TARGET COMPANY ACQUISITION AND REORGANIZATION AGREEMENT
Exhibit
10.4
This
agreement (the "Agreement") is executed and effective as of June 24, 2009 (the
"Effective Date") by and among the following parties:
Covenant
Group Holdings Inc., a United States ("U.S.") corporation incorporated in the
state of Delaware ("Covenant"). Covenant's legal representatives are Xxxxxxxx X.
Xxxxxxxxxxx, Chairman, and Xxxxxxx Xxxx, President, both of whom are U.S.
citizens; and
HaiNan
JIEN Intelligent Engineering Co., a company incorporated, in good standing and
doing business in the Peoples Republic of China ("China") ("Target Company" or
"JIEN"). The address of the Target Company is Floor 6, Xx.00 XxXxxx Xxxx,
Xxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxx Xxxxxxxx, postcode 570102, and its legal
representative is Ma Bing Feng, Chairman, who is a Chinese citizen;
and
each
equity owner of the Target Company ("Target Company Shareholder[s]") as
identified hereunder.
The
identity and percentage of equity holdings held by each Target Company
Shareholder is as follows:
|
Shareholder
|
Amount
of investment (registered capital)
|
Percentage
|
|
Ma
Bing Feng
|
RMB 600,000
|
60
%
|
|
Xxx
Xxxx Hua
|
RMB 400,000
|
40
%
|
|
Total
|
RMB
1,000,000
|
100
%
|
The
parties hereby agree as follows:
Section
1. Strategic
Company Structure.
Covenant is a corporation formed to acquire and hold a majority equity
ownership stake in Target Company and other target companies that are Chinese
operating companies. To effectuate this arrangement, the parties hereto agree to
organize pursuant to a strategic company structure which may entail, among other
things, having Covenant, a public shell company ("Public Shell"), a subsidiary
of the Public Shell ("Public Shell Subsidiary") and/or the Target Company enter
into a share exchange, merger, reverse merger, recapitalization or some other
similar transaction whereby Public Shell and/or Public Shell Subsidiary shall
acquire all of Covenant’s rights and obligations under this Agreement (including
the Target Company’s common stock as provided hereunder). Thereafter, the Public
Shell may engage in a private placement of its common stock, which private
placement would also grant registration rights to the investors (the "Private
Placement"). The above structure is hereinafter referred to as the "Strategic
Structure."
Section
2. Public
Shell Private Placement (Strategic Structure). The Strategic Structure
shall be pursued, and the Public Shell shall engage in a capital raise targeted
for the fourth quarter of
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2009, but
no later than the first quarter of 2010, for purposes of raising funds to inject
into Target Company a minimum of $2.5 Million ($2,500,000) for operational
and strategic growth purposes as its operating subsidiary.
Section
3. Covenant
Acquisition of Majority Interest in Target Company. When the Strategic Structure
is pursued, the consideration for Covenant's acquisition of one-hundred percent
(100%) of Target Company's common stock is the promise of Covenant, on behalf of
the Public Shell, to provide a cash injection and common stock of Public Shell
(the "Public Shell Stock Consideration") as detailed in Section 4 below. As
described above, under the Strategic Structure, Public Shell or Public Shell
Subsidiary shall ultimately own and hold the Target Company's common
stock.
Section
4. Details
of Consideration to Target Company and Target Company Shareholders. Covenant will assure a cash
injection pursuant to Section 2 above. Upon occurrence of the Strategic
Structure, Target Company Shareholder[s] shall receive pro-rata portions of
Public Shell common stock, which, in the aggregate, shall be one million three
hundred fifty thousand (1,350,000) shares of Public Shell common
stock.
These
common shares will be restricted and locked-up for a period of one (1) year
starting from the period when Covenant enters and qualifies for a NASDAQ Capital
Market Listing. These shares will also be subject to underwriter's discretion
upon future capital raises.
Covenant
authorizes Target Company to distribute to its shareholders and management its
30% dividend amount for 2008 and to further allow Target Company to distribute a
thirty percent (30%) dividend against their 2009 profits at year
end.
Section
5. Reliance
on Target Company and Target Company's Data. Target Company and Target
Company Shareholder[s] shall provide audited financials to Covenant for periods
as reasonably requested by Covenant, and Target Company shall assure the
accuracy of all financial performance data and material disclosure items of
Target Company as reported for the period ended June 30, 2009, which includes
accounts payable and liabilities, accounts receivable, assets, operations,
associated debts, intangible assets, inventory, and any important
contracts.
Section
6. Declarations
and Assurances by Covenant.
|
1.
|
Covenant
is a duly registered Delaware corporation. It has exclusive rights to its
assets and is empowered to duly execute and be party to this
Agreement.
|
|
2.
|
Except
as hereinafter provided, Covenant agrees and acknowledges that the Target
Company may continue to independently operate itself and that Covenant
will not participate in the day-to-day business operations of the Target
Company or interfere with the management of the Target Company.
Notwithstanding the foregoing, if Target Company's management acts in any
manner that is materially inconsistent with the declarations and
assurances as presented in the Chairman's Annual Report to Covenant’s
Board as provided in Section 8 below, Covenant has the right to effect
changes in Target Company's
management.
