EXCHANGE AGREEMENT
Between
CHINA GLOBAL DEVELOPMENT, INC.
and
RAINBOW LIGHT GLOBAL CORPORATION
Dated February 7, 2001
TABLE OF CONTENTS
ARTICLE I REPRESENTATIONS, COVENANTS, AND WARRANTIES OF CHINA GLOBAL
DEVELOPMENT, INC.
1.01 Organization 1
1.02 Capitalization 1
1.03 Subsidiaries and Predecessor Corporations 1
1.04 Financial Statements 1
1.05 Information 2
1.06 Options and Warrants 2
1.07 Absence of Certain Changes or Events 2
1.08 Title and Related Matters 3
1.09 Litigation and Proceedings 3
1.10 Contracts 3
1.11 Material Contract Defaults 4
1.12 No Conflict With Other Instruments 4
1.13 Governmental Authorizations 4
1.14 Compliance With Laws and Regulations 4
1.15 Insurance 4
1.16 Approval of Agreement 4
1.17 Material Transactions or Affiliations 4
1.18 Labor Relations 4
1.19 CHINA GLOBAL Schedules 5
1.20 Bank Accounts; Power of Attorney 5
1.21 Valid Obligation 6
ARTICLE II REPRESENTATIONS, COVENANTS, AND WARRANTIES OF CHINA GLOBAL
DEVELOPMENT, INC.
2.01 Organization 6
2.02 Capitalization 6
2.03 Subsidiaries and Predecessor Corporations 6
2.04 Securities Filings; Financial Statements 6
2.05 Information 7
2.06 Options and Warrants 7
2.07 Absence of Certain Changes or Events 7
2.08 Title and Related Matters 8
2.09 Litigation and Proceedings 8
2.10 Contracts 8
2.11 Material Contract Defaults 9
2.12 No Conflict With Other Instruments 9
2.13 Governmental Authorizations 9
2.14 Compliance With Laws and Regulations 9
2.15 Insurance 9
2.16 Approval of Agreement 9
2.17 Continuity of Business Enterprises 9
2.18 Material Transactions or Affiliations 9
2.19 Labor Relations 9
2.20 Tropical Schedules 10
2.21 Bank Accounts; Power of Attorney 10
2.22 Valid Obligation 11
ARTICLE III PLAN OF EXCHANGE
3.01 The Exchange 11
3.02 Anti-Dilution 11
3.03 Closing 11
3.04 Closing Events 11
3.05 Termination 11
ARTICLE IV SPECIAL COVENANTS
4.01 Access to Properties and Records 13
4.02 Delivery of Books and Records 13
4.03 Third Party Consents and Certificates 13
4.04 Name Change and Increase in Authorized Capital 13
4.05 Tropical Shareholder Meeting 13
4.06 Consent of CHINA GLOBAL Shareholders 13
4.07 Designation of Directors and Officers 13
4.08 Exclusive Dealing Rights 13
4.09 Actions Prior to Closing 14
4.10 Sales Under Rule 144 or 145, If Applicable 15
4.11 Indemnification 16
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF CHINA GLOBAL
5.01 Accuracy of Representations and Performance of Covenants 16
5.02 Officer's Certificates 16
5.03 No Material Adverse Change 16
5.04 Good Standing 16
5.05 Approval by CHINA GLOBAL Shareholders 16
5.06 No Governmental Prohibitions 16
5.07 Consents 16
5.08 Other Items 17
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF NCC AND THE
CHINA GLOBAL SHAREHOLDERS
6.01 Accuracy of Representations and Performance of Covenants 17
6.02 Officer's Certificate 17
6.03 No Material Adverse Change 17
6.04 Good Standing 17
6.05 No Governmental Prohibition 17
6.06 Consents 18
6.07 Other Items 18
ARTICLE VII MISCELLANEOUS
7.01 Brokers 18
7.02 Governing Law 18
7.03 Notices 18
7.04 Attorney's Fees 18
7.05 Confidentiality 18
7.06 Public Announcements and Filings 19
7.07 Schedules; Knowledge 19
7.08 Third Party Beneficiaries 19
7.09 Expenses 19
7.10 Entire Agreement 19
7.11 Survival; Termination 19
7.12 Counterparts 19
7.13 Amendment or Waiver 19
7.14 Best Efforts 19
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement") is
entered into as of this 7th day of February 2001 by and between CHINA GLOBAL
DEVELOPMENT, INC. a Nevada corporation (hereinafter referred to as "Global")and
RAINBOW LIGHT GLOBAL CORPORATION, a British Virgin Islands corporation
(hereinafter referred to as ("Rainbow") upon the following premises:
Premises
WHEREAS, Global is a publicly held corporation organized under the laws of
the State of Nevada;
WHEREAS, Rainbow is a privately held corporation organized under the laws
of the British Virgin Islands;
WHEREAS, management of the constituent corporations have determined that it
is in the best interest of the parties that Global acquire 100% of the issued
and outstanding securities of Rainbow in exchange for the issuance of certain
shares of Global (the "Exchange") and Rainbow agreed to use its best efforts to
cause its shareholders (the "Rainbow Shareholders") to exchange their securities
of Rainbow on the terms described herein; and
WHEREAS, Global and Rainbow desire to set forth the terms of the Exchange,
which is intended to constitute a tax-free reorganization pursuant to the
provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986.
Agreement
NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF Rainbow
As an inducement to, and to obtain the reliance of Global, except as set
forth on the Rainbow Schedules (as hereinafter defined), Rainbow represents and
warrants as follows:
Section 1.01 Organization. Rainbow is a corporation duly organized, validly
existing, and in good standing under the laws of the British Virgin Islands and
has the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states or countries
in which the character and location of the assets owned by it or the nature of
the business transacted by it requires qualification, except where failure to be
so qualified would not have a material adverse effect on its business. Included
in the Rainbow Schedules are complete and correct copies of the articles of
incorporation, and bylaws of Rainbow as in effect on the date hereof. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, violate any provision of Rainbow'
articles of incorporation or bylaws. Rainbow has taken all actions required by
law, its articles of incorporation, or otherwise to authorize the execution and
delivery of this Agreement. Rainbow has full power, authority, and legal right
and has taken all action required by law, its articles of incorporation, and
otherwise to consummate the transactions herein contemplated.
Section 1.02 Capitalization. The authorized capitalization of Rainbow
consists of 50,000shares of common stock, $1.00 par value, of which 100 shares
are currently issued and outstanding. All issued and outstanding shares are
legally issued, fully paid, and non-assessable and not issued in violation of
the preemptive or other rights of any person.
Section 1.03 Subsidiaries and Predecessor Corporations. Rainbow does not
have any predecessor corporation(s) or subsidiaries, and does not own,
beneficially or of record, any shares of any other corporation, except as
disclosed in Schedule 1.03. For purposes hereinafter, the term " Rainbow" also
includes those subsidiaries, if any, set forth on Schedule 1.03.
Section 1.04 Financial Statements.
(a) Included in the Rainbow Schedules are the audited balance sheets of
Rainbow's 95% owned subsidiary Beijing Baxian Real Estate Development
Company Limited ("Beijing") (hereinafter Rainbow and Beijing are jointly
referred to as Rainbow) as successor in interest as of September 30, 2000
and 2001, and the related audited statements of operations, stockholders'
equity and cash flows for the two fiscal years ended September 30, 2000 and
2001 together with the notes to such statements and the opinion of Ernst &
Young LLP, independent certified public accountants, with respect thereto.
(b) All such financial statements have been prepared in accordance with
generally accepted accounting principles. The Rainbow balance sheets
present a true and fair view as of the dates of such balance sheets of the
financial condition of Rainbow. Rainbow did not have, as of the dates of
such balance sheets, except as and to the extent reflected or reserved
against therein, any liabilities or obligations (absolute or contingent)
which should be reflected in the balance sheets or the notes thereto,
prepared in accordance with generally accepted accounting principles, and
all assets reflected therein are properly reported and present fairly the
value of the assets of Rainbow in accordance with generally accepted
accounting principles.
(c) Rainbow has no liabilities with respect to the payment of any federal,
state, county, local or other taxes (including any deficiencies, interest
or penalties), except for taxes accrued but not yet due and payable.
