EXHIBIT 2.1
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement, dated as of September 24, 2004, is made
by and among GENERAL COMPONENTS INC. (formerly known as Pro-Active Solutions,
Inc.), a Nevada corporation (the "Acquiror"), each of the Persons listed on
Exhibit A hereto (collectively, the "Acquiror Shareholders", and individually an
"Acquiror Shareholder") each of the Persons listed on Exhibit B hereto
(collectively, the "Shareholders", and individually a "Shareholder") and GENERAL
COMPONENTS INC., a Cayman Islands company (the "Company").
BACKGROUND
The Shareholders have agreed to transfer to the Acquiror, and the
Acquiror has agreed to acquire from the Shareholders, all of the Shares, which
Shares constitute 100% of the outstanding capital stock of the Company, in
exchange for 20,000,000 shares of the Acquiror's Common Stock to be issued on
the Closing Date (the "Acquiror Shares"), which Acquiror Shares shall constitute
80% of the issued and outstanding shares of Acquiror's Common Stock immediately
after the closing of the transactions contemplated herein, in each case, on the
terms and conditions as set forth herein.
SECTION I
DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section 1 will have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
1.1 "Accredited Investor" has the meaning set forth in Regulation D
under the Securities Act and set forth on Exhibit C.
1.2 "Acquired Companies" means, collectively, the Company and the
Company Subsidiaries.
1.3 "Acquiror Balance Sheet" means the Acquiror's audited balance sheet
at December 31, 2003.
1.4 "Acquiror Board" means the Board of Directors of the Acquiror.
1.5 "Acquiror Companies" means, collectively, the Acquiror and the
Acquiror Subsidiaries, if any.
1.6 "Acquiror's Common Stock" means the Acquiror's common stock, par
value US $0.001 per share.
1.7 "Acquiror Subsidiaries" means all of the direct and indirect
Subsidiaries of the Acquiror.
1.8 "Affiliate" means any Person that directly or indirectly controls,
is controlled by or is under common control with the indicated Person.
1.9 "Agreement" means this Share Exchange Agreement, including all
Schedules and Exhibits hereto, as this Share Exchange Agreement may be from time
to time amended, modified or supplemented.
1.10 "Approved Plans" means a stock option or similar plan for the
benefit of employees or others which has been approved by the stockholders of
the Acquiror.
1.11 "Closing Acquiror Shares" means the aggregate number of Acquiror
Shares issuable to the Shareholders at the Closing Date.
1.12 "Closing Date" has the meaning set forth in Section 3.
1.13 "Code" means the Internal Revenue Code of 1986, as amended.
1.14 "Common Stock" means the Company's common shares, US $0.01 nominal
or par value per share.
1.15 "Commission" means the Securities and Exchange Commission or any
other federal agency then administering the Securities Act.
1.16 "Company Board" means the Board of Directors of the Company.
1.17 "Company Indemnified Party" has the meaning set forth in Section
11.3.
1.18 "Company Subsidiaries" means all of the direct and indirect
Subsidiaries of the Company, including, without limitation, Tianhu International
Holding Limited, General Components Limited (Hong Kong) and General Components,
Inc. (New Jersey).
1.19 "Covered Persons" means all Persons, other than Acquiror, who are
parties to indemnification and employment agreements with Acquiror existing on
or before the Closing Date.
1.20 "Damages" has the meaning set forth in Section 11.3.
1.21 "Distributor" means any underwriter, dealer or other Person who
participates, pursuant to a contractual arrangement, in the distribution of the
securities offered or sold in reliance on Regulation S.
1.22 "Environmental Laws" means any Law or other requirement relating
to the environment, natural resources, or public or employee health and safety.
1.23 "Environmental Permit" means all licenses, permits,
authorizations, approvals, franchises and rights required under any applicable
Environmental Law or Order.
1.24 "Equity Security" means any stock or similar security, including,
without limitation, securities containing equity features and securities
containing profit participation features, or any security convertible into or
exchangeable for, with or without consideration, any stock or similar security,
or any security carrying any warrant, right or option to subscribe to or
purchase any shares of capital stock, or any such warrant or right.
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1.25 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.26 "Exchange Act" means the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same will then be in effect.
1.27 "Exhibits" means the several exhibits referred to and identified
in this Agreement.
1.28 "GAAP" means, with respect to any Person, United States generally
accepted accounting principles applied on a consistent basis with such Person's
past practices.
1.29 "Governmental Authority" means any federal or national, state or
provincial, municipal or local government, governmental authority, regulatory or
administrative agency, governmental commission, department, board, bureau,
agency or instrumentality, political subdivision, commission, court, tribunal,
official, arbitrator or arbitral body, in each case whether U.S. or non-U.S.
1.30 "Indebtedness" means any obligation, contingent or otherwise. Any
obligation secured by a Lien on, or payable out of the proceeds of, or
production from, property of the relevant party will be deemed to be
Indebtedness.
1.31 "Indemnified Persons" has the meaning set forth in Section 8.1.1.
1.32 "Intellectual Property" means all industrial and intellectual
property, including, without limitation, all U.S. and non-U.S. patents, patent
applications, patent rights, trademarks, trademark applications, common law
trademarks, Internet domain names, trade names, service marks, service ▇▇▇▇
applications, common law service marks, and the goodwill associated therewith,
copyrights, in both published and unpublished works, whether registered or
unregistered, copyright applications, franchises, licenses, know-how, trade
secrets, technical data, designs, customer lists, confidential and proprietary
information, processes and formulae, all computer software programs or
applications, layouts, inventions, development tools and all documentation and
media constituting, describing or relating to the above, including manuals,
memoranda, and records, whether such intellectual property has been created,
applied for or obtained anywhere throughout the world.
1.33 "Laws" means, with respect to any Person, any U.S. or non-U.S.
federal, national, state, provincial, local, municipal, international,
multinational or other law (including common law), constitution, statute, code,
ordinance, rule, regulation or treaty applicable to such Person.
1.34 "Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising by
Law.
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1.35 "Material Acquiror Contract" means any and all agreements,
contracts, arrangements, leases, commitments or otherwise, of the Acquiror
Companies, of the type and nature that the Acquiror is required to file with the
Commission.
1.36 "Material Adverse Effect" means, when used with respect to the
Acquiror Companies or the Acquired Companies, as the case may be, any change,
effect or circumstance which, individually or in the aggregate, would reasonably
be expected to (a) have a material adverse effect on the business, assets,
financial condition or results of operations of the Acquiror Companies or the
Acquired Companies, as the case may be, in each case taken as a whole or (b)
materially impair the ability of the Acquiror or the Company, as the case may
be, to perform their obligations under this Agreement, excluding any change,
effect or circumstance resulting from (i) the announcement, pendency or
consummation of the transactions contemplated by this Agreement, (ii) changes in
the United States securities markets generally, or (iii) changes in general
economic, currency exchange rate, political or regulatory conditions in
industries in which the Acquiror Companies or the Acquired Companies, as the
case may be, operate.
1.37 "Order" means any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
Governmental Authority.
1.38 "Organizational Documents" means (a) the articles or certificate
of incorporation and the by-laws or code of regulations of a corporation; (b)
the partnership agreement and any statement of partnership of a general
partnership; (c) the limited partnership agreement and the certificate of
limited partnership of a limited partnership; (d) the articles or certificate of
formation and operating agreement of a limited liability company; (e) any other
document performing a similar function to the documents specified in clauses
(a), (b), (c) and (d) adopted or filed in connection with the creation,
formation or organization of a Person; and (f) any and all amendments to any of
the foregoing.
1.39 "Permitted Liens" means (a) Liens for Taxes not yet payable or in
respect of which the validity thereof is being contested in good faith by
appropriate proceedings and for the payment of which the relevant party has made
adequate reserves; (b) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation, carriers, warehousemen, mechanics,
laborers and materialmen and similar Liens, if the obligations secured by such
Liens are not then delinquent or are being contested in good faith by
appropriate proceedings conducted and for the payment of which the relevant
party has made adequate reserves; (c) statutory Liens incidental to the conduct
of the business of the relevant party which were not incurred in connection with
the borrowing of money or the obtaining of advances or credits and that do not
in the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business; and (d) Liens that
would not have a Material Adverse Effect.
1.40 "Person" means all natural persons, corporations, business trusts,
associations, companies, partnerships, limited liability companies, joint
ventures and other entities, governments, agencies and political subdivisions.
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1.41 "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative or
investigative) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Authority.
1.42 "Regulation S" means Regulation S under the Securities Act, as the
same may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
1.43 "Rule 144" means Rule 144 under the Securities Act, as the same
may be amended from time to time, or any successor statute.
1.44 "Schedule 14(f) Filing" means an information statement filed by
the Acquiror on Schedule 14f-1 under the Exchange Act.
1.45 "Schedules" means the several schedules referred to and identified
herein, setting forth certain disclosures, exceptions and other information,
data and documents referred to at various places throughout this Agreement.
1.46 "SEC Documents" has the meaning set forth in Section 6.26.
1.47 "Section 4(2)" means Section 4(2) under the Securities Act, as the
same may be amended from time to time, or any successor statute.
1.48 "Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same will be in effect at the time.
1.49 "Shares" means the (a) 10,000,000 issued and outstanding shares of
Common Stock, par value US $0.01 of the Company and 1,142,860 issued and
outstanding shares of Series A Preferred Stock, par value US $0.01 of the
Company owned by the Shareholders and exchanged pursuant to this Agreement.
1.50 "Subsidiary" means, with respect to any Person, any corporation,
limited liability company, joint venture or partnership of which such Person (a)
beneficially owns, either directly or indirectly, more than 50% of (i) the total
combined voting power of all classes of voting securities of such entity, (ii)
the total combined equity interests, or (iii) the capital or profit interests,
in the case of a partnership; or (b) otherwise has the power to vote or to
direct the voting of sufficient securities to elect a majority of the board of
directors or similar governing body.
1.51 "Survival Period" has the meaning set forth in Section 11.1.
1.52 "Taxes" means all foreign, federal, state or local taxes, charges,
fees, levies, imposts, duties and other assessments, as applicable, including,
but not limited to, any income, alternative minimum or add-on, estimated, gross
income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise, registration, title, license, capital, paid-up
capital, profits, withholding, payroll, employment, unemployment, excise,
severance, stamp, occupation, premium, real property, recording, personal
property, federal highway use, commercial rent, environmental (including, but
not limited to, taxes under Section 59A of the Code) or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest, penalties or additions to
tax with respect to any of the foregoing; and "Tax" means any of the foregoing
Taxes.
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1.53 "Tax Group" means any federal, state, local or foreign
consolidated, affiliated, combined, unitary or other similar group of which the
Acquiror is now or was formerly a member.
1.54 "Tax Return" means any return, declaration, report, claim for
refund or credit, information return, statement or other similar document filed
with any Governmental Authority with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
1.55 "Transaction Documents" means, collectively, all agreements,
instruments and other documents to be executed and delivered in connection with
the transactions contemplated by this Agreement.
1.56 "U.S." means the United States of America.
1.57 "U.S. Dollars" or "US $" means the currency of the United States
of America.
1.58 "U.S. Person" has the meaning set forth in Regulation S under the
Securities Act and set forth on Exhibit D hereto.
SECTION II
EXCHANGE OF SHARES AND SHARE CONSIDERATION
2.1 SHARE EXCHANGE. Each of the Shareholders desires to transfer to,
and the Acquiror desires to acquire from each Shareholder, that number of Shares
set out beside the respective names of the Shareholders in Exhibit B for the
consideration and on the terms set forth in this Agreement. The aggregate
consideration for the Shares acquired by the Acquiror pursuant to this Agreement
will be 20,000,000 shares of the Acquiror's Common Stock to be issued on a pro
rata basis among the Shareholders based on the percentage of the Shares owned by
such Shareholder as set forth in Exhibit B.