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3.
|
Covenant,
at its expense, shall retain an independent international accountant to
conduct a quarterly and annual audit of Target Company in anticipation of
the Strategic Structure and eventual listing of Covenant’s common stock on
a U.S. national exchange.
|
|
4.
|
Covenant
or its shareholders shall appoint the initial Covenant Board of Directors,
which is initially anticipated to be a Board of five persons, three of
whom will meet qualifications of independence under NASDAQ listing
standard rules.
|
Section
7. Declarations
and Assurances of Target Company and Target Company Shareholder[s].
|
1.
|
Target
Company is established under the legal structure of China and shall remain
so following occurrence of the Strategic Structure. Target Company has
exclusive rights to its assets and no material liabilities as otherwise
disclosed to Covenant and is empowered to duly execute and be a party to
this Agreement.
|
|
2.
|
Target
Company shall use its best efforts to assist Covenant in performance of
quarterly and annual financial reports along with issuance of 10-Q and
10-K SEC reports filed with the
SEC.
|
|
3.
|
Target
Company must standardize its financial operations, avoid any hidden cash
or assets, and not engage in any fraudulent
activities.
|
|
4.
|
Target
Company shall not issue additional common stock or other securities
without the express written consent of Covenant. Target Company agrees and
acknowledges that Covenant is required to own at least a majority of
Target Company's common stock so that Target Company's financial reports
may be consolidated with Covenant.
|
|
5.
|
Any
material news relating to the Target Company must be reported to Covenant
following the Effective Date.
|
|
6.
|
Target
Company shall not provide any loans or any vouchers to third
parties.
|
|
7.
|
Target
Company should avoid any related transactions with itself, including, but
not restricted to, such transactions with: (1) shareholders; (2)
management; and/or (3) any enterprises that are owned by a direct relative
of the shareholders or management. If related enterprises exist, the
Target Company shall assure no liabilities for such enterprise or any
other debt or liability related to any of its shareholders, direct
relatives, CEOs, or any of its executives in top
management.
|
|
8.
|
The
board minutes of Target Company shall be accurate and comprehensive. The
financial statements of Target Company should be represented in
appropriate form, including assets and liabilities of the company and
sales and revenues from business operations. Moreover, the financial
statements shall be prepared in accordance with U.S. GAAP
standards.
|
|
9.
|
Target
Company shall not have any undisclosed guarantees to any individual, group
or company.
|
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|
10.
|
All
of the information of Target Company should be provided to Covenant,
including bank accounts, company's address, telephone numbers,
etc.
|
|
11.
|
Target
Company should keep good records of all legal documents for managing the
business.
|
|
12.
|
Target
Company must avoid any activities that are against the law, statutes, or
regulations of the legal systems of the U.S. or China, as
applicable.
|
|
13.
|
Target
Company may not file a petition for bankruptcy without the express written
consent of Covenant.
|
|
14.
|
Any
material contract signed by Target Company should be disclosed to
Covenant.
|
|
15.
|
The
assets and inventory of Target Company shall be kept in good operation and
no sales of assets should occur, unless in the ordinary course of
business, without the express written consent of Covenant. Additionally,
Target Company shall not engage in any exclusivity agreements with third
parties without the express written consent of
Covenant.
|
|
16.
|
Target
Company should only operate under its current lines of business as of the
Effective Date, and shall not open new business lines without the written
consent of Covenant. Target Company shall protect all patents, trade
marks, copyrights, or business secrets of Target Company from infringement
by third parties.
|
|
17.
|
Target Company and Target Company
Shareholder[s] agree to comply with all reasonable and customary requests
by any investment bank that assists Covenant with respect to the Strategic
Structure or other fundraising activities, including, but not limited to,
lock-ups of the Target Company Shareholder[s]' Covenant common stock
shares.
|
Section
8. Consequence
of Covenant Reliance on Information. Target Company and Target
Company Shareholder[s] hereby indemnify and hold harmless Covenant for any
material misstatements or omissions relating to financial and business reports
that Covenant reasonably relies upon that are produced by Target Company and/or
Target Company Shareholder[s].
Section
9. Confidentiality. The parties agree to the
confidentiality of the matters relating to this Agreement. If the Agreement
expires, the parties agree to return the relevant documentation, including the
financial, technical and commercial information provided, to the issuing party,
and promise to not disclose and utilize such confidential information. Nothing
precludes a party from providing information to a government organization upon
request of such organization or as otherwise required by law.
Section
10. Material
Changes in Target Company's Business. If before the occurrence of
the Strategic Structure, the Target Company's business has experienced a
material adverse change that cannot be promptly corrected before the filing of
the registration statement, Covenant, at its sole discretion, may terminate this
Agreement with respect to the Target Company and Target
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Company's
Shareholder[s]. Thereafter, the mutual return of shares will be identical to the
procedures set forth in Section 5 above.