(d) Rainbow has filed all state, federal or local income and/or franchise
tax returns required to be filed by it from inception to the date hereof.
Each of such income tax returns reflects the taxes due for the period
covered thereby, except for amounts which, in the aggregate, are
immaterial.
(e) The books and records, financial and otherwise, of Rainbow are in all
material respects complete and correct and have been maintained in
accordance with good business and accounting practices.
(f) All of Rainbow' assets are reflected on its financial statements, and,
except as set forth in the Rainbow Schedules or the financial statements of
Rainbow or the notes thereto, Rainbow has no material liabilities, direct
or indirect, matured or unmatured, contingent or otherwise.
Section 1.05 Information. The information concerning Rainbow set forth
in this Agreement and in the Rainbow Schedules is complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, not misleading. In addition,
Rainbow has fully disclosed in writing to Global (through this Agreement or the
Rainbow Schedules) all information relating to matters involving Rainbow or its
assets or its present or past operations or activities which (i) indicated or
may indicate, in the aggregate, the existence of a greater than $25,000
liability or diminution in value, (ii) have led or may lead to a competitive
disadvantage on the part of Rainbow or (iii) either alone or in aggregation with
other information covered by this Section, otherwise have led or may lead to a
material adverse effect on the transactions contemplated herein or on Rainbow,
its assets, or its operations or activities as presently conducted or as
contemplated to be conducted after the Closing Date, including, but not limited
to, information relating to governmental, employee, environmental, litigation
and securities matters and transactions with affiliates.
Section 1.06 Options or Warrants. There are no existing options,
warrants, calls, or commitments of any character relating to the authorized and
unissued Rainbow common stock, except options, warrants, calls or commitments,
if any, to which Rainbow is not a party and by which it is not bound.
Section 1.07 Absence of Certain Changes or Events. Except as set
forth in this Agreement or the Rainbow Schedules, since September 30, 2001:
(a) there has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of Rainbow or (ii) any
damage, destruction, or loss to Rainbow (whether or not covered by
insurance) materially and adversely affecting the business, operations,
properties, assets, or condition of Rainbow;
(b) Rainbow has not (i) amended its memorandum or articles of
association; (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind
whatsoever to stockholders or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock; (iii) waived any rights
of value which in the aggregate are outside of the ordinary course of
business or material considering the business of Rainbow; (iv) made any
material change in its method of management, operation or accounting;
(v) entered into any other material transaction other than sales in the
ordinary course of its business; (vi) made any accrual or arrangement
for payment of bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer or
employee; (vii) increased the rate of compensation payable or to become
payable by it to any of its officers or directors or any of its
salaried employees whose monthly compensation exceeds $1,000; or (viii)
made any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan,
payment, or arrangement made to, for, or with its officers, directors,
or employees;
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(c) Rainbow has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability
(absolute or contingent) except as disclosed herein and except
liabilities incurred in the ordinary course of business; (ii) paid or
agreed to pay any material obligations or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent Rainbow balance sheet, and current liabilities incurred
since that date in the ordinary course of business and professional and
other fees and expenses in connection with the preparation of this
Agreement and the consummation of the transactions contemplated hereby;
(iii) sold or transferred, or agreed to sell or transfer, any of its
assets, properties, or rights (except assets, properties, or rights not
used or useful in its business which, in the aggregate have a value of
less than $1,000), or canceled, or agreed to cancel, any debts or
claims (except debts or claims which in the aggregate are of a value of
less than $1,000); (iv) made or permitted any amendment or termination
of any contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of
Rainbow; or (v) issued, delivered, or agreed to issue or deliver any
stock, bonds or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); and
(d) to the best knowledge of Rainbow, Rainbow has not become subject to
any law or regulation which materially and adversely affects, or in the
future may adversely affect the business, operations, properties,
assets, or condition of Rainbow.
Section 1.08 Title and Related Matters. Rainbow has good and marketable
title to all of its properties, inventory, interests in properties, and assets,
real and personal, which are reflected in the most recent Rainbow balance sheet
or acquired after that date (except properties, inventory, interests in
properties, and assets sold or otherwise disposed of since such date in the
ordinary course of business) free and clear of all liens, pledges, charges, or
encumbrances except (a) statutory liens or claims not yet delinquent; (b) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the properties subject
thereto or affected thereby or otherwise materially impair present business
operations on such properties; and (c) as described in the Rainbow Schedules.
Except as set forth in the Rainbow Schedules, Rainbow owns, free and clear of
any liens, claims, encumbrances, royalty interests, or other restrictions or
limitations of any nature whatsoever, any and all products it is currently
manufacturing, including the underlying technology and data, and all procedures,
techniques, marketing plans, business plans, methods of management, or other
information utilized in connection with Rainbow' business. Except as set forth
in the Rainbow Schedules, no third party has any right to, and Rainbow has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade secrets, know-how,
propriety techniques, trademarks, service marks, trade names, or copyrights
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a materially adverse effect on the
business, operations, financial condition, income, or business prospects of
Rainbow or any material portion of its properties, assets, or rights.
Section 1.09 Litigation and Proceedings. Except as set forth in the
Rainbow Schedules, there are no actions, suits, proceedings, or investigations
pending or, to the knowledge of Rainbow after reasonable investigation,
threatened by or against Rainbow or affecting Rainbow or its properties, at law
or in equity, before any court or other governmental agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind. Rainbow does not have
any knowledge of any material default on its part with respect to any judgment,
order, injunction, decree, award, rule, or regulation of any court, arbitrator,
or governmental agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a default.
Section 1.10 Contracts.
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(a) Except as included or described in the Rainbow Schedules, there are
no "material" contracts, agreements, franchises, license agreements,
debt instruments or other commitments to which Rainbow is a party or by
which it or any of its assets, products, technology, or properties are
bound other than those incurred in the ordinary course of business (as
used in this Agreement, a "material" contract, agreement, franchise,
license agreement, debt instrument or commitment is one which (i) will
remain in effect for more than six (6) months after the date of this
Agreement or (ii) involves aggregate obligations of at least fifty
thousand dollars ($50,000));
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(b) All contracts, agreements, franchises, license agreements, and
other commitments to which Rainbow is a party or by which its
properties are bound and which are material to the operations of
Rainbow taken as a whole are valid and enforceable by Rainbow in all
respects, except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally;
(c) Rainbow is not a party to or bound by, and the properties of
Rainbow are not subject to any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any
judgment, order, writ, injunction, decree, or award which materially
and adversely affects, the business operations, properties, assets, or
condition of Rainbow; and
(d) Except as included or described in the Rainbow Schedules or
reflected in the most recent Rainbow balance sheet, Rainbow is not a
party to any oral or written (i) contract for the employment of any
officer or employee which is not terminable on 30 days, or less notice;
(ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit or retirement plan, (iii) agreement,
contract, or indenture relating to the borrowing of money, (iv)
guaranty of any obligation, other than one on which Rainbow is a
primary obligor, for the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties of obligations
which, in the aggregate do not exceed more than one year or providing
for payments in excess of $25,000 in the aggregate; (vi) collective
bargaining agreement; or (vii) agreement with any present or former
officer or director of Rainbow.
Section 1.11 Material Contract Defaults. Rainbow is not in default in
any material respect under the terms of any outstanding contract, agreement,
lease, or other commitment which is material to the business, operations,
properties, assets or condition of Rainbow and there is no event of default in
any material respect under any such contract, agreement, lease, or other
commitment in respect of which Rainbow has not taken adequate steps to prevent
such a default from occurring.
Section 1.12 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
an event of default under, or terminate, accelerate or modify the terms of any
material indenture, mortgage, deed of trust, or other material contract,
agreement, or instrument to which Rainbow is a party or to which any of its
properties or operations are subject.
Section 1.13 Governmental Authorizations. Except as set forth in the
Rainbow Schedules, Rainbow has all licenses, franchises, permits, and other
governmental authorizations that are legally required to enable it to conduct
its business in all material respects as conducted on the date hereof. Except
for compliance with federal and state securities and corporation laws, as
hereinafter provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental body
is required in connection with the execution and delivery by Rainbow of this
Agreement and the consummation by Rainbow of the transactions contemplated
hereby.
