Exhibit 2.1 Purchase Agreement
PURCHASE AGREEMENT
AMONG
CHINA DIRECT TRADING CORPORATION,
XXXXXXX XXXX,
AND
COMPLETE POWER SOLUTIONS LLC
DATED JANUARY 27, 2006
PURCHASE AGREEMENT dated January 27, 2006 (this "Agreement"), among
CHINA DIRECT TRADING CORPORATION, a Florida corporation ("Purchaser"), XXXXXXX
XXXX, an individual ("Dato"), and COMPLETE POWER SOLUTIONS, LLC, a Florida
limited liability company (the "Company").
RECITALS
A. The Company is engaged in the business of importing, marketing,
selling and installing generators and related products and providing related
services.
X. Xxxx owns all of the member interests (the "Interests"), and is the
sole manager, of the Company.
C. Purchaser is a holding company that currently conducts it business
through two operating subsidiaries, one of which trades Chinese-manufactured
souvenir, gift and promotional products and the other of which provides
consulting and business development services to Chinese and North American
companies seeking distribution, manufacturing sources, funding sources and joint
venture partners.
D. Purchaser's shares of Common Stock are registered under the Exchange
Act and its Common Stock trades over-the-counter under the symbol CHDT.OB.
E. Purchaser wishes to purchase from Dato, and Dato wishes to sell to
the Purchaser, Fifty One Percent (51%) of the Interests (the "Purchased
Interests"), for cash and shares of Preferred Stock, on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
1.01 Definitions. As used herein, the following terms shall have the following
meanings:
"Agreement" has the meaning specified in the preamble.
"Amended Articles" means the amendment to the articles of
incorporation of the Purchaser in the form attached as Annex A which authorize
and provide for the terms of the Preferred Stock.
"Ancillary Documents" as to any Person means all agreements,
instruments, releases, certificates and other documents contemplated by this
Agreement to be entered into or executed by such Person; and where a reference
to a Person is made in conjunction with a reference to "Ancillary Documents,"
the term shall refer only to such documents which such Person has entered into
or executed. Without limiting the generality of the foregoing, Ancillary
Documents includes the Amended Articles, the Employment Agreement, the Voting
Agreement and the Operating Agreement.
"Arbiter" has the meaning specified in Section 2.06(b) hereof.
"Closing" has the meaning specified in Section 2.02 hereof.
"Closing Cash" has the meaning specified in Section 2.02 hereof.
"Closing Date" has the meaning specified in Section 2.02 hereof.
"Closing Payments" means the payments due under Section 2.03 hereof.
"Closing Shares" has the meaning specified in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, $.0001 par value per share, of
the Purchaser.
"Company" has the meaning specified in the Recitals.
"Company Financial Statements" means the compiled unaudited balance
sheet as of December 31, 2005 and related statement of operations and retained
earnings of the Company and the related compilation report of AG Associates
dated January __, 2006.
"Damage Claim Notice" has the meaning specified in Section 5.04(a)
hereof.
"Damages" has the meaning specified in Section 5.02 hereof.
"Dato" means Xxxxxxx Xxxx.
"D&O Insurance" has the meaning specified in Section 7.06 hereof.
"Employee" means a regular employee on the payroll of the Company.
"Employment Agreement" means that certain employment agreement of even
date herewith among Dato, the Purchaser and the Company in the form of Annex D
hereto.
"Encumbrance" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, conditional sale agreement, financing
statement or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a security interest in
respect of such asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Filings" has the meaning set forth in Section 4.10(a)
hereof.
"Fair Market Value" means the average closing price for a security
measured over the ten (10) trading days prior to the date of determination in
the primary public market for such security, or if there is no established
public market for such security, the fair market value for such security
determined by an appraisal by an independent appraiser with experience in
valuing companies of the type issuing the security. In the event of a dispute
regarding the selection of an appraiser, each party shall have the right to
select its own appraiser with the fair market value of the security being the
average of the two appraisals if such appraisals reflect a Fair Market Value
that differs by more than ten (10%). In the event of a discrepancy of greater
than ten percent (10%), the two appraisers shall select a third appraiser and
such appraisal shall be binding on each of the parties for all purposes. The
parties shall share equally the cost of any appraisals.
"Governmental Authority" means any federal, state or local government,
other political subdivision or agency thereof exercising legislative, judicial,
regulatory or administrative functions of, or pertaining to, government.
"Indemnitee" has the meaning specified in Section 5.04(a) hereof.
"Indemnitor" has the meaning specified in Section 5.04(a) hereof.
"Interests" has the meaning specified in the recitals.
"Laws" means any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its Property is subject or bound.
"Liabilities" means all debts, claims, agreements, liabilities and
obligations, including, without limitation, all salaries, severance payments,
accounts payable, media obligations, obligations incurred under license
agreements, client contracts, supply contracts, leases and employment
agreements, litigation claims or demands and any other obligations whether or
not incurred in the ordinary course of business.
"Leased Real Property" has the meaning specified in Section 3.12(b) of
this Agreement.
"Member Interest" means a member interest in the Company.
"Operating Agreement" means the limited liability company operating
agreement dated as of January 27, 2006 among Dato, Purchaser and the Company in
the form of Annex C hereto.
