STOCK PURCHASE AGREEMENT By and between Tie LI, YILI CARBORUNDUM USA, INC. and PARAGON SEMITECH USA, INC. dated as of September 2, 2008
By
and between
Tie
LI,
YILI
CARBORUNDUM USA, INC.
and
dated
as of September 2, 2008
This
STOCK PURCHASE AGREEMENT, dated as of September 2, 2008 (the “Agreement”)
by and
among Tie
LI, an
individual residing at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(“Li”), YILI CARBORUNDUM USA, INC., a
Delaware corporation (“Yili
US”)
and
PARAGON
SEMITECH USA, INC., a
Delaware corporation (the “Company”).
WHEREAS,
Li
currently owns 100% of the issued and outstanding capital stock of C3 Capital,
Limited, a BVI Company incorporated under the laws of the British Virgin Islands
(“C3”);
WHEREAS,
C3 has
entered into an Equity Transfer Agreement with Yili Master Carborundum
Production Co., Ltd. (“Yili
China”),
a
corporation incorporated under the laws of the People’s Republic of China
(“PRC”)
to
acquire all of the equity interests in Yili China; C3 has also entered into
an
Equity Transfer Agreement with Xinjiang Ehe Mining and Metallurgy Co., Ltd.
(“Ehe
China”),
a
corporation incorporated under the laws of the PRC to acquire 90% of the equity
interests in Ehe China; in addition, C3 has entered into a Memorandum of
Understanding (“MOU”) with ▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇. ▇▇ Ping to acquire all of
the equity interests they are going to have in Xinjiang Paragon Master Mining
Co., Ltd. (“Quartz
Mine China”),
a
corporation to be incorporated under the laws of the PRC having the quartz
mine
as identified in the MOU. The transactions contemplated under the Equity
Transfer Agreements and MOU with respect to Yili China, Ehe China and Quartz
Mine China are referred to as “PRC Entity Restructuring”.
WHEREAS,
the
Company owns 100% of the outstanding capital stock of Yili US;
WHEREAS,
Li
believes it is in his best interests to sell and transfer to Yili US all of
the
outstanding capital stock of C3 (the “C3
Shares”) for
$10,000 and each of the Company and Yili US believes it is in its best interests
to purchase the C3 Shares, upon the terms and subject to the conditions set
forth in this Agreement (the “Stock
Purchase”);
WHEREAS,
it is
the intention of the parties that: (i) Yili US shall acquire 100% of the C3
for
a cash purchase price of $10,000; and (ii) said sale and transfer to Yili US
shall qualify as a transaction in securities exempt from registration or
qualification under the Securities Act of 1933, as amended and in effect on
the
date of this Agreement (the “Securities
Act”);
WHEREAS,
immediately following the consummation of the Stock Purchase, the Company
intends to enter into a private placement financing transaction with one or
more
accredited investors (each an “Investor”
and
collectively, the“Investors”) whereby
the Company will issue shares of newly-designated Series A Senior Convertible
Preferred Stock, par value $.001 per share, of the Company and related warrants
for cash (the “Financing
Transaction”); and
2
NOW,
THEREFORE,
in
consideration of the mutual terms, conditions and other agreements set forth
herein, the parties hereto hereby agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF C3 SHARES
Section
1.1 Purchase
and Sale.
On the
Closing Date (as hereinafter defined) and upon the terms and subject to the
conditions set forth in this Agreement, Li shall sell, assign, transfer, convey
and deliver the C3 Shares to Yili US, and Yili US shall pay to Li in cash,
in
full consideration for the purchase of the C3 Shares $10,000 in cash or by
wire
transfer of immediately available funds.
Section
1.2 Capitalization.
On the
Closing Date, immediately before the transactions to be consummated pursuant
to
this Agreement and the Securities Purchase Agreement, dated the date hereof
by
and among the Company and The China Hand Fund I, LLC (the “Securities
Purchase Agreement”;
the
transactions contemplated under the Securities Purchase Agreement, the
“Series
A Financing”),
the
Company shall have authorized (a) a total of 100,000,000 shares of Common Stock,
par value $.001 per share, 10,006,000 shares of which are issued and
outstanding, (b) a total of 10,000,000 shares of Preferred Stock, par value
$.001 per share (the “Preferred
Stock”),
none
of which are issued and outstanding., but 2,000,000 shares shall have been
designated as Series A Senior Convertible Preferred Stock (“Series
A Stock”).
Section
1.3 Closing.
The
closing of the Stock Purchase to be made pursuant to this Agreement (the
"Closing")
shall
take place at 5:00 p.m. E.D.S.T. on the day the conditions to closing set forth
in Articles V and VI have been satisfied or waived, or at such other time and
date as the parties hereto shall agree in writing (the "Closing
Date"),
at
the offices of Guzov Ofsink, LLC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. At the Closing, Li shall deliver to Yili US the stock
certificates representing 100% of the C3 Shares, duly endorsed in blank for
transfer or accompanied by appropriate stock powers duly executed in blank.