Section 1.14 Compliance With Laws and Regulations. Except as set forth
in the Rainbow Schedules, to the best of its knowledge Rainbow has complied with
all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of Rainbow or except to the extent that noncompliance would
not result in the occurrence of any material liability for Rainbow.
Section 1.15 Insurance. All of the properties of Rainbow are fully
insured for their full replacement cost.
Section 1.16 Approval of Agreement. The board of directors of Rainbow
has authorized the execution and delivery of this Agreement by Rainbow and has
approved this Agreement and the transactions contemplated hereby, and will
recommend to the Rainbow Shareholders that the Exchange be accepted by them.
Section 1.17 Material Transactions or Affiliations. Set forth in the
Rainbow Schedules is a description of every contract, agreement, or arrangement
between Rainbow and any predecessor and any person who was at the time of such
contract, agreement, or arrangement an officer, director, or person owning of
record, or known by Rainbow to own beneficially, 5% or more of the issued and
outstanding common stock of Rainbow and which is to be performed in whole or in
part after the date hereof or which was entered into not more than three years
prior to the date hereof. Except as disclosed in the Rainbow Schedules or
otherwise disclosed herein, no officer, director, or 5% shareholder of Rainbow
has, or has had since inception of Rainbow, any known interest, direct or
indirect, in any transaction with Rainbow which was material to the business of
Rainbow. There are no commitments by Rainbow, whether written or oral, to lend
any funds, or to borrow any money from, or enter into any other transaction
with, any such affiliated person.
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Section 1.18 Labor Relations. Rainbow has not had work stoppage
resulting from labor problems. To the knowledge of Rainbow, no union or other
collective bargaining organization is organizing or attempting to organize any
employee of Rainbow.
Section 1.19 The Rainbow Schedules. Rainbow has delivered to Global the
following schedules, which are collectively referred to as the " Rainbow
Schedules" and which consist of separate schedules dated as of the date of
execution of this Agreement, all certified by the chief executive officer of
Rainbow as complete, true, and correct as of the date of this Agreement in all
material respects:
(a) a schedule containing complete and correct copies of the articles
of incorporation, and bylaws of Rainbow in effect as of the date of this
Agreement;
(b) a schedule containing the financial statements of Rainbow
identified in paragraph 1.04(a);
(c) a Schedule 1.19(c) containing a list indicating the name and
address of each shareholder of Rainbow together with the number of shares
owned by him, her or it;
(d) a schedule containing a description of all real property owned by
Rainbow, together with a description of every mortgage, deed of trust,
pledge, lien, agreement, encumbrance, claim, or equity interest of any
nature whatsoever in such real property;
(e) copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which
Rainbow carries on or proposes to carry on its business (except those
which, in the aggregate, are immaterial to the present or proposed business
of Rainbow);
(f) a schedule listing the accounts receivable and notes and other
obligations receivable of Rainbow as of September 30, 2001, or thereafter
other than in the ordinary course of business of Rainbow, indicating the
debtor and amount, and classifying the accounts to show in reasonable
detail the length of time, if any, overdue, and stating the nature and
amount of any refunds, set offs, reimbursements, discounts, or other
adjustments, which are in the aggregate material and due to or claimed by
such debtor;
(g) a schedule listing the accounts payable and notes and other
obligations payable of Rainbow as of September 30, 2001, or that arose
thereafter other than in the ordinary course of the business of Rainbow,
indicating the creditor and amount, classifying the accounts to show in
reasonable detail the length of time, if any, overdue, and stating the
nature and amount of any refunds, set offs, reimbursements, discounts, or
other adjustments, which in the aggregate are material and due to or
claimed by Rainbow respecting such obligations;
(h) a schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or
condition of Rainbow since September 30, 2001, required to be provided
pursuant to section 1.07 hereof; and
(i) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the Rainbow
Schedules by Sections 1.01 through 1.18.
Rainbow shall cause the Rainbow Schedules and the instruments and data
delivered to Global hereunder to be promptly updated after the date hereof up to
and including the Closing Date.
It is understood and agreed that not all of the schedules referred to
above have been completed or are available to be furnished by Rainbow. Rainbow
shall have until January 31, 2002 to provide such schedules. If Rainbow cannot
or fails to do so, or if Global acting reasonably finds any such schedules or
updates provided after the date hereof to be unacceptable according to the
criteria set forth below, Global may terminate this Agreement by giving written
notice to Rainbow within five (5) days after the schedules or updates were due
to be produced or were provided. For purposes of the foregoing, Global may
consider a disclosure in the Rainbow Schedules to be "unacceptable" only if that
item would have a material adverse impact on the financial statements listed in
Section 1.04(a), taken as a whole.
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Section 1.20 Bank Accounts; Power of Attorney. Set forth in Schedule
1.20 is a true and complete list of (a) all accounts with banks, money market
mutual funds or securities or other financial institutions maintained by Rainbow
within the past twelve (12) months, the account numbers thereof, and all persons
authorized to sign or act on behalf of Rainbow, (b) all safe deposit boxes and
other similar custodial arrangements maintained by Rainbow within the past
twelve (12) months, and (c) the names of all persons holding powers of attorney
from Rainbow or who are otherwise authorized to act on behalf of Rainbow with
respect to any matter, other than its officers and directors, and a summary of
the terms of such powers or authorizations.
Section 1.21 Valid Obligation. This Agreement and all agreements and
other documents executed by Rainbow in connection herewith constitute the valid
and binding obligation of Rainbow, enforceable in accordance with its or their
terms, except as may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF GLOBAL
As an inducement to, and to obtain the reliance of Rainbow and the
Rainbow Shareholders, except as set forth in the Global Schedules (as
hereinafter defined), Global represents and warrants as follows:
Section 2.01 Organization. Global is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada and
has the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets, to carry on its
business in all material respects as it is now being conducted, and except where
failure to be so qualified would not have a material adverse effect on its
business, there is no jurisdiction in which it is not qualified in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in the Global Schedules are
complete and correct copies of the certificate of incorporation and bylaws of
Global as in effect on the date hereof. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of Global's certificate of incorporation or
bylaws. Global has taken all action required by law, its certificate of
incorporation, its bylaws, or otherwise to authorize the execution and delivery
of this Agreement, and Global has full power, authority, and legal right and has
taken all action required by law, its certificate of incorporation, bylaws, or
otherwise to consummate the transactions herein contemplated.
Section 2.02 Capitalization. Global's authorized capitalization
consists of 50,000,000 shares of common stock, par value $.001 of which
2,106,248 shares are issued and outstanding and 5,000,000 shares of preferred
stock $.001 par value of which none are issued and outstanding (the "Global
Shares"). All issued and outstanding shares are legally issued, fully paid, and
non-assessable and not issued in violation of the preemptive or other rights of
any person.
Section 2.03 Subsidiaries and Predecessor Corporations. Global does not
have any predecessor corporation(s) or subsidiaries, and does not own,
beneficially or of record, any shares of any other corporation, except as
disclosed in Schedule 2.03. For purposes hereinafter, the term "Global" also
includes those subsidiaries, if any, set forth on Schedule 2.03.
Section 2.04 Securities Filings; Financial Statements.
(a) For at least the past twelve months Global has timely filed all
forms, reports and documents required to be filed with the Securities
and Exchange Commission, and has heretofore delivered to Rainbow, in
the form filed with the Commission, (i) all quarterly and annual
reports on Forms 10-QSB and 10-KSB filed since December 31, 1999, (ii)
all other reports filed by Global with the Securities and Exchange
Commission since December 31, 1999 (collectively, the "SEC Reports")
and (iii) all comment letters from the Securities and Exchange
Commission with respect to the SEC Reports. The SEC Reports (i) were
prepared in accordance with the requirements of the Securities Exchange
Act of 1934 or the Securities Act of 1933, as appropriate, 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 the light of the circumstances under
which they were made, not misleading.