"Preferred Stock" means the shares of senior voting convertible
preferred stock of Purchaser, that (i) have an aggregate stated value of One
Million Two Hundred Thousand Dollars ($1,200,000.00), of the Purchaser which are
convertible initially into 50,739,958 shares of Common Stock of Purchaser,
subject to adjustment in the event of dilution, at any time at the election of
the holder thereof, (ii) vote with the shares of Common Stock on an "as if
converted basis," (iii) are senior in right of payment as to dividends and in
liquidation preference to all other series or classes of capital stock of the
Purchaser and (iv) have such other rights as set forth in the Amended Articles.
"Person" means a natural person, corporation, partnership or other
business entity, or any Governmental Entity.
"Purchase Price" means the Closing Payments and the Closing Shares.
"Purchased Interests" has the meaning specified in the recitals.
"Purchaser" has the meaning specified in the preamble.
"Purchaser Financial Statements" has the meaning specified in Section
4.10(a).
"Real Property" has the meaning specified in Section 3.13(a) hereof.
"Repurchase Event" means the first to occur of (1) the third
anniversary of the Closing Date unless prior to such date, Purchaser has either
(x) made an underwritten public offering of the Purchased Interests at a price
that values the Company at an aggregate amount not less than Fifteen Million
Dollars ($15,000,000) where Dato has the right to include his Interests in the
offering at the expense of Purchaser, other than underwriter's discount, or (y)
(i) paid Dato eleven percent (11%) of the Interests in consideration of the
agreement of the Company to engage Purchaser as the Company's exclusive supplier
of import generators and (ii) distributed twenty percent (20%) of the Interests
to Purchaser's Preferred Stock and Common Stock shareholders as a dividend which
dividend is distributed in proportion to the total capital stock of Purchaser
treating the shares of Preferred Stock as shares of Common Stock on an "as if
converted" basis or (2) in the event that Purchaser's independent public
auditors or the SEC shall determine that Purchaser shall not be permitted to
consolidate the financial statements of the Company with the financial
statements of Purchaser.
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" means the United States Securities and Exchange Commission.
"Seller" and "Sellers" has the meaning specified in the preamble.
"Standstill Period" has the meaning set forth in Section 7.03(a)
hereof.
"Taxes" means income, premium, gross receipts, net proceeds, ad
valorem, value added, sales, use, real property, personal property (tangible and
intangible), stamp, leasing, lease, user, excise, duty, franchise, transfer,
license, withholding, payroll, employment, occupational licensing, social
security or any other tax or charge of a similar nature and import.
"Voting Agreement" means that certain Voting Agreement dated
as of January 27, 2006 among Purchaser, Dato, and certain shareholders of
Purchaser specified therein in the form of Annex D hereto.
ARTICLE 2 - PURCHASE AND SALE
2.01 Purchase and Sale. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties contained
herein, at the Closing, Dato will sell, convey, assign, transfer and deliver to
the Purchaser, and Purchaser will acquire from Dato, the Purchased Interests.
2.02 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on January __, 2006 or on such date
as may be acceptable to each of the parties hereto (the "Closing Date") at the
offices of Xxxxx XxXxxxxx Xxxxx Xxxxxxxx & Xxxxxxx, P.A., 000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000 or such other place as may be
acceptable to each of the parties hereto.
2.03 Closing Deliveries. In consideration of the transfer of the
Purchased Interests pursuant to Section 2.01 hereof, at Closing the Purchaser
shall (i) pay to Dato Six Hundred Thirty Seven Thousand Dollars ($637,000.00) in
cash (the "Closing Cash") by wire of immediately available funds to an
account(s) specified in wire transfer instructions delivered by Dato to
Purchaser and (ii) deliver to Dato one or more certificates evidencing an
aggregate of Six Hundred Thousand (600,000) shares of Preferred Stock, each
share having a stated value of Two Dollars ($2.00) per share ("Closing Shares").
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
OF DATO
Dato represents and warrants to the Purchaser as follows:
.01 Organization, Good Standing and Foreign Qualification. The Company
is duly organized, validly existing and in good standing under the laws of the
State of Florida. The Company is not required to be licensed or qualified to do
business as a foreign limited liability company in any jurisdiction except where
the failure to so qualify would not have a material adverse effect on the
Company or the Purchaser. The Company has all requisite power and authority to
own, operate, lease and encumber its properties and to carry on its business as
now being conducted. A complete and correct copy of the articles of formation
and operating agreement, as amended to date, of the Company have been provided
to the Purchaser.
3.02 Capitalization. The entire authorized and issued Interests of the
Company are owned by Dato, free and clear of any Encumbrances. All outstanding
Interests are validly issued, fully paid, nonassessable and free of preemptive
rights. No Interests of the Company (i) have been reserved for any purpose; (ii)
are subject to pre-emptive rights created by statute, the Company's
organizational documents or any agreement to which the Company is a party or is
bound; (iii) were issued in violation of any agreement to which the Company is a
party or is bound; (iv) were issued in violation of the Company' organizational
documents; or (v) were issued in violation of any Laws. There are no outstanding
agreements to which the Company or Dato is a party affecting or relating to the
voting, issuance, purchase, redemption, repurchase or transfer of the Interests
or any other securities of the Company.
3.03 Absence of Outstanding Rights to Interests or Other Securities of
the Company. There are no outstanding options, rights (preemptive, registration
or otherwise), subscriptions, calls, commitments, warrants or rights of any
character to purchase, to subscribe for or to otherwise acquire any securities
of the Company.
