SHARE EXCHANGE AGREEMENT
AMONG
CHINA DIGITAL COMMUNICATION GROUP
BILLION ELECTRONICS CO., LTD.
SHENZHEN E'JINIE TECHNOLOGY DEVELOPMENT CO., LTD
AND
THE SHAREHOLDERS OF BILLION ELECTRONICS CO., LTD. LISTED ON SCHEDULE 1
----------
DATED AS OF
September 17, 2004
TABLE OF CONTENTS
PAGE
INDEX OF SCHEDULES AND EXHIBITS..............................................IV
ARTICLE I. EXCHANGE OF SHARES.................................................1
1.1 Agreement to Sell...................................................1
1.2 Purchase Price......................................................1
1.3 Mechanics of Exchange...............................................2
1.4 No Fractional Shares................................................2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF E'JINIE.........................2
2.1 Organization and Qualification......................................3
2.2 Subsidiaries........................................................3
2.3 Articles of Incorporation and Bylaws................................3
2.4 Authorization and Validity of this Agreement........................3
2.5 No Violation........................................................4
2.6 Capitalization and Related Matters..................................4
2.7 Compliance with Laws and Other Instruments..........................5
2.8 Certain Proceedings.................................................6
2.9 No Brokers or Finders...............................................6
2.10 Title to and Condition of Properties................................6
2.11 Absence of Undisclosed Liabilities..................................7
2.12 Changes.............................................................7
2.13 Material Contracts..................................................8
2.14 Tax Returns and Audits..............................................9
2.15 Material Assets. 10
2.16 Insurance Coverage.................................................10
2.17 Litigation; Orders.................................................11
2.18 Licenses...........................................................11
2.19 Interested Party Transactions......................................11
2.20 Governmental Inquiries.............................................12
2.21 Bank Accounts and Safe Deposit Boxes...............................12
2.22 Intellectual Property..............................................12
2.23 Stock Option Plans; Employee Benefits..............................12
2.24 Employee Matters 13
2.25 Environmental and Safety Matters...................................13
2.26 Material Customers.................................................14
2.27 Inventories........................................................14
2.28 Money Laundering Laws..............................................14
2.29 Disclosure.........................................................15
2.30 Finders and Brokers................................................15
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CDCG..........................16
3.1 Organization; Good Standing........................................16
3.2 CDCG Common Stock..................................................16
3.3 Authority; Binding Nature of Agreements............................16
3.4 Non-Contravention; Consents........................................17
3.5 Finders and Brokers................................................18
3.6 Reports and Financial Statements; Absence of Certain Changes.......18
3.7 Compliance with Applicable Law.....................................19
3.8 Complete Copies of Requested Reports...............................19
3.9 Full Disclosure....................................................19
ARTICLE IV. COVENANTS OF E'JINIE.............................................19
4.1 Access and Investigation...........................................19
4.2 Operation of Business..............................................20
4.3 Filings and Consents; Cooperation..................................21
4.4 Notification; Updates to Disclosure Schedules......................22
4.5 Commercially Reasonable Efforts....................................23
4.6 Confidentiality; Publicity.........................................23
ARTICLE V. COVENANTS OF CDCG.................................................23
5.1 Notification.......................................................23
5.2 Filings and Consents; Cooperation..................................24
5.3 Commercially Reasonable Efforts....................................24
5.4 Disclosure of Confidential Information.............................24
5.5 Indemnification....................................................25
ARTICLE VI. CLOSING CONDITIONS OF CDCG.......................................27
6.1 Accuracy of Representations and Warranties.........................27
6.2 Additional Conditions to Closing...................................27
6.3 Performance of Agreements..........................................28
6.4 Consents...........................................................28
6.5 No Material Adverse Change.........................................28
6.6 E'JINIE Closing Certificates.......................................28
6.7 Transactional Agreements...........................................28
6.8 Resignation of Directors and Officers..............................29
6.9 Delivery of Stock Certificates, Minute Book and Corporate Seal.....29
ARTICLE VII. CLOSING CONDITIONS OF THE SHAREHOLDERS..........................29
7.1 Accuracy of Representations and Warranties.........................29
7.2 Additional Conditions to Closing...................................29
7.3 CDCG Closing Certificates..........................................30
7.4 No Material Adverse Change.........................................30
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7.5 Performance of Agreements..........................................30
7.6 Consents...........................................................30
7.7 Registration Rights Agreement......................................30
7.8 CDCG Stock.........................................................31
ARTICLE VIII. FURTHER ASSURANCES.............................................31
ARTICLE IX. TERMINATION .....................................................31
9.1 Termination........................................................31
9.2 Termination Procedures.............................................32
9.3 Effect of Termination..............................................32
ARTICLE X. MISCELLANEOUS ....................................................33
10.1 Survival of Representations and Warranties.........................33
10.2 Expenses...........................................................33
10.3 Entire Agreement...................................................33
10.4 Counterparts ......................................................33
10.5 Descriptive Headings...............................................33
10.6 Notices............................................................34
10.7 Choice of Law .....................................................34
10.8 Binding Effect; Benefits...........................................34
10.9 Assignability .....................................................35
10.10 Waiver and Amendment...............................................35
10.11 Attorneys' Fees....................................................35
10.12 Severability.......................................................35
10.13 Construction.......................................................35
COUNTERPART SIGNATURE PAGE SHARE EXCHANGE AGREEMENT AMONG CHINA DIGITAL
COMMUNICATION GROUP, BILLION ELECTRONICS CO., LTD., SHENZHEN E'JINIE TECHNOLOGY
DEVELOPMENT CO., LTD. AND THE SHAREHOLDERS NAMED THEREIN 1
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INDEX OF SCHEDULES AND EXHIBITS
Exhibits:
A. Certain Definitions
B. Form of Registration Rights Agreement
Schedules:
1. Shareholders of Billion Electronics Co., Ltd. and Shenzhen E'Jinie
Technology Development Co., Ltd
2. Billion and Shenzhen E'Jinie Technology Development Co., Ltd Disclosure
Schedule
SHARE EXCHAGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "AGREEMENT") dated as of September 29,
2004, is entered into by and among CHINA DIGITAL COMMUNICATION GROUP, a Nevada
corporation ("CDCG"), Billion Electronics Co., Ltd, a ____ corporation in China
("BILLION"), Shenzhen E'Jinie Technology Development Co., Ltd a Shenzhen
corporation in China ("E'JINIE"), and the shareholders of Billion listed on
Schedule 1 to this Agreement (each, a "SHAREHOLDER" and, collectively, the
"SHAREHOLDERS").
RECITALS
A. The Shareholders own the number of shares of capital stock in Billion
(the "SHARES") set forth opposite each Shareholder's name on Schedule 1, which
Shares collectively constitute all of the issued and outstanding shares of
capital stock in Billion.
B. Billion is a holding company and the sole shareholder of E'JINIE.
Billion's sole assets are its shareholdings in E'JINIE.
C. CDCG desires to purchase from the Shareholders, and the Shareholders
desire to sell to CDCG, the Shares in exchange for shares of CDCG Common Stock,
all on the terms and subject to the conditions set forth in this Agreement (the
"Exchange").
D. As a result of the Exchange, CDCG will become the sole shareholder of
Billion, and through Billion, will own all of the issued and outstanding stock
of E'JINIE.
E. Certain capitalized terms used in this Agreement are defined on Exhibit
A.
AGREEMENT
In consideration of the agreements, provisions and covenants set forth
below, CDCG, Billion, the Shareholders and E'JINIE, hereby agree as follows:
ARTICLE I.
EXCHANGE OF SHARES
1.1 AGREEMENT TO SELL.
Upon the terms and subject to all of the conditions contained herein, each
of the Shareholders hereby agrees to sell, assign, transfer and deliver to CDCG,
and CDCG hereby agrees to purchase and accept from each of the Shareholders, on
the Closing Date, the Shares.
1.2 PURCHASE PRICE.
As full consideration for the sale, assignment, transfer and delivery of
the Shares by the Shareholders to CDCG, and upon the terms and subject to all of
the conditions contained herein, CDCG shall issue to the Shareholders 4,566,210
shares of RESTRICTED CDCG COMMON STOCK (the "ACQUISITION SHARES") and pay cash
consideration of US $1,500,000 to the Shareholders. The parties understand and
acknowledge that such exchange is based upon an approximate valuation of CDCG at
US $105,070,000 and E'JINIE at US$11,500,000.
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1.3 MECHANICS OF EXCHANGE.
(a) At the Closing, each Shareholder shall be entitled to surrender the
certificate or certificates that immediately prior to the Closing represented
the Billion Common Stock (the "CERTIFICATES") to the exchange agent designated
by CDCG in exchange for the Acquisition Shares.
(b) Promptly after the Closing, CDCG or its designated exchange agent
shall make available to each Shareholder a letter of transmittal and
instructions for use in effecting the surrender of Certificates in exchange for
the Acquisition Shares. Upon surrender of a Certificate to such exchange agent
together with the letter of transmittal, duly executed, the Shareholder shall be
entitled to receive in exchange therefor such number of Acquisition Shares as
such Shareholder has the right to receive in respect of the Certificate so
surrendered pursuant to the provisions of this Article I.
1.4 NO FRACTIONAL SHARES.
No fraction of a share of CDCG Common Stock shall be issued in the
Exchange. In lieu of fractional shares, the Shareholders upon surrender of their
Certificates as set forth in Section 1.3 shall be paid an amount in cash,
without interest, rounded to the nearest cent, determined by multiplying the
fractional interest to which such Shareholder would otherwise be entitled by the
Average CDCG Stock Price as of the date on which this Agreement has been signed
by all parties.
1.5 CLOSING.
The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall take place in Shenzhen at 9:00 a.m., local time, on or before
October 31, 2004 (the "CLOSING DATE"); provided, however, that if all of the
other conditions set forth in Articles VI and VII hereof are not satisfied or
waived, unless this agreement has been terminated under Section 9 hereof, or at
such date, the Closing Date shall be the business day following the day on which
all such conditions have been satisfied or waived, or at such other date, time
and place as CDCG and Billion, E'JINIE and the Shareholders shall agree.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF E'JINIE
Except as set forth in the Disclosure Schedule attached hereto provided by
Billion and E'JINIE (the "BILLION AND E'JINIE DISCLOSURE SCHEDULE"), the parts
of which are numbered to correspond to the section numbers of this Agreement,
each of Billion, E'JINIE and the Shareholders represents and warrants jointly
and severally to CDCG as follows:
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2.1 ORGANIZATION AND QUALIFICATION.
Each of Billion and E'JINIE is duly incorporated, validly and in good
standing existing under the laws of China, 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 in good standing or to have
such governmental licenses, authorizations, consents and approvals will not, in
the aggregate, either (i) have a Material Adverse Effect on the business, assets
or financial condition of Billion or E'JINIE, or (ii) impair the ability of
Billion or E'JINIE to perform its material obligations under this Agreement.
Each of Billion and E'JINIE 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 requires such qualification,
licensing or domestication, except where the failure to be so qualified,
licensed or domesticated will not have a Material Adverse Effect. Set forth on
Part 2.1 of the Billion and E'JINIE Disclosure Schedule is a list of those
jurisdictions in which each of Billion and E'JINIE presently conducts its
business, owns, holds and operates its properties and assets.
2.2 SUBSIDIARIES.
Billion and E'JINIE do not own directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise. Billion and E'JINIE do not have any direct or indirect
interests of stock ownership or otherwise in any corporation, partnership, joint
venture, firm, association or business enterprise, and is not party to any
agreement to acquire such an interest.
