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PURCHASE AND SALE AGREEMENT
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By and Among
SONGZAI METAL PRODUCTS CO. LTD., and HONG ▇▇▇ ▇▇,
(individually collectively the "SELLERS")
and
SONGZAI INTERNATIONAL HOLDING GROUP INC.
(BUYER)
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Covering the Acquisition of
CERTAIN ASSETS FORMERLY OWNED BY HEIHE JINCHANG COAL MINE COMPANY, LLC
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April 5, 2004
TABLE OF CONTENTS
1. DESCRIPTION OF ASSETS AND INTERPRETATIONS
1.1. Description of Assets 1
1.2. Interpretations 1
2. PURCHASE AND SALE OF ASSETS
2.1. Purchase and Sale 1
2.2. Purchase Price 3
2.3. The Closing 3
2.4. Deliveries at the Closing 3
2.5. Assumed Liabilities 4
2.6. Retained Assets and Liabilities 4
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
3.1. Representations and Warranties Concerning the Sellers 4
3.2. Representations and Warranties of the Buyer 5
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE ASSETS
4.1. Representations and Warranties Concerning the Assets 6
4.2. Limitations of Representations and Warranties 8
5. PRE-CLOSING COVENANTS
5.1. Satisfaction of Conditions Precedent 9
5.2. Notices and Consents 9
5.3. Operation of Business 9
5.4. Access to Information 10
5.5. Contact with Customers and Vendors 10
5.6. Amendment of Schedules 10
5.7 Financial Statements 11
6. POST-CLOSING COVENANTS
6.1. General 11
6.2. Delivery and Retention of Records 11
6.3. Employee Matters 12
7. CONDITIONS PRECEDENT
7.1. Conditions to Obligation of the Buyer 12
7.2. Conditions to Obligation of the Sellers 13
8. REMEDIES FOR BREACHES OF AGREEMENT
8.1. Survival of Representations, Warranties and
Certain Covenants 14
8.2. Indemnification Provisions for Benefit of the Buyer 14
8.3. Indemnification Provisions for Benefit of the Sellers 15
8.4. Matters Involving Third Parties 15
8.5. Determination of Amount of Adverse Consequences 16
8.6. Tax Treatment of Indemnity Payments 16
9. TAX MATTERS
9.1. Post-Closing Tax Returns 16
9.2. Pre-Closing Tax Returns 16
9.3. Prorated Ad Valorem Taxes 17
9.4. Claims for Refund 17
9.5. Cooperation on Tax Matters 17
9.6. Certain Taxes 18
9.7. Confidentiality 18
9.8. Audits 18
9.9. Control of Proceedings 18
9.10. Powers of Attorney 18
9.11. Remittance of Refunds 18
9.12. Purchase Price Allocation 19
10. TERMINATION OF AGREEMENT
10.1. Termination of Agreement 19
10.2. Effect of Termination 20
11. MISCELLANEOUS
11.1. Insurance 20
11.2. Press Releases and Public Announcements 20
11.3. No Third Party Beneficiaries 20
11.4. Succession and Assignment 20
11.5. Counterparts 20
11.6. Notices 20
11.7. Governing Law 21
11.8. Entire Agreement 21
11.9. Severability 22
11.10. Transaction Expenses 22
EXHIBITS
Exhibit A: Definitions and Interpretations
Exhibit B: Description of Assets
Exhibit C: Form of Special Warranty Deed
Exhibit D: Form of Assignment Agreement
Exhibit E: Form of Lease Agreements
Exhibit F: Form of Legal Opinions
Exhibit G: Form of ▇▇▇▇ of Sale
Exhibit H: Disclosure Schedule
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of April 5,
2004 is by and among SONGZAI INTERNATIONAL HOLDING GROUP INC, a Nevada
corporation, ("Songzai" or the "Buyer") whose address is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and SONGZAI METAL PRODUCTS CO. LTD., and HONG ▇▇▇ ▇▇, the
current Chairman of the Board of Directors of the Buyer, whose address is 178
HuaShan Rd., Nan ▇▇▇▇ ▇▇, ▇▇▇▇▇▇, Heilongjiang P.R. China 150090 (individually
a "Seller" and collectively the "Sellers"). The Sellers and the Buyer are
sometimes referred to collectively herein as the "Parties" and individually as a
"Party."
RECITALS
WHEREAS, Songzai is a Nevada corporation with its principal place of
business in California and is engaged in various business pursuits;
WHEREAS, Sellers own various resource exploitation rights in coal reserves
and relevant equipment located at Harbin, Heilongjiang Province of the Peoples
Republic of China;
WHEREAS, this Agreement contemplates a transaction in which the Seller
will sell, transfer and convey to Buyer all of his rights title and interests in
and to such exploitation rights, coal reserves, equipment and other assets and
Buyer will purchase in return for the consideration specified herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
ARTICLE I
DESCRIPTION OF ASSETS AND INTERPRETATIONS
1.1 Description of Assets. The assets conveyed hereunder shall include all
of Sellers' rights, title and interest, of whatever type or kind, in the
following assets and properties:
(a) Coal Assets.
(i) approximately 1,016,822 square meters of surface and/or mineral estates
located in Heilongjiang Province, Peoples Republic of China, now or
heretofore owned or possessed by Sellers, the China Everbright Bank,
Heilongjiang Branch, or the Heihe Jinchang Coal Mine;
(ii) all written or oral mineral and coal rights and leases, surface leases, oil
and gas agreements, timber agreements, servitudes, easements, roads, cart
ways, rights of access, ingress and egress and rights of way relating to or
useful in connection with the coal mine formerly known as Heihe Jinchang.
(sometimes collectively referred to as the "Jinchang assets")
(b) Rights. All rights acquired pursuant to that Certain Contract for the
Exchange of Assets made December 25, 2002 by and between China Everbright
Bank, Heilongjiang Branch and Heilongjiang Songzai Metal Products Co., Ltd.
(c) Records. All records in the possession of the Sellers pertaining directly
to the Jinchang Assets, including maps, files, reserve information and
other similar materials pertaining to such assets (the "Jinchang Records");
provided that Buyer will be given reasonable access to the Jinchang Records
as reasonably necessary to conduct coal mining operations and related
activities pursuant to the agreements.
(d) Other Assets. Any tangible assets contained within or associated with Heihe
Jinchange Coal Mine, including any buildings, furniture, furnishings, file
cabinets, computers, printers, vehicles, and related assets and the
tangible assets contained within or associated with the loading facility
located in Heilongjiang Province (collectively the "Other Assets" or the
"Tangible Assets").
(e) Licenses. Assignment of all licenses of Sellers and any remaining rights of
China Everbright Bank, Heilongjiang Branch in any of the Jinchang assets,
including without limitation the Enterprise Legal Person Business License
of Heihe Jinchang Coal Mine.
(f) Royalties. Any royalties, licensing fees, excavation rights, overriding
royalties or similar agreements in and to the coal, coal mine, or any of
the Jinchang assets, whether under written or oral agreement and any maps,
files, reserve information and other similar materials pertaining to any
royalty, licensing, excavation, overriding or similar agreement or
contract.
