EXHIBIT 2.1
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
▇▇▇▇▇▇▇ REVERSE MERGER FUND, LLC ("BUYER"),
CYBER MERCHANTS EXCHANGE, INC. ("COMPANY"),
▇▇▇▇▇ ▇▇▇▇ ("YUAN")
DATED AS OF NOVEMBER 19, 2004
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "AGREEMENT") is made and
entered into as of November 19, 2004, by and among ▇▇▇▇▇▇▇ Reverse Merger Fund,
LLC, a Delaware limited liability company (the "BUYER"), Cyber Merchants
Exchange, Inc., a California corporation (the "COMPANY"), and ▇▇▇▇▇ ▇. ▇▇▇▇, an
adult resident of the State of California ("Yuan").
RECITALS
A. The Company currently has 7,472,673 shares of common stock, no par
value, issued and outstanding ("COMMON Stock").
B. Yuan currently owns 2,450,000 shares of the Company's Common Stock.
C. The Company's board of directors has approved, subject to
shareholder approval, a bonus payable to certain current employees and directors
of the Company in the form of 1,027,327 restricted shares of the Company's
Common Stock ("STOCK BONUS"), which such shares shall not be included in any
registration statement of the Company (including any S-8 registration statement)
and shall be paid in partial consideration of the cancellation by such employees
and directors of certain outstanding stock options issued by the Company.
D. Following the approval of the Stock Bonus and the issuance of the
shares with respect thereto, the Company will have 8,500,000 shares of its
Common Stock issued and outstanding.
E. In connection with the transactions contemplated herein, the Company
desires to effect a one-for-eight and one-half (1-for-8.5) reverse stock split
with special treatment to preserve round lot stockholders ("REVERSE SPLIT") and
to re-incorporate in the state of Nevada ("RE-INCORPORATION"), each as more
fully described herein.
F. Immediately following the Reverse Split and the Re-incorporation,
the Company desires to issue 7,000,000 shares of Common Stock ("SHARES") to
Buyer, and Buyer desires to purchase the Shares from the Company ("STOCK
ISSUANCE"), on the terms and conditions set forth herein.
G. Following the Stock Issuance, Buyer will own 87.5% of the issued and
outstanding shares of the Company's Common Stock on a post-Reverse Split basis.
H. In connection with the transactions contemplated herein and as a
condition to Buyer's purchase of the Shares, the Company will transfer all of
the assets and liabilities of the Company (including all pending patents,
registered trademarks and the goodwill related to the business of the Company)
to ASAP Show, Inc., a Nevada corporation, a wholly owned subsidiary of the
Company ("ASAP SUBSIDIARY"), and the ASAP Subsidiary will assume and agree to
pay and/or assume any and all liabilities and obligations of the Company,
including,
without limitation, any and all obligations of the Company with respect to the
1996, 1999 and 2001 stock option plans of the Company ("OPTION PLANS"), all
pursuant to the terms and conditions of a certain asset and liability transfer
agreement between the Company and the ASAP Subsidiary ("TRANSFER AGREEMENT").
I. In connection with the transactions contemplated herein and as a
condition to Buyer's purchase of the Shares, following the transfer of the
assets and liabilities of the Company to the ASAP Subsidiary, the Company
desires to declare a distribution of, and distribute, all the outstanding shares
of the ASAP Subsidiary's common stock pro rata to the stockholders of the
Company's Common Stock immediately prior to the issuance of Shares to Buyer
hereunder, after giving effect to the Reverse Split and the Stock Bonus
("DISTRIBUTION").
J. The consummation of the transactions under this Agreement and the
consummation of the Reverse Split, Re-incorporation, the Transfer Agreement and
the Distribution require, and are subject to, the approval of the directors and
stockholders of the Company.
H. As a further condition to Buyer's purchase of the Shares hereunder,
the Company, ASAP Subsidiary and Yuan will, at Closing (as defined in Section
1.2) enter into an indemnity agreement in substantially the form attached hereto
as EXHIBIT A (the "INDEMNITY AGREEMENT").
NOW, THEREFORE, in consideration of the above recitals, the covenants,
promises and representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
SALE AND PURCHASE
1.1 SALE AND PURCHASE OF SHARES.
At the Closing and subject to and upon the terms and conditions of this
Agreement, the Company agrees to sell and issue to Buyer, and Buyer agrees to
purchase from the Company, the Shares. As of Closing, the Shares shall
constitute not less than 87.5% of the issued and outstanding shares of the
Company's Common Stock on a post-Reverse Split basis. The sale and purchase of
Shares contemplated hereunder shall be referred to herein as the "TRANSACTION"
or the "STOCK ISSUANCE".
1.2 CLOSING.
Unless this Agreement shall have been terminated pursuant to Article IX
hereof, the closing of the Transaction (the "CLOSING") shall take place at the
offices of the Buyer at a time and date to be specified by the parties, which
shall be no later than the third business day after the satisfaction or waiver
of the conditions set forth in Article VII, or at such other time, date and
location as the parties hereto agree in writing (the "CLOSING DATE").
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1.3 PURCHASE PRICE.
The aggregate purchase price for the Shares shall be Four Hundred
Twenty Five Thousand Dollars ($425,000) ("SHARE PURCHASE PRICE"). At Closing,
the Share Purchase Price shall be paid to the Company. Except as set forth in
Section 1.6 hereof, the Company and Buyer agree that the Share Purchase Price
will be transferred to the ASAP Subsidiary, subject to the terms and conditions
of this Agreement and the Transfer Agreement.
1.4 ISSUANCE OF CERTIFICATES REPRESENTING THE SHARES.
At Closing, the Company shall direct the Company's transfer agent, U.S.
Stock Transfer Corporation ("TRANSFER AGENT") to issue to Buyer certificates
representing the Shares with the restrictive legend under the Securities Act of
1933, as amended ("Securities Act").
1.5 TAKING OF NECESSARY ACTION; FURTHER ACTION.
If, at any time after the Closing, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest Buyer with
full right, title and possession to the Shares, the Company will take all such
lawful and necessary action.
1.6 ESCROW.
Notwithstanding any provision of this Agreement to the contrary, the
Closing of the Transaction contemplated hereunder shall be completed in escrow,
with ▇▇▇▇▇▇▇▇ ▇▇▇▇, Esq., acting as escrow agent (the "ESCROW Agent"), and any
funds delivered in escrow shall be held and disposed of by the Escrow Agent in
accordance with the terms and provisions of a certain escrow agreement by and
between the Company, ASAP Subsidiary, Buyer and Escrow Agent, in substantially
the form attached hereto as EXHIBIT B (the "ESCROW AGREEMENT"). In furtherance
of the foregoing, the following shall apply:
(a) In lieu of delivering the Share Purchase Price to the Company as
provided for in Section 1.3, Buyer shall, at or prior to Closing, deliver or
cause to be delivered to Escrow Agent for deposit into escrow pursuant to the
Escrow Agreement, the amount of $425,000 representing the Share Purchase Price.
(b) At such time as all of the conditions precedent to Closing under
Article VII hereof have been satisfied by the respective parties, and no party
shall be in breach any term, warranty, representation, covenant or agreement
applicable to them, and each party shall have made all deliveries required by
each of them under this Agreement, the Company and Buyer shall provide written
notice to Escrow Agent directing that the escrow be disposed of in accordance
with the Escrow Agreement and the terms of this Agreement; provided, however,
that the Escrow Agent shall retain $50,000 of the Share Purchase Price in escrow
to satisfy any indemnification obligations of Yuan under this Agreement and any
indemnification obligations of the ASAP Subsidiary and Yuan under the Indemnity
Agreement ("Indemnity Escrow"). On the date six months (6) months following the
Closing Date, to the extent that the Indemnity Escrow has not been and is not
the subject of an indemnification claim under this Agreement and the Indemnity
Agreement, the Indemnity Escrow shall be released to the ASAP Subsidiary
together with accrued interest thereon, if any.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants to, and covenants with,
Buyer, as follows:
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2.1 ORGANIZATION AND QUALIFICATION.
(a) Company is a corporation duly incorporated or organized, validly
existing and in good standing under the laws of the State of California and has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted by
Company. The Company is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
("APPROVALS") necessary to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as it is now being or
currently planned by Company to be conducted. The Company is duly qualified to
conduct its business in each state listed on SCHEDULE 2.1 hereof. Except as set
forth in SCHEDULE 2.1 hereof, the Company has timely filed each annual corporate
or information report ("ANNUAL REPORT") required to be filed by it in each state
in which it is required to be qualified to do business as a foreign corporation.
Complete and correct copies of the articles of incorporation or organization and
by-laws (or other comparable governing instruments with different names)
(collectively referred to herein as "CHARTER DOCUMENTS") of Company, as amended
and currently in effect, and each Annual Report filed by the Company have been
heretofore delivered to Buyer. Company is not in violation of any of the
provisions of the Company's Charter Documents.
(b) The minute books of Company contain true, complete and accurate
records of all meetings and consents in lieu of meetings of its Board of
Directors (and any committees thereof), similar governing bodies and
stockholders ("CORPORATE RECORDS"), since the time of Company's organization.
Copies of such Corporate Records of Company have been heretofore delivered to
Buyer.
(c) The Company has heretofore delivered to Buyer a true, complete
and accurate record of the registered ownership of the Company's capital stock
maintained by the Transfer Agent as of a recent date acceptable to Buyer and a
record of the beneficial ownership of the Company's capital stock as of a recent
date acceptable to Buyer ("STOCK RECORDS").
2.2 SUBSIDIARIES. Set forth in SCHEDULE 2.2 hereto is a true and
complete list of all Subsidiaries stating, with respect to each Subsidiary, its
jurisdiction of incorporation or organization, date of incorporation or
organization, capitalization and equity ownership. Each Subsidiary is a
corporation duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization. Each Subsidiary is duly qualified to conduct its business in each
state listed on SCHEDULE 2.2 hereof. Except as set forth in SCHEDULE 2.2 hereof,
each Subsidiary has timely filed each Annual Report required to be filed by it
in each state in which it is required to be qualified to do business as a
foreign corporation. All of the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued, are fully paid and
non-assessable, have not been issued in violation of any preemptive or other
right of any Person or of any laws, and are owned beneficially and of record
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by Company as specified on SCHEDULE 2.2, free and clear of all liens, claims,
charges, encumbrances, pledges, mortgages, security interests, options, rights
to acquire, proxies, voting trusts or similar agreements, restrictions on
transfer or adverse claims of any nature whatsoever ("LIENS"). Complete and
correct copies of the Charter Documents of each Subsidiary, as amended and
currently in effect, and each Annual Report filed by a Subsidiary have been
heretofore delivered to Buyer. No Subsidiary is in violation of any of the
provisions of its Charter Documents.
Except as described in SCHEDULE 2.2 hereto, neither Company nor any
Subsidiary owns, directly or indirectly, any ownership, equity, profits or
voting interest in any Person (other than Subsidiaries) or has any agreement or
commitment to purchase any such interest, and Company and its Subsidiaries have
not agreed and are not obligated to make nor are bound by any written, oral or
other agreement, contract, subcontract, lease, binding understanding,
instrument, note, option, warranty, purchase order, license, sublicense,
insurance policy, benefit plan, commitment or undertaking of any nature, as of
the date hereof or any date hereafter, under which any of them may be obligated
to make any future investment in or capital contribution to any other entity.
For purposes of this Agreement, (i) the term "SUBSIDIARY" shall mean
any Person in which the Company or any Subsidiary directly or indirectly, owns
beneficially securities or interests representing 50% or more of (x) the
aggregate equity or profit interests, or (y) the combined voting power of voting
interests ordinarily entitled to vote for management or otherwise, and (ii) the
term "PERSON" shall mean and include an individual, a corporation, a partnership
(general or limited), a joint venture, an association, a trust or any other
organization or entity, including a government or political subdivision or an
agency or instrumentality thereof.
