EXHIBIT 1.1
ACQUISITION AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 18th, 2000
BETWEEN
CATHAYONLINE, INC.
AND
XXXXXXX FINANCIAL ASSET RECOVERY, INC
TABLE OF CONTENTS
ARTICLE 1. The Merger
Section 1.1. The Merger
Section 1.2. Effective Time
Section 1.3. Closing of the Merger
Section 1.4. Effects of the Merger
Section 1.5. Board of Directors and Officers
Section 1.6. Conversion of Shares
Section 1.7. Exchange of Certificates
Section 1.8. Stock Options
Section 1.9. Taking of Necessary Action; Further Action
ARTICLE 2. Representations and Warranties of CATHAYONLINE
Section 2.1. Organization and Qualification
Section 2.2. Capitalization of CATHAYONLINE
Section 2.3.Authority Relative to this Agreement; Recommendation.
Section 2.4. SEC Reports; Financial Statements
Section 2.5. Information Supplied
Section 2.6. Consents and Approvals; No Violations
Section 2.7. No Default
Section 2.8. No Undisclosed Liabilities; Absence of Changes
Section 2.9. Litigation
Section 2.10. Compliance with Applicable Law
Section 2.11. Employee Benefit Plans; Labor Matters
Section 2.12. Environmental Laws and Regulations
Section 2.13. Tax Matters
Section 2.14. Title To Property
Section 2.15. Intellectual Property
Section 2.16. Insurance
Section 2.17. Vote Required
Section 2.18. Tax Treatment
Section 2.19. Affiliates
Section 2.20. Certain Business Practices
Section 2.21. Insider Interests
Section 2.22. Opinion of Financial Adviser
Section 2.23. Brokers
Section 2.24. Disclosure
Section 2.25. No Existing Discussion
Section 2.26. Material Contracts
ARTICLE 3. Representations and Warranties of XXXXXXX.
Section 3.1. Organization and Qualification
Section 3.2. Capitalization of XXXXXXX
Section 3.3.Authority Relative to this Agreement; Recommendation
Section 3.4. SEC Reports; Financial Statements
Section 3.5. Information Supplied
Section 3.6. Consents and Approvals; No Violations
Section 3.7. No Default
Section 3.8 No Undisclosed Liabilities; Absence of Changes
Section 3.9. Litigation
Section 3.10. Compliance with Applicable Law
Section 3.11. Employee Benefit Plans; Labor Matters
Section 3.12. Environmental Laws and Regulations
Section 3.13. Tax Matters
Section 3.14. Title to Property
Section 3.15. Intellectual Property
Section 3.16. Insurance
Section 3.17. Vote Required
Section 3.18. Tax Treatment
Section 3.19. Affiliates
Section 3.20. Certain Business Practices
Section 3.21. Insider Interests
Section 3.22. Opinion of Financial Adviser
Section 3.23. Brokers
Section 3.24. Disclosure
Section 3.25. No Existing Discussions
Section 3.26. Material Contracts
ARTICLE 4. Covenants
Section 4.1. Conduct of Business of CATHAYONLINE
Section 4.2. Conduct of Business of XXXXXXX
Section 4.3. Preparation of 8-K and the Proxy Statement
Section 4.4. Other Potential Acquirers
Section 4.5. Meetings of Stockholders
Section 4.6. NASD OTC:BB Listing
Section 4.7. Access to Information
Section 4.8. Additional Agreements; Reasonable Efforts.
Section 4.9.Employee Benefits; Stock Option and Employee Purchase Plans
Section 4.10. Public Announcements
Section 4.11. Indemnification
Section 4.12. Notification of Certain Matters
ARTICLE 5. Conditions to Consummation of the Merger
Conditions to Each Party's Obligations to Effect the
Section 5.1. Merger
Section 5.2. Conditions to the Obligations of CATHAYONLINE
Section 5.3. Conditions to the Obligations of XXXXXXX
ARTICLE 6. Termination; Amendment; Waiver
Section 6.1. Termination
Section 6.2. Effect of Termination
Section 6.3. Fees and Expenses
Section 6.4. Amendment
Section 6.5. Extension; Waiver
ARTICLE 7. Miscellaneous
Section 7.1. Nonsurvival of Representations and Warranties
Section 7.2. Entire Agreement; Assignment
Section 7.3. Validity
Section 7.4. Notices
Section 7.5. Governing Law
Section 7.6. Descriptive Headings
Section 7.7. Parties in Interest
Section 7.8. Certain Definitions
Section 7.9. Personal Liability
Section 7.10. Specific Performance
Section 7.11. Counterparts
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of
January 18th, 2000, is between CATHAYONLINE, INC., a Nevada corporation
("CATHAYONLINE"), and XXXXXXX FINANCIAL ASSET RECOVERY, INC., a Nevada
corporation ("XXXXXXX").
Whereas, the Boards of Directors of CATHAYONLINE and XXXXXXX each
have, in light of and subject to the terms and conditions set forth herein,
(i) determined that the Merger (as defined below) is fair to their
respective stockholders and in the best interests of such stockholders and
(ii) approved the Merger in accordance with this Agreement;
Whereas, for Federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
Whereas, CATHAYONLINE and XXXXXXX desire to make certain
representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
Now, therefore, in consideration of the promises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, CATHAYONLINE and XXXXXXX hereby agree
as follows:
ARTICLE I
The Merger
Section 1.1. The Merger. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in
accordance with the General Corporation Law of the State of Nevada (the
"NGCL"), XXXXXXX shall be merged with and into CATHAYONLINE (as defined
below) (the ''Merger`). Following the Merger, CATHAYONLINE shall continue
as the surviving corporation (the "Surviving Corporation"), shall continue
to be governed by the laws of the jurisdiction of its incorporation or
organization and the separate corporate existence of XXXXXXX shall cease.