For avoidance of doubt, the Assets shall include all of the following: (a) the
inventories previously owned by Heihe Jinchang Coal Mine, including inventories
of extracted coal and other raw materials and supplies) that are now located on
or are in transit to the Jinchang assets (although Seller shall receive all
royalty attributable to such inventory, to the extent such coal is sold prior to
the date hereof), (b) preparation plants, buildings, infrastructure, machinery,
equipment, vehicles, furniture, supplies, replacement parts, tools and any other
tangible personal property that are located on or are in transit to the Sites,
(c) any leases, licenses, coal sale agreements, supply agreements, railroad
agreements and any other agreements or contracts not specifically listed to
which the Sellers or their Affiliates are a party, whether written or oral, (d)
any governmental licenses or permits relating to the Assets or the operation of
the business of the Affiliates of the Sellers, and (e) any accounts, accounts
receivable, notes and notes receivable, reclamation and performance bonds,
deposit, pre-paid rentals and royalties, cash and cash equivalents and other
securities and instruments.
This Agreement may refer to all assets collectively as the "Assets" or the "Coal
Assets."
1.2 Interpretations. Unless expressly provided to the contrary in this
Agreement, this Agreement shall be interpreted in accordance with the provisions
of Nevada law.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, (a) the Seller agrees to sell to the Buyer, and the Buyer agrees to
purchase from the Sellers all of such Sellers' right, title and interest in the
Coal Assets.
2.2 Purchase Price. In consideration for the sale of the Assets, the Buyer
agrees to pay to Seller (or its designee) at the Closing 400,000 shares of the
convertible preferred stock of SONGZAI INTERNATIONAL HOLDING GROUP INC. ( the
"Purchase Price") convertible into 40,000,000 shares of common voting stock
ofSONGZAI INTERNATIONAL HOLDING GROUP INC. payable by duly executed certificates
immediately at Closing, and such payment shall constitute the receipt by each of
the Sellers of the purchase price as allocated herein.
2.3 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of SONGZAI
INTERNATIONAL HOLDING GROUP INC , commencing at 10:00 a.m. local time on the
second business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated by
this Agreement (other than conditions with respect to actions each Party will
take at the Closing itself), or such other date as the Buyer and Seller may
mutually determine (the "Closing Date"). The Closing shall not be extended
beyond June 1, 2004 unless extended in writing by both parties.
2.4 Deliveries at the Closing. At the Closing,
(a) the Buyer will deliver to the Sellers or their designees the various
certificates, instruments, and documents referred to in Article VII;
(b) the Sellers will deliver to the Buyer the various certificates,
instruments, and documents referred to in Article VII , and will execute
and deliver to the Buyer one or more special warranty deeds acceptable to
Buyer's counsel, that are necessary to convey (i) the Jinchang Assets, (ii)
Assignment of any lease of the Jinchang Real Property and any easements,
cartways, ingress and egress and other rights in and to the coal mine
property for the purpose of mining, processing and/or transporting coal
from such properties and (iii) any real property interests, surface rights,
or Easements, together with sales and recording forms required by
applicable law,
(c) Sellers will execute and deliver to the Buyer an Assignment Agreement
acceptable to Buyer's counsel to transfer any interests in and to the
Jinchang Assets, the other assets, or royalty contracts,
(d) Buyer will execute and deliver to the Seller and the common voting stock
certificates in form necessary for submission and recordation by the
transfer agent;
(e) Buyer will execute and deliver to the Sellers the preferred stock
certificates in form necessary for submission and recordation by the
transfer agent;
(f) Sellers will execute and deliver the Assignment Agreements acceptable to
Buyer's counsel, assigning any leases, mining rights, property rights, or
Easements
(g) Sellers will execute and deliver a ▇▇▇▇ of Sale, acceptable to Buyer's
counsel, transferring title to the Jinchang Assets and (h) the Buyer will
pay the Purchase Price by certificate to Sellers (or their designees).
2.5 Assumed Liabilities. On the Closing Date, the Buyer will assume and
will be obligated to fully and timely pay, perform, and discharge in accordance
with their terms, only those liabilities specifically identified in Section 2.5
of the Disclosure Schedule (the "Assumed Liabilities").
2.6 Retained Assets and Liabilities. On the Closing Date, Sellers shall
retain and will be (a) obligated to fully and timely pay, perform and discharge
in accordance with their terms and (b) entitled to receive any proceeds,
recoveries (monetary or otherwise) and benefits, associated with the matters
specifically identified in Section 2.6 of the Disclosure Schedule (the "Retained
Assets and Liabilities"). On or prior to the Closing Date, to the extent
permitted and required, the Sellers shall cause the Retained Assets and
Liabilities to be assigned or otherwise transferred to Buyer. To the extent that
any of the Retained Assets and Liabilities cannot be assigned or otherwise
transferred to Buyer or its designee prior to the Closing Date (including where
such an assignment or transfer would constitute a breach or default under any
agreement, encumbrance or commitment, would violate any Law or would in any way
adversely affect the rights or increase the obligations of Buyer or its
designee), then the Buyer will execute and deliver any other documents,
certificates, agreements and other writings, and take such other actions, in
each case, as may be reasonably necessary, desirable or requested by Sellers in
order to provide or impose upon Buyer or its designee the benefits and the
obligations associated with such Retained Assets and Liabilities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
3.1 Representations and Warranties Concerning the Sellers. Except as set
forth in the Disclosure Schedule set forth in Exhibit H, the Sellers represent
and warrant to the Buyer as follows:
(a) Organization of the Sellers and Affiliates. SONGZAI METAL PRODUCTS CO. LTD
is a corporation, each of which is duly organized, validly existing, and in
good standing under the Laws of the People's Republic of China. Each of the
Sellers is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to qualify would not have a material adverse
effect on the Sellers or their ability to consummate the transactions
contemplated by this Agreement.
(b) Authorization of Transaction. Each of the Sellers has full power and
authority including full company power and authority) to execute and
deliver this Agreement and to perform its obligations under this Agreement.
This Agreement constitutes the valid and legally binding obligation of each
of the Sellers enforceable in accordance with its terms and conditions,
subject, however, to the effects of bankruptcy, insolvency, reorganization,
moratorium or similar Laws affecting creditors' rights, and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). To the extent that any
approvals of shareholders or Boards of Directors is required, consummation
of closing shall constitute affirmative warranty that all such required
approvals have been obtained. None of the Sellers need give any notice to,
make any filing with, or obtain any authorization, consent, or approval of
any Governmental Authority in order to consummate the transactions
contemplated by this Agreement.
(c) Noncontravention. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) violate
any statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any Governmental Authority to which any of
the Sellers is subject or any provision of their Organizational Documents
or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which any of
the Sellers is a party or by which it is bound or to which any of its
assets is subject, except for (x) required consents to transfer and related
provisions as set forth in the Disclosure Schedule, (y) any other
third-party approvals or consents contemplated in this Agreement; and (z)
such violations, defaults, breaches, or other occurrences that do not have
a Material Adverse Effect on the ability of any of the Sellers to
consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. Neither the Sellers nor their Affiliates have any liability
or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for
which the Buyer could become liable or obligated.