2.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and, to consummate the transactions
contemplated hereby (including the Transaction). The execution and delivery of
this Agreement and the consummation by Company of the transactions contemplated
hereby (including the Transaction) have been duly and validly authorized by all
necessary corporate action on the part of Company (including the approval by its
Board of Directors and by the Stockholders as required), and no other corporate
proceedings on the part of Company are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Company and, assuming the due
authorization, execution and delivery thereof by the Buyer, constitutes the
legal and binding obligation of Company, enforceable against Company in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity and public policy.
2.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company shall not, (i)
conflict with or violate the Company's Charter Documents, (ii) subject to
obtaining the adoption of this Agreement and the Transaction by the Stockholders
of Company, conflict with or violate any Legal Requirements to
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which the Company is bound, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or materially impair Company's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Company
pursuant to any Contracts except, with respect to clauses (ii) or (iii), for any
such conflicts, violations, breaches, defaults or other occurrences that would
not, individually and in the aggregate, have a Material Adverse Effect on
Company and its Subsidiaries, taken as a whole. For purposes of this Agreement,
"LEGAL REQUIREMENTS" means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity (as defined in Section 2.4(b)),
and all requirements set forth in applicable Contracts (as defined in Section
2.16).
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of their obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court, administrative agency, commission, governmental or regulatory
authority, domestic or foreign (a "GOVERNMENTAL ENTITY"), except for applicable
requirements, if any, of the Securities Act, the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), state securities laws ("BLUE SKY LAWS"),
and the rules and regulations thereunder, and appropriate documents with the
relevant authorities of other jurisdictions in which Company is qualified to do
business.
2.5 CAPITALIZATION.
(a) The authorized capital stock of Company consists of 40,000,000
shares of common stock, no par value ("COMMON STOCK") and 10,000,000 shares of
preferred stock, no par value ("PREFERRED STOCK"). At the close of business on
the business day prior to the date hereof, (i) 7,472,673 shares of Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable; (ii) no shares of Preferred Stock were issued and outstanding;
(iii) 2,120,465 shares of Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Common Stock granted to certain
employees of Company or other parties ("STOCK OPTIONS"), which Stock Options
shall be cancellation in connection with the Company's payment of the Stock
Bonus or assumed by the consent of the holder thereof pursuant to the Transfer
Agreement; (iv) 30,000 shares of Common Stock were reserved for issuance upon
the exercise of outstanding warrants to purchase Common Stock ("WARRANTS") held
by ▇.▇. ▇▇▇▇▇▇ and Co. ("▇▇▇▇▇▇"), which Warrants shall be transferred to ASAP
Subsidiary under the Transfer Agreement with the consent of ▇▇▇▇▇▇; and (v) no
shares of Common Stock were reserved for issuance upon the conversion of the
Preferred Stock or any outstanding convertible notes, debentures or securities
("CONVERTIBLE SECURITIES"). All shares of Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the instrument
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable. The Shares to be issued with respect to the
Transaction shall, when issued, be duly authorized, validly issued, fully paid
and nonassessable. Except as described in SCHEDULE 2.5 hereto, there are no
commitments or agreements of any character to which Company is bound obligating
Company to accelerate the vesting of any Stock Option as a
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result of the Transaction. All outstanding shares of Common Stock and Preferred
Stock and all outstanding Stock Options, Warrants and Convertible Securities
have been issued and granted in compliance with (i) all applicable securities
laws and (in all material respects) other applicable laws and regulations, and
(ii) all requirements set forth in any applicable contracts.
(b) Except as set forth in SCHEDULE 2.5 hereto, there are no equity
securities, partnership interests or similar ownership interests of any class of
any equity security of Company or any Subsidiary, or any securities exchangeable
or convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in SCHEDULE 2.5 hereof or as set forth in
Section 2.5(a) hereof there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which Company or any Subsidiary is a party or by which it is bound obligating
Company or any Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Company or any
Subsidiary or obligating Company or any Subsidiary to grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. Except as set forth in SCHEDULE
2.5 hereof, there are no lock up agreements or other agreements affecting the
transfer of any equity security of any class of Company or any Subsidiary.
(c) Except as contemplated by this Agreement and except as set forth
in SCHEDULE 2.5 hereto, there are no registration rights, and there is no voting
trust, proxy, rights plan, antitakeover plan, or other agreement or
understanding to which Company or any Subsidiary is a party or by which Company
or any Subsidiary is bound with respect to any equity security of any class of
Company or any Subsidiary.
2.6 COMPLIANCE. Company has complied with, is not in violation of, any
laws, rules or regulations of any Governmental Entity including, without
limitation, any and all applicable securities laws, environmental laws, and laws
regarding hazardous substances and wastes, except for failures to comply or
violations which, individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect on Company or its
Subsidiaries. No Company or Subsidiary is in default or violation of any term,
condition or provision of any applicable Charter Documents.
2.7 FINANCIAL STATEMENTS; FILINGS.
(a) Company has made available to Buyer each report and statement
filed by Company and each Subsidiary with any Governmental Entity (the "COMPANY
REPORTS"), which are all the forms, reports and documents required to be filed
by Company with any Governmental Entity, and such Company Reports are true,
correct and complete. As of their respective dates, the Company Reports (i) were
prepared in accordance and complied in all material respects with the
requirements of the applicable Governmental Entity, and the rules and
regulations of such Governmental Entities applicable to such Company Reports,
and (ii) did not at the time they were filed (and if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing and
as so amended or superceded) contain any untrue statement of a material fact or
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omit 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 set forth in the preceding
sentence, Company makes no representation or warranty whatsoever concerning the
Company Reports as of any time other than the time they were filed.
(b) Company has provided to Buyer a correct and complete copy of the
audited financial statements (including, in each case, any related notes
thereto) of Company and each Subsidiary for the prior three fiscal years ended,
complied as to form in all material respects with the published rules and
regulations of any applicable Governmental Entity, prepared in accordance with
the generally accepted accounting principles of the United States ("U.S. GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto), audited by a certifying accountant registered
with the Public Company Accounting Oversight Board ("PCAOB"), and each fairly
presents in all material respects the financial position of Company and
Subsidiaries at the respective dates thereof and the results of its operations
and cash flows for the periods indicated.
(c) Company has provided to Buyer a correct and complete copy of the
unaudited financial statements (including, in each case, any related notes
thereto) of Company and each Subsidiary for the most recent interim period
ended, complied as to form in all material respects with the published rules and
regulations of any applicable Governmental Entity, prepared in accordance with
U.S. GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto), and each fairly presents in all
material respects the financial position of Company and Subsidiaries at the
respective dates thereof and the results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal adjustments which were not or are not expected to
have a Material Adverse Effect on Company.
(d) Company has previously furnished to Buyer a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
applicable Governmental Entities but which are required to be filed with respect
to Company or any Subsidiary, to agreements, documents or other instruments
which previously had been filed by Company or any Subsidiary with the applicable
Governmental Entities pursuant to applicable rules and regulations. The books of
account and other financial records of Company and each Subsidiary have been
maintained in accordance with good business practice.
(e) Company is in full compliance with, and current in, all of the
reporting, filing and other requirements under the Exchange Act. The shares of
the Company's Common Stock have been duly and properly registered under Section
12(g) of the Exchange Act, and the Company is in full compliance with all of the
requirements under, and imposed by, Section 12(g) of the Exchange Act.
2.8 NO UNDISCLOSED LIABILITIES.
Except as set forth in SCHEDULE 2.8 hereto, Company and each Subsidiary
have no liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
financial statements prepared in accordance with U.S. GAAP.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth in SCHEDULE 2.9 hereto, since September 30, 2004,
there has not been: (i) any Material Adverse Effect on Company or any
Subsidiary, (ii) any declaration, setting aside or payment of any dividend on,
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or other distribution (whether in cash, stock or property) in respect of, any of
Company's or any Subsidiary's capital stock, or any purchase, redemption or
other acquisition of any of Company's or any Subsidiary's capital stock or any
other securities of Company or any Subsidiary or any options, warrants, calls or
rights to acquire any such shares or other securities, (iii) any split,
combination or reclassification of any of Company's capital stock, (iv) any
granting by Company or Subsidiary of any increase in compensation or fringe
benefits, except for normal increases of cash compensation in the ordinary
course of business consistent with past practice, (v) any material change by
Company or any Subsidiary in its accounting methods, principles or practices,
except as required by concurrent changes in U.S. GAAP, (vi) any change in the
auditors of Company or any Subsidiary, (vii) any issuance of capital stock of
Company or any of its Subsidiaries, or (vii) any revaluation by Company or any
Subsidiary of any of their respective assets, other than in the ordinary course
of business.
2.10 LITIGATION. Except as disclosed in SCHEDULE 2.10 hereto, there are no
claims, suits, actions or, to the best knowledge of Company, proceedings pending
or threatened against Company or any Subsidiary, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement.
2.11 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 2.11 hereto are all employee compensation,
incentive, fringe or benefit plans, programs, policies, commitments or other
arrangements (whether or not set forth in a written document) covering any
active or former employee, director or consultant of Company or any Subsidiary,
with respect to which Company or any Subsidiary has liability (collectively, the
"PLANS"), and each Plan has been maintained and administered in all material
respects in compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations which are applicable to such
Plans, and all liabilities with respect to the Plans have been properly
reflected in the financial statements of Company and it Subsidiaries. No suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of Plan activities) has been brought, or to the knowledge of
Company, is threatened, against or with respect to any such Plan. The
transactions contemplated under the Transfer Agreement shall not result in any
liability under any Plans.
(b) Except as disclosed on SCHEDULE 2.11 hereto, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor the transactions contemplated under the
Transfer Agreement will (i) result in any payment (including severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any stockholder, director, employee or consultant of Company or any Subsidiary
under any Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Plan, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
2.12 LABOR MATTERS.
The Company and its Subsidiary are not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by Company or a Subsidiary.
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2.13 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
commitment, judgment, injunction, order or decree binding upon Company or a
Subsidiary or to which Company or a Subsidiary is a party which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Company or a Subsidiary, any acquisition of property by
Company or a Subsidiary or the conduct of business by Company or a Subsidiary.
2.14 TAXES.
(a) DEFINITION OF TAXES.
For the purposes of this Agreement, "TAX" or "TAXES" refers to any
and all federal, state, local and foreign taxes, including, without limitation,
gross receipts, income, profits, sales, use, occupation, value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, assessments, governmental charges and duties together
with all interest, penalties and additions imposed with respect to any such
amounts and any obligations under any agreements or arrangements with any other
person with respect to any such amounts and including any liability of a
predecessor entity for any such amounts.
(b) TAX RETURNS AND AUDITS.
Except as set forth in SCHEDULE 2.14 hereto:
(i) Company and each Subsidiary has timely filed all federal,
state, local and foreign returns, estimates, information statements and reports
relating to Taxes ("RETURNS") required to be filed by Company or a Subsidiary
with any Tax authority prior to the date hereof, except such Returns which are
not material to Company or a Subsidiary. All such Returns are true, correct
and complete in all material respects. Company and each Subsidiary have paid all
Taxes shown to be due on such Returns.
(ii) All Taxes that Company or a Subsidiary is required by law to
withhold or collect have been duly withheld or collected, and have been timely
paid over to the proper governmental authorities to the extent due and payable.
(iii) Company and each Subsidiary have not been delinquent in the
payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Company or any Subsidiary, nor has
Company or any Subsidiary executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of Company or
any Subsidiary by any Tax authority is presently in progress, nor has Company or
any Subsidiary been notified of any request for such an audit or other
examination.
(v) No adjustment relating to any Returns filed by Company or any
Subsidiary has been proposed in writing, formally or informally, by any Tax
authority to the Company or any Subsidiary or any representative thereof.
(vi) Company and its Subsidiaries have no liability for any
material unpaid Taxes which have not been accrued for or reserved on Company's
or Subsidiary's balance sheets included in the audited financial statements for
the most recent fiscal year ended, whether asserted or unasserted, contingent or
10
otherwise, which is material to Company or a Subsidiary, other than any
liability for unpaid Taxes that may have accrued since the end of the most
recent fiscal year in connection with the operation of the business of Company
or its Subsidiaries in the ordinary course of business, none of which is
material to the business, results of operations or financial condition of
Company or its Subsidiaries.