Prior to the Effective Time, the parties hereto shall mutually agree as to
the name of the Surviving Corporation; however, initially the Surviving
Corporation shall be named CATHAYONLINE, INC.. a Nevada corporation. The
Merger is intended to qualify as a tax-free reorganization under Section
368 of the Code as relates to the non-cash exchange of stock referenced
herein.
Section 1.2. Effective Time. Subject to the terms and conditions set forth
in this Agreement, a Certificate of Merger (the "Merger Certificate") shall
be duly executed and acknowledged by each of XXXXXXX and CATHAYONLINE, and
thereafter the Merger Certificate reflecting the Merger shall be delivered
to the Secretary of State of the State of Nevada for filing pursuant to the
NGCL on the Closing Date (as defined in Section 1.3). The Merger shall
become effective at such time as a properly executed and certified copy of
the Merger Certificate is duly filed by the Secretary of State of the State
of Nevada in accordance with the NGCL or such later time as the parties may
agree upon and set forth in the Merger Certificate (the time at which the
Merger becomes effective shall be referred to herein as the "Effective
Time").
Section 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date to be specified by the
parties, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Article
5 (the "Closing Date"), at the offices of Sperry Young & Xxxxxxxxxx, 0000
X. Xxxxxxxx Xx., Xxxxx 000, Xxx Xxxxx, Xxxxxx, unless another time, date or
place is agreed to in writing by the parties hereto.
Section 1.4. Effects of the Merger. The Merger shall have the effects
set forth in the NGCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the properties, rights,
privileges, powers of XXXXXXX shall vest in the Surviving Corporation, and
all debts, liabilities and duties of XXXXXXX shall become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.5. Board of Directors and Officers of CATHAYONLINE. At or
prior to the Effective Time, each of XXXXXXX and CATHAYONLINE agrees to
take such action as is necessary (i) to cause the number of directors
comprising the full Board of Directors of CATHAYONLINE to remain the same
Section 1.6. Conversion of Shares. At the Effective Time, each share
of common stock, par value $.001 per share of XXXXXXX (individually a
"XXXXXXX Share" and collectively, the "XXXXXXX Shares") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of XXXXXXX, CATHAYONLINE, or the
holder thereof, be converted into and shall become fully paid and
nonassessable CATHAYONLINE common shares determined by issuing one (1)
share of CATHAYONLINE common share for every 200 shares of XXXXXXX.
Section 1.7. Exchange of Certificates.
(a) Prior to the Effective Time, CATHAYONLINE shall enter into an
agreement with, and shall deposit with, Sperry Young & Xxxxxxxxxx, or such
other agent or agents as may be satisfactory to CATHAYONLINE and XXXXXXX
(the "Exchange Agent'), for the benefit of the holders of XXXXXXX Shares,
for exchange through the Exchange Agent in accordance with this Article I:
(i) certificates representing the appropriate number of CATHAYONLINE Shares
to be issued to holders of XXXXXXX Shares issuable pursuant to Section 1.6
in exchange for outstanding XXXXXXX Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding XXXXXXX Shares (the "Certificates") whose shares were converted
into the right to receive CATHAYONLINE Shares pursuant to Section 1.6: (i)
a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as XXXXXXX and CATHAYONLINE may
reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
CATHAYONLINE Shares. Upon surrender of a Certificate to the Exchange Agent,
together with such letter of transmittal, duly executed, and any other
required documents, the holder of such Certificate shall be entitled to
receive in exchange therefore a certificate representing that number of
whole CATHAYONLINE Shares, which such holder has the right to receive
pursuant to the provisions of this Article I, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of XXXXXXX Shares which are not registered in the transfer
records of XXXXXXX, a certificate representing the proper number of
CATHAYONLINE Shares may be issued to a transferee if the Certificate
representing such XXXXXXX Shares is presented to the Exchange Agent
accompanied by all documents required by the Exchange Agent or CATHAYONLINE
to evidence and effect such transfer and by evidence that any applicable
stock transfer or other taxes have been paid. Until surrendered as
contemplated by this Section 1.7, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon
such surrender the certificate representing CATHAYONLINE Shares as
contemplated by this Section 1.7.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to CATHAYONLINE Shares with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the CATHAYONLINE Shares represented thereby
until the holder of record of such Certificate shall surrender such
Certificate.
(d) In the event that any Certificate for XXXXXXX Shares or
CATHAYONLINE Shares shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange therefore, upon the making of an affidavit of
that fact by the holder thereof such CATHAYONLINE Shares and cash in lieu
of fractional CATHAYONLINE Shares, if any, as may be required pursuant to
this Agreement; provided, however, that CATHAYONLINE or the Exchange Agent,
may, in its respective discretion, require the delivery of a suitable bond,
opinion or indemnity.
(e) All CATHAYONLINE Shares issued upon the surrender for exchange of
XXXXXXX Shares in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such XXXXXXX
Shares. There shall be no further registration of transfers on the stock
transfer books of either of XXXXXXX or CATHAYONLINE of the XXXXXXX Shares
or CATHAYONLINE Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
CATHAYONLINE for any reason, they shall be canceled and exchanged as
provided in this Article I.
(f) No fractional CATHAYONLINE Shares shall be issued in the Merger,
but in lieu thereof each holder of XXXXXXX Shares otherwise entitled to a
fractional CATHAYONLINE Share shall, upon surrender of its, his or her
Certificate or Certificates, be entitled to receive an additional share to
round up to the nearest round number of shares.
Section 1.8. Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, XXXXXXX or CATHAYONLINE reasonably
determines that any deeds, assignments, or instruments or confirmations of
transfer are necessary or desirable to carry out the purposes of this
Agreement and to vest CATHAYONLINE with full right, title and possession to
all assets, property, rights, privileges, powers and franchises of XXXXXXX,
the officers and directors of CATHAYONLINE and XXXXXXX are fully authorized
in the name of their respective corporations or otherwise to take, and will
take, all such lawful and necessary or desirable action.