(e) Solvency. As of the date of this Agreement, and after consummation of the
transactions contemplated by this Agreement, none of the Sellers are
insolvent or unable to pay its debts or have made a general assignment with
or for the benefit of its creditors, and no proceeding under any
bankruptcy, insolvency or reorganization law has been commenced by or with
respect to any of the Sellers.
3.2 Representations and Warranties of the Buyer. The Buyer hereby
represents and warrants to the Sellers as follows:
(a) Organization of the Buyer. The Buyer is a limited liability company duly
organized, validly existing, and in good standing under the Laws of the
state of Nevada.
(b) Authorization of Transaction. The Buyer has full power and authority
(including full company power and authority) to execute and deliver this
Agreement and to perform its obligations under this Agreement. To the
extent that any approvals of shareholders or Boards of Directors is
required, consummation of closing shall constitute affirmative warranty
that all such required approvals have been obtained. This Agreement
constitutes the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions, subject, however,
to the effects of bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting creditors' rights generally and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The Buyer need not give
any notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Authority in order to consummate the
transactions contemplated by this Agreement.
(c) Buyer shall furnish to Seller such certificate or certificates as Seller
may direct in form suitable for recordation by the registrar or transfer
agent of the Company. Such certificates shall be duly authorized and deemed
fully paid and non-assessable immediately upon delivery. Buyer, at Buyer's
expense, shall provide for rights of registration, including piggyback
rights, by which the Seller's shares will be registered at Buyer's expense
contemporaneously with any other registration of securities by the Buyer.
(d) Noncontravention. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) violate
any statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any Governmental Authority to which the
Buyer is subject or any provision of its Organizational Documents or (ii)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any Party the right to accelerate,
terminate, modify, or cancel, or require any notice, approval or consent
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject, except for such violations, defaults,
breaches, or other occurrences that do not, individually or in the
aggregate, have a material adverse effect on the ability of the Buyer to
consummate the transactions contemplated by this Agreement.
(e) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers or its
Affiliates could become liable or obligated.
(f) Financing. The Buyer has sufficient immediately available funds to enable
it to make payment of the Purchase Price at Closing without encumbrance or
delay and without causing the Buyer to become insolvent or to declare
insolvency. The Buyer expressly acknowledges that, in executing this
Agreement, the Sellers are relying on the Buyer's representation with
regard to the availability of the necessary funds for the payment of the
Purchase Price upon Closing and that there is no condition precedent under
this Agreement with regard to the Buyer's ability to obtain financing.
(g) Sellers' Breach of Representation or Warranty. To the Buyer's Knowledge as
of the date of this Agreement, there is no fact or circumstance that would
cause the Sellers to be in breach of any representation or warranty set
forth in this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING THE ASSETS
4.1 Representations and Warranties Concerning the Assets. Except as set
forth in the Disclosure Schedule set forth in Exhibit G, the Sellers represent
and warrant to the Buyer as follows:
(a) Title to the Coal Assets. To the Sellers' Knowledge, the Coal Assets are
free and clear of all Encumbrances, except for (i) Permitted Encumbrances,
(ii) the Encumbrances disclosed in the Disclosure Schedule and (iii)
Encumbrances which do not have a Material Adverse Effect. The Sellers have
delivered or made available to the Buyer all material title reports, title
insurance policies, title commitments, title opinions and title abstracts
relating to the Jinchang Assets and any real property, leaseholds,
easements, rights of way, cartways, and any rights of ingress and egress
(the "Title Information") which are in the possession and control of the
Sellers. To Sellers' Knowledge, all Title Information is true and accurate
except to the extent such inaccuracy would not have a Material Adverse
Effect or as set forth in the Disclosure Schedule.
(b) No Adverse Claims. To the Sellers' Knowledge, there are no adverse claims
to any of the Jinchang assets, including any real property and Easements,
except for (i) Permitted Encumbrances, (ii) those claims which would not
have a Material Adverse Effect, and (iii) those claims disclosed in the
Disclosure Schedule. There are no eminent domain, zoning or condemnation
proceedings pending, or to the Sellers' Knowledge, threatened against any
of the Jinchang assets or other assets, except such proceedings that would
not have a Material Adverse Effect.
(c) Contracts and Commitments. All contracts are in full force and effect,
except where the failure to be in full force and effect would not have a
Material Adverse Effect. Sellers have performed all material obligations
required to be performed to date under any contracts pertaining to the coal
mine, the Jinchang assets or the other assets, and are not in default under
any material obligation of such contracts, except when such default would
not have a Material Adverse Effect.
(d) Material Change. To the Sellers' Knowledge, since December 25, 2002 there
has been no Material Adverse Effect.
(e) Tax Matters. Except as would not have a Material Adverse Effect:
(i) There is no dispute or claim concerning any Tax liability with respect to
the Assets claimed or raised by any authority in writing.
(ii) There are no outstanding agreements or waivers extending the statutory
period of limitations applicable to any Tax Returns required to be filed by
or with respect to the Assets and for which the Buyer may be responsible.
(iii)Sellers have filed all Tax Returns with respect to the Assets that were
required to be filed and such Tax Returns (with respect to the Coal Assets)
are accurate in all respects. All Taxes shown as due with respect to the
Assets on any such Tax Returns have been paid.
(iv) To Sellers' Knowledge, no special assessments for improvements are
outstanding or have been completed as of the date of this Agreement.
(f) Litigation. There are no matters of litigation affecting the Coal Assets
except as set forth on the Disclosure Schedule, which sets forth each
instance in which any of the Assets (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is the
subject of any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction, or is the subject of any
pending or, to the Sellers' Knowledge, threatened claim, demand, or notice
of violation or liability from any Person, except where any of the
foregoing would not have a Material Adverse Effect.
(g) Environmental Matters. To the Sellers' Knowledge:
(i) With respect to the Assets, Sellers' operation and ownership of the coal
mine is in compliance with all applicable Laws (including common law)
including those relating to protection of the environment as in effect on
or before the date of this Agreement, except as set forth in the Disclosure
Schedule, and except for such instances of noncompliance that do not have a
Material Adverse Effect.
(ii) With respect to the Assets, Sellers have obtained all permits, licenses,
franchises, authorities, consents, and approvals, and has made all filings
and maintained all material information, documentation, and records, as
necessary under applicable Environmental Laws for operating its assets and
business as it is presently conducted, and all such permits, licenses,
franchises, authorities, consents, approvals, and filings remain in full
force and effect, except as set forth in the Disclosure Schedule, and
except for such matters that do not have a Material Adverse Effect.
(iii)Except as set forth in the Disclosure Schedule, and except as does not
have a Material Adverse Effect, (A) there are no pending or, to the
Sellers' Knowledge, threatened claims, demands, actions, administrative
proceedings or lawsuits against either of the Coal Assets, the Jinchang
assets, or the underlying coal or coal mining facilities, the other assets,
or otherwise with respect to any Environmental Laws and none of the Sellers
has any Knowledge (without any obligation of due inquiry) of facts which
would give rise to the same and (B) none of the Assets are, subject to any
outstanding injunction, judgment, order, decree or ruling, under any
Environmental Laws.