2.2 WITHHOLDING. The Acquiror shall be entitled to deduct and withhold
from the Acquiror Shares otherwise payable pursuant to this Agreement to any
holder of Shares such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code or any provision of state,
local, provincial or foreign tax Law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Shares in respect of which such
deduction and withholding was made.
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2.3 SECTION 368 REORGANIZATION. For U.S. federal income tax purposes,
the exchange by the Shareholders of the Shares for the Acquiror's Common Stock
is intended to constitute a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code. The parties to this Agreement hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
Notwithstanding the foregoing or anything else to the contrary contained in this
Agreement, the parties acknowledge and agree that no party is making any
representation or warranty as to the qualification of the exchange by the
Shareholders of the Shares for the Acquiror's Common Stock as a reorganization
under Section 368 of the Code or as to the effect, if any, that any transaction
consummated prior to the Closing Date has or may have on any such reorganization
status. The parties acknowledge and agree that each (i) has had the opportunity
to obtain independent legal and tax advice with respect to the transaction
contemplated by this Agreement, and (ii) is responsible for paying its own Taxes
including without limitation, any adverse Tax consequences that may result if
the transaction contemplated by this Agreement is not determined to qualify as a
reorganization under Section 368 of the Code.
2.4 DIRECTORS OF ACQUIROR AT CLOSING DATE. By the Closing Date the
current directors of the Acquiror shall appoint Messrs. Simon Mu, ▇▇▇▇▇ ▇▇▇▇,
Junichi Goto, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ as additional members of the Acquiror
Board. Immediately thereafter, ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Ms. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇. ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ shall resign as directors of the Acquiror Board.
SECTION III
CLOSING DATE
3.1 CLOSING DATE. The closing of the share exchange will occur upon
execution of this Agreement on September 22, 2004 or at such later date as all
of the closing conditions set forth in Sections 9 and 10 have been satisfied or
waived (the "Closing Date").
SECTION IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
4.1 GENERALLY. Each Shareholder, severally and not jointly, hereby
represents and warrants to the Acquiror:
4.1.1 AUTHORITY. Such Shareholder has the right, power, authority and
capacity to execute and deliver this Agreement and each of the Transaction
Documents to which such Shareholder is a party, to consummate the transactions
contemplated by this Agreement and each of the Transaction Documents to which
such Shareholder is a party, and to perform such Shareholder's obligations under
this Agreement and each of the Transaction Documents to which such Shareholder
is a party. This Agreement has been, and each of the Transaction Documents to
which such Shareholder is a party will be, duly and validly authorized and
approved, executed and delivered by such Shareholder. Assuming this Agreement
and the Transaction Documents have been duly and validly authorized, executed
and delivered by the parties thereto other than such Shareholder, this Agreement
is, and each of the Transaction Documents to which such Shareholder is a party
have been, duly authorized, executed and delivered by such Shareholder and
constitutes the legal, valid and binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with their respective terms,
except as such enforcement is limited by general equitable principles, or by
bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors rights generally.
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4.1.2 NO CONFLICT. Neither the execution or delivery by such
Shareholder of this Agreement or any Transaction Document to which such
Shareholder is a party, nor the consummation or performance by such Shareholder
of the transactions contemplated hereby or thereby will, directly or indirectly,
(a) contravene, conflict with, or result in a violation of any provision of the
Organization Documents of such Shareholder (if such Shareholder is not a natural
person); (b) contravene, conflict with, constitute a default (or an event or
condition which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination or acceleration of, any agreement
or instrument to which such Shareholder is a party or by which the properties or
assets of such Shareholder are bound; or (c) contravene, conflict with, or
result in a violation of, any Law or Order to which such Shareholder, or any of
the properties or assets of such Shareholder, may be subject.
4.1.3 OWNERSHIP OF SHARES. Such Shareholder owns, of record and
beneficially, and has good, valid and indefeasible title to and the right to
transfer to the Acquiror pursuant to this Agreement, such Shareholder's Shares
free and clear of any and all Liens. There are no options, rights, voting
trusts, stockholder agreements or any other contracts or understandings to which
such Shareholder is a party or by which such Shareholder or such Shareholder's
Shares are bound with respect to the issuance, sale, transfer, voting or
registration of such Shareholder's Shares. At the Closing Date, the Acquiror
will acquire good, valid and marketable title to such Shareholder's Shares free
and clear of any and all Liens.
4.1.4 LITIGATION. There is no pending Proceeding against such
Shareholder that challenges, or may have the effect of preventing, delaying or
making illegal, or otherwise interfering with, any of the transactions
contemplated by this Agreement and, to the knowledge of such Shareholder, no
such Proceeding has been threatened, and no event or circumstance exists that is
reasonably likely to give rise to or serve as a basis for the commencement of
any such Proceeding.
4.1.5 NO BROKERS OR FINDERS. Except as disclosed in Schedule 4.1.5, no
Person has, or as a result of the transactions contemplated herein will have,
any right or valid claim against such Shareholder for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, and such
Shareholder will indemnify and hold the Acquiror harmless against any liability
or expense arising out of, or in connection with, any such claim.
4.2 INVESTMENT REPRESENTATIONS. Each Shareholder, severally and not
jointly, hereby represents and warrants to the Acquiror:
4.2.1 ACKNOWLEDGMENT. Each Shareholder understands and agrees
that the Acquiror Shares have not been registered under the Securities Act or
the securities laws of any state of the U.S. and that the issuance of the
Acquiror Shares is being effected in reliance upon an exemption from
registration afforded either under Section 4(2) of the Securities Act for
transactions by an issuer not involving a public offering or Regulation S for
offers and sales of securities outside the U.S.
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4.2.2 STATUS. By its execution of this Agreement, each
Shareholder, severally and not jointly, represents and warrants to the Acquiror
as indicated on its signature page to this Agreement, either that:
(a) it is an Accredited Investor; or
(b) it is not a U.S. Person.
Each Shareholder severally understands that the Acquiror
Shares are being offered and sold to such Shareholder in reliance upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Shareholder set forth in this Agreement, in order that
the Acquiror may determine the applicability and availability of the exemptions
from registration of the Acquiror Shares on which the Acquiror is relying.
4.2.3 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF ACCREDITED
INVESTORS. Each Shareholder indicating that it is an Accredited Investor on its
signature page to this Agreement, severally and not jointly, further makes the
representations and warranties to the Acquiror set forth on Exhibit E.
4.2.4 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF NON-U.S. PERSONS.
Each Shareholder indicating that it is not a U.S. person on its signature page
to this Agreement, severally and not jointly, further makes the representations
and warranties to the Acquiror set forth on Exhibit F.
4.2.5 STOCK LEGENDS. Each Shareholder hereby agrees with the Acquiror
as follows:
(a) SECURITIES ACT LEGEND - ACCREDITED INVESTORS. The
certificates evidencing the Acquiror Shares issued to those
Shareholders who are Accredited Investors, and each certificate issued
in transfer thereof, will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT
(1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (2) PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION
OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
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(b) SECURITIES ACT LEGEND - NON-U.S. PERSONS. The certificates
evidencing the Acquiror Shares issued to those Shareholders who are not
U.S. Persons, and each certificate issued in transfer thereof, will
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT
(1) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER
THE SECURITIES ACT, AND BASED ON AN OPINION OF COUNSEL, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THE
PROVISIONS OF REGULATION S HAVE BEEN SATISFIED (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR (3) PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE SECURITIES ACT.
(c) OTHER LEGENDS. The certificates representing such Acquiror
Shares, and each certificate issued in transfer thereof, will also bear
any other legend required under any applicable Law, including, without
limitation, any U.S. state corporate and state securities law, or
contract.
(d) OPINION. No Shareholder will transfer any or all of the
Acquiror Shares pursuant to Regulation S or absent an effective
registration statement under the Securities Act and applicable state
securities law covering the disposition of such Shareholder's Acquiror
Shares, without first providing the Acquiror with an opinion of counsel
(which counsel and opinion are reasonably satisfactory to the Acquiror)
to the effect that such transfer will be made in compliance with
Regulation S or will be exempt from the registration and the prospectus
delivery requirements of the Securities Act and the registration or
qualification requirements of any applicable U.S. state securities
laws.
(e) CONSENT. Each Shareholder understands and acknowledges
that the Acquiror may refuse to transfer the Acquiror Shares, unless
such Shareholder complies with this Section 4.2.5 and any other
restrictions on transferability set forth in Exhibits E and F. Each
Shareholder consents to the Acquiror making a notation on its records
or giving instructions to any transfer agent of the Acquiror's Common
Stock in order to implement the restrictions on transfer of the
Acquiror Shares.
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(f) SHAREHOLDERS OF SERIES A PREFERRED STOCK. Those
Shareholders of Series A Preferred Stock of the Company hereby
acknowledge and agree that upon the exchange of their shares of Series
A Preferred Stock of the Company for their respective pro-rata share of
Acquiror's Common Stock, such Shareholders shall relinquish any and all
rights, powers, preferences and privileges they may have had with
respect to the shares of Series A Preferred Stock of the Company. The
Shareholders of the Series A Preferred Stock of the Company further
acknowledge and agree that effective as of the date of such exchange,
the Subscription Agreement, dated March 23, 2000, by and among the
Company (formerly known as ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.), Lotus Liberator Fund,
▇▇▇▇▇ ▇. Mu and ▇▇▇ ▇▇▇▇▇ ▇▇▇, and the Registration Rights Agreements,
dated as of March 23, 2000 by and between the Company (formerly known
as ▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.) and Lotus, shall terminate and no longer be in
effect.
SECTION V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
5.1 ORGANIZATION AND QUALIFICATION. The Company is duly incorporated
and validly existing under the laws of the Cayman Islands, has all requisite
authority and power (corporate and other), governmental licenses,
authorizations, consents and approvals to carry on its business as presently
conducted and as contemplated to be conducted, to own, hold and operate its
properties and assets as now owned, held and operated by it, to enter into this
Agreement, to carry out the provisions hereof except where the failure to be so
organized, existing and in good standing or to have such authority or power will
not, in the aggregate, either (i) have a material adverse effect on the
business, assets or financial condition of the Company, or (ii) materially
impair the ability of the Company and the Shareholders each to perform their
material obligations under this Agreement (any of such effects or impairments, a
"Material Adverse Effect"). The Company is duly qualified, licensed or
domesticated as a foreign corporation in good standing in each jurisdiction
wherein the nature of its activities or its properties owned or leased makes
such qualification, licensing or domestication necessary, except where the
failure to be so qualified, licensed or domesticated will not have a Material
Adverse Effect. Set forth on Schedule 5.1 is a list of those jurisdictions in
which the Company presently conducts its business, owns, holds and operates its
properties and assets.
5.2 SUBSIDIARIES. Except as set forth on Schedule 5.2, the Company does
not own directly or indirectly, any equity or other ownership interest in any
corporation, partnership, joint venture or other entity or enterprise.
5.3 ARTICLES OF INCORPORATION AND BYLAWS. The copies of the Amended and
Restated Memorandum and Articles of Association of the Company adopted on
September 30, 2003 (the "Organizational Documents") that have been delivered to
the Acquiror prior to the execution of this Agreement are true and complete and
have not been amended or repealed. The Company is not in violation or breach of
any of the provisions of the Organizational Documents, except for such
violations or breaches as, in the aggregate, will not have a Material Adverse
Effect.