ARTICLE 2
Representations and Warranties of CATHAYONLINE
Except as set forth on the Disclosure Schedule delivered by
CATHAYONLINE to XXXXXXX (the "CATHAYONLINE Disclosure Schedule"),
CATHAYONLINE hereby represents and warrants to XXXXXXX as follows:
Section 2.1. Organization and Qualification.
(a) CATHAYONLINE is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, has 300 or more round lot (100 or more shares) stockholders
and has all requisite power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted, except
where the failure to be so organized, existing and in good standing or to
have such power and authority would not have a Material Adverse Effect (as
defined below) on CATHAYONLINE. When used in connection with CATHAYONLINE,
the term "Material Adverse Effect" means any change or effect (i) that is
or is reasonably likely to be materially adverse to the business, results
of operations, condition (financial or otherwise) or prospects of
CATHAYONLINE, other than any change or effect arising out of general
economic conditions unrelated to any business in which CATHAYONLINE is
engaged, or (ii) that may impair the ability of CATHAYONLINE to perform its
obligations hereunder or to consummate the transactions contemplated
hereby.
(b) CATHAYONLINE has heretofore delivered to XXXXXXX accurate and
complete copies of the Certificate of Incorporation and Bylaws (or similar
governing documents), as currently in effect, of CATHAYONLINE. Except as
set forth on Schedule 2.1 of the CATHAYONLINE Disclosure Schedule,
CATHAYONLINE is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect on CATHAYONLINE.
Section 2.2. Capitalization of CATHAYONLINE.
(a) The authorized capital stock of CATHAYONLINE consists of: (i)
Fifty Million (50,000,000) Shares of Common Stock, $0.001 par value. In
February 1999, CATHAYONLINE board of Directors and shareholders approved an
amendment to the Articles of Incorporation which authorized 30,000,000
shares if par value $.001 preferred stock. CATHAYONLINE have not amended
the Articles of Incorporation to authorized the issuence of these shares
but expect to do so in the near future. During October 1999, CATHAYONLINE
granted 21,700,000 warrants exercisable for a period of 3 years and during
April and June 1999, granted 2,990,000 warrants to eight (8) investors and
50,000 to the President of CATHAYONLINE. As of January 18, 2000 18,892,711
shares of CATHAYONLINE Common Stock were issued and outstanding and held by
300 or more round lot (100 or more shares) stockholders. Pursuant to the
Merger Agreement CATHAYONLINE will issue 25,000 of 144 restricted common
stock to the stockholder of XXXXXXX. All of the outstanding CATHAYONLINE
Shares have been duly authorized and validly issued, and are fully paid,
nonassessable and free of preemptive rights. Except as set forth herein, as
of the date hereof, there are no outstanding (i) shares of capital stock or
other voting securities of CATHAYONLINE, (ii) securities of CATHAYONLINE
convertible into or exchangeable for shares of capital stock or voting
securities of CATHAYONLINE, except for the preferred shares of
CATHAYONLINE, (iii) options or other rights to acquire from CATHAYONLINE
and, no obligations of CATHAYONLINE to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock
or voting securities of CATHAYONLINE, and (iv) equity equivalents,
interests in the ownership or earnings of CATHAYONLINE or other similar
rights (collectively, "CATHAYONLINE Securities"). As of the date hereof,
except as set forth on Schedule 2.2(a) of the CATHAYONLINE Disclosure
Schedule there are no outstanding obligations of CATHAYONLINE or its
subsidiaries to repurchase, redeem or otherwise acquire any CATHAYONLINE
Securities or stockholder agreements, voting trusts or other agreements or
understandings to which CATHAYONLINE is a party or by which it is bound
relating to the voting or registration of any shares of capital stock of
CATHAYONLINE. For purposes of this Agreement, ''Lien" means, with respect
to any asset (including, without limitation, any security) any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset.
(b) The CATHAYONLINE Shares constitute the only class of equity
securities of CATHAYONLINE registered or required to be registered under
the Exchange Act.
(c) CATHAYONLINE does not own directly or indirectly more than fifty
percent (50%) of the outstanding voting securities or interests (including
membership interests) of any entity, other than as specifically disclosed
in the disclosure documents.
Section 2.3. Authority Relative to this Agreement; Recommendation.
CATHAYONLINE has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of CATHAYONLINE (the "CATHAYONLINE
Board") and no other corporate proceedings on the part of CATHAYONLINE are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by CATHAYONLINE and constitutes a valid, legal and binding
agreement of CATHAYONLINE, enforceable against CATHAYONLINE in accordance
with its terms.
Section 2.4. SEC Reports; Financial Statements. CATHAYONLINE is not
required to file forms, reports and documents with the SEC.
Section 2.5. Information Supplied. None of the information supplied or
to be supplied by CATHAYONLINE for inclusion or incorporation by reference
in connection with the Merger will at the date presented to stockholder of
XXXXXXX and at the times of the meeting or meetings of stockholders of
CATHAYONLINE to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
Section 2.6. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the
Exchange Act, state securities or blue sky laws, the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1916, as amended (the ''HSR Act''), the rules
of the National Association of Securities Dealers, Inc. ("NASD"), the
filing and recordation of the Merger Certificate as required by the NGCL,
and as set forth on Schedule 2.6 of the CATHAYONLINE Disclosure Schedule no
filing with or notice to, and no permit, authorization, consent or approval
of, any court or tribunal or administrative, governmental or regulatory
body, agency or authority (a "Governmental Entity") is necessary for the
execution and delivery by CATHAYONLINE of this Agreement or the
consummation by CATHAYONLINE of the transactions contemplated hereby,
except where the failure to obtain such permits, authorizations, consents
or approvals or to make such filings or give such notice would not have a
Material Adverse Effect on CATHAYONLINE.