2.3 ARTICLES OF INCORPORATION AND BYLAWS.
The copies of the Articles of Incorporation and bylaws of each of Billion
or E'JINIE (collectively, the "ORGANIZATIONAL DOCUMENTS") that have been
delivered to CDCG prior to the execution of this Agreement are true and complete
and have not been amended or repealed. Billion and E'JINIE are not in violation
or breach of any of the provisions of the Organizational Documents, except for
such violations or breaches which, in the aggregate, will not have a Material
Adverse Effect on Billion or E'JINIE.
2.4 AUTHORIZATION AND VALIDITY OF THIS AGREEMENT.
This Agreement and each of the Transaction Agreements constitute the
legal, valid and binding obligation of each person or entity who is a party
thereto (other than CDCG), enforceable against each such person or entity 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. Each of Billion, the
Shareholders and E'JINIE has all requisite legal capacity to execute and deliver
this Agreement and the Transaction Agreements to which he or she is a party, and
to perform its, his or her obligations hereunder and thereunder. The execution
and delivery by each of Billion, E'JINIE and each Shareholders of this Agreement
and the Transaction Agreements (to the extent either is a party thereto), and
the consummation of the transactions contemplated herein and therein (the
"Transactions") have been authorized by all necessary corporate or other action
on the part of Billion, E'JINIE and each of the Shareholders. This Agreement and
the Transaction Agreements have been duly executed and delivered by the parties
thereto (other than CDCG).
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2.5 NO VIOLATION.
Neither the execution nor delivery of this Agreement or the Transaction
Agreements, nor the consummation or performance of any of the Transactions by
Billion, E'JINIE or the Shareholders will directly or indirectly:
(i) violate or conflict with any provision of the Organizational Documents
of E'JINIE or Billion; (B) result in (with or without notice or lapse of time) a
violation or breach of, or conflict with or constitute a default or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or require notice under, any agreement, promissory
note, lease, instrument or arrangement to which Billion or E'JINIE or any of its
assets are bound or result in the creation of any Liens upon Billion or E'JINIE
or any of its assets; (C) violate any order, writ, judgment, injunction, ruling,
award or decree of any Governmental Body; ("Governmental Body"); (D) violate any
statute, law or regulation of any jurisdiction as such statute, law or
regulation that relates to the Shareholders, Billion or E'JINIE or any of the
assets of Billion or E'JINIE; or (E) result in cancellation, modification,
revocation or suspension of any permits, licenses, registrations, consents,
approvals, authorizations or certificates issued or granted by any Governmental
Body which are held by or granted to the Shareholders, Billion or E'JINIE or
which are necessary for the conduct of Billion's or E'JINIE's business; or
(ii) to the knowledge of Billion, E'JINIE or any of the Shareholders,
cause Billion or E'JINIE to become subject to, or to become liable for the
payment of, any Tax (as hereinafter defined) or cause any of the assets owned by
Billion or E'JINIE to be reassessed or revalued by any taxing authority or other
Governmental Body.
None of Billion, E'JINIE or the Shareholders is or will be required to
give any notice to or obtain any approval, consent, ratification, waiver or
other authorization (a "Consent") from any person or entity (including, without
limitation, any Governmental Body) in connection with (i) the execution and
delivery of this Agreement or any of the Transaction Agreements, or (ii) the
consummation or performance of any of the Transactions.
2.6 CAPITALIZATION AND RELATED MATTERS.
(a) Capitalization. The registered capital stock of Billion consists of
_____ and E'JINIE consists of RMB 500,000 in fully-paid shares. Except as set
forth in the preceding sentence, no other class of capital stock or other
security of Billion or E'JINIE is authorized, issued, reserved for issuance or
outstanding. The Shareholders, as of the Closing Date, are the lawful, record
and beneficial owners of the number of Billion Common Stock set forth opposite
each Seller's name on Schedule 1 attached hereto. Billion, as of the Closing
Date, is the lawful, record and beneficial owner of all of the issued and
outstanding shares of E'JINIE Common Stock. The Shareholders have, as of the
date hereof and as of the Closing Date, valid and marketable title to their
respective Shares, free and clear of all Liens (including, without limitation,
any claims of spouses under applicable community property laws) and are the
lawful, record and beneficial owners of all of the Shares. Except as is issued
to and held by the Shareholders or Billion, no other class of capital stock or
other security of Billion or E'JINIE, as applicable, is authorized, issued,
reserved for issuance or outstanding. At the Closing, CDCG will be vested with
good and marketable title to the Shares, free and clear of all Liens (including,
without limitation, any claims of spouses under applicable community property
laws). No legend or other reference to any purported Lien appears upon any
certificate representing the Shares. Each of the Shares has been duly authorized
and validly issued and is fully paid and nonassessable. None of the outstanding
capital or other securities of Billion or E'JINIE was issued, redeemed or
repurchased in violation of the Securities Act of 1933, as amended (the
"Securities Act"), or any other securities or "blue sky" laws.
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(b) No Redemption Requirements. There are no authorized or outstanding
options, warrants, equity securities, calls, rights, commitments or agreements
of any character by which Billion, E'JINIE or any of the Shareholders is
obligated to issue, deliver or sell, or cause to be issued, delivered or sold,
any shares of capital stock or other securities of Billion or E'JINIE. There are
no outstanding contractual obligations (contingent or otherwise) of Billion or
E'JINIE to retire, repurchase, redeem or otherwise acquire any outstanding
shares of capital stock of, or other ownership interests in, Billion or E'JINIE
or to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity.
2.7 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS.
Except as would not have a Material Adverse Effect, the business and
operations of Billion and E'JINIE have been and are being conducted in
accordance with all applicable foreign, federal, provincial 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. There are no permits, bonuses, registrations, consents,
approvals, authorizations, certificates, or any waiver of the foregoing, which
are required to be issued or granted by a Governmental Body for the conduct of
the Business as presently conducted or the ownership of the assets of Billion
and E'JINIE. Except as would not have a Material Adverse Effect, each of Billion
or E'JINIE is not, and has not received notice alleging that it is, 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 Billion or E'JINIE is a party or
by which any of Billion's or E'JINIE's properties, assets or rights are bound or
affected. To the knowledge of Billion and E'JINIE, no other party to any
material contract, agreement, lease, license, commitment, instrument or other
obligation to which Billion or E'JINIE is a party is (with or without notice or
lapse of time or both) in default thereunder or in breach of any term thereof.
Each of Billion and E'JINIE is not subject to any obligation or restriction of
any kind or character, nor is there, to the knowledge of Billion or E'JINIE, any
event or circumstance relating to Billion or E'JINIE that materially and
adversely affects in any way its business, properties, assets or prospects or
that prohibits Billion or E'JINIE from entering into this Agreement and the
Transaction Agreements or would prevent or make burdensome its performance of or
compliance with all or any part of this Agreement, the Transaction Agreements or
the consummation of the Transactions contemplated hereby or thereby.
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2.8 CERTAIN PROCEEDINGS.
There are no outstanding or pending Proceeding that has been commenced
against or involving Billion or E'JINIE or any of its assets and, to the
knowledge of Billion or E'JINIE and the Shareholders, no matters of the
foregoing nature are contemplated or threatened. None of Billion, E'JINIE or the
Shareholders have been charged with, and is not threatened with, or under any
investigation with respect to, any allegation concerning any violation of any
provision of any federal, provincial, local or foreign law, regulation,
ordinance, order or administrative ruling, and is not in default with respect to
any order, writ, injunction or decree of any Governmental Body.
2.9 NO BROKERS OR FINDERS.
None of Billion, E'JINIE, the Shareholders, or any officer, director,
independent contractor, consultant, agent or employee of Billion or E'JINIE has
agreed to pay, or has taken any action that will result in any person or entity
becoming obligated to pay or entitled to receive, any investment banking,
brokerage, finder's or similar fee or commission in connection with this
Agreement or the Transactions. Billion, E'JINIE and the Shareholders shall
jointly and severally indemnify and hold CDCG harmless against any liability or
expense arising out of, or in connection with, any such claim.
2.10 TITLE TO AND CONDITION OF PROPERTIES.
Each of Billion and E'JINIE has good, valid and marketable title to all of
its properties and assets (whether real, personal or mixed, and whether tangible
or intangible) reflected as owned in its books and records, free and clear of
all Liens. Each of Billion and E'JINIE owns or holds under valid leases or other
rights to use all real property, plants, machinery, equipment and all assets
necessary for the conduct of its business as presently conducted, except where
the failure to own or hold such property, plants, machinery, equipment and
assets would not have a Material Adverse Effect on Billion or E'JINIE. No Person
other than Billion or E'JINIE owns or has any right to the use or possession of
the assets used in Billion's or E'JINIE's business. The material buildings,
plants, machinery and equipment necessary for the conduct of the business of
Billion or E'JINIE 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 or would be put in the Ordinary Course of Business, 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.
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2.11 ABSENCE OF UNDISCLOSED LIABILITIES.
Billion and E'JINIE have no debt, obligation or liability (whether
accrued, absolute, contingent, liquidated or otherwise, whether asserted or
unasserted, whether due or to become due, whether or not known to Billion or
E'JINIE) arising out of any transaction entered into prior to the Closing Date
or any act or omission prior to the Closing Date which individually or taken
together would constitute a Material Adverse Effect on Billion or E'JINIE and
have no debt, obligation or liability to each other or any of the Shareholders
or their affiliates, except to the extent specifically set forth on or reserved
against on the Balance Sheet of Billion or E'JINIE.
The financial statements are consistent with the books and records of
E'JINIE and Billion and fairly present in all material respects the financial
condition, assets and liabilities of Billion and E'JINIE, as applicable, taken
as a whole, as of the dates and periods indicated, and were prepared in
accordance with GAAP (except as otherwise indicated therein or in the notes
thereto).
2.12 CHANGES.
Neither Billion nor E'JINIE has, since September 29, 2004:
(a) Ordinary Course of Business. Conducted its business or entered into
any transaction other than in the Ordinary Course of Business, except for this
Agreement.
(b) 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 which would have a
Material Adverse Effect;
(c) 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;
(d) Compensation and Bonuses. Made any payments of any bonuses or
compensation other than regular salary payments, or increase in the salaries, or
payment on any of its debts in the Ordinary Course of Business, to any of its
shareholders, directors, officers, employees, independent contractors or
consultants or entry into by it of any employment, severance, or similar
contract with any director, officer, or employee, independent contractor or
consultant; Adopted, or increased in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any of its employees;
(e) Liens. Created or permitted to exist any Lien on any of its properties
or assets other than Permitted Liens;
(f) 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; changed its authorized or issued capital stock; granted any stock
option or right to purchase shares of its capital stock; issued any security
convertible into any of its capital stock; granted any registration rights with
respect to shares of its capital stock; purchased, redeemed, retired, or
otherwise acquired any shares of its capital stock; declared or paid any
dividend or other distribution or payment in respect of shares of capital stock
of any other entity;
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(g) Dividends. Declared, set aside, made or paid any dividend or other
distribution to any of its shareholders;
(h) Material Contracts. Terminated or modified any of its Material
Contract except for termination upon expiration in accordance with the terms of
such agreements, a description of which is included in the Billion and E'JINIE's
Disclosure Schedule;
(i) Claims. Released, waived or cancelled any claims or rights relating to
or affecting Billion or E'JINIE in excess of $10,000 in the aggregate or
instituted or settled any Proceeding involving in excess of $10,000 in the
aggregate;
(j) Discharged Liabilities. Paid, discharged, cancelled, waived or
satisfied any claim, obligation or liability in excess of $10,000 in the
aggregate, except for liabilities incurred prior to the date of this Agreement
in the Ordinary Course of Business;
(k) Indebtedness. Created, incurred, assumed or otherwise become liable
for any Indebtedness or commit to any endeavor involving a commitment in excess
of $10,000 in the aggregate, other than contractual obligations incurred in the
Ordinary Course of Business;
(l) Guarantees. Guaranteed or endorsed in a material amount any obligation
or net worth of any Person;
(m) Acquisitions. Acquired the capital stock or other securities or any
ownership interest in, or substantially all of the assets of, any other Person;
(n) 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;
(o) Agreements. Entered into any agreement, or otherwise obligated itself,
to do any of the foregoing.
