REORGANIZATION AGREEMENT
This Reorganization Agreement ("Agreement") is made and entered into
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this 30h day of July 2000, between and among Yifan Communications, Inc., a
Delaware corporation formerly known as Smart Games Interactive, Inc. (the
"Company"), Xxxxx.xxx, Inc., a New York corporation, ("Yifan") and the
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persons identified in Schedule "A-1" attached hereto (the "Shareholders").
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WHEREAS, the Shareholders collectively own, and have the unrestricted
right to sell, transfer and convey, one hundred percent (100%) of the issued and
outstanding common stock of Yifan to the Company in accordance with the terms of
this Agreement; and
WHEREAS, each Shareholder identified in Schedule A-1 has executed a
"Reorganization Agreement Signature Page" in the form attached hereto as Exhibit
"A-1" and an "Investment Representation Letter" in the forms attached hereto as
Exhibit "A-2;" and
WHEREAS, the Company wishes to acquire one hundred percent (100%) of the
issued and outstanding common stock of Yifan, solely in exchange for shares of
the Company's common stock; and
WHEREAS, the Company's shareholders have approved and the Company has
properly filed certain amendments to its' Certificate of Incorporation that
will, on the effective date thereof, enable the Company to complete the stock
issuances contemplated by this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, obligations and
benefits hereinafter set forth, the parties hereto agree as follows:
1. Affirmative Covenants.
(a) SEC Reporting Obligations. For so long as any of the Company's
securities are registered under the Securities Exchange Act of 1934, as amended
(said Act and rules and regulations promulgated thereunder being hereinafter
referred to as the "Exchange Act"), the Company (i) will file all forms,
reports, statements and other documents required to be filed with (A) the
Securities and Exchange Commission ("SEC"), including, without limitation (1)
all Annual Reports on Form 10-KSB, (2) all Quarterly Reports on Form 10-QSB, (3)
all proxy statements relating to meetings of stockholders (whether annual or
special), (4) all Reports on Form 8-K, (5) all other reports or registration
statements and (6) all amendments and supplements to all such reports and
registration statements and (B) any state, local or other governmental authority
pursuant to applicable laws regulating the offer and sale of securities (the
"Blue Sky Laws") and (C) all forms, reports, statements and other documents
required to be filed with any other applicable federal or state regulatory
authorities (collectively the "Company Reports"). The Company Reports shall be
prepared in all material respects in accordance with the requirements of
applicable Law (including, the Exchange Act and the rules and regulations of the
SEC thereunder applicable to such Company Reports) and shall not at the time
they are filed 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 are made,
not misleading.
(b) Reports to Stockholders. For so long as the Company's common stock is
registered under the Exchange Act, the Company will hold an annual meeting of
shareholders for the election of directors within 180 days after the end of each
of the Company's fiscal years and, within 180 days after the end of each of the
Company's fiscal years, will provide the Company's shareholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial statements shall be those required by
Rule 14a-3 under the Exchange Act and shall be included in an annual report
meeting the requirements of the Rule. Further, the Company agrees to make
available to the Company's shareholders in printable form within 60 days after
the end of each fiscal quarter of the Company (other than the last fiscal
quarter in any fiscal year) reasonably itemized financial statements of the
Company and its' subsidiaries, if any, for the fiscal quarter just ended and a
narrative discussion of such financial statements and the business conducted by
the Company and its' subsidiaries, if any, during such quarter.
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company hereby
represents and warrants to Yifan and the Shareholders:
a. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate or other power and authority to own, lease
and operate its' properties and to carry on its' business as it is now being
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its' properties makes such qualification necessary. The
Company has no directly or indirectly owned subsidiaries.
b. Articles of Incorporation and By-Laws. The Company has heretofore
furnished to the Yifan and the Shareholders complete and correct copies of its'
Articles of Incorporation and By-Laws, including all amendments thereto or
restatements thereof. The Company is not in violation of any of the provisions
of its' Articles of Incorporation, By-Laws, or any amendments thereto.
c. Capitalization. The Company currently has the corporate authority to
issue a total of 50,000,000 shares of $0.0002 par value common stock ("Old
Common") and 5,000,000 shares of $0.0002 par value Preferred Stock ("Old
Preferred"), of which 32,500,000 shares of Old Common are presently issued and
outstanding. The record owners of such shares are identified in Exhibit "B" to
this Agreement.
On July 27, 2000, the Company filed in the office of the Secretary of
State of Delaware an amendment to its' Certificate of Incorporation (the
"Amendment") that will, effective at 12:01 a.m. on September 30, 2000, (a)
implement a 1 for 40 reverse split of the Company's Old Common and (b) increase
the authorized capitalization of the Company to 100,000,000 shares of $0.008 par
value common stock ("New Common") and 10,000,000 shares of $0.008 par value
preferred stock ("New Preferred"). A true and correct copy of the Amendment is
attached hereto as Exhibit "C" and incorporated herein by this reference.
Immediately prior to the closing of this Agreement, the Company will have
not more than 32,500,000 shares of Old Common issued and outstanding and on the
effective date of the Amendment the beneficial owners of such shares will become
the beneficial owners of not more than 812,500 shares of New Common.
During the period between the execution of this Agreement and the
effectiveness of the Amendment, the Company will not take or permit to be taken
any action that would withdraw, negate, modify or otherwise change the terms of
the Amendment, delay the effectiveness thereof or otherwise adversely effect the
rights of Yifan and the Shareholders as embodied in this Agreement.
Notwithstanding the generality of the foregoing, the Company may, if
circumstances warrant, take such action as may be necessary to accelerate the
effectiveness of the Amendment.
In addition to the Old Common, the Company has previously issued selling
agent's warrants to purchase an aggregate of 693,333 shares of Old Common at an
exercise price of $0.20625 per share. A true and correct copy of the form of
Warrant Agreement is attached hereto as Exhibit "D" and the beneficial owners of
such warrants, as reflected on the records of the Company, are identified in
Schedule "D-1" to this Agreement. The holders of the warrants have the
piggy-back and demand registration rights specified in the Warrant Agreement and
such warrants include customary provisions for the adjustment of the warrant
terms to reflect subsequent stock issuances at a price that is less than the
exercise price of the warrants. After accounting for all of the adjustments
required by the terms of the Warrant Agreements, including the adjustments
necessitated by the terms of this Agreement and the Amendment, such outstanding
warrants will represent the right to purchase an 136,191 shares of New Common at
an exercise price of $1.05 per share. The Company's "Calculation of Warrant
Exercise Price Adjustments" is set forth in Schedule "D-2" to this Agreement and
incorporated herein by this reference. Except for the selling agents warrants,
the Company has no other options, warrants or stock purchase rights issued and
outstanding.
d. Public Offering. The initial public offering of the Company was a bona
fide offering to the "public" as such term is used and defined in connection
with offerings of securities subject to the Securities Act of 1933, as amended
(said Act and rules and regulations promulgated thereunder being hereinafter
referred to as the "Securities Act") in material compliance with the Securities
Act and the rules and regulations promulgated thereunder. The Old Common of the
Company that was issued and outstanding prior to the Closing Date of this
Agreement has been (a) issued pursuant to a valid claim of exemption under
Section 4(2) of the Securities Act, (b) issued pursuant to an effective
registration statement under the Securities Act, or (c) issued in violation of
the registration requirements of the Securities Act, but at a date sufficiently
remote from the Closing Date that that purchasers of such shares are precluded
from initiating or maintaining an action in law or in equity based on the sale
and issuance of such shares.
e. Authority. The Company has all requisite corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated herein. The execution and delivery
of this Agreement and the consummation of the transactions contemplated herein
have been duly authorized by all necessary corporate action and no other
corporate proceeding on the part of the Company (including, without limitation,
any approval by the shareholders of the Company of this Agreement or the
transactions contemplated herein) is necessary to authorize this Agreement or to
consummate the transactions contemplated herein. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by Yifan and the Shareholders, constitutes the
legal, valid and binding obligation of the Company enforceable in accordance
with its' terms.
f. No Conflict; Required Filings and Consents. The execution and delivery
of this Agreement by the Company does not, and the performance of this Agreement
by the Company will not (i) conflict with or violate the Certificate of
Incorporation or By-Laws, as amended or restated, of the Company, (ii) conflict
with or violate any Laws in effect as of the date of this Agreement applicable
to the Company or by which any of its' properties is bound, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a lien or Encumbrance on, any of the
properties or assets of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the Company
or any of its' properties is bound or subject except for breaches, defaults,
events, rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or Encumbrances that would not have a material adverse
effect on the business, properties, assets, condition (financial or otherwise)
operations or prospects of the Company, taken as a whole, or on the transactions
herein contemplated ("Company Material Adverse Effect").
The execution and delivery of this Agreement by the Company and the
performance of this Agreement by the Company does not require the Company to
obtain any consent, approval, authorization or permit of, or to make any filing
with or notification to, any Governmental Entities, except for applicable
requirements, if any, of (i) the Securities Act, the Exchange Act, the Blue Sky
Laws, the National Association of Securities Dealers, and the filing and
recordation of such appropriate documents as required by General Corporation Law
of Delaware and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
either individually or in the aggregate, prevent the Company from performing
its' obligations under this Agreement or have a Company Material Adverse Effect.
While the Company is not required to obtain any regulatory consents prior
to the closing of this Agreement, it is expressly acknowledged by the parties
that the Company will be required to make the following filings with the SEC in
connection with the execution of this Agreement, the effectiveness of the
Amendment and the performance of the Company's obligations hereunder.
o Within 5 days after the execution of this Agreement, the Company will
be required to file with the SEC and promptly distribute to its'
stockholders an "Information Statement Pursuant to Section 14(f) of
the Exchange Act " which discloses that effective on the 10th day
after the mailing thereof, four individuals selected by Yifan will be
appointed to the Board of Directors;
o Within 15 days after the execution of the Agreement, the Company will
be required to file with the SEC a Current Report on Form 8-K that
provides detailed information on the business combination effected by
this Agreement, including audited and unaudited historical financial
information on Yifan and unaudited pro forma financial information;
o Within 20 days after the execution of the Agreement, the Company will
be required to file with the SEC an "Information Statement Pursuant to
Section 14(c) of the Exchange Act" that provides the detailed
disclosure on the Amendment;
o After the Company has responded to any comments from the SEC's staff
and is legally authorized to mail to its' stockholders the
"Information Statement Pursuant to Section 14(c) of the Exchange Act,"
the Company intends to take such additional action as may be necessary
to change the effective date of the Amendment to the date which is 20
days after the mailing date of the Information Statement;
g. Permits; Compliance. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its' properties and to carry on its' business as it is now being conducted
(collectively, the "Company Permits"), and there is no action, proceeding or
investigation pending or, to the knowledge of the Company, threatened, regarding
suspension or cancellation of any of the Company Permits. The Company is not in
conflict with, or in default or violation of (a) any Law applicable to the
Company or by which any of its' properties is bound or subject or (b) any of the
Company Permits, except for any such conflicts, defaults or violations which
would not have a Company Material Adverse Effect. The Company has not received
from any Governmental Entity any written notification with respect to possible
conflicts, defaults or violations of Laws.
h. Reports; Financial Statements. The Company has filed (i) all forms,
reports, statements and other documents required to be filed with (A) the SEC,
including, without limitation (1) all Annual Reports on Form 10-KSB, (2) all
Quarterly Reports on Form 10-QSB, (3) all proxy statements relating to meetings
of stockholders (whether annual or special), (4) all Reports on Form 8-K, (5)
all other reports or registration statements and (6) all amendments and
supplements to all such reports and registration statements (collectively, the
"Company SEC Reports") and (B) any applicable Blue Sky Laws and (ii) all forms,
reports, statements and other documents required to be filed with any other
applicable federal or state regulatory authorities (all such forms, reports,
statements and other documents being referred to herein, collectively, as the
"Company Reports"). The Company Reports were prepared in all material respects
in accordance with the requirements of applicable Law (including, with respect
to the Company SEC Reports, the Securities Act and Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
Company SEC Reports) and did not at the time they were filed 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.
Each of the financial statements (including, in each case, any related
notes thereto) contained in the Company SEC Reports filed prior to or on the
date of this Agreement (i) have been prepared in accordance with, and complied
as to form with, the published rules and regulations of the SEC and generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as otherwise noted therein) and (ii) fairly present the
financial position of the Company as of the respective dates thereof and the
results of its' operations and cash flows for the periods indicated.
The Company's auditors have issued no management letters in connection
with the Company's financial statements.
Attached hereto as Exhibit "E", the text of which is hereby incorporated
herein by reference, are the audited financial statements of the Company as of
December 31, 1999, containing the balance sheet of the Company and the related
statements of operations, cash flows and shareholders' equity for the period
then ended, together with unaudited interim financial statements for the period
ended June 30, 2000 (the "Company Financial Statements"). The Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles and practices consistently followed by the Company throughout the
period indicated, and fairly present the consolidated financial position of the
Company as of the date thereof. Schedule "E-1" attached hereto describes every
sale of the Company's stock that has occurred subsequent to the date of the
unaudited interim financial statements. Except as described in the notes to the
Company's Financial Statements and Schedule E-1, the Company has not:
(1) issued any shares of its' capital stock, or any options or rights
to acquire such securities, to any person;
(2) paid or declared any dividends or distributions of capital, surplus, or
profits with respect to any of its' issued and outstanding shares of
capital stock;
(3) paid or agreed to pay any consideration in redemption of any of
its' issued and outstanding capital stock; or
(4) entered into any other transaction or agreement which would, or might,
materially impair its' shareholders' equity as reflected in such financial
statements.
i. Satisfaction of All Liabilities. Subsequent to the date of the interim
financial statements set forth in Exhibit E, the Company has compromised, paid
or otherwise settled all of its' liabilities to third party creditors. Exhibit
"F" attached hereto contains a complete list of all former creditors of the
Company and the terms of all compromise, payment or settlement agreements
entered into by the Company with respect thereto. All amounts payable with
respect to such compromise, payment and settlement agreements have been paid in
full as of the date of this Agreement and the Company has no further obligation,
duty or liability with respect thereto.
j. No Undisclosed Liabilities. There are no liabilities of any kind
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whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a
liability.
k. Indemnification Against Unpaid and Undisclosed Liabilities. As an
inducement to Yifan and the Shareholders to enter into the transactions
contemplated hereby, Capston Network Company, a principal stockholder of the
Company, has agreed to indemnify the Company, Yifan and the Shareholders against
any loss or damage incurred as a result of unpaid or undisclosed liabilities to
third-party creditors arising from the operations of the Company prior to the
date of this Agreement. A true and complete copy of the Indemnification
Agreement executed by Capston is attached hereto as Exhibit "G" and incorporated
herein by this reference.
l. Absence of Certain Changes or Events. Except as disclosed in
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Company SEC Reports filed prior to or on the date of this Agreement, there
has not been any significant change by the Company in its' accounting
methods, principles or practices.
m. Absence of Litigation. There is no claim, action, suit, litigation,
proceeding, arbitration or investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or
threatened against the Company or any properties or rights of the Company and
the Company is not subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or continuing
investigation by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator, including,
without limitation, cease and desist or other orders.
n. Taxes. The Company has filed all federal, state and local tax returns
required by law, or has filed proper extensions, and has paid all Taxes,
assessments and penalties due and payable. The provisions for Taxes, if any,
reflected in the most recent balance sheet included in the Company Financial
Statements are adequate for any and all federal, state, county and local taxes
for the period ending on the date of that balance sheet and for all prior
periods, whether or not disputed. There are no present disputes as to Taxes of
any nature payable by the Company.
o. Brokers. Except as specifically disclosed to Yifan and the
Shareholders, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated in this Agreement based upon arrangements made by or
on behalf of the Company. Notwithstanding the generality of the foregoing,
Capston has advised the Company that it intends to transfer 89,961 shares of New
Common to 5 individuals as compensation for financial consulting services
rendered in connection with the transaction contemplated hereby. Capston has
also advised the Company that it intends to distribute an aggregate of 204,424
shares of New Common to 11 individuals who have rendered substantial service to
Capston in connection with its' activities pursuant to a Project Management
Agreement with the Company. Exhibit "H" sets forth a true and complete list of
persons who are entitled to receive consulting fees or other compensation from
Capston in connection with the execution and performance of this Agreement,
showing for each such person the person's name, address, social security number
and the number of shares of New Common issuable as compensation.
p. Company Corporate Action. The holders of a majority of the issued
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and outstanding stock of the Company have approved the Amendment and the
transaction contemplated hereby in accordance with the applicable provisions
of the General Corporation Law of Delaware.
q. Environmental Laws and Regulations. The Company is in material
compliance with all applicable Environmental Laws, which compliance includes,
but is not limited to, the possession by the Company of all material permits and
other governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof and compliance with
notification, reporting and registration provisions under applicable
Environmental Laws; the Company has not received notice of, or, to the knowledge
of the Company, is the subject of any Environmental Claim; and to the knowledge
of the Company, there are no circumstances that are reasonably likely to prevent
or interfere with such material compliance in the future, or to require material
expenditures to maintain such material compliance in the future.
There are no Environmental Claims that are pending or, to the knowledge of
the Company, threatened against the Company or, to the knowledge of the Company,
against any person or entity whose liability for any Environmental Claim the
Company has or may have retained or assumed either contractually or by operation
of law.
To the knowledge of the Company, there are no circumstances that could
form the basis for an Environmental Claim against the Company, or against any
person or entity whose liability for any Environmental Claim the Company has or
may have retained or assumed either contractually or by operation of law.
r. Contract Rights. Except for this Agreement and the agreements
contemplated herein, the Company is not a party to or bound by any contract or
agreement, whether written or oral, including, without limitation, any contract
or agreement for employment, consulting or similar services, for capital
expenditures or the acquisition or construction of fixed assets, which
constitutes any note, bond, indenture or other evidence of indebtedness or
guaranty or security for indebtedness of others, for the sale of any asset, or
the grant of any right or option to purchase such asset, which constitutes a
lease, which purports to limit the freedom of the Company to compete in any line
of business or in any geographic area or to borrow money or incur indebtedness.
s. Employee Benefit Plans. Except for its' recently adopted Incentive
Stock Plan, the Company does not have, and has not had any employee benefit plan
(including, without limitation, any "employee benefit plan," as defined in
Section 3(3) of the ERISA), or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan, arrangement or understanding
(whether or not legally binding). No incentive grants of any type or nature are
outstanding under the Company's Incentive Stock Plan and no person has any right
to require the Company to issue any such incentive grant in the future.
The Company is not party to any collective bargaining agreement.
The Company has no obligation for retiree health, medical or life
insurance benefits under any plan or arrangement. The Company has no
employees other than Xxxxx X. Xxxxxx.
t. Transfer Agent. The Company has appointed American Stock Transfer &
Trust Company, New York, New York as the Company's transfer agent. The Company
will continue to retain a transfer agent reasonably satisfactory to Yifan and
the Shareholders for so long as the Company is subject to the reporting
requirements under Section 12(g) or Section 15(d) of the Exchange Act. The
Company will make arrangements to have available at the office of the transfer
agent sufficient quantities of the Company's common stock certificates as may be
needed for the quick and efficient transfer of the Shares.
u. Survival of Representations and Warranties. All of the
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representations and warranties set forth above are true as of the date of
this Agreement, shall be true at the Closing Date and shall survive the
closing for a period of three (3) years from the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF YIFAN AND THE SHAREHOLDERS.
Yifan and the Shareholders jointly and severally represent and warrant to the
Company:
a. Organization and Qualification; Subsidiaries. Yifan is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York, has all requisite corporate or other power and authority to
own, lease and operate its' properties and to carry on its' business as it is
now being conducted, and is duly qualified and in good standing to do business
in the State of New York and each other jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its' properties makes
such qualification necessary. Yifan has no directly or indirectly owned
subsidiaries.
b. Articles of Incorporation and By-Laws. Yifan has heretofore furnished
to the Company complete and correct copies of its' Articles of Incorporation and
By-Laws, including all amendments thereto or restatements thereof. Yifan is not
in violation of any of the provisions of its' Articles of Incorporation,
By-Laws, or any of the amendments thereto.
All original documents relating to Yifan's affairs have been made available
to all parties to the transactions contemplated hereby. Included within the
documents made available have been at least the Articles of Incorporation and
any Amendments, By-laws and any amendments thereto, Minutes of all of the
meetings of the Incorporators, Directors and Shareholders, all financial
statements and copies of all contracts, leases, patents, copyrights, licenses,
trademarks or agreements to which Yifan is a party or in which Yifan has an
interest.
c. Capitalization. The authorized capital stock of Yifan consists of
5,000,000 shares of common stock, $0.01 par value ("Yifan Common"). As of the
date hereof, all 5,000,000 shares of authorized Yifan Common are issued,
outstanding and held of record by the Shareholders identified in Schedule A-1
attached hereto. All 5,000,000 shares of issued and outstanding Yifan Common are
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, Yifan's Articles of Incorporation or
By-Laws or any agreement to which Yifan is a party or bound. There are no bonds,
debentures, notes or other issued and outstanding securities of any kind that
have the right to vote on any matters submitted for a vote of the Shareholders.
Yifan has received and accepted fully paid subscriptions for an additional
331,000 shares of Yifan Common that will be issuable upon the filing of an
amendment to Yifan's Articles of Incorporation that was previously consented to
in writing by the holders of a majority of the issued and outstanding Yifan
Common. The persons who have subscribed to purchase the additional shares of
Yifan Common are also identified in Schedule A-1 and are referred to from time
to time herein as "Shareholders," notwithstanding the fact that Yifan lacks the
corporate capacity to issue such additional shares at the date of this
Agreement.
All holders of Yifan Common and all persons who have subscribed to purchase
shares of Yifan Common are identified in Schedule A-1 to this Agreement and
there are no other options, warrants, calls, rights, agreements, arrangements or
commitments presently outstanding that obligate Yifan to issue, deliver or sell
shares of its' capital stock or debt securities, or that obligate Yifan to
grant, extend or enter into any such option, warrant, call, right, agreement,
arrangement or commitment. Schedule A-1 sets forth a true and complete list of
all holders of Yifan Common and all persons who have subscribed to purchase
additional shares of Yifan Common, showing for each such person the
Shareholder's name, address, social security number and the number of shares of
Yifan Common owned or subscribed for as of the date hereof.
d. Authority. Yifan has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its' obligations hereunder and to
consummate the transactions contemplated herein. The execution and delivery of
this Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate action and no other corporate
proceeding on the part of Yifan is necessary to authorize this Agreement or to
consummate the transactions contemplated herein. This Agreement has been duly
executed and delivered by Yifan and, assuming the due authorization, execution
and delivery thereof by the Company, constitutes the legal, valid and binding
obligation of Yifan enforceable in accordance with its' terms.
e. No Conflict; Required Filings and Consent. The execution and delivery
of this Agreement by Yifan does not, and the performance of this Agreement by
Yifan will not (i) conflict with or violate the Articles of Incorporation or
By-Laws of Yifan, (ii) conflict with or violate any federal, state, or local
law, statute, ordinance, rule, regulation, order, judgment or decree
(collectively, "Laws") in effect as of the date of this Agreement and applicable
to Yifan or by which its' properties are bound or subject, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of an Encumbrance on, any of the properties or
assets of Yifan pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Yifan is a party or by which Yifan or its' properties are bound or
subject except for breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation, payment obligations or liens or Encumbrances that
would not have a material adverse effect on the business, properties, assets,
condition (financial or otherwise) operations or prospects of Yifan, taken as a
whole ("Yifan Material Adverse Effect").
The execution and delivery of this Agreement by Yifan does not, and the
performance of this Agreement by Yifan will not, require Yifan to obtain any
consent, approval, authorization or permit of, or to make any filing with or
notification to, any governmental or regulatory authority ("Governmental
Entities") based on laws, rules, regulations and other requirements of
Governmental Entities in effect as of the date of this Agreement, except for
applicable requirements, if any, of (i) federal or state securities laws and the
filing and recordation of certain corporate documents as required by applicable
State law and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
either individually or in the aggregate, prevent Yifan from performing its'
obligations under this Agreement or have a Yifan Material Adverse Effect.
f. Permits; Compliance. Yifan is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its'
properties and to carry on its' business as it is now being conducted
(collectively, the "Yifan Permits"), and there is no action, proceeding or
investigation pending or, to the knowledge of Yifan, threatened, regarding
suspension or cancellation of any of Yifan Permits. Yifan is not in conflict
with, or in default or violation of (a) any Law applicable to Yifan or by which
any of its' properties is bound or subject or (b) any of the Yifan Permits,
except for any such conflicts, defaults or violations which would not have a
Yifan Material Adverse Effect.
g. Financial Statements. Attached hereto as Exhibit "I", the text of which
is hereby incorporated herein by reference, are the audited financial statements
of Yifan as of December 31, 1999 containing the balance sheet of Yifan and the
related statements of operations, cash flows and shareholders' equity for the
period then ended, together with unaudited interim financial statements for the
period ended June 30, 2000 (the "Yifan Financial Statements"). The Yifan
Financial Statements have been prepared in accordance with generally accepted
accounting principles and practices consistently followed by Yifan throughout
the period indicated, and fairly present the consolidated financial position of
Yifan as of the dates thereof. Schedule "I-1" attached hereto describes every
sale of Yifan Common that has occurred subsequent to the date of the unaudited
interim financial statements and Schedule A-1 includes the required information
with respect to each such Stockholder. Except as described in the notes to the
Yifan Financial Statements and Schedule I-1, Yifan has not
(1) issued any options or other rights to acquire any common stock or
other securities of Yifan to any person;
(2) paid or declared any dividends or distributions of capital, surplus,
or profits with respect to any of its' issued and outstanding shares
of capital stock;
(3) paid or agreed to pay any consideration in redemption of any of its'
issued and outstanding capital stock; or
(4) entered into any other transaction or agreement which would, or might,
materially impair its' shareholders' equity as reflected in such
financial statements.
h. No Undisclosed Liabilities. There are no liabilities of Yifan of any
kind whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a liability,
other than liabilities fully reflected or reserved against on the Yifan
Financial Statements; and liabilities which, individually or in the aggregate,
would not have a Yifan Material Adverse Effect.
i. Absence of Certain Changes or Events. Except as and to the extent
disclosed herein since June 30, 2000, there has not been any significant change
by Yifan in its' accounting methods, principles or practices or any circumstance
which would constitute a Yifan Material Adverse Effect.
j. Absence of Litigation. There is no claim, action, suit, litigation,
proceeding, arbitration or investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or
threatened against Yifan or any properties or rights of Yifan and Yifan is not
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or continuing investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, decree or award
of any Governmental Entity or arbitrator, including, without limitation,
cease-and-desist or other orders.
k. Taxes. Yifan has filed all federal, state and local tax returns
required by law, or has filed proper extensions, and has paid all Taxes,
assessments and penalties due and payable. The provisions for Taxes, if any,
reflected in the most recent balance sheet included in the Yifan Financial
Statements are adequate for any and all federal, state, county and local taxes
for the period ending on the date of that balance sheet and for all prior
periods, whether or not disputed. There are no present disputes as to Taxes of
any nature payable by Yifan.
l. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated in this Agreement based upon arrangements made by or
on behalf of Yifan except for fees consisting of 179,921 shares of New Common
that will be issued 5 of the individuals identified in Exhibit H as compensation
for financial consulting services rendered in connection with the transaction
contemplated hereby. Exhibit H sets forth a true and complete list of persons
who are entitled to receive consulting fees or other compensation from Yifan in
connection with the execution and performance of this Agreement, showing for
each such person the person's name, address, social security number and the
number of shares of New Common issuable as compensation.
m. Yifan Corporate Action. The Board of Directors of Yifan has by the
unanimous vote of all directors present (a) determined that the transaction
contemplated hereby is advisable and fair and in the best interests of Yifan and
its' Shareholders, (b) approved the transaction contemplated hereby in
accordance with the applicable provisions of New York law, (c) recommended the
approval of this Agreement by the Shareholders (d) obtained the unanimous
approval of all Shareholders of a resolution approving the transactions
contemplated in this Agreement; and (e) obtained written Investment
Representation Letters from all of the Shareholders.
n. Environmental Laws and Regulations. (a) Yifan is in material compliance
with all applicable federal, state and local laws and regulations and common law
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata (collectively, "Environmental Laws")), which
compliance includes, but is not limited to, the possession by Yifan of all
material permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof and
compliance with notification, reporting and registration provisions under
applicable Environmental Laws; Yifan has not received notice of, or, to the
knowledge of Yifan, is the subject of, any action, cause of action, claim,
investigation, demand or notice by any person or entity alleging liability under
or noncompliance with any Environmental Law ("Environmental Claim"); and to the
knowledge of Yifan, there are no circumstances that are reasonably likely to
prevent or interfere with such material compliance in the future, or to require
material expenditures to maintain such material compliance in the future.
There are no Environmental Claims that are pending or, to the knowledge of
Yifan, threatened against Yifan, or, to the knowledge of Yifan, against any
person or entity whose liability for any Environmental Claim Yifan has or may
have retained or assumed either contractually or by operation of law.
To the knowledge of Yifan, there are no circumstances that could form the
basis for an Environmental Claim against Yifan, or against any person or entity
whose liability for any Environmental Claim Yifan has or may have retained or
assumed either contractually or by operation of law.
o. Intellectual Property Rights. Yifan has good and marketable title
------------------------------
to all patents, know-how, trade secrets, trademarks and other intellectual
properties required for operation of its' business, including but not limited
to:
o Full unencumbered and unrestricted ownership of the internet domain
name "xxxxx.xxx," together with the existing Chinese language internet
portal site operating under such domain name and all of the software
source code, computer programs, business processes, trademarks,
copyrights and other intellectual property incorporated therein or
necessary for the operation thereof;
o Full unencumbered and unrestricted ownership of the internet domain
name "xxxxx.xxx," together with the existing Chinese language internet
portal site operating under such domain name and all of the software
source code, computer programs, business processes, trademarks,
copyrights and other intellectual property incorporated therein or
necessary for the operation thereof;
o Full unencumbered and unrestricted ownership of the internet domain
name "xxxxxxxx.xxx," together with the existing Chinese language
internet portal site operating under such domain name and all of the
software source code, computer programs, business processes,
trademarks, copyrights and other intellectual property incorporated
therein or necessary for the operation thereof;
o Full unencumbered and unrestricted ownership of the internet domain
name "xxxxxxxx.xxx," together with the existing bulletin board service
operating under such domain name and all of the software source code,
computer programs, business processes, trademarks, copyrights and
other intellectual property incorporated therein or necessary for the
operation thereof;
o Full unencumbered and unrestricted ownership of the internet domain
name "xxxxxxxx.xxx," together with the existing Chinese language
internet search engine operating under such domain name and all of the
software source code, computer programs, business processes,
trademarks, copyrights and other intellectual property incorporated
therein or necessary for the operation thereof;
o Full unencumbered and unrestricted ownership of the "E-Omninet"
e-mail, file management and web hosting service together with all of
the software source code, computer programs, business processes,
trademarks, copyrights and other intellectual property incorporated
therein or necessary for the operation thereof;
o Full unencumbered and unrestricted ownership of the internet domain
name "Yifansoft,com" and associated software development activities
together with all of the software source code, computer programs,
business processes, trademarks, copyrights and other intellectual
property incorporated therein or necessary for the operation thereof;
o All user service agreements, user records and customer lists of
xxxxx.xxx, xxxxx.xxx, xxxxxxxx.xxx, xxxxxxxx.xxx, xxxxxxxx.xxx,
E-Omninet and Yifansoft, together with all of the user file archives,
computer programs, business processes, trademarks, copyrights and
other intellectual property incorporated therein or necessary for the
operation thereof;
Such intellectual properties are free and clear of all liens, charges,
encumbrances, or restrictions, however characterized. All of the contracts,
leases, subleases, patents, copyrights, licenses and agreements, however
characterized, under which Yifan holds such intellectual properties are in full
force and effect. Yifan is not in default under any of the material terms or
provisions of any contracts, leases, subleases, patents, copyrights, licenses or
agreements under which Yifan holds its' intellectual properties. There are no
known claims against Yifan concerning its' rights under the leases, subleases,
patents, copyrights, licenses and agreements and concerning its' right to
continued possession of the intellectual properties.
p. Survival of Representations and Warranties. All of the
---------------------------------------------------
representations and warranties set forth above are true as of the date of
this Agreement, shall be true at the Closing Date and shall survive the
closing for a period of three (3) years from the Closing Date.
4. REPRESENTATIONS AND WARRANTIES BY THE SHAREHOLDERS. The
Shareholders hereby jointly and severally warrant to the Company:
a. The Shareholders have full power and authority to exchange the Yifan
Common held by them upon the terms and conditions provided for in this
Agreement, and when delivered to the Company in accordance with the terms of
this Agreement, the Yifan Common will be free and clear of any lien or other
encumbrance.
b. The Shareholders acknowledge that they have been advised that the
Company will not have the corporate authority under Delaware law to issue shares
of New Common to the Shareholders on the Closing Date specified in Section 5 of
this Agreement and that the actual issuance and delivery of such shares of New
Common to the Shareholders will be contingent on the effectiveness of a
previously filed Amendment to the Company's Certificate of Incorporation that
was duly adopted and filed in accordance with Delaware law, but will not become
effective until 12:01 a.m. on September 30, 2000.
c. The Shareholders are acquiring stock of the Company solely for their
own account, for investment, and not with a view to any subsequent
"distribution" thereof within the meaning of that term as defined in the
Securities Act. The Shareholders understand that the stock of the Company has
not been registered under the Securities Act or securities laws of any State
("State Act") by reason of the specific exemptions therefrom, which exemptions
depend in part upon the Shareholders subjective investment intent as expressed
herein. In furtherance of the foregoing, each Shareholder has executed and
delivered to the Company an Investment Representation Letter in the form set
forth in Exhibit A attached hereto.
d. Each of the Shareholders desires to join in this Agreement as a party
and to be bound by all of the terms and conditions set forth herein. In
furtherance of the foregoing, each Shareholder has executed and delivered to the
Company a Reorganization Agreement Signature Page in the form set forth in
Exhibit A attached hereto
The Shareholders represent and warrant that all of the representations and
warranties set forth above are true as of the date of this Agreement, shall be
true at the Closing Date and shall survive the closing for a period of three (3)
years from the Closing Date.
5. CLOSING DATE. The final closing of this Agreement shall take place in
New York, New York on July 30, 2000, or at such other reasonable time and place
as the parties hereto shall agree upon.
6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of
the Company hereunder shall be subject to the following conditions:
a. The Company shall not have discovered any material error, misstatement
or omission in any of the representations and warranties made by Yifan or the
Shareholders herein and all the terms and conditions of this Agreement to be
performed and complied with have been performed and complied with.
b. There shall have been no material adverse changes in the financial
condition, business or operations of Yifan taken as a whole from June 30, 2000
until the Closing Date, except for changes resulting from operations in the
usual and ordinary course of its' business, and between such dates no business
and assets of Yifan shall have been materially adversely affected as the result
of any fire, explosion, earthquake, flood, accident, strike, lockout,
combination of the workmen, condemnation of any assets by any governmental
authorities, riot, activities of armed forces, or Acts of God or of the public
enemies.
c. There shall have been no material adverse changes in the financial
condition, business or operations of Yifan, except for immaterial changes
resulting from operations in the usual ordinary course of the business.
d. The Company shall have received the opinion of legal counsel for
Yifan, to the effect that:
(1) Yifan is a corporation duly organized, validly existing and in good
standing under the laws of New York and has the power and authority to own
its' properties and to carry on its' business in the State of New York as
of the Closing Date;
(2) The outstanding Yifan Common is validly issued, fully paid and
nonassessable;
(3) This Agreement has been duly executed and delivered by Yifan and the
Shareholders and constitutes a legal, valid and binding obligation of Yifan
and the Shareholders enforceable in accordance with its' terms.
7. CONDITIONS TO THE OBLIGATIONS OF YIFAN AND THE SHAREHOLDERS. The
obligations of the Yifan and the Shareholders hereunder are subject to the
following conditions:
a. Yifan and the Shareholders shall not have discovered any material error
or misstatement in any of the representations and warranties made by the Company
herein and all the terms and conditions of this Agreement to be performed and
complied with by the Company have been performed and complied with.
b. There shall have been no material adverse changes in the financial
condition, business or operations of the Company, from June 30, 2000 until the
Closing Date, except for changes resulting from those operations in the usual
ordinary course of the business.
c. Yifan and the Shareholders shall have received the opinion of
legal counsel for the Company, to the effect that:
(1) The Company is a corporation duly organized and validly existing under
the laws of the State of Delaware and has the power to own and operate its'
properties wherever the same shall be located as of the Closing Date;
(2) The New Common of the Company which was issued and outstanding prior to
the Closing Date of this Agreement has been (a) issued pursuant to a valid
claim of exemption under Section 4(2) of the Securities Act, (b) issued
pursuant to an effective registration statement under the Securities Act,
or (c) issued in violation of the applicable registration requirements of
the Securities Act, but at a date sufficiently remote from the Closing Date
that that purchasers of such shares are precluded from initiating or
maintaining an action in law or in equity based on the sale and issuance of
such shares;
(3) The execution, delivery and performance of this Agreement by the
Company has been duly authorized by all necessary corporate action and
constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its' terms;
(4) The Amendment to the Company's Certificate of Incorporation, which will
automatically become effective at 12:01 a.m. on September 30, 2000, has
been duly proposed by the board of directors, approved by holders of a
majority of the Company's issued and outstanding stock and filed in the
office of the Secretary of State of Delaware.
(5) When the Amendment becomes effective in accordance with Delaware law,
the Company will have all necessary authority to deliver 11,994,750 shares
of New Common to the Shareholders in accordance with this Agreement;
(6) When the New Common is delivered to the Shareholders pursuant to the
terms of this Agreement, such shares will be validly issued, fully paid and
nonassessable;
(7) The transaction contemplated qualifies as a tax-free reorganization
under ss.368(a)(1)(B) of the Internal Revenue Code and related regulations
thereunder and the receipt of New Common by the Shareholders on the
effective date of the Amendment will not give rise to a taxable event; and
(8) The Old Common of the Company is fully registered under the Exchange
Act and the Company has, for the preceding 12 months, filed all reports
required to be filed under Sections 12 and 15 of the Exchange Act.
8. ACTIONS AT THE CLOSING. At the closing of this Agreement, the
Shareholders will each deliver, or cause to be delivered to the Company, the
Reorganization Agreement Signature Page specified in Section 4(c) of this
Agreement, the Investment Representation Letter specified in Section 4(d) of
this Agreement and certificates for the shares of Yifan stock to be exchanged in
accordance with this Agreement, duly endorsed to the Company. In addition to the
above-mentioned delivery of documents by the Shareholders, the following will
take place at the final closing.
Yifan and the Shareholders will deliver to the Company:
(1) The opinion of legal counsel for Yifan, as provided for in
Section 6(d) hereof;
(2) A certificate of corporate good standing for Yifan from the Secretary
of State of the State of New York which shall be dated no more than sixty
(60) days prior to the Closing Date;
(3) A certificate by a principal officer of Yifan that each of the
representations and warranties of Yifan and the Shareholders, respectively,
are true and correct as of the Closing Date and that all of the conditions
to the obligations of the Company which are to be performed by Yifan and
the Shareholders have been performed as of the Closing Date.
Concurrently, the Company will deliver to Yifan and the Shareholders:
(1) Receipts in the form attached hereto as Exhibit "J" which evidence the
Shareholders' fully-paid right to receive certificates representing an
aggregate of 11,994,750 shares of the Company's New Common on the effective
date of the Amendment;
(2) Receipts in the form attached hereto as Exhibit J which evidence the
fully-paid right of certain consultants to receive certificates
representing an aggregate of 179,921 shares of the Company's New Common on
the effective date of the Amendment;
(3) Duly certified copies of corporate resolutions and other corporate
proceedings taken by the Company to authorize the execution, delivery and
performance of this Agreement;
(4) The opinion legal counsel for the Company, as provided for in
Section 7(c) hereof;
(5) A certificate executed by a principal officer of the Company attesting
that the foregoing representations and warranties of the Company are true
and correct as of the Closing Date and that all of the conditions to the
obligations of Yifan and the Shareholders which are to be performed by the
Company have been performed as of the Closing Date;
(6) A certificate of corporate good standing for the Company from the
Delaware Secretary of State which shall be dated no more than 60 days prior
to the Closing Date;
(7) Duly executed resignations of all existing officers of the
Company, effective as of 8:00 a.m. on the Closing Date;
(8) Duly certified copies of corporate resolutions (a) appointing a slate
of executive officers designated by Yifan to serve as officers of the
Company, effective as of 8:00 a.m. on the Closing Date; and (b) appointing
four persons designated by Yifan to serve as members of the Company's board
of directors commencing as of 8:00 a.m. on the eleventh day after the
Company mails to stockholders the Information Statement required by Section
14(f) of the Exchange Act.
9. ACTIONS SUBSEQUENT TO CLOSING. The Company hereby undertakes to
use all reasonable efforts to make the following filings with the SEC at the
time and in the manner herein specified.
a. Within 5 days after the execution of this Agreement, the Company shall
file with the SEC and promptly distribute to its' stockholders an "Information
Statement Pursuant to Section 14(f) of the Exchange Act" which discloses that
effective on the 10th day after the mailing thereof, four individuals selected
by Yifan will be appointed to the Board of Directors;
b. Within 15 days after the execution of the Agreement, the Company shall
file with the SEC a Current Report on Form 8-K that provides detailed
information on the transactions contemplated hereby, including audited and
unaudited historical financial information on Yifan and unaudited pro forma
financial information;
c. Within 20 days after the execution of the Agreement, the Company shall
file with the SEC an "Information Statement Pursuant to Section 14(c) of the
Exchange Act" that provides the detailed disclosure on the Amendment to the
Company's Certificate of Incorporation;
d. After the Company has responded to any comments from the SEC's staff and
is legally authorized to mail to its' stockholders the "Information Statement
Pursuant to Section 14(c) of the Exchange Act," the Company shall to take such
additional action as may be necessary to change the effective date of the
Amendment to the date which is 20 days after the mailing date of the Information
Statement;
10. ISSUANCE OF NEW COMMON. On the effective date of the Amendment, or as
soon thereafter as practicable, the Company will issue and deliver certificates
evidencing the ownership of 11,994,750 shares of the Company's New Common to the
Shareholders identified in Schedule A-1. Concurrently, the Company shall issue
and deliver certificates evidencing the ownership of 179,921 shares of the
Company's New Common to the financial consultants identified in Schedule H-1.
Concurrently, Capston will transfer 89,961 shares of the Company's New Common to
the financial consultants identified in Schedule H-1.
11. CONDUCT OF BUSINESS. Between the date hereof and the Closing Date,
Yifan shall conduct its' business in the same manner in which it has heretofore
been conducted and the Shareholders will not permit Yifan to (1) enter into any
contract, other than in the ordinary course of business, or (2) declare or make
any distribution in the nature of a dividend or return of capital to the
Shareholders without first obtaining the written consent of the Company.
Likewise, between the date hereof and the date when Yifan's nominees are
actually seated as members of the Board of Directors, the Company will not (1)
enter into any contract, other than in the ordinary course of business, (2)
declare or make any distribution in the nature of a dividend or return of
capital to its' shareholders without first obtaining the written consent of the
Shareholders, or (3) take any action to Amend its' Certificate of Incorporation
or modify in any respect the previously filed Amendment thereto.
12. BOARD OF DIRECTORS. Promptly after compliance with Section 14(f) of
the Exchange Act, the Board of Directors of the Company shall have a meeting, at
which the present directors of the Company shall elect as members of the
Company's Board of Directors, in accordance with the By-Laws of the Company,
four individuals nominated by Yifan. Such new directors shall serve as members
of the Board of Directors until the next annual meeting of the stockholders or
until their successors are elected and qualified.
13. FUTURE REGISTRATION OF COMMON STOCK. The Shareholders understand that
because the New Common has not been registered under the Act or any state Act,
they must hold the New Common indefinitely, and cannot dispose of any or all of
the New Common unless such New Common is subsequently registered under the Act
and any applicable State Act, or exemptions from registration are available. The
Shareholders acknowledge and understand that they have no independent right to
require the Company to register the shares of New Common. The Shareholders
further understand that the Company may, as a condition to the transfer of any
of New Common, require that the request for transfer by a Shareholder be
accompanied by an opinion of counsel, in form and substance satisfactory to the
Company, provided at such Shareholder's expense, to the effect that the proposed
transfer does not result in violation of the Securities Act or any applicable
State Act, unless such transfer is covered by an effective registration
statement under the Securities Act and is in compliance with all applicable
State Acts.
Notwithstanding the generality of the foregoing, the Company agrees that
all Shareholders who are not officers, directors or 10% stockholders of the
Company after the closing of the transaction evidenced hereby shall be entitled
to join in and have their shares of New Common registered by any registration
statement under the Securities Act that is subsequently filed by the Company for
the purpose of facilitating the piggy-back and demand registration rights held
by holders of the selling agent's warrants. The Shareholders will not have any
right to require the Company to file such a registration statement on their
behalf, but if such a Registration Statement is filed on behalf of the holders
of selling agent's warrants, then the Shareholders shall be entitled to join in
such registration statement.
14. TRANSFERABILITY. All certificates for shares of New Common which are
issued to the Shareholders pursuant to the terms of this Agreement shall be
restricted securities within the meaning of Regulation D promulgated under
Section 4(2) of the Securities Act. The Company shall issue stop transfer
instructions to the transfer agent for its' New Common with respect to the of
New Common and shall place the following legend on the certificates representing
such of New Common:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED PURSUANT TO
A TRANSACTION EFFECTED IN RELIANCE UPON SECTION 4(2) OF THE ACT AND RULE
506 OF REGULATION D PROMULGATED THEREUNDER AND HAVE NOT BEEN THE SUBJECT OF
A REGISTRATION STATEMENT UNDER THE ACT OR ANY STATE SECURITIES ACT. THESE
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR APPLICABLE EXEMPTION THEREFROM UNDER THE ACT OR ANY
APPLICABLE STATE SECURITIES ACT."
15. ACCESS TO INFORMATION. Either previously or concurrently herewith, the
Company has delivered to Yifan and the Shareholders correct and complete copies
of all documents and records requested by them. In addition, Yifan and the
Shareholders have had the opportunity to ask questions of, and receive answers
from, officers and directors of the Company, and persons acting on its' behalf
concerning the terms and conditions of the Agreement, and have received
sufficient information relating to the Company to enable them to make an
informed decision with respect to the acquisition of the New Common.
16. NO SOLICITATION. At no time were Yifan or the Shareholders presented
with or solicited by any leaflet, public promotion meeting, circular, newspaper
or magazine article, radio or television advertisement, or any other form of
general advertising in connection with its' acquisition of the New Common.
17. EXPENSES. The Shareholders, Yifan and the Company shall each pay their
respective expenses incident to this Agreement and the transactions contemplated
hereby, including all fees of their counsel and accountants, whether or not such
transactions shall be consummated. The Shareholders shall pay all other fees and
expenses incurred by them or by Yifan by reason of this Agreement and the
proposed transactions contemplated hereby.
18. ATTORNEYS FEES. In the event of any litigation among the parties
related to this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees and costs to be fixed by the Court, said fees to
include appeal and collection of judgment.
19. ARBITRATION. All disputes concerning this Agreement or the
transactions contemplated herein will be submitted to binding arbitration in New
York, New York, in accordance with the rules of the American Arbitration
Association. The decisions of the Arbitrator must be delivered in writing
accompanied by written findings of fact and conclusions of law. Any court of
competent jurisdiction may enter judgment upon the Arbitrator's awards. The
prevailing party, as part of its' damages, shall be entitled to recover its'
reasonable attorneys fees and expenses incurred in such arbitration from the
losing party.
20. MISCELLANEOUS.
a. This Agreement shall be controlled, construed and enforced in
accordance with the laws of the State of Delaware without giving effect to
conflict of laws principles thereof.
b. This Agreement may not be assigned by any party without prior
written consent of the others.
c. All Section headings herein are inserted for convenience only. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, which together shall constitute one and the same instrument.
Facsimile signatures shall constitute original signatures.
d. This Agreement incorporates the term of all prior agreements and sets
forth the entire understanding between the parties. No amendments hereto shall
be valid unless made in writing and signed by the parties hereto.
e. This Agreement shall be binding upon and shall inure to the benefit of
the heirs, executors, administrators and assigns of Yifan and the Shareholders
and upon the successors and assigns of the Company.
f. All notices, requests, instructions, or other documents to be given
hereunder shall be in writing and sent by registered mail as follows:
To the Company and/or Capston:
0000 Xxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
To Yifan and/or the Shareholders:
00-00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx, Xxx Xxxx 00000
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
Yifan Communications, Inc. Xxxxx.xxx, Inc.
By: /s/ By: /s/
-------------------------- -------------
Xxxxx X. Xxxxxx, President Yifan He, President
Shareholders Identified In Schedule A-1
By: /s/
-------------
Yifan He, Attorney in Fact