2.15 BROKERS; THIRD PARTY EXPENSES. Except as set forth on SCHEDULE
2.15, Company and Yuan have not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agent's commissions
or any similar charges in connection with this Agreement or any transactions
contemplated hereby.
2.16 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in
SCHEDULE 2.16, the Company and its Subsidiaries are not a party to any
contracts, agreements, leases, mortgages, indentures, note, bond, guaranty,
liens, license, permit, franchise, purchase orders, sales orders, arbitration
awards, judgments, decrees, orders, documents, instruments, understandings and
commitments, or other instrument or obligation (including without limitation
outstanding offers or proposals) of any kind, whether written or oral
("CONTRACTS"). True, correct and complete copies of each Contract (or written
summaries in the case of oral Contracts) have been heretofore delivered to
Buyer.
2.17 INTERESTED PARTY TRANSACTIONS. Except as set forth in the SCHEDULE
2.17 hereto or the Company Reports, no employee, officer, director or 5% or more
stockholder of Company or a member of his or her immediate family is indebted to
Company, nor is Company indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of Company or an Subsidiary, and (iii) for other employee benefits made
generally available to all employees, and all related party transactions between
such persons and the Company have been fully and properly disclosed in the
Company Reports.
2.18 OVER-THE-COUNTER BULLETIN BOARD QUOTATION. The Company's common
stock is quoted on the Over-the-Counter Bulletin Board ("OTC BB"). There is no
action or proceeding pending or, to Company's knowledge, threatened against the
Company by NASDAQ or the National Association of Securities Dealers ("NASD")
with respect to any intention by such entities to prohibit or terminate the
quotation of Buyer Common Stock on the OTC BB. There is no action pending or
threatened, to Company's knowledge, by any market maker in the Company's common
stock to discontinue their market making activities with respect thereto.
2.19 BOARD APPROVAL. The board of directors of Company or similar
governing body (including any required committee or subgroup of thereof) has, as
of the date of this Agreement, unanimously (i) declared the advisability of the
Transaction and approved, subject to the approval of Stockholders (as required),
this Agreement and the transactions contemplated hereby, the Reverse Split,
Re-incorporation, Transfer Agreement and the transactions contemplated
thereunder, and the Distribution, (ii) determined that the Transaction, the
Reverse Split, Re-incorporation, Transfer Agreement, and the Distribution are in
11
the best interests of the Stockholders and are on terms that are fair to such
Stockholders, and (iii) to the extent applicable, recommended that the
Stockholders approve and adopt this Agreement and approve the Transaction, the
Reverse Split, Re-incorporation, Transfer Agreement and the transactions
contemplated thereunder, and the Distribution.
2.20 INVESTMENT COMPANY ACT. Company is not an "investment company" or
an "affiliated person" of or "promoter" or "principal underwriter" or an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended, nor is Company otherwise subject to regulation thereunder.
Company is not a "holding company" as that term is defined in, and is not
otherwise subject to regulation under, the Public Utility Holding Company Act of
1935.
2.21 OFFICERS AND DIRECTORS. During the past five year period, to
Company's knowledge, no current or former officer or director of Company has
been the subject of:
(a) a petition under the Federal bankruptcy laws or any other
insolvency or moratorium law or has a receiver, fiscal agent or similar officer
been appointed by a court for such person, or any partnership in which such
person was a general partner at or within two years before the time of such
filing, or any corporation or business association of which such person was an
executive officer at or within two years before the time of such filing;
(b) a conviction in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations which do not relate to
driving while intoxicated or driving under the influence);
(c) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining any such person from, or otherwise limiting, the following
activities:
(i) Acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant, any other
person regulated by the United States Commodity Futures Trading
Commission or an associated person of any of the foregoing, or as
an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of
any investment company, bank, savings and loan association or
insurance company, or engaging in or continuing any conduct or
practice in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with
the purchase or sale of any security or commodity or in
connection with any violation of Federal, state or other
securities laws or commodities laws;
(d) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any Federal, state or local authority barring,
suspending or otherwise limiting for more than 60 days the right of any such
person to engage in any activity described in the preceding sub-paragraph, or to
be associated with persons engaged in any such activity;
(e) a finding by a court of competent jurisdiction in a civil
action or by the U.S. Securities and Exchange Commission ("SEC") to have
violated any securities law, regulation or decree and the judgment in such civil
12
action or finding by the SEC has not been subsequently reversed, suspended or
vacated; or
(f) a finding by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding has
not been subsequently reversed, suspended or vacated.
2.22 REPRESENTATIONS AND WARRANTIES COMPLETE. The representations and
warranties of Company included in this Agreement and any list, statement,
document or information set forth in, or attached to, any Schedule provided
pursuant to this Agreement or delivered hereunder, are true and complete in all
material respects and do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading, under the circumstance under
which they were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to, and covenants with, the Company, as
follows:
3.1 ORGANIZATION.
Buyer is a limited liability company duly organized and validly
existing under the laws of the State of Delaware and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being or currently planned by Buyer to be conducted.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT.
Buyer has full power and authority to: (i) execute, deliver and perform
this Agreement, and each ancillary document which Buyer has executed or
delivered or is to execute or deliver pursuant to this Agreement, and (ii) carry
out Buyer's obligations hereunder and thereunder and, to consummate the
transactions contemplated hereby (including the Transaction). The execution and
delivery of this Agreement and the consummation by Buyer of the transactions
contemplated hereby (including the Transaction) have been duly and validly
authorized by all necessary action on the part of Buyer (including the approval
by its Board of Managers), and no other proceedings on the part of Buyer are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Buyer and, assuming the due authorization, execution and delivery
thereof by the Company, constitutes the legal and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
and public policy.
13
3.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Buyer do not,
and the performance of this Agreement by Buyer, shall not: (i) conflict with or
violate Buyer's certificate of organization or operating agreement, or (ii)
subject to obtaining the adoption of this Agreement and the Transaction by the
Board of Managers, conflict with or violate any laws or regulations.
(b) The execution and delivery of this Agreement by Buyer does
not, and the performance of its obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except for applicable requirements, if any, of the
Exchange Act and the rules and regulations thereunder.
3.4 BROKERS. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇, Buyer has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agent's commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
3.5 APPROVAL. The Board of Managers of Buyer has, as of the date of
this Agreement, unanimously declared the advisability of the Transaction and
approved this Agreement and the transactions contemplated hereby.
3.6 ACQUISITION OF SHARES FOR INVESTMENT. Buyer is an "accredited
investor," as such term is defined in Section 2(15) of the Securities Act and
Rule 501 of Regulation D promulgated thereunder, Buyer is purchasing the Shares
for Buyer's own account, for investment purposes, in Buyer's name and solely for
Buyer's own beneficial interest and not as nominee for, or on behalf of, or for
the beneficial interest of, or with the intention to transfer to, any other
Person. Buyer understands and agrees that the Shares being acquired pursuant to
this Agreement have not been registered under the Securities Act or under any
applicable state securities laws and may not be sold, pledged, assigned,
hypothecated or otherwise transferred ("TRANSFER"), except pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption from registration under the Securities Act, the availability of which
shall to be established to the satisfaction of the Company at or prior to the
time of Transfer.
3.7 REPRESENTATIONS AND WARRANTIES COMPLETE. The representations and
warranties of Buyer included in this Agreement and any list, statement, document
or information set forth in, or attached to, any Schedule provided pursuant to
this Agreement or delivered hereunder, are true and complete in all material
respects and do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading, under the circumstance under which
they were made.
Article IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS BY COMPANY.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
14
Closing, the Company, except to the extent that the other party shall otherwise
consent in writing, shall carry on its business in the usual, regular and
ordinary course consistent with past practices, in substantially the same manner
as heretofore conducted and in compliance with all applicable laws and
regulations, pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, pay or perform other material obligations when due,
and use its commercially reasonable efforts consistent with past practices and
policies to preserve substantially intact its present business organization. In
addition, except as required or permitted by the terms of this Agreement,
without the prior written consent of the other party, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Closing, the Company shall not to do
any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or
(except as specifically provided for herein) change the period of exercisability
of options or restricted stock, or reprice options granted under any employee,
consultant, director or other stock plans or authorize cash payments in exchange
for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or
employee except pursuant to applicable law, written agreements outstanding, or
policies existing on the date hereof and as previously or concurrently disclosed
in writing or made available to the other party, or adopt any new severance
plan, or amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof;
(c) Except for the Reverse Split, Stock Bonus and the
Distribution, declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(d) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of Company, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(e) Issue, deliver, sell, authorize, pledge or otherwise
encumber, or agree to any of the foregoing with respect to, any shares of
capital stock or any securities convertible into or exchangeable for shares of
capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into or exchangeable for
shares of capital stock, or enter into other agreements or commitments of any
character obligating it to issue any such shares or convertible or exchangeable
securities;
(f) Except for the Re-incorporation and the Reverse Split, amend
its Charter Documents;
(g) Except for the Transfer Agreement, acquire or dispose or
agree to acquire or dispose by merging or consolidating with, or by purchasing
or disposing of any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
15
business organization or division thereof, or otherwise acquire or dispose or
agree to acquire or dispose any assets which are material, individually or in
the aggregate, to the business of Company, or enter into any joint ventures,
strategic partnerships or alliances or other arrangement;
(h) Incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Company, enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing;
(i) Adopt or amend any employee benefit plan, policy or
arrangement, any employee stock purchase or employee stock option plan, or enter
into any employment contract or collective bargaining agreement (other than
offer letters and letter agreements entered into in the ordinary course of
business consistent with past practice with employees who are terminable "at
will"), pay any special bonus or special remuneration to any director or
employee, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants, except in the ordinary course of business consistent with past
practices;
(j) Except as disclosed in SCHEDULE 4.1(J) hereto, pay,
discharge, settle or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), or litigation
(whether or not commenced prior to the date of this Agreement) other\ than the
payment, discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practices or in accordance with their terms;
(k) Except as required by U.S. GAAP, revalue any of its assets or
make any change in accounting methods, principles or practices;
(l) Except as set forth in SCHEDULE 4.1(L) hereto, incur or enter
into any agreement, contract or commitment requiring such party to pay in excess
of $1,000 in any 12 month period;
(m) Except for the ASAP Subsidiary, form, establish or acquire
any Subsidiary;
(n) Permit the any person to exercise any of its discretionary
rights under any Plan to provide for the automatic acceleration of any
outstanding options, the termination of any outstanding repurchase rights or the
termination of any cancellation rights issued pursuant to such plans; or
(o) Agree in writing or otherwise agree, commit or resolve to
take any of the actions described in Section 4.1 (a) through (n) above.
ARTICLE V
ADDITIONAL AGREEMENTS
16
5.1 ABSENCE OF LIABILITIES AND CONTRACTS. At or prior to Closing, the
Company shall cause the ASAP Subsidiary to assume, and to pay, perform or
discharge any debts, liabilities or obligations of the Company of any kind or
nature, whether actual, contingent or accrued, known or unknown, including, but
not limited to, obligations relating to workers' compensation, unemployment
compensation reserve accounts, employee compensation, federal, state and local
employment taxes (including any trust fund obligations for employment and income
tax withholding from employees), pension, profit sharing, vacation, insurance,
deferred compensation or other qualified or nonqualified benefit programs
(including any group health insurance plan), liabilities for violations of
environmental regulations, current or deferred taxes of any kind including those
arising from the transactions contemplated under this Agreement, trade accounts
payable, accrued expenses, claims and liabilities relating to advertising and
marketing by the Company, liabilities for negligent performance or
nonperformance of contracts and leases to which the Company is a party,
liabilities under any and all Plans (including any obligations for COBRA health
care continuation), liabilities for any severance pay, liabilities for any
Taxes, any obligations under any Stock Options, Warrants, or Convertible
Securities, obligations under the Option Plans, liabilities for noncompliance by
the Company of any laws, regulations, decrees or governmental orders (including
the violation of any bulk sales laws as a result of the closing of the
transactions contemplated hereunder), liabilities for warranty claims or
negligent performance or nonperformance arising out of services rendered or
products sold by the Company, liabilities for refunds, rebates and allowances,
and product liability, personal injury, property damage, financial loss or
warranty claims arising out of services rendered or products sold by the
Company. Furthermore, without limiting the foregoing, the Company shall cause
the ASAP Subsidiary to assume, and to pay, perform or discharge any debts,
liabilities or obligations of the Company arising out of or relating to services
rendered or products sold by the Company including, without limitation, product
or service returns or refunds of any kind.
