STOCK PURCHASE AND SHARE EXCHANGE AGREEMENT by and among PAPERCLIP SOFTWARE, INC. a Delaware Corporation, AMERICAN SUNRISE INTERNATIONAL, INC. a Delaware Corporation, THE SHAREHOLDERS OF AMERICAN SURISE INTERNATIONAL, INC. LISTED ON SCHEDULE 3.2, and...
by
and
among
PAPERCLIP
SOFTWARE, INC.
a
Delaware Corporation,
AMERICAN
SUNRISE INTERNATIONAL, INC.
a
Delaware Corporation,
THE
SHAREHOLDERS OF AMERICAN SURISE INTERNATIONAL, INC. LISTED ON SCHEDULE
3.2,
and
Jilin
Dongsheng Weiye Science and Technology Co., Ltd.
a
limited
liability company of the People’s Republic of China
effective
as of November 6, 2006
1
Table
of Contents
|
ARTICLE
I
|
3 | |
|
REPRESENTATIONS,
COVENANTS AND WARRANTIES OF PCLP
|
3 | |
|
Section
1.1
|
Organization.
|
3
|
|
Section
1.2
|
Capitalization.
|
3
|
|
Section
1.3
|
Subsidiaries.
|
3
|
|
Section
1.4
|
3
|
|
|
Section
1.5
|
3
|
|
|
Section
1.6
|
Material
Contract Defaults.
|
3
|
|
Section
1.7
|
Information.
|
3
|
|
Section
1.8
|
3
|
|
|
Section
1.9
|
Contracts.
|
3
|
|
Section
1.10
|
3
|
|
|
Section
1.11
|
Approval
of Agreement.
|
3
|
|
Section
1.12
|
Material
Transactions or Affiliations.
|
3
|
|
Section
1.13
|
No
Conflict With Other Instruments.
|
3
|
|
Section
1.14
|
Governmental
Authorizations.
|
3
|
|
Section
1.15
|
SEC
Reporting and Compliance.
|
3
|
|
Section
1.16
|
Financial
Statements.
|
3
|
|
Section
1.17
|
No
General Solicitation or Advertising.
|
3
|
|
Section
1.18
|
Questionable
Payments and Off-Balance Sheet Arrangements.
|
3
|
|
Section
1.19
|
Indebtedness.
|
|
|
Section
1.20
|
Absence
of Certain Developments.
|
|
|
Section
1.21
|
Financial
Statements.
|
|
|
ARTICLE
II
|
|
3 |
|
REPRESENTATIONS,
COVENANTS AND WARRANTIES OF ASI
|
3 | |
|
Section
2.1
|
Organization.
|
3
|
|
Section
2.2
|
Capitalization.
|
3
|
|
Section
2.3
|
Subsidiaries.
|
3
|
|
Section
2.4
|
Tax
Matters, Books & Records.
|
3
|
|
Section
2.5
|
Information.
|
3
|
|
Section
2.6
|
Title
and Related Matters.
|
3
|
2
|
Section
2.7
|
3
|
|
|
Section
2.8
|
Contracts.
|
3
|
|
Section
2.9
|
No
Conflict With Other Instruments.
|
3
|
|
Section
2.10
|
Material
Contract Defaults.
|
3
|
|
Section
2.11
|
Governmental
Authorizations.
|
3
|
|
Section
2.12
|
Compliance
with Laws and Regulations.
|
3
|
|
Section
2.13
|
Insurance.
|
3
|
|
Section
2.14
|
Approval
of Agreement.
|
3
|
|
Section
2.15
|
Material
Transactions or Affiliations.
|
3
|
| Section 2.16 |
Indebtedness.
|
3
|
| Section 2.17 |
Absence
of Certain Developments.
|
|
| Section 2.18 |
Financial
Statements.
|
|
|
ARTICLE
III
|
3 | |
|
EXCHANGE
PROCEDURE AND OTHER CONSIDERATION
|
3 | |
|
Section
3.1
|
Share
Exchange/Delivery of ASI Securities.
|
3
|
|
Section
3.2
|
Issuance
of PCLP Shares.
|
3
|
|
Section
3.3
|
Spin-Off
of Paperclip Inc. (“Spinco”).
|
3
|
|
Section
3.4
|
Present
Liabilities of PCLP; Escrow Agreement.
|
3
|
|
Section
3.5
|
Events
Prior to Closing.
|
3
|
|
Section
3.6
|
Closing.
|
3
|
|
Section
3.7
|
Termination.
|
3
|
|
Section
3.8
|
Directors
of PCLP After Acquisition.
|
3
|
|
Section
3.9
|
Officers
of PCLP.
|
3
|
|
ARTICLE
IV
|
|
3 |
|
SPECIAL
COVENANTS
|
3 | |
|
Section
4.1
|
Access
to Properties and Records.
|
3
|
|
Section
4.2
|
Availability
of Rule 144.
|
3
|
|
Section
4.3
|
Special
Covenants and Representations Regarding the PCLP Common Shares
to be
Issued in the Exchange.
|
3
|
|
Section
4.4
|
Third
Party Consents.
|
3
|
|
Section
4.5
|
Actions
Prior to and Subsequent to Closing.
|
3
|
|
Section
4.6
|
Indemnification.
|
3
|
3
|
ARTICLE
V
|
|
3 |
| 3 | ||
|
Section
5.1
|
Accuracy
of Representations.
|
3
|
|
Section
5.2
|
Director
Approval.
|
3
|
|
Section
5.3
|
Officer's
Certificate.
|
3
|
|
Section
5.4
|
No
Material Adverse Change.
|
3
|
|
Section
5.5
|
Other
Items.
|
3
|
|
ARTICLE
VI
|
3 | |
|
CONDITIONS
PRECEDENT TO OBLIGATIONS OF ASI
|
3 | |
|
Section
6.1
|
Accuracy
of Representations.
|
3
|
|
Section
6.2
|
Director
Approval.
|
3
|
|
Section
6.3
|
Officer's
Certificate.
|
3
|
|
Section
6.4
|
No
Material Adverse Change.
|
3
|
|
Section
6.5
|
Series
B Convertible Preferred Stock Designation.
|
3
|
|
Section
6.6
|
Conversion
and Cancellation of Series A Preferred Stock Designation.
|
3
|
|
Section
6.7
|
Cancellation
of Outstanding Options, Warrants, Rights, Etc.
|
3
|
|
Section
6.8
|
Cancellation
of Voting Trusts.
|
3
|
|
ARTICLE
VII
|
3 | |
|
MISCELLANEOUS
|
3 | |
4
|
Section
7.1
|
Brokers
and Finders.
|
3
|
|
Section
7.2
|
Law,
Forum and Jurisdiction.
|
3
|
|
Section
7.3
|
Notices.
|
3
|
|
Section
7.4
|
Attorneys'
Fees.
|
3
|
|
Section
7.5
|
Confidentiality.
|
3
|
|
Section
7.6
|
Schedules;
Knowledge.
|
3
|
|
Section
7.7
|
Third
Party Beneficiaries.
|
3
|
|
Section
7.8
|
Entire
Agreement.
|
3
|
|
Section
7.9
|
Survival;
Termination.
|
3
|
|
Section
7.10
|
Counterparts.
|
3
|
|
Section
7.11
|
Amendment
or Waiver.
|
3
|
|
Section
7.12
|
[Intentionally
Omitted]
|
3
|
|
Section
7.13
|
Headings;
Context.
|
3
|
|
Section
7.14
|
Benefit.
|
3
|
|
Section
7.15
|
Public
Announcements.
|
3
|
|
Section
7.16
|
Severability.
|
3
|
|
Section
7.17
|
Failure
of Conditions; Termination.
|
3
|
|
Section
7.18
|
No
Strict Construction.
|
3
|
|
Section
7.19
|
Execution
Knowing and Voluntary.
|
3
|
|
Section
7.20
|
Amendment.
|
3
|
|
Section
7.21
|
Lock-Up
and Damages.
