EXHIBIT
Exhibit 1. Reorganization Agreement
EXHIBIT No. 1
REORGANIZATION AGREEMENT
CHINASOFT, INC.
(a District of Columbia corporation)
with
CBQ, INC.
(a Colorado corporation)
and
TRI BEAU ACQUISITION COMPANY
(a District of Columbia corporation)
December 22, 1999
THIS REORGANIZATION AGREEMENT (Agreement), has been entered into this 22nd day
of December, 1999, and is between ChinaSoft, Inc. (ChinaSoft), a privately held
District of Columbia corporation, CBQ, Inc. (CBQI), a publicly held Colorado
corporation, and Tri Beau Acquisition Company (Acquiring Corporation), a
District of Columbia corporation wholly owned by CBQI which was formed solely
for the purpose of acquiring ChinaSoft as a wholly owned subsidiary of CBQI in a
tax free A Reorganization using a Reverse Triangular Merger (Merger).
THE FOLLOWING PREMISES ARE AN INTEGRAL PART OF THIS AGREEMENT: CBQI intends to
acquire (through the Merger) ChinaSoft as a wholly owned subsidiary, and
ChinaSoft intends to be acquired by CBQI in this manner. Acquiring Corporation
was formed as a wholly owned subsidiary of CBQI solely for the purpose of
acquiring ChinaSoft as a wholly owned subsidiary of CBQI in a tax exempt
reorganization. The respective board of directors of ChinaSoft, CBQI and
Acquiring Corporation have found it advisable for the benefit of each
corporation that CBQI acquire through the Merger ChinaSoft as a wholly owned
subsidiary and have each approved this Agreement. The board of directors of
ChinaSoft and Acquiring Corporation have recommended and submitted the Merger to
the shareholders of their respective corporations for approval. The shareholders
of ChinaSoft and Acquiring Corporation have duly approved the Merger.
In consideration of the foregoing premises and the mutual terms,
representations, warranties, covenants and conditions set forth subsequently in
this Agreement, and such other and further consideration, the receipt and
sufficiency of each which are hereby acknowledged,
THE PARTIES HEREBY ADOPT THIS AGREEMENT AS A TAX FREE REORGANIZATION UNDER
SECTION 368(a) OF THE INTERNAL REVENUE CODE AS FOLLOWS:
ARTICLE I: Merger
1.01. Closing. The closing of the transactions evidenced by this Agreement
(Closing) will take place at the offices of Porter, Wright, Xxxxxx & Xxxxxx at
0000 X Xxxxxx XX, Xxxxx 0000, Xxxxxxxxxx, X.X., upon the occurrence of certain
conditions subsequent as set forth in Section 5.12 of this Agreement on or
before January 14, 2000 (the Closing Date).
1.02. Surviving Corporation. Acquiring Corporation shall be merged into
ChinaSoft, which shall be, and will be sometimes referred to in this Agreement,
as the Surviving Corporation. The Merger shall become effective on the filing
date of the Certificates and Articles of Merger with the appropriate Secretaries
of State and/or equivalent organization in the District of Columbia. (a)
Articles of Incorporation. The articles of incorporation of ChinaSoft, as
heretofore amended and as in effect immediately prior to Closing, shall be the
articles of the Surviving Corporation. (b) Bylaws. The bylaws of ChinaSoft, as
heretofore amended and as in effect immediately prior to Closing, shall be the
bylaws of the Surviving Corporation. (c) Directors. The directors of CBQI,
immediately subsequent to Closing, shall be Xxxx X. Xxxxxx (who shall also act
as Chairman of the Board), J. Xxxxxxx Xxxx, Song Zhi De, Xxxxx Xxxxxx, Xxxx
Xxxxxx, Xxxx Xxxxx and Xxxxxxx Xxxxxxxx. The directors of the Surviving
Corporation, immediately subsequent to Closing, shall be Xxxx X. Xxxxxx (who
shall also act as Chairman of the Board), and Song Zhi De and Xx Xxxx. These
directors shall hold office until their respective successors are duly elected
or appointed and qualified in the manner provided in the articles and bylaws
governing the Surviving Corporation. Nothing contained in this paragraph shall
be construed to create any employment or other contractual rights in the
aforesaid directors with the Surviving Corporation, except that such directors
shall be entitled to participate in any incentive stock option plan which may be
subsequently adopted by CBQI. (d) Executive Officers. The executive officers of
CBQI and ChinaSoft, immediately subsequent to Closing, shall be appointed by the
board of directors of the respective corporations.