In
full consideration for the purchase of the C3 Shares, Yili US shall pay to
Li
$10,000 in cash or by wire transfer of immediately available funds.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents, warrants and agrees that the statements in the
following paragraphs of this Section 2 are all true and complete as of the
date
hereof, and will, except as contemplated by this Agreement, be true and complete
as of the Closing Date as if first made on such date:
3
Section
2.1 Corporate
Organization
a. Each
of
the Company and Yili US is a corporation duly organized, validly existing and
in
good standing under the laws of Delaware, and has all requisite corporate power
and authority to own its properties and assets and to conduct its business
as
now conducted and is duly qualified to do business in good standing in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification and being in
good standing necessary, except where the failure to be so qualified and in
good
standing will not have a material adverse effect on the business, operations,
properties, assets, condition or results of operation of the Company (a
"Company
Material Adverse Effect");
b. Copies
of
the Certificate of Incorporation and By-laws of the Company as well as the
Certificate of Designation of the Series A Stock, with all amendments thereto
to
the date hereof, have been furnished to Li, and such copies are accurate and
complete as of the date hereof. The minute books of the Company and Yili US
are
current as required by law, contain the minutes of all meetings of the Board
of
Directors and shareholders of the Company and Yili US from their dates of
incorporation to the date of this Agreement, and adequately reflect all material
actions taken by the Board of Directors and shareholders of the Company and
Yili
US.
Section
2.2 Authorization
and Validity of Agreements.
Each of
the Company and Yili US has all corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and Yili US and the consummation by the Company and
Yili US of the transactions contemplated hereby have been duly authorized by
all
necessary corporate action of the Company, and no other corporate proceedings
on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby.
Section 2.3 No
Conflict or Violation.
The
execution and delivery by each of the Company and Yili US of this Agreement
does
not, and the performance by the Company and Yili US of their obligations under
this Agreement and the consummation of the transactions contemplated hereby
will
not, conflict with or result in a violation or breach of any of the terms,
conditions or provisions of any other agreement to which the Company or Yili
US
is a party. Neither the Company, Yili US nor any subsidiary, is in violation
of,
in conflict with, in breach of or in default under any term or provision of,
and
no right of any party to accelerate, terminate, modify or cancel has come into
existence under, (i) its articles of incorporation or by-laws (each as may
have
been amended, supplemented or restated), (ii) any provision of any judgment,
writ, injunction, decree or order to which the any of them is a party; or (iii)
any law, statute, rule or regulation applicable to any of them.
Section
2.4 Consents
and Approvals.
No
consent, waiver, authorization or approval of any governmental or regulatory
authority, domestic or foreign, or of any other person, firm or entity, is
required in connection with the execution and delivery of this Agreement by
the
Company or Yili US or the performance by the Company or Yili US of its
obligations hereunder.
Section
2.5 Survival.
Each of
the representations and warranties set forth in this Article II shall be deemed
represented and made by the Company at the Closing as if made at such time
and
shall survive the Closing for a period terminating on the second anniversary
of
the date of this Agreement.
4
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF ▇▇
▇▇
represents, warrants and agrees, that the statements in the following paragraphs
of this Section 3 are all true and complete as of the date hereof, and will,
except as contemplated by this Agreement, be true and complete as of the Closing
Date as if first made on such date:
Section
3.1 Corporate
Organization of C3.
C3 is a
company organized as a BVI Business Company under the laws of the British Virgin
Islands, is duly organized, validly existing and in good standing under the
laws
of the British Virgin Islands 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 to be conducted. Li 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 conducted, and to
consummate the transactions contemplated under this Agreement, except where
the
failure to have such Approvals would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition or results of operation of C3. Li
has
delivered to the Company complete and correct copies of the Memorandum of
Association and Articles of Association or similar governing, organization
or
charter documents of C3 (collectively referred to herein as "Charter
Documents").
C3 is
not in violation of any of the provisions of its Charter Documents. The minute
books or the equivalent of C3 contain true, complete and accurate records of
meetings and consents in lieu of meetings of its board of directors (and any
committees thereof), similar governing bodies and stockholders of Li
("Corporate
Records"),
since
the time of its organization. The ownership records of C3 Shares are true,
complete and accurate records of the ownership of the C3 Shares as of the date
of such records and contain all transfers of such C3 Shares since the time
of
original issuance of the C3 Shares.
Section
3.2 Capitalization
of C3; Title to the C3 Shares.
On the
Closing Date, immediately before the transactions to be consummated pursuant
to
this Agreement, C3 shall have authorized 50,000 shares of capital stock, $1
per
share, of which 1 C3 Share will be issued and outstanding. The C3 Shares
constitute all the outstanding shares of capital stock of C3, and there are
no
outstanding options, warrants, agreements, commitments, conversion rights,
preemptive rights or other rights to subscribe for, purchase or otherwise
acquire any shares of capital stock or any un-issued or treasury shares of
capital stock of C3.