(h) Noncontravention. Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) violate
any statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any Governmental Authority to which any
Asset or the Sellers are subject or (ii) to the Sellers' Knowledge,
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice or trigger any rights
to payment or other compensation under any agreement, contract, lease,
license, instrument, or other arrangement to which any Asset is subject,
except for required consents to transfer and related provisions and any
other third party appraisals or consents contemplated in this Agreement or
where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, right to payment or
other compensation, or Encumbrance would not have a Material Adverse
Effect, or would not materially adversely affect the ability of the Sellers
to consummate the transactions contemplated by this Agreement. None of the
Sellers needs to give notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Authority in order
for the Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain
any authorization, consent, or approval would not have a Material Adverse
Effect or would not materially adversely affect the ability of the Sellers
to consummate the transactions contemplated by this Agreement.
4.2 Limitations of Representations and Warranties. The following
limitations apply with regard to any representations and warranties by the
Sellers:
(a) The Buyer acknowledges that (i) it has had and pursuant to this Agreement
will have before Closing access to the Sellers, the Assets, and the
officers and employees of the Sellers and (ii) in making the decision to
enter into this Agreement and consummate the transactions contemplated
hereby, the Buyer has relied solely on the basis of its own independent
investigation and upon the express representations, warranties, covenants,
and agreements set forth in this Agreement. Without limiting the above,
Buyer has, prior to the execution and delivery of this Agreement, (i)
reviewed the environmental site assessments and financial evaluations that
were provided to the Buyer and are more fully described in the Sellers'
Disclosure Schedule, (ii) had full opportunity to conduct to its
satisfaction inspections of the Real Property, and (iii) fully completed
all inspections of the Real Property. Buyer acknowledges, after such review
and inspections, that no further investigation of the Real Property is
necessary for purposes of acquiring the Assets for Buyer's intended use.
THE BUYER ACKNOWLEDGES THAT THERE ARE NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT.
(b) WITHOUT LIMITING THE ABOVE, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, THE SELLERS MAKE NO AND DISCLAIM ANY REPRESENTATION OR
WARRANTY, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE,
OR OTHERWISE REGARDING ALL GEOLOGICAL DATA, RESERVE OR RESOURCE DATA,
SUFFICIENCY OF MINING RIGHTS (EXCEPT AS EXPRESSLY SET FORTH IN SECTION
4.1(a) ABOVE), PROCESSING CAPABILITIES OF THE ASSETS, MINEABILITY OF COAL,
QUALITY OF COAL RESERVES AND INVENTORIES. THE ACREAGES OF THE PROPERTY
AGREEMENT ARE APPROXIMATIONS AND ANY REPRESENTATION OR WARRANTY WITH
RESPECT THERETO IS DISCLAIMED.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Satisfaction of Conditions Precedent. From the date of this Agreement
until the earlier of the Closing Date or the termination of this Agreement, each
Party will use all commercially reasonable efforts to take all action and to do
all things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement, including without
limitation the satisfaction of the conditions precedent set forth in Article
VII. Without limiting the generality of the foregoing, the Buyer and the Sellers
agree to cooperate to take all commercially reasonable actions to satisfy the
conditions precedent and consummate the transactions contemplated under this
Agreement not later than March 30, 2004.
5.2 Notices and Consents. From the date of this Agreement until the
earlier of the Closing Date or the termination of this Agreement, the Sellers
will give any notices to third parties, and will use its commercially reasonable
efforts to obtain the third party consents, listed on Section 5.2 of the
Disclosure Schedule. Each of the Parties will give any notices to, make any
filings with, and use all commercially reasonable efforts to obtain any
authorizations, consents, and approvals of Governmental Authorities.
5.3 Operation of Business. From the date of this Agreement until the
earlier of the Closing Date or the termination of this Agreement, the Sellers
will not, without the consent of the Buyer (which consent shall not be
unreasonably withheld or delayed), except as expressly contemplated by this
Agreement or Section 5.3 of the Disclosure Schedule, engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Sellers will
not, without the consent of the Buyer (which consent shall not be unreasonably
withheld, delayed or conditioned), except as expressly contemplated by this
Agreement or as set forth on the Disclosure Schedule, do any of the following:
(a) cause or allow any of the Assets to become subject to an Encumbrance,
except for Permitted Encumbrances and other Encumbrances identified in
Section 5.3(a) of the Disclosure Schedule; or
(b) except in the Ordinary Course of Business, amend in any material respect,
or terminate any production or royalty contract or any material agreement,
lease, license or other instrument affecting or related to the Coal Assets
or the before the expiration of the term thereof, other than to the extent
that any of them terminate or are terminable pursuant to their respective
terms in the Ordinary Course of Business.
(c) During the pendency of the Agreement, neither party shall negotiate or
enter into agreements with third parties to purchase any equity interests
in Coal Assets at any time prior to the termination of this Agreement.
5.4 Access to Information. The Sellers will permit representatives of the
Buyer to have reasonable access at all reasonable times, and in a manner so as
not to interfere with the normal business operations and to all premises,
properties, personnel, books, records (including Tax records), contracts, and
documents of or pertaining to the Assets. Any information obtained by the Buyer,
its employees, representatives, consultants, attorneys, agents, lenders and
other advisors under this Section shall be subject to the confidentiality and
use restrictions contained in the Confidentiality Agreement. All "due diligence"
activities of the Buyer shall be conducted in accordance with applicable Laws
and the Buyer shall indemnify the Sellers and their Affiliates from and against
all damages, losses and liabilities incurred as a result of such activities.
During the period prior to Closing, in no event shall Buyer or its Affiliates or
their respective officers, directors, employees, counsel, financial advisors or
other representatives be permitted to conduct Phase II environmental assessments
or any other sampling or testing of soil and/or ground or surface water at, or
under, any real property associated with the Subject Assets, without the prior
written consent of the Sellers, which consent shall not be unreasonably withheld
or delayed.
5.5 Contacts with Lessees, Customers and Vendors. The Buyer shall not,
prior to the Closing Date, contact any lessee, customer, vendor, supplier or
employee of, or any other Person having business dealings with, Sellers or their
Affiliates with respect to any aspect of the Assets or the transactions
contemplated hereby, without the prior consent of the Sellers, which consent
shall not be unreasonably withheld or delayed.
5.6 Amendment of Schedules. Each Party agrees that, with respect to the
representations and warranties of such Party contained in this Agreement, such
Party shall have the continuing obligation until the Closing to supplement or
amend the Disclosure Schedules applicable to that Party with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in the
Disclosure Schedules. For the purposes of determining whether the conditions set
forth in Article VII have been fulfilled, the Disclosure Schedules shall be
deemed to include only that information contained therein on the date of this
Agreement and shall be deemed to exclude all information contained in any
supplement or amendment thereto. However, if the Closing shall occur, then all
matters disclosed pursuant to any such supplement or amendment at or prior to
the Closing shall be deemed included in the Disclosure Schedule and no Party
shall be entitled to make a claim for indemnification under this Agreement with
regard to such supplemental information based on the absence of any such
supplemental information in the Disclosure Schedule as of the date of this
Agreement, pursuant to the terms of this Agreement.