Except as set forth in Section 2.6 of the CATHAYONLINE Disclosure
Schedule, neither the execution, delivery and performance of this Agreement
by CATHAYONLINE nor the consummation by CATHAYONLINE of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the respective Certificate of Incorporation or Bylaws (or
similar governing documents) of CATHAYONLINE, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which CATHAYONLINE
is a party or by which any of its properties or assets may be bound, or
(iii) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to CATHAYONLINE or any of its properties or assets,
except in the case of (ii) or (iii) for violations, breaches or defaults
which would not have a Material Adverse Effect on CATHAYONLINE.
Section 2.7. No Default. Except as set forth in Section 2.7 of the
CATHAYONLINE Disclosure Schedule, CATHAYONLINE is not in breach, default or
violation (and no event has occurred which with notice or the lapse of time
or both would constitute a breach default or violation) of any term,
condition or provision of (i) its Certificate of Incorporation or Bylaws
(or similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to
which CATHAYONLINE is now a party or by which any of its respective
properties or assets may be bound or (iii) any order, writ injunction,
decree, law, statute, rule or regulation applicable to CATHAYONLINE or any
of its respective properties or assets, except in the case of (ii) or (iii)
for violations, breaches or defaults that would not have a Material Adverse
Effect on CATHAYONLINE. Except as set forth in Section 2.7 of the
CATHAYONLINE Disclosure Schedule, each note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to
which CATHAYONLINE is now a party or by which its respective properties or
assets may be bound that is material to CATHAYONLINE and that has not
expired is in full force and effect and is not subject to any material
default thereunder of which CATHAYONLINE is aware by any party obligated to
CATHAYONLINE thereunder.
Section 2.8. No Undisclosed Liabilities; Absence of Changes. Except as
and to the extent disclosed by CATHAYONLINE of approximately $1.2 million
in certain bridge loan obligations, none of CATHAYONLINE or its
subsidiaries had any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, that would be required by generally
accepted accounting principles to be reflected on a consolidated balance
sheet of CATHAYONLINE and its consolidated subsidiaries (including the
notes thereto) or which would have a Material Adverse Effect on
CATHAYONLINE. Except as disclosed by CATHAYONLINE, none of CATHAYONLINE or
its subsidiaries has incurred any liabilities of any nature, whether or not
accrued, contingent or otherwise, which could reasonably be expected to
have, and there have been no events, changes or effects with respect to
CATHAYONLINE or its subsidiaries having or which could reasonably be
expected to have, a Material Adverse Effect on CATHAYONLINE. Except as and
to the extent disclosed by CATHAYONLINE there has not been (i) any material
change by CATHAYONLINE in its accounting methods, principles or practices
(other than as required after the date hereof by concurrent changes in
generally accepted accounting principles), (ii) any revaluation by
CATHAYONLINE of any of its assets having a Material Adverse Effect on
CATHAYONLINE, including, without limitation, any write-down of the value of
any assets other than in the ordinary course of business or (iii) any other
action or event that would have required the consent of any other party
hereto pursuant to Section 4.2 of this Agreement had such action or event
occurred after the date of this Agreement.
Section 2.9. Litigation. Except as set forth in Schedule 2.9 of the
CATHAYONLINE Disclosure Schedule there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of CATHAYONLINE,
threatened against CATHAYONLINE or any of its subsidiaries or any of their
respective properties or assets before any Governmental Entity which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on CATHAYONLINE or could reasonably be expected to
prevent or delay the consummation of the transactions contemplated by this
Agreement. Except as disclosed by CATHAYONLINE, none of CATHAYONLINE or its
subsidiaries is subject to any outstanding order, writ, injunction or
decree which, insofar as can be reasonably foreseen in the future, could
reasonably be expected to have a Material Adverse Effect on CATHAYONLINE or
could reasonably be expected to prevent or delay the consummation of the
transactions contemplated hereby.
Section 2.10. Compliance with Applicable Law. Except as disclosed by
CATHAYONLINE, CATHAYONLINE and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the
"CATHAYONLINE Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have
a Material Adverse Effect on CATHAYONLINE. Except as disclosed by
CATHAYONLINE, CATHAYONLINE and its subsidiaries are in compliance with the
terms of the CATHAYONLINE Permits, except where the failure so to comply
would not have a Material Adverse Effect on CATHAYONLINE. Except as
disclosed by CATHAYONLINE, the businesses of CATHAYONLINE and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity except that no representation or
warranty is made in this Section 2.10 with respect to Environmental Laws
and except for violations or possible violations which do not, and, insofar
as reasonably can be foreseen, in the future will not, have a Material
Adverse Effect on CATHAYONLINE. Except as disclosed by CATHAYONLINE no
investigation or review by any Governmental Entity with respect to
CATHAYONLINE or its subsidiaries is pending or, to the knowledge of
CATHAYONLINE, threatened, nor, to the knowledge of CATHAYONLINE, has any
Governmental Entity indicated an intention to conduct the same, other than,
in each case, those which CATHAYONLINE reasonably believes will not have a
Material Adverse Effect on CATHAYONLINE.
Section 2.11. Employee Benefit Plans; Labor Matters.
(a) Except as set forth in Section 2.11(a) of the CATHAYONLINE
Disclosure Schedule with respect to each employee benefit plan, program,
policy, arrangement and contract (including, without limitation, any
"employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained
or contributed to at any time by CATHAYONLINE or any entity required to be
aggregated with CATHAYONLINE pursuant to Section 414 of the Code (each, a
"CATHAYONLINE Employee Plan"), no event has occurred and to the knowledge
of CATHAYONLINE, no condition or set of circumstances exists in connection
with which CATHAYONLINE could reasonably be expected to be subject to any
liability which would have a Material Adverse Effect on CATHAYONLINE.