5
Section
3.3 Subsidiaries
and Equity Investments of C3.
(i) Set
forth on Schedule 3.3
is a
true and correct list of the entities in which C3, directly or indirectly,
owns
capital stock or holds an equity or similar interest, together with their
respective jurisdictions of organization and the percentage of the outstanding
capital stock or other equity interests of such entity that is held by C3,
subject to the completion of the PRC Entity Restructuring; (ii) other than
with
respect to the entities listed on Schedule 3.3,
C3 does
not, directly or indirectly, own any securities or beneficial ownership
interests in any other person (including through joint ventures or partnership
arrangements) or have any investment in any other person; (iii) C3 and its
“Subsidiaries”
(which
for purposes of this Agreement means any entity in which C3 or any of its
Subsidiaries, directly or indirectly, owns any of the capital stock, equity
or
similar interests or voting power of such entity at the date of this Agreement,
after giving effect to the completion of the PRC Entity Restructuring) are
entities duly organized and
validly existing and in good standing under the laws of the jurisdictions in
which they are formed, and have the requisite power and authority to own their
properties and to carry on their business as now being conducted; and (iv)
if
applicable, each of C3 and the Subsidiaries is duly qualified as a foreign
entity to do business and, to the extent legally applicable, is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
have
a material adverse effect.
Section
3.4 Authorization
and Validity of Agreements. The
execution and delivery of this Agreement by Li and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
actions and no other actions on the part of Li are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby.
Section
3.5 No
Conflict or Violation.
The
execution, delivery and performance of this Agreement by Li does not and will
not violate or conflict with any provision of the Charter Documents of C3,
and
does not and will not violate any provision of law, or any order, judgment
or
decree of any court or other governmental or regulatory authority, nor violate,
result in a breach of or constitute (with due notice or lapse of time or both)
a
default under or give to any other entity any right of termination, amendment,
acceleration or cancellation of any contract, lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
Li
or C3 is a party or by which it is bound or to which any of his or its
respective properties or assets is subject, nor result in the creation or
imposition of any lien, charge or encumbrance of any kind whatsoever upon any
of
the properties or assets of Li or C3, nor result in the cancellation,
modification, revocation or suspension of any of the licenses, franchises,
permits to which Li or C3 is bound.
Section
3.6 Regulatory
Permits.
C3 and
its Subsidiaries possess all certificates, authorizations and permits issued
by
the appropriate federal, state (or their equivalent), local or foreign
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such permits could not, individually or in the
aggregate, have or reasonably be expected to result in a C3 Material Adverse
Effect (as such term is hereinafter defined).
Section
3.7 Brokers’
Fees. Li
does
not have any liability to pay any fees or commissions or other consideration
to
any broker, finder, or agent with respect to the transactions contemplated
by
this Agreement.
Section
3.8 Material
Agreements.
Except
as set forth on Schedule
3.8
hereof,
C3 is not a party to or bound by any contracts, including, but not limited
to
any:
| a. |
employment,
advisory or consulting contract;
|
| b. |
plan
providing for employee benefits of any
nature;
|
| c. |
lease
with respect to any property or equipment with a value exceeding
$50,000;
|
|
d.
|
contract,
agreement, understanding or commitment for any future expenditure
in
excess of $50,000 in the aggregate;
|
|
e.
|
contract
or commitment pursuant to which it has assumed, guaranteed, endorsed,
or
otherwise become liable for any obligation of any other person, entity
or
organization exceeding $50,000;
|
|
f.
|
agreement
with any person relating to the dividend, purchase or sale of securities,
that has not been settled by the delivery or payment of securities
when
due, and which remains unsettled upon the date of the
Agreement.
|
Section
3.9. Financial
Statements.
Set
forth on Schedule 3.9 attached hereto are the unaudited financial statements
of
Yili China which will become an indirect Subsidiary of the Company upon the
consummation of the transactions contemplated hereunder (collectively, the
“Financial
Statements”).
The
Financial Statements fairly present in all material respects the financial
position of Yili China as of the dates thereof and the results of operations
for
the periods then ended.
Section
3.10. Material
Changes.
Since
the date of the latest balance sheet included in the Financial Statements
included on Schedule
3.10
attached
hereto and, except as set forth on Schedule 3.10 attached hereto, (i) there
has
been no event, occurrence or development that has had or that would reasonably
be expected to have a material adverse effect on the business, operations,
properties, assets, condition or results of operation of C3 (a "C3
Material Adverse Effect"),
(ii)
neither the C3 nor any Subsidiary has incurred any liabilities (contingent
or
otherwise) other than (A) trade payables, accrued expenses and other liabilities
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s or its
Subsidiaries’ financial statements pursuant to GAAP.
Section
3.11. Governmental
Consents.
To the
best of Li’s knowledge, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with any court,
governmental agency, regulatory authority or political subdivision thereof,
or
any other entity, is required in connection with the execution, delivery and
performance by Li of this Agreement.