11
5.4 AUTHORIZATION AND VALIDITY OF THIS AGREEMENT. The execution,
delivery and performance by the Company of this Agreement and the recording of
the transfer of the Shares and the delivery of the Shares are within the
Company's corporate powers, have been duly authorized by all necessary corporate
action, do not require from the Board or Shareholders of the Company any consent
or approval that has not been validly and lawfully obtained, require no
authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality of government that has not been validly and
lawfully obtained, filed or registered, as the case may be, except for those
that, if not obtained or made would not have a Material Adverse Effect.
5.5 NO VIOLATION. None of the execution, delivery or performance by the
Company of this Agreement or any other agreement or instrument contemplated
hereby to which the Company is a party, nor the consummation by the Company of
the transactions contemplated hereby violates any provision of the
Organizational Documents, or violates or conflicts with, or constitute a default
(or an event or condition which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or acceleration of, or
result in the creation of imposition of any Lien under, any agreement or
instrument to which the Company is a party or by which the Company is or will be
bound or subject, or violate any laws.
5.6 BINDING OBLIGATIONS. Assuming this Agreement has been duly and
validly authorized, executed and delivered by the Acquiror, the Acquiror
Shareholders and the Shareholders of the Company, this Agreement is and all
other agreements or instruments contemplated hereby to which the Company is a
party, have been duly authorized, executed and delivered by the Company and are
the legal, valid and binding Agreement of the Company and is enforceable against
the Company in accordance with its terms, except as such enforcement is limited
by general equitable principles, or by bankruptcy, insolvency and other similar
laws affecting the enforcement of creditors rights generally.
5.7 CAPITALIZATION AND RELATED MATTERS.
5.7.1 CAPITALIZATION. The authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock, of which 10,000,000
shares of Common Stock are issued and outstanding and 10,000,000 shares of
Series A Preferred Stock, of which 1,142,860 shares of Series A Preferred Stock
are issued and outstanding. Except as set forth in Schedule 5.7.1, there are no
outstanding or authorized options, warrants, calls, subscriptions, rights
(including any preemptive rights or rights of first refusal), agreements or
commitments of any character obligating the Company to issue any shares of its
Common Stock or any other Equity Security of the Company. All issued and
outstanding shares of the Company's capital stock are duly authorized, validly
issued, fully paid and nonassessable and have not been issued in violation of
any preemptive or similar rights.
5.7.2 NO REDEMPTION REQUIREMENTS. Except as set forth in
Schedule 5.7.2, there are no outstanding contractual obligations (contingent or
otherwise) of the Company to retire, repurchase, redeem or otherwise acquire any
outstanding shares of capital stock of, or other ownership interests in, the
Company or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any other entity.
12
5.7.3 DULY AUTHORIZED. The exchange of the Shares has been
duly authorized and, upon delivery to the Acquiror of certificates therefor in
accordance with the terms of this Agreement, the Shares will have been validly
issued and fully paid and will be nonassessable, have the rights, preferences
and privileges specified, will be free of preemptive rights and will be free and
clear of all Liens and restrictions, other than Liens set forth on Schedule
5.7.3 or that might have been created by the Acquiror and restrictions on
transfer imposed by this Agreement and the Securities Act.
5.8 SHAREHOLDERS. Exhibit B contains a true and complete list of the
names and addresses of the record and beneficial holders of all of the
outstanding Equity Securities of the Company. Except as expressly provided in
this Agreement, no Holder of Shares or any other security of the Company or any
other Person is entitled to any preemptive right, right of first refusal or
similar right as a result of the issuance of the shares or otherwise. There is
no voting trust, agreement or arrangement among any of the Holders of any Equity
Securities of the Company affecting the exercise of the voting rights of any
such Equity Securities.
5.9 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Except as would not
have a Material Adverse Effect, the business and operations of the Company have
been and are being conducted in accordance with all applicable foreign, federal,
state and local laws, rules and regulations and all applicable orders,
injunctions, decrees, writs, judgments, determinations and awards of all courts
and governmental agencies and instrumentalities. Except as would not have a
Material Adverse Effect, the Company is not, and is not alleged to be, in
violation of, or (with or without notice or lapse of time or both) in default
under, or in breach of, any term or provision of the Organizational Documents or
of any indenture, loan or credit agreement, note, deed of trust, mortgage,
security agreement or other material agreement, lease, license or other
instrument, commitment, obligation or arrangement to which the Company is a
party or by which any of the Company's properties, assets or rights are bound or
affected. To the knowledge of the Company, no other party to any material
contract, agreement, lease, license, commitment, instrument or other obligation
to which the Company is a party is (with or without notice or lapse of time or
both) in default thereunder or in breach of any term thereof. The Company is not
subject to any obligation or restriction of any kind or character, nor is there,
to the knowledge of the Company, any event or circumstance relating to the
Company that materially and adversely affects in any way its business,
properties, assets or prospects or that prohibits the Company from entering into
this Agreement or would prevent or make burdensome its performance of or
compliance with all or any part of this Agreement or the consummation of the
transactions contemplated hereby or thereby.
5.10 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against the Company and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated in this Agreement. To the Company's knowledge, no such
Proceeding has been threatened.
5.11 NO BROKERS OR FINDERS. Except as disclosed in Schedule 5.11, no
person has, or as a result of the transactions contemplated herein will have,
any right or valid claim against the Company for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, and the Company
will indemnify and hold the Acquiror harmless against any liability or expense
arising out of, or in connection with, any such claim.
13
5.12 TITLE TO AND CONDITION OF PROPERTIES. The Company owns or holds
under valid leases or other rights to use all real property, plants, machinery
and equipment necessary for the conduct of the business of the Company as
presently conducted, except where the failure to own or hold such property,
plants, machinery and equipment would not have a Material Adverse Effect on the
Company. The material buildings, plants, machinery and equipment necessary for
the conduct of the business of the Company as presently conducted are
structurally sound, are in good operating condition and repair and are adequate
for the uses to which they are being put, in each case, taken as a whole, and
none of such buildings, plants, machinery or equipment is in need of maintenance
or repairs, except for ordinary, routine maintenance and repairs that are not
material in nature or cost.
5.13 BOARD RECOMMENDATION. The Board has, by unanimous written consent,
determined that this Agreement and the transactions contemplated by this
Agreement, are advisable and in the best interests of the Company's
Shareholders.
SECTION VI
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR AND THE
ACQUIROR SHAREHOLDERS
The Acquiror and the Acquiror Shareholders, jointly and severally,
represents and warrants to the Shareholders and the Company as follows:
6.1 ORGANIZATION AND QUALIFICATION. Each of the Acquiror Companies is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all requisite authority and power (corporate
and other), governmental licenses, authorizations, consents and approvals to
carry on its business as presently conducted and to own, hold and operate its
properties and assets as now owned, held and operated by it, except where the
failure to be so organized, existing and in good standing, or to have such
authority and power, governmental licenses, authorizations, consents or
approvals would not have a Material Adverse Effect. Each of the Acquiror
Companies is duly qualified, licensed or domesticated as a foreign corporation
in good standing in each jurisdiction wherein the nature of its activities or
its properties owned, held or operated makes such qualification, licensing or
domestication necessary, except where the failure to be so duly qualified,
licensed or domesticated and in good standing would not have a Material Adverse
Effect. Schedule 6.1 sets forth a true, correct and complete list of each
Acquiror Company's jurisdiction of organization and each other jurisdiction in
which such Acquiror Company presently conducts its business or owns, holds and
operates its properties and assets.
6.2 SUBSIDIARIES. Except as set forth on Schedule 6.2, no Acquiror
Company owns, directly or indirectly, any equity or other ownership interest in
any corporation, partnership, joint venture or other entity or enterprise.
14
6.3 ORGANIZATIONAL DOCUMENTS. True, correct and complete copies of the
Organizational Documents of each Acquiror Company have been delivered to the
Company prior to the execution of this Agreement, and no action has been taken
to amend or repeal such Organizational Documents except for the filing of the
Certificate of Amendment to the Certificate of Incorporation of the Acquiror,
dated September 22, 2004 and filed September 23, 2004. No Acquiror Company is in
violation or breach of any of the provisions of its Organizational Documents,
except for such violations or breaches as would not have a Material Adverse
Effect.
6.4 AUTHORIZATION. The Acquiror has all requisite authority and power
(corporate and other), governmental licenses, authorizations, consents and
approvals to enter into this Agreement and each of the Transaction Documents to
which the Acquiror is a party, to consummate the transactions contemplated by
this Agreement and each of the Transaction Documents to which the Acquiror is a
party and to perform its obligations under this Agreement and each of the
Transaction Documents to which the Acquiror is a party. The execution, delivery
and performance by the Acquiror of this Agreement and each of the Transaction
Documents to which the Acquiror is a party have been duly authorized by all
necessary corporate action and do not require from the Acquiror Board or the
stockholders of the Acquiror any consent or approval that has not been validly
and lawfully obtained. The execution, delivery and performance by the Acquiror
of this Agreement and each of the Transaction Documents to which the Acquiror is
a party requires no authorization, consent, approval, license, exemption of or
filing or registration with any Governmental Authority or other Person other
than (a) the Schedule 14(f) Filing, and (b) such other customary filings with
the Commission for transactions of the type contemplated by this Agreement.
6.5 NO VIOLATION. Neither the execution nor the delivery by the
Acquiror of this Agreement or any Transaction Document to which the Acquiror is
a party, nor the consummation or performance by the Acquiror of the transactions
contemplated hereby or thereby will, directly or indirectly, (a) contravene,
conflict with, or result in a violation of any provision of the Organizational
Documents of any Acquiror Company; (b) contravene, conflict with, constitute a
default (or an event or condition which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or acceleration
of, or result in the imposition or creation of any Lien under, any agreement or
instrument to which any Acquiror Company is a party or by which the properties
or assets of any Acquiror Company are bound; (c) contravene, conflict with, or
result in a violation of, any Law or Order to which any Acquiror Company, or any
of the properties or assets owned or used by any Acquiror Company, may be
subject; or (d) contravene, conflict with, or result in a violation of, the
terms or requirements of, or give any Governmental Authority the right to
revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits,
authorizations, approvals, franchises or other rights held by any Acquiror
Company or that otherwise relate to the business of, or any of the properties or
assets owned or used by, any Acquiror Company, except, in the case of clause
(b), (c), or (d), for any such contraventions, conflicts, violations, or other
occurrences as would not have a Material Adverse Effect.
6.6 BINDING OBLIGATIONS. Assuming this Agreement and the Transaction
Documents have been duly and validly authorized, executed and delivered by the
parties thereto other than the Acquiror, this Agreement and each of the
Transaction Documents to which the Acquiror is a party are duly authorized,
executed and delivered by the Acquiror and constitutes the legal, valid and
15
binding obligations of the Acquiror, enforceable against the Acquiror in
accordance with their respective terms, except as such enforcement is limited by
general equitable principles, or by bankruptcy, insolvency and other similar
Laws affecting the enforcement of creditors rights generally.
6.7 SECURITIES LAWS. Assuming the accuracy of the representations and
warranties of the Shareholders contained in Section 4 and Exhibits E and F, the
issuance of the Acquiror Shares pursuant to this Agreement are (a) exempt from
the registration and prospectus delivery requirements of the Securities Act, (b)
have been registered or qualified (or are exempt from registration and
qualification) under the registration permit or qualification requirements of
all applicable state securities laws, and (c) accomplished in conformity with
all other applicable federal and state securities laws.