1.03. Terms of the Merger. On Closing and with the effectiveness of the Merger,
each share of stock then issued and outstanding by Acquiring Corporation and
ChinaSoft shall, by virtue of the Merger and without any action on the part of
the holder(s) of the shares (with the exception of one (1) share of ChinaSoft,
which shall be owned and held by CBQI) shall no longer be outstanding and shall
be canceled and retired and cease to exist, and the shares of ChinaSoft shall be
converted into the right to receive, on surrender of the certificate
representing such shares, the consideration set forth under Section 1.04 of this
Agreement.
1.04. Payment for Shares. In consideration for the Merger, CBQI shall issue and
deliver approximately thirty million (30,000,000) shares of its restricted
common stock (the CBQI Shares) to the shareholders of ChinaSoft on a pro rata
basis. The CBQI Shares shall constitute no less than 51% of the outstanding
proprietary interest of CBQI on a fully diluted basis immediately after their
issuance and delivery. The CBQI Shares shall be fully paid, non assessable, and
restricted, as defined in Regulation D and Rule 144 under the Securities Act of
1933, as amended (the Securities Act).
1.05. Certain Effects of the Merger. On Closing, the separate existence of
Acquiring Corporation shall cease, and Acquiring Corporation shall be merged
with and into ChinaSoft, which, as the Surviving Corporation, shall possess all
the assets, properties, rights, privileges, powers and franchises of a public or
of a private nature, and be subject to all liabilities, restrictions,
disabilities and duties of Acquiring Corporation. If at any time the Surviving
Corporation shall consider or be advised that any further assignment or
assurances in law or any things are necessary or desirable to vest in the
Surviving Corporation, according to the terms hereof, the title to any property
or rights of Acquiring Corporation, the last acting officers and directors of
Acquiring Corporation (or the corresponding officers and directors of the
Surviving Corporation) shall execute and make all such proper assignments and
assurances and do all things necessary or proper to vest title in such property
or rights in the Surviving Corporation, and otherwise to carry out the purpose
and intent of this Agreement.
1.06. Filing of Certificate of Merger. As soon as practicable after the
effectiveness of Closing, Acquiring Corporation shall deliver for filing duly
executed Articles of Merger as required by the District of Columbia Corporations
Code, and will take such other and further action in connection therewith as may
be required by District of Columbia law to make the Merger effective as soon as
practicable thereafter. ChinaSoft shall deliver for filing duly executed
Articles of Merger as required by the District of Columbia Corporations Code,
and will take such other and further action in connection therewith as may be
required by District of Columbia law to make the Merger effective as soon as
practicable thereafter.
ARTICLE II: Representations and Warranties of ChinaSoft to CBQI and Acquiring
Corporation
ChinaSoft hereby represents and warrants to CBQI and Acquiring Corporation,
jointly and severally, that, as of the execution date of this Agreement and also
as of Closing:
2.01. Authority: All necessary action has been taken to make this Agreement a
legal, valid and binding obligation of ChinaSoft enforceable in accordance with
its terms and conditions.
2.02. No Breach or Violation: The execution and delivery of this Agreement and
the performance by ChinaSoft of its obligations will not result in any breach or
violation of or default under any material agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
rule, regulation, statute, order or decree of any kind, to which ChinaSoft
and/or any of its affiliates is a party or by which they or any of them or any
of their property is or may be or may become subject, nor in the violation of
any documents governing the conduct of ChinaSoft.
2.03. Nonassessable ChinaSoft Shares: The outstanding ChinaSoft proprietary
shares have each been validly issued and are fully paid for and nonassessable.
2.04. No Liens on ChinaSoft Shares: The outstanding ChinaSoft proprietary shares
are not and shall not be or shall not become subject to any lien, encumbrance,
security interest or financing statement whatsoever through any act of ChinaSoft
and/or its shareholders; further, the outstanding ChinaSoft proprietary shares
are not the subject of any agreement.
2.05. Capital Percentage; Outstanding Commitments: The outstanding ChinaSoft
proprietary shares represent 100% of the outstanding proprietary interest of
ChinaSoft; further, there are no outstanding commitments (direct or indirect)
which would cause the issuance or transfer out of treasury of any additional
proprietary interest of ChinaSoft, whether by common stock, preferred stock,
option, warrant, debt or otherwise.
2.06. Audited Financial Statements and Tax Reports. Chinasoft was formed on
September 8, 1999 for the primary purpose of providing a joint venture mechanism
to develop telephony, software development and internet service businesses to
and from the People's Republic of China. As such, Chinasoft and, thereby, CBQI,
subsequent to Closing are not required to provide audited or unaudited financial
statements in accordance with Form 8 KSB or Regulation S X as incorporated
thereby in regards of the Merger.