Section
3.12 Litigation. There
is
no action, suit, proceeding, claim, arbitration or investigation pending (or,
to
the best knowledge of Li, currently threatened) against C3 or any of its
Subsidiaries or, against any officer or director of C3 or any of its
Subsidiaries in connection with such officer’s or director’s relationship with,
or actions taken on behalf of, C3 or any of its Subsidiaries. There is no
pending or, to the knowledge or belief of Li, currently threatened, claim or
litigation against C3 or any of its Subsidiaries.
6
Section
3.13. Indebtedness;
Compliance.
Except
as disclosed on Schedule
3.13
attached
hereto, neither C3 nor any of its Subsidiaries is a party to any indenture,
debt, loan or credit agreement by which it or any of its properties is bound.
Neither C3 nor any of its Subsidiaries is (i) in default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default under), neither C3 nor any
of
its Subsidiaries has received notice of a claim that it is in default under
or
that it is in violation of, any indenture, loan or credit agreement or any
other
agreement or instrument to which it is a party or by which it or
any of
its properties is bound (whether
or not such default or violation has been waived), (ii) in violation of any
court, arbitrator, governmental or administrative agency, regulatory or self
regulatory authority (federal, state, county, local or foreign), stock market,
stock exchange or trading facility, or (iii) or has not been in violation of
any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result
in a
C3 Material Adverse Effect.
Section
3.14 Money
Laundering Laws.
The
operations of C3 and each of its Subsidiaries are and have been conducted at
all
times in compliance with the money laundering statutes of applicable
jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any
applicable governmental agency (collectively, the “Money
Laundering Laws”)
and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the C3 and each of its
Subsidiaries with respect to the Money Laundering Laws is pending or, to the
best knowledge of Li, threatened.
Section
3.15 Disclosure.
This
Agreement, the schedules hereto and any certificate attached hereto or delivered
in accordance with the terms hereby by or on behalf of Li in connection with
the
transactions contemplated by this Agreement, when taken together, do not contain
any untrue statement of a material fact or omit any material fact necessary
in
order to make the statements contained herein and/or therein not misleading.
Section
3.16 Survival.
Each of
the representations and warranties set forth in this Article III shall be deemed
represented and made by Li at the Closing as if made at such time and shall
survive the Closing for a period terminating on the second anniversary of the
date of this Agreement.
7
ARTICLE
IV
COVENANTS
Section
4.1 Certain
Changes and Conduct of Business.
a. From
and
after the date of this Agreement and until the Closing Date, the Company shall
conduct its business solely in the ordinary course consistent with past
practices and, in a manner consistent with all representations, warranties
or
covenants of the Company, and without the prior written consent of Li, will
not,
except as required or permitted pursuant to the terms hereof and the Financing
Transaction:
|
i.
|
make
any material change in the conduct of its businesses and/or operations
or
enter into any transaction other than in the ordinary course of business
consistent with past practices;
|
|
ii.
|
make
any change in its Charter Documents; issue any additional shares
of
capital stock or equity securities or grant any option, warrant or
right
to acquire any capital stock or equity securities or issue any security
convertible into or exchangeable for its capital stock or alter in
any
material term of any of its outstanding securities or make any change
in
its outstanding shares of capital stock or its capitalization, whether
by
reason of a reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, stock dividend or
otherwise;
|
|
iii.
|
A.
|
incur,
assume or guarantee any indebtedness for borrowed money, issue any
notes,
bonds, debentures or other corporate securities or grant any option,
warrant or right to purchase any thereof, except pursuant to transactions
in the ordinary course of business consistent with past practices;
or
|
| B. | Issue any securities convertible or exchangeable for debt or equity securities of the Company; |
|
iv.
|
make
any sale, assignment, transfer, abandonment or other conveyance of
any of
its assets or any part thereof, except pursuant to transactions in
the
ordinary course of business consistent with past
practice;
|
|
v.
|
subject
any of its assets, or any part thereof, to any lien or suffer such
to be
imposed other than such liens as may arise in the ordinary course
of
business consistent with past practices by operation of law which
will not
have an the Company Material Adverse
Effect;
|
|
vi.
|
acquire
any assets, raw materials or properties, or enter into any other
transaction, other than in the ordinary course of business consistent
with
past practices;
|
8
|
vii.
|
enter
into any new (or amend any existing) employee benefit plan, program
or
arrangement or any new (or amend any existing) employment, severance
or
consulting agreement, grant any general increase in the compensation
of
officers or employees (including any such increase pursuant to any
bonus,
pension, profit-sharing or other plan or commitment) or grant any
increase
in the compensation payable or to become payable to any employee,
except
in accordance with pre-existing contractual provisions or consistent
with
past practices;
|
|
viii.
|
make
or commit to make any material capital
expenditures;
|
|
ix.
|
pay,
loan or advance any amount to, or sell, transfer or lease any properties
or assets to, or enter into any agreement or arrangement with, any
of its
affiliates;
|
|
x.
|
guarantee
any indebtedness for borrowed money or any other obligation of any
other
person;
|
|
xi.