2.13 MATERIAL CONTRACTS.
Each of Billion and E'JINIE has delivered to CDCG, prior to the date of
this Agreement, true, correct and complete copies of each of its Material
Contracts.
(a) No Defaults. The Material Contracts of each of Billion and E'JINIE are
valid and binding agreements of E'JINIE and Billion, as applicable, and are in
full force and effect and are enforceable in accordance with their terms. Except
as would not have a Material Adverse Effect, Billion and E'JINIE are not in
breach or default of any of its Material Contracts to which it is a party and,
to the knowledge of Billion and E'JINIE, no other party to any of its Material
Contracts is in breach or default thereof. Except as would not have a Material
Adverse Effect, no event has occurred or circumstance has existed 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 of its Material Contracts or (b) permit Billion, E'JINIE 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
of its Material Contracts. Billion and E'JINIE have not received any notice and
have no knowledge of any pending or threatened cancellation, revocation or
termination of any of its Material Contracts to which it is a party, and there
are no renegotiations of, or attempts to renegotiate.
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2.14 TAX RETURNS AND AUDITS.
(a) Tax Returns. (a) All material Tax Returns required to be filed by or
on behalf of Billion or E'JINIE have been timely filed and all such Tax Returns
were (at the time they were filed) and are true, correct and complete in all
material respects; (b) all Taxes of Billion and E'JINIE required to have been
paid (whether or not reflected on any Tax Return) have been fully and timely
paid, except those Taxes which are presently being contested in good faith or
for which an adequate reserve for the payment of such Taxes has been established
on E'JINIE Balance Sheet or Billion's balance sheet; (c) no waivers of statutes
of limitation have been given or requested with respect to Billion or E'JINIE in
connection with any Tax Returns covering Billion or E'JINIE or with respect to
any Taxes payable by it; (d) no Governmental Body in a jurisdiction where
Billion or E'JINIE does not file Tax Returns has made a claim, assertion or
threat to Billion or E'JINIE that Billion or E'JINIE is or may be subject to
taxation by such jurisdiction; (e) each of Billion and E'JINIE has duly and
timely collected or withheld, paid over and reported to the appropriate
Governmental Body all amounts required to be so collected or withheld for all
periods under all applicable laws; (f) there are no Liens with respect to Taxes
on the property or assets of Billion and E'JINIE other than Permitted Liens; (g)
there are no Tax rulings, requests for rulings, or closing agreements relating
to Billion or E'JINIE for any period (or portion of a period) that would affect
any period after the date hereof; and (h) any adjustment of Taxes of Billion or
E'JINIE made by a Governmental Body in any examination that Billion or E'JINIE
is required to report to the appropriate provincial, local or foreign taxing
authorities has been reported, and any additional Taxes due with respect thereto
have been paid. No state of fact exists or has existed which would constitute
ground for the assessment of any tax liability by any Governmental Body. All Tax
Returns filed by Billion and E'JINIE are true, correct and complete.
(b) No Adjustments, Changes. Neither Billion, E'JINIE nor any other Person
on behalf of Billion or E'JINIE (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 provincial, 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 provincial, local or foreign law.
(c) No Disputes. There is no pending audit, examination, investigation,
dispute, proceeding or claim with respect to any Taxes of or Tax Return filed or
required to be filed by Billion or E'JINIE, nor is any such claim or dispute
pending or contemplated. Each of Billion and E'JINIE has made available to CDCG
true, correct and complete copies of all Tax Returns, examination reports and
statements of deficiencies assessed or asserted against or agreed to by Billion
or E'JINIE since January 1, 2001, and any and all correspondence with respect to
the foregoing. Billion and E'JINIE do not have 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 Body in connection
with any Tax matter.
9
(d) No Tax Allocation, Sharing. Billion and E'JINIE are not a party to any
Tax allocation or sharing agreement. Other than with respect to the Tax Group of
which Billion or E'JINIE is the common parent, Billion and E'JINIE (a) have not
been a member of a Tax Group filing a consolidated income Tax Return under
Section 1501 of the Code (or any similar provision of provincial, local or
foreign law), and (b) do not have any liability for Taxes for any Person under
Treasury Regulations Section 1.1502-6 (or any similar provision of provincial,
local or foreign law) as a transferee or successor, by contract or otherwise.
2.15 MATERIAL ASSETS.
The financial statements of Billion and E'JINIE reflect the material
properties and assets (real and personal) owned or leased by them.
2.16 INSURANCE COVERAGE.
Each of Billion and E'JINIE has made available to CDCG, prior to the date
of this Agreement, true, correct and complete copies of all insurance and
general liability policies maintained by Billion and E'JINIE on their properties
and assets all claims made under any such current or prior insurance policies.
All of such policies (a) taken together, provide adequate insurance coverage for
the properties, assets and operations of Billion and E'JINIE for all risks
normally insured against by a Person carrying on the same business as Billion or
E'JINIE, and (b) are sufficient for compliance with all applicable Laws and
Material Contracts of Billion and E'JINIE. 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 3.19, Billion
and E'JINIE have not received and has no knowledge of (a) any refusal of
coverage or any written notice that a defense will be afforded with reservation
of rights, or (b) any notice of cancellation or any other indication in writing
or otherwise 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, and Billion,
E'JINIE and the Shareholders have no knowledge of any circumstances or facts
which, with or without notice of lapse of time or both would lead to any: (i)
pending or threatened claims with respect to Billion or E'JINIE or their
properties or assets under any such insurance policies; (ii) claims as to which
the insurers have notified Billion or E'JINIE that they intend to deny
liability; and (iii) existing defaults on the part of Billion or E'JINIE under
any such insurance policies.
10
2.17 LITIGATION; ORDERS.
There is no Proceeding (whether federal, provincial, local or foreign)
pending or, to the knowledge of Billion or E'JINIE, threatened or appealable
against or affecting Billion or E'JINIE or any of its properties, assets,
business or employees. To the knowledge of Billion or E'JINIE, there is no fact
that might result in or form the basis for any such Proceeding. Billion and
E'JINIE are not subject to any Orders and have not received any written opinion
or memorandum or legal advice from their legal counsel to the effect that
Billion or E'JINIE is exposed, from a legal standpoint, to any liability which
would be material to its business. Billion and E'JINIE are not engaged in any
legal action to recover monies due it or for damages sustained by any of them.
2.18 LICENSES.
Except as would not have a Material Adverse Effect, each of Billion and
E'JINIE possesses from the appropriate Governmental Body all licenses, permits,
authorizations, approvals, franchises and rights that are necessary for it to
engage in its business as currently conducted and to permit it to own and use
its properties and assets in the manner in which it currently owns and uses such
properties and assets (collectively, "PERMITS"). Except as would not have a
Material Adverse Effect, Billion and E'JINIE have not received any written
notice from any Governmental Body or other Person that there is lacking any
license, permit, authorization, approval, franchise or right necessary for
Billion or E'JINIE to engage in its business as currently conducted and to
permit Billion or E'JINIE 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 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 Permit; or (b) result, directly or indirectly, in the
revocation, withdrawal, suspension, cancellation or termination of, or any
modification to, any Permit. Neither Billion or E'JINIE has received any written
notice from any Governmental Body or any other Person regarding: (a) any actual,
alleged, possible or potential contravention of any Permit; or (b) any actual,
proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to, any Permit. All applications
required to have been filed for the renewal of such 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 Permits have been duly made on a timely
basis with the appropriate Persons. All 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.
2.19 INTERESTED PARTY TRANSACTIONS.
No officer, director or shareholder of Billion, E'JINIE or any Affiliate,
Related Person or "associate" (as such term is defined in Rule 405 of the
Commission under the Securities Act) of any such Person, either directly or
indirectly, (1) has 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 Billion or E'JINIE, or (b) purchases from or sells or furnishes to,
or proposes to purchase from, sell to or furnish Billion or E'JINIE any goods or
services; (2) has a beneficial interest in any contract or agreement to which
Billion or E'JINIE is a party or by which it may be bound or affected; or (3) is
a party to any material agreements, contracts or commitments in effect as of the
date hereof with Billion or E'JINIE. "Related Person" means: (i) with respect to
a particular individual, the individual's immediate family which shall include
the individual's spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law; and
(ii) with respect to a specified individual or entity, any entity or individual
that, directly or indirectly, controls, is controlled by, or is under common
control with such specified entity or individual.
11
2.20 GOVERNMENTAL INQUIRIES.
Each of Billion and E'JINIE has made available to CDCG a copy of each
material written inspection report, questionnaire, inquiry, demand or request
for information received by Billion or E'JINIE from (and the response of Billion
or E'JINIE thereto), and each material written statement, report or other
document filed by Billion or E'JINIE with, any Governmental Body since January
1, 2003.
2.21 BANK ACCOUNTS AND SAFE DEPOSIT BOXES.
Part 2.22 of the Billion and E'JINIE Disclosure Schedule discloses the
title and number of each bank or other deposit or financial account, and each
lock box and safety deposit box used by Billion or E'JINIE, 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.
2.22 INTELLECTUAL PROPERTY.
Any Intellectual Property Billion or E'JINIE uses in its business as
presently conducted is owned by Billion or E'JINIE or properly licensed.
2.23 STOCK OPTION PLANS; EMPLOYEE BENEFITS.
(a) Set forth on Part 2.23 of the Billion and E'JINIE Disclosure Schedule
is a complete list of all stock option plans providing for the grant by Billion
or E'JINIE of stock options to directors, officers or employees. All such stock
option plans are Approved Plans.
(b) Except as set forth on Part 2.23 of the Billion and E'JINIE Disclosure
Schedule, Billion and E'JINIE do not have any employee benefit plans or
arrangements covering their present and former employees or providing benefits
to such persons in respect of services provided to Billion or E'JINIE. Billion
and E'JINIE have no commitment, whether formal or informal and whether legally
binding or not, to create any additional plan, arrangement or practice similar
to the Approved Plans.
(c) The consummation of the transactions contemplated hereby will not
result in (a) any payment (including, without limitation, severance,
unemployment compensation or bonus payments) becoming due from Billion or
E'JINIE or due to any Person, (b) any increase in the amount of compensation or
benefits payable to any Person or (c) any acceleration of the vesting or timing
of payment of any compensation, award or determination of options, warrants,
rights, severance payments or other contingent obligations of any nature
whatsoever of Billion or E'JINIE in favor of any Person. No agreement,
arrangement or other contract of Billion or E'JINIE provides benefits or
payments contingent upon, triggered by, or increased as a result of a change in
the ownership or effective control of Billion or E'JINIE.