(b) (i) No CATHAYONLINE Employee Plan is or has been subject to Title
IV of ERISA or Section 412 of the Code; and (ii) each CATHAYONLINE Employee
Plan intended to qualify under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code is the subject of a
favorable Internal Revenue Service determination letter, and nothing has
occurred which could reasonably be expected to adversely affect such
determination.
(c) Section 2.11(c) of the CATHAYONLINE Disclosure Schedule sets forth
a true and complete list, as of the date of this Agreement, of each person
who holds any CATHAYONLINE Stock Options, together with the number of
CATHAYONLINE Shares which are subject to such option, the date of grant of
such option, the extent to which such option is vested (or will become
vested as a result of the Merger), the option price of such option (to the
extent determined as of the date hereof), whether such option is a
nonqualified stock option or is intended to qualify as an incentive stock
option within the meaning of Section 422(b) of the Code, and the expiration
date of such option. Section 2.11(c) of the CATHAYONLINE Disclosure
Schedule also sets forth the total number of such incentive stock options
and such nonqualified options. CATHAYONLINE has furnished XXXXXXX with
complete copies of the plans pursuant to which the CATHAYONLINE Stock
Options were issued. Other than the automatic vesting of CATHAYONLINE Stock
Options that may occur without any action on the part of CATHAYONLINE or
its officers or directors, CATHAYONLINE has not taken any action that would
result in any CATHAYONLINE Stock Options that are unvested becoming vested
in connection with or as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(d) CATHAYONLINE has made available to XXXXXXX (i) a description of
the terms of employment and compensation arrangements of all officers of
CATHAYONLINE and a copy of each such agreement currently in effect; (ii)
copies of all agreements with consultants who are individuals obligating
CATHAYONLINE to make annual cash payments in an amount exceeding $60,000;
(iii) a schedule listing all officers of CATHAYONLINE who have executed a
non-competition agreement with CATHAYONLINE and a copy of each such
agreement currently in effect; (iv) copies (or descriptions) of all
severance agreements, programs and policies of CATHAYONLINE with or
relating to its employees, except programs and policies required to be
maintained by law; and (v) copies of all plans, programs, agreements and
other arrangements of CATHAYONLINE with or relating to its employees which
contain change in control provisions all of which are set forth in Section
2.11(d) of the CATHAYONLINE Disclosure Schedule.
(e) There shall be no payment, accrual of additional benefits,
acceleration of payments, or vesting in any benefit under any CATHAYONLINE
Employee Plan or any agreement or arrangement disclosed under this Section
2.11 solely by reason of entering into or in connection with the
transactions contemplated by this Agreement.
(f) There are no controversies pending or, to the knowledge of
CATHAYONLINE, threatened, between CATHAYONLINE and any of their employees,
which controversies have or could reasonably be expected to have a Material
Adverse Effect on CATHAYONLINE. Neither CATHAYONLINE nor any of its
subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by CATHAYONLINE or any
of its subsidiaries (and neither CATHAYONLINE nor any of its subsidiaries
has any outstanding material liability with respect to any terminated
collective bargaining agreement or labor union contract), nor does
CATHAYONLINE know of any activities or proceedings of any labor union to
organize any of its or employees. CATHAYONLINE has no knowledge of any
strike, slowdown, work stoppage, lockout or threat thereof, by or with
respect to any of its employees.
Section 2.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by CATHAYONLINE in the CATHAYONLINE
SEC Reports, (i) CATHAYONLINE is in material compliance with all applicable
federal, state, local and foreign laws and regulations relating to
pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, ground water, land surface
or subsurface strata) (collectively, "Environmental Laws"), except for
non-compliance that would not have a Material Adverse Effect on
CATHAYONLINE, which compliance includes, but is not limited to, the
possession by CATHAYONLINE of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance
with the terms and conditions thereof; (ii) CATHAYONLINE has not received
written notice of, or, to the knowledge of CATHAYONLINE, is the subject of,
any action, cause of action, claim, investigation, demand or notice by any
person or entity alleging liability under or non-compliance with any
Environmental Law (an ''Environmental Claim") that could reasonably be
expected to have a Material Adverse Effect on CATHAYONLINE; and (iii) to
the knowledge of CATHAYONLINE, there are no circumstances that are
reasonably likely to prevent or interfere with such material compliance in
the future.
(b) Except as publicly disclosed by CATHAYONLINE, there are no
Environmental Claims which could reasonably be expected to have a Material
Adverse Effect on CATHAYONLINE that are pending or, to the knowledge of
CATHAYONLINE, threatened against CATHAYONLINE or, to the knowledge of
CATHAYONLINE, against any person or entity whose liability for any
Environmental Claim CATHAYONLINE has or may have retained or assumed either
contractually or by operation of law.
Section 2.13. Tax Matters.
(a) Except as set forth in Section 2.13 of the CATHAYONLINE Disclosure
Schedule: (i) CATHAYONLINE has filed or has had filed on its behalf in a
timely manner (within any applicable extension periods) with the
appropriate Governmental Entity all income and other material Tax Returns
(as defined herein) with respect to Taxes (as defined herein) of
CATHAYONLINE and all Tax Returns were in all material respects true,
complete and correct; (ii) all material Taxes with respect to CATHAYONLINE
have been paid in full or have been provided for in accordance with GAAP on
CATHAYONLINE's most recent balance sheet which is part of the CATHAYONLINE
SEC Documents. (iii) there are no outstanding agreements or waivers
extending the statutory period of limitations applicable to any federal,
state, local or foreign income or other material Tax Returns required to be
filed by or with respect to CATHAYONLINE; (iv) to the knowledge of
CATHAYONLINE none of the Tax Returns of or with respect to CATHAYONLINE is
currently being audited or examined by any Governmental Entity; and (v) no
deficiency for any income or other material Taxes has been assessed with
respect to CATHAYONLINE which has not been abated or paid in full.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority and (ii) "Tax Return" shall mean any report, return, documents
declaration or other information or filing required to be supplied to any
taxing authority or jurisdiction with respect to Taxes.