3.04 Authority Relative to Agreements. No notices, reports or other
filings are required to be made by the Company with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
the Company from a Governmental Authority, in connection with the execution and
delivery of this Agreement by Dato and the consummation by Dato of the
transactions contemplated by this Agreement and the Ancillary Documents.
3.05 No Subsidiaries. The Company does not have any ownership, whether
owned directly or indirectly, in any other corporation, partnership, limited
liability company or other business entity.
3.06 Company Financial Statements.
(a) Annexed to this Agreement are the Company Financial Statements, a copy of
which has been delivered to Purchaser.
(b) The Company Financial Statements are complete and correct in all material
respects, (ii) present fairly, consistently and accurately the financial
position of the Company as at the dates thereof, and (iii) present fairly,
consistently and accurately the results of operations of the Company for the
respective periods thereof.
3.07 Absence of Undisclosed Liabilities. The Company does not have any
liabilities or obligations (whether known or unknown, contingent or absolute,
matured or unmatured, or otherwise) that are not reflected or reserved against
in the Company Financial Statement s, other than such liabilities or obligations
not required under generally accepted accounting principles to be reflected on
the balance sheet of the Company Financial Statements and which do not and could
not have a material adverse effect on the business of the Company.
3.08 Tax Matters. The Company (i) has duly and timely filed all Tax
returns and reports, (ii) has paid all Taxes required by law to the extent due
and payable, and (iii) has made adequate provision (in accordance with generally
accepted accounting principles consistently applied) for the payment of all such
Taxes attributable to any period ending on or prior to the Closing Date but not
currently due and payable. The Company is not a party to any pending action or
proceeding by any Governmental Entity for the assessment or collection of any
Taxes.
3.09 Absence of Changes. Since December 31, 2005, there has not been
any material adverse change in the financial position of the Company, or any
material adverse change in the condition, prospects or operations of the
business of the Company.
3.10 Absence of Certain Transactions. Except as contemplated by this
Agreement, since December 31, 2005 the Company has not:
(a) issued, authorized for issuance or sold any of its capital stock or other
equity securities or interests;
(b) issued, authorized for issuance, delivered or granted any right, option or
other commitment for the issuance of shares of its capital stock or other
securities;
(c) incurred any material obligation or liability (fixed or contingent) except
unsecured current obligations and liabilities incurred in the ordinary course of
business,
(d) mortgaged, pledged or granted a security interest in any of its assets,
except for purchase money security interest incurred in the ordinary course of
its business;
(e) made any loan to, guaranteed the indebtedness (of any kind) of or otherwise
incurred any indebtedness on behalf of any Person;
(f) made any material change in the customary operating methods of the Company;
(g) amended or restated its articles of formation or Operating Agreement, except
as contemplated by this Agreement;
(h) entered into any material commitment or transaction not in the ordinary
course of business; or
(i) made any agreement to do any of the foregoing.
3.11 Title to Properties, Liens and Encumbrances; Condition of Assets.
The Company has good title to all properties, interests in properties and assets
reflected in the balance sheet included in the Company Financial Statements or
acquired thereafter, free and clear of all Encumbrances. Such assets and
properties include all tangible and intangible assets, contracts and rights
necessary or required for the operation of the business of the Company as now or
heretofore conducted. All material tangible assets of the Company are in good
operating condition and repair, subject to normal wear and tear, free of
defects, and are suitable, adequate and fit for the uses for which they are
intended or being used; and such assets and the present use thereof do not
violate in any material respect any applicable licenses or any Laws.
3.12 Real Property.
(a) The Company owns no real property ("Real Property").
(b) Schedule A to this Agreement sets forth a list of all Real Property leased,
occupied or used by the Company (the "Leased Real Property"). All Leased Real
Property is suitable and adequate for the purposes for which it is currently
being used. The Company leases the Leased Real Property pursuant to lease
agreements (the "Lease Agreements"), each of which is in full force and effect
and there is no event of default, or event which with notice or passage of time,
or both, would become an event of default under the Lease Agreements.
3.15 Indebtedness; Guarantees. Except as set forth in the Company
Financial Statements, the Company does not have any outstanding indebtedness,
other than payables incurred in the ordinary course of business, is not a
guarantor of any third party indebtedness, and is not in default in respect of
any terms or conditions of any indebtedness which would permit an acceleration
of the due date thereof. Copies of all loan and guaranty agreements to which the
Company is a party have been made available to the Purchaser.
3.16 Litigation. There are no civil, criminal or administrative
actions, suits, claims, hearings, investigations, arbitrations, or proceedings
pending or threatened against the Company preventing, or which, if determined
adversely to the Company would prevent the Company from consummating the
transactions contemplated by this Agreement and the Ancillary Documents.
3.17 Brokers. All negotiations relative to this Agreement and the
transactions contemplated herein have been carried on by Dato directly with the
Purchaser and without the intervention of any other person on behalf of the
Company or Dato in such manner as to give rise to any claim against any of the
parties hereto for a brokerage commission, finder's fee, consulting fee or other
like payment.
3.18 Compliance with Law. The Company is, and has at all times
conducted its business, in material compliance with all federal, state and local
laws, regulations and ordinances applicable to its business and operations.
3.19 Corporate Records. Copies of the minutes, stock transfer and other
record books of the Company have been made available to the Purchaser and are
true and complete in all material respects.