12
(d) None of Billion or E'JINIE is a party to or bound by any written or
oral agreement or understanding to employ, subsequent to the Closing, any of its
respective present or former directors, officers, independent contractors,
consultants, agents or employees.
2.24 EMPLOYEE MATTERS
(a) No former or current employee of Billion or E'JINIE is a party to, or
is otherwise bound by, any agreement or arrangement (including, without
limitation, any confidentiality, non-competition or proprietary rights
agreement) that in any way adversely affected, affects, or will affect (i) the
performance of his, her or its duties to Billion or E'JINIE, or (ii) the ability
of Billion or E'JINIE to conduct its business.
(b) None of Billion or E'JINIE has employees, directors, officers,
consultants, independent contractors, representatives or agents whose contract
of employment or engagement cannot be terminated by three months' notice. (c)
Billion and E'JINIE are not required or obligated to pay, and since January 1,
2001, have not paid any moneys other than in respect of remuneration, pension or
other benefits pursuant to plans described in Part 2.23 of the Billion and
E'JINIE Disclosure Schedule, to or for the benefit of, any director, officer,
employee, consultant, independent contractor, representative or agent of Billion
or E'JINIE. (d) Billion and E'JINIE are in compliance with all applicable laws
respecting employment and employment practices, terms and conditions or
employment and wages and hours, and are not engaged in any unfair labor
practice. There is no labor strike, dispute, shutdown or stoppage actually
pending or, to the knowledge of Billion, E'JINIE or the Shareholders, threatened
against or affecting Billion or E'JINIE.
2.25 ENVIRONMENTAL AND SAFETY MATTERS.
Except as would not have a Material Adverse Effect:
(a) Each of Billion and E'JINIE has at all time been and is in compliance
with all Environmental Laws and Orders applicable to Billion or E'JINIE, as
applicable.
(b) There are no Proceedings pending or, to the knowledge of Billion or
E'JINIE, threatened against Billion or E'JINIE alleging the violation of any
Environmental Law or Environmental Permit applicable to Billion or E'JINIE or
alleging that Billion or E'JINIE is a potentially responsible party for any
environmental site contamination. None of Billion, E'JINIE or the Shareholders
are aware of, or has ever received notice of, any past, present or future
events, conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent continued compliance, or which may
give rise to any common law or legal liability, or otherwise form the basis of
any claim, action, suit, proceeding, hearing or investigation, based on or
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant, or
hazardous or toxic material or waste.
13
(c) 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 Body or third Persons under any Environmental
Laws applicable to Billion or E'JINIE.
2.26 MATERIAL CUSTOMERS.
Since January 1, 2001, none of the Material Customers (as hereinafter
defined) of Billion or E'JINIE has notified any of Billion, E'JINIE or the
Shareholders of their intent to terminate their business with Billion or E'JINIE
business because of any dissatisfaction on the part of any such person or
entity. The Transactions have not caused any of the Material Customers of
Billion or E'JINIE to terminate or provide notice of their intent or threaten to
terminate their business with Billion or E'JINIE or to notify Billion, E'JINIE
or the Shareholders of their intent not to continue to do such business with
Billion or E'JINIE after the Closing. As used herein, "Material Customers" means
those customers from whom Billion or E'JINIE derives annual revenues in excess
of RMB 100,000.
2.27 INVENTORIES.
All inventories of Billion and E'JINIE are of good, usable and
merchantable quality in all material respects, and, except as set forth in the
Billion and E'JINIE Disclosure Schedule, do not include a material amount of
obsolete or discontinued items. Except as set forth in the Billion and E'JINIE
Disclosure Schedule, (a) all such inventories are of such quality as to meet in
all material respects the quality control standards of Billion and E'JINIE, (b)
all such inventories are recorded on the books at the lower of cost or market
value determined in accordance with GAAP, and (c) no write-down in inventory has
been made or should have been made pursuant to GAAP during the past two years.
2.28 MONEY LAUNDERING LAWS.
The operations of Billion and E'JINIE are and have been conducted at all
times in compliance with applicable financial record-keeping and reporting
requirements of 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 Body (collectively, the "MONEY LAUNDERING LAWS") and no Proceeding
involving Billion or E'JINIE with respect to the Money Laundering Laws is
pending or, to the knowledge of Billion or E'JINIE, threatened.
14
2.29 DISCLOSURE..23 DISCLOSURE.
(a) Any information set forth in this Agreement, the Billion and E'JINIE
Disclosure Schedule, or the Transaction Agreements shall be true, correct and
complete in all material respects.
(b) No statement, representation or warranty of Billion, E'JINIE or the
Shareholders in this Agreement (taken with the Schedules) or the Transaction
Agreements or any exhibits or schedules thereto contain any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements herein or therein, taken as a whole, in light of the circumstances in
which they were made, not misleading.
(c) Except as set forth in the Billion and E'JINIE Disclosure Schedule,
the Shareholders, Billion and E'JINIE have no knowledge of any fact that has
specific application to Billion or E'JINIE (other than general economic or
industry conditions) and that adversely affects the assets or the business,
prospects, financial condition, or results of operations of Billion or E'JINIE.
(d) In the event of any inconsistency between the statements in the body
of this Agreement and those in the Schedules (other than an exception expressly
set forth as such in the Schedules with respect to a specifically identified
representation or warranty), the statements in the Schedules shall control.
(e) The books of account, minute books and stock record books of Billion
and E'JINIE, all of which have been made available to CDCG, are complete and
accurate and have been maintained in accordance with sound business practices.
Without limiting the generality of the foregoing, the minute books of Billion
and E'JINIE contain complete and accurate records of all meetings held, and
corporate action taken, by the shareholders, the boards of directors, and
committees of the boards of directors of Billion or E'JINIE, as applicable, and
no meeting of any such shareholders, board of directors, or committee has been
held for which minutes have not been prepared and are not contained in such
minute books.
2.30 FINDERS AND BROKERS.
(a) None of Billion, E'JINIE, the Shareholders or any Person acting on
behalf of Billion, E'JINIE or the Shareholders has engaged any finder, broker,
intermediary or any similar Person in connection with the Exchange.
(b) None of Billion, E'JINIE, the Shareholders nor any Person acting on
behalf of Billion, E'JINIE or the Shareholders has entered into a contract or
other agreement that provides that a fee shall be paid to any Person or Entity
if the Exchange is consummated.
15
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF CDCG
CDCG hereby represents and warrants to the Shareholders as of the date
hereof:
3.1 ORGANIZATION; GOOD STANDING.
CDCG is duly incorporated, validly and in good standing existing under the
laws of Nevada, 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 in good standing or to have such governmental licenses,
authorizations, consents and approvals will not, in the aggregate, either (i)
have a Material Adverse Effect on the business, assets or financial condition of
CDCG, or (ii) impair the ability of CDCG to perform its material obligations
under this Agreement. CDCG 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 requires such qualification,
licensing or domestication, except where the failure to be so qualified,
licensed or domesticated will not have a Material Adverse Effect.
3.2 CDCG COMMON STOCK.
As of 5TH SEPTEMBER, 2005, there were 47,980,000 shares of CDCG's common
stock issued and outstanding. The Acquisition Shares, when issued in connection
with this Agreement and the other Transactional Agreements, will be duly
authorized, validly issued, fully paid and nonassessable.
3.3 AUTHORITY; BINDING NATURE OF AGREEMENTS.
(a) The execution, delivery and performance of this Agreement, the
Transactional Agreements, and all other agreements and instruments contemplated
to be executed and delivered by CDCG in connection herewith have been duly
authorized by all necessary corporate action on the part of CDCG and its board
of directors.
(b) This Agreement, the Transactional Agreements, and all other agreements
and instruments contemplated to be executed and delivered by CDCG constitute the
legal, valid and binding obligation of CDCG, enforceable against CDCG in
accordance with their terms, except to the extent that enforceability may be
limited by applicable bankruptcy, Exchange, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity regardless of whether such enforceability is considered in
a proceeding in law or equity.
(c) There is no pending Proceeding, and, to CDCG's knowledge, no Person
has threatened to commence any Proceeding that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
the Exchange or CDCG's ability to comply with or perform its obligations and
covenants under the Transactional Agreements, and, to the knowledge of CDCG, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that might directly or indirectly give rise to or serve as a basis for
the commencement of any such Proceeding.
16
3.4 NON-CONTRAVENTION; CONSENTS.
The execution and delivery of this Agreement and the other Transactional
Agreements, and the consummation of the Exchange, by CDCG will not, directly or
indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a material violation of (i)
CDCG's Certificate of Incorporation or Bylaws, or (ii) any resolution adopted by
CDCG Board or any committee thereof or the stockholders of CDCG;
(b) to the knowledge of CDCG, contravene, conflict with or result in a
material violation of, or give any Governmental Body the right to challenge the
Exchange or to exercise any remedy or obtain any relief under, any legal
requirement or any Order to which CDCG or any material assets owned or used by
it are subject;
(c) to the knowledge of CDCG, cause any material assets owned or used by
CDCG to be reassessed or revalued by any taxing authority or other Governmental
Body;
(d) to the knowledge of CDCG, contravene, conflict with or result in a
material violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorization that is held by CDCG or that otherwise
relates to CDCG's business or to any of the material assets owned or used by
CDCG, where such contraventions, conflict, violation, revocation, withdrawal,
suspension, cancellation, termination or modification would have a Material
Adverse Effect on CDCG;
(e) contravene, conflict with or result in a material violation or
material breach of, or material default under, any Contract to which CDCG is a
party;
(f) give any Person the right to any payment by CDCG or give rise to any
acceleration or change in the award, grant, vesting or determination of options,
warrants, rights, severance payments or other contingent obligations of any
nature whatsoever of CDCG in favor of any Person, in any such case as a result
of the Exchange; or
(g) result in the imposition or creation of any material Lien upon or with
respect to any material asset owned or used by CDCG.
Except for Consents, filings or notices required under the state and
federal securities laws or any other laws or regulations or as otherwise
contemplated in this Agreement and the other Transactional Agreements, CDCG will
not be required to make any filing with or give any notice to, or obtain any
Consent from, any Person in connection with the execution and delivery of this
Agreement and the other Transactional Agreements or the consummation or
performance of the Exchange.
17
3.5 FINDERS AND BROKERS.
(a) Neither CDCG nor any Person acting on behalf of CDCG has engaged any
finder, broker, intermediary or any similar Person in connection with the
Exchange.
(b) CDCG has not entered into a contract or other agreement that provides
that a fee shall be paid to any Person or Entity if the Exchange is consummated.
3.6 REPORTS AND FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES.
(a) CDCG has filed all reports required to be filed with the SEC pursuant
to the Exchange Act since DECEMBER 31, 2003 (all such reports, including those
to be filed prior to the Closing Date and all registration statements and
prospectuses filed by CDCG with the SEC, are collectively referred to as the
"CDCG SEC REPORTS). All of the CDCG SEC Reports, as of their respective dates of
filing (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) complied in all material
respects as to form with the applicable requirements of the Securities Act or
Exchange Act and the rules and regulations thereunder, as the case may be, and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited financial statements of CDCG included in the CDCG
SEC Reports comply in all material respects with the published rules and
regulations of the SEC with respect thereto, and such audited financial
statements (i) were prepared from the books and records of CDCG, (ii) were
prepared in accordance with GAAP applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto) and (iii) present fairly
the financial position of CDCG as of the dates thereof and the results of
operations and cash flows for the periods then ended. The unaudited financial
statements included in the CDCG SEC Reports comply in all material respects with
the published rules and regulations of the SEC with respect thereto; and such
unaudited financial statements (i) were prepared from the books and records of
CDCG, (ii) were prepared in accordance with GAAP, except as otherwise permitted
under the Exchange Act and the rules and regulations thereunder, on a consistent
basis (except as may be indicated therein or in the notes or schedules thereto)
and (iii) present fairly the financial position of CDCG as of the dates thereof
and the results of operations and cash flows (or changes in financial condition)
for the periods then ended, subject to normal year-end adjustments and any other
adjustments described therein or in the notes or schedules thereto.