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(b) Included in the Global Schedules are (i) the unaudited balance
sheets of Global and the related statements of operations and cash
flows as of and for the nine months ended September 30, 2001 and (ii)
the audited balance sheets of Global as of December 31, 1999 and 2000,
and the related audited statements of operations, stockholders' equity
and cash flows for the two fiscal years ended December 31, 1999 and
December 31, 2000, together with the notes to such statements and the
opinion the CPA Networks LLC independent certified public accountants,
with respect thereto, all as set forth in the SEC Reports.
(c) All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved. The Global balance sheets present
fairly as of their respective dates the financial condition of Global.
As of the date of such balance sheets, except as and to the extent
reflected or reserved against therein, Global had no liabilities or
obligations (absolute or contingent) which should be reflected in the
balance sheets or the notes thereto prepared in accordance with
generally accepted accounting principles, and all assets reflected
therein are properly reported and present fairly the value of the
assets of Global, in accordance with generally accepted accounting
principles. The statements of operations, stockholders' equity and cash
flows reflect fairly the information required to be set forth therein
by generally accepted accounting principles.
(d) Global has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any
deficiencies, interest or penalties), except for taxes accrued but not
yet due and payable.
(e) Global has timely filed all state, federal or local income and/or
franchise tax returns required to be filed by it from inception to the
date hereof. Each of such income tax returns reflects the taxes due for
the period covered thereby, except for amounts which, in the aggregate,
are immaterial.
(f) The books and records, financial and otherwise, of Global are in
all material aspects complete and correct and have been maintained in
accordance with good business and accounting practices.
(g) All of Global's assets are reflected on its financial statements,
and, except as set forth in the Global Schedules or the financial
statements of Global or the notes thereto, Global has no material
liabilities, direct or indirect, matured or unmatured, contingent or
otherwise.
Section 2.05 Information. The information concerning Global set forth
in this Agreement and the Global Schedules is complete and accurate in all
material respects and does not contain any untrue statements of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, not misleading. In addition,
Global has fully disclosed in writing to Rainbow (through this Agreement or the
Global Schedules) all information relating to matters involving Global or its
assets or its present or past operations or activities which (i) indicated or
may indicate, in the aggregate, the existence of a greater than $25,000
liability or diminution in value, (ii) have led or may lead to a competitive
disadvantage on the part of Global or (iii) either alone or in aggregation with
other information covered by this Section, otherwise have led or may lead to a
material adverse effect on the transactions contemplated herein or on Global,
its assets, or its operations or activities as presently conducted or as
contemplated to be conducted after the Closing Date, including, but not limited
to, information relating to governmental, employee, environmental, litigation
and securities matters and transactions with affiliates.
Section 2.06 Options or Warrants. There are no existing options,
warrants, calls, or commitments of any character relating to the authorized and
unissued stock of Global.
Section 2.07 Absence of Certain Changes or Events. Except as disclosed
in Exhibit 2.07, or permitted in writing by Rainbow, since the date of the most
recent Global balance sheet:
(a) there has not been (i) any material adverse change in the business,
operations, properties, assets or condition of Global or (ii) any
damage, destruction or loss to Global (whether or not covered by
insurance) materially and adversely affecting the business, operations,
properties, assets or condition of Global;
(b) Global has not (i) amended its certificate of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make any payment
of dividends or distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed, or agreed to purchase or redeem,
any of its capital stock; (iii) waived any rights of value which in the
aggregate are outside of the ordinary course of business or material
considering the business of Global; (iv) made any material change in
its method of management, operation, or accounting; (v) entered into
any transactions or agreements other than in the ordinary course of
business; (vi) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by it
to any of its officers or directors or any of its salaried employees
whose monthly compensation exceed $1,000; or (viii) made any increase
in any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or
arrangement, made to, for or with its officers, directors, or
employees;
7
(c) Global has not (i) granted or agreed to grant any options,
warrants, or other rights for its stock, bonds, or other corporate
securities calling for the issuance thereof; (ii) borrowed or agreed to
borrow any funds or incurred, or become subject to, any material
obligation or liability (absolute or contingent) except liabilities
incurred in the ordinary course of business; (iii) paid or agreed to
pay any material obligations or liabilities (absolute or contingent)
other than current liabilities reflected in or shown on the most recent
Global balance sheet and current liabilities incurred since that date
in the ordinary course of business and professional and other fees and
expenses in connection with the preparation of this Agreement and the
consummation of the transaction contemplated hereby; (iv) sold or
transferred, or agreed to sell or transfer, any of its assets,
properties, or rights (except assets, properties, or rights not used or
useful in its business which, in the aggregate have a value of less
than $1000), or canceled, or agreed to cancel, any debts or claims
(except debts or claims which in the aggregate are of a value less than
$1000); (v) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of
Global; or (vi) issued, delivered or agreed to issue or deliver, any
stock, bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock), except in
connection with this Agreement; and
(d) to the best knowledge of Global, it has not become subject to any
law or regulation which materially and adversely affects, or in the
future, may adversely affect, the business, operations, properties,
assets or condition of Global.
Section 2.08 Title and Related Matters. Global has good and marketable
title to all of its properties, inventory, interest in properties, and assets,
real and personal, which are reflected in the most recent Global balance sheet
or acquired after that date (except properties, inventory, interest in
properties, and assets sold or otherwise disposed of since such date in the
ordinary course of business), free and clear of all liens, pledges, charges, or
encumbrances except (a) statutory liens or claims not yet delinquent; (b) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the properties subject
thereto or affected thereby or otherwise materially impair present business
operations on such properties; and (c) as described in the Global Schedules.
Except as set forth in the Global Schedules, Global owns, free and clear of any
liens, claims, encumbrances, royalty interests, or other restrictions or
limitations of any nature whatsoever, any and all products it is currently
manufacturing, including the underlying technology and data, and all procedures,
techniques, marketing plans, business plans, methods of management, or other
information utilized in connection with Global's business. Except as set forth
in the Global Schedules, no third party has any right to, and Global has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade secrets, know-how,
propriety techniques, trademarks, service marks, trade names, or copyrights
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a materially adverse effect on the
business, operations, financial condition, income, or business prospects of
Global or any material portion of its properties, assets, or rights.
Section 2.09 Litigation and Proceedings. There are no actions, suits,
proceedings or investigations pending or, to the knowledge Global after
reasonable investigation, threatened by or against Global or affecting Global or
its properties, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind except as disclosed in Schedule 2.09. Global has no knowledge of any
default on its part with respect to any judgement, order, writ, injunction,
decree, award, rule or regulation of any court, arbitrator, or governmental
agency or instrumentality or any circumstance which after reasonable
investigation would result in the discovery of such default.
Section 2.10 Contracts.
----------
(a) Global is not a party to, and its assets, products, technology and
properties are not bound by, any material contract, franchise, license
agreement, agreement, debt instrument or other commitments whether such
agreement is in writing or oral, except as disclosed in Schedule 2.10.
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(b) All contracts, agreements, franchises, license agreements, and
other commitments to which Global is a party or by which its properties
are bound and which are material to the operations of Global taken as a
whole are valid and enforceable by Global in all respects, except as
limited by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally;
(c) Global is not a party to or bound by, and the properties of Global
are not subject to any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any
judgment, order, writ, injunction, decree, or award which materially
and adversely affects, the business operations, properties, assets, or
condition of Global; and
(d) Except as included or described in the Global Schedules or
reflected in the most recent Global balance sheet, Global is not a
party to any oral or written (i) contract for the employment of any
officer or employee which is not terminable on 30 days, or less notice;
(ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit or retirement plan, (iii) agreement,
contract, or indenture relating to the borrowing of money, (iv)
guaranty of any obligation, other than one on which Global is a primary
obligor, for the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties of obligations
which, in the aggregate do not exceed more than one year or providing
for payments in excess of $25,000 in the aggregate; (vi) collective
bargaining agreement; or (vii) agreement with any present or former
officer or director of Global.
Section 2.11 Material Contract Defaults. Global is not in default in
any material respect under the terms of any outstanding contract, agreement,
lease, or other commitment which is material to the business, operations,
properties, assets or condition of Global and there is no event of default in
any material respect under any such contract, agreement, lease, or other
commitment in respect of which Global has not taken adequate steps to prevent
such a default from occurring.