At Closing, the Company shall pay, or cause the ASAP Subsidiary to pay,
from the proceeds of the Share Purchase Price any and all financial liabilities
and obligations of the Company or ASAP Subsidiary whether or not such
obligations are due at the time of Closing (including, without limitation, all
invoices received from vendors and suppliers and any costs incurred by the
Company or the ASAP Subsidiary in connection with the transactions contemplated
hereunder) ("CLOSING PAYMENTS").
The Company shall enter into a Transfer Agreement with the ASAP
Subsidiary within ten (10) days following the date hereof, which Transfer
Agreement shall be acceptable to Buyer. The Transfer Agreement shall be
consistent with the provisions set forth in this Section 5.1 and shall contain
appropriate indemnification provisions. The Transfer Agreement shall further
provide that all assets of the Company shall be transferred to the ASAP
Subsidiary (including the proceeds from the Share Purchase Price) subject to the
Closing Payments required under this Section 5.1.
The Company shall also take and any and all actions required to effect
the Distribution prior to or at Closing. The Transfer Agreement shall further
provide that: (i) the ASAP Subsidiary shall be responsible for the payment of
any and all taxes of any kind arsing out or with respect to the Distribution,
(ii) the ASAP Subsidiary shall be responsible for the registration of the ASAP
17
Subsidiary's shares included the Distribution under the Securities Act or the
Exchange Act, as required, prior to the time of the Distribution
("Registration"), and (iii) the ASAP Subsidiary shall be responsible for any and
all costs associated with the Registration, including attorneys' and
accountants' fees, which costs shall be paid at or prior to Closing.
5.2 COMPANY REPORTS; INCOME TAX RETURNS; S-8 PLAN. Prior to Closing,
the Company shall be responsible for filing the Form 10Q or 10K for the most
recent period ended if such Form 10Q or 10K is due on or before the Closing Date
or becomes due within 45 days following the Closing Date. Following the Closing,
Yuan agrees to cooperate with the Company, and provide any documentation
reasonably requested by the Company or its advisors, to allow the Company to
continue to file its Company Reports (or any amendments thereto) in a timely
manner, and to comply with the reporting requirements of the Exchange Act. At or
prior to Closing, the Company shall complete and file any and all U.S., state
and local income and franchise tax returns for the year ended June 30, 2004 and
all state annual reports and information statements (the "2004 RETURNS"), with
copies of the filed 2004 Returns being delivered to Buyer at or prior to
Closing. The Company shall further terminate, at or prior to Closing, the Option
Plans and any S-8 plans maintained by the Company.
5.3 RESIGNATIONS AND APPOINTMENTS OF COMPANY'S OFFICERS AND DIRECTORS.
At or prior to Closing, the Company shall deliver to Buyer resignations, in a
form and substance acceptable to Buyer, providing for the resignation of all of
the officers of the Company and all of the directors of the Company effective as
of the Closing (the "RESIGNATIONS"). At or prior to Closing, the Company shall
deliver to Buyer duly adopted resolutions, in a form and substance acceptable to
Buyer, providing for: (i) the appointment of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to serve as the
President, Treasurer and Secretary of the Company, and (ii) the appointment of
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as the sole director of the Company, each effective as of the
Closing (the "RESOLUTIONS").
5.4 UNDERTAKING BY COMPANY ACCOUNTANTS. At or prior to Closing, the
Company shall obtain, and deliver to Buyer, an undertaking from the Company's
accountants, ▇▇▇▇▇▇ & Company ("ACCOUNTANT"), in a form and substance
satisfactory to Buyer, providing that: (i) the Accountants agree to an
engagement with Company to serve as its certified public accountants following
the Closing for purposes of the Company's ongoing reporting requirements under
the Exchange Act including, without limitation, the filing of Forms 10-Q and
10-K, at the rates and charges similar to those currently being charged by
Accountant, (ii) the Accountants are duly registered with the U.S. Public
Company Accounting Oversight Board ("PCAOB"), and (iii) the Accountants shall
provide their consent to the use of their audited financial statements and
accompanying report in any regulatory filing by the Company prior to or
following the Closing ("UNDERTAKING").
5.5 OTHER ACTIONS.
(a) At least five (5) days prior to Closing, the Company shall prepare
the Form 8-K announcing the Closing, together with the Company's pro forma
financial statements giving effect to the transactions contemplated hereunder
(including the Transfer Agreement), prepared by the Company and its Accountant,
and such other information that may be required to be disclosed with respect to
the Transaction in any report or form to be filed with the SEC ("TRANSACTION
FORM 8-K"), which shall be in a form acceptable to Company and in a format
acceptable for ▇▇▇▇▇ filing. At the Closing, the Company shall file the
Transaction Form 8-K with the SEC.
18
(b) At least twenty (20) days prior to Closing, the Company shall take
any and all action: (i) to effect the Re-incorporation of the Company in the
State of Nevada, and (ii) to amend the Company's articles of incorporation to
effect the Reverse Split, with special treatment to certain stockholders of the
Company to preserve round lot stockholders and without reducing the number of
authorized shares of Common Stock, with such actions being contingent upon and
effective as of the Closing of the Transaction.
(c) Prior to Closing, in connection with the Re-incorporation and the
Reverse Split, the Company shall have also effected the change to the Company's
CUSIP number, made any required filings with, and received the approval from,
the NASD Market Regulation, and (iii) completed all matters to properly effect
the Reverse Split with the Company's Transfer Agent and with the DTC to properly
effect the Reverse Split at the beneficial owner level (collectively, the
"Corporate Matters").
(d) The Company shall prepare the proxy statement required under the
Rule 14a of the Exchange Act ("PROXY STATEMENT"), in a form acceptable to Buyer,
which shall include, without limitation, all information regarding the Company's
change in control and the various transactions contemplated hereunder. The
Company shall file the Proxy Statement with the SEC and mail the same to each of
the Company's stockholders at least twenty (20) days prior to the Closing. Prior
the Closing, the Proxy Statement shall have become final without further comment
from the SEC, and the Company shall have held the annual meeting of stockholders
to vote on the matters contained in the Proxy Statement.
(e) The Company shall be responsible for all costs associated with the
transactions contemplated hereunder including, without limitation, the
Transaction 8-K, the Re-incorporation, the Reverse Split, the Stock Bonus, the
Proxy Statement, the Distribution, and the Corporate Matters. All of such costs
shall be paid by the Company at or prior to Closing.
Company and Buyer shall further cooperate with each other and use
their respective reasonable best efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on its part under this Agreement and applicable laws to consummate the
Transaction and the other transactions contemplated hereby as soon as
practicable, including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as soon as practicable all consents, registrations, approvals, permits
and authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Transaction or any of
the other transactions contemplated hereby. Subject to applicable laws relating
to the exchange of information and the preservation of any applicable
attorney-client privilege, work-product doctrine, self-audit privilege or other
similar privilege, each of Company and Buyer shall have the right to review and
comment on in advance, and to the extent practicable each will consult the other
on, all the information relating to such party, that appear in any filing made
with, or written materials submitted to, any third party and/or any Governmental
Entity in connection with the Transaction and the other transactions
contemplated hereby. In exercising the foregoing right, each of Company and
Buyer shall act reasonably and as promptly as practicable.
19
In connection with the preparation of the Transaction Form 8-K, and the
Proxy Statement, and for such other reasonable purposes, Company and Buyer each
shall, upon request by the other, furnish the other with all information
concerning themselves, their respective directors, officers and stockholders
(including the directors of the Company to be elected effective as of the
Closing pursuant to Section 5.3 hereof) and such other matters as may be
reasonably necessary or advisable in connection with the Transaction, or any
other statement, filing, notice or application made by or on behalf of Company
and Buyer to any third party and/or any Governmental Entity in connection with
the Transaction and the other transactions contemplated hereby. Each party
warrants and represents to the other party that all such information shall be
true and correct in all material respects and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
5.6 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) Each party agrees to maintain and hold in strict confidence any
material, non-public information provided by any other party in connection with
transactions contemplated hereunder.
(b) Company shall afford Buyer and its financial advisors,
accountants, counsel and other representatives reasonable access during normal
business hours, upon reasonable notice, to the properties, books, records and
personnel of Company and its Subsidiaries during the period prior to the Closing
to obtain all information concerning the business, including financial
condition, properties, results of operations and personnel of Company and its
Subsidiaries, as Buyer may reasonably request. No information or knowledge
obtained by Buyer in any investigation pursuant to this Section 5.6 will affect
or be deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Transaction.
5.7 NO SOLICITATION. Other than with respect to the Transaction, the
Company, Yuan and Buyer agree that they shall not, and shall direct and use
their reasonable best efforts to cause their agents and other representatives
(including any investment banker, attorney or accountant retained by it or any
of its Subsidiaries) not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any proposal or
offer relating to a "going public" or reverse merger transaction, the sale,
issuance or transfer of any shares of the Company's Common Stock whether by
sale, merger, share exchange or otherwise, or any recapitalization of the
Company.
20
5.8 PUBLIC DISCLOSURE. Buyer and Company will consult with each other
and agree in writing before issuing any press release or otherwise making any
public statement with respect to the Transaction or this Agreement and will not
issue any such press release or make any such public statement prior to such
consultation. Upon the execution of this Agreement, the Company will file a
Current Report on Form 8-K announcing the execution of this Agreement, which
Form 8-K shall be acceptable to Buyer.
5.9 BUSINESS RECORDS. At Closing, Company shall deliver to Buyer all
records and documents relating to the Company, wherever located, including,
without limitation, books, records, supplier and customer lists and files,
government filings, the Returns, consent decrees, orders, and correspondence,
financial information and records, electronic files containing any financial
information and records, and other documents used in or associated with the
Company, but specifically excluding all records related to the sales and
operations of the business transferred to ASAP Subsidiary under the Transfer
Agreement ("BUSINESS RECORDS").
5.10 OWNERSHIP RECORDS; TRANSFER AGENT UNDERTAKING. At Closing, the
Company shall deliver to Buyer; (i) a full and complete listing of all
stockholders of the Company, dated within three (3) business days prior to
Closing, from the Transfer Agent showing the name, address and stock ownership
of each stockholder, and (ii) a full and complete list of all holders of Company
Preferred Stock, Company Stock Options, Company Warrants and Convertible
Securities, dated within three (3) business days prior to Closing, showing the
name, address and ownership of each holder and, as applicable, the exercise or
conversion price and expiration date (collectively, the "OWNERSHIP RECORDS"). At
or prior to Closing, the Company shall obtain, and deliver to Buyer, an
undertaking from the Transfer Agent, in a form and substance satisfactory to
Buyer, stating the amount of any and all fees and charges owed to Transfer Agent
by Company for services rendered prior to Closing ("TRANSFER AGENT
UNDERTAKING").
Article VI
CONDITIONS TO THE TRANSACTION
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE TRANSACTION.
The respective obligations of each party to this Agreement to effect
the Transaction shall be subject to the satisfaction at or prior to the Closing
Date of the following conditions:
(a) NO ORDER.