(b) Except as specifically contemplated by this Agreement or reflected in
the CDCG SEC Reports, since June 30, 2004, there has not been (i) any material
adverse change in CDCG's business, assets, liabilities, operations, and, to the
knowledge of CDCG, no event has occurred that is likely to have a material
adverse effect on CDCG's business, assets, liabilities or operations, (ii) any
declarations setting aside or payment of any dividend or distribution with
respect to the CDCG Common Stock other than consistent with past practices,
(iii) any material change in CDCG's accounting principles, procedures or
methods, (iv) cancellation in writing of any material customer contract or (v)
the loss of any customer relationship which would have a material adverse effect
on CDCG's business, assets, liabilities or operations.
18
3.7 COMPLIANCE WITH APPLICABLE LAW.
Except as disclosed in the CDCG SEC Reports filed prior to the date of
this Agreement and except to the extent that the failure or violation would not
in the aggregate have a Material Adverse Effect on the business, results of
operations or financial condition of CDCG, to CDCG's knowledge CDCG holds all
Governmental Authorizations necessary for the lawful conduct of its business
under and pursuant to, and the business of CDCG is not being conducted in
violation of, any Governmental Authorization applicable to CDCG.
3.8 COMPLETE COPIES OF REQUESTED REPORTS.
CDCG has delivered or made available true and complete copies of each
document that has been reasonably requested by Billion, E'JINIE or the
Shareholders.
3.9 FULL DISCLOSURE.
(a) Neither this Agreement (including all Schedules and Exhibits hereto)
nor any of the Transactional Agreements contemplated to be executed and
delivered by CDCG in connection with this Agreement contains any untrue
statement of material fact; and none of such documents omits to state any
material fact necessary to make any of the representations, warranties or other
statements or information contained therein not misleading.
(b) All of the information set forth in the prospectus and all other
information regarding CDCG and the business, condition, assets, liabilities,
operations, financial performance, net income and prospects of either that has
been furnished to Billion, E'JINIE or the Shareholders by or on behalf of CDCG
or any of the CDCG's Representatives, is accurate and complete in all material
respects.
ARTICLE IV.
COVENANTS OF BILLION AND E'JINIE
4.1 ACCESS AND INVESTIGATION.
Each of Billion and E'JINIE shall ensure that, at all times during the
Pre-Closing Period:
(a) Billion, E'JINIE and their Representatives provide CDCG and its
Representatives access, at reasonable times and with twenty-four (24) hours
notice from CDCG to Billion or E'JINIE, to all of the premises and assets of
Billion and E'JINIE, to all existing books, records, Tax Returns, work papers
and other documents and information relating to Billion or E'JINIE, and to
responsible officers and employees of Billion or E'JINIE, and Billion, E'JINIE
and its Representatives provide CDCG and its Representatives with copies of such
existing books, records, Tax Returns, work papers and other documents and
information relating to Billion or E'JINIE as CDCG may request in good faith;
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(b) Each of Billion and E'JINIE and their Representatives confer regularly
with CDCG upon its request, concerning operational matters and otherwise report
regularly (not less than semi-monthly and as CDCG may otherwise request) to CDCG
and discuss with CDCG and its Representatives concerning the status of the
business, condition, assets, liabilities, operations, and financial performance
of Billion or E'JINIE, and promptly notify CDCG of any material change in the
business, condition, assets, liabilities, operations, and financial performance
of Billion or E'JINIE, or any event reasonably likely to lead to any such
change.
4.2 OPERATION OF BUSINESS.
Each of Billion and E'JINIE shall ensure that, during the Pre-Closing
Period:
(a) It conducts its operations in the Ordinary Course of Business and in
the same manner as such operations have been conducted prior to the date of this
Agreement;
(b) It uses its commercially reasonable efforts to preserve intact its
current business organization, keep available and not terminate the services of
its current officers and employees and maintain its relations and goodwill with
all suppliers, customers, landlords, creditors, licensors, licensees, employees
and other Persons having business relationships with Billion or E'JINIE;
(c) It does not declare, accrue, set aside or pay any dividend or make any
other distribution in respect of any shares of its capital stock, and does not
repurchase, redeem or otherwise reacquire any shares of its capital stock or
other securities, except with respect to the repurchase of shares of Billion or
E'JINIE Common Stock upon termination of employees at the original purchase
price pursuant to agreements existing at the date hereof;
(d) It does not sell or otherwise issue (or grant any warrants, options or
other rights to purchase) any shares of capital stock or any other securities,
except the issuance of shares of Billion or E'JINIE Common Stock pursuant to
option grants to employees made under the Option Plan in the Ordinary Course of
Business;
(e) It does not amend its Articles of Incorporation, Bylaws or other
Organizational Documents, and does not effect or become a party to any
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(f) It does not form any subsidiary or acquire any equity interest or
other interest in any other Entity;
(g) It does not establish or adopt any Employee Benefit Plan, and does not
pay any bonus or make any profit sharing or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or other compensation
or remuneration payable to, any of its directors, officers or employees;
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(h) It does not change any of its methods of accounting or accounting
practices in any respect;
(i) It does not make any Tax election;
(j) It does not commence or take any action or fail to take any action
which would result in the commencement of any Proceeding;
(k) It does not (i) acquire, dispose of, transfer, lease, license,
mortgage, pledge or encumber any fixed or other assets, other than in the
Ordinary Course of Business; (ii) incur, assume or prepay any indebtedness,
Indebtedness or obligation or any other liabilities or issue any debt
securities, other than in the Ordinary Course of Business; (iii) assume,
guarantee, endorse for the obligations of any other person, other than in the
Ordinary Course of Business; (iv) make any loans, advances or capital
contributions to, or investments in, any other Person, other than in the
Ordinary Course of Business; or (v) fail to maintain insurance consistent with
past practices for its business and property;
(l) It pays all debts and Taxes, files all of its Tax Returns (as provided
herein) and pays or performs all other obligations, when due;
(m) It does not enter into or amend any agreements pursuant to which any
other Person is granted distribution, marketing or other rights of any type or
scope with respect to any of its services, products or technology;
(n) It does not hire any new officer-level employee;
(o) It does not revalue any of its assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts receivable,
except as required under GAAP and in the Ordinary Course of Business;
(p) Except as otherwise contemplated hereunder, it does not enter into any
transaction or take any other action outside the Ordinary Course of Business;
and
(q) It does not enter into any transaction or take any other action that
likely would cause or constitute a Breach of any representation or warranty made
by it in this Agreement.
4.3 FILINGS AND CONSENTS; COOPERATION.
Each of Billion and E'JINIE shall ensure that:
(a) Each filing or notice required to be made or given (pursuant to any
applicable Law, Order or contract, or otherwise) by Billion, E'JINIE or the
Shareholders in connection with the execution and delivery of any of the
Transactional Agreements, or in connection with the consummation or performance
of the Exchange, is made or given as soon as possible after the date of this
Agreement;
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(b) Each Consent required to be obtained (pursuant to any applicable Law,
Order or contract, or otherwise) by Billion, E'JINIE or the Shareholders in
connection with the execution and delivery of any of the Transactional
Agreements, or in connection with the consummation or performance of the
Exchange, is obtained as soon as possible after the date of this Agreement and
remains in full force and effect through the Closing Date;
(c) It promptly delivers to CDCG a copy of each filing made, each notice
given and each Consent obtained by Billion or E'JINIE during the Pre-Closing
Period; and
(d) During the Pre-Closing Period, it and its Representatives cooperate
with CDCG and CDCG's Representatives, and prepare and make available such
documents and take such other actions as CDCG may request in good faith, in
connection with any filing, notice or Consent that CDCG is required or elects to
make, give or obtain.
4.4 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULES.
(a) During the Pre-Closing Period, each of Billion and E'JINIE shall
promptly notify CDCG in writing of:
(i) the discovery by it of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement which is contrary to any representation or warranty made by it
in this Agreement or in any of the other Transactional Agreements, or that
would upon the giving of notice or lapse of time, result in any of its
representations and warranties set forth in this agreement to become
untrue or otherwise cause any of the conditions of Closing set forth in
Article VI or Article VII not to be satisfied;
(ii) any event, condition, fact or circumstance that occurs, arises
or exists after the date of this Agreement (except as a result of actions
taken pursuant to the express written consent of CDCG) and that is
contrary to any representation or warranty made by it in this Agreement,
or that would upon the giving of notice or lapse of time, result in any of
its representations and warranties set forth in this agreement to become
untrue or otherwise cause any of the conditions of Closing set forth in
Article VI or Article VII not to be satisfied;
(b) If any event, condition, fact or circumstances that is required to be
disclosed pursuant to Section 4.4(a) requires any material change in the Billion
and E'JINIE Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming the Billion and E'JINIE
Disclosure Schedule were dated as of the date of the occurrence, existence or
discovery of such event, condition, fact or circumstances, then Billion or
E'JINIE, as applicable, shall promptly deliver to CDCG an update to the Billion
and E'JINIE Disclosure Schedule specifying such change (a "DISCLOSURE SCHEDULE
UPDATE").
(c) It will promptly update any relevant and material information provided
to CDCG after the date hereof pursuant to the terms of this Agreement.
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4.5 COMMERCIALLY REASONABLE EFFORTS.
During the Pre-Closing Period, each of Billion and E'JINIE shall use its
commercially reasonable efforts to cause the conditions set forth in Article VI
and Article VII to be satisfied on a timely basis and so that the Closing can
take place on or before October 31, 2004, in accordance with Section 1.5, and
shall not take any action or omit to take any action, the taking or omission of
which would or could reasonably be expected to result in any of the
representations and warranties of Billion and E'JINIE set forth in this
Agreement becoming untrue, or in any of the conditions of Closing set forth in
Article VI or Article VII not being satisfied.
4.6 CONFIDENTIALITY; PUBLICITY.
Each of Billion and E'JINIE shall ensure that:
(a) It and its Representatives keep strictly confidential the existence
and terms of this Agreement prior to the issuance or dissemination of any
mutually agreed upon press release or other disclosure of the Exchange; and
(b) neither it nor any of its Representatives issues or disseminates any
press release or other publicity or otherwise makes any disclosure of any nature
(to any of its suppliers, customers, landlords, creditors or employees or to any
other Person) regarding any of the Exchange;
except in each case to the extent that it is required by law to make any such
disclosure regarding such transactions or as separately agreed by the parties;
provided, however, that if it is required by law to make any such disclosure,
Billion or E'JINIE advises CDCG, at least five business days before making such
disclosure, of the nature and content of the intended disclosure.
ARTICLE V.
COVENANTS OF CDCG
5.1 NOTIFICATION.
During the Pre-Closing Period, CDCG shall promptly notify Billion or
E'JINIE in writing of:
(a) the discovery by CDCG of any event, condition, fact or circumstance
that occurred or existed on or prior to the date of this Agreement which is
contrary to any representation or warranty made by CDCG in this Agreement; and,
(b) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement (except as a result of actions taken
pursuant to the written consent of E'JINIE) and that is contrary to any
representation or warranty made by CDCG in this Agreement;
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5.2 FILINGS AND CONSENTS; COOPERATION.
