in the aggregate, to have a material
adverse effect with respect to the Company or adversely affect the
ability of the Company to consummate the transactions herein
contemplated or perform its obligations hereunder), and Parent shall
have received a certificate signed on behalf of the Company by the
president of the Company to such effect.
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(c) Consents, etc. Parent shall have received evidence, in
form and substance reasonably satisfactory to it, that such licenses,
permits, consents, approvals, authorizations, qualifications and orders
of governmental authorities and other third parties as necessary in
connection with the transactions contemplated hereby have been
obtained.
(d) No Litigation. There shall not be pending or threatened by
any Governmental Entity any suit, action or proceeding (or by any other
person any suit, action or proceeding which has a reasonable likelihood
of success), (i) challenging or seeking to restrain or prohibit the
consummation of the Sale or any of the other transactions contemplated
by this Agreement or seeking to obtain from Parent any damages that are
material in relation to Parent taken as a whole, (ii) seeking to
prohibit or limit the ownership or operation by the Company, Company
Sub or Parent of any material portion of the business or assets of the
Company, Company Sub or Parent, or to dispose of or hold separate any
material portion of the business or assets of the Company, Company Sub
or Parent, as a result of the Sale or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose limitations on
the ability of Parent to acquire or hold, or exercise full rights of
ownership of, any shares of Company Ordinary Shares, including, without
limitation, the right to vote the Company Ordinary Shares on all
matters properly presented to the shareholders of the Company, or (iv)
seeking to prohibit Parent from effectively controlling in any material
respect the business or operations of the Company.
(e) Due Diligence Investigation. Parent shall be satisfied
with the results of its due diligence investigation of the Company and
Company Sub in its sole and absolute discretion.
(f) Form 8-K. The Company shall file a Form 8-K with the SEC
within the required period of time after the Closing Date containing
Form 10 information about the combined Parent and Company and audited
financial statements of the Company as required by Regulation S-K. Such
Form 8-K shall be in form and substance acceptable to Parent and its
counsel prior to Closing.
6.03 Conditions to Obligation of the Company. The obligation of the
Company to effect the Sale is further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth in this Agreement shall be true and
correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date. The Company shall have received a certificate signed on
behalf of Parent by the president of Parent to such effect.
(b) Performance of Obligations of Parent. Parent shall have
performed the obligations required to be performed by it under this
Agreement at or prior to the Closing Date (except for such failures to
perform as have not had or could not reasonably be expected, either
individually or in the aggregate, to have a material adverse effect
with respect to Parent or adversely affect the ability of Parent to
23
consummate the transactions herein contemplated or perform its
obligations hereunder), and the Company shall have received a
certificate signed on behalf of Parent by the president of Parent to
such effect.
(c) No Litigation. There shall not be pending or threatened
any suit, action or proceeding before any court, Governmental Entity or
authority (i) pertaining to the transactions contemplated by this
Agreement or (ii) seeking to prohibit or limit the ownership or
operation by the Company, Company Sub or Parent, or to dispose of or
hold separate any material portion of the business or assets of the
Company, Company Sub or Parent.
(d) Consents, etc. Company shall have received evidence, in
form and substance reasonably satisfactory to it, that such licenses,
permits, consents, approvals, authorizations, qualifications and orders
of governmental authorities and other third parties as necessary in
connection with the transactions contemplated hereby have been
obtained.
(e) Resignations. Parent shall deliver to the Company written
resignations of all of the officers and directors of the Parent and
evidence of election of those new directors and officers as further
described in Section 5.02 herein.
(f) Form 8-K. The Company shall file a Form 8-K with the SEC
within the required period of time after the Closing Date containing
Form 10 information about the combined Parent and Company and audited
financial statements of the Company as required by Regulation S-K. Such
Form 8-K shall be inform and substance acceptable to Parent and its
counsel prior to Closing.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination. This Agreement may be terminated and abandoned at any
time prior to the Closing:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Sale
and such order, decree, ruling or other action shall have become final
and nonappealable;
(c) by either party for a material breach by any party of any
representation, warranty, or covenant or the failure of any of the
conditions to closing to be satisfied; and
(d) if the Closing shall not have occurred for any reason by
September 30, 2008.
7.02 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent or the Company. Nothing contained in this
24
Section shall relieve any party for any breach of the representations,
warranties, covenants or agreements set forth in this Agreement.