3.20 Disclosure. No representation or warranty by Dato in, and no document,
statement, certificate, schedule or exhibit to be furnished or delivered to the
Purchaser pursuant to, this Agreement contains or will contain any material
untrue or misleading statement of fact or omits or will omit any fact necessary
to make the statements contained herein or therein not materially misleading.
3.21 Purchase for Investment. Dato is an "accredited investor" within
the meaning of Rule 501(a) promulgated under the Securities Act and is
purchasing the Closing Shares solely for its own account, for investment only,
and with no present intention of directly or indirectly distributing, offering
or reselling any such Closing Shares, the shares of Common Stock issuable upon
conversion of the Closing Shares, or any part thereof, or interest therein to
any Person in any transaction or otherwise, except in compliance with the
registration requirements or exemption provisions under the Securities Act and
the rules and regulations promulgated thereunder, and any other applicable
securities laws.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser hereby represents and warrants to Dato as follows:
4.01 Organization and Good Standing. The Purchaser and each of its
subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Florida and each has all requisite
corporate power and authority to own or hold under lease its properties and
assets and to carry on its business as now being conducted or as presently
proposed to be conducted, and is duly qualified and in good standing as a
foreign corporation in each jurisdiction where the nature of the property owned
or leased or the business transacted by it makes such qualification necessary.
4.02 Authority Relative to Agreements. The Purchaser has the requisite
corporate power and authority to enter into this Agreement and all Ancillary
Documents, and to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each Ancillary Document, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by the Board of Directors of the Purchaser, or an authorized
committee thereof, and do not violate any provision of the articles of
incorporation or bylaws of the Purchaser, and no other corporate proceedings on
the part of the Purchaser are necessary to authorize this Agreement and the
Ancillary Documents and the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and each Ancillary Document and the
consummation of the transactions provided for hereby and thereby will not
conflict with or effect a breach, violation or default, or cause an event of
default, under any mortgage, lease, or other material agreement or instrument,
or any statute, regulation, order, judgment or decree to which it is a party or
by which it is bound, or any law or governmental regulation applicable to the
Purchaser, or require the consent of any Person (other than the parties to this
Agreement). This Agreement and the Ancillary Documents constitute the legal,
valid and binding obligations of the Purchaser, enforceable in accordance with
their terms, except as enforcement thereof may be limited by any applicable
bankruptcy, reorganization, insolvency, moratorium, or similar laws affecting
rights of creditors generally and general principles of equity, whether applied
at law or in equity.
4.03 No Broker. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on directly by the Purchaser
with Dato and the Company without the intervention of any person on behalf of
the Purchaser in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission, finder's fee or other like
payment.
4.04 Governmental Filings; No Violations. No notices, reports or other
filings are required to be made by the Purchaser with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
the Purchaser from, any Governmental Authority in connection with the execution
and delivery of this Agreement by the Purchaser and the consummation by the
Purchaser of the transactions contemplated by this Agreement and the Ancillary
Documents.
4.05 Litigation. There are no civil, criminal or administrative
actions, suits, claims, hearings, investigations, arbitrations, or proceedings
pending or threatened against the Purchaser preventing, or which, if determined
adversely to the Purchaser would prevent the Purchaser from consummating the
transactions contemplated by this Agreement and the Ancillary Documents.
4.06 Capital Stock. The authorized capital stock of the Purchaser
consists of 600,000,000 shares of common stock, $.001 par value per share, and
1,000,000 shares of preferred stock, $.001 par value per share, of which as of
the date of this Agreement, 524,977,610 shares of Common Stock is issued and
outstanding and no shares of preferred stock are issued and outstanding.
4.07 Issuance of Closing Shares. On the date of this Agreement, the
Closing Shares are, and, any shares of Common Stock which may be issued by
Purchaser to Dato upon conversion of the Closing Shares pursuant to the terms of
the Preferred Stock and this Agreement on the relevant date of their required
issuance and delivery shall be, duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights. Purchaser has and will keep
reserved and available for issuance a sufficient number of shares of Common
Stock for issuance upon conversion of the Closing Shares.
4.08 Funds. Purchaser, directly or indirectly has, and will have at the Closing,
sufficient funds in the aggregate amount of not less than the Closing Cash,
available without restriction for use in payment thereof at the Closing.
4.09 Purchase for Investment. Purchaser is an "accredited investor"
within the meaning of Rule 501(a) promulgated under the Securities Act and is
purchasing the Purchased Interests solely for its own account, for investment
only, and with no present intention of directly or indirectly distributing,
offering or reselling any such Purchased Interests, or any part thereof, or
interest therein to any Person in any transaction or otherwise, except in
compliance with the registration requirements or exemption provisions under the
Securities Act and the rules and regulations promulgated thereunder, and any
other applicable securities laws.
4.10 Exchange Act Filings; Financial Statements.
(a) Purchaser's Common Stock is registered under Section 12(g)
of the Exchange Act and it files reports, proxy statements and other filings
with the SEC ("Exchange Act Filings"). Purchaser is current in all of its
Exchange Act Filings and all such Exchange Act Filings, including, without
limitation, its annual report on Form 10-KSB for the year ended December 31,
2004 and its quarterly report on Form 10-QSB for the period ended September 30,
2005, and the related audited annual and unaudited interim financial statements
contained therein, respectively (collectively, "Purchaser Financial
Statements"), comply with all requirements of the Exchange Act and other
applicable law. None of the Exchange Act Filings contained as of the filing date
(or, in the case of any Exchange Act Filing that has been amended, as of the
date of amendment) or contain as of the date of this Agreement any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances in which they were made not misleading.