5.7 Financial Statements. As soon as practicable following the date
of this Agreement, the Sellers will provide to Buyer the audited financial
statements and unaudited interim financial statements in a form suitable for
filing with the Securities and Exchange Commission ("SEC") on Form 8-K, together
with any related amendment thereto regarding the purchase of the Assets. As
soon as practicable following the date of this Agreement, (i) the Sellers shall
provide financial statements and footnotes to the Buyer and its auditors and
(ii) upon receipt of such financial statements and footnotes from the Seller,
the Buyer will cause its auditors to commence an audit of the applicable
financial statements. Upon receiving comments or other response from the SEC,
the Seller shall provide financial statements and footnotes that conform to the
SEC responses to the Buyer and its auditors. The Sellers shall cooperate fully
with the Buyer and its auditors in completing the required audit(s) of annual
periods and review(s) of interim periods in a timely manner, allowing the Buyer
to file the required Form 8-K and 8-K amendment(s) in accordance with Regulation
S-K and S-X. The audit(s) and interim period review(s) shall be completed prior
to the Closing Date. The fees and costs of audit(s) and interim period review(s)
shall be borne by the Buyer.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as the other Parties reasonably may request, all at
the sole cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefore under Article VIII).
6.2 Delivery and Retention of Records. On or before sixty (60) days after
the Closing Date, at the Buyer's request, the Sellers will deliver or cause to
be delivered to the Buyer at its office in ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other mutually agreeable location, all files, records,
information and data relating to the Coal Asset records (collectively, the
"Records"). Each of the Sellers (and their successors and assigns) may retain a
copy of the Records to the extent that they relate to the operation of their
businesses. The Buyer agrees to (a) hold the Records and not to destroy or
dispose of any portion thereof for a period of ten years from the Closing Date
or such longer time as may be required by Law, provided that, if it desires to
destroy or dispose of such Records during such period, it will first offer in
writing at least sixty (60) days before such destruction or disposition to
surrender them to the Sellers and if the Sellers do not accept such offer within
twenty (20) days after receipt of such offer, the Buyer may take such action and
(b) following the Closing Date to afford (i) the Sellers, (ii) the Sellers'
successors and assigns and (iii) any of their accountants, and counsel, during
normal business hours, upon reasonable request, at any time, full access to the
Records and to the Buyer's employees at no cost to the Sellers (other than for
reasonable out-of-pocket expenses); provided that such access will not be
construed to require the disclosure of Records that would cause the waiver of
any attorney-client, work product or like privilege; provided, further, that in
the event of any litigation nothing herein shall limit any Party's rights of
discovery under applicable Law. Nothing herein shall impose any liability upon
Buyer in the event of destruction or loss of any Records as a result of
casualty. The Buyer agrees to provide the Sellers and their successors and
assigns to the interests in the Coal Assets and their Affiliates involved in the
coal mining business reasonable access to the Records after the Closing Date in
order for Sellers to comply with their obligations under this Agreement
(including without limitation, the preparation of the Closing Date Statement,
the preparation of any required tax returns in accordance with this Agreement
and to comply with any indemnity obligations), to conduct any historical audit
of the financial statements in accordance with generally accepted accounting
principles and in accordance with Regulation S-X of the Securities and Exchange
Commission and, to the extent required, to perform any obligations or to receive
any benefits associated with the Retained Assets and Liabilities. The Sellers
agree (and shall bind its successors and assigns) to keep the terms and
conditions of the material agreements confidential; provided that the Sellers
shall not be obligated to keep such terms and conditions confidential to the
extent that they are already in possession of the public or becomes available to
the public other than through the act or omission of the Sellers in breach
hereof.
6.3 Employee Matters. As of the Closing Date, the employees listed on the
Disclosure Schedule as of the Closing (the "Current Employees") shall be offered
employment with the Buyer or its Affiliates in the same positions, at the same
level of wages and/or salary, and at a work location which is within 50 miles of
their work location immediately prior to the Closing Date; provided, however,
except as may be specifically required by applicable Law or any contract,
neither the Buyer nor its Affiliates, on the one hand, nor any employee, on the
other hand, shall be obligated to continue any employment relationship or any
specific terms of employment for any specific period of time. As of the Closing
Date, all Current Employees shall cease active participation in all employee
benefit plans and arrangements of the Sellers and their Affiliates. As of the
first day following the Closing Date, all Current Employees shall be permitted
to participate in the employee benefits plans and arrangements of the Buyer and
its Affiliates on the same terms as similarly situated employees of the Buyer or
any of its Affiliates. To the extent any employee benefit plan, program or
policy of the Buyer or their Affiliates is made available to the Current
Employees immediately prior to the Closing Date with respect to any welfare
benefit plans to which such employees may become eligible, the Buyer or its
Affiliates shall cause such plans to provide credit for any co-payments or
deductibles by such employees and waive all pre-existing condition exclusions
and waiting periods, other than limitations or waiting periods that have not
been satisfied under any welfare plans maintained by the Seller and its
Affiliates for their employees prior the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) the representations and warranties of the Sellers contained in Section 3.1
and Article IV shall be true and correct when made and as of the Closing
Date (other than representations and warranties that are made as of a
specific date which shall have been true and correct as of such date),
except to the extent that any failures of such representations and
warranties to be so true and correct would not have a Material Adverse
Effect; provided, however, that if any representation and warranty of the
Sellers is determined to be untrue or incorrect prior to the Closing Date
and such failure of such representation and warranty to be so true and
correct would have a Material Adverse Effect, then the Buyer shall notify
the Sellers upon such determination, and the Sellers shall have the right,
but not the obligation, to cure such failure on or before the Closing Date,
in which case, if cured, such failure shall be deemed to have been waived;
(b) the Sellers shall have performed and complied with all of its covenants
hereunder through the Closing except to the extent that any failure to
perform or comply would not have a Material Adverse Effect;
(c) there shall not be any injunction, judgment, order, decree, ruling, or
charge in effect preventing consummation of any of the transactions
contemplated by this Agreement;
(d) the Sellers shall have delivered to the Buyer an officer's certificate to
the effect that each of the conditions specified in subsections 7.1(a)-(c)
is satisfied in all respects;
(e) any governmental approvals required to consummate the transactions
contemplated by this Agreement shall have been received;
(f) the Buyer shall have either (i) completed the audit requirements with
respect to the Assets in accordance with the SEC Requirements as set forth
in Section 5.7(b) or (ii) shall have reasonably determined that, based upon
its review of the Sellers' accounting records, the SEC Requirements will be
capable of being completed in a reasonable period of time; and
(g) the Sellers shall have delivered to the Buyer a Fairness opinion or audit
or other financial information to the Sellers that is reasonably acceptable
to the Buyer's counsel, to the effect that the Assets are worth a
substantially equivalent amount as the market price of the common voting
shares issued in payment thereof as of a date reasonably close to the
closing date.