|
fail
to keep in full force and effect insurance comparable in amount and
scope
to coverage maintained by it (or on behalf of it) on the date
hereof;
|
|
xii.
|
take
any other action that would cause any of the representations and
warranties made by it in this Agreement not to remain true and correct
in
all material aspect;
|
|
xiii.
|
make
any material loan, advance or capital contribution to or investment
in any
person;
|
|
xiv.
|
make
any material change in any method of accounting or accounting principle,
method, estimate or practice;
|
|
xv.
|
settle,
release or forgive any claim or litigation or waive any
right;
|
|
xvi.
|
commit
itself to do any of the foregoing.
|
b. From
and
after the date of this Agreement, Li will cause C3 each of its Subsidiaries
to:
|
1.
|
continue
to maintain, in all material respects, its properties in accordance
with
present practices in a condition suitable for its current
use;
|
|
2.
|
file,
when due or required, federal, state, foreign and other tax returns
and
other reports required to be filed and pay when due all taxes,
assessments, fees and other charges lawfully levied or assessed against
it, unless the validity thereof is contested in good faith and by
appropriate proceedings diligently
conducted;
|
9
|
3.
|
continue
to conduct its business in the ordinary course consistent with past
practices;
|
|
4.
|
keep
its books of account, records and files in the ordinary course and
in
accordance with existing practices;
and
|
|
5.
|
continue
to maintain existing business relationships with suppliers.
|
Section
4.2 Access
to Properties and Records.
Li
shall afford the Company’s accountants, counsel and authorized representatives,
and the Company shall afford to Li’s accountants, counsel and authorized
representatives full access during normal business hours throughout the period
prior to the Closing Date (or the earlier termination of this Agreement) to
all
of such parties’ properties, books, contracts, commitments and records and,
during such period, shall furnish promptly to the requesting party all other
information concerning the other party's business, properties and personnel
as
the requesting party may reasonably request, provided that no investigation
or
receipt of information pursuant to this Section 4.2 shall affect any
representation or warranty of or the conditions to the obligations of any party.
Section
4.3 Negotiations.
From
and after the date hereof until the earlier of the Closing or the termination
of
this Agreement, no party to this Agreement nor its officers or directors
(subject to such director's fiduciary duties) nor anyone acting on behalf of
any
party or other persons shall, directly or indirectly, encourage, solicit, engage
in discussions or negotiations with, or provide any information to, any person,
firm, or other entity or group concerning any merger, sale of substantial
assets, purchase or sale of shares of capital stock or similar transaction
involving any party except for the Financing Transaction. A party shall promptly
communicate to any other party any inquiries or communications concerning any
such transaction which they may receive or of which they may become aware
of.
Section
4.4 Consents
and Approvals.
The
parties shall:
|
i.
|
use
their reasonable commercial efforts to obtain all necessary consents,
waivers, authorizations and approvals of all governmental and regulatory
authorities, domestic and foreign, and of all other persons, firms
or
corporations required in connection with the execution, delivery
and
performance by them of this Agreement; and
|
10
|
ii.
|
diligently
assist and cooperate with each party in preparing and filing all
documents
required to be submitted by a party to any governmental or regulatory
authority, domestic or foreign, in connection with such transactions
and
in obtaining any governmental consents, waivers, authorizations or
approvals which may be required to be obtained connection in with
such
transactions.
|
Section
4.5 Public
Announcement.
Unless
otherwise required by applicable law, the parties hereto shall consult with
each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation.
Section
4.6 Stock
Issuance.
From
and after the date of this Agreement until the Closing Date, Li shall cause
C3
not to issue any additional shares of its capital stock.
ARTICLE
V
CONDITIONS
TO OBLIGATIONS OF LI
The
obligations of Li to consummate the transactions contemplated by this Agreement
are subject to the fulfillment, at or before the Closing Date, of the following
conditions, any one or more of which may be waived by Li in his sole
discretion:
Section
5.1 Representations
and Warranties of the Company and Yili US.
All
representations and warranties made by the Company and Yili US in this Agreement
shall be true and correct on and as of the Closing Date as if again made by
the
Company and Yili US as of such date.
Section
5.2 Agreements
and Covenants.
The
Company and Yili US shall have performed and complied in all material respects
to all agreements and covenants required by this Agreement to be performed
or
complied with by it on or prior to the Closing Date.
Section
5.3 Consents
and Approvals.
Consents, waivers, authorizations and approvals of any governmental or
regulatory authority, domestic or foreign, and of any other person, firm or
corporation, required in connection with the execution, delivery and performance
of this Agreement shall be in full force and effect on the Closing
Date.
Section
5.4 No
Violation of Orders.