(b) Each of the Purchaser Financial Statements, including the
notes thereto, contained in an Exchange Act Filing were prepared in accordance
with generally accepted accounting principles except as otherwise disclosed
therein (and in the case of financial statements for interim periods, the
absence of notes thereto and normal year-end adjustments) applied on a
consistent basis throughout the periods covered thereby (except as disclosed
therein). The Purchaser Financial Statements (i) are complete and correct in all
material respects, (ii) present fairly, consistently and accurately the
consolidated financial position of the Purchaser and its subsidiaries as at the
respective dates thereof, (iii) present fairly, consistently and accurately the
consolidated results of Purchaser's and its subsidiaries' operations and changes
in financial position of the for the respective periods thereof and (iv) reflect
all adjustments (consisting only of normal recurring accruals) that are
necessary for a fair presentation of the consolidated financial condition of
Purchaser and its subsidiaries and the results of the operations of Purchaser
and its subsidiaries as of the respective dates thereof or for the respective
periods covered thereby.
4.11 No Material Adverse Change. Since the date of the quarterly report
for the quarter ended September 30, 2005, there has not been any materially
adverse change or any event, occurrence or development which could reasonably be
expected to have a materially adverse effect on Purchaser and its subsidiaries.
4.12 Absence of Undisclosed Liabilities. Purchaser does not have any
liabilities or obligations (whether known or unknown, contingent or absolute,
matured or unmatured, or otherwise) that are not reflected or reserved against
in the Purchaser Financial Statements (other than such liabilities or
obligations not required under generally accepted accounting principles to be
reflected on the balance sheet of the Purchaser Financial Statements and which
do not and could not have a material adverse effect on the business of the
Purchaser and its subsidiaries).
ARTICLE 5 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
5.01 Survival of Representations and Warranties of the Parties. All
representations and warranties made by any party hereto contained in this
Agreement or in any Ancillary Document, and the indemnification obligations of
each party hereto, shall survive the Closing Date until the second anniversary
of the Closing Date. Notwithstanding the foregoing, if a party has made a claim
for indemnification in accordance with the procedures set forth in this Article
5 on or prior to the expiration of the applicable survival period referred to in
the previous sentence, then the indemnity obligations relating to such claim
shall survive until the final resolution of such claim, as further provided in
this Article 5.
5.02 Indemnification by Dato. Dato agrees to indemnify and hold the
Purchaser and its affiliates, subsidiaries, parent companies, directors,
officers, agents and employees harmless (subject to the terms of this Article 5)
from and against any and all damages, losses, liabilities, deficiencies, costs
and/or expenses (including all reasonable legal fees, expenses and other
out-of-pocket costs) (collectively, "Damages") resulting from, arising out of or
in connection with any misrepresentation or breach of any warranty or
representation made by Dato in this Agreement or any Ancillary Document, in each
instance whether or not any such Damages are in connection with any action,
suit, proceeding, demand or judgment of a third party (including Governmental
Authority).
5.03 Indemnification by the Purchaser. Purchaser hereby agrees to
indemnify and hold the Dato and the Company and their agents harmless (subject
to the terms of this Article 5) from and against any and all Damages resulting
from, arising out of or in connection with any misrepresentation or breach of
any warranty, representation or covenant in this Agreement or any Ancillary
Document, on the part of the Purchaser in each instance whether or not any such
Damages are in connection with any action, suit, proceeding, demand or judgment
of a third part (including Governmental Authority).
5.04 Procedure.
(a) Upon receipt by one party of notice of any claim by a
third party which might give rise to indemnification hereunder, or upon such
party's discovery of facts which might give rise to indemnification hereunder,
the party claiming indemnification hereunder (the "Indemnitee") shall give
prompt written notice to the other (the "Indemnitor"), which notice shall
describe in reasonable detail the Damages anticipated to be suffered (if
ascertainable) and the specific circumstances thereof, and specifying the
provisions of this Agreement to which such claim for Damages relates (the
"Damage Claim Notice"). The Indemnitee may amend the Damage Claim Notice,
without prejudice to its rights hereunder, if it becomes aware of facts
indicating that the Damages anticipated to be suffered have increased or
decreased from those estimated in the previous Damage Claim Notice. A failure to
provide or amend the Damage Claim Notice shall not relieve the Indemnitor from
any obligations or liabilities that the Indemnitor may have to the Indemnitee
hereunder, except to the extent that the Indemnitor has been adversely
prejudiced as a result of such failure. The Indemnitor shall be entitled to
participate in the defense of any such claim or action which is a third party
claim or action at the Indemnitor's own cost and, upon the prior written consent
of the Indemnitee (which consent shall not be unreasonably withheld or delayed),
to assume the defense thereof, with counsel of Indemnitor's own choosing, the
cost of which shall be paid for by the Indemnitor. Upon notice from Indemnitor
to Indemnitee of Indemnitor's election to assume the defense, the Indemnitor
will not be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the defense thereof.