6.8 CAPITALIZATION AND RELATED MATTERS.
6.8.1 CAPITALIZATION. The authorized capital stock of the
Acquiror consists of 25,000,000 shares of the Acquiror's Common Stock, of which
5,000,000 shares are issued and outstanding. All issued and outstanding shares
of the Acquiror's Common Stock are duly authorized, validly issued, fully paid
and nonassessable, and have not been issued in violation of any preemptive or
similar rights. At the Closing Date, the Acquiror will have sufficient
authorized and unissued Acquiror's Common Stock to consummate the transactions
contemplated hereby. Except as disclosed in Schedule 6.8.1 or the SEC Documents,
there are no outstanding options, warrants, purchase agreements, participation
agreements, subscription rights, conversion rights, exchange rights or other
securities or contracts that could require the Acquiror to issue, sell or
otherwise cause to become outstanding any of its authorized but unissued shares
of capital stock or any securities convertible into, exchangeable for or
carrying a right or option to purchase shares of capital stock or to create,
authorize, issue, sell or otherwise cause to become outstanding any new class of
capital stock. There are no outstanding stockholders' agreements, voting trusts
or arrangements, registration rights agreements, rights of first refusal or
other contracts pertaining to the capital stock of the Acquiror. The issuance of
all of the shares of Acquiror's Common Stock described in this Section 6.8.1
have been in compliance with U.S. federal and state securities laws.
6.8.2 NO REDEMPTION REQUIREMENTS. Except as set forth in
Schedule 6.8.2 or in the SEC Documents, there are no outstanding contractual
obligations (contingent or otherwise) of the Acquiror to retire, repurchase,
redeem or otherwise acquire any outstanding shares of capital stock of, or other
ownership interests in, the Acquiror or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
other Person.
6.8.3 DULY AUTHORIZED. The issuance of the Acquiror Shares has
been duly authorized and, upon delivery to the Shareholders of certificates
therefor in accordance with the terms of this Agreement, the Acquiror Shares
will have been validly issued and fully paid, and will be nonassessable, have
the rights, preferences and privileges specified, will be free of preemptive
rights and will be free and clear of all Liens and restrictions, other than
Liens created by the Shareholders and restrictions on transfer imposed by this
Agreement and the Securities Act.
16
6.8.4 SUBSIDIARIES. The capitalization of each Acquiror
Subsidiary is as set forth on Schedule 6.8.4. The issued and outstanding shares
of capital stock of each Acquiror Subsidiary set forth on such schedule have
been duly authorized and are validly issued and outstanding, fully paid and
non-assessable, and constitute all of the issued and outstanding capital stock
of such Acquiror Subsidiary. The owners of the shares of each of the Acquiror
Subsidiaries set forth on Schedule 6.8.4 own, and have good, valid and
marketable title to, all shares of capital stock of such Subsidiaries. There are
no outstanding or authorized options, warrants, purchase agreements,
participation agreements, subscription rights, conversion rights, exchange
rights or other securities or contracts that could require any of the Acquiror
Subsidiaries to issue, sell or otherwise cause to become outstanding any of its
respective authorized but unissued shares of capital stock or any securities
convertible into, exchangeable for or carrying a right or option to purchase
shares of capital stock or to create, authorize, issue, sell or otherwise cause
to become outstanding any new class of capital stock. There are no outstanding
stockholders' agreements, voting trusts or arrangements, registration rights
agreements, rights of first refusal or other contracts pertaining to the capital
stock of any of the Acquiror Subsidiaries. None of the outstanding shares of
capital stock of any of the Acquiror Subsidiaries has been issued in violation
of any rights of any Person or in violation of any Law.
6.9 COMPLIANCE WITH LAWS. Except as would not have a Material Adverse
Effect, the business and operations of each Acquiror Company have been and are
being conducted in accordance with all applicable Laws and Orders. Except as
would not have a Material Adverse Effect, no Acquiror Company has received
notice of any violation (or any Proceeding involving an allegation of any
violation) of any applicable Law or Order by or affecting such Acquiror Company
and, to the knowledge of the Acquiror, no Proceeding involving an allegation of
violation of any applicable Law or Order is threatened or contemplated. Except
as would not have a Material Adverse Effect, no Acquiror Company is subject to
any obligation or restriction of any kind or character, nor is there, to the
knowledge of the Acquiror, any event or circumstance relating to any Acquiror
Company that materially and adversely affects in any way its business,
properties, assets or prospects or that prohibits the Acquiror from entering
into this Agreement or would prevent or make burdensome its performance of or
compliance with all or any part of this Agreement or the consummation of the
transactions contemplated hereby.
6.10 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against the Acquiror and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated by this Agreement. To the knowledge of the Acquiror,
no such Proceeding has been threatened.
6.11 NO BROKERS OR FINDERS. Except as disclosed in Schedule 6.11, no
Person has, or as a result of the transactions contemplated herein will have,
any right or valid claim against any Acquiror Company for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, and the
Acquiror will indemnify and hold the Company harmless against any liability or
expense arising out of, or in connection with, any such claim.
17
6.12 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 6.12 or in the SEC Documents, no Acquiror Company has any debt,
obligation or liability (whether accrued, absolute, contingent, liquidated or
otherwise, whether due or to become due, whether or not known to such Acquiror
Company) arising out of any transaction entered into at or prior to the Closing
Date or any act or omission at or prior to the Closing Date, except to the
extent set forth on or reserved against on the Acquiror Balance Sheet. Except as
set forth on Schedule 6.12, no Acquiror Company has incurred any liabilities or
obligations under agreements entered into, in the usual and ordinary course of
business since [____________].
6.13 CHANGES. Except as set forth on Schedule 6.13 or in the SEC
Documents, no Acquiror Company has, since [______________, 2004]:
6.13.1 ORDINARY COURSE OF BUSINESS. Conducted its business or
entered into any transaction other than in the usual and ordinary course of
business, except for this Agreement.
6.13.2 ADVERSE CHANGES. Suffered or experienced any change in,
or affecting, its condition (financial or otherwise), properties, assets,
liabilities, business, operations, results of operations or prospects other than
changes, events or conditions in the usual and ordinary course of its business,
none of which would have a Material Adverse Effect;
6.13.3 LOANS. Made any loans or advances to any Person other
than travel advances and reimbursement of expenses made to employees, officers
and directors in the ordinary course of business;
6.13.4 LIENS. Created or permitted to exist any Lien on any
material property or asset of the Acquiror Companies, other than Permitted
Liens;
6.13.5 CAPITAL STOCK. Issued, sold, disposed of or encumbered,
or authorized the issuance, sale, disposition or encumbrance of, or granted or
issued any option to acquire any shares of its capital stock or any other of its
securities or any Equity Security, or altered the term of any of its outstanding
securities or made any change in its outstanding shares of capital stock or its
capitalization, whether by reason of reclassification, recapitalization, stock
split, combination, exchange or readjustment of shares, stock dividend or
otherwise;
6.13.6 DIVIDENDS. Declared, set aside, made or paid any
dividend or other distribution to any of its stockholders;
6.13.7 MATERIAL ACQUIROR CONTRACTS. Terminated or modified any
Material Acquiror Contract, except for termination upon expiration in accordance
with the terms thereof;
6.13.8 CLAIMS. Released, waived or cancelled any claims or
rights relating to or affecting such Acquiror Company in excess of [US $10,000]
in the aggregate or instituted or settled any Proceeding involving in excess of
[US $10,000] in the aggregate;
6.13.9 DISCHARGED LIABILITIES. Paid, discharged or satisfied
any claim, obligation or liability in excess of [US $10,000] in the aggregate,
except for liabilities incurred prior to the date of this Agreement in the
ordinary course of business;
18
6.13.10 INDEBTEDNESS. Created, incurred, assumed or otherwise
become liable for any Indebtedness in excess of [US $10,000] in the aggregate,
other than professional fees;
6.13.11 GUARANTEES. Guaranteed or endorsed in a material
amount any obligation or net worth of any Person;
6.13.12 ACQUISITIONS. Acquired the capital stock or other
securities or any ownership interest in, or substantially all of the assets of,
any other Person;
6.13.13 ACCOUNTING. Changed its method of accounting or the
accounting principles or practices utilized in the preparation of its financial
statements, other than as required by GAAP;
6.13.14 AGREEMENTS. Except as set forth on Schedule 6.13.14 or
in the SEC Documents, entered into any agreement, or otherwise obligated itself,
to do any of the foregoing.
6.14 MATERIAL ACQUIROR CONTRACTS. Except to the extent filed with the
SEC Documents, the Acquiror has made available to the Company, prior to the date
of this Agreement, true, correct and complete copies of each written Material
Acquiror Contract, including each amendment, supplement and modification
thereto.
6.14.1 NO DEFAULTS. Each Material Acquiror Contract is a valid
and binding agreement of the Acquiror Company that is party thereto, and is in
full force and effect. Except as would not have a Material Adverse Effect, no
Acquiror Company is in breach or default of any Material Acquiror Contract to
which it is a party and, to the knowledge of the Acquiror, no other party to any
Material Acquiror Contract is in breach or default thereof. Except as would not
have a Material Adverse Effect, no event has occurred or circumstance exists
that (with or without notice or lapse of time) would (a) contravene, conflict
with or result in a violation or breach of, or become a default or event of
default under, any provision of any Material Acquiror Contract or (b) permit any
Acquiror Company or any other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Material Acquiror Contract. No Acquiror Company has
received notice of the pending or threatened cancellation, revocation or
termination of any Material Acquiror Contract to which it is a party. There are
no renegotiations of, or attempts to renegotiate, or outstanding rights to
renegotiate any material terms of any Material Acquiror Contract.
6.15 EMPLOYEES.
6.15.1 Except as set forth on Schedule 6.15.1, the Acquiror
Companies have no employees, independent contractors or other Persons providing
research or other services to them. Except as would not have a Material Adverse
Effect, each Acquiror Company is in full compliance with all Laws regarding
employment, wages, hours, benefits, equal opportunity, collective bargaining,
the payment of Social Security and other taxes, occupational safety and health
and plant closing. No Acquiror Company is liable for the payment of any
compensation, damages, taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing Laws.
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6.15.2 No director, officer or employee of any Acquiror
Company is a party to, or is otherwise bound by, any contract (including any
confidentiality, noncompetition or proprietary rights agreement) with any other
Person that in any way adversely affects or will materially affect (a) the
performance of his or her duties as a director, officer or employee of such
Acquiror Company or (b) the ability of such Acquiror Company to conduct its
business. Except as set forth on Schedule 6.15.2, each employee of each Acquiror
Company is employed on an at-will basis and no Acquiror Company has any contract
with any of its employees which would interfere with such Acquiror Company's
ability to discharge its employees.
6.16 TAX RETURNS AND AUDITS.
6.16.1 TAX RETURNS. The Acquiror Companies have filed all
material Tax Returns required to be filed by or on behalf of the Acquiror
Companies and have paid all material Taxes of each Acquiror Company required to
have been paid (whether or not reflected on any Tax Return). Except as set forth
on Schedule 6.16.1, (a) no Governmental Authority in any jurisdiction has made a
claim, assertion or threat to such Acquiror Company that such Acquiror Company
is or may be subject to taxation by such jurisdiction; (b) there are no Liens
with respect to Taxes on any Acquiror Company's property or assets other than
Permitted Liens; and (c) there are no Tax rulings, requests for rulings, or
closing agreements relating to any Acquiror Company for any period (or portion
of a period) that would affect any period after the date hereof.