Section 2.12 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
a default under, or terminate, accelerate or modify the terms of, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which
Global is a party or to which any of its assets or operations are subject.
Section 2.13 Governmental Authorizations. Global has all licenses,
franchises, permits, and other governmental authorizations, that are legally
required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with federal and
state securities or corporation laws, as hereinafter provided, no authorization,
approval, consent or order of, of registration, declaration or filing with, any
court or other governmental body is required in connection with the execution
and delivery by Global of this Agreement and the consummation by Global of the
transactions contemplated hereby.
Section 2.14 Compliance With Laws and Regulations. To the best of its
knowledge, Global has complied with all applicable statutes and regulations of
any federal, state, or other applicable governmental entity or agency thereof,
except to the extent that noncompliance would not materially and adversely
affect the business, operations, properties, assets or condition of Global or
except to the extent that noncompliance would not result in the occurrence of
any material liability. This compliance includes, but is not limited to, the
filing of all reports to date with federal and state securities authorities.
Section 2.15 Insurance. All of the properties of Global are fully
insured for their full replacement cost.
Section 2.16 Approval of Agreement. The board of directors of Global
has authorized the execution and delivery of this Agreement by Global and has
approved this Agreement and the transactions contemplated hereby and will
recommend to its shareholders that they approve this Agreement and the
transactions contemplated hereby.
Section 2.17 Continuity of Business Enterprises. Global has no
commitment or present intention to liquidate Rainbow or sell or otherwise
dispose of a material portion of Rainbow' business or assets following the
consummation of the transactions contemplated hereby.
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Section 2.18 Material Transactions or Affiliations. Except as disclosed
herein and in the Global Schedules, there exists no contract, agreement or
arrangement between Global and any predecessor and any person who was at the
time of such contract, agreement or arrangement an officer, director, or person
owning of record or known by Global to own beneficially, 5% or more of the
issued and outstanding common stock of Global and which is to be performed in
whole or in part after the date hereof or was entered into not more than three
years prior to the date hereof. Neither any officer, director, nor 5%
shareholder of Global has, or has had since inception of Global, any known
interest, direct or indirect, in any such transaction with Global which was
material to the business of Global. Global has no commitment, whether written or
oral, to lend any funds to, borrow any money from, or enter into any other
transaction with, any such affiliated person.
Section 2.19 Labor Relations. Global has not had work stoppage
resulting from labor problems. To the knowledge of Global, no union or other
collective bargaining organization is organizing or attempting to organize any
employee of Global.
Section 2.20 Global Schedules. Global has delivered to Rainbow the
following schedules, which are collectively referred to as the "Global
Schedules" and which consist of separate schedules, which are dated the date of
this Agreement, all certified by the chief executive officer of Global to be
complete, true, and accurate in all material respects as of the date of this
Agreement:
(a) a schedule containing complete and accurate copies of the certificate
of incorporation and bylaws of Global as in effect as of the date of
this Agreement;
(b) a schedule containing the financial statements of Global identified in
paragraph 2.04(b);
(c) a Schedule 2.20(c) containing a list indicating the name and address
of each shareholder of Global together with the number of shares owned
by him, her or it;
(d) a schedule containing a description of all real property owned by
Global, together with a description of every mortgage, deed of trust,
pledge, lien, agreement, encumbrance, claim, or equity interest of any
nature whatsoever in such real property;
(e) copies of all licenses, permits, and other governmental authorizations
(or requests or applications therefor) pursuant to which Global
carries on or proposes to carry on its business (except those which,
in the aggregate, are immaterial to the present or proposed business
of Global);
(f) a schedule listing the accounts receivable and notes and other
obligations receivable of Global as of September 30, 2001, or
thereafter other than in the ordinary course of business of Global,
indicating the debtor and amount, and classifying the accounts to show
in reasonable detail the length of time, if any, overdue, and stating
the nature and amount of any refunds, set offs, reimbursements,
discounts, or other adjustments which are in the aggregate material
and due to or claimed by such debtor;
(g) a schedule listing the accounts payable and notes and other
obligations payable of Global as of September 30, 2001, or that arose
thereafter other than in the ordinary course of the business of
Global, indicating the creditor and amount, classifying the accounts
to show in reasonable detail the length of time, if any, overdue, and
stating the nature and amount of any refunds, set offs,
reimbursements, discounts, or other adjustments, which in the
aggregate are material and due to or claimed by Global respecting such
obligations;
(h) a schedule setting forth a description of any material adverse change
in the business, operations, property, inventory, assets, or condition
of Global since September 30, 2001 required to be provided pursuant to
section 2.07 hereof; and
(i) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the Global
Schedules by Sections 2.01 through 2.19.
Global shall cause the Global Schedules and the instruments and data
delivered to Rainbow hereunder to be promptly updated after the date hereof up
to and including the Closing Date.
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It is understood and agreed that not all of the schedules referred to
above have been completed or are available to be furnished by Global. Global
shall have until January 31, 2002 to provide such schedules. If Global cannot or
fails to do so, or if Rainbow acting reasonably finds any such schedules or
updates provided after the date hereof to be unacceptable according to the
criteria set forth below, Rainbow may terminate this Agreement by giving written
notice to Global within five (5) days after the schedules or updates were due to
be produced or were provided. For purposes of the foregoing, Rainbow may
consider a disclosure in the Global Schedules to be "unacceptable" only if that
item would have a material adverse impact on the financial statements listed in
Section 2.04(b), taken as a whole.
Section 2.21 Bank Accounts; Power of Attorney. Set forth in Schedule
2.21 is a true and complete list of (a) all accounts with banks, money market
mutual funds or securities or other financial institutions maintained by Global
within the past twelve (12) months, the account numbers thereof, and all persons
authorized to sign or act on behalf of Global, (b) all safe deposit boxes and
other similar custodial arrangements maintained by Global within the past twelve
(12) months, and (c) the names of all persons holding powers of attorney from
Global or who are otherwise authorized to act on behalf of Global with respect
to any matter, other than its officers and directors, and a summary of the terms
of such powers or authorizations.
Section 2.22 Valid Obligation. This Agreement and all agreements and
other documents executed by Global in connection herewith constitute the valid
and binding obligation of Global, enforceable in accordance with its or their
terms, except as may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought.
ARTICLE III
PLAN OF EXCHANGE
Section 3.01 The Exchange. On the terms and subject to the conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3.03),
each Rainbow Shareholder who shall elect to accept the exchange offer described
herein (the "Accepting Shareholders"), shall assign, transfer and deliver, free
and clear of all liens, pledges, encumbrances, charges, restrictions or known
claims of any kind, nature, or description, the number of shares of common stock
of Rainbow set forth on Schedule 1.19(c) attached hereto, in the aggregate
constituting 100% of the issued and outstanding shares of common stock of
Rainbow held by each of such shareholders; the objective of such Exchange being
the acquisition by Global of 100% of the issued and outstanding common stock of
Rainbow. In exchange for the transfer of such securities by the Rainbow
Shareholders, Global shall issue to the Rainbow Shareholders (1) an aggregate of
15,000,000 of common stock of Global. At the Closing, each Rainbow Shareholder
shall, on surrender of his certificate or certificates representing such Rainbow
shares to Global or its registrar or transfer agent, be entitled to receive a
certificate or certificates evidencing his proportionate interest in the Initial
Shares. Upon consummation of the transaction contemplated herein, assuming
participation by all of the Rainbow Shareholders, all of the shares of capital
stock of Rainbow shall be held by Global.
Section 3.02 Anti-Dilution. The number of shares of Global common stock
issuable upon exchange pursuant to Section 3.01 shall be appropriately adjusted
to take into account any other stock split, stock dividend, reverse stock split,
recapitalization, or similar change in the Global common stock which may occur
(i) between the date of the execution of this Agreement and the Closing Date, as
to the Initial Shares, and (ii) between the date of the execution of this
Agreement and the release date, as to the Additional Shares.
Section 3.03 Closing. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date") but not later than December 31, 2001, subject
to the right of Global or Rainbow to extend such Closing Date by up to an
additional sixty (60) days. Such Closing shall take place at a mutually
agreeable time and place.