The Indemnitee may not compromise or settle any claim for which it has asserted
or may assert its right to indemnification without the prior written consent of
the Indemnitor, which consent shall not be unreasonably withheld or delayed. The
Indemnitor may not compromise or settle any claim for which Indemnitor has
elected to assume the defense without Indemnitee's prior written consent, unless
(i) Indemnitor has acknowledged its obligation to pay all Damages relating to
such claim and has provided to Indemnitee evidence reasonably satisfactory to
Indemnitee that Indemnitor has the financial wherewithal to pay such Damages,
(ii) such settlement will not contain any terms that would interfere in the
normal operations of the Indemnitee, and (iii) such settlement contains a
unconditional release of all claims against the Indemnitee.
(b) Upon receipt by Indemnitor of a Damage Claim Notice which does not relate to
a third party claim, the Indemnitor and Indemnitee shall make all reasonable
efforts to promptly resolve such claim on an amicable basis within the thirty
(30) day period following such receipt.
5.05. Payment of Indemnification Obligations.
(a) Damages shall be due and owing when finally judicially determined to be
covered by the indemnities set forth in Article 5 hereof or otherwise as
mutually agreed among the parties hereto. The Indemnitor shall, within two (2)
business days following receipt of written demand by the Indemnitee, pay the
Indemnitee or at the Indemnitee's direction in immediately available funds any
and all Damages then due and owing.
(b) Purchaser may elect, but shall not be obligated to apply
the amount of any Damages due and owing to it as Indemnitee to offset and reduce
any Deferred Payments otherwise due hereunder. Any such Damages not so offset
shall be and remain payable pursuant to Section 5.05(a) above.
ARTICLE 6 - THE CLOSING
6.01 Conditions to Each Party's Obligations to Close. The respective
obligation of each party to close the transactions described in Article 2 hereof
shall be subject to the satisfaction prior to Closing of the following
conditions:
(a) No temporary restraining order, injunction or other order preventing the
transactions contemplated by this Agreement shall have been issued by any court
or other governmental entity and remain in effect, and no litigation seeking the
issuance of such an order or injunction, or seeking relief against the
Purchaser, the Company or Dato if the sale is consummated, shall be pending. In
the event any such order or injunction shall have been issued, each party agrees
to use commercially reasonable efforts to have any such injunction lifted.
(b) All authorizations, consents, orders or approvals of, or declarations or
filings with, or expiration of waiting periods imposed by, any private party or
Governmental Authority necessary for the consummation of the transactions
contemplated by this Agreement shall have been filed, occurred or been obtained,
unless failure to make such filing or obtain such approval would not be
materially adverse to the Purchaser, the Company or Dato.
6.02 Conditions to Obligations of the Purchaser. The obligations of the
Purchaser to complete the transactions contemplated hereunder are subject to the
satisfaction of the following conditions, unless waived by the Purchaser in
writing:
(a) Performance of Obligations of Dato and the Company. Dato and the Company
shall have performed in all material respects all obligations and covenants
required to be performed by them under this Agreement on or prior to the Closing
Date.
(b) Operating Agreement. The Purchaser, Dato and the Company shall have each
duly executed and delivered the Operating Agreement in the form attached as
Annex C hereto.
(c) Employment Agreement. At the Closing, Dato shall have entered into the
Employment Agreement with the Company and Purchaser in the form attached as
Annex D hereto.
6.03 Conditions to Obligations of Dato and the Company. The obligations
of Dato and the Company to complete the transactions contemplated hereunder are
subject to the satisfaction of the following conditions, unless waived by Dato
in writing:
(a) Performance of Obligations of the Purchaser. The Purchaser shall have
performed in all material respects all obligations and covenants required to be
performed by it under this Agreement on or prior to the Closing Date.
(b) Closing Payment. At the Closing, the Purchaser shall have delivered to or at
the direction of the Sellers the Closing Payments, including the Cash Closing
Payment, the Closing Notes, and certificates representing the Closing Shares.
(c) Employment Agreement. At the Closing, the Company shall have entered into
the Agreement.
(d) Voting Agreement. At the Closing, Purchaser, Xxxxxx Xxxxxx and Xxxxxxx Xxxx
shall have entered into the Voting Agreement in the form attached as Annex B
hereto.
(e) Amended Articles. On or before the Closing, Purchaser shall file the Amended
Articles in the form attached as Annex A hereto with the Secretary of State of
the State of Florida and such Amended Articles shall be effective.
6.04 Termination.
(a) This Agreement may be terminated at any time prior to the Closing:
by mutual agreement of the Purchaser and Dato;
by the Purchaser (provided the Purchaser is not otherwise in breach),
if the Closing has not occurred on or before January 31, 2006 by reason of the
failure to fulfill any closing condition set forth under Sections 6.01 and 6.02
(unless waived by the Purchaser) or if there has been a breach by Dato of any
covenant or agreement set forth in this Agreement on the part of Dato which is
material (and which was not caused in whole or part by the Purchaser) and which
is not cured within a reasonable period of time after notice thereof is given by
the Purchaser (except that no cure period shall be provided for a breach by Dato
which by its nature cannot be cured) or if any representation or warranty made
by Dato in this Agreement is materially inaccurate or untrue as of the date
hereof;
by Dato (provided Dato is otherwise in breach), if the Closing has not
occurred on or before January 31, 2006 by reason of the failure to fulfill any
closing condition set forth under Sections 6.01 and 6.03 (unless waived by Dato)
or if there has been a breach by the Purchaser of any covenant or agreement set
forth in this Agreement on the part of the Purchaser which is material (and
which was not caused in whole or part by Dato) and which is not cured within a
reasonable period of time after notice thereof is given by Dato (except that no
cure period shall be provided for a breach by the Purchaser which by its nature
cannot be cured) or if any representation or warranty made by the Purchaser in
this Agreement is materially inaccurate or untrue as of the date hereof;
by either the Purchaser or Dato if any permanent injunction or other
order of a court or other competent authority preventing the transactions
hereunder shall have become final and non-appealable; by the Purchaser, in the
event of any material adverse change to the Company's business; or
by Dato, in the event of any material adverse change to the Purchaser's
business.