No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and which has the effect of making the Transaction illegal or
otherwise prohibiting consummation of the Transaction, substantially on the
terms contemplated by this Agreement. All waiting periods, if any, under any law
in any jurisdiction in which the Company or Buyer has material operations
relating to the transactions contemplated hereby will have expired or
terminated.
(b) PROXY STATEMENT; APPROVAL BY COMPANY STOCKHOLDERS. At least
twenty (20) days prior to Closing, the Company shall have filed the Proxy
21
Statement with the SEC and shall have mailed the same to each of the
stockholders of Company, and the Company shall have otherwise compiled with all
of the provisions under Rule 14a under the Exchange Act. The Proxy Statement
shall have become final without further comment from the SEC, and the Company
shall have held the annual meeting of stockholders to vote on the matters
contained in the Proxy Statement, and all such matters presented to the
stockholders have been duly approved by the majority of the shares of the
Company' Common Stock issued and outstanding.
(c) RE-INCORPORATION; REVERSE SPLIT; CORPORATE MATTERS; STOCK BONUS;
DISTRIBUTION. The Re-incorporation, Reverse Split, the Corporate Matters, the
Stock Bonus and the Distribution shall have been duly authorized and approved by
the Company's directors and stockholders and have been fully executed,
implemented and completed. Company shall have delivered to Buyer certificates of
incorporation, certificates of amendment, certificates of merger, certificates
of good status, tax clearance certificates and such other documents evidencing
the actions set forth in this Section 6.1(c).
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of
the Company to consummate and effect the Transaction shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES.
Each representation and warranty of Buyer contained in this
Agreement (i) shall have been true and correct as of the date of this Agreement
and (ii) shall be true and correct on and as of the Closing Date with the same
force and effect as if made on the Closing Date. Company shall have received a
certificate with respect to the foregoing signed on behalf of Buyer by an
authorized manager of Buyer ("BUYER CLOSING CERTIFICATE").
(b) AGREEMENTS AND COVENANTS. Buyer shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date, except to the extent that any failure to perform or comply (other than a
willful failure to perform or comply or failure to perform or comply with an
agreement or covenant reasonably within the control of Buyer) does not, or will
not, constitute a Material Adverse Effect with respect to Buyer taken as a
whole, and the Company shall have received Buyer Closing Certificate to such
effect.
(c) OTHER DELIVERIES. At or prior to Closing, Buyer shall have
delivered: (i) the Share Purchase Price to Escrow Agent, (ii) copies of
resolutions and actions taken Buyer's board of managers in connection with the
approval of this Agreement and the transactions contemplated hereunder, and
(iii) such other documents or certificates as shall reasonably be required by
Company and its counsel in order to consummate the transactions contemplated
hereunder.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligations
of Buyer to consummate and effect the Transaction shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Buyer:
22
(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
the Company contained in this Agreement (i) shall have been true and correct as
of the date of this Agreement and (ii) shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of the
Closing. Buyer shall have received a certificate with respect to the foregoing
signed on behalf of the Company with respect to the warranties and
representations made by Company under this Agreement ("CLOSING CERTIFICATE")
(b) AGREEMENTS AND COVENANTS. Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by Company at or prior to the Closing
Date except to the extent that any failure to perform or comply (other than a
willful failure to perform or comply or failure to perform or comply with an
agreement or covenant reasonably within the control of Company) does not, or
will not, constitute a Material Adverse Effect on Company, and Buyer shall have
received the Closing Certificate to such effect.
(c) ABSENCE OF LIABILITIES; RELEASE AGREEMENT; CLOSING PAYMENTS;
REGISTRATION. The Company and ASAP Subsidiary have executed and delivered to
Buyer the Transfer Agreement and shall have satisfied the requirements of
Section 5.1 hereof. The Company, ASAP Subsidiary and Yuan have executed and
delivered to Buyer the Indemnity Agreement. The Closing Payments required under
Section 5.1 hereof shall have been paid in full. The ASAP Subsidiary shall have
completed the Registrations to the satisfaction of Buyer.
(d) MATERIAL ADVERSE EFFECT. No Material Adverse Effect with respect to
Company shall have occurred since the date of this Agreement.
(f) UNDERTAKING BY ACCOUNTANT. Company shall have delivered to Buyer
the Undertaking by Accountant, in a form satisfactory to Buyer.
(g) STOCK RECORDS; OWNERSHIP RECORDS; TRANSFER AGENT UNDERTAKING.
Company shall have delivered to Buyer the Stock Records, Ownership Records and
Transfer Agent Undertaking (including all electronic files related thereto), in
a form satisfactory to Buyer.
(h) RESIGNATIONS AND RESOLUTIONS. The Company shall have delivered to
Buyer the Resignations and Resolutions, in a form satisfactory to Buyer.
(i) SEC COMPLIANCE; OTC BB QUOTATION; COMPANY REPORTS; 2004 TAX
RETURNS. Immediately prior to Closing, Company shall be in compliance with, and
current in, the reporting and filing requirements under the Exchange Act and
shall be quoted on the OTC BB. The Company shall have complied with the
requirements of Section 5.2 hereof.
(j) DUE DILIGENCE. Buyer shall have completed its due diligence
investigation and review of the Company, and the results of such investigation
and review are satisfactory to the Buyer in its sole discretion.
(k) OTHER DELIVERIES. At Closing, Company shall have delivered to
Buyer: (i) the duly executed direction letter to the Transfer Agent as
23
contemplated by Section 1.4 hereof, (ii) the Company's Charter Documents, (iv)
Company's Corporate Records and Business Records (including all electronic files
and programs related thereto), (v) the Transaction Form 8-K, all in a form
acceptable to Buyer, and (vi) such other documents or certificates as shall
reasonably be required by Buyer and its counsel in order to consummate the
transactions contemplated hereunder.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 SURVIVAL. All representations, warranties, agreements and covenants
contained in or made pursuant to this Agreement, or any Exhibit or Schedule
hereto or thereto or any certificate delivered at the Closing, shall survive
(and not be affected by) the Closing, but all claims made by virtue of such
representations, warranties, agreements and covenants shall be made under, and
subject to the limitations set forth in this Article VII.
7.2 INDEMNIFICATION BY YUAN. Yuan hereby indemnifies and holds
harmless, and agrees to indemnify and hold harmless, Company and Buyer (from and
after the Closing), and Buyer's directors, officers, shareholders, managers,
members, employees and agents (collectively, the "BUYER INDEMNIFIED PARTIES")
against (i) any and all liabilities, obligations, losses, damages, claims,
actions, Liens and deficiencies which exist, or which may be imposed on,
incurred by or asserted against any one or more of the Buyer Indemnified
Parties, (1) based upon, resulting from or arising out of, or as to which there
was, any breach or inaccuracy of any representation or warranty by Company under
this Agreement, or any statement, agreement or covenant made by Company or Yuan
in or pursuant to this Agreement, including the Indemnity Agreement, or (2)
based upon, resulting from or arising out of any present or future claim,
action, suit or proceeding brought or asserted against any Buyer Indemnified
Party by or on behalf of any person who, at any time prior to the Closing, had
or purports to have had any interest in the Company's Common Stock, or by any
Person in connection with the Stock Bonus, and (ii) any cost or expense
(including reasonable attorneys' fees and court costs) incurred by the Buyer
Indemnified Parties or any of them in connection with the foregoing (including,
without limitation, any cost or expense incurred by the Buyer Indemnified
Parties in enforcing their rights pursuant to this Section 7.2). No demand or
claim for indemnification under this Section 7.2 may be made after 11:59 p.m.,
Denver time, on the date one (1) year following the Closing Date.
Article VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Buyer and Company;
24
(b) by either Buyer or Company if the Proxy Statement shall not have
been approved by the SEC by December 30, 2004 or the Transaction shall not have
been consummated by January 15, 2004 for any reason; provided, however, that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Transaction to occur on or before such date
and such action or failure to act constitutes a breach of this Agreement; or
(c) by either Buyer or the Company if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Transaction, which order, decree, ruling or other action is final and
nonappealable.
8.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of
this Agreement under Section 8.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 8.1,
this Agreement shall be of no further force or effect and the Transaction shall
be abandoned, except (i) as set forth in this Section 8.2, Section 8.3 and
Article IX (General Provisions), each of which shall survive the termination of
this Agreement, and (ii) nothing herein shall relieve any party from liability
for any intentional or willful breach of this Agreement.
8.3 FEES AND EXPENSES. All fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses whether or not the Transaction are
consummated. Without limiting the foregoing sentence, the Company shall be
responsible for all costs associated with the Transaction 8-K, the
Re-incorporation, the Reverse Split, the Stock Bonus, the Proxy Statement, the
Distribution, and the Corporate Matters.
8.4 AMENDMENT. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
Buyer and the Company.
8.5 EXTENSION; WAIVER. At any time prior to the Closing, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
25
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or sent via telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy numbers for
a party as shall be specified by like notice):
(a) if to Buyer, to:
▇▇▇▇▇▇▇ Reverse Merger Fund, LLC
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
(b) if to Company or Yuan, to:
Cyber Merchant Exchange, Inc.
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Chairman and CEO
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇ ▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
with a copy to:
The ▇▇▇▇ Law Group
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ fax
9.2 INTERPRETATION.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect Subsidiaries of such entity.
Reference to the Subsidiaries of an entity shall be deemed to include all direct
and indirect Subsidiaries of such entity.
26
(b) For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect, individually or when aggregated
with other changes, events, violations, inaccuracies, circumstances or effects,
that is materially adverse to the business, assets (including intangible
assets), revenues, financial condition or results of operations of such entity
and its Subsidiaries, if any, taken as a whole (it being understood that neither
of the following alone or in combination shall be deemed, in and of itself, to
constitute a Material Adverse Effect: (a) changes attributable to the public
announcement or pendency of the transactions contemplated hereby, (b) changes in
general national or regional economic conditions or (c) changes affecting the
industry generally in which Company or Buyer operates).
(c) For purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(b) For purposes of this Agreement, all monetary amounts set forth
herein are referenced in United States dollars, unless otherwise noted.
9.3 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.
9.4 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES.
This Agreement and the documents and instruments and other agreements
among the parties hereto as contemplated by or referred to herein, including the
Schedules hereto (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Escrow Agreement shall
continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder (except as specifically provided in this
Agreement).
9.5 SEVERABILITY.
In the event that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
9.6 OTHER REMEDIES; SPECIFIC PERFORMANCE.
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will
27
not preclude the exercise of any other remedy. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, USA, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the first sentence of this Section 9.9, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
9.10 ARBITRATION. Any disputes or claims arising under or in connection
with this Agreement or the transactions contemplated hereunder shall be resolved
by binding arbitration. Notice of a demand to arbitrate a dispute by either
party shall be given in writing to the other at their last known address.
Arbitration shall be commenced by the filing by a party of an arbitration demand
with the American Arbitration Association ("AAA") in its office in Denver,
Colorado USA. The arbitration and resolution of the dispute shall be resolved by
a single arbitrator appointed by the AAA pursuant to AAA rules. The arbitration
shall in all respects be governed and conducted by applicable AAA rules, and any
award and/or decision shall be conclusive and binding on the parties. The
arbitration shall be conducted in Denver, Colorado. The arbitrator shall supply
a written opinion supporting any award, and judgment may be entered on the award
in any court of competent jurisdiction. Each party shall pay its own fees and
expenses for the arbitration, except that any costs and charges imposed by the
AAA and any fees of the arbitrator for his services shall be assessed against
the losing party by the arbitrator. In the event that preliminary or permanent
injunctive relief is necessary or desirable in order to prevent a party from
acting contrary to this Agreement or to prevent irreparable harm prior to a
confirmation of an arbitration award, then either party is authorized and
entitled to commence a lawsuit solely to obtain equitable relief against the
other pending the completion of the arbitration in a court having jurisdiction
over the parties. All rights and remedies of the parties shall be cumulative and
in addition to any other rights and remedies obtainable from arbitration.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
▇▇▇▇▇▇▇ REVERSE MERGER FUND, LLC
By:
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Manager
CYBER MERCHANTS EXCHANGE, INC.