Section 3.04 Closing Events. At the Closing, Global, Rainbow and each
of the Accepting Shareholders shall execute, acknowledge, and deliver (or shall
ensure to be executed, acknowledged, and delivered) any and all certificates,
opinions, financial statements, schedules, agreements, resolutions, rulings or
other instruments required by this Agreement to be so delivered at or prior to
the Closing, together with such other items as may be reasonably requested by
the parties hereto and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby. Among other things, Global shall
provide an opinion of counsel acceptable to Rainbow as to such matters as
Rainbow may reasonably request, which shall include, but not be limited to, a
statement, to the effect that (i) to such counsel's best knowledge, after
reasonable investigation, from inception until the Closing Date, Global has
complied with all applicable statutes and regulations of any federal, state, or
other applicable governmental entity or agency thereof, except to the extent
that noncompliance would not materially and adversely affect the business,
operations, properties, assets or condition of Global or except to the extent
that noncompliance would not result in the occurrence of any material liability
(such compliance including, but not being limited to, the filing of all reports
to date with federal and state securities authorities) and (ii) based on a
summary of the facts and applicable law, such counsel believes that the
Placement described in Section 4.08 below is not subject to "integration" with
the offering being made pursuant to the Registration Statement ( Rainbow
acknowledges that "integration" is a highly factual issue not susceptible to the
rendering of a legal opinion and that the statement to be delivered hereunder
shall merely constitute a summary of the reasoning which counsel to Global
believes would apply if a third party were to assert that such offerings should
be integrated).
11
Section 3.05 Termination.
(a) This Agreement may be terminated by the board of directors of either
Global or Rainbow at any time prior to the Closing Date if:
(i) there shall be any actual or threatened action or proceeding
before any court or any governmental body which shall seek to
restrain, prohibit, or invalidate the transactions contemplated
by this Agreement and which, in the judgement of such board of
directors, made in good faith and based upon the advice of its
legal counsel, makes it inadvisable to proceed with the Exchange;
or
(ii) any of the transactions contemplated hereby are disapproved by
any regulatory authority whose approval is required to consummate
such transactions (which does not include the Securities and
Exchange Commission) or in the judgement of such board of
directors, made in good faith and based on the advice of counsel,
there is substantial likelihood that any such approval will not
be obtained or will be obtained only on a condition or conditions
which would be unduly burdensome, making it inadvisable to
proceed with the Exchange.
In the event of termination pursuant to this paragraph (a) of Section
3.05, no obligation, right or liability shall arise hereunder, and each
party shall bear all of the expenses incurred by it in connection with
the negotiation, drafting, and execution of this Agreement and the
transactions herein contemplated in accordance with the Expense Sharing
Agreement attached hereto as Exhibit "B".
(b) This Agreement may be terminated by the board of directors of
Global at any time prior to the Closing Date if:
(i) there shall have been any change after the date of the latest
balance sheet of Rainbow in the assets, properties, business, or
financial condition of Rainbow, which could have a materially
adverse effect on the financial statements of Rainbow listed in
Section 1.04(a) taken as a whole, except any changes disclosed in
the Rainbow Schedules;
(ii) the board of directors of Global determines in good faith that
one or more of Global's conditions to Closing has not occurred,
through no fault of Global.
(iii)Global takes the termination action specified in Section 1.18 as
a result of Rainbow Schedules or updates thereto which Global
finds unacceptable;
(iv) on or beforeJanuary 31, 2002, Global notifies Rainbow that
Global's investigation pursuant to Section 4.01 below has
uncovered information which it finds unacceptable by the same
criteria set forth in Section 1.19; or
(v) Rainbow shall fail to comply in any material respect with any of
its covenants or agreements contained in this Agreement or if any
of the representations or warranties of Rainbow contained herein
shall be inaccurate in any material respect, where such
noncompliance or inaccuracy has not been cured within ten (10)
days after written notice thereof.
If this Agreement is terminated pursuant to this paragraph (b) of
Section 3.05, this Agreement shall be of no further force or effect,
and no obligation, right or liability shall arise hereunder, except
that Rainbow shall bear its own costs as well as the reasonable costs
of Global in connection with the negotiation, preparation, and
execution of this Agreement and qualifying the offer and sale of
securities to be issued in the Exchange under the registration
requirements, or exemption from the registration requirements, of state
and federal securities laws.
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(c) This Agreement may be terminated by the board of directors of
Rainbow at any time prior to the Closing Date if:
(i) there shall have been any change after the date of the latest
balance sheet of Global in the assets, properties, business or
financial condition of Global, which could have a material
adverse effect on the financial statements of Global listed in
Section 2.04(b) taken as a whole, except any changes disclosed in
the Global Schedules;
(ii) the board of directors of Rainbow determines in good faith that
one or more of Rainbow' conditions to Closing has not occurred,
through no fault of Rainbow;
(iii)Rainbow takes the termination action specified in Section 2.20
as a result of Global Schedules or updates thereto which Rainbow
finds unacceptable;
(iv) on or before January 31, 2002, Rainbow notifies Global that
Rainbow' investigation pursuant to Section 4.01 below has
uncovered information which it finds unacceptable by the same
criteria set forth in Section 2.20; or
(v) Global shall fail to comply in any material respect with any of
its covenants or agreements contained in this Agreement or if any
of the representations or warranties of Global contained herein
shall be inaccurate in any material respect, where such
noncompliance or inaccuracy has not been cured within ten (10)
days after written notice thereof.
If this Agreement is terminated pursuant to this paragraph (c) of
Section 3.05, this Agreement shall be of no further force or effect,
and no obligation, right or liability shall arise hereunder, except
that Global shall bear its own costs as well as the reasonable costs of
Rainbow and its principal shareholders incurred in connection with the
negotiation, preparation and execution of this Agreement.
ARTICLE IV
SPECIAL COVENANTS
Section 4.01 Access to Properties and Records. Global and Rainbow will
each afford to the officers and authorized representatives of the other full
access to the properties, books and records of Global or Rainbow, as the case
may be, in order that each may have a full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other, and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of Global or Rainbow, as the
case may be, as the other shall from time to time reasonably request. Without
limiting the foregoing, as soon as practicable after the end of each fiscal
quarter (and in any event through the last fiscal quarter prior to the Closing
Date), each party shall provide the other with quarterly internally prepared and
unaudited financial statements.
Section 4.02 Delivery of Books and Records. At the Closing, Rainbow
shall deliver to Global the originals of the corporate minute books, books of
account, contracts, records, and all other books or documents of Rainbow now in
the possession of Rainbow or its representatives.
Section 4.03 Third Party Consents and Certificates. Global and Rainbow
agree to cooperate with each other in order to obtain any required third party
consents to this Agreement and the transactions herein contemplated.
Section 4.04 Name Change. At or prior to the Closing Date, Global's
Board of Directors shall have approved an amendment to the certificate of
incorporation to change the name of Global to "China Global Development, Inc."
Such amendment shall be carried out promptly upon approval of the same by the
shareholders of Global.
Section 4.05 Global Shareholder Meeting. Global shall call a special
shareholders meeting to be held on or prior to the Closing Date at which meeting
the shareholders of Global shall be requested to approve, and Global's Board of
Directors shall recommend approval of, the terms of this Agreement, including
the name change and increase in authorized capital described in Section 4.04 and
such other matters as shall require shareholder approval hereunder.
13
Section 4.06 Consent of Rainbow Shareholders. Rainbow shall use its best
efforts to obtain the consent of all Rainbow Shareholders to participate in the
Exchange.
Section 4.07 Designation of Directors and Officers. On or before the
Closing Date, Global shall increase its board of directors to three (3) persons.
Xxxxxxx Xxxxx shall be designated as Chairman of the Board of Global and Yu-Xxxx
Xxxxx & Xxxxxxx Xxxxx , shall be designated as additional board members.
Section 4.08 Exclusive Dealing Rights. Until 5:00 P.M. Eastern Daylight
Time on January 31, 2002.