(b) In the event of termination of this Agreement as provided in this
Section 6.04, this Agreement shall forthwith become void, except that
termination of this Agreement shall not limit the liability of any party hereto
except as provided in this Agreement and the Purchaser shall not use
confidential information of the Company.
6.05 Mutual Efforts To Close. Subject to the terms and conditions of
this Agreement, the Purchaser and Dato shall use its and his respective
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate the transactions contemplated by this Agreement on
or before January 31, 2006 and, in particular, Dato shall use his commercially
reasonable efforts to fulfill, by such date, the conditions to Closing set forth
in Sections 6.01 and 6.02 hereof and the Purchaser shall use its commercially
reasonable efforts to fulfill, by such date, the conditions to Closing set forth
in Sections 6.01 and 6.03 hereof.
6.06 Access to Information. From the date hereof until the Closing, (a)
Dato shall provide the Purchaser, its counsel, financial advisors, auditors and
other authorized representatives full access to such information as the
Purchaser may from time to time reasonably request with respect to the Company,
and the transactions contemplated by this Agreement, and shall provide the
Purchaser and its representatives reasonable access during regular business
hours and upon reasonable notice to the properties, books, and records of the
Company as the Purchaser may from time to time reasonably request and the
Company will instruct its counsel and financial advisors to cooperate with the
Purchaser in its investigation of the Company and (b) Purchaser shall provide
Dato, his counsel, financial advisors, auditors and other authorized
representatives full access to such information as the Purchaser may from time
to time reasonably request with respect to the Purchaser and its subsidiaries,
and the transactions contemplated by this Agreement, and shall provide Dato and
his representatives reasonable access during regular business hours and upon
reasonable notice to the properties, books, and records of the Purchaser and its
subsidiaries as Dato may from time to time reasonably request and Purchaser will
instruct its counsel and financial advisors to cooperate with Dato in his
investigation of the Purchaser and its subsidiaries.
6.07 Conduct of the Business Prior to Closing.
(a) Except as is required by the terms of this Agreement, from
the date hereof until the Closing, the Company will conduct its business in the
ordinary course in substantially the same manner as presently conducted and will
use reasonable commercial efforts consistent with past practices to preserve
relationships with customers, suppliers and others. Except as required by the
terms of this Agreement, from the date hereof until the Closing, without the
prior written consent of the Purchaser, the Company shall not:
sell, assign, transfer or otherwise convey, or make any material change
in, any of its assets, except for any transactions which are in the ordinary
course of business consistent with past practice and which are not material to
its business;
grant or permit to exist any Encumbrance on any of its assets other
than the Encumbrances existing as of the date hereof and those arising in the
ordinary course of business consistent with past practice and which are not
material to its business;
fail to maintain all policies of insurance (and such additional
policies as may be necessary to comply with applicable Laws or replacement
policies on terms no less favorable to the Company) in full force and effect, at
its sole expense, and at least at such levels as are in effect on the date
hereof, through and including the Closing Date; or cancel any such insurance, or
take, or fail to take any action, that would enable the insurers under such
policies to avoid liability for claims arising out of occurrences prior to the
Closing;
issue any ownership interests in the Company or any grant any rights to
acquire ownership interests in the Company; enter into any agreements or
instruments concerning the voting of the shares or control of the Company;
enter into any agreement or instrument that conflicts with this
Agreement or that prohibits or restricts the transactions contemplated
hereunder;
intentionally or knowingly fail to comply with any applicable Law; or
agree to commit to do any of the foregoing.
(b) In addition to the foregoing, during the period from the
date hereof to the Closing Date, Dato shall not (i) sell any of Dato's Interests
in the Company, (ii) grant or permit any Encumbrance with respect to any of such
interests, or (iii) enter into any agreement or instrument relating to the
voting or control of the Company or which conflicts with this Agreement or
prohibits the transactions contemplated hereunder.
(c) Notwithstanding anything to the contrary contained herein,
nothing herein shall be construed to prevent Dato from paying any obligations of
the Company owed to him or from satisfying any debt or obligation of the Company
for which Dato is a guarantor, co-xxxxxx or otherwise obligated.
ARTICLE 7 - ADDITIONAL AGREEMENTS
7.01 Registration of Closing Shares and Common Stock. Purchaser agrees
to register the Closing Shares and any shares of Common Stock issuable to Dato
upon conversion of the Preferred Stock to Common Stock in accordance with the
terms of the Preferred Stock under the Securities Act and any applicable state
securities laws as promptly as practicable following the Closing Date at its
sole cost and expense.
7.02 Repurchase Right. Data shall have the right to repurchase twenty
percent (20%) of the Interests upon the occurrence of a Repurchase Event at a
price equal to the Fair Market Value of such Interests.