6.16.2 NO ADJUSTMENTS, CHANGES. No Acquiror Company nor any
other Person on behalf of any Acquiror Company (a) has executed or entered into
a closing agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law; or
(b) has agreed to or is required to make any adjustments pursuant to Section
481(a) of the Code or any similar provision of state, local or foreign law.
6.16.3 NO DISPUTES. There is no pending audit, examination,
investigation, dispute, proceeding or claim with respect to any Taxes of the
Acquiror Companies, nor is any such claim or dispute pending or contemplated.
The Acquiror has delivered to the Company true, correct and complete copies of
all Tax Returns, if any, examination reports and statements of deficiencies
assessed or asserted against or agreed to by the Acquiror Companies since their
inception and any and all correspondence with respect to the foregoing.
6.16.4 NOT A U.S. REAL PROPERTY HOLDING CORPORATION. The
Acquiror is not and has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code at any time
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
6.16.5 NO TAX ALLOCATION, SHARING. The Acquiror is not a party
to any Tax allocation or sharing agreement. Other than with respect to the Tax
Group of which the Acquiror is the common parent, no Acquiror Company (a) has
been a member of a Tax Group filing a consolidated income Tax Return under
Section 1501 of the Code (or any similar provision of state, local or foreign
law), and (b) has any liability for Taxes for any Person under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law) as a transferee or successor, by contract or otherwise.
20
6.16.6 NO OTHER ARRANGEMENTS. No Acquiror Company is a party
to any agreement, contract or arrangement for services that would result,
individually or in the aggregate, in the payment of any amount that would not be
deductible by reason of Section 162(m), 280G or 404 of the Code. The Acquiror
Companies are not "consenting corporations" within the meaning of Section 341(f)
of the Code. The Acquiror Companies do not have any "tax-exempt bond financed
property" or "tax-exempt use property" within the meaning of Section 168(g) or
(h), respectively of the Code. No Acquiror Company has any outstanding closing
agreement, ruling request, request for consent to change a method of accounting,
subpoena or request for information to or from a Governmental Authority in
connection with any Tax matter. During the last two years, none of the Acquiror
Companies has engaged in any exchange with a related party (within the meaning
of Section 1031(f) of the Code) under which gain realized was not recognized by
reason of Section 1031 of the Code. The Company is not a party to any reportable
transaction within the meaning of Treasury Regulation Section 1.6011-4.
6.17 MATERIAL ASSETS. The financial statements of the Acquiror set
forth in the SEC Documents reflect the material properties and assets (real and
personal) owned or leased by each Acquiror Company.
6.18 INSURANCE COVERAGE. The Acquiror has made available to the
Company, prior to the date of this Agreement, true, correct and complete copies
of any insurance policies maintained by each Acquiror Company on its properties
and assets. Except as would not have a Material Adverse Effect, all of such
policies (a) taken together, provide adequate insurance coverage for the
properties, assets and operations of each Acquiror Company for all risks
normally insured against by a Person carrying on the same business as such
Acquiror Company, and (b) are sufficient for compliance with all applicable Laws
and Material Acquiror Contracts. Except as would not have a Material Adverse
Effect, all of such policies are valid, outstanding and in full force and effect
and, by their express terms, will continue in full force and effect following
the consummation of the transactions contemplated by this Agreement. Except as
set forth on Schedule 6.18, no Acquiror Company has received (a) any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights, or (b) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform its obligations
thereunder. All premiums due on such insurance policies on or prior to the date
hereof have been paid. There are no pending claims with respect to any Acquiror
Company or its properties or assets under any such insurance policies, and there
are no claims as to which the insurers have notified any Acquiror Company that
they intend to deny liability. There is no existing default under any such
insurance policies.
6.19 LITIGATION; ORDERS. Except as set forth on Schedule 6.19, there is
no Proceeding (whether federal, state, local or foreign) pending or, to the
knowledge of the Acquiror, threatened against or affecting any Acquiror Company
or any Acquiror Company's properties, assets, business or employees. To the
knowledge of the Acquiror, there is no fact that might result in or form the
basis for any such Proceeding. No Acquiror Company is subject to any Orders.
21
6.20 LICENSES. Except as would not have a Material Adverse Effect, each
Acquiror Company possesses from the appropriate Governmental Authority all
licenses, permits, authorizations, approvals, franchises and rights that are
necessary for such Acquiror Company to engage in its business as currently
conducted and to permit such Acquiror Company to own and use its properties and
assets in the manner in which it currently owns and uses such properties and
assets (collectively, "Acquiror Permits"). No Acquiror Company has received
notice from any Governmental Authority or other Person that there is lacking any
license, permit, authorization, approval, franchise or right necessary for such
Acquiror Company to engage in its business as currently conducted and to permit
such Acquiror Company to own and use its properties and assets in the manner in
which it currently owns and uses such properties and assets. Except as would not
have a Material Adverse Effect, the Acquiror Permits are valid and in full force
and effect. Except as would not have a Material Adverse Effect, no event has
occurred or circumstance exists that may (with or without notice or lapse of
time): (a) constitute or result, directly or indirectly, in a violation of or a
failure to comply with any Acquiror Permit; or (b) result, directly or
indirectly, in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Acquiror Permit. No Acquiror Company
has received notice from any Governmental Authority or any other Person
regarding: (a) any actual, alleged, possible or potential contravention of any
Acquiror Permit; or (b) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to, any
Acquiror Permit. All applications required to have been filed for the renewal of
such Company Permits have been duly filed on a timely basis with the appropriate
Persons, and all other filings required to have been made with respect to such
Acquiror Permits have been duly made on a timely basis with the appropriate
Persons. All Acquiror Permits are renewable by their terms or in the ordinary
course of business without the need to comply with any special qualification
procedures or to pay any amounts other than routine fees or similar charges, all
of which have, to the extent due, been duly paid.
6.21 INTERESTED PARTY TRANSACTIONS. Except as disclosed in Schedule
6.21, no officer, director or stockholder of any Acquiror Company or any
Affiliate or "associate" (as such term is defined in Rule 405 of the Commission
under the Securities Act) of any such Person, has or has had, either directly or
indirectly, (1) an interest in any Person which (a) furnishes or sells services
or products which are furnished or sold or are proposed to be furnished or sold
by any Acquiror Company, or (b) purchases from or sells or furnishes to, or
proposes to purchase from, sell to or furnish any Acquiror Company any goods or
services; or (2) a beneficial interest in any contract or agreement to which any
Acquiror Company is a party or by which it may be bound or affected.
6.22 GOVERNMENTAL INQUIRIES. The Acquiror has provided to the Company a
copy of each material written inspection report, questionnaire, inquiry, demand
or request for information received by any Acquiror Company from any
Governmental Authority, and the applicable Acquiror Company's response thereto,
and each material written statement, report or other document filed by any
Acquiror Company with any Governmental Authority.
6.23 BANK ACCOUNTS AND SAFE DEPOSIT BOXES. Schedule 6.23 discloses the
title and number of each bank or other deposit or financial account, and each
lock box and safety deposit box used by each Acquiror Company, the financial
institution at which that account or box is maintained and the names of the
persons authorized to draw against the account or otherwise have access to the
account or box, as the case may be.
22
6.24 INTELLECTUAL PROPERTY. No Acquiror Company owns, uses or licenses
any Intellectual Property in its business as presently conducted, except as set
forth in the SEC Documents.
6.25 TITLE TO AND CONDITION OF PROPERTIES. Except as would not have a
Material Adverse Effect, each Acquiror Company owns (with good and marketable
title in the case of real property) or holds under valid leases or other rights
to use all real property, plants, machinery, equipment and other personal
property necessary for the conduct of its business as presently conducted, free
and clear of all Liens, except Permitted Liens. The material buildings, plants,
machinery and equipment necessary for the conduct of the business of each
Acquiror Company as presently conducted are structurally sound, are in good
operating condition and repair and are adequate for the uses to which they are
being put, and none of such buildings, plants, machinery or equipment is in need
of maintenance or repairs, except for ordinary, routine maintenance and repairs
that are not material in nature or cost.
6.26 SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as set forth on
Schedule 6.26, the Acquiror has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the three years preceding the date hereof (or such shorter period as the
Acquiror was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC Documents") and, while not
having filed all such SEC Documents prior to the expiration of any extension(s),
is nevertheless current with respect to its Exchange Act filing requirements. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statement therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Acquiror is
a party or to which the property or assets of the Acquiror are subject have been
appropriately filed as exhibits to the SEC Documents as and to the extent
required under the Exchange Act. The financial statements of the Acquiror
included in the SEC Documents comply in all material respects with applicable
accounting requirement and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto, or, in the case of unaudited statements
as permitted by Form 10-Q of the Commission), and fairly present in all material
respects (subject in the case of unaudited statements, to normal, recurring
audit adjustments) the financial position of the Acquiror as at the dates
thereof and the results of its operations and cash flows for the periods then
ended. The Acquiror's Common Stock is listed on the OTC Bulletin Board, and the
Acquiror is not aware of any facts which would make the Acquiror's Common Stock
ineligible for quotation on the OTC Bulletin Board.
23
6.27 STOCK OPTION PLANS; EMPLOYEE BENEFITS.
6.27.1 Set forth on Schedule 6.27.1 is a complete list of all
stock option plans providing for the grant by the Acquiror of stock options to
directors, officers or employees. Except as disclosed on Schedule 6.27.1, all
such stock option plans are Approved Plans.
6.27.2 None of the Acquiror Companies has any employee benefit
plans or arrangements covering their present and former employees or providing
benefits to such persons in respect of services provided such Acquiror Company.
6.27.3 Neither the consummation of the transactions
contemplated hereby alone, nor in combination with another event, with respect
to each director, officer, employee and consultant of the Acquiror, will result
in (a) any payment (including, without limitation, severance, unemployment
compensation or bonus payments) becoming due from the Acquiror, (b) any increase
in the amount of compensation or benefits payable to any such individual or (c)
any acceleration of the vesting or timing of payment of compensation payable to
any such individual. No agreement, arrangement or other contract of the Acquiror
provides benefits or payments contingent upon, triggered by, or increased as a
result of a change in the ownership or effective control of the Acquiror.
6.28 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth on Schedule
6.28 or in the SEC Documents and except as would not have a Material Adverse
Effect:
6.28.1 Each Acquiror Company has at all time been and is in
compliance with all Environmental Laws applicable to such Acquiror Company.
6.28.2 There are no Proceedings pending or threatened against
any Acquiror Company alleging the violation of any Environmental Law or
Environmental Permit applicable to such Acquiror Company or alleging that the
Acquiror is a potentially responsible party for any environmental site
contamination.
6.28.3 Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations to
notify or obtain the consent of any Governmental Authority or third Persons
under any Environmental Laws applicable to any Acquiror Company.
6.29 MONEY LAUNDERING LAWS. The operations of the Acquiror Companies
are and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all U.S. and non-U.S. jurisdictions, the rules and regulations thereunder and
any related or similar rules, regulations or guidelines, issued, administered or
enforced by any Governmental Authority (collectively, the "Money Laundering
Laws") and no Proceeding involving any Acquiror Company with respect to the
Money Laundering Laws is pending or, to the knowledge of the Acquiror,
threatened.
6.30 BOARD RECOMMENDATION. The Acquiror Board, at a meeting duly called
and held, has determined that this Agreement and the transactions contemplated
by this Agreement are advisable and in the best interests of the Acquiror's
stockholders and has duly authorized this Agreement and the transactions
contemplated by this Agreement.