By:
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman and CEO
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Individually
29
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT A - INDEMNITY AGREEMENT
EXHIBIT B - ESCROW AGREEMENT
SCHEDULES
COMPANY DISCLOSURE SCHEDULES
30
EXHIBIT A
INDEMNITY AGREEMENT
This Indemnity Agreement (the "Agreement") is entered into and dated
effective as of November __, 2004 (the "Effective Date") by and among ▇▇▇▇▇▇▇
Reverse Merger Fund, LLC, a Delaware limited liability company (the "Buyer"),
Cyber Merchants Exchange, Inc., a California corporation (the "Company"), ▇▇▇▇▇
▇. ▇▇▇▇, an adult resident of the State of California ("Yuan"), and ASAP Show,
Inc., a Nevada corporation ("ASAP").
RECITALS
A. Company and Yuan desire to settle any and all obligations and claims
with respect to any debt and/or obligations of the Company owed to Yuan
including, without limitation, any obligations of the Company with respect to
Yuan's employment by the Company or his membership on the Company's board of
directors ("Yuan Obligations").
B. Pursuant to a certain securities purchase agreement ("Purchase
Agreement") dated November 19, 2004 by and among the Company, Yuan and Buyer,
ASAP shall pursuant to a certain asset and liability transfer agreement
("Transfer Agreement") assume, and pay, perform or discharge any debts,
liabilities or obligations of the Company of any kind or nature, whether actual,
contingent or accrued, known or unknown ("Company Liabilities").
C. Company does not have any available funds to pay the Debt or the
Company Liabilities.
D. Pursuant to the Purchase Agreement, Buyer has agreed to purchase
common stock of the Company for $425,000 ("Purchase Price"), which Purchase
Price will be used to satisfy in part the Company Liabilities.
E. The execution and delivery of this Agreement is one condition of,
and an inducement to, the Buyer to enter into the Purchase Agreement and close
the transaction contemplated under the Purchase Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the above recitals, the following
representations, warranties, covenants and conditions, and other good and
valuable consideration, the receipt of which is acknowledged, the parties agree
as follows:
1. WAIVER AND RELEASE OF YUAN OBLIGATIONS. Yuan for himself and on
behalf of all his spouse and family members hereby waives, and forever releases
and discharges the Company from, any and all liabilities or obligations with
respect to the Yuan Obligations including, without limitation, any interest,
charges, penalties or other charges arising under or related to the Yuan
Obligations.
2. ASSUMPTION OF OTHER LIABILITIES BY YUAN AND ASAP. Upon the closing
of the Purchase Agreement, as part of its settlement with Company, and at no
additional cost to Company, Yuan and ASAP agree to pay, assume, satisfy or
otherwise discharge the Company Liabilities. Yuan and ASAP, jointly and
severally, agree to indemnify and hold Company and Buyer harmless from and
against any and all claims, expenses, losses, damages, actions or liabilities
(including reasonable attorneys' fees) incurred by Company or Buyer ("DAMAGES")
relating to or arising out: (i) the Company Liabilities, or (ii) any other
liabilities, obligations or debts of Company arising out of or related to the
period prior to the closing of the Purchase Agreement or arising out of any of
the transactions contemplated under the Purchase Agreement (collectively, the
"IDENTIFIABLE CLAIMS").
The parties hereto hereby acknowledge and agree that the Indemnity
Escrow established under the Purchase Agreement shall also be available to
satisfy any indemnification claims that Company or Buyer may assert against Yuan
or ASAP pursuant to this Agreement.
If at any time Company or Buyer determines to assert a right to
indemnification under this Section 2, Company or Buyer shall give to ASAP and
Yuan written notice describing the matter for which indemnification is sought in
reasonable detail. In the event that a demand or claim for indemnification is
made hereunder with respect to a matter the amount or extent of which is not yet
known or certain, the notice of demand for indemnification shall so state, and,
where practicable, shall include an estimate of the amount of the matter. The
failure of Company or Buyer to give notice of any matter to ASAP or Yuan shall
not relieve ASAP or Yuan of any liability which ASAP or Yuan may have to Company
or Buyer. Within 10 days after receipt of the notice referred to above, ASAP or
Yuan shall (i) acknowledge in writing its responsibility for all or part of such
matter, and shall pay or otherwise satisfy the portion of such matter as to
which responsibility is acknowledged or take such other action as is reasonably
satisfactory to Company or Buyer to resolve any such matter that involves anyone
not a party hereto, or (ii) give written notice to Company or Buyer of its
intention to dispute or contest all or part of such responsibility. Upon
delivery of such notice of intention to contest, the parties shall negotiate in
good faith to resolve as promptly as possible any dispute as to responsibility
for, or the amount of, any such matter. If such dispute is not resolved within
10 days, such dispute shall be submitted to arbitration as provided under
Section 7(i) hereof. ASAP and Yuan shall have the authority and right to satisfy
such Indemnifiable Claims, without notice or cost to Company or Buyer, and
Company and Buyer shall reasonably cooperate with ASAP and Yuan as necessary to
dispute and defend against any indemnification claim as determined by ASAP and
Yuan, at ASAP's and Yuan's expense, and Company and Buyer shall supply any
necessary confirmation or available documentation as related to the defense of
any indemnification claim involving a third party. In the event ASAP and Yuan
fail to pay an indemnification claim for which ASAP and Yuan accept
responsibility or for which ASAP and Yuan are determined to be responsible, the
Indemnity
2
Escrow shall be used to pay such claim, and the Escrow Agent (as defined in the
Purchase Agreement) shall disburse such monies from the Indemnity Escrow to
satisfy said claims in accordance with this Section 2 and the Escrow Agreement.
On one hundred eightieth (180th) day following the closing of the Purchase
Agreement, any remaining monies in the Indemnity Escrow shall be promptly
disbursed by Escrow Agent, provided, however, no monies shall be disbursed
unless and until all indemnification claims for which notice had previously been
provided in accordance with this Section 2 are resolved.
3. RELEASE OF ALL CLAIMS. Upon the closing of the Purchase Agreement,
and the execution and delivery of this Agreement, Yuan and ASAP, for themselves
and each of their respective successors and assigns, hereby forever release
Company and Buyer, and each of their respective successors and assigns, and
their respective past and present officers and directors, employees,
shareholders, members, consultants, attorneys, accountants, other professional,
insurers, agents and all other related entities, including, but not limited to,
assigns, predecessors, successors, controlling corporations, subsidiaries or
other affiliates (jointly, the "RELATED PARTIES") from any and all claims,
demands, and causes of action of every kind and nature, including, without
limitation, those relating to or arising out of the Yuan Obligations, and any
federal, state or local laws, and common law; provided, however, that nothing
contained herein shall be construed to limit in anyway the rights of either
party, and their successors and assigns, to enforce the terms of this Agreement,
the Transfer Agreement and the Purchase Agreement. Yuan and ASAP irrevocably
agree to refrain from directly or indirectly asserting any claim or demand or
commencing (or causing to be commenced) any suit, action, or proceeding of any
kind, in any court or before any tribunal, against the Company or Buyer and
their Related Parties based upon any released claim.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company represents and
warrants to ASAP and Yuan that: (i) on the date of this Agreement, Company has
all necessary authority to execute this Agreement; (ii) there is no claim,
action, suit or other proceeding pending, threatened or known, which, if decided
adversely, would interfere with the consummation of the transaction contemplated
hereby; (iii) no approval or consent of any governmental authority or third
party is required for Company to enter into or perform this Agreement; and (iv)
this Agreement is enforceable in accordance with their terms, subject to the
laws of insolvency and general principles of equity.
5. REPRESENTATIONS AND WARRANTIES OF ASAP AND YUAN. ASAP and Yuan
represent to Company and Buyer that: (i) on the date of this Agreement, ASAP and
Yuan have all necessary authority to execute this Agreement; (ii) there is no
claim, action, suit or other proceeding pending, threatened or known against
ASAP and Yuan, which, if decided adversely, would interfere with the
consummation of the transaction contemplated hereby; (iii) no approval or
consent of any governmental authority or third party is required for ASAP and
Yuan to enter into or perform this Agreement; and (iv) this Agreement is
enforceable against ASAP and Yuan in accordance with its terms, subject to the
laws of insolvency and general principles of equity.
3
6. DELIVERY AND COOPERATION. If either party requires any further
documentation, the other party will promptly respond to any reasonable requests
for additional documentation.
7. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns.
(b) SURVIVAL OF COVENANTS AND REPRESENTATIONS. All agreements,
covenants, representations and warranties made by the parties herein shall
survive the delivery of this Agreement, and the closing of the Purchase
Agreement and the transactions thereunder.
(c) SEVERABILITY. Should any part of this Agreement for any reason
be declared invalid or unenforceable, such decision will not affect the validity
or enforceability of any remaining portion, which remaining portion will remain
in force and effect as if this Agreement had been executed with the invalid
portion thereof eliminated, and it is hereby declared as the intention of the
parties hereto that the parties would have executed the remaining portion of
this Agreement without including therein any such part or portion which may, for
any reason, be hereafter declared invalid or unenforceable.
(d) GOVERNING LAW AND VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, without
reference to choice of law principles.
(e) CAPTIONS. The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
(f) CONFLICT. In the event of any conflict between this Agreement
and the Purchase Agreement, the terms of this Agreement shall prevail and
control.
(g) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto concerning the subject matter contained
herein, and supersedes all prior agreements or understanding of the parties. No
provision of this Agreement may be waived or amended except in a writing signed
by both parties. A waiver or amendment of any term or provision of this
Agreement shall not be construed as a waiver or amendment of any other term or
provision.
(h) COUNTERPARTS. This Agreement may be executed by facsimile
signatures and in multiple counterparts, each of which shall be deemed an
original. It shall not be necessary that each party executes each counterpart,
or that any one counterpart be executed by more than one party so long as each
party executes at least one counterpart.
4
(i) ARBITRATION. All disputes, controversies or claims ("DISPUTES")
arising out of or relating to this Agreement shall in the first instance be the
subject of a meeting between a representative of each party who has
decision-making authority with respect to the matter in question. Should the
meeting either not take place or not result in a resolution of the Dispute
within twenty (20) business days following notice of the Dispute to the other
party, then the Dispute shall be resolved in a binding arbitration proceeding to
be held in Denver, Colorado in accordance with the international rules of the
American Arbitration Association. The arbitrators may award attorneys' fees and
other related arbitration expenses, as well as pre- and post-judgment interest
on any award of damages, to the prevailing party, in their sole discretion. The
parties agree that a panel of three arbitrators shall be required, all of whom
shall be fluent in the English language, and that the arbitration proceeding
shall be conducted entirely in the English language. Any award of the
arbitrators shall be deemed confidential information for a minimum period of
five years.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
▇▇▇▇▇▇▇ REVERSE MERGER FUND, LLC
By:
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
CYBER MERCHANTS EXCHANGE, INC.
By:
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Chairman and CEO
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Individually
ASAP SHOW, INC.
By:
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Chairman and CEO
5
EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT, dated this ____ day of November, 2004 (this
"Agreement"), by and among ▇▇▇▇▇▇▇ Reverse Merger Fund, LLC, a Delaware limited
liability company ("Buyer"), Cyber Merchants Exchange, Inc., a California
corporation (the "Company"), ▇▇▇▇▇ ▇. ▇▇▇▇, an adult resident of the State of
California ("Yuan"), and ▇▇▇▇▇▇▇▇ ▇▇▇▇, Esq. ("▇▇▇▇"), attorney at law, solely
in her capacity as escrow agent and not in any other capacity. ▇▇▇▇ is referred
to herein in her capacity as escrow agent as the "Escrow Agent" and this
Agreement and the Purchase Agreement (hereinafter defined) are sometimes
together referred to herein as the "Agreements."