No
preliminary or permanent injunction or other order issued by any court or
governmental or regulatory authority, domestic or foreign, nor any statute,
rule, regulation, decree or executive order promulgated or enacted by any
government or governmental or regulatory authority, which declares this
Agreement invalid in any respect or prevents the consummation of the
transactions contemplated hereby, or which materially and adversely affects
the
assets, properties, operations, prospects, net income or financial condition
of
the Company or Yili US shall be in effect; and no action or proceeding before
any court or governmental or regulatory authority, domestic or foreign, shall
have been instituted or threatened by any government or governmental or
regulatory authority, domestic or foreign, or by any other person, or entity
which seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement.
11
Section
5.5 Other
Closing Documents.
Li
shall have received such other certificates, instruments and documents in
confirmation of the representations and warranties of the Company and Yili
US or
in furtherance of the transactions contemplated by this Agreement as Li or
its
counsel may reasonably request.
Section
5.6 Series
A Financing. Li
shall
have received a copy of the Securities Purchase Agreement duly executed by
the
parties thereto and the Series A Financing shall have been
consummated.
ARTICLE
VI
CONDITIONS
TO OBLIGATIONS OF THE COMPANY AND YILI US
The
obligations of the Company and Yili US to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before
the
Closing Date, of the following conditions, any one or more of which may be
waived by the Company in its sole discretion:
Section
6.1 Representations
and Warranties of Li.
All
representations and warranties made by Li in this Agreement shall be true and
correct on and as of the Closing Date as if again made by Li on and as of such
date.
Section
6.2 Agreements
and Covenants.
Li
shall have performed and complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by
Li
on or prior to the Closing Date. Yili China shall have received a Certificate
of
Approval issued by the related PRC governmental authority evidencing the
governmental approval regarding the Purchase of Yili China by C3.
Section
6.3 Consents
and Approvals.
All
consents, waivers, authorizations and approvals of any governmental or
regulatory authority, domestic or foreign, and of any other person, firm or
corporation, required in connection with the execution, delivery and performance
of this Agreement, shall have been duly obtained and shall be in full force
and
effect on the Closing Date.
Section
6.4 No
Violation of Orders.
No
preliminary or permanent injunction or other order issued by any court or other
governmental or regulatory authority, domestic or foreign, nor any statute,
rule, regulation, decree or executive order promulgated or enacted by any
government or governmental or regulatory authority, domestic or foreign, that
declares this Agreement invalid or unenforceable in any respect or which
prevents the consummation of the transactions contemplated hereby, or which
materially and adversely affects the assets, properties, operations, prospects,
net income or financial condition of C3 shall be in effect; and no action or
proceeding before any court or government or regulatory authority, domestic
or
foreign, shall have been instituted or threatened by any government or
governmental or regulatory authority, domestic or foreign, or by any other
person, or entity which seeks to prevent or delay the consummation of the
transactions contemplated by this Agreement or which challenges the validity
or
enforceability of this Agreement.
12
Section
6.5 Other
Closing Documents.
The
Company and Yili US shall have received such other certificates, instruments
and
documents in confirmation of the representations and warranties of Li or in
furtherance of the transactions contemplated by this Agreement as the Company
or
its counsel may reasonably request.
ARTICLE
VII
TERMINATION
AND ABANDONMENT
Section
7.1 Methods
of Termination.
This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time before the Closing:
a. By
the
mutual written consent of Li and the Company;
b. By
the
Company or Yili US, upon a material breach of any representation, warranty,
covenant or agreement on the part of Li set forth in this Agreement, or if
any
representation or warranty of Li shall become untrue, in either case such that
any of the conditions set forth in Article VI hereof would not be satisfied
(a
"Li
Breach"),
and
such breach shall, if capable of cure, has not been cured within ten (10) days
after receipt by the party in breach of a notice from the non-breaching party
setting forth in detail the nature of such breach;
c. By
Li,
upon a material breach of any representation, warranty, covenant or agreement
on
the part of the Company or Yili US set forth in this Agreement, or, if any
representation or warranty of the Company or Yili US shall become untrue, in
either case such that any of the conditions set forth in Article V hereof would
not be satisfied (a "Company
Breach"),
and
such breach shall, if capable of cure, not have been cured within ten (10)
days
after receipt by the party in breach of a written notice from the non-breaching
party setting forth in detail the nature of such breach;
d. By
either
the Company or Li, if the Closing shall not have consummated before ninety
(90)
days after the date hereof; provided,
however,
that
this Agreement may be extended by written notice of either Li or the Company,
if
the Closing shall not have been consummated as a result of the Company or Li
having failed to receive all required regulatory approvals or consents with
respect to this transaction or as the result of the entering of an order as
described in this Agreement; and further
provided, however,
that the
right to terminate this Agreement under this Section 7.1(d) shall not be
available to any party whose failure to fulfill any obligations under this
Agreement has been the cause of, or resulted in, the failure of the Closing
to
occur on or before this date.
13
e. By
either
Li or the Company if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action (which order, decree or ruling the
parties hereto shall use its best efforts to lift), which permanently restrains,
enjoins or otherwise prohibits the transactions contemplated by this
Agreement.
Section
7.2 Procedure
Upon Termination.