24
SECTION VII
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
7.1 DIVIDENDS. The Company shall use its best efforts to effect a
one-for-one (1-for-1) dividend to the holders of Shares of the Company after the
Closing Date but not before a class of preferred stock has been authorized as
set forth in Section 7.2.
7.2 PREFERRED STOCK. The Company shall use its best efforts to create
and authorize a preferred class of stock of not less than [10,000,000] shares
after the Closing Date.
SECTION VIII
COVENANTS OF THE ACQUIROR
8.1 INDEMNIFICATION AND INSURANCE.
8.1.1 The Acquiror shall to the fullest extent permitted under
applicable Law or its Organizational Documents, indemnify and hold harmless,
each present and former director, officer or employee of the Acquiror or any
Acquiror Subsidiary (collectively, the "Indemnified Parties") against any costs
or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
Proceeding (x) arising out of or pertaining to the transactions contemplated by
this Agreement or (y) otherwise with respect to any acts or omissions occurring
at or prior to the Closing Date, to the same extent as provided in the
Acquiror's Organizational Documents or any applicable contract or agreement as
in effect on the date hereof, in each case for a period of two years after the
Closing Date. In the event of any such Proceeding (whether arising before or
after the Closing Date), (i) any counsel retained by the Indemnified Parties for
any period after the Closing Date shall be reasonably satisfactory to the
Acquiror, (ii) after the Closing Date, the Acquiror shall pay the reasonable
fees and expenses of such counsel, promptly after statements therefor are
received, provided that the Indemnified Parties shall be required to reimburse
the Acquiror for such payments in the circumstances and to the extent required
by the Acquiror's Organizational Documents, any applicable contract or agreement
or applicable Law, and (iii) the Acquiror will cooperate in the defense of any
such matter; PROVIDED, HOWEVER, that the Acquiror shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld); and provided, further, that, in the event that any claim
or claims for indemnification are asserted or made within such two-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims. The Indemnified
Parties as a group may retain only one law firm to represent them in each
applicable jurisdiction with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties, in which
case each Indemnified Person with respect to whom such a conflict exists (or
group of such Indemnified Persons who among them have no such conflict) may
retain one separate law firm in each applicable jurisdiction.
8.1.2 This Section 8.1 shall survive the consummation of the
transactions contemplated by this Agreement upon execution, is intended to
benefit the Indemnified Parties and the Covered Persons, shall be binding on all
successors and assigns of the Acquiror and shall be enforceable by the
Indemnified Parties and the Covered Persons.
25
8.2 RULE 144 REPORTING. With a view to making available to the
Acquiror's stockholders the benefit of certain rules and regulations of the
Commission which may permit the sale of the Acquiror Common Stock to the public
without registration, from and after the Closing Date, the Acquiror agrees to:
8.2.1 Make and keep public information available, as those
terms are understood and defined in Rule 144; and
8.2.2 File with the Commission, in a timely manner, all
reports and other documents required of the Acquiror under the Exchange Act.
8.3 SEC DOCUMENTS. From and after the Closing Date, in the event the
Commission notifies the Acquiror of its intent to review any SEC Document filed
prior to the Closing Date or the Acquiror receives any oral or written comments
from the Commission with respect to any SEC Document filed prior to the Closing
Date, the Acquiror shall promptly notify the Acquiror Shareholders and the
Acquiror Shareholders shall fully cooperate with the Acquiror.
8.4 DIVIDENDS. The Company shall use its best efforts for the Acquiror
to effect a one-for-one (1-for-1) dividend to the holders of Shares of the
Company after the Closing Date but not before a class of preferred stock has
been authorized as set forth in Section 8.5.
8.5 PREFERRED STOCK. The Company shall use its best efforts for the
Acquiror to create and authorize a preferred class of stock of not less than
[10,000,000] shares after the Closing Date.
SECTION IX
CONDITIONS PRECEDENT OF THE ACQUIROR
The Acquiror's obligation to acquire the Shares and to take the other
actions required to be taken by the Acquiror at the Closing Date is subject to
the satisfaction, at or prior to the Closing Date, of each of the following
conditions (any of which may be waived by the Acquiror, in whole or in part):
9.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of the
Company and the Shareholders set forth in this Agreement or in any Schedule or
certificate delivered pursuant hereto that are not qualified as to materiality
shall be true and correct in all material respects as of the date of this
Agreement except to the extent a representation or warranty is expressly limited
by its terms to another date and without giving effect to any supplemental
Schedule. The representations and warranties of the Company and the Shareholders
set forth in this Agreement or in any Schedule or certificate delivered pursuant
hereto that are qualified as to materiality shall be true and correct in all
respects as of the date of this Agreement, except to the extent a representation
or warranty is expressly limited by its terms to another date and without giving
effect to any supplemental Schedule.
26
9.2 PERFORMANCE BY THE COMPANY AND SHAREHOLDERS.
9.2.1 All of the covenants and obligations that the Company
and Shareholders are required to perform or to comply with pursuant to this
Agreement (considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
9.2.2 Each document required to be delivered by the Company
and the Shareholders pursuant to this Agreement must have been delivered.
9.3 NO FORCE MAJEURE EVENT. There shall not have been any delay, error,
failure or interruption in the conduct of the business of any Acquired Company,
or any loss, injury, delay, damage, distress, or other casualty, due to force
majeure including but not limited to (a) acts of God; (b) fire or explosion; (c)
war, acts of terrorism or other civil unrest; or (d) national emergency.
9.4 CERTIFICATE OF OFFICER. The Company will have delivered to the
Acquiror a certificate executed by an officer of the Company.
9.5 CERTIFICATE OF SHAREHOLDERS. Each Shareholder will have delivered
to the Acquiror a certificate executed by such Shareholder, if a natural person,
or an authorized officer of the Shareholder, if an entity, certifying the
satisfaction of the conditions specified in Sections 9.1 and 9.2.
9.6 CONSENTS.
9.6.1 All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by the Company and/or the Shareholders for the authorization, execution
and delivery of this Agreement and the consummation by them of the transactions
contemplated by this Agreement, shall have been obtained and made by the Company
or the Shareholders, as the case may be, except where the failure to receive
such consents, waivers, approvals, authorizations or orders or to make such
filings would not have a Material Adverse Effect on the Company or the Acquiror.
9.6.2 Without limiting the foregoing, the Schedule 14(f)
Filing shall have been mailed to the stockholders of the Acquiror not less than
10 days prior to the Closing Date. No Proceeding occasioned by the Section 14(f)
Filing shall have been initiated or threatened by the Commission (which
Proceeding remains unresolved as of the Closing Date).
9.7 DOCUMENTS. The Company and the Shareholders must have caused the
following documents to be delivered to the Acquiror and/or the Escrow Agent:
9.7.1 share certificates evidencing the number of Shares held
by each Shareholder (as set forth in Exhibit A), along with executed stock
powers transferring such Shares to the Acquiror;
9.7.2 a Secretary's Certificate of the Company, dated the
Closing Date, certifying attached copies of (A) the Organizational Documents of
the Company and each Company Subsidiary, (B) the resolutions of the Company
Board and the Shareholders approving this Agreement and the transactions
contemplated hereby; and (C) the incumbency of each authorized officer of the
Company signing this Agreement and any other agreement or instrument
contemplated hereby to which the Company is a party;
27
9.7.3 a certified certificate of good standing, or equivalent
thereof, of the Company;
9.7.4 each of the Transaction Documents to which the Company
and/or the Shareholders is a party, duly executed; and
9.7.5 such other documents as the Acquiror may reasonably
request for the purpose of (i) evidencing the accuracy of any of the
representations and warranties of the Company and the Shareholders pursuant to
Section 9.1, (ii) evidencing the performance of, or compliance by the Company
and the Shareholders with, any covenant or obligation required to be performed
or complied with by the Company or the Shareholders, as the case may be, (iii)
evidencing the satisfaction of any condition referred to in this Section 9, or
(iv) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement.
9.8 NO PROCEEDINGS. There must not have been commenced or threatened
against the Acquiror, the Company or any Shareholder, or against any Affiliate
thereof, any Proceeding (which Proceeding remains unresolved as of the Closing
Date) (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the transactions contemplated by this Agreement, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the transactions contemplated by this Agreement.
9.9 NO CLAIM REGARDING STOCK OWNERSHIP OR CONSIDERATION. There must not
have been made or threatened by any Person any claim asserting that such Person
(a) is the holder of, or has the right to acquire or to obtain beneficial
ownership of the Shares or any other stock, voting, equity, or ownership
interest in, the Company, or (b) is entitled to all or any portion of the
Acquiror Shares.
SECTION X
CONDITIONS PRECEDENT OF THE COMPANY
AND THE SHAREHOLDERS
The Shareholders' obligation to transfer the Shares and the obligations
of the Company to take the other actions required to be taken by the Company in
advance of or at the Closing Date are subject to the satisfaction, at or prior
to the Closing Date, of each of the following conditions (any of which may be
waived by the Company and the Shareholders, in whole or in part):
10.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of
the Acquiror and Acquiror Shareholders set forth in this Agreement or in any
Schedule or certificate delivered pursuant hereto that are not qualified as to
materiality shall be true and correct in all material respects as of the date of
this Agreement except to the extent a representation or warranty is expressly
limited by its terms to another date and without giving effect to any
supplemental Schedule. The representations and warranties of the Acquiror and
Acquiror Shareholders set forth in this Agreement or in any Schedule or
certificate delivered pursuant hereto that are qualified as to materiality shall
be true and correct in all respects as of the date of this Agreement, except to
the extent a representation or warranty is expressly limited by its terms to
another date and without giving effect to any supplemental Schedule.
28
10.2 PERFORMANCE BY THE ACQUIROR.
10.2.1 All of the covenants and obligations that the Acquiror
and Acquiror Shareholders are required to perform or to comply with pursuant to
this Agreement (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all respects.
10.2.2 Each document required to be delivered by the Acquiror
and Acquiror Shareholders pursuant to this Agreement must have been delivered.
10.3 NO FORCE MAJEURE EVENT. There shall not have been any delay,
error, failure or interruption in the conduct of the business of any Acquiror
Company, or any loss, injury, delay, damage, distress, or other casualty, due to
force majeure including but not limited to (a) acts of God; (b) fire or
explosion; (c) war, acts of terrorism or other civil unrest; or (d) national
emergency.
10.4 CERTIFICATE OF OFFICER. The Acquiror will have delivered to the
Company a certificate, dated the Closing Date, executed by an officer of the
Acquiror, certifying the satisfaction of the conditions specified in Sections
10.1, 10.2. and 10.3.
10.5 CERTIFICATE OF ACQUIROR SHAREHOLDERS. The Acquiror Shareholders
will have delivered to the Company a certificate, dated the Closing Date,
executed by such Acquiror Shareholder, if a natural person or an authorized
officer of the Acquiror Shareholder, if an entity, certifying the satisfaction
of the conditions specified in Sections 10.1 and 10.2.
10.6 CONSENTS.
10.6.1 All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by the Acquiror for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated by this
Agreement, shall have been obtained and made by the Acquiror, except where the
failure to receive such consents, waivers, approvals, authorizations or orders
or to make such filings would not have a Material Adverse Effect on the Company
or the Acquiror.
10.6.2 Without limiting the foregoing, the Schedule 14(f)
Filing shall have been mailed to the stockholders of the Acquiror not less than
10 days prior to the Closing Date. No Proceeding occasioned by the Section 14(f)
Filing shall have been initiated or threatened by the Commission (which
Proceeding remains unresolved as of the Closing Date).