2.07. No Undisclosed Liabilities or Obligations. ChinaSoft has no obligations or
liabilities of any nature (absolute, accrued, contingent or otherwise, and
whether due or to become due, herein liabilities).
2.08. Litigation. There is no legal, administrative, arbitration or other
proceeding, claim or action of any nature or investigation pending or threatened
against ChinaSoft, or which questions or challenges the validity of this
Agreement or any action to be taken by ChinaSoft pursuant to this Agreement or
in connection with the transactions contemplated hereby, and ChinaSoft does not
know or have any reason to know of any valid basis for any such legal,
administrative, arbitration or other proceeding, claim or action of any nature
or investigation. ChinaSoft is not subject to any judgment, order or decree
entered in any lawsuit or proceeding which has an adverse effect on their
business practices or on their ability to acquire any property or conduct their
business in any area.
2.09. Compliance with Law. ChinaSoft is in compliance with all laws, regulations
and orders applicable to its business and ChinaSoft has not received any
notification that they are in violation of any law, regulation or order and no
such violation exists.
2.10. Disclosure. No representations or warranties made by ChinaSoft contain any
untrue statement of fact or omit to state any fact necessary in order to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading; further, there are no facts known to ChinaSoft which
(either individually or in the aggregate) could or would materially and
adversely affect or involve any substantial possibility of having a material,
adverse effect on the condition (financial or otherwise), results of operations,
assets, liabilities or businesses of ChinaSoft which have not been disclosed in
this Agreement.
2.11 No Material Liabilities. ChinaSoft owns and holds 25% of all authorized,
issued and outstanding shares of common stock of Capital Software, Inc., a
District of Columbia corporation. Except as provided in this Section 2.11,
neither ChinaSoft nor Capital Software, Inc. have any material liabilities of
any kind.
ARTICLE III: Understandings of ChinaSoft and its Shareholders
ChinaSoft acknowledges, understands and agrees that:
3.01. Certificate. The certificate representing the CBQI Shares will bear a
legend restricting their transfer under Rule 144 of the Securities Act of 1933.
3.02. No Securities Act Registration. The CBQI Shares have not been registered
under the Securities Act of 1933 or any applicable state law (collectively, the
Securities Act). The CBQI Shares may not be sold, offered for sale, transferred,
pledged, hypothecated or otherwise disposed of except in compliance with the
Securities Act. The ChinaSoft shareholders must bear the economic risk of their
investment in the CBQI Shares for an indefinite period of time. If they desire
to sell or transfer all or any part of the CBQI Shares within the restricted
period, CBQI may require their counsel to provide a legal opinion that the
transfer may be made without registration under the Securities Act.
3.03. Lack of Agency Findings. No federal or state agency has made any findings
or determination as to the fairness of an investment in CBQI or any
recommendation or endorsement of this investment.
3.04. Limited Market for CBQI Shares. There is presently only a limited market
for the CBQI Shares and no market may exist in the future for any sale or sales
of all or any portion thereof.
3.05. Commitments to Investments. The commitment of the ChinaSoft shareholders
to investments that are not readily marketable is not disproportionate to their
net worth and their investment in the CBQI shares will not cause their
commitments to become excessive.
3.06. Financial Ability. The ChinaSoft shareholders have the financial ability
to bear the economic risks of this investment, have adequate means of providing
for their current needs, and have no need for liquidity in this investment.
3.07. High Risk of Investment. The ChinaSoft shareholders have evaluated the
high risks of investing in the CBQI Shares and have such knowledge and
experience in financial and business matters in general and in particular with
respect to this type of investment that they are capable of evaluating the
merits and risks of an investment in the CBQI Shares.
3.08. Opportunity to Investigate Investment. The ChinaSoft shareholders have
been given the opportunity to ask questions of and receive answers from CBQI
concerning the terms and conditions of this investment and to obtain additional
information necessary to verify the accuracy of the information it desired in
order to evaluate his investment. In evaluating the suitability of an investment
in the CBQI Shares, they have not relied on any representations or other
information (whether oral or written) other than that furnished to them by CBQI
or the representatives of CBQI.
3.09. Opportunity to Consult Professionals. The ChinaSoft shareholders have had
the opportunity to discuss with their professional, legal, tax and financial
advisers the suitability of an investment in the CBQI Shares for their
particular tax and financial situation and all information that they have
provided to CBQI concerning themselves and their financial position is correct
and complete.
3.10. Reliance. In making the decision to purchase the CBQI Shares, the
ChinaSoft shareholders have relied solely upon independent investigations made
by them or on their behalf.