7.03 No Encumbrances; No Obligation for Purchaser Debt.
(a) Without the prior written consent of Dato, Purchaser
agrees not (i) place any Encumbrances on any Interests acquired by it pursuant
to this Agreement or (ii) sell any Interests or any substantial amount of assets
of the Company for a three-year period ending on the third anniversary of the
Closing Date (the "Standstill Period"), other than the right of repurchase under
Section 7.02 and the right of first refusal in favor of Dato set forth in the
Operating Agreement.
(b) Without the prior written consent of Dato, Purchaser
agrees that following the Closing, it will not take any action that would cause
the Company to become a co-borrower or guarantor or otherwise obligated for the
obligations of the Purchaser or any of its subsidiaries, other than itself.
7.04 Cooperation re Consolidation of Financial Statements. The parties
agree to cooperate and take such actions as may be reasonably required to permit
consolidation of the financial statements of the Company with the financial
statements of Purchaser, including, the amendment of this Agreement and the
Ancillary Agreements; provided, however, that notwithstanding the foregoing,
Dato shall not be obligated to make any change to this Agreement or any of the
Ancillary Agreements that would materially and adversely effect any of his
rights under this Agreement or any of the Ancillary Agreements, including,
without limitation, his ownership interest in the Company, his right to
repurchase Interests under Section 7.02 hereof, his right to nominate and have
elected to the board of managers of the Company as set forth in the Operating
Agreement, the material terms of his Employment Agreement, his rights as a
holder of Preferred Stock, the amount or value of the consideration payable to
his for the Purchased Interests or the restrictions on liens and loans set forth
in Section 7.03 hereof.
7.05 Prohibition on Trading. Neither Dato, the Company or any of their
respective affiliates nor Purchaser or any of its affiliates shall trade any
security of the Purchaser for a period commencing on the date hereof and ending
five (5) business days after the Closing Date or the termination of this
Agreement without Closing.
7.06 D&O Insurance. Purchaser shall use its best efforts to obtain and
maintain directors' and officers' liability insurance ("D&O Insurance") covering
all directors and officers of Purchaser, the Company and other subsidiaries of
Purchaser, including without limitation, Dato and his nominees with an
endorsement for occurrences from and after the Closing Date in an amount not
less than $1,000,000 per occurrence with a deductible reasonably acceptable to
Dato within 120 days following the Closing Date. Notwithstanding the foregoing
provision, Purchaser shall not be obligated to obtain and maintain D&O Insurance
if the cost of doing so is demonstrably commercially unreasonable under then
current market conditions, or if the cost of such D&O Insurance would materially
and adversely affect Purchaser's and its subsidiaries' financial viability as
going concerns to the extent that to obtain such D&O Insurance on such terms
would constitute a breach by Purchaser's management of its duty of loyalty to
Purchaser and its shareholders.
ARTICLE 8 - GENERAL PROVISIONS
8.01 Expenses. Each party shall pay its own expenses (including legal
and accounting costs and expenses) in connection with the negotiation,
preparation and consummation of this Agreement and the Ancillary Documents, and
the transactions contemplated hereby and thereby.
8.02 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
8.03 Headings. Article and Section headings used in this Agreement are
for convenience only and shall not affect the meaning or construction of this
Agreement.
8.04 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
certified mail (return receipt requested) or by courier (with proof of delivery
and charges prepaid), to the parties at the following address (or at such other
address for a party as shall be specified by like notice), or if sent by
telecopy to the parties at the following telecopy numbers;
if to the Purchaser: China Direct Trading Corporation
00000 Xxxxxxx Xxxx #000
Xxxxxx Xxxx, XX 00000
Attention: President
if to Dato or the Company:4100 Xxxxx Xxxxxxxxx Xxxx, Xxxxx 0-0
Xxxxxxx Xxxxx, Xxxxxxx 00000
8.05 Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors of the parties hereto, and by the successors, heirs, executors
and personal representatives of Dato.
8.06 Entire Agreement. This Agreement, including any agreements set
forth as an annex to any such agreements, constitute the entire agreement
between the parties hereto and supersede all prior agreements and
understandings, both written and oral, with respect to the subject matter
hereof.
8.07 Counterparts. This Agreement may be executed in two or more
counterparts (including by facsimile signature), each of which shall be
considered an original, but all of which together shall constitute the same
instrument.
8.08 Amendment; Assignment. This Agreement may be amended only by an
instrument in writing signed by or on behalf of each of the parties sought to be
bound by such amendment. This Agreement may not be assigned without the written
consent of the other parties hereto.
8.09 Public Announcements. The parties hereto shall mutually agree in
advance on the form, timing and contents of any public announcements concerning
the transactions contemplated hereby, subject to the requirement that nothing
herein shall be construed to prevent Purchaser from making any such disclosure
that is reasonably determined by Purchaser's outside legal counsel in writing to
be required for Purchaser to comply with its obligations under the Exchange Act
or other applicable law.
8.10 Gender, Etc. Whenever the context may require, any pronouns used
herein shall be deemed to refer to the masculine, feminine, or neuter forms, and
the singular form of nouns, pronouns and verbs shall include the plural, and
vice versa. Whenever used herein, the terms "include," "includes" and
"including" shall mean to include without limitation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
CHINA DIRECT TRADING CORPORATION.
By: _______________________________
Name: Xxxxxx Xxxxxx
Title: President
DATO:
-----------------------------------
Xxxxxxx Xxxx, individually
COMPLETE POWER SOLUTIONS, LLC
By: _______________________________
Name: Xxxxxxx Xxxx
Title: Manager