CDCG shall ensure that:
(a) Each filing or notice required to be made or given (pursuant to any
applicable Law, Order or contract, or otherwise) by CDCG in connection with the
execution and delivery of any of the Transactional Agreements, or in connection
with the consummation or performance of the Exchange, is made or given as soon
as possible after the date of this Agreement;
(b) Each Consent required to be obtained (pursuant to any applicable Law,
Order or contract, or otherwise) by CDCG in connection with the execution and
delivery of any of the Transactional Agreements, or in connection with the
consummation or performance of the Exchange, is obtained as soon as possible
after the date of this Agreement and remains in full force and effect through
the Closing Date;
(c) CDCG promptly delivers to Billion and E'JINIE a copy of each filing
made, each notice given and each Consent obtained by CDCG during the Pre-Closing
Period; and
(d) During the Pre-Closing Period, CDCG and its Representatives cooperate
with Billion, E'JINIE and their Representatives, and prepare and make available
such documents and take such other actions as Billion or E'JINIE may request in
good faith, in connection with any filing, notice or Consent that Billion or
E'JINIE is required or elects to make, give or obtain.
5.3 COMMERCIALLY REASONABLE EFFORTS.
During the Pre-Closing Period, CDCG shall use its commercially reasonable
efforts to cause the conditions set forth in Article VI and Article VII to be
satisfied on a timely basis and so that the Closing can take place on or before
October 31, 2004 or as soon thereafter as is reasonably practical, in accordance
with Section 1.5, and shall not take any action or omit to take any action, the
taking or omission of which would or could reasonably be expected to result in
any of the representations and warranties or CDCG set forth in this Agreement
becoming untrue or in any of the conditions of closing set forth in Article VI
or Article VII not being satisfied.
5.4 DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Each of CDCG, E'JINIE and the Shareholders acknowledges and agrees
that it may receive Confidential Information in connection with this Transaction
including without limitation, the Billion and E'JINIE Disclosure Schedule and
any information disclosed during the due diligence process, the public
disclosure of which will harm the disclosing party's business. The Receiving
Party may use Confidential Information only in connection with the Transaction.
The results of the due diligence review may not be used for any other purpose
other than in connection with the Transaction. Except as expressly provided in
this Agreement, the Receiving Party shall not disclose Confidential Information
to anyone without the Disclosing Party's prior written consent. The Receiving
Party shall take all reasonable measures to avoid disclosure, dissemination or
unauthorized use of Confidential Information, including, at a minimum, those
measures it takes to protect its own confidential information of a similar
nature. The Receiving Party shall not export any Confidential Information in any
manner contrary to the export regulations of the governmental jurisdiction to
which it is subject.
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(b) The Receiving Party may disclose Confidential Information as required
to comply with binding orders of governmental entities that have jurisdiction
over it, provided that the Receiving Party (i) gives the Disclosing Party
reasonable notice (to the extent permitted by law) to allow the Disclosing Party
to seek a protective order or other appropriate remedy, (ii) discloses only such
information as is required by the governmental entity, and (iii) uses
commercially reasonable efforts to obtain confidential treatment for any
Confidential Information so disclosed.
(c) All Confidential Information shall remain the exclusive property of
the Disclosing Party. The Disclosing Party's disclosure of Confidential
Information shall not constitute an express or implied grant to the Receiving
Party of any rights to or under the Disclosing Party's patents, copyrights,
trade secrets, trademarks or other intellectual property rights.
(d) The Receiving Party shall notify the Disclosing Party immediately upon
discovery of any unauthorized use or disclosure of Confidential Information or
any other breach of this Agreement by the Receiving Party. The Receiving Party
shall cooperate with the Disclosing Party in every reasonable way to help the
Disclosing Party regain possession of such Confidential Information and prevent
its further unauthorized use.
(e) The Receiving Party shall return or destroy all tangible materials
embodying Confidential Information (in any form and including, without
limitation, all summaries, copies and excerpts of Confidential Information)
promptly following the Disclosing Party's written request; provided, however,
that, subject to the provisions of this Agreement, the Receiving Party may
retain one copy of such materials in the confidential, restricted access files
of its legal department for use only in the event a dispute arises between the
parties related to the Transaction and only in connection with that dispute. At
the Disclosing Party's option, the Receiving Party shall provide written
certification of its compliance with this Section.
5.5 INDEMNIFICATION.
(a) Each of Billion, E'JINIE and the Shareholders, jointly and severally,
each shall defend, indemnify and hold harmless CDCG, and its respective
employees, officers, directors, stockholders, controlling persons, affiliates,
agents, successors and assigns (collectively, the "CDCG Indemnified Persons"),
and shall reimburse the CDCG Indemnified Person, for, from and against any loss,
liability, claim, damage, expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not involving
a third-party claim (collectively, "Damages"), directly or indirectly, relating
to, resulting from or arising out of:
(i) any untrue representations, misrepresentations or breach of
warranty by or of Billion, E'JINIE or the Shareholders contained in or
pursuant to this Agreement, and the Billion and E'JINIE Disclosure
Schedule;
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(ii) any breach or nonfulfillment of any covenant, agreement or
other obligation by or of Billion, E'JINIE or the Shareholders (only to
the extent made or occurring prior to or at the Closing) contained in or
pursuant to this Agreement, the Transaction Agreements executed by
Billion, E'JINIE or any of the Shareholders in their individual capacity,
the Billion and E'JINIE Disclosure Schedule, or any of the other
agreements, documents, schedules or exhibits to be entered into by Billion
or E'JINIE or any of the Shareholders in their individual capacity
pursuant to or in connection with this Agreement;
(iii) all of Pre-Closing liabilities of Billion, E'JINIE or the
Shareholders; and
(iv) any liability, claim, action or proceeding of any kind
whatsoever, whether instituted or commenced prior to or after the Closing
Date, which directly or indirectly relates to, arises or results from, or
occurs in connection with facts or circumstances relating to the conduct
of business of Billion or E'JINIE, or the assets of Billion or E'JINIE, or
events or circumstances existing on or prior to the Closing Date.
(b) CDCG shall defend, indemnify and hold harmless Billion, E'JINIE and
its respective affiliates, agents, successors and assigns (collectively, the
"E'JINIE Indemnified Persons"), and shall reimburse the E'JINIE Indemnified
Persons, for, from and against any Damages, directly or indirectly, relating to,
resulting from or arising out of:
(i) any untrue representation, misrepresentation or breach of
warranty by or of CDCG contained in or pursuant to this Agreement;
(ii) any breach or nonfulfillment of any covenant, agreement or
other obligations by or of CDCG contained in or pursuant to this
Agreement, the Transaction Agreements or any other agreements, documents,
schedules or exhibits to be entered into or delivered to pursuant to or in
connection with this Agreement.
(c) Promptly after receipt by an indemnified Party under Section 5.6 of
this Agreement of notice of a claim against it ("Claim"), such indemnified Party
shall, if a claim is to be made against an indemnifying Party under such
Section, give notice to the indemnifying Party of such Claim, but the failure to
so notify the indemnifying Party will not relieve the indemnifying Party of any
liability that it may have to any indemnified Party, except to the extent that
the indemnifying Party demonstrates that the defense of such action is
prejudiced by the indemnified Party's failure to give such notice.
(c) A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the Party from whom indemnification is
sought.
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ARTICLE VI.
CLOSING CONDITIONS OF CDCG
CDCG's obligations to effect the Closing and consummate the Exchange are
subject to the satisfaction of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Billion, E'JINIE and the
Shareholders in this Agreement shall have been true and correct as of the date
of this Agreement and shall be true and correct on and as of the Closing.
Billion, E'JINIE and the Shareholders shall have performed all obligations in
this Agreement required to be performed or observed by them on or prior to the
Closing.
6.2 ADDITIONAL CONDITIONS TO CLOSING.
(a) All necessary approvals under federal and state securities laws and
other authorizations relating to the issuance of the Acquisition Shares and the
transfer of the Shares shall have been received.
(b) CDCG shall have obtained an opinion stating that the terms of the
Exchange are fair, just and equitable to CDCG and its shareholders.
(c) No preliminary or permanent injunction or other order by any federal,
state or foreign court of competent jurisdiction which prohibits the
consummation of the Exchange shall have been issued and remain in effect. No
statute, rule, regulation, executive order, stay, decree, or judgment shall have
been enacted, entered, issued, promulgated or enforced by any court or
governmental authority which prohibits or restricts the consummation of the
Exchange. All authorizations, consents, orders or approvals of, or declarations
or filings with, and all expirations of waiting periods imposed by, any
Governmental Body which are necessary for the consummation of the Exchange,
other than those the failure to obtain which would not materially adversely
affect the consummation of the Exchange or in the aggregate have a material
adverse effect on CDCG and its subsidiaries, taken as a whole, shall have been
filed, occurred or been obtained (all such permits, approvals, filings and
consents and the lapse of all such waiting periods being referred to as the
"REQUISITE REGULATORY APPROVALS") and all such Requisite Regulatory Approvals
shall be in full force and effect.
(d) There shall not be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Exchange, by any
Governmental Body which, in connection with the grant of a Requisite Regulatory
Approval, imposes any material condition or material restriction upon CDCG or
its subsidiaries or Billion or E'JINIE, including, without limitation,
requirements relating to the disposition of assets, which in any such case would
so materially adversely impact the economic or business benefits of the Exchange
as to render inadvisable the consummation of the Exchange.
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6.3 PERFORMANCE OF AGREEMENTS.
Billion, E'JINIE or the Shareholders, as the case may be, shall have
executed and delivered each of the agreements, instruments and documents
required to be executed and delivered, and performed all actions required to be
performed by Billion or E'JINIE or any of the Shareholders, as the case may be,
pursuant to this Agreement, except as CDCG has otherwise consented in writing.
6.4 CONSENTS.
Each of the Consents identified or required to have been identified in the
Billion and E'JINIE Disclosure Schedule shall have been obtained and shall be in
full force and effect, other than those Consents, which have been expressly
waived by CDCG.
6.5 NO MATERIAL ADVERSE CHANGE AND SATISFACTORY DUE DILIGENCE.
There shall not have been any material adverse change in the business,
condition, assets, liabilities, operations or financial performance of Billion
or E'JINIE since the date of this Agreement as determined by CDCG in its
discretion. CDCG shall be satisfied in all respects with the results of its due
diligence review of Billion and E'JINIE.
6.6 BILLION/E'JINIE CLOSING CERTIFICATES.
In addition to the documents required to be received under this Agreement,
CDCG shall also have received the following documents:
(a) copies of resolutions of Billion and E'JINIE, certified by a
Secretary, Assistant Secretary or other appropriate officer of Billion or
E'JINIE, authorizing the execution, delivery and performance of this Agreement
and other Transactional Agreements;
(b) good standing certificate from China of Billion and E'JINIE; and
(c) such other documents as CDCG may request in good faith for the purpose
of (i) evidencing the accuracy of any representation or warranty made by Billion
and E'JINIE, (ii) evidencing the compliance by Billion and E'JINIE, or the
performance by Billion and E'JINIE of, any covenant or obligation set forth in
this Agreement or any of the other Transactional Agreements, (iii) evidencing
the satisfaction of any condition set forth in Article VII or this Article VI,
or (iv) otherwise facilitating the consummation or performance of the Exchange.