Section 2.14. Title to Property. CATHAYONLINE has good and defensible
title to all of its properties and assets, free and clear of all liens,
charges and encumbrances except liens for taxes not yet due and payable and
such liens or other imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use of the property
affected thereby or which, individually or in the aggregate, would not have
a Material Adverse Effect on CATHAYONLINE; and, to CATHAYONLINE's
knowledge, all leases pursuant to which CATHAYONLINE leases from others
real or personal property are in good standing, valid and effective in
accordance with their respective terms, and there is not, to the knowledge
of CATHAYONLINE, under any of such leases, any existing material default or
event of default (or event which with notice of lapse of time, or both,
would constitute a default and in respect of which CATHAYONLINE has not
taken adequate steps to prevent such a default from occurring) except where
the lack of such good standing, validity and effectiveness, or the
existence of such default or event, would not have a Material Adverse
Effect on CATHAYONLINE.
Section 2.15. Intellectual Property.
(a) CATHAYONLINE owns, or possesses adequate licenses or other valid
rights to use, all existing United States and foreign patents, trademarks,
trade names, service marks, copyrights, trade secrets and applications
therefore that are material to its business as currently conducted (the
"CATHAYONLINE Intellectual Property Rights").
(b) The validity of the CATHAYONLINE Intellectual Property Rights and
the title thereto of CATHAYONLINE is not being questioned in any litigation
to which CATHAYONLINE is a party.
(c) Except as set forth in Section 2.15(c) of the CATHAYONLINE
Disclosure Schedule, the conduct of the business of CATHAYONLINE as now
conducted does not, to CATHAYONLINE's knowledge, infringe any valid
patents, trademarks, trade names, service marks or copyrights of others.
The consummation of the transactions completed hereby will not result in
the loss or impairment of any CATHAYONLINE Intellectual Property Rights.
(d) CATHAYONLINE has taken steps it believes appropriate to protect
and maintain its trade secrets as such, except in cases where CATHAYONLINE
has elected to rely on patent or copyright protection in lieu of trade
secret protection.
Section 2.16. Insurance. CATHAYONLINE currently does not maintain
general liability and other business insurance.
Section 2.17. Vote Required. Approval of this Agreement and Plan of
Merger by the Stockholders of CATHAYONLINE is not required pursuant to NRS
92A.130(i).
Section 2.18. Tax Treatment. Neither CATHAYONLINE nor, to the
knowledge of CATHAYONLINE, any of its affiliates has taken or agreed to
take action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the
Code.
Section 2.19. Affiliates. Except for Principal CATHAYONLINE
Stockholder ("CATHAYONLINES") and the directors and executive officers of
CATHAYONLINE, each of whom is listed in Section 2.19 of the CATHAYONLINE
Disclosure Schedule, there are no persons who, to the knowledge of
CATHAYONLINE, may be deemed to be affiliates of CATHAYONLINE under Rule
1-02(b) of Regulation S-X of the SEC (the "CATHAYONLINE Affiliates").
Section 2.20. Certain Business Practices. None of CATHAYONLINE or any
directors, officers, agents or employees of CATHAYONLINE has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended (the "FCPA"), or (iii)
made any other unlawful payment.
Section 2.21. Insider Interests. Except as set forth in Section 2.21
of the CATHAYONLINE Disclosure Schedule, neither PVS nor any officer or
director of CATHAYONLINE has any interest in any material property, real or
personal, including without limitation, any computer software or
CATHAYONLINE Intellectual Property Rights, used in or pertaining to the
business of CATHAYONLINE, expect for the ordinary rights of a stockholder
or employee stock optionholder.
Section 2.22. Opinion of Financial Adviser. No advisers, as of the
date hereof, have delivered to the CATHAYONLINE Board a written opinion to
the effect that, as of such date, the exchange ratio contemplated by the
Merger is fair to the holders of CATHAYONLINE Shares.
Section 2.23. Brokers. No broker, finder or investment banker (other
than the CATHAYONLINE Financial Adviser, a true and correct copy of whose
engagement agreement has been provided to XXXXXXX) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of CATHAYONLINE.
Section 2.24. Disclosure. No representation or warranty of
CATHAYONLINE in this Agreement or any certificate, schedule, document or
other instrument furnished or to be furnished to XXXXXXX pursuant hereto or
in connection herewith contains, as of the date of such representation,
warranty or instrument, or will contain any untrue statement of a material
fact or, at the date thereof, omits or will omit to state a material fact
necessary to make any statement herein or therein, in light of the
circumstances under which such statement is or will be made, not
misleading.
Section 2.25. No Existing Discussions. As of the date hereof,
CATHAYONLINE is not engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to any Third Party
Acquisition (as defined in Section 4.4).
Section 2.26. Material Contracts.
(a) CATHAYONLINE has delivered or otherwise made available to XXXXXXX
true, correct and complete copies of all contracts and agreements (and all
amendments, modifications and supplements thereto and all side letters to
which CATHAYONLINE is a party affecting the obligations of any party
thereunder) to which CATHAYONLINE is a party or by which any of its
properties or assets are bound that are, material to the business,
properties or assets of CATHAYONLINE taken as a whole, including, without
limitation, to the extent any of the following are, individually or in the
aggregate, material to the business, properties or assets of CATHAYONLINE
taken as a whole, all: (i) employment, product design or development,
personal services, consulting, non-competition, severance, golden parachute
or indemnification contracts (including, without limitation, any contract
to which CATHAYONLINE is a party involving employees of CATHAYONLINE); (ii)
licensing, publishing, merchandising or distribution agreements; (iii)
contracts granting rights of first refusal or first negotiation; (iv)
partnership or joint venture agreements; (v) agreements for the
acquisition, sale or lease of material properties or assets or stock or
otherwise entered into since June 30, 1999; (vi) contracts or agreements
with any Governmental Entity. and (vii) all commitments and agreements to
enter into any of the foregoing (collectively, together with any such
contracts entered into in accordance with Section 4.1 hereof, the
"CATHAYONLINE Contracts"). CATHAYONLINE is not a party to or bound by any
severance, golden parachute or other agreement with any employee or
consultant pursuant to which such person would be entitled to receive any
additional compensation or an accelerated payment of compensation as a
result of the consummation of the transactions contemplated hereby.