29
10.7 DOCUMENTS. The Acquiror must have caused the following documents
to be delivered to the Company and/or the Shareholders:
10.7.1 share certificates evidencing each Shareholder's pro
rata share of the Closing Acquiror Shares (as set forth in Exhibit B);
10.7.2 a Secretary's Certificate, dated the Closing Date
certifying attached copies of (A) the Organizational Documents of the Acquiror
and each Acquiror Subsidiary, (B) the resolutions of the Acquiror Board
approving this Agreement and the transactions contemplated hereby; and (C) the
incumbency of each authorized officer of the Acquiror signing this Agreement and
any other agreement or instrument contemplated hereby to which the Acquiror is a
party;
10.7.3 a Certificate of Good Standing of the Acquiror;
10.7.4 each of the Transaction Documents to which the Acquiror
is a party, duly executed; and
10.7.5 such other documents as the Company may reasonably
request for the purpose of (i) evidencing the accuracy of any representation or
warranty of the Acquiror pursuant to Section 10.1, (ii) evidencing the
performance by the Acquiror of, or the compliance by the Acquiror with, any
covenant or obligation required to be performed or complied with by the
Acquiror, (iii) evidencing the satisfaction of any condition referred to in this
Section 10, or (iv) otherwise facilitating the consummation of any of the
transactions contemplated by this Agreement.
10.8 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against the Acquiror, the Company or any
Shareholder, or against any Affiliate thereof, any Proceeding (which Proceeding
remains unresolved as of the date of this Agreement) (a) involving any challenge
to, or seeking damages or other relief in connection with, any of the
transactions contemplated hereby, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the transactions
contemplated hereby.
SECTION XI
INDEMNIFICATION; REMEDIES
11.1 SURVIVAL. All representations, warranties, covenants, and
obligations in this Agreement shall expire on the second anniversary of the date
this Agreement is executed (the "Survival Period"). The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation. The
waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of Damages, or other remedy based
on such representations, warranties, covenants, and obligations.
30
11.2 INDEMNIFICATION BY THE ACQUIROR SHAREHOLDERS. From and after the
execution of this Agreement until the expiration of the Survival Period, each of
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ (together, the
"Principal Acquiror Shareholders") shall indemnify and hold harmless the
Acquiror, Company and the Shareholders (collectively, the "Company Indemnified
Parties"), from and against any Damages arising, directly or indirectly, from or
in connection with:
(a) any breach of any representation or warranty made by the
Acquiror or the Acquiror Shareholders in this Agreement or in any
certificate delivered by the Acquiror pursuant to this Agreement; or
(b) any breach by the Acquiror or the Acquiror Shareholders of
any covenant or obligation of the Acquiror in this Agreement required
to be performed by the Acquiror or the Acquiror Shareholders on or
prior to the Closing Date.
11.3 LIMITATIONS ON AMOUNT - THE ACQUIROR. No Company Indemnified Party
shall be entitled to indemnification pursuant to Section 11.3, unless and until
the aggregate amount of Damages to all Company Indemnified Parties with respect
to such matters under Section 11.4 exceeds US $100,000, at which time, the
Company Indemnified Parties shall be entitled to indemnification for the total
amount of such Damages in excess of US $100,000.
11.4 DETERMINING DAMAGES. Materiality qualifications to the
representations and warranties of the Company and the Acquiror shall not be
taken into account in determining the amount of Damages occasioned by a breach
of any such representation and warranty for purposes of determining whether the
baskets set forth in Section 11.3 has been met.
11.5 BREACH BY SHAREHOLDERS. Nothing in this Section 11 shall limit the
Acquiror's right to pursue any appropriate legal or equitable remedy against any
Shareholder with respect to any Damages arising, directly or indirectly, from or
in connection with: (a) any breach by such Shareholder of any representation or
warranty made by such Shareholder in this Agreement or in any certificate
delivered by such Shareholder pursuant to this Agreement or (b) any breach by
such Shareholder of its covenants or obligations in this Agreement. All claims
of the Acquiror pursuant to this Section 11.1 shall be brought by the Acquiror
Shareholders on behalf of the Acquiror and those Persons who were stockholders
of the Acquiror immediately prior to the Closing Date.
SECTION XII
GENERAL PROVISIONS
12.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the transactions contemplated by this Agreement, including all
fees and expenses of agents, representatives, counsel, and accountants. In the
event of termination of this Agreement, the obligation of each party to pay its
own expenses will be subject to any rights of such party arising from a breach
of this Agreement by another party.
31
12.2 PUBLIC ANNOUNCEMENTS. The Acquiror shall promptly, but no later
than three days following the effective date of this Agreement, issue a press
release disclosing the transactions contemplated hereby. Prior to the Closing
Date, the Company and the Acquiror shall consult with each other in issuing any
other press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or stock market or
trading facility with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, which consent shall not be unreasonably withheld or
delayed, except that no prior consent shall be required if such disclosure is
required by law, in which case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication
and shall incorporate into such public statement, filing or other communication
the reasonable comments of the other party.
12.3 CONFIDENTIALITY.
12.3.1 Subsequent to the date of this Agreement, the Acquiror,
the Acquiror Shareholders the Shareholders and the Company will maintain in
confidence, and will cause their respective directors, officers, employees,
agents, and advisors to maintain in confidence, any written, oral, or other
information obtained in confidence from another party in connection with this
Agreement or the transactions contemplated by this Agreement, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any required filing with the Commission, or obtaining any consent or
approval required for the consummation of the transactions contemplated by this
Agreement, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
12.3.2 In the event that any party is required to disclose any
information of another party pursuant to clause (b) or (c) of Section 12.3.1,
the party requested or required to make the disclosure (the "disclosing party")
shall provide the party that provided such information (the "providing party")
with prompt notice of any such requirement so that the providing party may seek
a protective order or other appropriate remedy and/or waive compliance with the
provisions of this Section 12.3. If, in the absence of a protective order or
other remedy or the receipt of a waiver by the providing party, the disclosing
party is nonetheless, in the opinion of counsel, legally compelled to disclose
the information of the providing party, the disclosing party may, without
liability hereunder, disclose only that portion of the providing party's
information which such counsel advises is legally required to be disclosed,
provided that the disclosing party exercises its reasonable efforts to preserve
the confidentiality of the providing party's information, including, without
limitation, by cooperating with the providing party to obtain an appropriate
protective order or other relief assurance that confidential treatment will be
accorded the providing party's information.
32
12.3.3 If the transactions contemplated by this Agreement are
not consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
12.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), or (c) when received
by the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by written notice to the other parties):
If to Acquiror: with a copy to:
General Components, Inc. ▇▇▇ ▇. ▇▇▇▇▇▇▇ Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President
Telephone No.: [_____________________] Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇ Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to Company: with a copy to:
General Components, Inc. Loeb & Loeb LLP
▇▇▇▇▇ ▇▇▇▇, ▇▇/▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Two Pacific Place New York, New York 10154
▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Attention: Simon Mu, Chief Executive Officer Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇▇-▇▇▇▇ Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇▇-▇▇▇▇
12.5 ARBITRATION. Any dispute or controversy under this Agreement shall
be settled exclusively by arbitration in the City of New York, County of New
York in accordance with the rules of the American Arbitration Association then
in effect. Judgment may be entered on the arbitration award in any court having
jurisdiction.
12.6 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
12.7 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
33
12.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party against whom the enforcement of such
amendment is sought.
12.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No party may
assign any of its rights under this Agreement without the prior consent of the
other parties. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties. Except as set
forth in Section 8.1 and Section 11.3, nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
12.10 SEVERABILITY. If any provision of this Agreement is held 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 invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
12.12 GOVERNING LAW. This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles.
12.13 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.
34
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed and delivered this Share
Exchange Agreement as of the date first written above.
ACQUIROR: ACQUIROR SHAREHOLDER:
GENERAL COMPONENTS, INC.. Signed:
----------------------------------
Signed: Printed name:
------------------------------------ ----------------------------
Printed name: Title:
------------------------------ -----------------------------------
Title:
COMPANY: ACQUIROR SHAREHOLDER:
GENERAL COMPONENTS, INC. Signed:
-----------------------------------
Signed: Printed name:
------------------------------------ ----------------------------
Printed name: Title:
------------------------------- -----------------------------------
Title:
-------------------------------------
ACQUIROR SHAREHOLDER:
Signed:
------------------------------------
Printed name:
------------------------------
Title:
------------------------------------
35
COUNTERPART SIGNATURE PAGE
(FOR ISSUANCES PURSUANT TO REGULATION S)
IN WITNESS WHEREOF, the parties have executed and delivered this Share
Exchange Agreement as of the date first written above.
ENTITY NAME:
By:
--------------------------------------
Name:
Title:
OFFSHORE DELIVERY INSTRUCTIONS:
------------------------------
PRINT EXACT NAME IN WHICH YOU WANT THE SECURITIES TO BE
REGISTERED
Attn:
--------------------------------------------
Address:
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Phone No.
--------------------------------------------
Facsimile No.
--------------------------------------------
36
COUNTERPART SIGNATURE PAGE
(FOR ISSUANCES PURSUANT TO SECTION 4(2))
IN WITNESS WHEREOF, the parties have executed and delivered this Share
Exchange Agreement as of the date first written above.
ENTITY NAME:
By:
-----------------------------------------------
Name:
Title:
Circle the category under which you are an "accredited investor" pursuant to
Exhibit C:
1 2 3 4 5 6 7 8
PRINT EXACT NAME IN WHICH YOU WANT THE SECURITIES TO BE
REGISTERED
Attn:
--------------------------------------------
Address:
--------------------------------------------
--------------------------------------------
--------------------------------------------
Phone No.
--------------------------------------------
Facsimile No.
--------------------------------------------
37
EXHIBIT A
ACQUIROR SHAREHOLDERS
1. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
2. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
3. ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
38
EXHIBIT B
SHARES AND ACQUIROR SHARES TO BE EXCHANGED
Total Shares to be delivered by the Shareholders to Acquiror: 12,963,401 Common
Shares.
Total Acquiror Shares to be delivered by the Acquiror to Shareholders:
20,000,000 Shares.
Common Shares (Authorized 20,000,000 shares)
No. of
Name of Shareholder shares
------------------- ------
1 ▇▇▇▇▇ ▇▇▇▇▇▇▇ Mu 3,500,000 27.00%
2 ▇▇▇ ▇▇▇▇▇ ▇▇▇ 1,500,000 11.57%
3 ▇▇▇▇▇ ▇. ▇▇▇▇ 1,000,000 7.71%
4 ▇▇▇▇▇▇ Industries, Ltd. 500,000 3.85%
5 Chan Nap ▇▇▇ ▇▇▇▇▇▇ 350,000 2.70%
6 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 200,000 1.54%
7 Junichi Goto 100,000 0.77%
8 ▇▇▇▇▇ ▇▇▇▇ 50,000 0.39%
9 ▇▇▇▇▇ ▇▇▇▇▇ 50,000 0.39%
10 ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ 80,000 0.62%
11 ▇▇▇▇ ▇▇▇▇▇▇ 50,000 0.39%
12 Mao Ping 50,000 0.39%
13 Yun Hon Man 50,000 0.39%
14 ▇▇ ▇▇▇▇ 50,000 0.39%
15 ▇▇▇▇▇▇ ▇▇▇▇▇ 166,667 1.28%
16 ▇▇▇▇▇ ▇▇▇▇ Hui 208,333 1.61%
17 Zhao Bing 200,000 1.54%
18 Long XiaoBo 150,000 1.16%
19 ▇▇▇▇ ▇▇▇▇ 25,000 0.19%
20 Geng ▇▇▇▇ ▇▇▇ 350,000 2.70%
21 Hu ▇▇▇▇ ▇▇▇ 300,000 2.31%
22 Kuai Yinglian 460,000 3.55%
23 Jiang Tao 500,000 3.86%
24 Ho Lo San ▇▇▇▇▇ 50,000 0.39%
25 Ni Yaping 20,000 0.15%
26 ▇▇ ▇▇▇▇ Bin 20,000 0.15%
27 Zeng Fan 20,000 0.15%
28 China Enterprise Investments No.12 Limited 923,917 7.13%
29 Lotus Liberator Fund 1,714,286 13.22%
30 Japan-China Investment No.2 Limited 325,198 2.51%
---------- ------
12,963,401 100.00%
39
EXHIBIT B
STOCK OPTIONS GRANTED BY THE COMPANY
Not Applicable
40
EXHIBIT C
DEFINITION OF "ACCREDITED INVESTOR"
The term "accredited investor" means:
(1) A bank as defined in Section 3(a)(2) of the Securities Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934; an insurance company as
defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 (the "Investment
Company Act") or a business development company as defined in Section
2(a)(48) of the Investment Company Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958; a
plan established and maintained by a state, its political subdivisions
or any agency or instrumentality of a state or its political
subdivisions for the benefit of its employees, if such plan has total
assets in excess of US $5,000,000; an employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974
("ERISA"), if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings and
loan association, insurance company, or registered investment advisor,
or if the employee benefit plan has total assets in excess of US
$5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors.