The Buyer may waive any condition specified in this Section 7.1 if it executes a
writing so stating at or before the Closing.
7.2 Conditions to Obligation of the Sellers. The obligation of the Sellers
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties of the Buyer contained in Section 3.2
shall be true and correct when made and as of the Closing Date (other than
representations and warranties that are made as of a specific date which
shall have been true and correct as of such date), except to the extent
that any failures of such representations and warranties to be so true and
correct would not have a material adverse effect on the Sellers; provided,
however, that if any representation and warranty of the Buyer is determined
to be untrue or incorrect prior to the Closing Date and such failure of
such representation and warranty to be so true and correct would have a
material adverse effect, then Sellers shall notify Buyer upon such
determination, and Buyer shall have the right, but not the obligation, to
cure such failure on or before the Closing Date, in which case, if cured,
such failure shall be deemed to have been waived;
(b) the Buyer shall have performed and complied with all of its covenants
hereunder through the Closing except to the extent any failure to perform
or comply would not have a material adverse effect on the Sellers;
(c) there shall not be any injunction, judgment, order, decree, ruling, or
charge in effect preventing consummation of any of the transactions
contemplated by this Agreement;
(d) the Buyer shall have delivered to the Sellers a certificate to the effect
that each of the conditions specified in subsections 7.2(a)-(c) is
satisfied in all respects;
(e) any governmental approvals required to consummate the transactions
contemplated by this Agreement shall have been received;
(f) all third party consents required to effectuate the transaction under this
Agreement have been received by the Sellers on terms acceptable to it, in
its sole discretion; and
(g) the Buyer shall have delivered to the Sellers an opinion of counsel
(relying to the extent deemed necessary by such counsel on the opinion of
Chinese counsel), or other counsel to the Buyer that is reasonably
acceptable to the Seller.
The Sellers may waive any condition specified in this Section 7.2 if it executes
a writing so stating at or before the Closing.
ARTICLE VIII
REMEDIES FOR BREACHES OF AGREEMENT
8.1 Survival of Representations, Warranties and Certain Covenants. (i) All
of the representations and warranties of the Sellers contained in Articles III
and IV and in any documentation or certificates delivered pursuant to Section
7.1(d) or as described in Section 2.1 shall survive the Closing under this
Agreement for a period of two years after the Closing Date; (ii) the
representations and warranties in Section 4.1(e) shall survive the Closing with
respect to any given claim that would constitute a breach of such representation
or warranty until the earlier of four (4) years from the Closing Date or the
expiration of the statute of limitations applicable to the underlying Tax matter
giving rise to that claim; and (iii) the representations and warranties in
Section 4.1(g) shall survive the Closing under this Agreement for a period of
three years after the Closing Date. The representations and warranties of the
Buyer contained in Section 3.2 shall survive the Closing for a period of two
years after the Closing Date. The covenants contained in this Agreement to be
performed after the Closing shall survive the Closing indefinitely.
8.2 Indemnification Provisions for Benefit of the Buyer.
(a) Sellers shall indemnify and hold Buyer harmless from and against any and
all Adverse Consequences whatsoever arising out of or resulting from:
(i) Any breach of warranty or misrepresentation by the Sellers or the
nonperformance of any covenant or obligation to be performed by the Sellers
to the extent that and only to the extent that (A) there is an applicable
survival period pursuant to Section 8.1; and that (B) the Buyer makes a
written claim for indemnification against the Sellers pursuant to Section
11.6 within such survival period;
(ii) Any liability arising out of the ownership, conduct or operation of the
Assets prior to the Closing Date (other than the Assumed Liabilities) to
the extent that the Buyer makes a written claim for indemnification against
the Sellers pursuant to Section 11.6 within five years of the Closing Date;
(iii)Any claim which may be asserted against the Buyer or any of the Assets, by
any of the Sellers' employees, independent contractors, their employees, or
agents with respect to liabilities incurred by or on the Sellers' behalf
prior to the Closing Date, whether covered by a collective bargaining
agreement or not, including labor costs, severance pay, pension benefits,
employee benefits, workers' compensation, vacation and holiday benefits,
sick pay, multiemployer withdrawal liability, any and all employee
benefits, and any other costs associated therewith;
(iv) Any attempt (whether or not successful) by any person to cause or require
Buyer to pay or discharge any debt, obligation or liability relating to the
Sellers not associated with the Assets or an Assumed Liability.
(b) Limitations of Indemnification. The following limitations shall apply with
regard to the Sellers' obligations to indemnify the Buyer Indemnitees
pursuant to this Section 8.2:
(i) The Sellers' liability under this Agreement shall not exceed 25% of the
Purchase Price paid in accordance with Section 2.2. The limitations on
Sellers' indemnification obligations set forth in the prior sentence shall
not apply to losses resulting from fraud or willful misconduct by the
Sellers.
(ii) The Sellers and their Affiliates will have no liability for any Adverse
Consequences, unless and until the aggregate Adverse Consequences for which
the Buyer Indemnitees are entitled to recover under this Agreement exceeds
1% of the Purchase Price paid in accordance with Section 2.2 (the
"Threshold Amount"); provided, however, once such amount exceeds the
Threshold Amount, the Buyer Indemnitees will be entitled to recover all
amounts to which they are entitled in excess of the Threshold Amount,
subject to the limitations set forth in (i) above.
(iii)The Sellers and their Affiliates shall not be liable to the Buyer
Indemnitees for any Adverse Consequences associated with a claim that is
based upon any fact, matter or circumstance within the actual knowledge of
the Buyer, the Buyer Indemnitees and their Affiliates as of the date
hereof, as well as such facts, matters or circumstances which before the
Closing Date had been communicated to the Buyer, the Buyer Indemnitees or
their Affiliates in writing.
(iv) The Buyer acknowledges and agrees that the indemnification provisions in
this Article VIII and the termination rights in Section 10.1 shall be the
exclusive remedies of the Buyer, the Buyer Indemnitees and their Affiliates
with respect to the transactions contemplated by this Agreement.
8.3 Indemnification Provisions for Benefit of the Sellers. The Buyer shall
indemnify and hold the Sellers forever harmless from and against all Adverse
Consequences whatsoever arising out of or resulting from:
(a) Any breach of warranty or misrepresentation by the Buyer contained herein,
or the non-performance of any covenant or obligation to be performed by the
Buyer to the extent that and only to the extent that (A) there is an
applicable survival period pursuant to Section 8.1; and that (B) the
Sellers make a written claim for indemnification against the Buyer pursuant
to Section 11.6 within such survival period; or
(b) The ownership, conduct or operation of the Assets from and after the
Closing Date and any Assumed Liability.
8.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") that may give rise to a right
to claim for indemnification against any other Party (the "Indemnifying
Party") under Section 8.2 or Section 8.3, then the Indemnified Party shall
promptly (and in any event within five business days after receiving notice
of the Third Party Claim) notify the Indemnifying Party thereof in writing.