(a) In recognition of the substantial time and effort which Global has
spent and will continue to spend in investigating Rainbow and its
business and in addressing the matters related to the transactions
contemplated herein, each of which may preempt or delay other
management activities, neither Rainbow, nor any of its officers,
employees, representatives or agents will directly or indirectly
solicit or initiate any discussions or negotiations with, or, except
where required by fiduciary obligations under applicable law as advised
by counsel, participate in any negotiations with or provide any
information to or otherwise cooperate in any other way with, or
facilitate or encourage any effort or attempt by, any corporation,
partnership, person or other entity or group (other than Global and its
directors, officers, employees, representatives and agents) concerning
any merger, sale of substantial assets, sale of shares of capital
stock, (including without limitation, any public or private offering of
the common stock of Rainbow) or similar transactions involving Rainbow
(all such transactions being referred to as " Rainbow Acquisition
Transactions"). If Rainbow receives any proposal with respect to a
Rainbow Acquisition Transaction, it will immediately communicate to
Global the fact that it has received such proposal and the principal
terms thereof.
(b) In recognition of the substantial time and effort which Rainbow has
spent and will continue to spend in investigating Global and its
business and in addressing the matters related to the transactions
contemplated herein, each of which may preempt or delay other
management activities, neither Global, nor any of its officers,
employees, representatives or agents will directly or indirectly
solicit or initiate any discussions or negotiations with, or, except
where required by fiduciary obligations under applicable law as advised
by counsel, participate in any negotiations with or provide any
information to or otherwise cooperate in any other way with, or
facilitate or encourage any effort or attempt by, any corporation,
partnership, person or other entity or group (other than Rainbow and
its directors, officers, employees, representatives and agents)
concerning any merger, sale of substantial assets, sale of shares of
capital stock, (including without limitation, any public or private
offering of the common stock of Global or similar transactions
involving Global (all such transactions being referred to as "Global
Acquisition Transactions"). If Global receives any proposal with
respect to a Global Acquisition Transaction, it will immediately
communicate to Rainbow the fact that it has received such proposal and
the principal terms thereof.
Section 4.09 Actions Prior to Closing.
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the Global Schedules or Rainbow Schedules or
as permitted or contemplated by this Agreement, Global (subject to
paragraph (d) below) and Rainbow respectively, will each:
(i) carry on its business in substantially the same manner as it has
heretofore;
(ii) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary
wear and tear and damage due to casualty;
(iii)maintain in full force and effect insurance comparable in amount
and in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligations under
material contracts, leases, and instruments relating to or
affecting its assets, properties, and business;
14
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain
its relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state
laws and all rules, regulations, and orders imposed by federal or
state governmental authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither Global nor Rainbow will:
(i) make any changes in their articles or certificate of
incorporation or bylaws;
(ii) take any action described in Section 1.07 in the case of Rainbow,
or in Section 2.07, in the case of Global (all except as
permitted therein or as disclosed in the applicable party's
schedules);
(iii)enter into or amend any contract, agreement, or other instrument
of any of the types described in such party's schedules, except
that a party may enter into or amend any contract, agreement, or
other instrument in the ordinary course of business involving the
sale of goods or services; or
(iv) sell any assets or discontinue any operations (other than the
Divestiture), sell any shares of capital stock (other than as
contemplated in Sections 4.07 and 4.08 hereof and the sale of
securities underlying existing warrants or options of Global) or
conduct any similar transactions other than in the ordinary
course of business.
(C) In light of the fact that Rainbow' shareholders will control Global as
a result of the Exchange, from and after the date of this Agreement
until the Closing Date, Global shall take no action which is material
to its business without the prior written approval of Rainbow, which
Rainbow may give or withhold in its sole discretion after consultation
with Global.
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Section 4.10 Sales Under Rule 144 or 145,If Applicable.
(a) Global will use its best efforts to at all times comply with the
reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including timely filing of all periodic
reports required under the provisions of the Exchange Act and the rules
and regulations promulgated thereunder.
(b) Upon being informed in writing by any such person holding
restricted stock of Global that such person intends to sell any shares
under Rule 144, Rule 145 or Regulation S promulgated under the
Securities Act (including any rule adopted in substitution or
replacement thereof), Global will certify in writing to such person
that it has filed all of the reports required to be filed by it under
the Exchange Act to enable such person to sell such person's restricted
stock under Rule 144, 145 or Regulation S, as may be applicable in the
circumstances, or will inform such person in writing that it has not
filed any such report or reports.
(c) If any certificate representing any such restricted stock is
presented to Global's transfer agent for registration of transfer in
connection with any sale theretofore made under Rule 144, 145 or
Regulation S, provided such certificate is duly endorsed for transfer
by the appropriate person(s) or accompanied by a separate stock power
duly executed by the appropriate person(s) in each case with reasonable
assurances that such endorsements are genuine and effective, and is
accompanied by an opinion of counsel satisfactory to Global and its
counsel that the stock transfer has complied with the requirements of
Rule 144, 145 or Regulation S, as the case may be, Global will promptly
instruct its transfer agent to register such shares and to issue one or
more new certificates representing such shares to the transferee and,
if appropriate under the provisions of Rule 144, 145 or Regulation S,
as the case may be, free of any stop transfer order or restrictive
legend. The provisions of this Section 4.11 shall survive the Closing
and the consummation of the transactions contemplated by this
Agreement.
Section 4.11 Indemnification.
(a) Rainbow hereby agrees to indemnify Global and each of the officers,
agents and directors of Global as of the date of execution of this
Agreement against any loss, liability, claim, damage, or expense
(including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever), to
which it or they may become subject arising out of or based on any
inaccuracy appearing in or misrepresentations made under Article I of
this Agreement. The indemnification provided for in this paragraph
shall survive the Closing and consummation of the transactions
contemplated hereby and termination of this Agreement.
(b) Global hereby agrees to indemnify Rainbow and each of the officers,
agents, and directors of Rainbow and each of the Rainbow Shareholders
as of the date of execution of this Agreement against any loss,
liability, claim, damage, or expense (including, but not limited to,
any and all expense whatsoever reasonably incurred in investigating,
preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever), to which it or they may become
subject arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article II of this Agreement. The
indemnification provided for in this paragraph shall survive the
Closing and consummation of the transactions contemplated hereby and
termination of this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF GLOBAL
The obligations of Global under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.01 Accuracy of Representations and Performance of Covenants.
The representations and warranties made by Rainbow in this Agreement were true
when made and shall be true at the Closing Date with the same force and effect
as if such representations and warranties were made at and as of the Closing
Date (except for changes therein permitted by this Agreement). Rainbow shall
have performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by Rainbow prior to or at the
Closing. Global shall be furnished with a certificate, signed by a duly
authorized executive officer of Rainbow and dated the Closing Date, to the
foregoing effect.
Section 5.02 Officer's Certificate. Global shall have been furnished
with a certificate dated the Closing Date and signed by a duly authorized
officer of Rainbow to the effect that no litigation, proceeding, investigation,
or inquiry is pending, or to the best knowledge of Rainbow threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement, or, to the extent not disclosed in
the Rainbow Schedules, by or against Rainbow, which might result in any material
adverse change in any of the assets, properties, business, or operations of
Rainbow.
Section 5.03 No Material Adverse Change. Prior to the Closing Date,
there shall not have occurred any change in the financial condition, business,
or operations of Rainbow nor shall any event have occurred which, with the lapse
of time or the giving of notice, is determined to be unacceptable using the
criteria set forth in Section 1.19.
Section 5.04 Good Standing. Global shall have received a certificate of
good standing from the British Virgin Islands, dated as of a date within ten
days prior to the Closing Date certifying that Rainbow is in good standing as a
corporation in the British Virgin Islands.
Section 5.05 Approval by Rainbow Shareholders. The Exchange shall have
been approved, and shares delivered in accordance with Section 3.01, by the
holders of not less than ninety percent (90%) of the outstanding common stock of
Rainbow, unless a lesser number is agreed to by Global.
Section 5.06 No Governmental Prohibition. No order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
16
Section 5.07 Consents. All consents, approvals, waivers or amendments
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of Global and Rainbow after the Closing Date on the basis as presently
operated shall have been obtained.