6.7 TRANSACTIONAL AGREEMENTS.
Each Person (other than CDCG) shall have executed and delivered prior to
or on the Closing Date all Transactional Agreements to which it is to be a
party.
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6.8 RESIGNATION OF DIRECTORS AND OFFICERS.
CDCG shall have received a written resignation from each of the directors
and officers of Billion and E'JINIE effective as of the Closing.
6.9 DELIVERY OF STOCK CERTIFICATES, MINUTE BOOK AND CORPORATE SEAL.
The Shareholders shall have delivered to CDCG the stock books, stock
ledgers, minute books and corporate seals of Billion and E'JINIE.
ARTICLE VII.
CLOSING CONDITIONS OF THE SHAREHOLDERS
The Shareholders' obligations to effect the Closing and consummate the
Exchange are subject to the satisfaction of each of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of CDCG in this Agreement shall have
been true and correct as of the date of this Agreement and shall be true and
correct on and as of the Closing and CDCG shall have performed all obligations
in this Agreement required to be performed or observed by them on or prior to
the Closing.
7.2 ADDITIONAL CONDITIONS TO CLOSING.
(a) All necessary approvals under federal and state securities laws and
other authorizations relating to the issuance and transfer of the Acquisition
Shares by CDCG and the transfer of the Shares by Billion and E'JINIE shall have
been received.
(b) No preliminary or permanent injunction or other order by any federal,
state or foreign court of competent jurisdiction which prohibits the
consummation of the Exchange shall have been issued and remain in effect. No
statute, rule, regulation, executive order, stay, decree, or judgment shall have
been enacted, entered, issued, promulgated or enforced by any court or
governmental authority which prohibits or restricts the consummation of the
Exchange. All Requisite Regulatory Approvals shall have been filed, occurred or
been obtained and all such Requisite Regulatory Approvals shall be in full force
and effect.
(c) There shall not be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Exchange, by any
federal or state Governmental Body which, in connection with the grant of a
Requisite Regulatory Approval, imposes any condition or restriction upon the
Surviving Corporation or its subsidiaries (or, in the case of any disposition of
assets required in connection with such Requisite Regulatory Approval, upon
CDCG, its subsidiaries or E'JINIE, Billion or any of their subsidiaries),
including, without limitation, requirements relating to the disposition of
assets, which in any such case would so materially adversely impact the economic
or business benefits of the Exchange as to render inadvisable the consummation
of the Exchange.
29
7.3 CDCG CLOSING CERTIFICATES.
The Shareholders shall have received the following documents:
(a) copies of resolutions of CDCG, certified by a Secretary, Assistant
Secretary or other appropriate officer of CDCG, authorizing the execution,
delivery and performance of the Transactional Agreements and the Exchange;
(b) good standing certificates for the State of Nevada; and
(c) such other documents as Billion or E'JINIE may request in good faith
for the purpose of (i) evidencing the accuracy of any representation or warranty
made by CDCG, (ii) evidencing the compliance by CDCG with, or the performance by
CDCG of, any covenant or obligation set forth in this Agreement or any of the
other Transactional Agreements, (iii) evidencing the satisfaction of any
condition set forth in Article VI or this Article VII, or (iv) otherwise
facilitating the consummation or performance of the Exchange.
7.4 NO MATERIAL ADVERSE CHANGE.
There shall not have been any material adverse change in CDCG's business,
condition, assets, liabilities, operations or financial performance since the
date of this Agreement.
7.5 PERFORMANCE OF AGREEMENTS.
CDCG shall have executed and delivered each of the agreements, instruments
and documents required to be executed and delivered, and performed all actions
required by CDCG pursuant to this Agreement, except as Billion, E'JINIE and the
Shareholders have otherwise consented in writing.
7.6 CONSENTS.
Each of the Consents identified or required to have been identified in
Section 3.4 shall have been obtained and shall be in full force and effect,
other than those Consents the absence of which shall not have a material adverse
effect on CDCG.
7.7 REGISTRATION RIGHTS AGREEMENT.
CDCG shall have entered into a Registration Rights Agreement with all of
the Shareholders, in the form attached hereto as Exhibit B, which shall provide,
among other things, that (i) the Shareholders shall be granted piggyback
registration rights, subject to customary underwriter's and company cutbacks and
other limitations, (ii) the Shareholders shall make customary investor
representations to CDCG, and (iii) the Shareholders shall agree to hold and not
sell any of the Acquisition Shares for two (2) years after the Closing Date.
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7.8 CDCG STOCK.
On the Closing Date, shares of CDCG Common Stock shall be eligible for
quotation on the OTC Bulletin Board.
ARTICLE VIII.
FURTHER ASSURANCES
Each of the parties hereto agrees that it will, from time to time after
the date of the Agreement, execute and deliver such other certificates,
documents and instruments and take such other action as may be reasonably
requested by the other party to carry out the actions and transactions
contemplated by this Agreement, including the closing conditions described in
Articles VI and VII. Billion , E'JINIE and the Shareholders shall reasonably
cooperate with CDCG in its of the books and records of Billion and E'JINIE, or
in preparing any solicitation materials to be sent to the shareholders of CDCG
in connection with the approval of the Exchange and the transactions
contemplated by the Transactional Agreements.
ARTICLE IX.
TERMINATION
9.1 TERMINATION.
This Agreement may be terminated and the Exchange abandoned at any time
prior to the Closing Date:
(a) by mutual written consent of CDCG, Billion, E'JINIE and the
Shareholders;
(b) by CDCG if the Financial Statements of Billion and E'JINIE for the
prior three fiscal years do not disclose minimum revenues of XXX 00 million or
if it is not satisfied with the results of its due diligence of Billion and
E'JINIE for any reason;
(c) by CDCG if (i) there is a material Breach of any covenant or
obligation of Billion, E'JINIE or the Shareholders; provided however, that if
such Breach or Breaches are capable of being cured prior to the Closing Date,
such Breach or Breaches shall not have been cured within 10 days of delivery of
the written notice of such Breach, or (ii) CDCG reasonably determines that the
timely satisfaction of any condition set forth in Article VI has become
impossible or impractical (other than as a result of any failure on the part of
CDCG to comply with or perform its covenants and obligations under this
Agreement or any of the other Transactional Agreements);
(d) by Billion or E'JINIE if (i) there is a material Breach of any
covenant or obligation of CDCG; provided however, that if such Breach or
Breaches are capable of being cured prior to the Closing Date, such Breach or
Breaches shall not have been cured within 10 days of delivery of the written
notice of such Breach, or (ii) Billion or E'JINIE reasonably determines that the
timely satisfaction of any condition set forth in Article VII has become
impossible or impractical (other than as a result of any failure on the part of
Billion or E'JINIE or any Shareholder to comply with or perform any covenant or
obligation set forth in this Agreement or any of the other Transactional
Agreements);
31
(e) by CDCG if the Closing has not taken place on or before December 31,
2004 (except if as a result of any failure on the part of CDCG to comply with or
perform its covenants and obligations under this Agreement or in any other
Transactional Agreement);
(f) by Billion or E'JINIE if the Closing has not taken place on or before
December 31, 2004 (except if as a result of the failure on the part of Billion,
E'JINIE or the Shareholders to comply with or perform any covenant or obligation
set forth in this Agreement or in any other Transactional Agreement);
(g) by any of CDCG, on the one hand or Billion or E'JINIE, on the other
hand, if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Exchange and such order, decree, ruling or any other action shall have become
final and non-appealable; provided, however, that the party seeking to terminate
this Agreement pursuant to this clause (f) shall have used all commercially
reasonable efforts to remove such order, decree or ruling; or
(h) The parties hereby agree and acknowledge that a breach of the
provisions of Sections y4.1, y4.2, y4.3, y4.4 and y4.6 are, without limitation,
material Breaches of this Agreement.
9.2 TERMINATION PROCEDURES.
If CDCG wishes to terminate this Agreement pursuant to Section 9.1, CDCG
shall deliver to the Shareholders, Billion and E'JINIE a written notice stating
that CDCG is terminating this Agreement and setting forth a brief description of
the basis on which CDCG is terminating this Agreement. If Billion or E'JINIE
wishes to terminate this Agreement pursuant to Section 9.1, Billion or E'JINIE,
as applicable, shall deliver to CDCG a written notice stating that Billion or
E'JINIE is terminating this Agreement and setting forth a brief description of
the basis on which Billion or E'JINIE is terminating this Agreement.
9.3 EFFECT OF TERMINATION.
In the event of termination of this Agreement as provided above, this
Agreement shall forthwith have no further effect. Except for a termination
resulting from a Breach by a party to this Agreement, there shall be no
liability or obligation on the part of any party hereto. In the event of a
breach, the remedies of the non-breaching party shall be to seek damages from
the breaching party or to obtain an order for specific performance, in addition
to or in lieu of other remedies provided herein. Upon request after termination,
each party will redeliver or, at the option of the party receiving such request,
destroy all reports, work papers and other material of any other party relating
to the Exchange, whether obtained before or after the execution hereof, to the
party furnishing same; provided, however, that Billion, E'JINIE and the
Shareholders shall, in all events, remain bound by and continue to be subject to
Section 4.6 and all parties shall in all events remain bound by and continue to
be subject to Section 5.4 and 5.5. .
32
Notwithstanding the above, both CDCG, on the one hand, and Billion,
E'JINIE and the Shareholders, on the other hand, shall be entitled to announce
the termination of this Agreement by means of a mutually acceptable press
release.
ARTICLE X.
MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties of Billion, E'JINIE and the
Shareholders in this Agreement and the Billion and E'JINIE Disclosure Schedule
shall survive shall survive indefinitely. The right to indemnification,
reimbursement or other remedy based on such representations and warranties will
not be affected by any investigation conducted by the parties.
10.2 EXPENSES.
Except as otherwise set forth herein, each of the parties to the Exchange
shall bear its own expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by this Agreement.
10.3 ENTIRE AGREEMENT.
This Agreement and the other Transactional Agreements contain the entire
agreement of the parties hereto, and supersede any prior written or oral
agreements between them concerning the subject matter contained herein, or
therein. There are no representations, agreements, arrangements or
understandings, oral or written, between the parties to this Agreement, relating
to the subject matter contained in this Agreement and the other Transaction
Agreements, which are not fully expressed herein or therein. The schedules and
each exhibit attached to this Agreement or delivered pursuant to this Agreement
are incorporated herein by this reference and constitute a part of this
Agreement.
10.4 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
10.5 DESCRIPTIVE HEADINGS.
The Article and Section headings in this Agreement are for convenience
only and shall not affect the meanings or construction of any provision of this
Agreement.
33
10.6 NOTICES.
Any notices required or permitted to be given under this Agreement shall
be in writing and shall be deemed sufficiently given on the earlier to occur of
the date of personal delivery, the date of receipt or three (3) days after
posting by overnight courier or registered or certified mail, postage prepaid,
addressed as follows:
If to CDCG: CHINA DIGITAL COMMUNICATION GROUP
00000 Xxxxxxxx Xxxx. Xxxxx 0000
Xxx Xxxxxxx, XX 00000
If to Billion: BILLION ELECTRONICS CO., LTD.
------------------------------
------------------------------
------------------------------
If to E'JINIE: SHENZHEN E'JINIE TECHNOLOGY DEVELOPMENT CO., LTD.