In the
event of termination and abandonment of this Agreement by Li or the Company
pursuant to Section 7.1, written notice thereof shall forthwith be given to
the
other parties and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action. If this
Agreement is terminated as provided herein, no party to this Agreement shall
have any liability or further obligation to any other party to this Agreement;
provided, however, that no termination of this Agreement pursuant to this
Article VII shall relieve any party of liability for a breach of any provision
of this Agreement occurring before such termination.
ARTICLE
VIII
MISCELLANEOUS
PROVISIONS
Section
8.1 Survival
of Provisions.
The
respective representations, warranties, covenants and agreements of each of
the
parties to this Agreement (except covenants and agreements which are expressly
required to be performed and are performed in full on or before the Closing
Date) shall survive the Closing Date and the consummation of the transactions
contemplated by this Agreement, subject to Sections 2.15 and 3.16. In the event
of a breach of any of such representations, warranties or covenants, the party
to whom such representations, warranties or covenants have been made shall
have
all rights and remedies for such breach available to it under the provisions
of
this Agreement or otherwise, whether at law or in equity, regardless of any
disclosure to, or investigation made by or on behalf of such party on or before
the Closing Date.
14
Section
8.2 Indemnification.
a. Indemnification
Obligations in favor of the Shareholders, Executive Officers, Directors and
Employees of the Company.
Notwithstanding the limitation set forth in Section 8.1 and subject to the
limitations set forth in this Section 8.2, from and after the Closing Date
until
the expiration of statute of limitations for shareholder action under the laws
of New York, Li shall reimburse and hold harmless the Company’s shareholders,
executive officers, directors, employees in office immediately prior to the
Closing (each such person and his heirs, executors, administrators, agents,
successors and assigns is referred to herein as a “Company
Capital Indemnified Party”)
against and in respect of any and all damages, losses, settlement payments,
in
respect of deficiencies, liabilities, costs, expenses and claims suffered,
sustained, incurred or required to be paid by any the Company Indemnified Party,
and any and all actions, suits, claims, or legal, administrative, arbitration,
governmental or other procedures or investigation against any the Company
Indemnified Party, which arises or results from a third-party claim brought
against a the Company Indemnified Party to the extent based on (i) a breach
of
the representations and warranties with respect to the business, operations
or
assets of C3 and/or any of its Subsidiaries, or (ii) any actions or omissions
or
any the Company Indemnified Party taken in furtherance of the transactions
contemplated by this Agreement or the Financing Transaction.
b. Indemnification
in favor of Li.
Notwithstanding the limitation set forth in Section 8.1 and subject to the
limitations set forth in this Section 8.2, from and after the Closing Date
until
the expiration of statute of limitations for shareholder action under the laws
of New York, the Company will, indemnify and hold harmless Li and his agents,
attorneys and employees, and each person, if any, who controls or may “control”
(within the meaning of the Securities Act) any of the forgoing persons or
entities (hereinafter referred to individually as a “Li
Indemnified Person”)
from
and against any and all losses, costs, damages, liabilities and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
legal fees, (collectively, “Damages”)
arising out of any (i) any breach of representation or warranty made by the
Company or Yili US in this Agreement, (ii) any breach by the Company or Yili
US
of any covenant, obligation or other agreement made by the Company or Yili
US in
this Agreement, and (iii) a third-party claim based on any acts or omissions
by
the Company or Yili US from the inception of such corporations through and
including the Closing Date.
Section
8.3 Successors
and Assigns.
This
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective successors and assigns; provided, however, that no party
shall assign or delegate any of the obligations created under this Agreement
without the prior written consent of the other parties.
Section
8.4 Fees
and Expenses.
Except
as otherwise expressly provided in this Agreement, all legal and other fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
fees,
costs or expenses.
Section
8.5 Notices.
All
notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been given or made if in writing and
delivered personally or sent by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses:
15
If
to Li,
to:
Mr.
Tie
Li
▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
Tel:
▇▇▇▇▇▇▇▇▇▇
Fax:
▇▇▇▇▇▇▇▇▇▇
Email:
▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
If
to the
Company or Yili US, to:
▇▇▇
▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: Ms. ▇▇▇▇ ▇▇▇▇
Tel:
(▇▇▇)
▇▇▇-▇▇▇▇
with
copies to:
Guzov
Ofsink, LLC
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Tel.
No.: (▇▇▇) ▇▇▇-▇▇▇▇, ext. 127
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
or
to
such other persons or at such other addresses as shall be furnished by any
party
by like notice to the others, and such notice or communication shall be deemed
to have been given or made as of the date so delivered or mailed. No change
in
any of such addresses shall be effective insofar as notices under this Section
8.5 are concerned unless such changed address is located in the United States
of
America and notice of such change shall have been given to such other party
hereto as provided in this Section 8.5.
Section
8.6 Entire
Agreement.