(b) The Indemnifying Party will have the right to assume and thereafter conduct
the defense of the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party; provided, however, that the
Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably)
unless the judgment or proposed settlement involves only the payment of
money damages and does not impose an injunction or other equitable relief
upon the Indemnified Party.
(c) Unless and until the Indemnifying Party assumes the defense of the Third
Party Claim as provided in subsection 8.4(b), the Indemnified Party may
defend against the Third Party Claim in any manner it reasonably may deem
appropriate.
(d) In no event will the Indemnified Party consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnifying Party which consent shall not
be withheld unreasonably.
8.5 Determination of Amount of Adverse Consequences. The Adverse
Consequences giving rise to any indemnification obligation hereunder shall be
limited to the actual loss suffered by the Indemnified Party (i.e., reduced by
any insurance proceeds or other payment or recoupment received, realized or
retained by the Indemnified Party as a result of the events giving rise to the
claim for indemnification), net of any reduction in Taxes of the Indemnified
Party (or the affiliated group of which it is a member) occasioned by such loss
or damage. The amount of the actual loss and the amount of the indemnity payment
shall be computed by taking into account the timing of the loss or payment, as
applicable, using a 10% interest or discount rate, as appropriate. Upon the
request of the Indemnifying Party, the Indemnified Party shall provide the
Indemnifying Party with information sufficient to allow the Indemnifying Party
to calculate the amount of the indemnity payment in accordance with this Section
8.5. An Indemnified Party shall take all reasonable steps to mitigate damages in
respect of any claim for which it is seeking indemnification and shall use
reasonable efforts to avoid any costs or expenses associated with such claim
and, if such costs and expenses cannot be avoided, to minimize the amount
thereof.
8.6 Tax Treatment of Indemnity Payments. All indemnification payments made
under this Agreement, including any payment made under Article VIII, shall be
treated as purchase price adjustments for Tax purposes.
ARTICLE IX
TAX MATTERS
9.1 Post-Closing Tax Returns. The Buyer shall prepare or cause to be
prepared and file or cause to be filed any Post-Closing Tax Returns with respect
to the Assets. The Buyer shall pay (or shall cause to be paid) any Taxes due
with respect to such Tax Returns.
9.2 Pre-Closing Tax Returns. The Sellers shall prepare or cause to be
prepared and file or cause to be filed all Pre-Closing Tax Returns with respect
to the Assets. The Sellers shall pay (or cause to be paid) any Taxes due with
respect to such Tax Returns.
9.3 Prorated Ad Valorem Taxes. Ad valorem real property taxes on the
Assets shall be prorated and adjusted on the basis of the actual days in the
fiscal year, the Sellers to have the last day, to and including the date of
Closing. Taxes for all prior years shall be paid by the Sellers. If the Closing
shall occur before the tax rate is fixed for the then current fiscal year, the
apportionment of taxes shall be upon the basis of the tax rate for the preceding
year applied to the latest assessed valuation. General assessments, whether
matured or unmatured, shall be paid in full by the Sellers. All other
assessments shall be paid by the Buyer. If the Real Property and the Retained
Property are not separately assessed, then the Buyer shall submit to the Sellers
a statement for the Seller's pro rata share of such taxes calculated by
prorating the amount of taxes for land with respect to other real property
composing the tax parcel of which the Real Property is a part and determining
the portion of the taxes applicable to the Retained Property based upon its
relative value. The Sellers shall give to the Buyer after the Seller's receipt
of the Buyer's statement therefore and at least fifteen (15) days prior to the
date payable without interest or penalty, a check payable to the appropriate
County Treasurer for the amount specified in the statement or, upon delivery of
a paid receipt evidencing prior payment by the Buyer to any such County
Treasurer of such sums as are due, the Sellers shall reimburse the Buyer for the
amount specified.
9.4 Claims for Refund. The Buyer shall not file any claim for refund of
taxes with respect to the Assets for whole or partial taxable periods on or
before the Closing Date.
9.5 Cooperation on Tax Matters.
(a) The Buyer and the Sellers shall cooperate fully, as and to the extent
reasonably requested by the other parties, in connection with the filing of
Tax Returns pursuant to this Section and any audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Buyer and the Sellers shall (i) retain all books and records
with respect to Tax matters pertinent to the Assets relating to any whole
or partial taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
the Buyer or any Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with
any taxing authority, and (ii) give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, the Buyer or any Sellers, as
the case may be, shall allow the other party to take possession of such
books and records.
(b) The Buyer and the Sellers further agree, upon request, to use their best
efforts to obtain any certificate or other document from any Governmental
Authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to,
with respect to the transactions contemplated hereby).
9.6 Certain Taxes. The Sellers will file all necessary Tax Returns and
other documentation with respect to all transfer (including without limitation,
stock transfer), recording, documentary, sales, use, stamp, registration and
other Taxes and fees, and, if required by applicable Law, the Buyer will, and
will cause its Affiliates to, join in the execution of any such Tax Returns and
other documentation. Notwithstanding anything set forth in this Agreement to the
contrary, the Buyer will be obligated to bear and shall pay at Closing, any
transfer, documentary, sales, recording, use, stamp, registration and other
Taxes and fees incurred in connection with this Agreement and the transactions
contemplated under this Agreement. The Buyer agrees to indemnify, defend and
hold the Sellers harmless for all such taxes and fees.
9.7 Confidentiality. Any information shared in connection with Taxes shall
be kept confidential, except as may otherwise be necessary in connection with
the filing of Tax Returns or reports, refund claims, tax audits, tax claims and
tax litigation, or as required by Law.
9.8 Audits. The Sellers and the Buyer shall provide prompt written notice
to the others of any pending or threatened tax audit, assessment or proceeding
that it becomes aware of related to the Assets for whole or partial periods for
which it may be indemnified by the other party hereunder. Such notice shall
contain factual information (to the extent known) describing the asserted tax
liability in reasonable detail and shall be accompanied by copies of any notice
or other document received from or with any tax authority in respect of any such
matters. If an indemnified party has knowledge of an asserted tax liability with
respect to a matter for which it may be indemnified hereunder and such party
fails to give the indemnifying party prompt notice of such asserted tax
liability, then (a) if the indemnifying party is precluded by the failure to
give prompt notice from contesting the asserted tax liability in any forum, the
indemnifying party shall have no obligation to indemnify the indemnified party
for any Taxes arising out of such asserted tax liability, and (b) if the
indemnifying party is not so precluded from contesting, but such failure to give
prompt notice results in a detriment to the indemnifying party, then any amount
which the indemnifying party is otherwise required to pay the indemnified party
pursuant to this Section shall be reduced by the amount of such detriment,
provided, the indemnified party shall nevertheless be entitled to full
indemnification hereunder to the extent, and only to the extent, that such party
can establish that the indemnifying party was not prejudiced by such failure.
Section 9.10 shall control the procedure for Tax indemnification matters to the
extent it is inconsistent with any other provision of this Agreement.