Section 5.08 Other Items.
------------
(a) Global shall have received a list of Rainbow' shareholders
containing the name, address, and number of shares held by each Rainbow
shareholder as of the date of Closing, certified by an executive
officer of Rainbow as being true, complete and accurate; and
(b) Global shall have received such further opinions, documents,
certificates or instruments relating to the transactions contemplated
hereby as Global may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF Rainbow
AND THE Rainbow SHAREHOLDERS
The obligations of Rainbow and the Rainbow Shareholders under this
Agreement are subject to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 6.01 Accuracy of Representations and Performance of Covenants.
The representations and warranties made by Global in this Agreement were true
when made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Additionally, Global shall have performed and complied with all covenants and
conditions required by this Agreement to be performed or complied with by Global
and shall have satisfied the conditions described below prior to or at the
Closing:
(a) Immediately prior to the Closing, Global shall have no more than an
aggregate of 4,590,127 shares of common stock issued and outstanding or
issuable pursuant to outstanding warrants and options, excluding any
shares and warrants issuable pursuant to the Exchange or the Placement.
(b) The shareholders of Global shall have approved the Exchange and the
related transactions described herein.
Rainbow shall have been furnished with certificates, signed by duly authorized
executive officers of Global and dated the Closing Date, to the foregoing
effect.
Section 6.02 Officer's Certificate. Rainbow shall have been furnished
with certificates dated the Closing Date and signed by duly authorized executive
officers of Global, to the effect that no litigation, proceeding, investigation
or inquiry is pending, or to the best knowledge of Global threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement or, to the extent not disclosed in
the Global Schedules, by or against Global, which might result in any material
adverse change in any of the assets, properties or operations of Global.
Section 6.03 No Material Adverse Change. Prior to the Closing Date,
there shall not have occurred any change in the financial condition, business or
operations of Global nor shall any event have occurred which, with the lapse of
time or the giving of notice, is determined to be unacceptable using the
criteria set forth in Section 2.20.
Section 6.04 Good Standing. Global shall have received a certificate of
good standing from the Secretary of State of the State of Nevada or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that Global is in good standing as a corporation in the State of
Nevada and has filed all tax returns required to have been filed by it to date
and has paid all taxes reported as due thereon.
Section 6.05 No Governmental Prohibition. No order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
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Section 6.06 Consents. All consents, approvals, waivers or amendments
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of Global and Rainbow after the Closing Date on the basis as presently
operated shall have been obtained.
Section 6.07 Other Items. Rainbow shall have received further opinions,
documents, certificates, or instruments relating to the transactions
contemplated hereby as Rainbow may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Brokers. Global and Rainbow agree that, except as set out
on Schedule 7.01 attached hereto, there were no finders or brokers involved in
bringing the parties together or who were instrumental in the negotiation,
execution or consummation of this Agreement. Global and Rainbow each agree to
indemnify the other against any claim by any third person other than those
described above for any commission, brokerage, or finder's fee arising from the
transactions contemplated hereby based on any alleged agreement or understanding
between the indemnifying party and such third person, whether express or implied
from the actions of the indemnifying party.
Section 7.02 Governing Law. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to the matters of state law, with the laws
of the State of Nevada without giving effect to principles of conflicts of law
thereunder. Each of the parties (a) irrevocably consents and agrees that any
legal or equitable action or proceedings arising under or in connection with
this Agreement shall be brought exclusively in the federal courts of the United
States, (b) by execution and delivery of this Agreement, irrevocably submits to
and accepts, with respect to any such action or proceeding, generally and
unconditionally, the jurisdiction of the aforesaid court, and irrevocably waives
any and all rights such party may now or hereafter have to object to such
jurisdiction.
Section 7.03 Notices. Any notice or other communications required or
permitted hereunder shall be in writing and shall be sufficiently given if
personally delivered to it or sent by telecopy, overnight courier or registered
mail or certified mail, postage prepaid, addressed as follows:
If to Global, to: China Global Development, Inc.
0000 Xxxxx Xxxxxx, #000
Xxxxxxx Xxxxx, XX 00000
With copies to: Vanderkam & Xxxxxxx
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
If to Rainbow Light Global
Corporation: Rainbow Light Global Corporation
Seventh District North
Xxxxx-Ping Region
Beijing, PRC
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given (i) upon receipt, if personally delivered, (ii) on
the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if
transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3)
days after mailing, if sent by registered or certified mail.
Section 7.04 Attorney's Fees. In the event that either party institutes
any action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the prevailing party shall be reimbursed by
the losing party for all costs, including reasonable attorney's fees, incurred
in connection therewith and in enforcing or collecting any judgement rendered
therein.
Section 7.05 Confidentiality. Each party hereto agrees with the other
that, unless and until the transactions contemplated by this Agreement have been
consummated, it and its representatives will hold in strict confidence all data
and information obtained with respect to another party or any subsidiary thereof
from any representative, officer, director or employee, or from any books or
records or from personal inspection, of such other party, and shall not use such
data or information or disclose the same to others, except (i) to the extent
such data or information is published, is a matter of public knowledge, or is
required by law to be published; or (ii) to the extent that such data or
information must be used or disclosed in order to consummate the transactions
contemplated by this Agreement. In the event of the termination of this
Agreement, each party shall return to the other party all documents and other
materials obtained by it or on its behalf and shall destroy all copies, digests,
work papers, abstracts or other materials relating thereto, and each party will
continue to comply with the confidentiality provisions set forth herein.
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Section 7.06 Public Announcements and Filings. Unless required by
applicable law or regulatory authority, none of the parties will issue any
report, statement or press release to the general public, to the trade, to the
general trade or trade press, or to any third party (other than its advisors and
representatives in connection with the transactions contemplated hereby) or file
any document, relating to this Agreement and the transactions contemplated
hereby, except as may be mutually agreed by the parties. Copies of any such
filings, public announcements or disclosures, including any announcements or
disclosures mandated by law or regulatory authorities, shall be delivered to
each party at least one (1) business day prior to the release thereof.
Section 7.07 Schedules; Knowledge. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 7.08 Third Party Beneficiaries. This contract is strictly
between Global and Rainbow, and, except as specifically provided, no director,
officer, stockholder (other than the Rainbow Shareholders), employee, agent,
independent contractor or any other person or entity shall be deemed to be a
third party beneficiary of this Agreement.
Section 7.09 Expenses. Subject to Sections 3.05 and 7.04 above, whether
or not the Exchange is consummated, each of Global and Rainbow will bear their
own respective expenses, including legal, accounting and professional fees,
incurred in connection with the Exchange or any of the other transactions
contemplated hereby.
Section 7.10 Entire Agreement. This Agreement represents the entire
agreement between the parties relating to the subject matter thereof and
supersedes all prior agreements, understandings and negotiations, written or
oral, with respect to such subject matter.
Section 7.11 Survival; Termination. The representations, warranties,
and covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for a period of two years.
Section 7.12 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 7.13 Amendment or Waiver. Every right and remedy provided
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may by amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance may be extended by a writing
signed by the party or parties for whose benefit the provision is intended.
Section 7.14 Best Efforts. Subject to the terms and conditions herein
provided, each party shall use its best efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by it under this
Agreement so that the transactions contemplated hereby shall be consummated as
soon as practicable. Each party also agrees that it shall use its best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective this Agreement and the transactions contemplated
herein.
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly authorized,
as of the date first-above written.
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ATTEST: China Global Development, Inc.
/s/ Xxxxxxx Xxxx BY: /s/ Sheng Xxx Xxx
---------------- ------------------
Secretary or Assistant Secretary President
ATTEST: Rainbow LIGHT GLOBAL CORPORATION
BY:
Secretary or Assistant Secretary President
The undersigned shareholders of Rainbow LIGHT GLOBAL CORPORATION hereby
agree to participate in the Exchange on the terms set forth above. Subject to
Section 7.11 above, each of the undersigned hereby represents and affirms that
he has read each of the representations and warranties of Rainbow LIGHT GLOBAL
CORPORATION set out in Article I hereof and that, to the best of his knowledge,
all of such representations and warranties are true and correct.
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