(2) A private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940.
(3) An organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of US $5,000,000.
(4) A director or executive officer of the Acquiror.
(5) A natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his or her purchase exceeds US
$1,000,000.
(6) A natural person who had an individual income in excess of US $200,000
in each of the two most recent years or joint income with that person's
spouse in excess of US $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current
year.
(7) A trust, with total assets in excess of US $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) (i.e., a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of the prospective investment).
41
(8) An entity in which all of the equity owners are accredited investors.
(If this alternative is checked, the Shareholder must identify each
equity owner and provide statements signed by each demonstrating how
each is qualified as an accredited investor.)
42
EXHIBIT D
DEFINITION OF "U.S. PERSON"
(1) "U.S. person" (as defined in Regulation S) means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or incorporated under
the laws of the United States;
(iii) Any estate of which any executor or administrator is a U.S.
person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in the United
States;
(vi) Any non-discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary for
the benefit or account of a U.S. person;
(vii) Any discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary
organized, incorporated, or (if an individual) resident in the
United States; and
(viii) Any partnership or corporation if: (A) organized or
incorporated under the laws of any foreign jurisdiction; and
(B) formed by a U.S. person principally for the purpose of
investing in securities not registered under the Securities
Act, unless it is organized or incorporated, and owned, by
accredited investors (as defined in Rule 501(a)) who are not
natural persons, estates or trusts.
(2) Notwithstanding paragraph (1) above, any discretionary account or
similar account (other than an estate or trust) held for the benefit or
account of a non-U.S. person by a dealer or other professional
fiduciary organized, incorporated, or (if an individual) resident in
the United States shall not be deemed a "U.S. person."
(3) Notwithstanding paragraph (1), any estate of which any professional
fiduciary acting as executor or administrator is a U.S. person shall
not be deemed a U.S. person if:
(i) An executor or administrator of the estate who is not a U.S.
person has sole or shared investment discretion with respect
to the assets of the estate; and
(ii) The estate is governed by foreign law.
(4) Notwithstanding paragraph (1), any trust of which any professional
fiduciary acting as trustee is a U.S. person shall not be deemed a U.S.
person if a trustee who is not a U.S. person has sole or shared
investment discretion with respect to the trust assets, and no
beneficiary of the trust (and no settlor if the trust is revocable) is
a U.S. person.
43
(5) Notwithstanding paragraph (1), an employee benefit plan established and
administered in accordance with the law of a country other than the
United States and customary practices and documentation of such country
shall not be deemed a U.S. person.
(6) Notwithstanding paragraph (1), any agency or branch of a U.S. person
located outside the United States shall not be deemed a "U.S. person"
if:
(i) The agency or branch operates for valid business reasons; and
(ii) The agency or branch is engaged in the business of insurance
or banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located.
(7) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank,
the Asian Development Bank, the African Development Bank, the United
Nations, and their agencies, affiliates and pension plans, and any
other similar international organizations, their agencies, affiliates
and pension plans shall not be deemed "U.S. persons."
44
EXHIBIT E
ACCREDITED INVESTOR REPRESENTATIONS
Each Shareholder indicating that it is an Accredited Investor, severally and not
jointly, further represents and warrants to the Acquiror as follows:
1. Such Shareholder qualifies as an Accredited Investor on the basis set
forth on its signature page to this Agreement.
2. Such Shareholder has sufficient knowledge and experience in finance,
securities, investments and other business matters to be able to
protect such Shareholder's interests in connection with the
transactions contemplated by this Agreement.
3. Such Shareholder has consulted, to the extent that it has deemed
necessary, with its tax, legal, accounting and financial advisors
concerning its investment in the Acquiror Shares.
4. Such Shareholder understands the various risks of an investment in the
Acquiror Shares and can afford to bear such risks for an indefinite
period of time, including, without limitation, the risk of losing its
entire investment in the Acquiror Shares.
5. Such Shareholder has had access to the Acquiror's publicly filed
reports with the SEC.
6. Such Shareholder has been furnished during the course of the
transactions contemplated by this Agreement with all other public
information regarding the Acquiror that such Shareholder has requested
and all such public information is sufficient for such Shareholder to
evaluate the risks of investing in the Acquiror Shares.
7. Such Shareholder has been afforded the opportunity to ask questions of
and receive answers concerning the Acquiror and the terms and
conditions of the issuance of the Acquiror Shares.
8. Such Shareholder is not relying on any representations and warranties
concerning the Acquiror made by the Acquiror or any officer, employee
or agent of the Acquiror, other than those contained in this Agreement.
9. Such Shareholder is acquiring the Acquiror Shares for such
Shareholder's own account, for investment and not for distribution or
resale to others.
10. Such Shareholder will not sell or otherwise transfer the Acquiror
Shares, unless either (a) the transfer of such securities is registered
under the Securities Act or (b) an exemption from registration of such
securities is available.
11. Such Shareholder understands and acknowledges that the Acquiror is
under no obligation to register the Acquiror Shares for sale under the
Securities Act.
45
12. Such Shareholder consents to the placement of a legend on any
certificate or other document evidencing the Acquiror Shares
substantially in the form set forth in Section 4.2.5(a).
13. Such Shareholder represents that the address furnished by such
Shareholder on its signature page to this Agreement and in Exhibit A is
such Shareholder's principal residence if he is an individual or its
principal business address if it is a corporation or other entity.
14. Such Shareholder understands and acknowledges that the Acquiror Shares
have not been recommended by any federal or state securities commission
or regulatory authority, that the foregoing authorities have not
confirmed the accuracy or determined the adequacy of any information
concerning the Acquiror that has been supplied to such Shareholder and
that any representation to the contrary is a criminal offense.
15. Such Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution
and delivery of this Agreement and the purchase of the Acquiror Shares.
46
EXHIBIT F
NON U.S. PERSON REPRESENTATIONS
Each Shareholder indicating that it is not a U.S. person, severally and not
jointly, further represents and warrants to the Acquiror as follows:
1. At the time of (a) the offer by the Acquiror and (b) the acceptance of
the offer by such Shareholder, of the Acquiror Shares, such Shareholder
was outside the United States.
2. No offer to acquire the Acquiror Shares or otherwise to participate in
the transactions contemplated by this Agreement was made to such
Shareholder or its representatives inside the United States.
3. Such Shareholder is not purchasing the Acquiror Shares for the account
or benefit of any U.S. person, or with a view towards distribution to
any U.S. person, in violation of the registration requirements of the
Securities Act.
4. Such Shareholder will make all subsequent offers and sales of the
Acquiror Shares either (x) outside of the United States in compliance
with Regulation S; (y) pursuant to a registration under the Securities
Act; or (z) pursuant to an available exemption from registration under
the Securities Act. Specifically, such Shareholder will not resell the
Acquiror Shares to any U.S. person or within the United States prior to
the expiration of a period commencing on the Closing Date and ending on
the date that is one year thereafter (the "Distribution Compliance
Period"), except pursuant to registration under the Securities Act or
an exemption from registration under the Securities Act.
5. Such Shareholder is acquiring the Acquiror Shares for such
Shareholder's own account, for investment and not for distribution or
resale to others.
6. Such Shareholder has no present plan or intention to sell the Acquiror
Shares in the United States or to a U.S. person at any predetermined
time, has made no predetermined arrangements to sell the Acquiror
Shares and is not acting as a Distributor of such securities.
7. Neither such Shareholder, its Affiliates nor any Person acting on such
Shareholder's behalf, has entered into, has the intention of entering
into, or will enter into any put option, short position or other
similar instrument or position in the U.S. with respect to the Acquiror
Shares at any time after the Closing Date through the Distribution
Compliance Period except in compliance with the Securities Act.
8. Such Shareholder consents to the placement of a legend on any
certificate or other document evidencing the Acquiror Shares
substantially in the form set forth in Section 4.2.5(b).
47
9. Such Shareholder is not acquiring the Acquiror Shares in a transaction
(or an element of a series of transactions) that is part of any plan or
scheme to evade the registration provisions of the Securities Act.
10. Such Shareholder has sufficient knowledge and experience in finance,
securities, investments and other business matters to be able to
protect such Shareholder's interests in connection with the
transactions contemplated by this Agreement.
11. Such Shareholder has consulted, to the extent that it has deemed
necessary, with its tax, legal, accounting and financial advisors
concerning its investment in the Acquiror Shares.
12. Such Shareholder understands the various risks of an investment in the
Acquiror Shares and can afford to bear such risks for an indefinite
period of time, including, without limitation, the risk of losing its
entire investment in the Acquiror Shares.
13. Such Shareholder has had access to the Acquiror's publicly filed
reports with the SEC.
14. Such Shareholder has been furnished during the course of the
transactions contemplated by this Agreement with all other public
information regarding the Acquiror that such Shareholder has requested
and all such public information is sufficient for such Shareholder to
evaluate the risks of investing in the Acquiror Shares.
15. Such Shareholder has been afforded the opportunity to ask questions of
and receive answers concerning the Acquiror and the terms and
conditions of the issuance of the Acquiror Shares.
16. Such Shareholder is not relying on any representations and warranties
concerning the Acquiror made by the Acquiror or any officer, employee
or agent of the Acquiror, other than those contained in this Agreement.
17. Such Shareholder will not sell or otherwise transfer the Acquiror
Shares, unless either (A) the transfer of such securities is registered
under the Securities Act or (B) an exemption from registration of such
securities is available.
18. Such Shareholder understands and acknowledges that the Acquiror is
under no obligation to register the Acquiror Shares for sale under the
Securities Act.
19. Such Shareholder represents that the address furnished by such
Shareholder on its signature page to this Agreement and in Exhibit A is
such Shareholder's principal residence if he is an individual or its
principal business address if it is a corporation or other entity.
20. Such Shareholder understands and acknowledges that the Acquiror Shares
have not been recommended by any federal or state securities commission
or regulatory authority, that the foregoing authorities have not
confirmed the accuracy or determined the adequacy of any information
concerning the Acquiror that has been supplied to such Shareholder and
that any representation to the contrary is a criminal offense.
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21. Such Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution
and delivery of this Agreement and the purchase of the Acquiror Shares.
49