WITNESSETH
WHEREAS, in accordance with the terms and conditions of that
certain securities purchase agreement, dated November 19, 2004 (the "Purchase
Agreement"), by and among Buyer, Company and Yuan, the parties hereto enter into
this Agreement (unless otherwise indicated, each capitalized term used herein
shall have the meaning ascribed to such term in the Purchase Agreement);
WHEREAS, pursuant to the terms and conditions of the Purchase
Agreement, (i) at or prior to the Closing, Buyer shall deliver or cause to be
delivered to the Escrow Agent for deposit into an escrow account to be
established pursuant to the terms of this Agreement (the "Escrow"), the Share
Purchase Price, (ii) the Escrow Agent shall retain in Escrow following the
Closing the Indemnity Escrow in accordance with the terms of the Purchase
Agreement and this Agreement.
WHEREAS, the parties to this Agreement desire to set forth the
manner in which the Escrow is to be held and the terms and conditions by which
such Escrow shall be distributed and the Escrow shall terminate;
NOW, THEREFORE, in consideration of the foregoing premises and
of the mutual covenants and agreements set forth herein, the legal sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. APPOINTMENT OF ESCROW AGENT . Buyer, Company and Yuan hereby
irrevocably designate and appoint the Escrow Agent as their escrow agent for the
purposes set forth herein, and the Escrow Agent by its execution and delivery of
this Agreement hereby accepts such appointment under the terms and conditions
set forth herein.
2. ESTABLISHMENT OF ESCROW FUND AND ESCROW ACCOUNT.
2.1 INITIAL DEPOSIT AND ESCROW ACCOUNT. This Agreement contemplates
that Buyer deliver to the Escrow Agent cash in immediately available funds in an
aggregate amount equal to the Share Purchase, on or before the Closing, all as
shall be specified in the Purchase Agreement
(the "Deposit"). The Escrow Agent agrees to hold and administer the Deposit in
her COLTAF trust account (the "ESCROW FUND"); the interest on which account is
paid to support legal services for indigents in Colorado under guidelines
adopted by the Colorado Supreme Court.
2.2 PURPOSE OF ESCROW FUND. The Escrow Fund shall be available solely
for the purposes set forth in the Agreements and the Interested Parties hereby
agree to modify and amend this Agreement, as appropriate, contemporaneously with
the execution and delivery of the Purchase Agreement so that the specific
provisions for the handling of the Deposit shall be consistent under the terms
and conditions of both Agreements.
2.3 CLOSING DOCUMENTS. If desired by the parties, the Escrow Agent will
accept delivery of, and will hold until the Closing, any and all documents to be
delivered at the Closing by any of the Interested Parties pursuant to the
Purchase Agreement ("Closing Documents").
3. RELEASE OF ESCROW FUND. The Escrow Agent will disburse and pay over
the Deposit and the Closing Documents as follows:
3.1 HANDLING OF DEPOSIT AND CLOSING DOCUMENTS. On the date of the
Closing, contemporaneously with the consummation of the Transaction, the Escrow
Agent will disburse the Deposit received pursuant to Section 2.1 hereof to the
Company, subject to the Indemnity Escrow, as appropriate, only in accordance
with written instructions executed by Company, Yuan and Buyer and received by
the Escrow Agent at least two (2) Business Days (as defined in Section 3.4
below) prior to the Closing and will deliver the Closing Documents (if any)
delivered to her pursuant to Section 2.3 hereof to the Company and Buyer, as
appropriate, only in accordance with written directions executed by Company,
Yuan and Buyer and received by the Escrow Agent at least two (2) Business Days
prior to the Closing. The Indemnity Escrow shall be held by Escrow Agent in
accordance with the provisions of the Purchase Agreement and shall be disbursed
only in accordance with written instructions executed by Company, Yuan and Buyer
and received by the Escrow Agent at least two (2) Business Days (as defined in
Section 4.4 below) prior to the disbursement date.
3.2 COMPANY DEMAND FOR PAYMENT. At any time, Company may deliver to the
Escrow Agent and Buyer and Yuan a written notice ("Company Escrow Fund Demand")
that states that the Company is entitled to the Deposit held in the Escrow Fund
and requests that the Escrow Agent disburse the Deposit held in the Escrow Fund
to Company. Each Company Escrow Fund Demand will be accompanied by evidence that
a copy thereof has been delivered to Buyer and Yuan. The Escrow Agent shall
deliver a copy of the Company Escrow Fund Demand to Buyer and Yuan promptly.
3.3 BUYER DEMAND FOR PAYMENT. At any time, Buyer may deliver to the
Escrow Agent and Company and Yuan a written notice ("Buyer Escrow Fund Demand")
that states that Buyer is entitled to the Deposit held in the Escrow Fund hereof
and requests that the Escrow Agent disburse the Deposit held in the Escrow Fund
to Buyer. Each Buyer Escrow Fund Demand will be accompanied by evidence that a
copy thereof has been delivered to Company and Yuan. The Escrow Agent shall
deliver a copy of the Buyer Escrow Demand to Company and Yuan promptly.
2
3.4 DISPUTE NOTICE. After receiving a copy of a Company Escrow Fund
Demand or a Buyer Escrow Fund Demand (in either case, an "Escrow Fund Demand"),
Buyer (in the case of a Company Escrow Fund Demand) or Company (in the case of a
Buyer Escrow Fund Demand) (in either case, "Challenger") may challenge the
propriety under this Agreement and the Purchase Agreement of the requested
disbursement of the Deposit or Closing Documents, as the case may be, held in
the Escrow Fund by delivering to the Escrow Agent and Company (in the case of a
Company Escrow Fund Demand) or Buyer (in the case of a Buyer Escrow Fund Demand)
(in either case, "Requestor") a written notice setting forth the grounds for
such challenge ("ESCROW Fund Dispute Notice"). If the Escrow Agent receives an
Escrow Fund Dispute Notice in response to any Escrow Fund Demand, then the
Escrow Agent will not make the requested disbursement unless and until (i) the
Escrow Agent has received written instructions in respect of such disbursement
from the Requestor and the Challenger, acting jointly, or (ii) Requestor or
Challenger delivers to Escrow Agent a copy of an order of a court of competent
jurisdiction providing for the disbursement of the Deposit or Closing Documents,
as the case may be, held in the Escrow Fund ("COURT ORDER"), together with an
opinion, satisfactory in form, scope and substance to the Escrow Agent, of
counsel satisfactory to the Escrow Agent, stating that, in the unqualified
opinion of such counsel, such order is not subject to appeal, or that the appeal
period with respect to such order has elapsed and no appeal has been taken,
together with evidence reasonably satisfactory to the Escrow Agent that a copy
of the Court Order has been delivered to the other of them, in which case the
Escrow Agent shall disburse the Deposit or Closing Documents, as the case may
be, held in the Escrow Fund in accordance with the Court Order on the tenth
(10th) Business Day following the Escrow Agent's receipt of the Court Order. For
purposes of this Agreement, the term "BUSINESS DAY" shall mean any day other
than a day on which banks in the State of Colorado are closed.
3.5 DISBURSEMENT WITHOUT DISPUTE. On the tenth (10th) Business Day
after she receives an Escrow Fund Demand, the Escrow Agent will make the
requested disbursement of the Deposit or Closing Documents, as the case may be,
held in the Escrow Fund to the Requestor, in accordance with the Escrow Fund
Demand, unless, prior to the tenth (10th) Business Day, the Escrow Agent has
received an Escrow Fund Dispute Notice (in which event, Section 3.4 will govern
the resolution of such dispute and any related disposition of the Deposit or
Closing Documents, as the case may be, held in the Escrow Fund).
3.6 ESCROW AGENT COMPENSATION. The Escrow Agent shall be entitled to
receive compensation for her services as Escrow Agent hereunder in accordance
with the Fee Schedule attached hereto. Buyer and Company shall each pay fifty
percent (50%) of such compensation at the Closing. If all compensation due the
Escrow Agent as provided in the Fee Schedule, including the annual fee,
reimbursement for out-of-pocket expenses and fees for extraordinary services,
has not been paid prior to Closing, the Escrow Agent shall withhold the amount
due her from any amounts on deposit in the Escrow Account and the Buyer or the
Company, as appropriate, shall reimburse the other such that all compensation
paid to the Escrow Agent is shared equally between them.
3.7 NO LIABILITY. In taking any action hereunder, the Escrow Agent
shall in no event be liable for any act performed or omitted to be performed by
her hereunder in the absence of gross negligence, willful misconduct or bad
faith in breach of the terms of this Agreement; and she shall be under no
obligation to institute or defend any action, suit or legal proceeding in
3
connection herewith or take any other action likely to involve her unless she is
first indemnified to her satisfaction by the party or parties that desire her to
take such action. In case any claim or litigation is brought against the Escrow
Agent in respect of which indemnity may be sought hereunder, Escrow Agent shall
give prompt notice of that claim or litigation to the parties and the parties,
upon receipt of that notice, shall have the obligation and the right to assume
the defense of such claim or litigation; provided that failure of Escrow Agent
to give the notice shall not relieve the parties from any of their obligations
to indemnify Escrow Agent unless that failure prejudices the defense of any of
such litigation by said parties. Escrow Agent may employ separate counsel and
participate in the defense.
3.8 ACCEPTANCE OF APPOINTMENT. The Escrow Agent hereby accepts her
appointment and agrees to act as Escrow Agent under the terms and conditions of
this Agreement.
3.9 RESIGNATION. The Escrow Agent (or any successor) may at any time
during the term hereof resign her position hereunder by giving 30 days' prior
written notice of her intention to resign to Buyer and Company. Such resignation
shall be effective upon the appointment of a successor escrow agent reasonably
acceptable to Buyer and Company who shall have agreed to serve in accordance
with the terms hereof. The Escrow Agent may be removed by the joint action of
Buyer and Company, with or without cause, at any time upon 30 days' prior
written notice to the Escrow Agent, which notice may be waived by Escrow Agent.
Notwithstanding any resignation or removal of the Escrow Agent pursuant to this
Section 3.9, Escrow Agent shall continue to serve in her capacity as escrow
agent until (i) a successor escrow agent is appointed and has accepted such
appointment and (ii) the Escrow Fund has been transferred to and received by
such successor escrow agent. Buyer and Company shall promptly take the necessary
action to appoint a successor escrow agent in accordance with Section 3.10
below.
3.10 APPOINTMENT OF SUCCESSOR ESCROW AGENT. If at any time the Escrow
Agent shall resign, be removed or otherwise become incapable of acting as escrow
agent pursuant to this Agreement, or if at any time a vacancy shall occur in the
office of the Escrow Agent for any other cause, a successor escrow agent that is
mutually acceptable to Buyer and Company shall be appointed by the Interested
Parties by a written instrument delivered to the successor escrow agent. If no
successor escrow agent has been appointed at the effective date of resignation
or removal of the Escrow Agent or within 30 days after the time the Escrow Agent
becomes incapable of acting or a vacancy occurs in the office of escrow agent,
any party hereto may petition a court of competent jurisdiction for an
appointment of a successor escrow agent. Upon the appointment and acceptance of
any successor escrow agent hereunder, the Escrow Agent shall transfer the Escrow
Fund to her successor. Upon receipt by the successor escrow agent of the Escrow
Fund, the Escrow Agent shall be discharged from any continuing duties or
obligations under this Agreement, but such discharge shall not relieve the
Escrow Agent from any liability incurred prior to such event, and the successor
escrow agent shall be vested with all rights, powers, duties and obligations of
the Escrow Agent under this Agreement.