3.11. Investment Purpose. The ChinaSoft shareholders are acquiring the CBQI
Shares solely for their own account, for investment purposes only, and are not
purchasing with a view to, or for, the resale, distribution, subdivision or
fractionalization thereof.
ARTICLE IV: Representations and Warranties of CBQI and Acquiring Corporation to
ChinaSoft
CBQI and Acquiring Corporation hereby represent and warrant to ChinaSoft that,
as of the date of the execution of this Agreement and as of Closing:
4.01. Authority: All necessary action has been taken to make this Agreement a
legal, valid and binding obligation of CBQI enforceable in accordance with its
terms and conditions.
4.02. No Breach or Violation: The execution and delivery of this Agreement and
the performance by CBQI of its obligations will not result in any breach or
violation of or default under any agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
rule, regulation, statute, order or decree of any kind, to which CBQI or any of
its affiliates is a party or by which they or any of their property is or may be
or may become subject, nor in the violation of the articles or bylaws governing
the conduct of CBQI.
4.03. Nonassessable CBQI Shares: The CBQI Shares have each been validly issued
and are fully paid for and nonassessable.
4.04. No Liens on CBQI Shares: The CBQI Shares are not and shall not be or
become subject to any lien, encumbrance, security interest or financing
statement whatsoever through any act of CBQI or its affiliates; further, the
CBQI Shares are not the subject of any agreement other than this Agreement.
4.05. Capital Percentage; Outstanding Commitments: The CBQI Shares represent no
less than 51% of the outstanding proprietary interest of CBQI on a fully diluted
basis; further, there are no outstanding commitments (direct or indirect) which
would cause the issuance or transfer out of treasury of any additional
proprietary interest of CBQI, whether by common stock, preferred stock, option,
warrant, debt or otherwise, other than pursuant to those contracts which have
been disclosed to ChinaSoft and which it has acknowledged receipt of.
4.06. SEC and Tax Reports; Filings: CBQI has delivered to ChinaSoft its annual
report on Form 10 KSB for the year ended December 31, 1998, and its quarterly
reports on Form 10 QSB for the fiscal quarters ended March 31, 1999, June 30,
1999, and September 30, 1999, all of which were true and correct as of the date
of filing and remain true and correct. CBQI has provided to ChinaSoft full
access to any and all information desired concerning the business and operations
of CBQI, and CBQI has made available to ChinaSoft such personnel as has been
requested to answer any and all questions which ChinaSoft may have had
concerning an investment in CBQI. CBQI is current in all of its required reports
under the Securities Exchange Act of 1934. CBQI is current in its filings with
all federal and state taxing agencies, including, without limitation, the
Internal Revenue Service. CBQI has delivered to ChinaSoft its annual report on
Form 1120, which was true and correct as of the date of filing and remains true
and correct. No taxes are due any federal or state agency.
All SEC filings concerning CBQI and its predecessors filed to date comply with
the Securities Act and the Securities Exchange Act in all material respects. The
SEC filings concerning CBQI do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they will be made,
not misleading. None of the information that CBQI will supply or which CBQI has
supplied in connection with this Agreement will contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they will
be made, misleading.
4.07. No Undisclosed Liabilities or Obligations. CBQI has no obligations or
liabilities of any nature (absolute, accrued, contingent or otherwise, and
whether due or to become due, herein liabilities) except liabilities fully
reflected or reserved in the balance sheet filed as a part of the Form 10 QSB
dated September 30, 1999, or which have been incurred in the ordinary course of
business since that date.
4.08. Litigation. Except as provided for on Schedule 4.08 hereto, there is no
legal, administrative, arbitration or other proceeding, claim or action of any
nature or investigation pending or threatened against or involving CBQI, or
which questions or challenges the validity of this Agreement, or any action to
be taken by CBQI pursuant to this Agreement or in connection with the
transactions contemplated hereby, and CBQI does not know or have any reason to
know of any valid basis for any such legal, administrative, arbitration or other
proceeding, claim or action of any nature or investigation; further, CBQI is not
subject to any judgment, order or decree entered in any lawsuit or proceeding
which has an adverse effect on its business practices or on its ability to
acquire any property or conduct its business in any area.
4.09. Compliance with Law. CBQI is in compliance with all laws, regulations and
orders applicable to its business; further, CBQI has not received any
notification that it is in violation of any law, regulation or order and no such
violation exists.