9.9 Control of Proceedings. The party responsible for the Tax under this
Agreement shall control audits and disputes related to such Taxes (including
action taken to pay, compromise or settle such Taxes). Reasonable out of pocket
expenses with respect to such contests shall be borne by the Sellers and the
Buyer in proportion to their responsibility for such Taxes as set forth in this
Agreement. Except as otherwise provided by this Agreement, the noncontrolling
party shall be afforded a reasonable opportunity to participate in such
proceedings at its own expense.
9.10 Powers of Attorney. The Buyer shall provide the Sellers and their
Affiliates with such powers of attorney or other authorizing documentation as
are reasonably necessary to empower them to execute and file returns they are
responsible for hereunder, file refund and equivalent claims for Taxes they are
responsible for, and contest, settle, and resolve any audits and disputes that
they have control over under Section 9.8 (including any refund claims which turn
into audits or disputes).
9.11 Remittance of Refunds. If the Buyer or any Affiliate of the Buyer
receives a refund of any Taxes attributable to a Pre-Closing Tax Period that the
Sellers is responsible for hereunder, or if the Sellers or any Affiliate of the
Sellers receives a refund of any Taxes attributable to a Post-Closing Tax Period
that the Buyer is responsible for hereunder, the party receiving such refund
shall, within thirty days after receipt of such refund, remit it to the party
who has responsibility for such Taxes hereunder. For the purpose of this Section
9.11, the term "refund" shall include a reduction in Tax and the use of an
overpayment as a credit or other tax offset, and receipt of a refund shall occur
upon the filing of a return or an adjustment thereto using such reduction,
overpayment or offset or upon the receipt of cash.
9.12 Purchase Price Allocation. Within thirty (30) days of the date of
this Agreement and in any event prior to Closing, the Sellers and the Buyer
shall attempt to agree upon the allocation of the Purchase Price among the
Assets for all purposes (including Tax and financial accounting purposes). The
Buyer, the Sellers and their applicable Affiliates will file all Tax Returns
(including amended Tax Returns and claims for refund) and information reports in
a manner consistent with such agreed upon allocation.
ARTICLE X
TERMINATION OF AGREEMENT
10.1 Termination of Agreement. The Parties may terminate this Agreement,
as provided below:
(a) the Buyer and the Sellers may terminate this Agreement by mutual written
consent at any time before the Closing;
(b) the Buyer may terminate this Agreement by giving written notice to the
Sellers at any time before Closing if the Closing shall not have occurred
on or before January 31, 2003 (unless the failure results primarily from
the Buyer itself breaching any representation, warranty or covenant
contained in this Agreement);
(c) the Sellers may terminate this Agreement by giving written notice to the
Buyer at any time before the Closing if the Closing shall not have occurred
on or before May 1, 2004 (unless the failure results primarily from the
Sellers breaching any representation, warranty or covenant contained in
this Agreement);
(d) the Buyer or the Sellers may terminate this Agreement if any court of
competent jurisdiction or any governmental, administrative or regulatory
authority, agency or body shall have issued an order, decree or ruling or
shall have taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated hereby or impairing use
or exploitation of any Assets and such order, decree, ruling or other
action shall have become final and nonappealable; and
(e) the Sellers may terminate this Agreement by giving written notice to the
Buyer at any time before the Closing to the extent that the Buyer does not
provide its consent to the assignment of the Lease Agreements to a third
party (whether pursuant to a direct assignment or pursuant to a transfer of
control) designated by the Sellers.
10.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10.1, all rights and obligations of the Parties with respect
to any Assets not theretofore sold to the Buyer hereunder shall terminate
without any liability of any Party to any other Party (except for any liability
of any Party then in breach); provided that the confidentiality provisions
contained in the Confidentiality Agreement and Sections 11.2 and 11.3 of this
Agreement shall survive termination.
ARTICLE XI
MISCELLANEOUS
11.1 Insurance. The Buyer acknowledges and agrees that, following the
Closing, the Insurance Policies of the Sellers and its Affiliates may be
terminated or modified to exclude coverage of all or any portion of the Assets
by the Sellers or their Affiliates and, as a result, the Buyer acknowledges that
the Assets will not be insured by Sellers. The Buyer further acknowledges that
the Sellers only maintained such Insurance Policies (including self insurance
and deductible levels) that it deemed necessary in its sole discretion or that
were required by Law. Notwithstanding Section 11.1, if any claims are made or
losses occur prior to the Closing Date that relate solely to the Assets and such
claims, or the claims associated with such losses, properly may be made against
the policies retained by the Sellers or its Affiliates pursuant to Section 11.1
or under policies otherwise retained by the Sellers or its Affiliates after the
Closing, then, subject to any limitations under the Insurance Policies
(including without limitation time restrictions on "claims made" policies), the
Sellers shall use its reasonable commercial efforts so that the Buyer can file,
notice, and otherwise continue to pursue these claims pursuant to the terms of
such policies; however nothing in this Agreement shall require the Sellers to
maintain or to refrain from asserting claims against or exhausting any retained
policies and the Sellers shall not be required to proceed against any direct or
indirect self-insured primary insurance programs or policies of, or maintained
by Buyer or any of its Affiliates, including arrangement with carriers for
claims administration service under cost-plus reimbursement agreements, assumed
retention, deductible or retrospective rating plans or other plans or
arrangements to the extent that risk of loss thereunder is ultimately assumed or
paid by Buyer or its Affiliates.
11.2 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Parties; provided
that any Party may make any public disclosure it believes in good faith is
required by applicable Law or any listing or trading agreement concerning its
publicly traded securities (in which case the disclosing Party will advise the
other Parties before making the disclosure).
11.3 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
11.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Party.
11.5 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but which together will constitute one and the
same instrument.
11.6 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given two business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Buyer: SONGZAI INTERNATIONAL HOLDING GROUP, INC.
f/k/a HERITAGE COMPANIES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
---------------
With copy to:
If to the Sellers: HONG ▇▇▇ ▇▇
178 HuaShan Rd.
Nan ▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇.▇.
China 150090
With a copy to:
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the addresses set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
11.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic Laws of the state of Nevada without giving effect
to any choice or conflict of law provision or rule (whether of the state of
Nevada or any other jurisdiction) that would cause the application of the Laws
of any jurisdiction other than the state of Nevada.
11.8 Entire Agreement. This Agreement (including the documents referred to
in this Agreement) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they have related in any way to the
subject matter of this Agreement. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers.
11.9 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.10 Transaction Expenses. Each of the Buyer and the Sellers will bear
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
*****
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SELLERS:
SONGZAI METAL PRODUCTS CO. LTD.
By: /s/ Hong ▇▇▇ ▇▇
----------------
President
ATTEST:
_____________________________________
Corporate Secretary
/s/ Hong ▇▇▇ ▇▇
------------------
HONG ▇▇▇ ▇▇, (individually)
BUYER:
SONGZAI INTERNATIONAL HOLDING GROUP INC.
By: /s/ Hong ▇▇▇ ▇▇
----------------
President
ATTEST:
_____________________________________
Corporate Secretary