3.11 LIABILITY.
(a) Each Interested Party acknowledges and agrees that the
Escrow Agent (i) shall not be responsible for the Purchase Agreement,
or for determining or compelling compliance therewith, and shall not
otherwise be bound thereby,
4
(ii) shall be obligated only for the performance of such duties as are
expressly and specifically set forth in this Agreement on her part to
be performed, each of which are ministerial (and shall not be construed
to be fiduciary) in nature, and no implied duties or obligations of any
kind shall be read into this Agreement against or on the part of the
Escrow Agent, (iii) shall not be obligated to take any legal or other
action hereunder that might in her judgment involve or cause her to
incur any expense or liability unless she shall have been furnished
with acceptable indemnification, (iv) may rely on and shall be
protected in acting or refraining from acting upon any written notice,
instruction (including, without limitation, wire transfer instructions,
whether incorporated herein or provided in a separate written
instruction), instrument, statement, certificate, request or other
document furnished to her hereunder and believed by her to be genuine
and to have been signed or presented by the proper person, and shall
have no responsibility for determining the accuracy thereof, and (v)
may consult counsel satisfactory to her, and the written opinion or
advice of such counsel in any instance shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by her hereunder in good faith and in accordance with the
written opinion or advice of such counsel.
(b) In no event shall the Escrow Agent be liable for indirect,
punitive, special or consequential damage or loss (including but not
limited to lost profits) whatsoever, even if the Escrow Agent has been
informed of the likelihood of such loss or damage and regardless of the
form of action.
(c) The Escrow Agent shall have no more or less responsibility
or liability on account of any action or omission of any book-entry
depository, securities intermediary or other subescrow agent employed
by the Escrow Agent with the consent of Buyer and Company, than any
such book-entry depository, securities intermediary or other subescrow
agent has to the Escrow Agent, except to the extent that such action or
omission of any book-entry depository, securities intermediary or other
subescrow agent was caused by the Escrow Agent's own gross negligence
or willful misconduct.
(d) The Escrow Agent may act in reliance upon any instructions
signed on signature believed by her to be genuine, and may assume that
any person who gives any written instructions, notice or receipt, or
makes any statements in connection with the provisions hereof, has been
duly authorized to do so. The Escrow Agent shall have no duty to make
inquiry as to the genuineness, accuracy or validity of any statements
or instructions or any signatures on statements or instructions.
3.12 FEES AND EXPENSES.
(a) Each of the Interested Parties agrees, jointly and
severally, to pay or reimburse the Escrow Agent for her reasonable
attorney's fees and expenses incurred in connection with the
preparation of this Agreement. Escrow Agent
5
hereby agrees to waive such reimbursement upon receipt of the annual
fee set forth in the Fee Schedule attached hereto.
(b) Each of the Interested Parties agrees, jointly and
severally, to reimburse the Escrow Agent on demand for all costs and
expenses incurred in connection with the administration of this
Agreement or the escrow created hereby or the performance or observance
of her duties hereunder that are in excess of her compensation for
normal services hereunder, including without limitation, payment of any
reasonable legal fees and reasonable expenses incurred by the Escrow
Agent in connection with the resolution of any claim by any party
hereunder.
(c) Each of the Interested Parties covenants and agrees,
jointly and severally, to indemnify the Escrow Agent (and each of her
employees and agents) and hold her (and such employees and agents)
harmless from and against any loss, liability, damage, cost and expense
of any nature incurred by the Escrow Agent arising out of or in
connection with this Agreement or with the administration of her duties
hereunder, including, but not limited to, attorney's fees and other
costs and expenses of defending or preparing to defend against any
claim of liability unless and except to the extent such loss,
liability, damage, cost and expense shall be caused by the Escrow
Agent's gross negligence or willful misconduct. The foregoing
indemnification and agreement to hold harmless shall survive the
termination of this Agreement.
(d) The Buyer, on the one hand, and the Company, on the other
hand, agree in relation to any payment made to the Escrow Agent
pursuant to this Section 4.12 that, to the extent any amount is paid,
if for any reason one of the Interested Parties should pay an amount
greater than fifty percent (50%) of the amount due to the Escrow Agent
hereunder, the other Interested Party shall, within five (5) Business
Days of notification of such discrepancy, contribute to the other
Interested Party such an amount as results in the Interested Parties
sharing equally the payment of any amount paid to the Escrow Agent
pursuant to this Section 3.12.
4. NOTICES; WIRING INSTRUCTIONS.
4.1 NOTICES.
(a) All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement
shall be delivered personally or sent by facsimile transmission or
overnight package delivery service. Any such notice will be deemed
given when so delivered if delivered during business hours on a
business day or, if not, on the next succeeding business day. All such
notices shall be addressed as follows:
6
IF TO COMPANY OR YUAN:
Cyber Merchant Exchange, Inc.
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Chairman and CEO
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇▇ ▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ fax
with a copy to:
The ▇▇▇▇ Law Group
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ fax
IF TO BUYER:
▇▇▇▇▇▇▇ Reverse Merger Fund, LLC
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO THE ESCROW AGENT:
▇▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) WIRING INSTRUCTIONS. Any funds to be paid to or by the
Escrow Agent hereunder shall be sent by wire transfer pursuant to the
following instructions (or by such other method of payment and pursuant
to such instructions as may have been given in advance and in writing
to or by the Escrow Agent, as the case may be, in accordance with
Section 5.1(a) above).
(i) IF TO BUYER:
Bank: Fleet Bank
ABA: ▇▇▇-▇▇▇-▇▇▇
A/C Name: ▇▇▇▇▇▇▇ Reverse Merger Fund, LLC
A/C No.: 9429341239
7
(ii) IF TO THE ESCROW AGENT:
Bank: KeyBank, N.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ABA: ▇▇▇▇-▇▇▇▇-▇
Credit: ▇▇▇▇▇▇▇▇ ▇▇▇▇, Attorney At Law
COLTAF Trust Account
Account: 825959843
(iii) IF TO COMPANY:
Bank:
ABA:
A/C Name:
A/C:
A/C Address:
Contact:
5. BINDING EFFECT; THIRD PARTIES. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, representatives, successors and assigns. This
Agreement is not intended to confer any rights or remedies hereunder on any
other person other than the parties hereto.
6. AMENDMENTS. This Agreement may be amended, modified or supplemented
at any time or from time to time in a writing executed by Company, Buyer, Yuan
and the Escrow Agent. No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by each of the parties. No waiver of
any of the provisions of this Agreement shall be deemed to constitute a waiver
of any other provision hereof, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
7. GOVERNING LAW; JURISDICTION; VENUE. This Agreement will be governed
by the laws of the State of Colorado without regard to conflicts of laws
principles. In any action or proceeding between or among any of the parties
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement, each of the parties: (a) irrevocably and
unconditionally consents and submits to the exclusive jurisdiction and venue of
the state courts of the State of Colorado and the jurisdiction of the United
States District Court for the State of Colorado, and (b) agrees that all claims
in respect of such action or proceeding may be heard and determined exclusively
in any Colorado state or federal court sitting in the State of Colorado. It is
the intention of the parties hereto that the situs of the Escrow Account is and
shall be administered in the state in which the principal office of the Escrow
Agent from time to time acting hereunder is located.
8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
8
9. INTEGRATION. This Agreement and the Purchase Agreement, if and when
executed and delivered by the parties thereto, constitute the entire agreement
and understanding of the parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings with respect
thereto.
10. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held to be invalid or unenforceable only in part or degree
will remain in full force and effect to the extent not held to be invalid or
unenforceable.
11. HEADINGS; CONSTRUCTION. The descriptive headings used throughout
1this Agreement are for convenience only and do not constitute a part of this
Agreement.
12. TIME IS OF THE ESSENCE. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
* * *
[REST OF PAGE INTENTIONALLY LEFT BLANK]
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
CYBER MERCHANTS EXCHANGE, INC.,
As Company
Tax ID#: ▇▇-▇▇▇▇▇▇▇
By:
-----------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman and CEO
--------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Individually
▇▇▇▇▇▇▇ REVERSE MERGER FUND, LLC, as Buyer
Tax ID #: ▇▇-▇▇▇▇▇▇▇
By:
-----------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Manager
▇▇▇▇▇▇▇▇ ▇▇▇▇, ESQ., as Escrow Agent
By:
-----------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇
FEE SCHEDULE
The annual fee of $1,500.00 for administering this Agreement is payable in
advance at the time the Initial Deposit is delivered to the Escrow Agent, and,
if applicable, will be invoiced each year thereafter to the appropriate
party(ies) on the anniversary date of this Agreement. The first annual fee shall
be deemed earned in full upon receipt by the Escrow Agent, and no portion
thereof shall be refundable for any reason, including, without limitation,
termination of this Agreement.
Out of pocket expenses, such as, but not limited to, postage, courier, overnight
mail, insurance, money wire transfer, long distance telephone charges,
facsimile, travel, legal or accounting, etc., will be billed at cost.
The above fees do not include extraordinary services that will be priced
according to time and scope of duties. The fees shall be deemed earned in full
upon receipt by the Escrow Agent, and no portion thereof shall be refundable for
any reason, including without limitation, termination of the Agreement.
It is acknowledged that the schedule of fees described is acceptable for the
services mutually agreed upon.
COMPANY DISCLOSURE SCHEDULES
SCHEDULE 2.1
ORGANIZATION AND QUALIFICATION
------------------------------
World Wide Magic Net, Inc. was incorporated in July, 1996 under the laws of the
State of California. An amendment to the Articles of Incorporation was filed on
October 7, 1998 and the Company name was amended to Cyber Merchants Exchange,
Inc.
The Company is incorporated in California and only file taxes in California.
SCHEDULE 2.2
SUBSIDIARIES
------------
None. The Agreement contemplates the formation of ASAP Show, Inc., a Nevada
corporation, as a wholly owned subsidiary of the Company.
SCHEDULE 2.5
CAPITALIZATION
--------------
None
SCHEDULE 2.8
NO UNDISCLOSED LIABILITIES
--------------------------
None
SCHEDULE 2.9
ABSENCE OF CERTAIN CHANGES OR EVENTS
------------------------------------
None
SCHEDULE 2.10
LITIGATION
----------
None
SCHEDULE 2.11
EMPLOYEE BENEFIT PLANS
----------------------
1
o MEDICAL INSURANCE: All eligible full-time and permanent part-time employees
and their dependents are eligible to participate in the Company's health
insurance plan. The Company pays the premium for eligible employees.
Dependent coverage is available as the sole cost and expense of the
eligible employee. The Company will pay the premium for continuation of
group benefits during the first 30 days of any unauthorized leave.
Thereafter, the employee must reimburse the Company for such premium costs
if the employee wishes to remain covered under the group plans.
o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ AGREEMENT: The Company currently has a consultant agreement
with ▇▇. ▇▇▇▇▇▇ to serve as Director of Global Operations as an independent
contractor for the ASAP Show at the annual rate of $72,000, payable in
semi-monthly installments. In addition, ▇▇. ▇▇▇▇▇▇ is being paid a bonus of
$1,500 per month, as detailed in the agreement.
SCHEDULE 2.14
TAXES
-----
None
SCHEDULE 2.15
BROKERS; THIRD PARTY EXPENSES
-----------------------------
None
SCHEDULE 2.16
AGREEMENTS, CONTRACTS AND COMMITMENTS
-------------------------------------
o LEASE AGREEMENT: The Company leases its corporate headquarters located at
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The lease
commenced on March 15, 2003, and expires on March 31, 2006. The Company
currently leases approximately 9,800 square feet at an average monthly rent
of approximately $5,880.
2
o THE VENETIAN RESORT HOTEL & CASINO: The Company has entered into an
agreement with the Venetian to rent their ballroom for the Feb. 2005 and
the August 2005 ASAP Shows at a rate of $55,000 per show.
o THE CIT GROUP AND BANK SINOPAC AGREEMENT - In October 2000, the Company and
CIT Commercial Services entered into a Factoring Agreement. Under the
agreement, the Company sells and assigns to CIT certain accounts
receivable, as defined, arising from transaction sales.
SCHEDULE 2.17
INTERESTED PARTY TRANSACTIONS
-----------------------------
o The Company has a revolving line-of-credit (the "Line") from ▇▇▇▇▇ ▇▇▇▇,
the Company's Chief Executive Officer and a significant Company
shareholder, which expires on September 1, 2005 and provides for borrowings
up to a maximum of $500,000, as amended. The Line bears an interest rate of
8.0% per annum.
3