This
Agreement, together with the exhibits hereto, represents the entire agreement
and understanding of the parties with reference to the transactions set forth
herein and no representations or warranties have been made in connection with
this Agreement other than those expressly set forth herein or in the exhibits,
certificates and other documents delivered in accordance herewith. This
Agreement supersedes all prior negotiations, discussions, correspondence,
communications, understandings and agreements between the parties relating
to
the subject matter of this Agreement and all prior drafts of this Agreement,
all
of which are merged into this Agreement. No prior drafts of this Agreement
and
no words or phrases from any such prior drafts shall be admissible into evidence
in any action or suit involving this Agreement.
Section
8.7 Severability.
This
Agreement shall be deemed severable, and the invalidity or unenforceability
of
any term or provision hereof shall not affect the validity or enforceability
of
this Agreement or of any other term or provision hereof. Furthermore, in lieu
of
any such invalid or unenforceable term or provision, the parties hereto intend
that there shall be added as a part of this Agreement a provision as similar
in
terms to such invalid or unenforceable provision as may be possible so as to
be
valid and enforceable.
16
Section
8.8 Titles
and Headings.
The
Article and Section headings contained in this Agreement are solely for
convenience of reference and shall not affect the meaning or interpretation
of
this Agreement or of any term or provision hereof.
Section
8.9 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall be considered one and the
same agreement.
Section
8.10 Convenience
of Forum; Consent to Jurisdiction.
The
parties to this Agreement, acting for themselves and for their respective
successors and assigns, without regard to domicile, citizenship or residence,
hereby expressly and irrevocably elect as the sole judicial forum for the
adjudication of any matters arising under or in connection with this Agreement,
and consent and subject themselves to the jurisdiction of, the courts of the
State of New York located in County of New York, and/or the United States
District Court for the Southern District of New York, in respect of any matter
arising under this Agreement. Service of process, notices and demands of such
courts may be made upon any party to this Agreement by personal service at
any
place where it may be found or giving notice to such party as provided in
Section 8.5.
Section
8.11 Enforcement
of the Agreement.
The
parties hereto agree that irreparable damage would occur if 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 an injunction or injunctions to prevent breaches
of
this Agreement and to enforce specifically the terms and provisions hereto,
this
being in addition to any other remedy to which they are entitled at law or
in
equity.
Section
8.12 Governing
Law.
This
Agreement shall be governed by and interpreted and enforced in accordance with
the laws of the State of New York without giving effect to the choice of law
provisions thereof.
Section
8.13 Amendments
and Waivers.
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the parties hereto.. No waiver by
any
party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior
or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
Section
8.14 Publicity.
No
party shall cause the publication of any press release or other announcement
with respect to this Agreement or the transactions contemplated hereby without
the consent of the other parties, unless a press release or announcement is
required by law. If any such announcement or other disclosure is required by
law, the disclosing party agrees to give the non-disclosing parties prior notice
and an opportunity to comment on the proposed disclosure.
17
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
|
By:
|
|||
|
Name:
▇▇▇▇ ▇▇▇▇
|
|||
|
Title:
Director, CFO
|
|||
|
YILI
CARBORUNDUM USA, INC.
|
|||
|
By:
|
|||
|
Name:
▇▇▇▇ ▇▇▇▇
|
|||
|
Title:
Director, Treasurer and Secretary
|
|||
|
Tie
Li
|
|||
18
Schedule
2.2
Warrants
On
October 9, 2007, the Company issued warrants to acquire 1,000,000 shares of
its
common stock to Columbia China Capital Group, Inc., an affiliate of the Company,
at an exercise price of $0.001 per share with a term of five years from October
9, 2007 to October 9, 2012. The Warrants were issued pursuant to a consulting
agreement by and between the Company and Columbia China Capital Group, Inc.
(the
“Consultant”), an affiliate to the Company on October 9, 2007. Under such
agreement, the Company agrees to pay the warrants referenced above for the
financial advisory services rendered by the Consultant.
Schedule
3.3
|
Name
|
Jurisdiction
|
Equity Owners and
Percentage of Equity
Securities Held
|
|||
|
Yili
Master Carborundum Production Co., Ltd. (“Yili China”)
|
China
|
100%
owned by C3 Capital, Limited*
|
|||
|
Xinjiang
Ehe Mining and Metallurgy Co., Ltd. (“Ehe China”)
|
China
|
90%
owned by C3 Capital, Limited *
The
rest 10% is to be owned by the local electric power
supplier.
|
|||
|
Xinjiang
Paragon Master Mining Co., Ltd. (“Quartz Mine China”)
|
China
|
100%
owned by C3 Capital, Limited *
|
* Subject
to the completion of the PRC Entity Restructuring.
Schedule
3.8
Material
Agreements
None.
Schedule
3.9
Financial
Statement
See
separately attached sheets.
19
Schedule
3.10
Material
Changes
None.
Schedule
3.13
Indebtedness;
Compliance
As
of the
date of this Agreement, Yili China owns approximately RMB 2,666,537.23
(Approximately US$389,847) to local electric power supplier, Yihe Hydro-electric
Center of Development and Administration Center of Yilihe Area of
Xinjiang.
20