(b) Each of the CATHAYONLINE Contracts is valid and enforceable in
accordance with its terms, and there is no default under any CATHAYONLINE
Contract so listed either by CATHAYONLINE or, to the knowledge of
CATHAYONLINE, by any other party thereto, and no event has occurred that
with the lapse of time or the giving of notice or both would constitute a
default thereunder by CATHAYONLINE or, to the knowledge of CATHAYONLINE,
any other party, in any such case in which such default or event could
reasonably be expected to have a Material Adverse Effect on CATHAYONLINE.
(c) No party to any such CATHAYONLINE Contract has given notice to
CATHAYONLINE of or made a claim against CATHAYONLINE with respect to any
breach or default thereunder, in any such case in which such breach or
default could reasonably be expected to have a Material Adverse Effect on
CATHAYONLINE.
ARTICLE 3
Representations and Warranties of XXXXXXX
Except as set forth on the Disclosure Schedule delivered by XXXXXXX to
CATHAYONLINE (the "XXXXXXX Disclosure Schedule"), XXXXXXX hereby represents
and warrants to CATHAYONLINE as follows:
Section 3.1. Organization and Qualification.
(a) Each of XXXXXXX and its subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to
own, lease and operate its properties and to carry on its businesses as now
being conducted, except where the failure to be so organized, existing and
in good standing or to have such power and authority would not have a
Material Adverse Effect (as defined below) on XXXXXXX. When used in
connection with XXXXXXX, the term "Material Adverse Effect'' means any
change or effect (i) that is or is reasonably likely to be materially
adverse to the business, results of operations, condition (financial or
otherwise) or prospects of XXXXXXX and its subsidiaries, taken as a whole,
other than any change or effect arising out of general economic conditions
unrelated to any businesses in which XXXXXXX and its subsidiaries are
engaged, or (ii) that may impair the ability of XXXXXXX to consummate the
transactions contemplated hereby.
(b) XXXXXXX has heretofore delivered to CATHAYONLINE accurate and
complete copies of the Certificate of Incorporation and Bylaws (or similar
governing documents), as currently in effect, of XXXXXXX. Each of XXXXXXX
and its subsidiaries is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect on XXXXXXX.
Section 3.2. Capitalization of XXXXXXX.
(a) As of December 31, 1999, the authorized capital stock of XXXXXXX
consists of; (i) Twenty Million (20,000,000) XXXXXXX common Shares, $.001
par value, of which 5,000,000 common Shares are issued and outstanding, and
(ii) Five Million (5,000,000) XXXXXXX preferred shares, $.001 par value,
and no preferred shares are issued and outstanding. All of the outstanding
XXXXXXX Shares have been duly authorized and validly issued, and are fully
paid, nonassessable and free of preemptive rights.
(b) Except as set forth in Section 3.2(b) of the XXXXXXX Disclosure
Schedule, XXXXXXX is the record and beneficial owner of all of the issued
and outstanding shares of capital stock of its subsidiaries.
(c) Except as set forth in Section 3.2(c) of the XXXXXXX Disclosure
Schedule, between December 31, 1999 and the date hereof, no shares of
XXXXXXX'x capital stock have been issued and no XXXXXXX Stock options have
been granted. Except as set forth in Section 3.2(a) above, as of the date
hereof, there are no outstanding (i) shares of capital stock or other
voting securities of XXXXXXX, (ii) securities of XXXXXXX or its
subsidiaries convertible into or exchangeable for shares of capital stock
or voting securities of XXXXXXX, (iii) options or other rights to acquire
from XXXXXXX or its subsidiaries, or obligations of XXXXXXX or its
subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
XXXXXXX, or (iv) equity equivalents, interests in the ownership or earnings
of XXXXXXX or its subsidiaries or other similar rights (collectively,
"XXXXXXX Securities"). As of the date hereof, there are no outstanding
obligations of XXXXXXX or any of its subsidiaries to repurchase, redeem or
otherwise acquire any XXXXXXX Securities. There are no stockholder
agreements, voting trusts or other agreements or understandings to which
XXXXXXX is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of XXXXXXX.
(d) Except as set forth in Section 3.2(d) of the XXXXXXX Disclosure
Schedule, there are no securities of XXXXXXX convertible into or
exchangeable for, no options or other rights to acquire from XXXXXXX, and
no other contract, understanding, arrangement or obligation (whether or not
contingent) providing for the issuance or sale, directly or indirectly, of
any capital stock or other ownership interests in, or any other securities
of, any subsidiary of XXXXXXX.
(e) The XXXXXXX Shares constitute the only class of equity securities
of XXXXXXX or its subsidiaries.
(f) Except as set forth in Section 3.2(f) of the XXXXXXX Disclosure
Schedule, XXXXXXX does not own directly or indirectly more than fifty
percent (50%) of the outstanding voting securities or interests (including
membership interests) of any entity.
Section 3.3. Authority Relative to this Agreement; Recommendation.