4.10. Disclosure/Notices and Consents to Third Parties. No representations or
warranties by CBQI in this Agreement contain any untrue statement of fact or
omit to state any fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading; further, there are no facts known to CBQI which (either individually
or in the aggregate) could or would materially and adversely affect or involve
any substantial possibility of having a material, adverse effect on the
condition (financial or otherwise), results of operations, assets, liabilities
or businesses of CBQI which have not been disclosed in this Agreement.
CBQI will give any notices (and will cause each of its subsidiaries to give any
notices) to third parties, and will use its best efforts to obtain (and will
cause each of its subsidiaries to use its best efforts to obtain) any third
party consents, that ChinaSoft, Inc. may request in connection with this
Agreement.
4.11 Continuity of Business Enterprise. It is the present intention of CBQI to
continue at least one significant historic business line of ChinaSoft, Inc., or
to use at least a significant portion of ChinaSoft, Inc.'s historic business
assets in a business, in each case within the meaning of Treas. Reg. Section
1.368 1(d).
4.12 Regulatory Matters and Approvals. CBQI will (and will cause its
subsidiaries to) give any notices to, make any filings with, and use its best
efforts to obtain any authorizations, consents, and approvals of governments,
and governmental agencies which may be necessary to carry out this Agreement and
the transactions contemplated therein.
4.13 Necessary Steps. CBQI will use its best efforts to take all action and do
all things necessary, proper and advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of any conditions).
4.14 Noncontravention. CBQI represents and warrants that neither the execution
or delivery of this Agreement, nor the consummation of the transaction
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which CBQI is subject or any
provision of the charter or bylaws of CBQI, or (ii) conflict with, result in the
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which CBQI is a party or by which it is bound or to which any of
its assets is subject.
ARTICLE V: General Provisions
5.01. Waiver. Any failure on the part of any party to comply with any of its
obligations, agreements or conditions hereunder may be waived in writing by the
party to whom such compliance is owed; however, waiver on one occasion does not
operate to effectuate a waiver on any other occasion.
5.02. Notices. All notices and other communications under this Agreement shall
be in writing and shall be deemed to have been given on the date of receipt if
delivered in person or three days after such is sent by prepaid, first class,
registered or certified mail, return receipt requested, or, again, on the date
of receipt if sent by facsimile as follows: if to CBQI and/or Acquiring
Corporation, Mr. Xxxx Xxxxxx, 0000 Xxxxxx Xxxxxxx Xx., Xxx. 000, Xxxxxx XX,
(000) 000 0000; and if to ChinaSoft, Xx. Xxxx X. Xxxxxx, 0000 X Xxxxxx XX, Xxxxx
0000, Xxxxxxxxxx, XX 00000; (000) 000 0000.
5.03. Entire Agreement. This Agreement (and the documents, notes, lists and
other agreements executed in connection herewith and on the Closing Date)
constitute the entire agreement between the parties regarding the subject matter
hereof, and supersedes and cancels any other agreement, representation or
communication, whether oral or written, between the parties and relating to the
subject matter of this Agreement.
5.04. Headings. The article and paragraph headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
5.05. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of District of Columbia.
5.06. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
5.07. No Oral Modification. This Agreement may be amended solely in writing, and
only after the mutual agreement of all parties.
5.08. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants in this Agreement shall survive the
Closing Date for a period of three years, at which time they shall expire.
5.09. Severability. The invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity or enforceability of
any of the other provision, and this Agreement shall be construed in all
material respects as if such invalid or unenforceable provision were omitted.
5.10. Successor and Assigns. This Agreement, and each and every provision, shall
be binding on and inure to the benefit of the parties, their respective
permitted successors, successors in title and assigns, and each and every
successor in interest to any party, whether such successor acquires such
interest by way of gift, purchase, foreclosure, or by any other legal method,
who shall hold such interest subject to all of the terms and conditions of this
Agreement.
5.11. Expenses. Each party shall pay its own expenses incurred by or on behalf
of it in connection with the authorization, preparation, execution and
performance of this Agreement.
5.12. Due Diligence. Both parties shall have until January 14, 2000, to conduct
whatever due diligence is reasonable and necessary to verify the truth and
accuracy of the representations and warranties made in Articles II and IV
hereof. Either party, as the case may be, shall have the right to rescind this
Agreement in case of a material breach of the above referenced representations
and warranties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered on December 22, 1999.
CHINASOFT, INC., a District of Columbia corporation
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx, President
CBQ, Inc., a Colorado corporation
By: /s/ Xxxx Xxxxxx
Xxxx Xxxxxx, Chairman & CEO
TRI BEAU ACQUISITION COMPANY, a District of Columbia corporation
By: /s/ Xxxx Xxxxxx
Xxxx Xxxxxx, Chairman & CEO