Bamang Checking Station 1st Building,
South Mountain, Xili Town
Shenzhen, China
If to the Shareholders: To such address or addresses as a party shall have
previously designated by notice to the sender
given in accordance with this section.
10.7 CHOICE OF LAW
This Agreement shall be construed in accordance with and governed by the
laws of the State of California without regard to choice of law principles. The
parties hereto each consent to the jurisdiction of the courts of the state of
California, county of Los Angeles and to the federal courts located in the
county of Los Angeles, State of California.
10.8 BINDING EFFECT; BENEFITS
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer on any Person other than
the parties or their respective successors and permitted assigns, the
Shareholders and other Persons expressly referred to herein, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
34
10.9 ASSIGNABILITY
Neither this Agreement nor any of the parties' rights hereunder shall be
assignable by any party without the prior written consent of the other parties
and any attempted assignment without such consent shall be void.
10.10 WAIVER AND AMENDMENT
Any term or provision of this Agreement may be waived at any time by the
party, which is entitled to the benefits thereof. The waiver by any party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach. The parties may, by mutual agreement in
writing, amend this Agreement in any respect. Billion, E'JINIE and the
Shareholders hereby acknowledge their intent that this Agreement includes as a
party any holder of capital stock in Billion and E'JINIE at the time of Closing.
CDCG, Billion, E'JINIE and the Shareholders therefore agree that this Agreement
may be amended, without the further consent of any party to this Agreement, (i)
to add as a new Shareholder any existing shareholder of Billion or E'JINIE and
(ii) to modify Schedule 1 to reflect the addition of such shareholder.
10.11 ATTORNEYS' FEES.
In the event of any action or proceeding to enforce the terms and
conditions of this Agreement, the prevailing party shall be entitled to an award
of reasonable attorneys' and experts' fees and costs, in addition to such other
relief as may be granted.
10.12 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.
10.13 CONSTRUCTION.
In executing this Agreement, the parties severally acknowledge and
represent that each: (a) has fully and carefully read and considered this
Agreement; (b) has or has had the opportunity to consult independent legal
counsel regarding the legal effect and meaning of this document and all terms
and conditions hereof; (c) has been afforded the opportunity to negotiate as to
any and all terms hereof; and (d) is executing this Agreement voluntarily, free
from any influence, coercion or duress of any kind. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be applied against
any party.
35
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above written.
CHINA DIGITAL COMMUNICATION GROUP
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
SHENZHEN E'JINIE TECHNOLOGY
DEVELOPMENT CO., LTD.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
BILLION ELECTRONICS CO., LTD.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
SHAREHOLDERS:
See attached Shareholder signature pages
36
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
AGREEMENT. "Agreement" shall mean the Share Exchange Agreement to which
this Exhibit A is attached (including all Disclosure Schedules and all
Exhibits), as it may be amended from time to time.
APPROVED PLANS. "Approved Plans" shall mean a stock option or similar plan
for the benefit of employees or others, which has been approved by the
shareholders of E'JINIE.
AVERAGE CDCG STOCK PRICE. "Average CDCG Stock Price" shall refer to the
average of the closing price of the Common Stock of CDCG on the OTC Bulletin
Board equaling to US$2.19 per share based upon a valuation of CDCG of
$105,070,000 as determined by the parties.
BILLION COMMON STOCK. "Billion Common Stock" shall mean the shares of
common stock of Billion.
BREACH. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been any
inaccuracy in or breach of, or any failure to comply with or perform, such
representation, warranty, covenant, obligation or other provision.
CERTIFICATES. "Certificates" shall have the meaning specified in Section
1.3 of the Agreement.
CDCG. "CDCG" shall have the meaning specified in the first paragraph of
the Agreement.
CDCG COMMON STOCK. "CDCG Common Stock" shall mean the shares of common
stock of CDCG.
CDCG SEC REPORTS. "CDCG SEC Reports" shall have the meaning specified in
Section 4.6 of the Agreement.
CLOSING. "Closing" shall have the meaning specified in Section 1.5 of the
Agreement.
CLOSING DATE. "Closing Date" shall have the meaning specified in Section
1.5 of the Agreement.
CODE. "Code" shall have the meaning specified in the Recitals of this
Agreement.
37
CONFIDENTIAL INFORMATION. "Confidential Information" shall mean all
nonpublic information disclosed by one party or its agents (the "Disclosing
Party") to the other party or its agents (the "Receiving Party") that is
designated as confidential or that, given the nature of the information or the
circumstances surrounding its disclosure, reasonably should be considered as
confidential. Confidential Information includes, without limitation (i)
nonpublic information relating to the Disclosing Party's technology, customers,
vendors, suppliers, business plans, intellectual property, promotional and
marketing activities, finances, agreements, transactions, financial information
and other business affairs, and (ii) third-party information that the Disclosing
Party is obligated to keep confidential.
Confidential Information does not include any information that (i) is or
becomes publicly available without breach of this Agreement, (ii) can be shown
by documentation to have been known to the Receiving Party at the time of its
receipt from the Disclosing Party, (iii) is received from a third party who, to
the knowledge of the Receiving Party, did not acquire or disclose such
information by a wrongful or tortious act, or (iv) can be shown by documentation
to have been independently developed by the Receiving Party without reference to
any Confidential Information.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
DISCLOSURE SCHEDULE UPDATE. "Disclosure Schedule Update" shall have the
meaning specified in Section 4.4 of the Agreement.
E'JINIE BALANCE SHEET. "E'JINIE Balance Sheet" shall mean E'JINIE's
audited balance sheet at December 31, 2003.
E'JINIE COMMON STOCK. "E'JINIE Common Stock" shall mean the shares of
common stock of E'JINIE.
BILLION AND E'JINIE DISCLOSURE SCHEDULE. "Billion and E'JINIE Disclosure
Schedule" shall have the meaning specified in introduction to Article II of the
Agreement.
ENTITY. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
ENVIRONMENTAL LAWS. "Environmental Laws" shall mean any Law or other
requirement relating to the protection of the environment, health, or safety
from the release or disposal of hazardous materials.
ENVIRONMENTAL PERMIT. "Environmental Permit" means all licenses, permits,
authorizations, approvals, franchises and rights required under any applicable
Environmental Law or Order.
38
EQUITY SECURITIES. "Equity Security" shall mean 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.
EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
GAAP. "GAAP" shall mean Generally Accepted Accounting Principles, applied
on a consistent basis.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
that is issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Law; or
(b) right under any contract with any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal); or
(d) individual, Entity or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory, police,
military or taxing authority or power of any nature, including any court,
arbitrator, administrative agency or commissioner, or other governmental
authority or instrumentality.
INDEBTEDNESS. "Indebtedness" shall mean 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.
INTELLECTUAL PROPERTY. "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 xxxx 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.
39
KNOWLEDGE. A corporation shall be deemed to have "knowledge" of a
particular fact or matter only if a director or officer of such corporation has,
had or should have had knowledge of such fact or matter.
LAWS. "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.
LIEN. "Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge, right of first refusal, encumbrance or other
adverse claim or interest 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.
MATERIAL ADVERSE EFFECT. "Material Adverse Effect" means 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 affected party, in each case
taken as a whole or (b) materially impair the ability of the affected party to
perform its obligations under this Agreement and the Transaction Agreements,
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 affected party operates.
MATERIAL CONTRACT. "Material Contract" means any and all agreements,
contracts, arrangements, understandings, leases, commitments or otherwise,
providing for potential payments by or to the company in excess of $10,000, and
the amendments, supplements and modifications thereto.
ORDER. "Order" shall mean any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
Governmental Body.
ORDINARY COURSE OF BUSINESS. "Ordinary Course of Business" shall mean an
action taken by Billion or E'JINIE if (i) such action is taken in normal
operation, consistent with past practices, (ii) such action is not required to
be authorized by the Shareholders, Board of Directors or any committee of the
Board of the Directors or other governing body of Billion or E'JINIE and (iii)
does not require any separate or special authorization or consent of any nature
by any Governmental Body or third party.
40
PERMITTED LIENS. "Permitted Liens" shall mean (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; and (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.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PRE-CLOSING PERIOD. "Pre-Closing Period" shall mean the period commencing
as of the date of the Agreement and ending on the Closing Date.
PROCEEDING. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation,
commenced, brought, conducted or heard by or before, or otherwise has involved,
any Governmental Body or any arbitrator or arbitration panel.
REGISTRATION RIGHTS AGREEMENT. "Registration Rights Agreement" shall mean
an agreement substantially in the form of Exhibit B.
REPRESENTATIVES. "Representatives" of a specified party shall mean
officers, directors, employees, attorneys, accountants, advisors and
representatives of such party, including, without limitation, all subsidiaries
of such specified party, and all such Persons with respect to such subsidiaries.
The Related Persons of Billion or E'JINIE shall be deemed to be
"Representatives" of Billion or E'JINIE, as applicable.
SEC. "SEC" shall mean the Securities and Exchange Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
TAXES. "Taxes" shall mean 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.
41
TAX GROUP. "Tax Group" shall mean any federal, state, local or foreign
consolidated, affiliated, combined, unitary or other similar group of which
Billion or E'JINIE is now or was formerly a member.
TAX RETURN. "Tax Return" shall mean any return, declaration, report, claim
for refund or credit, information return, statement or other similar document
filed with any Governmental Body with respect to Taxes, including any schedule
or attachment thereto, and including any amendment thereof. TRANSACTIONAL
AGREEMENTS. "Transactional Agreements" shall mean:
(a) this Agreement; and
(b) the Registration Rights Agreement.
42
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
43
SCHEDULE 1
BILLION SHAREHOLDERS
Name and Address Number of Shares
Xu Xirong
Xxxx Xxxxxx
Top Interest International, Ltd
E'JINIE SHAREHOLDERS
Name and Address Number of Shares
BILLION ELECTRONICS CO., LTD
44
SCHEDULE 2
BILLION AND E'JINIE DISCLOSURE SCHEDULE
COUNTERPART SIGNATURE PAGE
SHARE EXCHANGE AGREEMENT
AMONG
CHINA DIGITAL COMMUNICATION GROUP,
BILLION ELECTRONICS CO., LTD
SHENZHEN E'JINIE TECHNOLOGY DEVELOPMENT CO., LTD.
AND THE SHAREHOLDERS NAMED THEREIN
A. The undersigned shareholder of BILLION ELECTRONICS CO., LTD.
("BILLION") desires to enter into the Share Exchange Agreement dated September
29, 2004 (the "AGREEMENT"), among CHINA DIGITAL COMMUNICATION GROUP, Billion,
SHENZHEN E'JINIE TECHNOLOGY DEVELOPMENT CO., LTD. ("E'JINIE") and the
Shareholders of Billion named therein, a copy of which has been delivered to the
undersigned.
B. The undersigned hereby adopts, accepts and agrees to all of the terms
and provisions of the Agreement.
C. This Counterpart Signature Page has been executed by the undersigned
Shareholder. The parties to the Agreement are hereby authorized to attach this
Counterpart Signature Page to a copy of the Agreement, together with executed
Counterpart Signature Pages of the other Shareholders. The undersigned agrees
that when this Counterpart Signature Page has been appended to the Agreement,
the Agreement shall thereupon become a binding agreement between the
undersigned, CDCG, Billion, E'JINIE and other Shareholders who have executed
similar Counterpart Signature Pages, enforceable against the undersigned in
accordance with its terms, without further action by the undersigned.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Counterpart Signature Page as of the 29th day of September 2004.
SHAREHOLDER:
By:
-------------------------------------
Name:
