Exhibit 2.1
SHARE EXCHANGE AGREEMENT
AMONG
CHINA DIGITAL COMMUNICATION GROUP
UPE (FAR EAST)., LTD.
SHENZHEN XXXX XXXX POWER SUPPLY INDUSTRY CO., LTD
AND
THE SHAREHOLDERS OF UPE (FAR EAST)., LIMITED, LISTED ON SCHEDULE 1
DATED AS OF
February 14, 2006
TABLE OF CONTENTS
PAGE
INDEX OF SCHEDULES AND EXHIBITS..............................................
ARTICLE I. EXCHANGE OF SHARES.................................................1
1.1 Agreement to Sell...................................................1
1.2 Purchase Price......................................................1
1.3 Mechanics of Exchange...............................................2
1.4 No Fractional Shares................................................2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF XXXX XXXX.......................2
2.1 Organization and Qualification......................................3
2.2 Subsidiaries........................................................3
2.3 Articles of Incorporation and Bylaws................................3
2.4 Authorization and Validity of this Agreement........................3
2.5 No Violation........................................................4
2.6 Capitalization and Related Matters..................................4
2.7 Compliance with Laws and Other Instruments..........................5
2.8 Certain Proceedings.................................................6
2.9 No Brokers or Finders...............................................6
2.10 Title to and Condition of Properties................................6
2.11 Absence of Undisclosed Liabilities..................................7
2.12 Changes.............................................................7
2.13 Material Contracts..................................................8
2.14 Tax Returns and Audits..............................................9
2.15 Material Assets. 10
2.16 Insurance Coverage.................................................10
2.17 Litigation; Orders.................................................11
2.18 Licenses...........................................................11
2.19 Interested Party Transactions......................................11
2.20 Governmental Inquiries.............................................12
2.21 Bank Accounts and Safe Deposit Boxes...............................12
2.22 Intellectual Property..............................................12
2.23 Stock Option Plans; Employee Benefits..............................12
2.24 Employee Matters 13
2.25 Environmental and Safety Matters...................................13
2.26 Material Customers.................................................14
2.27 Inventories........................................................14
2.28 Money Laundering Laws..............................................14
2.29 Disclosure.........................................................15
2.30 Finders and Brokers................................................15
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CHID..........................16
3.1 Organization; Good Standing........................................16
3.2 CHID Common Stock..................................................16
3.3 Authority; Binding Nature of Agreements............................16
3.4 Non-Contravention; Consents........................................17
3.5 Finders and Brokers................................................18
3.6 Reports and Financial Statements; Absence of Certain Changes.......18
3.7 Compliance with Applicable Law.....................................19
3.8 Complete Copies of Requested Reports...............................19
3.9 Full Disclosure....................................................19
ARTICLE IV. COVENANTS OF XXXX XXXX...........................................19
4.1 Access and Investigation...........................................19
4.2 Operation of Business..............................................20
4.3 Filings and Consents; Cooperation..................................21
4.4 Notification; Updates to Disclosure Schedules......................22
4.5 Commercially Reasonable Efforts....................................23
4.6 Confidentiality; Publicity.........................................23
ARTICLE V. COVENANTS OF CHID.................................................23
5.1 Notification.......................................................23
5.2 Filings and Consents; Cooperation..................................24
5.3 Commercially Reasonable Efforts....................................24
5.4 Disclosure of Confidential Information.............................24
5.5 Indemnification....................................................25
ARTICLE VI. CLOSING CONDITIONS OF CHID.......................................27
6.1 Accuracy of Representations and Warranties.........................27
6.2 Additional Conditions to Closing...................................27
6.3 Performance of Agreements..........................................28
6.4 Consents...........................................................28
6.5 No Material Adverse Change.........................................28
6.6 XXXX XXXX Closing Certificates....................................28
6.7 Transactional Agreements...........................................28
6.8 Resignation of Directors and Officers..............................29
6.9 Delivery of Stock Certificates, Minute Book and Corporate Seal.....29
ARTICLE VII. CLOSING CONDITIONS OF THE SHAREHOLDERS..........................29
7.1 Accuracy of Representations and Warranties.........................29
7.2 Additional Conditions to Closing...................................29
7.3 CHID Closing Certificates..........................................30
7.4 No Material Adverse Change.........................................30
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7.5 Performance of Agreements..........................................30
7.6 Consents...........................................................30
7.7 Registration Rights Agreement......................................30
7.8 CHID Stock.........................................................31
ARTICLE VIII. FURTHER ASSURANCES.............................................31
ARTICLE IX. TERMINATION .....................................................31
9.1 Termination........................................................31
9.2 Termination Procedures.............................................32
9.3 Effect of Termination..............................................32
ARTICLE X. MISCELLANEOUS ....................................................33
10.1 Survival of Representations and Warranties.........................33
10.2 Expenses...........................................................33
10.3 Entire Agreement...................................................33
10.4 Counterparts ......................................................33
10.5 Descriptive Headings...............................................33
10.6 Notices............................................................34
10.7 Choice of Law .....................................................34
10.8 Binding Effect; Benefits...........................................34
10.9 Assign ability ....................................................35
10.10 Waiver and Amendment...............................................35
10.11 Attorneys' Fees....................................................35
10.12 Severability.......................................................35
10.13 Construction.......................................................35
COUNTERPART SIGNATURE PAGE SHARE EXCHANGE AGREEMENT AMONG CHINA DIGITAL
COMMUNICATION GROUP, UPE (FAR EAST), LTD., SHENZHEN XXXX XXXX POWER SUPPLY
INDUSTRY CO., LTD. AND THE SHAREHOLDERS NAMED THEREIN 1
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INDEX OF SCHEDULES AND EXHIBITS
Exhibits:
A. Certain Definitions
B. Form of Registration Rights Agreement
Schedules:
1. Shareholders of UPE Limited. and Shenzhen Xxxx Xxxx Power Supply Industry
Co., Ltd
2. UPE and Shenzhen Xxxx Xxxx Power Supply Industry Co., Ltd Disclosure Schedule
SHARE EXCHAGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "AGREEMENT") dated as of February 14, 2006,
is entered into by and among CHINA DIGITAL COMMUNICATION GROUP, a Nevada
corporation ("CHID"), UPE Limited____ a BVI Corporation, Shenzhen Xxxx Xxxx
Power Supply Industry Co., Ltd a Shenzhen corporation in China (Xxxx Xxxx), and
the shareholders of UPE listed on Schedule 1 to this Agreement (each, a
"SHAREHOLDER" and, collectively, the "SHAREHOLDERS").
RECITALS
A. The Shareholders own the number of shares of capital stock in UPE (the
"SHARES") set forth opposite each Shareholder's name on Schedule 1, which Shares
collectively constitute all of the issued and outstanding shares of capital
stock in UPE.
B. UPE is a holding company and the sole shareholder of Xxxx Xxxx. UPE's sole
assets are its shareholdings in Xxxx Xxxx.
C. CHID desires to purchase from the Shareholders, and the Shareholders desire
to sell to CHID, the Shares in exchange for shares of CHID Common Stock, all on
the terms and subject to the conditions set forth in this Agreement (the
"Exchange").
D. As a result of the Exchange, CHID will become the sole shareholder of UPE,
and through UPE, will own all of the issued and outstanding stock of XXXX XXXX.
E. Certain capitalized terms used in this Agreement are defined on Exhibit A.
AGREEMENT
In consideration of the agreements, provisions and covenants set forth below,
CHID, UPE, the Shareholders and XXXX XXXX, hereby agree as follows:
ARTICLE I.
EXCHANGE OF SHARES
1.1 AGREEMENT TO SELL.
Upon the terms and subject to all of the conditions contained herein, each of
the Shareholders hereby agrees to sell, assign, transfer and deliver to CHID,
and CHID hereby agrees to purchase and accept from each of the Shareholders, on
the Closing Date, the Shares.
1.2 PURCHASE PRICE.
As full consideration for the sale, assignment, transfer and delivery of the
Shares by the Shareholders to CHID, and upon the terms and subject to all of the
conditions contained herein, CHID shall issue to the Shareholders 18,500,000
shares of RESTRICTED CHID COMMON STOCK (the "ACQUISITION SHARES") at $0.60 per
share and pay cash of $0 to the Shareholders. The parties understand and
acknowledge that such exchange is based upon an approximate valuation of CHID at
US $11.100, 000 and XXXX XXXX at US$11,100,000
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1.3 MECHANICS OF EXCHANGE.
(a) At the Closing, each Shareholder shall be entitled to surrender the
certificate or certificates that immediately prior to the Closing represented
the UPE Common Stock (the "CERTIFICATES") to the exchange agent designated by
CHID in exchange for the Acquisition Shares.
(b) Promptly after the Closing, CHID or its designated exchange agent shall make
available to each Shareholder a letter of transmittal and instructions for use
in effecting the surrender of Certificates in exchange for the Acquisition
Shares. Upon surrender of a Certificate to such exchange agent together with the
letter of transmittal, duly executed, the Shareholder shall be entitled to
receive in exchange therefore such number of Acquisition Shares as such
Shareholder has the right to receive in respect of the Certificate so
surrendered pursuant to the provisions of this Article I.
1.4 NO FRACTIONAL SHARES.
No fraction of a share of CHID Common Stock shall be issued in the Exchange. In
lieu of fractional shares, the Shareholders upon surrender of their Certificates
as set forth in Section 1.3 shall be paid an amount in cash, without interest,
rounded to the nearest cent, determined by multiplying the fractional interest
to which such Shareholder would otherwise be entitled by the Average CHID Stock
Price as of $0.60 per share agreed by all parties.
1.5 CLOSING.
The closing of the transactions contemplated by this Agreement (the "CLOSING")
shall take place in Shenzhen at 9:00 a.m., local time, on or before
February____, 2006 (the "CLOSING DATE"); provided, however, that if all of the
other conditions set forth in Articles VI and VII hereof are not satisfied or
waived, unless this agreement has been terminated under Section 9 hereof, or at
such date, the Closing Date shall be the business day following the day on which
all such conditions have been satisfied or waived, or at such other date, time
and place as CHID and UPE, XXXX XXXX and the Shareholders shall agree.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF XXXX XXXX
Except as set forth in the Disclosure Schedule attached hereto provided by UPE
and XXXX XXXX (the "UPE AND XXXX XXXX DISCLOSURE SCHEDULE"), the parts of which
are numbered to correspond to the section numbers of this Agreement, each of
UPE, XXXX XXXX and the Shareholders represents and warrants jointly and
severally to CHID as follows:
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2.1 ORGANIZATION AND QUALIFICATION.
Each of UPE and XXXX XXXX is duly incorporated, validly and in good standing
existing under the laws of BVI and China, has all requisite authority and power
(corporate and other), governmental licenses, authorizations, consents and
approvals to carry on its business as presently conducted and as contemplated to
be conducted, to own, hold and operate its properties and assets as now owned,
held and operated by it, to enter into this Agreement, to carry out the
provisions hereof except where the failure to be in good standing or to have
such governmental licenses, authorizations, consents and approvals will not, in
the aggregate, either (i) have a Material Adverse Effect on the business, assets
or financial condition of UPE or XXXX XXXX, or (ii) impair the ability of UPE or
XXXX XXXX to perform its material obligations under this Agreement. Each of UPE
and XXXX XXXX is duly qualified, licensed or domesticated as a foreign
corporation in good standing in each jurisdiction wherein the nature of its
activities or its properties owned or leased requires such qualification,
licensing or domestication, except where the failure to be so qualified,
licensed or domesticated will not have a Material Adverse Effect. Set forth on
Part 2.1 of the UPE and XXXX XXXX Disclosure Schedule is a list of those
jurisdictions in which each of UPE and XXXX XXXX presently conducts its
business, owns, holds and operates its properties and assets.
2.2 SUBSIDIARIES.
UPE and XXXX XXXX do not own directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise. UPE and XXXX XXXX do not have any direct or indirect
interests of stock ownership or otherwise in any corporation, partnership, joint
venture, firm, association or business enterprise, and is not party to any
agreement to acquire such an interest.
2.3 ARTICLES OF INCORPORATION AND BYLAWS.
The copies of the Articles of Incorporation and bylaws of each of UPE or XXXX
XXXX (collectively, the "ORGANIZATIONAL DOCUMENTS") that have been delivered to
CHID prior to the execution of this Agreement are true and complete and have not
been amended or repealed. UPE and XXXX XXXX are not in violation or breach of
any of the provisions of the Organizational Documents, except for such
violations or breaches which, in the aggregate, will not have a Material Adverse
Effect on UPE or XXXX XXXX.
2.4 AUTHORIZATION AND VALIDITY OF THIS AGREEMENT.
This Agreement and each of the Transaction Agreements constitute the legal,
valid and binding obligation of each person or entity who is a party thereto
(other than CHID), enforceable against each such person or entity in accordance
with its terms, except as such enforcement is limited by general equitable
principles, or by bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors rights generally. Each of UPE, the Shareholders and
XXXX XXXX has all requisite legal capacity to execute and deliver this Agreement
and the Transaction Agreements to which he or she is a party, and to perform
its, his or her obligations hereunder and thereunder. The execution and delivery
by each of UPE, XXXX XXXX and each Shareholders of this Agreement and the
Transaction Agreements (to the extent either is a party thereto), and the
consummation of the transactions contemplated herein and therein (the
"Transactions") have been authorized by all necessary corporate or other action
on the part of UPE, XXXX XXXX and each of the Shareholders. This Agreement and
the Transaction Agreements have been duly executed and delivered by the parties
thereto (other than CHID).
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2.5 NO VIOLATION.
Neither the execution nor delivery of this Agreement or the Transaction
Agreements, nor the consummation or performance of any of the Transactions by
UPE, XXXX XXXX or the Shareholders will directly or indirectly:
(i) violate or conflict with any provision of the Organizational Documents of
XXXX XXXX or UPE; (B) result in (with or without notice or lapse of time) a
violation or breach of, or conflict with or constitute a default or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or require notice under, any agreement, promissory
note, lease, instrument or arrangement to which UPE or XXXX XXXX or any of its
assets are bound or result in the creation of any Liens upon UPE or XXXX XXXX or
any of its assets; (C) violate any order, writ, judgment, injunction, ruling,
award or decree of any Governmental Body; ("Governmental Body"); (D) violate any
statute, law or regulation of any jurisdiction as such statute, law or
regulation that relates to the Shareholders, UPE or XXXX XXXX or any of the
assets of UPE or XXXX XXXX; or (E) result in cancellation, modification,
revocation or suspension of any permits, licenses, registrations, consents,
approvals, authorizations or certificates issued or granted by any Governmental
Body which are held by or granted to the Shareholders, UPE or XXXX XXXX or which
are necessary for the conduct of UPE's or XXXX XXXX'x business; or
(ii) to the knowledge of UPE, XXXX XXXX or any of the Shareholders, cause UPE or
XXXX XXXX to become subject to, or to become liable for the payment of, any Tax
(as hereinafter defined) or cause any of the assets owned by UPE or XXXX XXXX to
be reassessed or revalued by any taxing authority or other Governmental Body.
None of UPE, XXXX XXXX or the Shareholders is or will be required to give any
notice to or obtain any approval, consent, ratification, waiver or other
authorization (a "Consent") from any person or entity (including, without
limitation, any Governmental Body) in connection with (i) the execution and
delivery of this Agreement or any of the Transaction Agreements, or (ii) the
consummation or performance of any of the Transactions.
2.6 CAPITALIZATION AND RELATED MATTERS.
(a) Capitalization. The registered capital stock of UPE consists of _____ and
XXXX XXXX consists of RMB _______ in fully-paid shares. Except as set forth in
the preceding sentence, no other class of capital stock or other security of UPE
or XXXX XXXX is authorized, issued, reserved for issuance or outstanding. The
Shareholders, as of the Closing Date, are the lawful, record and beneficial
owners of the number of UPE Common Stock set forth opposite each Seller's name
on Schedule 1 attached hereto. UPE, as of the Closing Date, is the lawful,
record and beneficial owner of all of the issued and outstanding shares of XXXX
XXXX Common Stock. The Shareholders have, as of the date hereof and as of the
Closing Date, valid and marketable title to their respective Shares, free and
clear of all Liens (including, without limitation, any claims of spouses under
applicable community property laws) and are the lawful, record and beneficial
owners of all of the Shares. Except as is issued to and held by the Shareholders
or UPE, no other class of capital stock or other security of UPE or XXXX XXXX,
as applicable, is authorized, issued, reserved for issuance or outstanding. At
the Closing, CHID will be vested with good and marketable title to the Shares,
free and clear of all Liens (including, without limitation, any claims of
spouses under applicable community property laws). No legend or other reference
to any purported Lien appears upon any certificate representing the Shares. Each
of the Shares has been duly authorized and validly issued and is fully paid and
nonassessable. None of the outstanding capital or other securities of UPE or
XXXX XXXX was issued, redeemed or repurchased in violation of the Securities Act
of 1933, as amended (the "Securities Act"), or any other securities or "blue
sky" laws.
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(b) No Redemption Requirements. There are no authorized or outstanding options,
warrants, equity securities, calls, rights, commitments or agreements of any
character by which UPE, XXXX XXXX or any of the Shareholders is obligated to
issue, deliver or sell, or cause to be issued, delivered or sold, any shares of
capital stock or other securities of UPE or XXXX XXXX. There are no outstanding
contractual obligations (contingent or otherwise) of UPE or XXXX XXXX to retire,
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
of, or other ownership interests in, UPE or XXXX XXXX or to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any other entity.
2.7 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS.
Except as would not have a Material Adverse Effect, the business and operations
of UPE and XXXX XXXX have been and are being conducted in accordance with all
applicable foreign, federal, provincial and local laws, rules and regulations
and all applicable orders, injunctions, decrees, writs, judgments,
determinations and awards of all courts and governmental agencies and
instrumentalities. There are no permits, bonuses, registrations, consents,
approvals, authorizations, certificates, or any waiver of the foregoing, which
are required to be issued or granted by a Governmental Body for the conduct of
the Business as presently conducted or the ownership of the assets of UPE and
XXXX XXXX. Except as would not have a Material Adverse Effect, each of UPE or
XXXX XXXX is not, and has not received notice alleging that it is, in violation
of, or (with or without notice or lapse of time or both) in default under, or in
breach of, any term or provision of the Organizational Documents or of any
indenture, loan or credit agreement, note, deed of trust, mortgage, security
agreement or other material agreement, lease, license or other instrument,
commitment, obligation or arrangement to which UPE or XXXX XXXX is a party or by
which any of UPE's or XXXX XXXX'x properties, assets or rights are bound or
affected. To the knowledge of UPE and XXXX XXXX, no other party to any material
contract, agreement, lease, license, commitment, instrument or other obligation
to which UPE or XXXX XXXX is a party is (with or without notice or lapse of time
or both) in default thereunder or in breach of any term thereof. Each of UPE and
XXXX XXXX is not subject to any obligation or restriction of any kind or
character, nor is there, to the knowledge of UPE or XXXX XXXX, any event or
circumstance relating to UPE or XXXX XXXX that materially and adversely affects
in any way its business, properties, assets or prospects or that prohibits UPE
or XXXX XXXX from entering into this Agreement and the Transaction Agreements or
would prevent or make burdensome its performance of or compliance with all or
any part of this Agreement, the Transaction Agreements or the consummation of
the Transactions contemplated hereby or thereby.
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2.8 CERTAIN PROCEEDINGS.
There are no outstanding or pending Proceeding that has been commenced against
or involving UPE or XXXX XXXX or any of its assets and, to the knowledge of UPE
or XXXX XXXX and the Shareholders, no matters of the foregoing nature are
contemplated or threatened. None of UPE, XXXX XXXX or the Shareholders have been
charged with, and is not threatened with, or under any investigation with
respect to, any allegation concerning any violation of any provision of any
federal, provincial, local or foreign law, regulation, ordinance, order or
administrative ruling, and is not in default with respect to any order, writ,
injunction or decree of any Governmental Body.
2.9 NO BROKERS OR FINDERS.
None of UPE, XXXX XXXX, the Shareholders, or any officer, director, independent
contractor, consultant, agent or employee of UPE or XXXX XXXX has agreed to pay,
or has taken any action that will result in any person or entity becoming
obligated to pay or entitled to receive, any investment banking, brokerage,
finder's or similar fee or commission in connection with this Agreement or the
Transactions. UPE, XXXX XXXX and the Shareholders shall jointly and severally
indemnify and hold CHID harmless against any liability or expense arising out
of, or in connection with, any such claim.
2.10 TITLE TO AND CONDITION OF PROPERTIES.
Each of UPE and XXXX XXXX has good, valid and marketable title to all of its
properties and assets (whether real, personal or mixed, and whether tangible or
intangible) reflected as owned in its books and records, free and clear of all
Liens. Each of UPE and XXXX XXXX owns or holds under valid leases or other
rights to use all real property, plants, machinery, equipment and all assets
necessary for the conduct of its business as presently conducted, except where
the failure to own or hold such property, plants, machinery, equipment and
assets would not have a Material Adverse Effect on UPE or XXXX XXXX. No Person
other than UPE or XXXX XXXX owns or has any right to the use or possession of
the assets used in UPE's or XXXX XXXX'x business. The material buildings,
plants, machinery and equipment necessary for the conduct of the business of UPE
or XXXX XXXX as presently conducted are structurally sound, are in good
operating condition and repair and are adequate for the uses to which they are
being put or would be put in the Ordinary Course of Business, in each case,
taken as a whole, and none of such buildings, plants, machinery or equipment is
in need of maintenance or repairs, except for ordinary, routine maintenance and
repairs that are not material in nature or cost.
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2.11 ABSENCE OF UNDISCLOSED LIABILITIES.
UPE and XXXX XXXX have no debt, obligation or liability (whether accrued,
absolute, contingent, liquidated or otherwise, whether asserted or unasserted,
whether due or to become due, whether or not known to UPE or XXXX XXXX) arising
out of any transaction entered into prior to the Closing Date or any act or
omission prior to the Closing Date which individually or taken together would
constitute a Material Adverse Effect on UPE or XXXX XXXX and have no debt,
obligation or liability to each other or any of the Shareholders or their
affiliates, except to the extent specifically set forth on or reserved against
on the Balance Sheet of UPE or XXXX XXXX.
The financial statements are consistent with the books and records of XXXX XXXX
and UPE and fairly present in all material respects the financial condition,
assets and liabilities of UPE and XXXX XXXX, as applicable, taken as a whole, as
of the dates and periods indicated, and were prepared in accordance with GAAP
(except as otherwise indicated therein or in the notes thereto).
2.12 CHANGES.
Neither UPE nor XXXX XXXX has, since February 14, 2006:
(a) Ordinary Course of Business. Conducted its business or entered into any
transaction other than in the Ordinary Course of Business, except for this
Agreement.
(b) Adverse Changes. Suffered or experienced any change in, or affecting, its
condition (financial or otherwise), properties, assets, liabilities, business,
operations, results of operations or prospects which would have a Material
Adverse Effect;
(c) Loans. Made any loans or advances to any Person other than travel advances
and reimbursement of expenses made to employees, officers and directors in the
Ordinary Course of Business;
(d) Compensation and Bonuses. Made any payments of any bonuses or compensation
other than regular salary payments, or increase in the salaries, or payment on
any of its debts in the Ordinary Course of Business, to any of its shareholders,
directors, officers, employees, independent contractors or consultants or entry
into by it of any employment, severance, or similar contract with any director,
officer, or employee, independent contractor or consultant; Adopted, or
increased in the payments to or benefits under, any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any of its employees;
(e) Liens. Created or permitted to exist any Lien on any of its properties or
assets other than Permitted Liens;
(f) Capital Stock. Issued, sold, disposed of or encumbered, or authorized the
issuance, sale, disposition or encumbrance of, or granted or issued any option
to acquire any shares of its capital stock or any other of its securities or any
Equity Security, or altered the term of any of its outstanding securities or
made any change in its outstanding shares of capital stock or its
capitalization, whether by reason of reclassification, recapitalization, stock
split, combination, exchange or readjustment of shares, stock dividend or
otherwise; changed its authorized or issued capital stock; granted any stock
option or right to purchase shares of its capital stock; issued any security
convertible into any of its capital stock; granted any registration rights with
respect to shares of its capital stock; purchased, redeemed, retired, or
otherwise acquired any shares of its capital stock; declared or paid any
dividend or other distribution or payment in respect of shares of capital stock
of any other entity;
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(g) Dividends. Declared, set aside, made or paid any dividend or other
distribution to any of its shareholders;
(h) Material Contracts. Terminated or modified any of its Material Contract
except for termination upon expiration in accordance with the terms of such
agreements, a description of which is included in the UPE and XXXX XXXX'x
Disclosure Schedule;
(i) Claims. Released, waived or cancelled any claims or rights relating to or
affecting UPE or XXXX XXXX in excess of $10,000 in the aggregate or instituted
or settled any Proceeding involving in excess of $10,000 in the aggregate;
(j) Discharged Liabilities. Paid, discharged, cancelled, waived or satisfied any
claim, obligation or liability in excess of $10,000 in the aggregate, except for
liabilities incurred prior to the date of this Agreement in the Ordinary Course
of Business;
(k) Indebtedness. Created, incurred, assumed or otherwise become liable for any
Indebtedness or commit to any endeavor involving a commitment in excess of
$10,000 in the aggregate, other than contractual obligations incurred in the
Ordinary Course of Business;
(l) Guarantees. Guaranteed or endorsed in a material amount any obligation or
net worth of any Person;
(m) Acquisitions. Acquired the capital stock or other securities or any
ownership interest in, or substantially all of the assets of, any other Person;
(n) Accounting. Changed its method of accounting or the accounting principles or
practices utilized in the preparation of its financial statements, other than as
required by GAAP;
(o) Agreements. Entered into any agreement, or otherwise obligated itself, to do
any of the foregoing.
2.13 MATERIAL CONTRACTS.
Each of UPE and XXXX XXXX has delivered to CHID, prior to the date of this
Agreement, true, correct and complete copies of each of its Material Contracts.
(a) No Defaults. The Material Contracts of each of UPE and XXXX XXXX are valid
and binding agreements of XXXX XXXX and UPE, as applicable, and are in full
force and effect and are enforceable in accordance with their terms. Except as
would not have a Material Adverse Effect, UPE and XXXX XXXX are not in breach or
default of any of its Material Contracts to which it is a party and, to the
knowledge of UPE and XXXX XXXX, no other party to any of its Material Contracts
is in breach or default thereof. Except as would not have a Material Adverse
Effect, no event has occurred or circumstance has existed that (with or without
notice or lapse of time) would (a) contravene, conflict with or result in a
violation or breach of, or become a default or event of default under, any
provision of any of its Material Contracts or (b) permit UPE, XXXX XXXX or any
other Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate or modify any
of its Material Contracts. UPE and XXXX XXXX have not received any notice and
have no knowledge of any pending or threatened cancellation, revocation or
termination of any of its Material Contracts to which it is a party, and there
are no renegotiations of, or attempts to renegotiate.
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2.14 TAX RETURNS AND AUDITS.
(a) Tax Returns. (a) All material Tax Returns required to be filed by or on
behalf of UPE or XXXX XXXX have been timely filed and all such Tax Returns were
(at the time they were filed) and are true, correct and complete in all material
respects; (b) all Taxes of UPE and XXXX XXXX required to have been paid (whether
or not reflected on any Tax Return) have been fully and timely paid, except
those Taxes which are presently being contested in good faith or for which an
adequate reserve for the payment of such Taxes has been established on XXXX XXXX
Balance Sheet or UPE's balance sheet; (c) no waivers of statutes of limitation
have been given or requested with respect to UPE or XXXX XXXX in connection with
any Tax Returns covering UPE or XXXX XXXX or with respect to any Taxes payable
by it; (d) no Governmental Body in a jurisdiction where UPE or XXXX XXXX does
not file Tax Returns has made a claim, assertion or threat to UPE or XXXX XXXX
that UPE or XXXX XXXX is or may be subject to taxation by such jurisdiction; (e)
each of UPE and XXXX XXXX has duly and timely collected or withheld, paid over
and reported to the appropriate Governmental Body all amounts required to be so
collected or withheld for all periods under all applicable laws; (f) there are
no Liens with respect to Taxes on the property or assets of UPE and XXXX XXXX
other than Permitted Liens; (g) there are no Tax rulings, requests for rulings,
or closing agreements relating to UPE or XXXX XXXX for any period (or portion of
a period) that would affect any period after the date hereof; and (h) any
adjustment of Taxes of UPE or XXXX XXXX made by a Governmental Body in any
examination that UPE or XXXX XXXX is required to report to the appropriate
provincial, local or foreign taxing authorities has been reported, and any
additional Taxes due with respect thereto have been paid. No state of fact
exists or has existed which would constitute ground for the assessment of any
tax liability by any Governmental Body. All Tax Returns filed by UPE and XXXX
XXXX are true, correct and complete.
(b) No Adjustments, Changes. Neither UPE, XXXX XXXX nor any other Person on
behalf of UPE or XXXX XXXX (a) has executed or entered into a closing agreement
pursuant to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of provincial, local or foreign law; or (b) has agreed to or
is required to make any adjustments pursuant to Section 481(a) of the Code or
any similar provision of provincial, local or foreign law.
(c) No Disputes. There is no pending audit, examination, investigation, dispute,
proceeding or claim with respect to any Taxes of or Tax Return filed or required
to be filed by UPE or XXXX XXXX, nor is any such claim or dispute pending or
contemplated. Each of UPE and XXXX XXXX has made available to CHID true, correct
and complete copies of all Tax Returns, examination reports and statements of
deficiencies assessed or asserted against or agreed to by UPE or XXXX XXXX since
January 1, 2001, and any and all correspondence with respect to the foregoing.
UPE and XXXX XXXX do not have any outstanding closing agreement, ruling request,
request for consent to change a method of accounting, subpoena or request for
information to or from a Governmental Body in connection with any Tax matter.
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(d) No Tax Allocation, Sharing. UPE and XXXX XXXX are not a party to any Tax
allocation or sharing agreement. Other than with respect to the Tax Group of
which UPE or XXXX XXXX is the common parent, UPE and XXXX XXXX (a) have not been
a member of a Tax Group filing a consolidated income Tax Return under Section
1501 of the Code (or any similar provision of provincial, local or foreign law),
and (b) do not have any liability for Taxes for any Person under Treasury
Regulations Section 1.1502-6 (or any similar provision of provincial, local or
foreign law) as a transferee or successor, by contract or otherwise.
2.15 MATERIAL ASSETS.
The financial statements of UPE and XXXX XXXX reflect the material properties
and assets (real and personal) owned or leased by them.
2.16 INSURANCE COVERAGE.
Each of UPE and XXXX XXXX has made available to CHID, prior to the date of this
Agreement, true, correct and complete copies of all insurance and general
liability policies maintained by UPE and XXXX XXXX on their properties and
assets all claims made under any such current or prior insurance policies. All
of such policies (a) taken together, provide adequate insurance coverage for the
properties, assets and operations of UPE and XXXX XXXX for all risks normally
insured against by a Person carrying on the same business as UPE or XXXX XXXX,
and (b) are sufficient for compliance with all applicable Laws and Material
Contracts of UPE and XXXX XXXX. All of such policies are valid, outstanding and
in full force and effect and, by their express terms, will continue in full
force and effect following the consummation of the transactions contemplated by
this Agreement. Except as set forth on Schedule 3.19, UPE and XXXX XXXX have not
received and has no knowledge of (a) any refusal of coverage or any written
notice that a defense will be afforded with reservation of rights, or (b) any
notice of cancellation or any other indication in writing or otherwise that any
insurance policy is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform its obligations
thereunder. All premiums due on such insurance policies on or prior to the date
hereof have been paid. There are no, and UPE, XXXX XXXX and the Shareholders
have no knowledge of any circumstances or facts which, with or without notice of
lapse of time or both would lead to any: (i) pending or threatened claims with
respect to UPE or XXXX XXXX or their properties or assets under any such
insurance policies; (ii) claims as to which the insurers have notified UPE or
XXXX XXXX that they intend to deny liability; and (iii) existing defaults on the
part of UPE or XXXX XXXX under any such insurance policies.
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2.17 LITIGATION; ORDERS.
There is no Proceeding (whether federal, provincial, local or foreign) pending
or, to the knowledge of UPE or XXXX XXXX, threatened or appealable against or
affecting UPE or XXXX XXXX or any of its properties, assets, business or
employees. To the knowledge of UPE or XXXX XXXX, there is no fact that might
result in or form the basis for any such Proceeding. UPE and XXXX XXXX are not
subject to any Orders and have not received any written opinion or memorandum or
legal advice from their legal counsel to the effect that UPE or XXXX XXXX is
exposed, from a legal standpoint, to any liability which would be material to
its business. UPE and XXXX XXXX are not engaged in any legal action to recover
monies due it or for damages sustained by any of them.
2.18 LICENSES.
Except as would not have a Material Adverse Effect, each of UPE and XXXX XXXX
possesses from the appropriate Governmental Body all licenses, permits,
authorizations, approvals, franchises and rights that are necessary for it to
engage in its business as currently conducted and to permit it to own and use
its properties and assets in the manner in which it currently owns and uses such
properties and assets (collectively, "PERMITS"). Except as would not have a
Material Adverse Effect, UPE and XXXX XXXX have not received any written notice
from any Governmental Body or other Person that there is lacking any license,
permit, authorization, approval, franchise or right necessary for UPE or XXXX
XXXX to engage in its business as currently conducted and to permit UPE or XXXX
XXXX to own and use its properties and assets in the manner in which it
currently owns and uses such properties and assets. Except as would not have a
Material Adverse Effect, the Permits are valid and in full force and effect.
Except as would not have a Material Adverse Effect, no event has occurred or
circumstance exists that may (with or without notice or lapse of time): (a)
constitute or result, directly or indirectly, in a violation of or a failure to
comply with any Permit; or (b) result, directly or indirectly, in the
revocation, withdrawal, suspension, cancellation or termination of, or any
modification to, any Permit. Neither UPE or XXXX XXXX has received any written
notice from any Governmental Body or any other Person regarding: (a) any actual,
alleged, possible or potential contravention of any Permit; or (b) any actual,
proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to, any Permit. All applications
required to have been filed for the renewal of such Permits have been duly filed
on a timely basis with the appropriate Persons, and all other filings required
to have been made with respect to such Permits have been duly made on a timely
basis with the appropriate Persons. All Permits are renewable by their terms or
in the Ordinary Course of Business without the need to comply with any special
qualification procedures or to pay any amounts other than routine fees or
similar charges, all of which have, to the extent due, been duly paid.
2.19 INTERESTED PARTY TRANSACTIONS.
No officer, director or shareholder of UPE, XXXX XXXX or any Affiliate, Related
Person or "associate" (as such term is defined in Rule 405 of the Commission
under the Securities Act) of any such Person, either directly or indirectly, (1)
has an interest in any Person which (a) furnishes or sells services or products
which are furnished or sold or are proposed to be furnished or sold by UPE or
XXXX XXXX, or (b) purchases from or sells or furnishes to, or proposes to
purchase from, sell to or furnish UPE or XXXX XXXX any goods or services; (2)
has a beneficial interest in any contract or agreement to which UPE or XXXX XXXX
is a party or by which it may be bound or affected; or (3) is a party to any
material agreements, contracts or commitments in effect as of the date hereof
with UPE or XXXX XXXX. "Related Person" means: (i) with respect to a particular
individual, the individual's immediate family which shall include the
individual's spouse, parents, children, siblings, mothers and fathers-in-law,
sons and daughters-in-law, and brothers and sisters-in-law; and (ii) with
respect to a specified individual or entity, any entity or individual that,
directly or indirectly, controls, is controlled by, or is under common control
with such specified entity or individual.
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2.20 GOVERNMENTAL INQUIRIES.
Each of UPE and XXXX XXXX has made available to CHID a copy of each material
written inspection report, questionnaire, inquiry, demand or request for
information received by UPE or XXXX XXXX from (and the response of UPE or XXXX
XXXX thereto), and each material written statement, report or other document
filed by UPE or XXXX XXXX with, any Governmental Body since January 1, 2003.
2.21 BANK ACCOUNTS AND SAFE DEPOSIT BOXES.
Part 2.22 of the UPE and XXXX XXXX Disclosure Schedule discloses the title and
number of each bank or other deposit or financial account, and each lock box and
safety deposit box used by UPE or XXXX XXXX, the financial institution at which
that account or box is maintained and the names of the persons authorized to
draw against the account or otherwise have access to the account or box, as the
case may be.
2.22 INTELLECTUAL PROPERTY.
Any Intellectual Property UPE or XXXX XXXX uses in its business as presently
conducted is owned by UPE or XXXX XXXX or properly licensed.
2.23 STOCK OPTION PLANS; EMPLOYEE BENEFITS.
(a) Set forth on Part 2.23 of the UPE and XXXX XXXX Disclosure Schedule is a
complete list of all stock option plans providing for the grant by UPE or XXXX
XXXX of stock options to directors, officers or employees. All such stock option
plans are Approved Plans.
(b) Except as set forth on Part 2.23 of the UPE and XXXX XXXX Disclosure
Schedule, UPE and XXXX XXXX do not have any employee benefit plans or
arrangements covering their present and former employees or providing benefits
to such persons in respect of services provided to UPE or XXXX XXXX. UPE and
XXXX XXXX have no commitment, whether formal or informal and whether legally
binding or not, to create any additional plan, arrangement or practice similar
to the Approved Plans.
(c) The consummation of the transactions contemplated hereby will not result in
(a) any payment (including, without limitation, severance, unemployment
compensation or bonus payments) becoming due from UPE or XXXX XXXX or due to any
Person, (b) any increase in the amount of compensation or benefits payable to
any Person or (c) any acceleration of the vesting or timing of payment of any
compensation, award or determination of options, warrants, rights, severance
payments or other contingent obligations of any nature whatsoever of UPE or XXXX
XXXX in favor of any Person. No agreement, arrangement or other contract of UPE
or XXXX XXXX provides benefits or payments contingent upon, triggered by, or
increased as a result of a change in the ownership or effective control of UPE
or XXXX XXXX.
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(d) None of UPE or XXXX XXXX is a party to or bound by any written or oral
agreement or understanding to employ, subsequent to the Closing, any of its
respective present or former directors, officers, independent contractors,
consultants, agents or employees.
2.24 EMPLOYEE MATTERS
(a) No former or current employee of UPE or XXXX XXXX is a party to, or is
otherwise bound by, any agreement or arrangement (including, without limitation,
any confidentiality, non-competition or proprietary rights agreement) that in
any way adversely affected, affects, or will affect (i) the performance of his,
her or its duties to UPE or XXXX XXXX, or (ii) the ability of UPE or XXXX XXXX
to conduct its business.
(b) None of UPE or XXXX XXXX has employees, directors, officers, consultants,
independent contractors, representatives or agents whose contract of employment
or engagement cannot be terminated by three months' notice. (c) UPE and XXXX
XXXX are not required or obligated to pay, and since January 1, 2001, have not
paid any moneys other than in respect of remuneration, pension or other benefits
pursuant to plans described in Part 2.23 of the UPE and XXXX XXXX Disclosure
Schedule, to or for the benefit of, any director, officer, employee, consultant,
independent contractor, representative or agent of UPE or XXXX XXXX. (d) UPE and
XXXX XXXX are in compliance with all applicable laws respecting employment and
employment practices, terms and conditions or employment and wages and hours,
and are not engaged in any unfair labor practice. There is no labor strike,
dispute, shutdown or stoppage actually pending or, to the knowledge of UPE, XXXX
XXXX or the Shareholders, threatened against or affecting UPE or XXXX XXXX.
2.25 ENVIRONMENTAL AND SAFETY MATTERS.
Except as would not have a Material Adverse Effect:
(a) Each of UPE and XXXX XXXX has at all time been and is in compliance with all
Environmental Laws and Orders applicable to UPE or XXXX XXXX, as applicable.
(b) There are no Proceedings pending or, to the knowledge of UPE or XXXX XXXX,
threatened against UPE or XXXX XXXX alleging the violation of any Environmental
Law or Environmental Permit applicable to UPE or XXXX XXXX or alleging that UPE
or XXXX XXXX is a potentially responsible party for any environmental site
contamination. None of UPE, XXXX XXXX or the Shareholders are aware of, or has
ever received notice of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance, or which may give rise to any
common law or legal liability, or otherwise form the basis of any claim, action,
suit, proceeding, hearing or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic material or waste.
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(c) Neither this Agreement nor the consummation of the transactions contemplated
by this Agreement shall impose any obligations to notify or obtain the consent
of any Governmental Body or third Persons under any Environmental Laws
applicable to UPE or XXXX XXXX.
2.26 MATERIAL CUSTOMERS.
Since January 1, 2001, none of the Material Customers (as hereinafter defined)
of UPE or XXXX XXXX has notified any of UPE, XXXX XXXX or the Shareholders of
their intent to terminate their business with UPE or XXXX XXXX business because
of any dissatisfaction on the part of any such person or entity. The
Transactions have not caused any of the Material Customers of UPE or XXXX XXXX
to terminate or provide notice of their intent or threaten to terminate their
business with UPE or XXXX XXXX or to notify UPE, XXXX XXXX or the Shareholders
of their intent not to continue to do such business with UPE or XXXX XXXX after
the Closing. As used herein, "Material Customers" means those customers from
whom UPE or XXXX XXXX derives annual revenues in excess of RMB 100,000.
2.27 INVENTORIES.
All inventories of UPE and XXXX XXXX are of good, usable and merchantable
quality in all material respects, and, except as set forth in the UPE and XXXX
XXXX Disclosure Schedule, do not include a material amount of obsolete or
discontinued items. Except as set forth in the UPE and XXXX XXXX Disclosure
Schedule, (a) all such inventories are of such quality as to meet in all
material respects the quality control standards of UPE and XXXX XXXX, (b) all
such inventories are recorded on the books at the lower of cost or market value
determined in accordance with GAAP, and (c) no write-down in inventory has been
made or should have been made pursuant to GAAP during the past two years.
2.28 MONEY LAUNDERING LAWS.
The operations of UPE and XXXX XXXX are and have been conducted at all times in
compliance with applicable financial record-keeping and reporting requirements
of the money laundering statutes of all U.S. and non-U.S. jurisdictions, the
rules and regulations thereunder and any related or similar rules, regulations
or guidelines, issued, administered or enforced by any Governmental Body
(collectively, the "MONEY LAUNDERING LAWS") and no Proceeding involving UPE or
XXXX XXXX with respect to the Money Laundering Laws is pending or, to the
knowledge of UPE or XXXX XXXX, threatened.
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2.29 DISCLOSURE..23 DISCLOSURE.
(a) Any information set forth in this Agreement, the UPE and XXXX XXXX
Disclosure Schedule, or the Transaction Agreements shall be true, correct and
complete in all material respects.
(b) No statement, representation or warranty of UPE, XXXX XXXX or the
Shareholders in this Agreement (taken with the Schedules) or the Transaction
Agreements or any exhibits or schedules thereto contain any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements herein or therein, taken as a whole, in light of the circumstances in
which they were made, not misleading.
(c) Except as set forth in the UPE and XXXX XXXX Disclosure Schedule, the
Shareholders, UPE and XXXX XXXX have no knowledge of any fact that has specific
application to UPE or XXXX XXXX (other than general economic or industry
conditions) and that adversely affects the assets or the business, prospects,
financial condition, or results of operations of UPE or XXXX XXXX.
(d) In the event of any inconsistency between the statements in the body of this
Agreement and those in the Schedules (other than an exception expressly set
forth as such in the Schedules with respect to a specifically identified
representation or warranty), the statements in the Schedules shall control.
(e) The books of account, minute books and stock record books of UPE and XXXX
XXXX, all of which have been made available to CHID, are complete and accurate
and have been maintained in accordance with sound business practices. Without
limiting the generality of the foregoing, the minute books of UPE and XXXX XXXX
contain complete and accurate records of all meetings held, and corporate action
taken, by the shareholders, the boards of directors, and committees of the
boards of directors of UPE or XXXX XXXX, as applicable, and no meeting of any
such shareholders, board of directors, or committee has been held for which
minutes have not been prepared and are not contained in such minute books.
2.30 FINDERS AND BROKERS.
(a) None of UPE, XXXX XXXX, the Shareholders or any Person acting on behalf of
UPE, XXXX XXXX or the Shareholders has engaged any finder, broker, intermediary
or any similar Person in connection with the Exchange.
(b) None of UPE, XXXX XXXX, the Shareholders nor any Person acting on behalf of
UPE, XXXX XXXX or the Shareholders has entered into a contract or other
agreement that provides that a fee shall be paid to any Person or Entity if the
Exchange is consummated.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF CHID
CHID hereby represents and warrants to the Shareholders as of the date hereof:
3.1 ORGANIZATION; GOOD STANDING.
CHID is duly incorporated, validly and in good standing existing under the laws
of Nevada, has all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to carry on its
business as presently conducted and as contemplated to be conducted, to own,
hold and operate its properties and assets as now owned, held and operated by
it, to enter into this Agreement, to carry out the provisions hereof except
where the failure to be in good standing or to have such governmental licenses,
authorizations, consents and approvals will not, in the aggregate, either (i)
have a Material Adverse Effect on the business, assets or financial condition of
CHID, or (ii) impair the ability of CHID to perform its material obligations
under this Agreement. CHID is duly qualified, licensed or domesticated as a
foreign corporation in good standing in each jurisdiction wherein the nature of
its activities or its properties owned or leased requires such qualification,
licensing or domestication, except where the failure to be so qualified,
licensed or domesticated will not have a Material Adverse Effect.
3.2 CHID COMMON STOCK.
As of 5TH SEPTEMBER, 2005, there were 47,980,000 shares of CHID's common stock
issued and outstanding. The Acquisition Shares, when issued in connection with
this Agreement and the other Transactional Agreements, will be duly authorized,
validly issued, fully paid and nonassessable.
3.3 AUTHORITY; BINDING NATURE OF AGREEMENTS.
(a) The execution, delivery and performance of this Agreement, the Transactional
Agreements, and all other agreements and instruments contemplated to be executed
and delivered by CHID in connection herewith have been duly authorized by all
necessary corporate action on the part of CHID and its board of directors.
(b) This Agreement, the Transactional Agreements, and all other agreements and
instruments contemplated to be executed and delivered by CHID constitute the
legal, valid and binding obligation of CHID, enforceable against CHID in
accordance with their terms, except to the extent that enforceability may be
limited by applicable bankruptcy, Exchange, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity regardless of whether such enforceability is considered in
a proceeding in law or equity.
(c) There is no pending Proceeding, and, to CHID's knowledge, no Person has
threatened to commence any Proceeding that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
the Exchange or CHID's ability to comply with or perform its obligations and
covenants under the Transactional Agreements, and, to the knowledge of CHID, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that might directly or indirectly give rise to or serve as a basis for
the commencement of any such Proceeding.
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3.4 NON-CONTRAVENTION; CONSENTS.
The execution and delivery of this Agreement and the other Transactional
Agreements, and the consummation of the Exchange, by CHID will not, directly or
indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a material violation of (i) CHID's
Certificate of Incorporation or Bylaws, or (ii) any resolution adopted by CHID
Board or any committee thereof or the stockholders of CHID;
(b) to the knowledge of CHID, contravene, conflict with or result in a material
violation of, or give any Governmental Body the right to challenge the Exchange
or to exercise any remedy or obtain any relief under, any legal requirement or
any Order to which CHID or any material assets owned or used by it are subject;
(c) to the knowledge of CHID, cause any material assets owned or used by CHID to
be reassessed or revalued by any taxing authority or other Governmental Body;
(d) to the knowledge of CHID, contravene, conflict with or result in a material
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by CHID or that otherwise relates to
CHID's business or to any of the material assets owned or used by CHID, where
such contraventions, conflict, violation, revocation, withdrawal, suspension,
cancellation, termination or modification would have a Material Adverse Effect
on CHID;
(e) contravene, conflict with or result in a material violation or material
breach of, or material default under, any Contract to which CHID is a party;
(f) give any Person the right to any payment by CHID or give rise to any
acceleration or change in the award, grant, vesting or determination of options,
warrants, rights, severance payments or other contingent obligations of any
nature whatsoever of CHID in favor of any Person, in any such case as a result
of the Exchange; or
(g) result in the imposition or creation of any material Lien upon or with
respect to any material asset owned or used by CHID.
Except for Consents, filings or notices required under the state and federal
securities laws or any other laws or regulations or as otherwise contemplated in
this Agreement and the other Transactional Agreements, CHID will not be required
to make any filing with or give any notice to, or obtain any Consent from, any
Person in connection with the execution and delivery of this Agreement and the
other Transactional Agreements or the consummation or performance of the
Exchange.
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3.5 FINDERS AND BROKERS.
(a) Neither CHID nor any Person acting on behalf of CHID has engaged any finder,
broker, intermediary or any similar Person in connection with the Exchange.
(b) CHID has not entered into a contract or other agreement that provides that a
fee shall be paid to any Person or Entity if the Exchange is consummated.
3.6 REPORTS AND FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES.
(a) CHID has filed all reports required to be filed with the SEC pursuant to the
Exchange Act since DECEMBER 31, 2003 (all such reports, including those to be
filed prior to the Closing Date and all registration statements and prospectuses
filed by CHID with the SEC, are collectively referred to as the "CHID SEC
REPORTS). All of the CHID SEC Reports, as of their respective dates of filing
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing): (i) complied in all material respects as to
form with the applicable requirements of the Securities Act or Exchange Act and
the rules and regulations thereunder, as the case may be, and (ii) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited financial statements of CHID included in the CHID SEC
Reports comply in all material respects with the published rules and regulations
of the SEC with respect thereto, and such audited financial statements (i) were
prepared from the books and records of CHID, (ii) were prepared in accordance
with GAAP applied on a consistent basis (except as may be indicated therein or
in the notes or schedules thereto) and (iii) present fairly the financial
position of CHID as of the dates thereof and the results of operations and cash
flows for the periods then ended. The unaudited financial statements included in
the CHID SEC Reports comply in all material respects with the published rules
and regulations of the SEC with respect thereto; and such unaudited financial
statements (i) were prepared from the books and records of CHID, (ii) were
prepared in accordance with GAAP, except as otherwise permitted under the
Exchange Act and the rules and regulations thereunder, on a consistent basis
(except as may be indicated therein or in the notes or schedules thereto) and
(iii) present fairly the financial position of CHID as of the dates thereof and
the results of operations and cash flows (or changes in financial condition) for
the periods then ended, subject to normal year-end adjustments and any other
adjustments described therein or in the notes or schedules thereto.
(b) Except as specifically contemplated by this Agreement or reflected in the
CHID SEC Reports, since June 30, 2004, there has not been (i) any material
adverse change in CHID's business, assets, liabilities, operations, and, to the
knowledge of CHID, no event has occurred that is likely to have a material
adverse effect on CHID's business, assets, liabilities or operations, (ii) any
declarations setting aside or payment of any dividend or distribution with
respect to the CHID Common Stock other than consistent with past practices,
(iii) any material change in CHID's accounting principles, procedures or
methods, (iv) cancellation in writing of any material customer contract or (v)
the loss of any customer relationship which would have a material adverse effect
on CHID's business, assets, liabilities or operations.
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3.7 COMPLIANCE WITH APPLICABLE LAW.
Except as disclosed in the CHID SEC Reports filed prior to the date of this
Agreement and except to the extent that the failure or violation would not in
the aggregate have a Material Adverse Effect on the business, results of
operations or financial condition of CHID, to CHID's knowledge CHID holds all
Governmental Authorizations necessary for the lawful conduct of its business
under and pursuant to, and the business of CHID is not being conducted in
violation of, any Governmental Authorization applicable to CHID.
3.8 COMPLETE COPIES OF REQUESTED REPORTS.
CHID has delivered or made available true and complete copies of each document
that has been reasonably requested by UPE, XXXX XXXX or the Shareholders.
3.9 FULL DISCLOSURE.
(a) Neither this Agreement (including all Schedules and Exhibits hereto) nor any
of the Transactional Agreements contemplated to be executed and delivered by
CHID in connection with this Agreement contains any untrue statement of material
fact; and none of such documents omits to state any material fact necessary to
make any of the representations, warranties or other statements or information
contained therein not misleading.
(b) All of the information set forth in the prospectus and all other information
regarding CHID and the business, condition, assets, liabilities, operations,
financial performance, net income and prospects of either that has been
furnished to UPE, XXXX XXXX or the Shareholders by or on behalf of CHID or any
of the CHID's Representatives, is accurate and complete in all material
respects.
ARTICLE IV.
COVENANTS OF UPE AND XXXX XXXX
4.1 ACCESS AND INVESTIGATION.
Each of UPE and XXXX XXXX shall ensure that, at all times during the Pre-Closing
Period:
(a) UPE, XXXX XXXX and their Representatives provide CHID and its
Representatives access, at reasonable times and with twenty-four (24) hours
notice from CHID to UPE or XXXX XXXX, to all of the premises and assets of UPE
and XXXX XXXX, to all existing books, records, Tax Returns, work papers and
other documents and information relating to UPE or XXXX XXXX, and to responsible
officers and employees of UPE or XXXX XXXX, and UPE, XXXX XXXX and its
Representatives provide CHID and its Representatives with copies of such
existing books, records, Tax Returns, work papers and other documents and
information relating to UPE or XXXX XXXX as CHID may request in good faith;
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(b) Each of UPE and XXXX XXXX and their Representatives confer regularly with
CHID upon its request, concerning operational matters and otherwise report
regularly (not less than semi-monthly and as CHID may otherwise request) to CHID
and discuss with CHID and its Representatives concerning the status of the
business, condition, assets, liabilities, operations, and financial performance
of UPE or XXXX XXXX, and promptly notify CHID of any material change in the
business, condition, assets, liabilities, operations, and financial performance
of UPE or XXXX XXXX, or any event reasonably likely to lead to any such change.
4.2 OPERATION OF BUSINESS.
Each of UPE and XXXX XXXX shall ensure that, during the Pre-Closing Period:
(a) It conducts its operations in the Ordinary Course of Business and in the
same manner as such operations have been conducted prior to the date of this
Agreement;
(b) It uses its commercially reasonable efforts to preserve intact its current
business organization, keep available and not terminate the services of its
current officers and employees and maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with UPE or XXXX XXXX;
(c) It does not declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of its capital stock, and does not
repurchase, redeem or otherwise reacquire any shares of its capital stock or
other securities, except with respect to the repurchase of shares of UPE or XXXX
XXXX Common Stock upon termination of employees at the original purchase price
pursuant to agreements existing at the date hereof;
(d) It does not sell or otherwise issue (or grant any warrants, options or other
rights to purchase) any shares of capital stock or any other securities, except
the issuance of shares of UPE or XXXX XXXX Common Stock pursuant to option
grants to employees made under the Option Plan in the Ordinary Course of
Business;
(e) It does not amend its Articles of Incorporation, Bylaws or other
Organizational Documents, and does not effect or become a party to any
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(f) It does not form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(g) It does not establish or adopt any Employee Benefit Plan, and does not pay
any bonus or make any profit sharing or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or other compensation
or remuneration payable to, any of its directors, officers or employees;
20
(h) It does not change any of its methods of accounting or accounting practices
in any respect;
(i) It does not make any Tax election;
(j) It does not commence or take any action or fail to take any action which
would result in the commencement of any Proceeding;
(k) It does not (i) acquire, dispose of, transfer, lease, license, mortgage,
pledge or encumber any fixed or other assets, other than in the Ordinary Course
of Business; (ii) incur, assume or prepay any indebtedness, Indebtedness or
obligation or any other liabilities or issue any debt securities, other than in
the Ordinary Course of Business; (iii) assume, guarantee, endorse for the
obligations of any other person, other than in the Ordinary Course of Business;
(iv) make any loans, advances or capital contributions to, or investments in,
any other Person, other than in the Ordinary Course of Business; or (v) fail to
maintain insurance consistent with past practices for its business and property;
(l) It pays all debts and Taxes, files all of its Tax Returns (as provided
herein) and pays or performs all other obligations, when due;
(m) It does not enter into or amend any agreements pursuant to which any other
Person is granted distribution, marketing or other rights of any type or scope
with respect to any of its services, products or technology;
(n) It does not hire any new officer-level employee;
(o) It does not revalue any of its assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts receivable,
except as required under GAAP and in the Ordinary Course of Business;
(p) Except as otherwise contemplated hereunder, it does not enter into any
transaction or take any other action outside the Ordinary Course of Business;
and
(q) It does not enter into any transaction or take any other action that likely
would cause or constitute a Breach of any representation or warranty made by it
in this Agreement.
4.3 FILINGS AND CONSENTS; COOPERATION.
Each of UPE and XXXX XXXX shall ensure that:
(a) Each filing or notice required to be made or given (pursuant to any
applicable Law, Order or contract, or otherwise) by UPE, XXXX XXXX or the
Shareholders in connection with the execution and delivery of any of the
Transactional Agreements, or in connection with the consummation or performance
of the Exchange, is made or given as soon as possible after the date of this
Agreement;
21
(b) Each Consent required to be obtained (pursuant to any applicable Law, Order
or contract, or otherwise) by UPE, XXXX XXXX or the Shareholders in connection
with the execution and delivery of any of the Transactional Agreements, or in
connection with the consummation or performance of the Exchange, is obtained as
soon as possible after the date of this Agreement and remains in full force and
effect through the Closing Date;
(c) It promptly delivers to CHID a copy of each filing made, each notice given
and each Consent obtained by UPE or XXXX XXXX during the Pre-Closing Period; and
(d) During the Pre-Closing Period, it and its Representatives cooperate with
CHID and CHID's Representatives, and prepare and make available such documents
and take such other actions as CHID may request in good faith, in connection
with any filing, notice or Consent that CHID is required or elects to make, give
or obtain.
4.4 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULES.
(a) During the Pre-Closing Period, each of UPE and XXXX XXXX shall promptly
notify CHID in writing of:
(i) the discovery by it of any event, condition, fact or circumstance that
occurred or existed on or prior to the date of this Agreement which is contrary
to any representation or warranty made by it in this Agreement or in any of the
other Transactional Agreements, or that would upon the giving of notice or lapse
of time, result in any of its representations and warranties set forth in this
agreement to become untrue or otherwise cause any of the conditions of Closing
set forth in Article VI or Article VII not to be satisfied;
(ii) any event, condition, fact or circumstance that occurs, arises or exists
after the date of this Agreement (except as a result of actions taken pursuant
to the express written consent of CHID) and that is contrary to any
representation or warranty made by it in this Agreement, or that would upon the
giving of notice or lapse of time, result in any of its representations and
warranties set forth in this agreement to become untrue or otherwise cause any
of the conditions of Closing set forth in Article VI or Article VII not to be
satisfied;
(b) If any event, condition, fact or circumstances that is required to be
disclosed pursuant to Section 4.4(a) requires any material change in the UPE and
XXXX XXXX Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming the UPE and XXXX XXXX
Disclosure Schedule were dated as of the date of the occurrence, existence or
discovery of such event, condition, fact or circumstances, then UPE or XXXX
XXXX, as applicable, shall promptly deliver to CHID an update to the UPE and
XXXX XXXX Disclosure Schedule specifying such change (a "DISCLOSURE SCHEDULE
UPDATE").
(c) It will promptly update any relevant and material information provided to
CHID after the date hereof pursuant to the terms of this Agreement.
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4.5 COMMERCIALLY REASONABLE EFFORTS.
During the Pre-Closing Period, each of UPE and XXXX XXXX shall use its
commercially reasonable efforts to cause the conditions set forth in Article VI
and Article VII to be satisfied on a timely basis and so that the Closing can
take place on or before October 31, 2004, in accordance with Section 1.5, and
shall not take any action or omit to take any action, the taking or omission of
which would or could reasonably be expected to result in any of the
representations and warranties of UPE and XXXX XXXX set forth in this Agreement
becoming untrue, or in any of the conditions of Closing set forth in Article VI
or Article VII not being satisfied.
4.6 CONFIDENTIALITY; PUBLICITY.
Each of UPE and XXXX XXXX shall ensure that:
(a) It and its Representatives keep strictly confidential the existence and
terms of this Agreement prior to the issuance or dissemination of any mutually
agreed upon press release or other disclosure of the Exchange; and
(b) neither it nor any of its Representatives issues or disseminates any press
release or other publicity or otherwise makes any disclosure of any nature (to
any of its suppliers, customers, landlords, creditors or employees or to any
other Person) regarding any of the Exchange;
except in each case to the extent that it is required by law to make any such
disclosure regarding such transactions or as separately agreed by the parties;
provided, however, that if it is required by law to make any such disclosure,
UPE or XXXX XXXX advises CHID, at least five business days before making such
disclosure, of the nature and content of the intended disclosure.
ARTICLE V.
COVENANTS OF CHID
5.1 NOTIFICATION.
During the Pre-Closing Period, CHID shall promptly notify UPE or XXXX XXXX in
writing of:
(a) the discovery by CHID of any event, condition, fact or circumstance that
occurred or existed on or prior to the date of this Agreement which is contrary
to any representation or warranty made by CHID in this Agreement; and,
(b) any event, condition, fact or circumstance that occurs, arises or exists
after the date of this Agreement (except as a result of actions taken pursuant
to the written consent of XXXX XXXX) and that is contrary to any representation
or warranty made by CHID in this Agreement;
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5.2 FILINGS AND CONSENTS; COOPERATION.
CHID shall ensure that:
(a) Each filing or notice required to be made or given (pursuant to any
applicable Law, Order or contract, or otherwise) by CHID in connection with the
execution and delivery of any of the Transactional Agreements, or in connection
with the consummation or performance of the Exchange, is made or given as soon
as possible after the date of this Agreement;
(b) Each Consent required to be obtained (pursuant to any applicable Law, Order
or contract, or otherwise) by CHID in connection with the execution and delivery
of any of the Transactional Agreements, or in connection with the consummation
or performance of the Exchange, is obtained as soon as possible after the date
of this Agreement and remains in full force and effect through the Closing Date;
(c) CHID promptly delivers to UPE and XXXX XXXX a copy of each filing made, each
notice given and each Consent obtained by CHID during the Pre-Closing Period;
and
(d) During the Pre-Closing Period, CHID and its Representatives cooperate with
UPE, XXXX XXXX and their Representatives, and prepare and make available such
documents and take such other actions as UPE or XXXX XXXX may request in good
faith, in connection with any filing, notice or Consent that UPE or XXXX XXXX is
required or elects to make, give or obtain.
5.3 COMMERCIALLY REASONABLE EFFORTS.
During the Pre-Closing Period, CHID shall use its commercially reasonable
efforts to cause the conditions set forth in Article VI and Article VII to be
satisfied on a timely basis and so that the Closing can take place on or before
October 31, 2004 or as soon thereafter as is reasonably practical, in accordance
with Section 1.5, and shall not take any action or omit to take any action, the
taking or omission of which would or could reasonably be expected to result in
any of the representations and warranties or CHID set forth in this Agreement
becoming untrue or in any of the conditions of closing set forth in Article VI
or Article VII not being satisfied.
5.4 DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Each of CHID, XXXX XXXX and the Shareholders acknowledges and agrees that it
may receive Confidential Information in connection with this Transaction
including without limitation, the UPE and XXXX XXXX Disclosure Schedule and any
information disclosed during the due diligence process, the public disclosure of
which will harm the disclosing party's business. The Receiving Party may use
Confidential Information only in connection with the Transaction. The results of
the due diligence review may not be used for any other purpose other than in
connection with the Transaction. Except as expressly provided in this Agreement,
the Receiving Party shall not disclose Confidential Information to anyone
without the Disclosing Party's prior written consent. The Receiving Party shall
take all reasonable measures to avoid disclosure, dissemination or unauthorized
use of Confidential Information, including, at a minimum, those measures it
takes to protect its own confidential information of a similar nature. The
Receiving Party shall not export any Confidential Information in any manner
contrary to the export regulations of the governmental jurisdiction to which it
is subject.
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(b) The Receiving Party may disclose Confidential Information as required to
comply with binding orders of governmental entities that have jurisdiction over
it, provided that the Receiving Party (i) gives the Disclosing Party reasonable
notice (to the extent permitted by law) to allow the Disclosing Party to seek a
protective order or other appropriate remedy, (ii) discloses only such
information as is required by the governmental entity, and (iii) uses
commercially reasonable efforts to obtain confidential treatment for any
Confidential Information so disclosed.
(c) All Confidential Information shall remain the exclusive property of the
Disclosing Party. The Disclosing Party's disclosure of Confidential Information
shall not constitute an express or implied grant to the Receiving Party of any
rights to or under the Disclosing Party's patents, copyrights, trade secrets,
trademarks or other intellectual property rights.
(d) The Receiving Party shall notify the Disclosing Party immediately upon
discovery of any unauthorized use or disclosure of Confidential Information or
any other breach of this Agreement by the Receiving Party. The Receiving Party
shall cooperate with the Disclosing Party in every reasonable way to help the
Disclosing Party regain possession of such Confidential Information and prevent
its further unauthorized use.
(e) The Receiving Party shall return or destroy all tangible materials embodying
Confidential Information (in any form and including, without limitation, all
summaries, copies and excerpts of Confidential Information) promptly following
the Disclosing Party's written request; provided, however, that, subject to the
provisions of this Agreement, the Receiving Party may retain one copy of such
materials in the confidential, restricted access files of its legal department
for use only in the event a dispute arises between the parties related to the
Transaction and only in connection with that dispute. At the Disclosing Party's
option, the Receiving Party shall provide written certification of its
compliance with this Section.
5.5 INDEMNIFICATION.
(a) Each of UPE, XXXX XXXX and the Shareholders, jointly and severally, each
shall defend, indemnify and hold harmless CHID, and its respective employees,
officers, directors, stockholders, controlling persons, affiliates, agents,
successors and assigns (collectively, the "CHID Indemnified Persons"), and shall
reimburse the CHID Indemnified Person, for, from and against any loss,
liability, claim, damage, expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not involving
a third-party claim (collectively, "Damages"), directly or indirectly, relating
to, resulting from or arising out of:
(i) any untrue representations, misrepresentations or breach of warranty by or
of UPE, XXXX XXXX or the Shareholders contained in or pursuant to this
Agreement, and the UPE and XXXX XXXX Disclosure Schedule;
25
(ii) any breach or nonfulfillment of any covenant, agreement or other obligation
by or of UPE, XXXX XXXX or the Shareholders (only to the extent made or
occurring prior to or at the Closing) contained in or pursuant to this
Agreement, the Transaction Agreements executed by UPE, XXXX XXXX or any of the
Shareholders in their individual capacity, the UPE and XXXX XXXX Disclosure
Schedule, or any of the other agreements, documents, schedules or exhibits to be
entered into by UPE or XXXX XXXX or any of the Shareholders in their individual
capacity pursuant to or in connection with this Agreement;
(iii) all of Pre-Closing liabilities of UPE, XXXX XXXX or the Shareholders; and
(iv) any liability, claim, action or proceeding of any kind whatsoever, whether
instituted or commenced prior to or after the Closing Date, which directly or
indirectly relates to, arises or results from, or occurs in connection with
facts or circumstances relating to the conduct of business of UPE or XXXX XXXX,
or the assets of UPE or XXXX XXXX, or events or circumstances existing on or
prior to the Closing Date.
(b) CHID shall defend, indemnify and hold harmless UPE, XXXX XXXX and its
respective affiliates, agents, successors and assigns (collectively, the "XXXX
XXXX Indemnified Persons"), and shall reimburse the XXXX XXXX Indemnified
Persons, for, from and against any Damages, directly or indirectly, relating to,
resulting from or arising out of:
(i) any untrue representation, misrepresentation or breach of warranty by or of
CHID contained in or pursuant to this Agreement;
(ii) any breach or nonfulfillment of any covenant, agreement or other
obligations by or of CHID contained in or pursuant to this Agreement, the
Transaction Agreements or any other agreements, documents, schedules or exhibits
to be entered into or delivered to pursuant to or in connection with this
Agreement.
(c) Promptly after receipt by an indemnified Party under Section 5.6 of this
Agreement of notice of a claim against it ("Claim"), such indemnified Party
shall, if a claim is to be made against an indemnifying Party under such
Section, give notice to the indemnifying Party of such Claim, but the failure to
so notify the indemnifying Party will not relieve the indemnifying Party of any
liability that it may have to any indemnified Party, except to the extent that
the indemnifying Party demonstrates that the defense of such action is
prejudiced by the indemnified Party's failure to give such notice.
(c) A claim for indemnification for any matter not involving a third-party claim
may be asserted by notice to the Party from whom indemnification is sought.
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ARTICLE VI.
CLOSING CONDITIONS OF CHID
CHID's obligations to effect the Closing and consummate the Exchange are subject
to the satisfaction of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of UPE, XXXX XXXX and the Shareholders in
this Agreement shall have been true and correct as of the date of this Agreement
and shall be true and correct on and as of the Closing. UPE, XXXX XXXX and the
Shareholders shall have performed all obligations in this Agreement required to
be performed or observed by them on or prior to the Closing.
6.2 ADDITIONAL CONDITIONS TO CLOSING.
(a) All necessary approvals under federal and state securities laws and other
authorizations relating to the issuance of the Acquisition Shares and the
transfer of the Shares shall have been received.
(b) CHID shall have obtained an opinion stating that the terms of the Exchange
are fair, just and equitable to CHID and its shareholders.
(c) No preliminary or permanent injunction or other order by any federal, state
or foreign court of competent jurisdiction which prohibits the consummation of
the Exchange shall have been issued and remain in effect. No statute, rule,
regulation, executive order, stay, decree, or judgment shall have been enacted,
entered, issued, promulgated or enforced by any court or governmental authority
which prohibits or restricts the consummation of the Exchange. All
authorizations, consents, orders or approvals of, or declarations or filings
with, and all expirations of waiting periods imposed by, any Governmental Body
which are necessary for the consummation of the Exchange, other than those the
failure to obtain which would not materially adversely affect the consummation
of the Exchange or in the aggregate have a material adverse effect on CHID and
its subsidiaries, taken as a whole, shall have been filed, occurred or been
obtained (all such permits, approvals, filings and consents and the lapse of all
such waiting periods being referred to as the "REQUISITE REGULATORY APPROVALS")
and all such Requisite Regulatory Approvals shall be in full force and effect.
(d) There shall not be any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Exchange, by any
Governmental Body which, in connection with the grant of a Requisite Regulatory
Approval, imposes any material condition or material restriction upon CHID or
its subsidiaries or UPE or XXXX XXXX, including, without limitation,
requirements relating to the disposition of assets, which in any such case would
so materially adversely impact the economic or business benefits of the Exchange
as to render inadvisable the consummation of the Exchange.
27
6.3 PERFORMANCE OF AGREEMENTS.
UPE, XXXX XXXX or the Shareholders, as the case may be, shall have executed and
delivered each of the agreements, instruments and documents required to be
executed and delivered, and performed all actions required to be performed by
UPE or XXXX XXXX or any of the Shareholders, as the case may be, pursuant to
this Agreement, except as CHID has otherwise consented in writing.
6.4 CONSENTS.
Each of the Consents identified or required to have been identified in the UPE
and XXXX XXXX Disclosure Schedule shall have been obtained and shall be in full
force and effect, other than those Consents, which have been expressly waived by
CHID.
6.5 NO MATERIAL ADVERSE CHANGE AND SATISFACTORY DUE DILIGENCE.
There shall not have been any material adverse change in the business,
condition, assets, liabilities, operations or financial performance of UPE or
XXXX XXXX since the date of this Agreement as determined by CHID in its
discretion. CHID shall be satisfied in all respects with the results of its due
diligence review of UPE and XXXX XXXX.
6.6 UPE/XXXX XXXX CLOSING CERTIFICATES.
In addition to the documents required to be received under this Agreement, CHID
shall also have received the following documents:
(a) copies of resolutions of UPE and XXXX XXXX, certified by a Secretary,
Assistant Secretary or other appropriate officer of UPE or XXXX XXXX,
authorizing the execution, delivery and performance of this Agreement and other
Transactional Agreements;
(b) good standing certificate from China of UPE and XXXX XXXX; and
(c) such other documents as CHID may request in good faith for the purpose of
(i) evidencing the accuracy of any representation or warranty made by UPE and
XXXX XXXX, (ii) evidencing the compliance by UPE and XXXX XXXX, or the
performance by UPE and XXXX XXXX of, any covenant or obligation set forth in
this Agreement or any of the other Transactional Agreements, (iii) evidencing
the satisfaction of any condition set forth in Article VII or this Article VI,
or (iv) otherwise facilitating the consummation or performance of the Exchange.
6.7 TRANSACTIONAL AGREEMENTS.
Each Person (other than CHID) shall have executed and delivered prior to or on
the Closing Date all Transactional Agreements to which it is to be a party.
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6.8 RESIGNATION OF DIRECTORS AND OFFICERS.
CHID shall have received a written resignation from each of the directors and
officers of UPE and XXXX XXXX effective as of the Closing.
6.9 DELIVERY OF STOCK CERTIFICATES, MINUTE BOOK AND CORPORATE SEAL.
The Shareholders shall have delivered to CHID the stock books, stock ledgers,
minute books and corporate seals of UPE and XXXX XXXX.
ARTICLE VII.
CLOSING CONDITIONS OF THE SHAREHOLDERS
The Shareholders' obligations to effect the Closing and consummate the Exchange
are subject to the satisfaction of each of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of CHID in this Agreement shall have been
true and correct as of the date of this Agreement and shall be true and correct
on and as of the Closing and CHID shall have performed all obligations in this
Agreement required to be performed or observed by them on or prior to the
Closing.
7.2 ADDITIONAL CONDITIONS TO CLOSING.
(a) All necessary approvals under federal and state securities laws and other
authorizations relating to the issuance and transfer of the Acquisition Shares
by CHID and the transfer of the Shares by UPE and XXXX XXXX shall have been
received.
(b) No preliminary or permanent injunction or other order by any federal, state
or foreign court of competent jurisdiction which prohibits the consummation of
the Exchange shall have been issued and remain in effect. No statute, rule,
regulation, executive order, stay, decree, or judgment shall have been enacted,
entered, issued, promulgated or enforced by any court or governmental authority
which prohibits or restricts the consummation of the Exchange. All Requisite
Regulatory Approvals shall have been filed, occurred or been obtained and all
such Requisite Regulatory Approvals shall be in full force and effect.
(c) There shall not be any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Exchange, by any
federal or state Governmental Body which, in connection with the grant of a
Requisite Regulatory Approval, imposes any condition or restriction upon the
Surviving Corporation or its subsidiaries (or, in the case of any disposition of
assets required in connection with such Requisite Regulatory Approval, upon
CHID, its subsidiaries or XXXX XXXX, UPE or any of their subsidiaries),
including, without limitation, requirements relating to the disposition of
assets, which in any such case would so materially adversely impact the economic
or business benefits of the Exchange as to render inadvisable the consummation
of the Exchange.
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7.3 CHID CLOSING CERTIFICATES.
The Shareholders shall have received the following documents:
(a) copies of resolutions of CHID, certified by a Secretary, Assistant Secretary
or other appropriate officer of CHID, authorizing the execution, delivery and
performance of the Transactional Agreements and the Exchange;
(b) good standing certificates for the State of Nevada; and
(c) such other documents as UPE or XXXX XXXX may request in good faith for the
purpose of (i) evidencing the accuracy of any representation or warranty made by
CHID, (ii) evidencing the compliance by CHID with, or the performance by CHID
of, any covenant or obligation set forth in this Agreement or any of the other
Transactional Agreements, (iii) evidencing the satisfaction of any condition set
forth in Article VI or this Article VII, or (iv) otherwise facilitating the
consummation or performance of the Exchange.
7.4 NO MATERIAL ADVERSE CHANGE.
There shall not have been any material adverse change in CHID's business,
condition, assets, liabilities, operations or financial performance since the
date of this Agreement.
7.5 PERFORMANCE OF AGREEMENTS.
CHID shall have executed and delivered each of the agreements, instruments and
documents required to be executed and delivered, and performed all actions
required by CHID pursuant to this Agreement, except as UPE, XXXX XXXX and the
Shareholders have otherwise consented in writing.
7.6 CONSENTS.
Each of the Consents identified or required to have been identified in
Section 3.4 shall have been obtained and shall be in full force and effect,
other than those Consents the absence of which shall not have a material adverse
effect on CHID.
7.7 REGISTRATION RIGHTS AGREEMENT.
CHID shall have entered into a Registration Rights Agreement with all of the
Shareholders, in the form attached hereto as Exhibit B, which shall provide,
among other things, that (i) the Shareholders shall be granted piggyback
registration rights, subject to customary underwriter's and company cutbacks and
other limitations, (ii) the Shareholders shall make customary investor
representations to CHID, and (iii) the Shareholders shall agree to hold and not
sell any of the Acquisition Shares for two (2) years after the Closing Date.
30
7.8 CHID STOCK.
On the Closing Date, shares of CHID Common Stock shall be eligible for quotation
on the OTC Bulletin Board.
ARTICLE VIII.
FURTHER ASSURANCES
Each of the parties hereto agrees that it will, from time to time after the date
of the Agreement, execute and deliver such other certificates, documents and
instruments and take such other action as may be reasonably requested by the
other party to carry out the actions and transactions contemplated by this
Agreement, including the closing conditions described in Articles VI and VII.
UPE , XXXX XXXX and the Shareholders shall reasonably cooperate with CHID in its
of the books and records of UPE and XXXX XXXX, or in preparing any solicitation
materials to be sent to the shareholders of CHID in connection with the approval
of the Exchange and the transactions contemplated by the Transactional
Agreements.
ARTICLE IX.
TERMINATION
9.1 TERMINATION.
This Agreement may be terminated and the Exchange abandoned at any time prior to
the Closing Date:
(a) by mutual written consent of CHID, UPE, XXXX XXXX and the Shareholders;
(b) by CHID if the Financial Statements of UPE and XXXX XXXX for the prior three
fiscal years do not disclose minimum revenues of XXX 00 million or if it is not
satisfied with the results of its due diligence of UPE and XXXX XXXX for any
reason;
(c) by CHID if (i) there is a material Breach of any covenant or obligation of
UPE, XXXX XXXX or the Shareholders; provided however, that if such Breach or
Breaches are capable of being cured prior to the Closing Date, such Breach or
Breaches shall not have been cured within 10 days of delivery of the written
notice of such Breach, or (ii) CHID reasonably determines that the timely
satisfaction of any condition set forth in Article VI has become impossible or
impractical (other than as a result of any failure on the part of CHID to comply
with or perform its covenants and obligations under this Agreement or any of the
other Transactional Agreements);
(d) by UPE or XXXX XXXX if (i) there is a material Breach of any covenant or
obligation of CHID; provided however, that if such Breach or Breaches are
capable of being cured prior to the Closing Date, such Breach or Breaches shall
not have been cured within 10 days of delivery of the written notice of such
Breach, or (ii) UPE or XXXX XXXX reasonably determines that the timely
satisfaction of any condition set forth in Article VII has become impossible or
impractical (other than as a result of any failure on the part of UPE or XXXX
XXXX or any Shareholder to comply with or perform any covenant or obligation set
forth in this Agreement or any of the other Transactional Agreements);
31
(e) by CHID if the Closing has not taken place on or before December 31, 2004
(except if as a result of any failure on the part of CHID to comply with or
perform its covenants and obligations under this Agreement or in any other
Transactional Agreement);
(f) by UPE or XXXX XXXX if the Closing has not taken place on or before December
31, 2005 (except if as a result of the failure on the part of UPE, XXXX XXXX or
the Shareholders to comply with or perform any covenant or obligation set forth
in this Agreement or in any other Transactional Agreement);
(g) by any of CHID, on the one hand or UPE or XXXX XXXX, on the other hand, if
any court of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Exchange and
such order, decree, ruling or any other action shall have become final and
non-appealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this clause (f) shall have used all commercially
reasonable efforts to remove such order, decree or ruling; or
(h) The parties hereby agree and acknowledge that a breach of the provisions of
Sections y4.1, y4.2, y4.3, y4.4 and y4.6 are, without limitation, material
Breaches of this Agreement.
9.2 TERMINATION PROCEDURES.
If CHID wishes to terminate this Agreement pursuant to Section 9.1, CHID shall
deliver to the Shareholders, UPE and XXXX XXXX a written notice stating that
CHID is terminating this Agreement and setting forth a brief description of the
basis on which CHID is terminating this Agreement. If UPE or XXXX XXXX wishes to
terminate this Agreement pursuant to Section 9.1, UPE or XXXX XXXX, as
applicable, shall deliver to CHID a written notice stating that UPE or XXXX XXXX
is terminating this Agreement and setting forth a brief description of the basis
on which UPE or XXXX XXXX is terminating this Agreement.
9.3 EFFECT OF TERMINATION.
In the event of termination of this Agreement as provided above, this Agreement
shall forthwith have no further effect. Except for a termination resulting from
a Breach by a party to this Agreement, there shall be no liability or obligation
on the part of any party hereto. In the event of a breach, the remedies of the
non-breaching party shall be to seek damages from the breaching party or to
obtain an order for specific performance, in addition to or in lieu of other
remedies provided herein. Upon request after termination, each party will
redeliver or, at the option of the party receiving such request, destroy all
reports, work papers and other material of any other party relating to the
Exchange, whether obtained before or after the execution hereof, to the party
furnishing same; provided, however, that UPE, XXXX XXXX and the Shareholders
shall, in all events, remain bound by and continue to be subject to Section 4.6
and all parties shall in all events remain bound by and continue to be subject
to Section 5.4 and 5.5. .
32
Notwithstanding the above, both CHID, on the one hand, and UPE, XXXX XXXX and
the Shareholders, on the other hand, shall be entitled to announce the
termination of this Agreement by means of a mutually acceptable press release.
ARTICLE X.
MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties of UPE, XXXX XXXX and the Shareholders in
this Agreement and the UPE and XXXX XXXX Disclosure Schedule shall survive shall
survive indefinitely. The right to indemnification, reimbursement or other
remedy based on such representations and warranties will not be affected by any
investigation conducted by the parties.
10.2 EXPENSES.
Except as otherwise set forth herein, each of the parties to the Exchange shall
bear its own expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by this Agreement.
10.3 ENTIRE AGREEMENT.
This Agreement and the other Transactional Agreements contain the entire
agreement of the parties hereto, and supersede any prior written or oral
agreements between them concerning the subject matter contained herein, or
therein. There are no representations, agreements, arrangements or
understandings, oral or written, between the parties to this Agreement, relating
to the subject matter contained in this Agreement and the other Transaction
Agreements, which are not fully expressed herein or therein. The schedules and
each exhibit attached to this Agreement or delivered pursuant to this Agreement
are incorporated herein by this reference and constitute a part of this
Agreement.
10.4 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
instrument.
10.5 DESCRIPTIVE HEADINGS.
The Article and Section headings in this Agreement are for convenience only and
shall not affect the meanings or construction of any provision of this
Agreement.
33
10.6 NOTICES.
Any notices required or permitted to be given under this Agreement shall be in
writing and shall be deemed sufficiently given on the earlier to occur of the
date of personal delivery, the date of receipt or three (3) days after posting
by overnight courier or registered or certified mail, postage prepaid, addressed
as follows:
If to CHID: CHINA DIGITAL COMMUNICATION GROUP
A-3. Xinglian Industrial Zone. He Xxx Xxxx Pingxin
Road. Xin Nan. Ping Hua Town. Longgang
Xxxxxxxx Xxxxx 00000
If to UPE: UPE Limited
------------------------------
------------------------------
------------------------------
If to XXXX XXXX: SHENZHEN XXXX XXXX POWER SUPPLY INDUSTRY CO., LTD.
0/X Xxxx,000 Xxxx.,Xxxxxx Xxxxxxxxxx
Xxxx,Xxxxxxxxxxx,Xxxxxxxx,Xxxxx
If to the Shareholders: To such address or addresses as a party shall have
previously designated by notice to the sender given in accordance with this
section.
10.7 CHOICE OF LAW
This Agreement shall be construed in accordance with and governed by the laws of
the State of New York without regard to choice of law principles. The parties
hereto each consent to the jurisdiction of the courts of the state of New York,
county of New York and to the federal courts located in the county of New York,
State of New York.
10.8 BINDING EFFECT; BENEFITS
This Agreement shall inure to the benefit of and be binding upon the parties and
their respective successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to confer on any Person other than the parties
or their respective successors and permitted assigns, the Shareholders and other
Persons expressly referred to herein, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
34
10.9 ASSIGNABILITY
Neither this Agreement nor any of the parties' rights hereunder shall be
assignable by any party without the prior written consent of the other parties
and any attempted assignment without such consent shall be void.
10.10 WAIVER AND AMENDMENT
Any term or provision of this Agreement may be waived at any time by the party,
which is entitled to the benefits thereof. The waiver by any party of a breach
of any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach. The parties may, by mutual agreement in writing, amend
this Agreement in any respect. UPE, XXXX XXXX and the Shareholders hereby
acknowledge their intent that this Agreement includes as a party any holder of
capital stock in UPE and XXXX XXXX at the time of Closing. CHID, UPE, XXXX XXXX
and the Shareholders therefore agree that this Agreement may be amended, without
the further consent of any party to this Agreement, (i) to add as a new
Shareholder any existing shareholder of UPE or XXXX XXXX and (ii) to modify
Schedule 1 to reflect the addition of such shareholder.
10.11 ATTORNEYS' FEES.
In the event of any action or proceeding to enforce the terms and conditions of
this Agreement, the prevailing party shall be entitled to an award of reasonable
attorneys' and experts' fees and costs, in addition to such other relief as may
be granted.
10.12 SEVERABILITY.
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
10.13 CONSTRUCTION.
In executing this Agreement, the parties severally acknowledge and represent
that each: (a) has fully and carefully read and considered this Agreement; (b)
has or has had the opportunity to consult independent legal counsel regarding
the legal effect and meaning of this document and all terms and conditions
hereof; (c) has been afforded the opportunity to negotiate as to any and all
terms hereof; and (d) is executing this Agreement voluntarily, free from any
influence, coercion or duress of any kind. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
35
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the day and year first above written.
CHINA DIGITAL COMMUNICATION GROUP
By:
---
Name:
-----
Title:
------
SHENZHEN XXXX XXXX ., LTD.
By:
---
Name:
-----
Title:
------
UPE Limited
By:
---
Name:
-----
Title:
------
SHAREHOLDERS:
See attached Shareholder signature pages
36
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
AGREEMENT. "Agreement" shall mean the Share Exchange Agreement to which this
Exhibit A is attached (including all Disclosure Schedules and all Exhibits), as
it may be amended from time to time.
APPROVED PLANS. "Approved Plans" shall mean a stock option or similar plan for
the benefit of employees or others, which has been approved by the shareholders
of XXXX XXXX.
AVERAGE CHID STOCK PRICE. "Average CHID Stock Price" shall refer to the average
of the closing price of the Common Stock of CHID on the OTC Bulletin Board
equaling to $0.60 per share based upon a valuation of CHID of $11,100,000 as
determined by the parties.
UPE COMMON STOCK. "UPE Common Stock" shall mean the shares of common stock of
UPE.
BREACH. There shall be deemed to be a "Breach" of a representation, warranty,
covenant, obligation or other provision if there is or has been any inaccuracy
in or breach of, or any failure to comply with or perform, such representation,
warranty, covenant, obligation or other provision.
CERTIFICATES. "Certificates" shall have the meaning specified in Section 1.3 of
the Agreement.
CHID. "CHID" shall have the meaning specified in the first paragraph of the
Agreement.
CHID COMMON STOCK. "CHID Common Stock" shall mean the shares of common stock of
CHID.
CHID SEC REPORTS. "CHID SEC Reports" shall have the meaning specified in
Section 4.6 of the Agreement.
CLOSING. "Closing" shall have the meaning specified in Section 1.5 of the
Agreement.
CLOSING DATE. "Closing Date" shall have the meaning specified in Section 1.5 of
the Agreement.
CODE. "Code" shall have the meaning specified in the Recitals of this Agreement.
37
CONFIDENTIAL INFORMATION. "Confidential Information" shall mean all nonpublic
information disclosed by one party or its agents (the "Disclosing Party") to the
other party or its agents (the "Receiving Party") that is designated as
confidential or that, given the nature of the information or the circumstances
surrounding its disclosure, reasonably should be considered as confidential.
Confidential Information includes, without limitation (i) nonpublic information
relating to the Disclosing Party's technology, customers, vendors, suppliers,
business plans, intellectual property, promotional and marketing activities,
finances, agreements, transactions, financial information and other business
affairs, and (ii) third-party information that the Disclosing Party is obligated
to keep confidential.
Confidential Information does not include any information that (i) is or becomes
publicly available without breach of this Agreement, (ii) can be shown by
documentation to have been known to the Receiving Party at the time of its
receipt from the Disclosing Party, (iii) is received from a third party who, to
the knowledge of the Receiving Party, did not acquire or disclose such
information by a wrongful or tortious act, or (iv) can be shown by documentation
to have been independently developed by the Receiving Party without reference to
any Confidential Information.
CONSENT. "Consent" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
DISCLOSURE SCHEDULE UPDATE. "Disclosure Schedule Update" shall have the meaning
specified in Section 4.4 of the Agreement.
XXXX XXXX BALANCE SHEET. "XXXX XXXX Balance Sheet" shall mean XXXX XXXX'x
audited balance sheet at December 31, 2003.
XXXX XXXX COMMON STOCK. "XXXX XXXX Common Stock" shall mean the shares of common
stock of XXXX XXXX.
UPE AND XXXX XXXX DISCLOSURE SCHEDULE. "UPE and XXXX XXXX Disclosure Schedule"
shall have the meaning specified in introduction to Article II of the Agreement.
ENTITY. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
ENVIRONMENTAL LAWS. "Environmental Laws" shall mean any Law or other requirement
relating to the protection of the environment, health, or safety from the
release or disposal of hazardous materials.
ENVIRONMENTAL PERMIT. "Environmental Permit" means all licenses, permits,
authorizations, approvals, franchises and rights required under any applicable
Environmental Law or Order.
38
EQUITY SECURITIES. "Equity Security" shall mean any stock or similar security,
including, without limitation, securities containing equity features and
securities containing profit participation features, or any security convertible
into or exchangeable for, with or without consideration, any stock or similar
security, or any security carrying any warrant, right or option to subscribe to
or purchase any shares of capital stock, or any such warrant or right.
EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
GAAP. "GAAP" shall mean Generally Accepted Accounting Principles, applied on a
consistent basis.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession, approval, consent,
ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
that is issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Law; or
(b) right under any contract with any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature (including any
governmental division, subdivision, department, agency, bureau, branch, office,
commission, council, board, instrumentality, officer, official, representative,
organization, unit, body or Entity and any court or other tribunal); or
(d) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature, including any court, arbitrator,
administrative agency or commissioner, or other governmental authority or
instrumentality.
INDEBTEDNESS. "Indebtedness" shall mean any obligation, contingent or otherwise.
Any obligation secured by a Lien on, or payable out of the proceeds of, or
production from, property of the relevant party will be deemed to be
Indebtedness.
INTELLECTUAL PROPERTY. "Intellectual Property" means all industrial and
intellectual property, including, without limitation, all U.S. and non-U.S.
patents, patent applications, patent rights, trademarks, trademark applications,
common law trademarks, Internet domain names, trade names, service marks,
service xxxx applications, common law service marks, and the goodwill associated
therewith, copyrights, in both published and unpublished works, whether
registered or unregistered, copyright applications, franchises, licenses,
know-how, trade secrets, technical data, designs, customer lists, confidential
and proprietary information, processes and formulae, all computer software
programs or applications, layouts, inventions, development tools and all
documentation and media constituting, describing or relating to the above,
including manuals, memoranda, and records, whether such intellectual property
has been created, applied for or obtained anywhere throughout the world.
39
KNOWLEDGE. A corporation shall be deemed to have "knowledge" of a particular
fact or matter only if a director or officer of such corporation has, had or
should have had knowledge of such fact or matter.
LAWS. "Laws" means, with respect to any Person, any U.S. or non-U.S. federal,
national, state, provincial, local, municipal, international, multinational or
other law (including common law), constitution, statute, code, ordinance, rule,
regulation or treaty applicable to such Person.
LIEN. "Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge, right of first refusal, encumbrance or other adverse claim or
interest of any kind, including, without limitation, any conditional sale or
other title retention agreement, any lease in the nature thereof and the filing
of or agreement to give any financing statement under the Uniform Commercial
Code of any jurisdiction and including any lien or charge arising by Law.
MATERIAL ADVERSE EFFECT. "Material Adverse Effect" means any change, effect or
circumstance which, individually or in the aggregate, would reasonably be
expected to (a) have a material adverse effect on the business, assets,
financial condition or results of operations of the affected party, in each case
taken as a whole or (b) materially impair the ability of the affected party to
perform its obligations under this Agreement and the Transaction Agreements,
excluding any change, effect or circumstance resulting from (i) the
announcement, pendency or consummation of the transactions contemplated by this
Agreement, (ii) changes in the United States securities markets generally, or
(iii) changes in general economic, currency exchange rate, political or
regulatory conditions in industries in which the affected party operates.
MATERIAL CONTRACT. "Material Contract" means any and all agreements, contracts,
arrangements, understandings, leases, commitments or otherwise, providing for
potential payments by or to the company in excess of $10,000, and the
amendments, supplements and modifications thereto.
ORDER. "Order" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
Governmental Body.
ORDINARY COURSE OF BUSINESS. "Ordinary Course of Business" shall mean an action
taken by UPE or XXXX XXXX if (i) such action is taken in normal operation,
consistent with past practices, (ii) such action is not required to be
authorized by the Shareholders, Board of Directors or any committee of the Board
of the Directors or other governing body of UPE or XXXX XXXX and (iii) does not
require any separate or special authorization or consent of any nature by any
Governmental Body or third party.
40
PERMITTED LIENS. "Permitted Liens" shall mean (a) Liens for Taxes not yet
payable or in respect of which the validity thereof is being contested in good
faith by appropriate proceedings and for the payment of which the relevant party
has made adequate reserves; (b) Liens in respect of pledges or deposits under
workmen's compensation laws or similar legislation, carriers, warehousemen,
mechanics, laborers and materialmen and similar Liens, if the obligations
secured by such Liens are not then delinquent or are being contested in good
faith by appropriate proceedings conducted and for the payment of which the
relevant party has made adequate reserves; and (c) statutory Liens incidental to
the conduct of the business of the relevant party which were not incurred in
connection with the borrowing of money or the obtaining of advances or credits
and that do not in the aggregate materially detract from the value of its
property or materially impair the use thereof in the operation of its business.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PRE-CLOSING PERIOD. "Pre-Closing Period" shall mean the period commencing as of
the date of the Agreement and ending on the Closing Date.
PROCEEDING. "Proceeding" shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding and any informal proceeding), prosecution, contest,
hearing, inquiry, inquest, audit, examination or investigation, commenced,
brought, conducted or heard by or before, or otherwise has involved, any
Governmental Body or any arbitrator or arbitration panel.
REGISTRATION RIGHTS AGREEMENT. "Registration Rights Agreement" shall mean an
agreement substantially in the form of Exhibit B.
REPRESENTATIVES. "Representatives" of a specified party shall mean officers,
directors, employees, attorneys, accountants, advisors and representatives of
such party, including, without limitation, all subsidiaries of such specified
party, and all such Persons with respect to such subsidiaries. The Related
Persons of UPE or XXXX XXXX shall be deemed to be "Representatives" of UPE or
XXXX XXXX, as applicable.
SEC. "SEC" shall mean the Securities and Exchange Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
TAXES. "Taxes" shall mean all foreign, federal, state or local taxes, charges,
fees, levies, imposts, duties and other assessments, as applicable, including,
but not limited to, any income, alternative minimum or add-on, estimated, gross
income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise, registration, title, license, capital, paid-up
capital, profits, withholding, payroll, employment, unemployment, excise,
severance, stamp, occupation, premium, real property, recording, personal
property, federal highway use, commercial rent, environmental (including, but
not limited to, taxes under Section 59A of the Code) or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest, penalties or additions to
tax with respect to any of the foregoing; and "Tax" means any of the foregoing
Taxes.
41
TAX GROUP. "Tax Group" shall mean any federal, state, local or foreign
consolidated, affiliated, combined, unitary or other similar group of which UPE
or XXXX XXXX is now or was formerly a member.
TAX RETURN. "Tax Return" shall mean any return, declaration, report, claim for
refund or credit, information return, statement or other similar document filed
with any Governmental Body with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof. TRANSACTIONAL
AGREEMENTS. "Transactional Agreements" shall mean:
(a) this Agreement; and
(b) the Registration Rights Agreement.
42
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
43
SCHEDULE 1
UPE SHAREHOLDERS
Name Number of Shares
First Capital Limited 11%
Simple(Hong Kong) Investment & Managment Limited 10%
Shenzhen Xxxx Xx Investment Co., 11%
China US Bridge Capital 22%
Yan Xxxx Xxx 9.5%
Zi Xx XX 15%
Zi Xxxx Xx 13%
Xx Xxxx 8.5%
UPE CO., LTD
44
SCHEDULE 2
UPE AND XXXX XXXX DISCLOSURE SCHEDULE
COUNTERPART SIGNATURE PAGE
SHARE EXCHANGE AGREEMENT
AMONG
CHINA DIGITAL COMMUNICATION GROUP,
UPE CO., LTD
SHENZHEN XXXX XXXX POWER SUPPLY INDUSTRY CO., LTD.
AND THE SHAREHOLDERS NAMED THEREIN
A. The undersigned shareholder of UPE CO., LTD. ("UPE") desires to enter into
the Share Exchange Agreement dated September 29, 2004 (the "AGREEMENT"), among
CHINA DIGITAL COMMUNICATION GROUP, UPE, SHENZHEN XXXX XXXX POWER SUPPLY INDUSTRY
CO., LTD. ("XXXX XXXX") and the Shareholders of UPE named therein, a copy of
which has been delivered to the undersigned.
B. The undersigned hereby adopts, accepts and agrees to all of the terms and
provisions of the Agreement.
C. This Counterpart Signature Page has been executed by the undersigned
Shareholder. The parties to the Agreement are hereby authorized to attach this
Counterpart Signature Page to a copy of the Agreement, together with executed
Counterpart Signature Pages of the other Shareholders. The undersigned agrees
that when this Counterpart Signature Page has been appended to the Agreement,
the Agreement shall thereupon become a binding agreement between the
undersigned, CHID, UPE, XXXX XXXX and other Shareholders who have executed
similar Counterpart Signature Pages, enforceable against the undersigned in
accordance with its terms, without further action by the undersigned.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Counterpart
Signature Page as of the 29th day of September 2004.
SHAREHOLDER:
By:
---
Name:
-----