7.03 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
7.04 Extension; Waiver. Subject to Section 7.01(c), at any time prior
to the Closing, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement, or (c) waive compliance
with any of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
7.05 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver of this Agreement
pursuant to Section 7.04 shall, in order to be effective, require in the case of
Parent or the Company, action by its Board of Directors.
7.06 Return of Documents. In the event of termination of this Agreement
for any reason, Parent and Company will return to the other party all of the
other party's documents, work papers, and other materials (including copies)
relating to the transactions contemplated in this Agreement, whether obtained
before or after execution of this Agreement. Parent and Company will not use any
information so obtained from the other party for any purpose and will take all
reasonable steps to have such other party's information kept confidential.
ARTICLE VIII
GENERAL PROVISIONS
8.01 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by facsimile, electronic mail, or
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Parent Representative, to:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇, Esq.
Fax: ▇▇▇.▇▇▇.▇▇▇▇
(b) if to the Company, to:
Hainan Zhonghe Pharmaceuticals Co., Ltd.
Haikou Free Trade ▇▇▇▇
▇▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, Hainan 570216 P.R. China
Attention: Ye Xxiaoqun
Fax: ▇▇-▇▇▇-▇▇▇▇▇▇▇▇
with a copy to:
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
China Central Place, Tower 2, 2301
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: ▇▇-▇▇-▇▇▇▇-▇▇▇▇
8.02 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person;
(b) "material adverse change" or "material adverse effect"
means, when used in connection with the Company or Parent, any change
or effect that either individually or in the aggregate with all other
such changes or effects is materially adverse to the business, assets,
properties, condition (financial or otherwise) or results of operations
of such party and its subsidiaries taken as a whole (after giving
effect in the case of Parent to the consummation of the Sale);
(c) "person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other
entity; and
(d) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a
majority of its board of Directors or other governing body (or, if
26
there are no such voting interests, fifty percent (50%) or more of the
equity interests of which) is owned directly or indirectly by such
first person.
8.03 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
8.04 Entire Agreement; No Third-Party Beneficiaries. This Agreement and
the other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This Agreement
is not intended to confer upon any person other than the parties any rights or
remedies.
8.05 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Nevada, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
8.06 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
8.07 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
8.08 Counterparts. This Agreement may be executed in one or more
identical counterparts, all of which shall be considered one and the same
instrument and shall become effective when one or more such counterparts shall
have been executed by each of the parties and delivered to the other parties.
8.09 Survival. All of the representations and warranties of the parties
to this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Closing hereof for one (1) year. All covenants and agreements
that by their terms extend past the Closing shall survive the Closing for the
full period of limitations applicable to such agreements.
8.10 Indemnification. From and after the Closing Date, ▇▇▇▇ shall
reimburse, indemnify and hold harmless Parent, Company and Sellers, and the
executive officers, directors and employees of Parent and Company in office
after the Closing (each such person and his heirs, executors, administrators,
27
agents, successors and assigns is referred to herein as a "Company Indemnified
Party") against and in respect of any and all damages, losses, settlement
payments, in respect of deficiencies, liabilities, costs, expenses and claims
suffered, sustained, incurred or required to be paid by any Company Indemnified
party, and any and all actions, suits, claims or legal, administrative,
arbitration, governmental or other procedures or investigation against any
Company Indemnified Party (a "Loss"), in respect of any breach of any
representation, warranty, covenant or other agreement made by Parent or ▇▇▇▇ in
this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have caused their duly authorized
officers to execute this Agreement as of the date first above written.
KUN RUN BIOTECHNOLOGY, LTD.
By: /s/ Yang Liqiong___________________________
Name: Yang Liqiung________________________________
Title: Director____________________________________
ASPEN RACING STABLES, INC.
By: /s/ Trixy Sasyniuk-Walt_____________________
Name: Trixy Sasyniuk-Walt_________________________
Title: President___________________________________
/s/ Trixy Sasyniuk-▇▇▇▇
___________________________________________________
TRIXY SASYNIUK-▇▇▇▇
/s/ Cui Xueyun
___________________________________________________
CUI XUEYUN
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
___________________________________________________
▇▇▇▇ ▇▇▇▇▇▇▇
29
EXHIBIT B
Make Good Escrow Agreement