Section
11. Documents
to be Provided by Target Company and Target Company Shareholder[s] (translated
into English).
|
1.
|
The
original or certified copies of the charter documents of Target Company
and all corporate records, minute books, documents and instruments of
Target Company, the corporate seal and all books and accounts of Target
Company.
|
|
2.
|
All
reasonable consents or approvals required to be obtained by Target Company
for the purposes of implementing this
Agreement.
|
|
3.
|
All
other approval documents or evidences of ownership transfer of Target
Company's equity ownership to
Covenant.
|
|
4.
|
Such
other documents as Covenant may reasonably require to give effect to the
terms and intention of this
Agreement.
|
Section
12. Documents
to be Provided by Covenant.
|
1.
|
Share
certificates representing the Covenant Share Consideration, duly
registered in the names of the Target Company Shareholder[s] and pursuant
to the terms of this Agreement.
|
|
2.
|
All
reasonable consents or approvals required to be obtained by Covenant for
the purposes of implementing this
Agreement.
|
|
3.
|
Documents
relating to the Strategic Structure and preparation of any registration
statement so required.
|
|
4.
|
Such other documents as Target Company
may reasonably require to give effect to the terms and intention of this
Agreement.
|
Section
13. Notices. Message delivery method: any
request by either party to deliver the message to the designated receiver and
location are deemed adequate for the completion of delivery. Also, the delivery mail is
deemed to be received within four (4) business days after being sent. Electronic transmissions
are deemed received the same day they are sent.
Covenant:
Message
Address: Xxxxxxxx Xxxxxxxxx & Xxxxxx PC 00 X. 00xx
Xxxxxx - Xxxxx 0000, Xxxxxxxxxxxx, XX 00000 Attn: Xxxxxxx Xxxxxxxx c/o Covenant
Group Holdings Inc.
Receiver
: Xxxxxxx Xxxxxxxxxxx, Chairman
Telephone
: 000-000-0000
Fax :
000-000-0000
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Receiver
: Xxxxxxx Xxxx, President
Telephone
: 000-000-0000
Fax :
000-000-0000
JIEN
:
Message
Address : Floor 15, Xx.00 Xxxxxx Xxxx, Xxxxxxx Xxxxxxxx, Xxxxxx Xxxx, Xxxxxx
Xxxxxxxx, postcode 570102
Receiver
: Ma Bing Feng
Telephone
: 00-000-00000000
Fax:
00-000-00000000
Target
Company Shareholder[s] agree to use Target Company's message address as each
Shareholder's message addresses.
Alternative
address: A party must inform the other parties for changes of
address. E-mail may not be used as the message address.
Section
16. Miscellaneous.
|
a)
|
Entire
Agreement. This Agreement represents the entire agreement of the
parties with respect to the subject matter hereof and may not be changed
or terminated, except in a writing signed by all
parties.
|
|
b)
|
Waivers.
No waiver by any party of any breach of any term of this Agreement shall
be construed as a waiver of any subsequent breach of that term or any
other term of the same or of a different
nature.
|
|
c)
|
Binding
Nature. This Agreement and the rights, powers, and duties set forth
herein shall bind and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors, and assigns of the
parties hereto.
|
|
d)
|
Counterparts.
This Agreement may be executed in one or more counterparts (facsimile
copies are deemed to be originals), each of which shall be an original and
all of which taken together shall constitute one and the same
instrument.
|
|
e)
|
Governing
Law. This Agreement shall be deemed to have been made under, and
shall be governed by, and construed in accordance with, the internal laws
of the Commonwealth of Pennsylvania (excluding the law thereof which
requires the application of or reference to the law of any other
jurisdiction).
|
|
f)
|
Arbitration.
The parties consent and submit to arbitration before the American
Arbitration Association ("AAA") in connection with the adjudication of any
controversy arising in connection with this Agreement or the enforcement
hereof, which may be asserted. The parties agree that any such action
shall be submitted to arbitration in accordance with the rules and
procedures of the AAA. The venue for any such arbitration shall be
Philadelphia, Pennsylvania, and the parties further agree to abide by and
perform any award(s) rendered pursuant to this and further agree that a
judgment and any interest due
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|
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thereon
may be entered upon such award(s) and, for these purposes, the undersigned
parties hereby voluntarily consent to submit to the jurisdiction of any
court of competent jurisdiction which may properly enter such judgment.
The filing of a statement of claim by the party seeking relief hereunder
may commence any such action in
arbitration.
|
|
COVENANT
GROUP HOLDINGS INC.
|
|
/s/
Xxxxxxx X. Xxxxxxxxxxx
|
|
Xxxxxxx
X. Xxxxxxxxxxx, Chairman
|
|
/s/
Xxxxxxx Xxxx
|
|
Xxxxxxx
Xxxx, President
|
|
HAINAN
JIEN INTELLIGENT ENGINEERING CO.
|
|
By: /s/
Ma Bing
Feng
|
|
Name:
Ma Bing Feng
|
|
Title: General
Manager
|
TARGET
COMPANY SHAREHOLDERS:
|
A:
|
/s/ Ma Bing
Feng
|
B:
|
/s/ Xxx Xxxx
Hua
|
|
Ma
Bing Feng
|
Xxx
Xxxx Hua
|
||
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