|
3
|
5
STOCK
PURCHASE AGREEMENT AND SHARE EXCHANGE
THIS
STOCK PURCHASE AGREEMENT AND SHARE EXCHANGE
(the
“Agreement”),
is made
and entered into this 6th
day of
November, 2006, by and among Paperclip Software, Inc., a corporation organized
under the laws of Delaware, with its principal place of business located at
Xxx
Xxxxxxxxxx Xxxxx Xxxxx 000, Xxxxxxxxxx, XX 00000 (“PCLP"); American Sunrise
International, Inc., a Delaware Corporation with its principal place of business
located at 00 Xxxxxxxx Xxxxx, Xxxx Xxxxxxx, Xxx Xxxxxx 00000
("ASI”),
Jilin Dongsheng Weiye Science and Technology Co., Ltd. (“Dongsheng”), a limited
liability company organized under the laws of the People’s Republic of China
(the “PRC”) and a wholly-owned subsidiary of ASI, with its principal place of
business located at [0-800 Jifong Highway, Jiangnan Blvd., Jilin, Jilin
Province, PRC, and the ASI shareholders listed on Schedule 3.2 attached hereto
and made a part hereof (“ASI Shareholders”) (collectively, ASI, Dongsheng and
the ASI Shareholders shall be known as the “ASI Group”).
A. This
Agreement provides for the acquisition of 100% of the issued and outstanding
capital stock of ASI owned by the ASI Shareholders, making ASI a wholly owned
subsidiary of PCLP, in exchange for the issuance of (1) all of PCLP’s authorized
but unissued common stock, par value $.01 per share (“Common Stock”), and (2)
shares of PCLP’s Series B Convertible Preferred Stock, par value $.01 per share,
of which each share converts into 500 shares of PCLP’s Common Stock, which shall
constitute 98.7% of PCLP’s
issued and outstanding fully diluted common stock after the transaction is
closed.
B. The
boards of directors of PCLP and ASI have determined, subject to the terms and
conditions set forth in this Agreement, that the transaction contemplated hereby
is desirable and in the best interests of their stockholders, respectively.
This
Agreement is being entered into for the purpose of setting forth the terms
and
conditions of the proposed acquisition.
C. The
boards of directors of PCLP and ASI have determined that it would be in the
best
interests of PCLP and its shareholders to separate PCLP’s current business from
PCLP (the “Spinco Business”) after the transaction closes, contribute the Spinco
Business to Paperclip Inc., and distribute the stock of Paperclip Inc. to the
present shareholders of PCLP prior to the transaction.
D. The
parties desire that the exchange qualify as a tax free exchange meeting the
requirements of Article 368(a)(1)(B) of the Internal Revenue Code of 1986,
as
amended.
Agreement
NOW,
THEREFORE,
on the
stated premises and for and in consideration of the mutual covenants and
agreements hereinafter set forth and the mutual benefits to the parties to
be
derived here from, it is hereby agreed as follows:
6
ARTICLE
I
REPRESENTATIONS,
COVENANTS AND WARRANTIES OF PCLP
As
an
inducement to and to obtain the reliance of ASI, PCLP represents and warrants
as
follows:
Section
1.1 Organization.
PCLP is
a corporation duly organized, validly existing, and in good standing under
the
laws of Delaware and has the corporate power and is duly authorized, qualified,
franchised and licensed under all applicable laws, regulations, ordinances
and
orders of public authorities to own all of its properties and assets and to
carry on its business in all material respects as it is now being conducted,
including qualification to do business as a foreign corporation in the
jurisdiction in which the character and location of the assets owned by it
or
the nature of the business transacted by it requires qualification. Included
in
the Schedules attached hereto (hereinafter defined) are complete and correct
copies of the certificate of incorporation, bylaws and amendments thereto as
in
effect on the date hereof. The execution and delivery of this Agreement does
not
and the consummation of the transactions contemplated by this Agreement in
accordance with the terms hereof will not violate any provision of PCLP's
certificate of incorporation or bylaws. PCLP has full power, authority and
legal
right and has taken all action required by law, its certificate of
incorporation, its bylaws or otherwise to authorize the execution and delivery
of this Agreement.
Section
1.2 Capitalization.
The
authorized capitalization of PCLP consists of 30,000,000 shares of common stock,
par value $.01 per share, and 10,000,000 shares of preferred stock, par value
$.01 per share, of which 3,649,543 shares are designated as Series A Preferred
Stock. As of the date hereof, PCLP has 8,196,523 common shares issued and
outstanding, and 3,649,543 Series A Preferred Stock shares issued and
outstanding. No other shares of preferred stock are issued and outstanding.
The
3,649,543 outstanding shares of Series A Preferred Stock are to be converted
to
shares of common stock prior to closing, which would increase PCLP’s outstanding
common stock.
All
issued and outstanding shares are legally issued, fully paid and nonassessable
and are not issued in violation of the preemptive or other rights of any person.
PCLP has no securities, warrants or options authorized or issued, except for
those disclosed in Schedule 1.2.
Section
1.3 Subsidiaries.
PCLP has
one subsidiary, Paperclip Inc., a newly formed Delaware
Corporation.
Section
1.4 Tax
Matters; Books and Records.
(a) The
books
and records, financial and others, of PCLP are in all material respects complete
and correct and have been maintained in accordance with good business accounting
practices; and
(b) PCLP
has
no liabilities with respect to the payment of any country, federal, state,
county, or local taxes (including any deficiencies, interest or
penalties).
(c) Prior
to
or at the time of the closing, PCLP shall satisfy all outstanding liabilities,
debts, expenses and unpaid taxes, including those set forth in Schedule 1.4,
from the cash proceeds of the closing of PCLP.
Section
1.5 Litigation
and Proceedings.
There
are no actions, suits, proceedings or investigations pending or threatened
by or
against or affecting PCLP or its properties, at law or in equity, before any
court or other governmental agency or instrumentality, domestic or foreign
or
before any arbitrator of any kind that would have a material adverse affect
on
the business, operations, financial condition or income of PCLP. PCLP is not
in
default with respect to any judgment, order, writ, injunction, decree, award,
rule or regulation of any court, arbitrator or governmental agency or
instrumentality or of any circumstances which, after reasonable investigation,
would result in the discovery of such a default. PCLP is party to a binding
arbitration with one of its customers, Lumtron Technology, Inc., for breach
of
contract. PCLP was awarded damages of $93,189.55 plus legal fees, which have
not
yet been determined. A copy of the arbitrator’s award is attached as Schedule
1.5.
7
Section
1.7 Information.
The
information concerning PCLP as set forth in this Agreement and in the attached
Schedules is complete and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
required to make the statements made in light of the circumstances under which
they were made, not misleading.
Section
1.8 Title and Related Matters. PCLP
has
good and marketable title to and is the sole and exclusive owner of all of
its
properties, inventory, interest in properties and assets, real and personal
(collectively, the “Assets”) free and clear of all liens, pledges, charges or
encumbrances. PCLP owns free and clear of any liens, claims, encumbrances,
royalty interests or other restrictions or limitations of any nature whatsoever
and all procedures, techniques, marketing plans, business plans, methods of
management or other information utilized in connection with PCLP’ business. No
third party has any right to, and PCLP has not received any notice of
infringement of or conflict with asserted rights of other with respect to any
product, technology, data, trade secrets, know-how, proprietary techniques,
trademarks, service marks, trade names or copyrights which, singly on in the
aggregate, if the subject of an unfavorable decision ruling or finding, would
have a materially adverse affect on the business, operations, financial
conditions or income of PCLP or any material portion of its properties, assets
or rights.
Section
1.9 Contracts. On
the
closing date:
(a) There
are
no material contracts, agreements, leases, franchises, license agreements,
or
other commitments to which PCLP is a party or by which it or any of its
properties are bound, which have not been assigned to, or assumed by, another
party;
(b) PCLP
is
not a party to any contract, agreement, commitment or instrument or subject
to
any charter or other corporate restriction or any judgment, order, writ,
injunction, decree or award materially and adversely affects, or in the future
may (as far as PCLP can now foresee) materially and adversely affect, the
business, operations, properties, assets or conditions of PCLP; and
(c) PCLP
is
not a party to any material oral or written: (I) contract for the employment
of
any officer or employee; (ii) profit sharing, bonus, deferred compensation,
stock option, severance pay, pension benefit or retirement plan, agreement
or
arrangement covered by Title IV of the Employee Retirement Income Security
Act,
as amended; (iii) agreement, contract or indenture relating to the borrowing
of
money; (iv) guaranty of any obligation for the borrowing of money or otherwise,
excluding endorsements made for collection and other guaranties, of obligations,
which, in the aggregate exceeds $500; (v) consulting or other contract with
an
unexpired term of more than one year or providing for payments in excess of
$500
in the aggregate; (vi) collective bargaining agreement; and (vii) contract,
agreement or other commitment involving payments by it for more than $1,000
in
the aggregate.
Section
1.10 Compliance With Laws and Regulations. To
the
best of PCLP’s knowledge and belief, PCLP has complied with all applicable
statutes and regulations of any federal, state or other governmental entity
or
agency thereof, except to the extent that noncompliance would not materially
and
adversely affect the business, operations, properties, assets or condition
of
PCLP or would not result in PCLP incurring material liability.
8
Section
1.11 Approval of Agreement. The
directors of PCLP have authorized the execution and delivery of this Agreement
and have approved the transactions contemplated.
Section
1.12 Material Transactions or Affiliations.
There
are no material contracts or agreements of arrangement between PCLP and any
person, who was at the time of such contract, agreement or arrangement an
officer, director or person owning of record, or known to beneficially own
ten
percent (10%) or more of the issued and outstanding common shares of PCLP and
which is to be performed in whole or in part after the date hereof. PCLP has
no
commitment, whether written or oral, to lend any funds to, borrow any money
from
or enter into material transactions with any such affiliated person.
Section
1.13 No
Conflict With Other Instruments.
The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of, or constitute an event of default under, any material indenture,
mortgage, deed of trust or other material contract, agreement or instrument
to
which PCLP is a party or to which any of its properties or operations are
subject.
Section
1.14 Governmental
Authorizations. PCLP
has
all licenses, franchises, permits or other governmental authorizations legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent or order of, or registration, declaration or filing with,
any
court or other governmental body is required in connection with the execution
and delivery by PCLP of this Agreement and the consummation of the transactions
contemplated hereby.
Section
1.15 SEC
Reporting and Compliance.
(a)
PCLP
represents and warrants that it filed registration statements on (1) Form SB-2
(File No. 33-92768NY) under the Securities Act which became effective, and
(2)
Form 8-A under the Exchange Act which became effective. For the previous five
years, PCLP has filed with the SEC all registration statements, proxy
statements, information statements and reports required to be filed pursuant
to
the Exchange Act (collectively, the “PCLP SEC Documents”). PCLP has not filed
with the SEC a certificate on Form 15 pursuant to Rule 12h-3 of the Exchange
Act.
(b) None
of
the PCLP SEC Documents, as of their respective dates, contained any untrue
statement of a material fact or omitted to state a material fact necessary
in
order to make the statements contained therein not misleading.
(c) Except
as
set forth on Schedule 1.15, PCLP has not filed, and nothing has occurred with
respect to which PCLP would be required to file, any report on Form 8-K since
March 1, 2000 and Form 10-KSB or 10-QSB since August 10, 2006. Prior to and
until the Closing, PCLP will provide to ASI copies of any and all amendments
or
supplements to the PCLP SEC Documents filed with the Commission since August
10,
2006 and all subsequent registration statements and reports filed by PCLP
subsequent to the filing of the PCLP SEC Documents with the Commission and
any
and all subsequent information statements, proxy statements, reports or notices
filed by the PCLP with the Commission or delivered to the stockholders of
PCLP.
9
(d) PCLP
is
not an investment company within the meaning of Section 3 of the Investment
Company Act.
(e) The
shares of PCLP common stock are quoted on the Over-the-Counter (OTC) Bulletin
Board under the symbol “PCLP” and PCLP is in compliance in all material respects
with all rules and regulations of the OTC Bulletin Board applicable to it and
the PCLP stock.
(f) Between
the date hereof and the Closing Date, PCLP shall continue to timely satisfy
the
filing requirements of the Exchange Act and all other requirements of applicable
securities laws and the OTC Bulletin Board including, but not limited to the
timely filing of notices required by Rule 10b-17 under the Securities
Act.
(g) To
the
best knowledge of PCLP, PCLP has otherwise complied with the Securities Act,
Exchange Act and all other applicable federal and state securities
laws.
(h) PCLP
is
not a “blank check company” subject to the requirements of Rule 419 of the
Securities Act.
Section
1.16 Financial
Statements. The
balance sheets, and statements of income, changes in financial position and
stockholders’ equity contained in the PCLP SEC Documents (the “PCLP Financial
Statements”) (i) have been prepared in accordance with GAAP applied on a basis
consistent with prior periods (and, in the case of unaudited financial
information, on a basis consistent with year-end audits), (ii) are in accordance
with the books and records of the PCLP, and (iii) present fairly in all material
respects the financial condition of the PCLP at the dates therein specified
and
the results of its operations and changes in financial position for the periods
therein specified. The financial statements included in the Annual Report on
Form 10-KSB for the fiscal years ended December 31, 2005 and 2004, are as
audited by, and include the related opinions of Xxxxx & Co., LLC, PCLP’s
independent certified public accountants. The financial information included
in
the Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2006
and
June 30, 2006 are unaudited, but reflect all adjustments (including normally
recurring accounts) that PCLP considers necessary for a fair presentation of
such information and have been prepared in accordance with generally accepted
accounting principles, consistently applied.
Section
1.17 No
General Solicitation or Advertising. In
issuing PCLP common stock under this Agreement, neither PCLP nor anyone acting
on its behalf has offered to sell the PCLP common stock by any form of general
solicitation or advertising.
Section
1.18 Questionable
Payments and Off-Balance Sheet Arrangements. Neither
PCLP nor any director, officer or, to the best knowledge of PCLP, agent,
employee or other person associated with or acting on behalf of PCLP, has used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payments to government officials or employees from corporate funds;
established or maintained any unlawful or unrecorded fund of corporate monies
or
other assets; made any false or fictitious entries on the books of record of
any
such corporations; made any off-balance sheet arrangements; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful
payment.
Section
1.19 Indebtedness. The
Financial Statements, sets forth as of the dates and periods indicated on such
form and financial statements, all outstanding secured and unsecured
Indebtedness of PCLP, as applicable, or for which PCLP, as applicable, has
commitments. For the purposes of this Agreement, “Indebtedness” shall mean (a)
any liabilities for borrowed money or amounts owed in excess of $5,000 (other
than trade accounts payable incurred in the ordinary course of business), (b)
all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected
in
PCLP’s balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in
the
ordinary course of business; and (c) the present value of any lease payments
in
excess of $5,000 due under leases required to be capitalized in accordance
with
GAAP. Except as set forth on Schedule 1.19, PCLP is not in default with respect
to any Indebtedness.
10
Section
1.20 Absence of Certain Developments. Except
as
may be disclosed in the Disclosure Documents, PCLP has not:
a.
other
than upon conversion of any outstanding preferred stock or notes, issued any
stock, bonds or other corporate securities or any rights, options or warrants
with respect thereto;
b.
borrowed any amount or incurred or become subject to any liabilities (absolute
or contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of
its
prior fiscal year, as adjusted to reflect the current nature and volume of
PCLP’s business;
c.
made
capital expenditures or commitments therefor that aggregate in excess of
$10,000;
d.
entered into any other transaction other than in the ordinary course of
business, or entered into any other material transaction, whether or not in
the
ordinary course of business;
Section
1.21 Financial
Statements. The
balance sheets, and statements of income, changes in financial position and
stockholders’ equity contained in the PCLP financial statements filed with the
SEC, (“PCLP Financial Statements”) (i) have been prepared in accordance with
GAAP applied on a basis consistent with prior periods (and, in the case of
unaudited financial information, on a basis consistent with year-end audits),
(ii) are in accordance with the books and records of PCLP, and (iii) present
fairly in all material respects the financial condition of PCLP at the dates
therein specified and the results of its operations and changes in financial
position for the periods therein specified.
ARTICLE
II
As
an
inducement to, and to obtain the reliance of PCLP, ASI, Dongsheng and each
of
the ASI Shareholders, jointly and severally, represent and warrant as
follows:
Section
2.1 Organization.
Each of
ASI and Dongsheng is duly organized, validly existing and in good standing
under
the laws of the jurisdiction of its incorporation and has the corporate power
and is duly authorized, qualified, franchised and licensed under all applicable
laws, regulations, ordinances and orders of public authorities to own all of
its
properties and assets and to carry on its business in all material respects
as
it is now being conducted, including qualification to do business as a foreign
entity in the country, provinces or states, as applicable in which the character
and location of the assets owned by it or the nature of the business transacted
by it requires qualification. Included in the attached Schedules (as hereinafter
defined) are complete and correct copies of the certificate of incorporation,
bylaws, other charter documents and amendments thereto as in effect on the
date
hereof (collectively, the “Charter Documents”). The execution and delivery of
this Agreement does not and the consummation of the transactions contemplated
by
this Agreement in accordance with the terms hereof will not, violate any
provision of the Charter Documents of ASI or Dongsheng. Each of ASI and
Dongsheng has full power, authority and legal right and has taken all action
required by its Charter Documents or otherwise to authorize the execution and
delivery of this Agreement.
11
Section
2.2 Capitalization.
(A)
ASI’s authorized capitalization consists of 100,000,000 shares of common stock,
par value $.00001 per share, and no preferred stock. As of the date hereof,
ASI
has 30,000 shares of common stock issued and outstanding. All issued and
outstanding common shares have been legally issued, fully paid, are
nonassessable and not issued in violation of the preemptive rights of any other
person. ASI has no other securities, warrants or options authorized or issued.
(B) The registered capital of Dongsheng is 10,000 shares. As of the date hereof,
Dongsheng has 10,000 shares of common stock issued and outstanding and no shares
of preferred stock issued and outstanding. All issued and outstanding common
shares of each of ASI and Dongsheng have been legally issued, fully paid, are
nonassessable and not issued in violation of the preemptive rights of any other
person. Neither ASI nor Dongsheng has other securities, warrants, options or
any
rights to acquire securities of ASI or Dongsheng, as applicable, authorized
or
issued, and neither ASI nor Dongsheng is a party to any agreement, arrangement
or understanding pursuant to which either ASI or Dongsheng has agreed to issue
securities, warrants, options or rights to acquire securities of ASI or
Dongsheng, as applicable.
Section
2.3 Subsidiaries.
Dongsheng is the only subsidiary of ASI.
Section
2.4 Tax
Matters, Books & Records.
(a) The
books
and records, financial and others of each of ASI and Dongsheng are in all
material respects complete and correct and have been maintained in accordance
with good business accounting practices;
(b) Neither
ASI nor Dongsheng has liabilities with respect to the payment of any country,
federal, state, province, county, local or other taxes (including any
deficiencies, interest or penalties); and
(c) ASI
shall
remain responsible for all their debts incurred prior to the
closing.
Section
2.5 Information
and Disclosure.
Neither
this Agreement or the Schedules attached hereto nor any other documents,
certificates or instruments furnished to PCLP by or on behalf of ASI, Dongsheng
or the ASI Shareholders in connection with the transactions contemplated by
this
Agreement (collectively, the “Disclosure Documents”) contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not false or
misleading, including without limitation, the balance sheets, statements of
changes of stockholders’ equity and statements of cash flows of Dongsheng
contained in the Business Plan dated August 2006 attached hereto as Exhibit
2.5
(the “Financial Statements”).
Section
2.6 Title
and Related Matters.
Each of
ASI and Dongsheng has good and marketable title to and is the sole and exclusive
owner of all of its properties, inventory, interests in properties and assets,
real and personal (collectively, the "Assets") free and clear of all liens,
pledges, charges or encumbrances. Except as set forth in the attached Schedules,
the ASI Group owns free and clear of any liens, claims, encumbrances, royalty
interests or other restrictions or limitations of any nature whatsoever and
all
procedures, techniques, marketing plans, business plans, methods of management
or other information utilized in connection with the business of ASI or
Dongsheng. Except as set forth in the attached Schedules, no third party has
any
right to, and the ASI Group has not received any notice of infringement of
or
conflict with asserted rights of others with respect to any product, technology,
data, trade secrets, know-how, proprietary techniques, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a materially
adverse affect on the business, operations, business prospects, financial
conditions or operating results of ASI or Dongsheng, as applicable, or any
material portion of its properties, assets or rights.
12
Section
2.7 Litigation
and Proceedings.
There
are no actions, suits or proceedings pending or threatened by or against or
affecting ASI or Dongsheng, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign or before any
arbitrator of any kind that would have a material adverse effect on the
businesses, operations, business prospects, financial conditions or operating
results of ASI or Dongsheng. Neither ASI nor Dongsheng has any knowledge of
any
default on its part with respect to any judgment, order, writ, injunction,
decree, award, rule or regulation of any court, arbitrator or governmental
agency or instrumentality.
Section
2.8 Contracts. On
the
Closing Date:
(a) Except
as
disclosed in Schedule 2.8,
there
are no material contracts, agreements, franchises, license agreements, or other
commitments to which either ASI and/or Dongsheng, is a party to or by which
either of them or any of their subsidiaries or properties are
bound;
(b) Except
as
disclosed in Schedule 2.8, neither ASI nor Dongshen is a party to any contract,
agreement, commitment or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree or award which
may
now, or in the future (as far as ASI or Dongsheng, as applicable, can now
foresee), may, individually or in the aggregate, have a material adverse effect
on the businesses, operations, business prospects, financial conditions or
operating results of ASI or Dongsheng; As used in this Agreement, the term
“material adverse effect” means any material adverse effect on the business,
operations, properties, prospects, or financial condition of ASI or Dongsheng,
as applicable, and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of ASI or Dongsheng
to perform any of their respective obligations under this Agreement in any
material respect; and
(c) Except
as
disclosed in Schedule 2.8, neither ASI nor Dongsheng is a party to any material
oral or written: (i) contract for the employment of any officer or employee;
(ii) profit sharing, bonus, deferred compensation, stock option, severance
pay,
pension, benefit or retirement plan, agreement or arrangement covered by Title
IV of the Employee Retirement Income Security Act, as amended; (iii) agreement,
contract or indenture relating to the borrowing of money; (iv) guaranty of
any
obligation for the borrowing of money or otherwise, excluding endorsements
made
for collection and other guaranties of obligations, which, in the aggregate
exceeds $1,000; (v) consulting or other contract with an unexpired term of
more
than one year or providing for payments in excess of $5,000 in the aggregate;
(vi) collective bargaining agreement; and (vii) contract, agreement, or other
commitment involving payments by it for more than $5,000 in the
aggregate.
Section
2.9 No
Conflict. The
execution, delivery and performance of this Agreement, and any other agreement,
documents and instruments related to the transactions contemplated herein,
by
ASI, Dongsheng and each ASI Shareholder, the consummation by ASI, Dongsheng
and
each ASI Shareholder of the transactions contemplated herein and therein do
not
and will not (i) violate any provision of the Charter Documents of ASI or
Dongsheng, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to either ASI or Dongsheng is a party or
by
which either ASI or Dongsheng or any of its properties or assets are bound,
(iii) create or impose a lien, mortgage, security interest, charge or
encumbrance of any nature on any property of either ASI or Dongsheng under
any
agreement or any commitment to which either ASI or Dongsheng is a party or
by
which either ASI or Dongsheng is bound or by which any of their respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to
ASI,
Dongsheng or any ASI Shareholder, or by which any property or asset of ASI
or
Dongsheng or any of its subsidiaries are bound or affected, except, in all
cases
other than violations pursuant to clauses (i) and (iv) above, for such
conflicts, defaults, terminations, amendments, accelerations, cancellations
and
violations as would not, individually or in the aggregate, have a material
adverse effect. The business of ASI or Dongsheng is not being conducted in
violation of any laws, ordinances or regulations of any governmental entity,
except for possible violations which singularly or in the aggregate do not
and
will not have a Material Adverse Effect.
13
Section
2.10 Material
Contract Defaults. To
the
best of ASI’s and Dongsheng’s knowledge, neither ASI nor Dongsheng is in default
under the terms of any outstanding contract, agreement, lease or other
commitment which has, individually or in the aggregate, a material adverse
effect on the businesses, operations, business prospects, financial conditions
or operating results of ASI or Dongsheng, and there is no event of default
in
any such contract, agreement, lease or other commitment which default has,
individually or in the aggregate, a material adverse effect on the businesses,
operations, business prospects, financial conditions or operating results of
ASI
or Dongsheng in respect of which ASI has not taken adequate steps to prevent
such a default from occurring.
Section
2.11 Governmental
Authorizations. To
the
best of ASI’s and Dongsheng’s knowledge, each of ASI and Dongsheng has all
licenses, franchises, permits and other governmental authorizations that are
legally required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with federal
and
state securities or corporation laws, or the applicable laws of the PRC, as
applicable, no authorization, approval, consent or order of, or registration,
declaration or filing with, any court or other governmental body is required
in
connection with the execution and delivery by ASI of the transaction documents
contemplated hereby.
Section
2.12 Compliance
with Laws and Regulations.
To the
best of ASI’s and Dongsheng’s knowledge, the business of each of ASI and
Dongsheng has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, and all applicable laws, rules, regulations and ordinances of the
PRC, as applicable, except for such noncompliance that, individually or in
the
aggregate, would not cause a Material Adverse Effect. Each of ASI and Dongsheng
has all franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct of its
business as now being conducted by it unless the failure to possess such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
Section
2.13 Insurance.
All of
ASI’s and Dongsheng’s insurable properties are insured for ASI‘s or Dongsheng’s,
as applicable, benefit under valid and enforceable policy or policies containing
substantially equivalent coverage and will be outstanding and in full force
at
the Closing Date.
Section
2.14 Approval
of Agreement.
The
directors of ASI have authorized the execution and delivery of this Agreement
and have approved the transactions contemplated hereby.
14
Section
2.15 Material
Transactions or Affiliations.
As of
the Closing Date, there will exist no material contract, agreement or
arrangement between ASI and/or Dongsheng and any person who was at the time
of
such contract, agreement or arrangement an officer, director or person owning
of
record, or known by ASI to own beneficially, ten percent (10%) or more of the
issued and outstanding common shares of ASI and which is to be performed in
whole or in part after the date hereof. ASI has no commitment, whether written
or oral, to lend any funds to, borrow any money from or enter into any other
material transactions with, any such affiliated person.
Section
2.16 Indebtedness. The
Financials Statements, sets forth as of the dates and periods indicated on
such
form and financial statements, all outstanding secured and unsecured
Indebtedness of ASI or Dongsheng, as applicable, or for which ASI or Dongsheng,
as applicable, has commitments. For the purposes of this Agreement,
“Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $5,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent
obligations in respect of Indebtedness of others, whether or not the same are
or
should be reflected in ASI’s or Dongsheng’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $5,000 due under leases
required to be capitalized in accordance with GAAP. Except as set forth on
Schedule 2.16, neither ASI nor Dongsheng is in default with respect to any
Indebtedness.
Section
2.17 Absence of Certain Developments. Except
as
may be disclosed in the Disclosure Documents, neither ASI nor Dongsheng
has:
a.
issued
any stock, bonds or other corporate securities or any rights, options or
warrants with respect thereto;
b.
borrowed any amount or incurred or become subject to any liabilities (absolute
or contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of
its
prior fiscal year, as adjusted to reflect the current nature and volume of
ASI’s
or Dongsheng’s business;
c.
discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities paid in
the
ordinary course of business;
d.
declared or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital
stock;
e.
sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, except in the ordinary course of business;
15
f.
sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights, or
disclosed any proprietary confidential information to any person except to
customers in the ordinary course of business or to PCLP or its
representatives;
g.
suffered any substantial losses or waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of any material
amount of prospective business;
h.
made
any changes in employee compensation except in the ordinary course of business
and consistent with past practices;
i.
made
capital expenditures or commitments therefor that aggregate in excess of
$10,000;
j.
entered into any other transaction other than in the ordinary course of
business, or entered into any other material transaction, whether or not in
the
ordinary course of business;
k.
made
charitable contributions or pledges in excess of $10,000;
l.
suffered any material damage, destruction or casualty loss, whether or not
covered by insurance;
m.
experienced any material problems with labor or management in connection with
the terms and conditions of their employment;
n.
effected any two or more events of the foregoing kind which in the aggregate
would be material to the Company or its subsidiaries; or
o.
entered into an agreement, written or otherwise, to take any of the foregoing
actions.
Section
2.18 Financial
Statements. The
balance sheets, and statements of income, changes in financial position and
stockholders’ equity contained in the ASI and Dongsheng financial statements
annexed hereto as Exhibit 2.19, (“ASI Financial Statements”) (i) have been
prepared in accordance with GAAP applied on a basis consistent with prior
periods (and, in the case of unaudited financial information, on a basis
consistent with year-end audits), (ii) are in accordance with the books and
records of ASI and Dongsheng, and (iii) present fairly in all material respects
the financial condition of the ASI and Dongsheng at the dates therein specified
and the results of its operations and changes in financial position for the
periods therein specified.
ARTICLE
III
Section
3.1 Share
Exchange/Delivery of ASI Securities.
On the
Closing Date, the holders of 100% of the ASI common Shares, as set forth on
Schedule 3.2, consisting of 30,000 shares of common stock, par value $.001
per
share and, shall deliver to PCLP certificates or other documents evidencing
all
of the issued and outstanding ASI common shares, duly endorsed in blank or
with
executed power attached thereto in transferable form. On the Closing Date,
all
previously issued and outstanding common shares of ASI shall be transferred
to
PCLP, so that ASI shall become a wholly owned subsidiary of PCLP.
16
Section
3.2 Issuance of PCLP Shares.
In
exchange for 100% of the ASI common shares tendered pursuant to Section 3.1,
and
in consideration for a cash payment of $280,000 and costs and fees of the
transaction to be paid by the Strategic Alliance Fund (“SAF”), PCLP shall issue
to the ASI Shareholders set forth on Schedule 3.2 a total of (1) shares of
PCLP’s common stock, par value $.01 per share, and (2) shares of PCLP’s Series B
Convertible Preferred Stock, par value $.01 per share, of which each share
converts into 500 shares of PCLP’s common stock, which shall constitute an
aggregate of 98.7% of PCLP’s
issued and outstanding fully diluted common stock after the transaction is
closed. Such shares are restricted in accordance with Rule 144 of the 1933
Securities Act.
Section
3.3 Spin-Off
of Paperclip Inc. (“Spinco”). After
the
transaction closes, PCLP will separate PCLP’s business from PCLP, including the
assets and liabilities of PCLP prior to the transaction closing (the “Spinco
Business”), contribute the Spinco Business to Paperclip Inc., and distribute the
stock of Paperclip Inc. to the shareholders of PCLP prior to the
transaction.
Subsequent
to Closing, Xxxxxxx Xxxxx, current Chief Executive Officer and Principal
Financial Officer of PCLP agrees to assist new management of PCLP, its auditors
and counsel with PCLP’s SEC reporting obligations and financial statements for a
period of twelve (12) months from the Closing.
Section
3.4 Present
Liabilities of PCLP; Escrow Agreement.
Prior to
closing, the liabilities and obligations of PCLP set forth on Schedule 1.4
shall
be satisfied; provided, however, that any unsatisfied liabilities shall be
paid
from the $280,000 purchase price at closing. Any amount of the purchase price
in
excess of $50,000 remaining after payment of liabilities shall be paid to Spinco
with the remaining $50,000 to be held in escrow by PCLP for one year to pay
any
unsatisfied liabilities of PCLP which should have been paid prior to Closing
(the “Remaining Escrow”). At the end of the twelve (12) month period, any
remaining balance of the Remaining Escrow shall be paid to Spinco.
Section
3.5 Events
Prior to Closing.
Upon
execution hereof or as soon thereafter as practical, management of PCLP and
ASI
shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged and delivered) any and all certificates, opinions, financial
statements, schedules, agreements, resolutions rulings or other instruments
required by this Agreement to be so delivered, together with such other items
as
may be reasonably requested by the parties hereto and their respective legal
counsel in order to effectuate or evidence the transactions contemplated hereby,
subject only to the conditions to Closing referenced herein below.
Section
3.6 Closing.
The
closing ("Closing") of the transactions contemplated by this Agreement shall
be
on the date and at the time the exchange documents are filed with the Delaware
Secretary of State in accordance with applicable laws.
Section
3.7 Termination.
(a) This
Agreement may be terminated by the board of directors or majority interest
of
Shareholders of either PCLP or ASI, respectively, at any time prior to the
Closing Date if:
| (i) |
there
shall be any action or proceeding before any court or any governmental
body which shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement and which, in the judgment of such
board of
directors, made in good faith and based on the advice of its legal
counsel, makes it inadvisable to proceed with the exchange contemplated
by
this Agreement; or
|
| (ii) |
any
of the transactions contemplated hereby are disapproved by any regulatory
authority whose approval is required to consummate such
transactions.
|
17
Except
as
otherwise agreed by the Parties with respect to the payment of expenses, in
the
event of termination pursuant to Paragraph (a) of this Section 3.7, no
obligation, right, or liability shall arise hereunder and each party shall
bear
all of the expenses incurred by it in connection with the negotiation, drafting
and execution of this Agreement and the transactions herein contemplated.
(b) This
Agreement may be terminated at any time prior to the Closing Date by action
of
the board of directors of PCLP if ASI shall fail to comply in any material
respect with any of its covenants or agreements contained in this Agreement
or
if any of the representations or warranties of ASI contained herein shall be
inaccurate in any material respect, which noncompliance or inaccuracy is not
cured after 20 days written notice thereof is given to ASI. If this Agreement
is
terminated pursuant to Paragraph (b) of this Section 3.7, this Agreement shall
be of no further force or effect and no obligation, right or liability shall
arise hereunder.
(c) This
Agreement may be terminated at any time prior to the Closing Date by action
of
the board of directors of ASI if PCLP shall fail to comply in any material
respect with any of its covenants or agreements contained in this Agreement
or
if any of the representations or warranties of PCLP contained herein shall
be
inaccurate in any material respect, which noncompliance or inaccuracy is not
cured after 20 days written notice thereof is given to PCLP. If this Agreement
is terminated pursuant to Paragraph (c) of this Section 3.7, this Agreement
shall be of no further force or effect and no obligation, right or liability
shall arise hereunder.
Section
3.8 Directors
of PCLP After Acquisition.
Upon the
Closing, Xxxxxxx Xxxxx, D. Xxxxxxx Xxxxxxx, and Xxxxxxx Xxxxxxx shall
resign from the Board of Directors of PCLP and Xxxxxx Xx, Xxxxxx Xxx and Xxxxx
Xxxx shall be appointed to the Board of Directors of PCLP. Each director shall
hold office until his successor has been duly elected and has qualified or
until
his death, resignation or removal.
Section
3.9 Officers
of PCLP.
Upon the
closing, the following people shall be appointed as officers of
PCLP:
|
Name
|
Office
|
|
|
Xxxxxx
Xx
|
Chairman,
Chief Executive Officer, Chief Financial Officer
|
|
|
Xxxxxx
Xxx
|
General
Manager
|
|
|
Xxxxx
Xxxx
|
Vice
President
|
ARTICLE
IV
Section
4.1 Access
to Properties and Records.
Prior to
closing, PCLP and ASI will each afford to the officers and authorized
representatives of the other full access to the properties, books and records
of
each other, so that each may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of each other, as the other
shall from time to time reasonably request.
18
Section
4.2 Availability
of Rule 144.
PCLP and
ASI Shareholders holding "restricted securities", as that term is defined in
Rule 144 of the 1933 Securities Act will remain as “restricted securities”. PCLP
is under no obligation to register such shares under the Securities Act, or
otherwise. The stockholders of PCLP and ASI holding restricted securities of
PCLP and ASI as of the date of this Agreement and their respective heirs,
administrators, personal representatives, successors and assigns, are intended
third party beneficiaries of the provisions set forth herein. The covenants
set
forth in this Section 4.2 shall survive the Closing and the consummation of
the
transactions herein contemplated.
Section
4.3 Special
Covenants and Representations Regarding the PCLP Common Shares to be Issued
in
the Exchange.
The
consummation of this Agreement, including the issuance of the PCLP common shares
to the Shareholders of ASI as contemplated hereby, constitutes the offer and
sale of securities under the Securities Act, and applicable state statutes.
Such
transaction shall be consummated in reliance on exemptions from the registration
and prospectus delivery requirements of such statutes which depend, inter
alia,
upon
the circumstances under which the ASI Shareholders acquire such securities.
Section
4.4 Third
Party Consents.
PCLP,
ASI and Dongsheng agree to cooperate with each other in order to obtain any
required third party consents to this Agreement and the transactions herein
contemplated.
Section
4.5 Actions
Prior to and Subsequent to Closing.
(a) From
and
after the date of this Agreement until the Closing Date, except as permitted
or
contemplated by this Agreement, PCLP, ASI and Dongsheng will each use its best
efforts to:
| (i) |
maintain
and keep its properties in states of good repair and condition as
at
present, except for depreciation due to ordinary wear and tear and
damage
due to casualty;
|
| (ii) |
maintain
in full force and effect insurance comparable in amount and in scope
of
coverage to that now maintained by it;
and
|
| (iii) |
perform
in all material respects all of its obligations under material contracts,
leases and instruments relating to or affecting its assets, properties
and
business.
|
(b) From
and
after the date of this Agreement until the Closing Date, PCLP will not, without
the prior consent of ASI:
| (i) |
except
as otherwise specifically set forth herein, make any change in its
certificate of incorporation or
bylaws;
|
| (ii) |
declare
or pay any dividend on its outstanding common shares, except as may
otherwise be required by law, or effect any stock split or otherwise
change its capitalization, except as provided
herein;
|
| (iii) |
enter
into or amend any employment, severance or agreements or arrangements
with
any directors or officers;
|
| (iv) |
grant,
confer or award any options, warrants, conversion rights or other
rights
not existing on the date hereof to acquire any common shares; or
|
| (v) |
purchase
or redeem any common shares.
|
19
Section
4.6 Indemnification.
(a) PCLP
hereby agrees to indemnify ASI, Dongsheng and each ASI Shareholder, each of
their respective officers, agents and directors and current shareholders of
ASI
as of the Closing Date against any loss, liability, claim, damage or expense
(including, but not limited to, any and all expense whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened or any claim whatsoever), to which it or they may become
subject to or rising out of or based on any inaccuracy appearing in or
misrepresentation made in this Agreement. The indemnification provided for
in
this paragraph shall survive the Closing and consummation of the transactions
contemplated hereby and termination of this Agreement; and
(b) ASI,
Dongsheng and the ASI Shareholders hereby agree to, jointly and severally,
indemnify PCLP, each of the officers, agents, directors and current shareholders
of PCLP as of the Closing Date against any loss, liability, claim, damage or
expense (including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened or any claim whatsoever), to which it or
they may become subject arising out of or based on any inaccuracy appearing
in
or misrepresentation made in this Agreement. The indemnification provided for
in
this paragraph shall survive the Closing and consummation of the transactions
contemplated hereby and termination of this Agreement.
ARTICLE
V
The
obligations of PCLP under this Agreement are subject to the satisfaction, at
or
before the Closing Date, of the following conditions:
Section
5.1 Accuracy
of Representations.
The
representations and warranties made by ASI in this Agreement were true when
made
and shall be true at the Closing Date with the same force and effect as if
such
representations and warranties were made at the Closing Date (except for changes
therein permitted by this Agreement), and ASI shall have performed or compiled
with all covenants and conditions required by this Agreement to be performed
or
complied with by ASI prior to or at the Closing. PCLP shall be furnished with
a
certificate, signed by a duly authorized officer of ASI and dated the Closing
Date, to the foregoing effect.
Section
5.2 Director
Approval.
The
Board of Directors of PCLP shall have approved this Agreement and the
transactions contemplated herein.
Section
5.3 Officer's
Certificate.
PCLP
shall have been furnished with a certificate dated the Closing Date and signed
by a duly authorized officer of ASI to the effect that: (a) the representations
and warranties of ASI set forth in the Agreement and in all Exhibits, Schedules
and other documents furnished in connection herewith are in all material
respects true and correct as if made on the Effective Date; (b) ASI has
performed all covenants, satisfied all conditions, and complied with all other
terms and provisions of this Agreement to be performed, satisfied or complied
with by it as of the Effective Date; (c) since such date and other than as
previously disclosed to ASI on the attached Schedules, ASI has not entered
into
any material transaction other than transactions which are usual and in the
ordinary course if its business; and (d) no litigation, proceeding,
investigation or inquiry is pending or, to the best knowledge of ASI,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the ASI Schedules, by or against ASI which might result
in any material adverse change in any of the assets, properties, business or
operations of ASI.
20
Section
5.4 No
Material Adverse Change.
Prior to
the Closing Date, there shall not have occurred any material adverse change
in
the financial condition, business or operations of nor shall any event have
occurred which, with the lapse of time or the giving of notice, may cause or
create any material adverse change in the financial condition, business or
operations of ASI.
Section
5.5 Other
Items.
PCLP
shall have received such further documents, certificates or instruments relating
to the transactions contemplated hereby as PCLP may reasonably
request.
ARTICLE
VI
The
obligations of ASI under this Agreement are subject to the satisfaction, at
or
before the Closing date (unless otherwise indicated herein), of the following
conditions:
Section
6.1 Accuracy
of Representations.
The
representations and warranties made by PCLP in this Agreement were true when
made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date, and
PCLP
shall have performed and complied with all covenants and conditions required
by
this Agreement to be performed or complied with by PCLP prior to or at the
Closing. ASI shall have been furnished with a certificate, signed by a duly
authorized executive officer of PCLP and dated the Closing Date, to the
foregoing effect.
Section
6.2 Director Approval.
The
Board of Directors of PCLP shall have approved this Agreement and the
transactions contemplated herein.
Section
6.3 Officer's
Certificate.
ASI
shall be furnished with a certificate dated the Closing Date and signed by
a
duly authorized officer of PCLP to the effect that: (a) the representations
and
warranties of PCLP set forth in the Agreement and in all Exhibits, Schedules
and
other documents furnished in connection herewith are in all material respects
true and correct as if made on the Effective Date; and (b) PCLP has performed
all covenants, satisfied all conditions, and complied with all other terms
and
provisions of the Agreement to be performed, satisfied or complied with by
it as
of the Effective Date.
Section
6.4 No
Material Adverse Change.
Prior to
the Closing Date, there shall not have occurred any material adverse change
in
the financial condition, business or operations of nor shall any event have
occurred which, with the lapse of time or the giving of notice, may cause or
create any material adverse change in the financial condition, business or
operations of PCLP.
Section
6.5 Series
B Convertible Preferred Stock Designation.
Prior to
the Closing Date, PCLP shall file a Certificate of Designation amending its
certificate of incorporation in the State of Delaware designating 4,000,000
shares of preferred stock as “Series B Convertible Preferred Stock”. Each share
of Series B Convertible Preferred Stock, par value $.001 per share,
automatically converts into 500 shares of common stock, upon the availability
of
sufficient authorized capital stock.
Section
6.6 Conversion
and Cancellation of Series A Preferred Stock Designation.
Within
three (3) days of the Closing Date, PCLP shall convert all 3,649,543 shares
of
Series A Preferred Stock, par value $.01 per share, into shares of common stock
and cancel the designation.
21
Section
6.7 Cancellation
of Outstanding Options, Warrants, Rights, Etc.
Prior to
the Closing Date, PCLP shall cancel all outstanding stock options, rights or
commitments to issue shares of PCLP common or preferred stock, warrants and
convertible notes, and warrants that there shall be no other common or preferred
stock or equity securities or any options, warrants, rights or other agreements
or instruments convertible, exchangeable or exercisable into common or preferred
stock or other equity securities issued or outstanding unless they are
controlled by the ASI Shareholders.
Section
6.8 Cancellation
of Voting Trusts.
Prior to
the Closing Date, PCLP shall cancel all voting trusts, agreements or
arrangements among any of the beneficial holders of PCLP common or preferred
stock affecting the nomination or election of directors or the exercise of
the
voting rights of PCLP common or preferred stock.
ARTICLE
VII
Section
7.1 Brokers
and Finders.
Each
party to this Agreement represents and warrants that the Strategic Alliance
Fund
is obligated to pay any finders or broker fee that may be due to any party
in
connection with the bringing of the parties together in the negotiation,
execution, or consummation of this Agreement. The parties each agree to
indemnify the other against any claim by any third person for any commission,
brokerage or finder's fee or other payment with respect to this Agreement or
the
transactions contemplated hereby based on any alleged agreement or understanding
between the indemnifying party and such third person, whether express or implied
from the actions of the indemnifying party.
Section
7.2 Law,
Forum and Jurisdiction.
This
Agreement shall be construed and interpreted in accordance with the laws of
the
State of Delaware, United States of America.
Section
7.3 Notices.
Any
notices or other communications required or permitted hereunder shall be
sufficiently given if personally delivered to it or sent by registered mail
or
certified mail, postage prepaid, or by prepaid telegram addressed as
follows:
|
To
PCLP:
|
Paperclip
Software, Inc.
Attn.
Xxxxxxx Xxxxx, CEO
0
Xxxxxxxxxx Xxxxx
Xxxxxxxxxx,
XX 00000
Telephone:
(000) 000-0000
|
With
a Copy to:
|
Xxxxxx
X. Xxxxxx
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Telephone:
(000) 000-0000
Fax:
(000) 000-0000
|
|
|
To
ASI and Dongsheng:
|
American
Sunrise International, Inc.
c/o
American Union Securities
000
Xxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Telephone:
(000) 000-0000
|
With
a Copy to:
|
Xxxxxxx
X. Xxxxxx
Xxxxxx
& Xxxxxx, LLP
000
Xxxxx 0 Xxxxx
Xxxxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Fax:
(000) 000-0000
|
|
To
an ASI
Shareholder: the address as set forth on the applicable signature page
or
such
other addresses as shall be furnished in writing by any party in the manner
for
giving notices hereunder, and any such notice or communication shall be deemed
to have been given as of the date so delivered, mailed or
telegraphed.
22
Section
7.4 Attorneys'
Fees.
In the
event that any party institutes any action or suit to enforce this Agreement
or
to secure relief from any default hereunder or breach hereof, the breaching
party or parties shall reimburse the non-breaching party or parties for all
costs, including reasonable attorneys' fees, incurred in connection therewith
and in enforcing or collecting any judgment rendered therein.
Section
7.5 Confidentiality.
Each
party hereto agrees with the other party that, unless and until the transactions
contemplated by this Agreement have been consummated, they and their
representatives will hold in strict confidence all data and information obtained
with respect to another party or any subsidiary thereof from any representative,
officer, director or employee, or from any books or records or from personal
inspection, of such other party, and shall not use such data or information
or
disclose the same to others, except: (i) to the extent such data is a matter
of
public knowledge or is required by law to be published; and (ii) to the extent
that such data or information must be used or disclosed in order to consummate
the transactions contemplated by this Agreement.
Section
7.6 Schedules;
Knowledge. Each
party is presumed to have full knowledge of all information set forth in the
other party's schedules delivered pursuant to this Agreement.
Section
7.7 Third
Party Beneficiaries.
This
contract is solely between PCLP and ASI and except as specifically provided,
no
director, officer, stockholder, employee, agent, independent contractor or
any
other person or entity shall be deemed to be a third party beneficiary of this
Agreement.
Section
7.8 Entire
Agreement. This
Agreement represents the entire agreement between the parties relating to the
subject matter hereof. This Agreement alone fully and completely expresses
the
agreement of the parties relating to the subject matter hereof. There are no
other courses of dealing, understanding, agreements, representations or
warranties, written or oral, except as set forth herein. This Agreement may
not
be amended or modified, except by a written agreement signed by all parties
hereto.
Section
7.9 Survival;
Termination.
The
representations, warranties and covenants of the respective parties shall
survive the Closing Date and the consummation of the transactions herein
contemplated for 18 months.
Section
7.10 Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original and all of which taken together shall be but a single
instrument.
Section
7.11
Amendment or Waiver. Every
right and remedy provided herein shall be cumulative with every other right
and
remedy, whether conferred herein, at law or in equity, and may be enforced
concurrently herewith, and no waiver by any party of the performance of any
obligation by the other shall be construed as a waiver of the same or any other
default then, theretofore, or thereafter occurring or existing. At any time
prior to the Closing Date, this Agreement may be amended by a written consent
by
all parties hereto, with respect to any of the terms contained herein (except
with respect to any obligations or liabilities of the ASI Shareholders, which
may be amended by a written consent of all the parties to this Agreement),
and
any term or condition of this Agreement may be waived or the time for
performance hereof may be extended by a written consent by the party or parties
for whose benefit the provision is intended.
23
Section
7.12 [Intentionally
Omitted]
Section
7.13 Headings;
Context.
The
headings of the sections and paragraphs contained in this Agreement are for
convenience of reference only and do not form a part hereof and in no way
modify, interpret or construe the meaning of this Agreement.
Section
7.14 Benefit.
This
Agreement shall be binding upon and shall inure only to the benefit of the
parties hereto, and their permitted assigns hereunder. This Agreement shall
not
be assigned by any party without the prior written consent of the other party.
Section
7.15 Public
Announcements.
Except
as may be required by law, neither party shall make any public announcement
or
filing with respect to the transactions provided for herein without the prior
consent of the other party hereto.
Section
7.16 Severability.
In the
event that any particular provision or provisions of this Agreement or the
other
agreements contained herein shall for any reason hereafter be determined to
be
unenforceable, or in violation of any law, governmental order or regulation,
such unenforceability or violation shall not affect the remaining provisions
of
such agreements, which shall continue in full force and effect and be binding
upon the respective parties hereto.
Section
7.17 Failure
of Conditions; Termination.
In the
event of any of the conditions specified in this Agreement shall not be
fulfilled on or before the Closing Date, either of the parties have the right
either to proceed or, upon prompt written notice to the other, to terminate
and
rescind this Agreement. In such event, the party that has failed to fulfill
the
conditions specified in this Agreement will be liable for the other party’s
legal fees, as limited Section 7.20. The election to proceed shall not affect
the right of such electing party reasonably to require the other party to
continue to use its efforts to fulfill the unmet conditions.
Section
7.18 No
Strict Construction. The
language of this Agreement shall be construed as a whole, according to its
fair
meaning and intendment, and not strictly for or against either party hereto,
regardless of who drafted or was principally responsible for drafting the
Agreement or terms or conditions hereof.
Section
7.19 Execution
Knowing and Voluntary.
In
executing this Agreement, the parties severally acknowledge and represent that
each: (a) has fully and carefully read and considered this Agreement; (b) has
been or has had the opportunity to be fully apprized by its attorneys of the
legal effect and meaning of this document and all terms and conditions hereof;
(c) is executing this Agreement voluntarily, free from any influence, coercion
or duress of any kind.
24
Section
7.20 Amendment. At
any
time after the Closing Date, this Agreement may be amended by a writing signed
by both parties, with respect to any of the terms contained herein, and any
term
or condition of this Agreement may be waived or the time for performance hereof
may be extended by a writing signed by the party or parties for whose benefit
the provision is intended.
Section
7.21 Lock-Up
and Damages.
PCLP
agrees not to enter into any agreement, discussion, negotiation with, or provide
information to any other party for the purpose of any business transaction,
merger, share exchange or business combination and has agreed to pay damages
of
$150,000 to SAF in the event the share exchange/merger between ASI and PCLP
fails to close as a result of PCLP's material breach of this Agreement. No
damages will be paid by PCLP if the failure to close the transaction results
from ASI's failure to perform or if applicable law or regulatory authorities
prevent the closing of the transaction. This lock up and damages provision
will
be effective until November 15, 2006, and may be extended with the written
approval of all parties
[Remainder
of Page Intentionally Blank]
[Signature
Page Follows]
25
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be executed by their respective
duly authorized officers or representatives and entered into as of the date
first above written.
|
ATTEST:
|
PAPERCLIP
SOFTWARE, INC.
|
|
|
______________________________
|
By:
|
______________________________
|
|
Name:
|
Xxxxxxx
Xxxxx
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
Principal
Financial Officer
|
||
|
AMERICAN
SUNRISE INTERNATIONAL, INC.
|
||
|
By:
|
______________________________
|
|
|
Name:
|
Xxxxxxx
Xxxx
|
|
|
Title:
|
President
|
|
|
JILIN
DONGSHENG WEIYE SCIENCE AND TECHNOLOGY CO.
|
||
|
By:
|
______________________________
|
|
|
Name:
|
XXXXXX
XX
|
|
|
Title:
|
Chairman
|
|
ASI
SHAREHOLDERS:
|
WARNER
TECHNOLOGY & INVESTMENT CORP.
|
||
|
By:
|
______________________________
|
|
|
Name:
|
XXXXXXX
XXXX
|
|
|
Title:
|
President
|
|
|
AMERICAN
UNION SECURITIES, INC.
|
||
|
By:
|
______________________________
|
|
|
Name:
|
XXXX
XXX
|
|
|
Title:
|
President
|
|
|
STRATEGIC
ALLIANCE FUND, LP
|
||
|
By:
|
______________________________
|
|
|
Name:
|
XXXXXX
XXXXXXX
|
|
|
Title:
|
General
Partner
|
|
|
By:
|
______________________________
|
|
|
Name:
|
XXXXXXX
XXXX
|
|
|
By:
|
______________________________
|
|
|
Name:
|
XXXXXX
XXX
|
|
|
By:
|
______________________________
|
|
|
Name:
|
XXXXXX
XX
|
|
|
By:
|
______________________________
|
|
|
Name:
|
XXXXXXX
XXXX
|
|
|
By:
|
______________________________
|
|
|
Name:
|
XXXX
XXX
|
|
|
By:
|
______________________________
|
|
|
Name:
|
DEHOU
WANG
|
|
26
SCHEDULE
1.2
Capitalization
27
Schedule
3.2
ASI
Shareholders
|
Shareholder
|
Shares
Held
|
|
|
Warner
Technology & Investment Corp.
|
1,874
|
|
|
Xxxxxxx
Xxxx
|
24,315
|
|
|
Sanyu
Jin
|
403
|
|
|
Dehou
Wang
|
203
|
|
|
Xxxxxx
Xx
|
608
|
|
|
AUS
|
608
|
|
|
Xxxxxxx
Xxxx
|
861
|
|
|
Xxxx
Xxx
|
203
|
|
|
SAF
|
1,125
|
|
|
Total
|
30,000
|