(a) XXXXXXX has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of XXXXXXX (the "XXXXXXX Board"), and
no other corporate proceedings on the part of XXXXXXX are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby, except, as referred to in Section 3.17, the approval and adoption
of this Agreement by the holders of at least a majority of the then
outstanding XXXXXXX Shares. This Agreement has been duly and validly
executed and delivered by XXXXXXX and constitutes a valid, legal and
binding agreement of XXXXXXX, enforceable against XXXXXXX in accordance
with its terms.
(b) The XXXXXXX Board has resolved to recommend that the stockholders
of XXXXXXX approve and adopt this Agreement.
Section 3.4. SEC Reports; Financial Statements.
(a) XXXXXXX has filed all required forms, reports and documents with
the Securities and Exchange Commission (the "SEC") since December 31, 1999,
each of which has complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and the Exchange Act (and the rules and regulations promulgated
thereunder, respectively), each as in effect on the dates such forms,
reports and documents were filed. XXXXXXX has heretofore delivered or
promptly will deliver prior to the Effective Date to XXXXXXX, in the form
filed with the SEC (including any amendments thereto but excluding any
exhibits), (i) its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999, (ii) all definitive proxy statements relating to
XXXXXXX'x meetings of stockholders (whether annual or special) held since
December 31, 1999, if any, and (iii) all other reports or registration
statements filed by XXXXXXX with the SEC since December 31, 1999 (all of
the foregoing, collectively, the "XXXXXXX SEC Reports"). None of such
XXXXXXX SEC Reports, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted
to state a material fact required to be stated or incorporated by reference
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 XXXXXXX included in the XXXXXXX SEC Reports fairly
present, in conformity with generally accepted accounting principles
applied on a consistent basis (except as may be indicated in the notes
thereto), the financial position of XXXXXXX as of the dates thereof and its
results of operations and changes in financial position for the periods
then ended. All material agreements, contracts and other documents required
to be filed as exhibits to any of the XXXXXXX SEC Reports have been so
filed.
(b) XXXXXXX has heretofore made available or promptly will make
available to CATHAYONLINE a complete and correct copy of any amendments or
modifications which are required to be filed with the SEC but have not yet
been filed with the SEC, to agreements, documents or other instruments
which previously had been filed by XXXXXXX with the SEC pursuant to the
Exchange Act.
Section 3.5. Information Supplied. None of the information supplied or
to be supplied by XXXXXXX for inclusion or incorporation by reference to
the 8-K will, at the time the 8-K is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
Section 3.6. Consents and Approvals; No Violations. Except as set
forth in Section 3.6 of the XXXXXXX Disclosure Schedule, and for filings,
permits, authorizations, consents and approvals as may be required under,
and other applicable requirements of, the Securities Act, the Exchange Act,
state securities or blue sky laws, the HSR Act, the rules of the NASD, and
the filing and recordation of the Merger Certificate as required by the
NGCL, no filing with or notice to, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and
delivery by XXXXXXX of this Agreement or the consummation by XXXXXXX of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations consents or approvals or to make such filings or
give such notice would not have a Material Adverse Effect on XXXXXXX.
Neither the execution, delivery and performance of this Agreement by
XXXXXXX nor the consummation by XXXXXXX of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of
the respective Certificate of Incorporation or Bylaws (or similar governing
documents) of XXXXXXX or any of XXXXXXX'x subsidiaries, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration or Lien) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which
XXXXXXX or any of XXXXXXX'x subsidiaries is a party or by which any of them
or any of their respective properties or assets may be bound or (iii)
violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to XXXXXXX or any of XXXXXXX'x subsidiaries or any of
their respective properties or assets, except in the case of (ii) or (iii)
for violations, breaches or defaults which would not have a Material
Adverse Effect on XXXXXXX.
Section 3.7. No Default. None of XXXXXXX or any of its subsidiaries is
in breach, default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a breach, default or
violation) of any term, condition or provision of (i) its Certificate of
Incorporation or Bylaws (or similar governing documents), (ii) any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which XXXXXXX or any of its subsidiaries is now
a party or by which any of them or any of their respective properties or
assets may be bound or (iii) any order, writ, injunction, decree, law,
statute, rule or regulation applicable to XXXXXXX, its subsidiaries or any
of their respective properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults that would not have a Material
Adverse Effect on XXXXXXX. Each note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which
XXXXXXX or any of its subsidiaries is now a party or by which any of them
or any of their respective properties or assets may be bound that is
material to XXXXXXX and its subsidiaries taken as a whole and that has not
expired is in full force and effect and is not subject to any material
default thereunder of which XXXXXXX is aware by any party obligated to
XXXXXXX or any subsidiary thereunder.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except as
set forth in Section 2.8 of the XXXXXXX Disclosure Schedule and except as
and to the extent publicly disclosed by XXXXXXX in the XXXXXXX SEC Reports,
as of December 31, 1999, XXXXXXX does not have any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
that would be required by generally accepted accounting principles to be
reflected on a balance sheet of XXXXXXX (including the notes thereto) or
which would have a Material Adverse Effect on XXXXXXX. Except as publicly
disclosed by XXXXXXX, since November 19, 1999, XXXXXXX has not incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise,
which could reasonably be expected to have, and there have been no events,
changes or effects with respect to XXXXXXX having or which reasonably could
be expected to have, a Material Adverse Effect on XXXXXXX. Except as and to
the extent publicly disclosed by XXXXXXX in the XXXXXXX SEC Reports and
except as set forth in Section 2.8 of the XXXXXXX Disclosure Schedule,
since November 19,1999, there has not been (i) any material change by
XXXXXXX in its accounting methods, principles or practices (other than as
required after the date hereof by concurrent changes in generally accepted
accounting principles), (ii) any revaluation by XXXXXXX of any of its
assets having a Material Adverse Effect on XXXXXXX, including, without
limitation, any write-down of the value of any assets other than in the
ordinary course of business or (iii) any other action or event that would
have required the consent of any other party hereto pursuant to Section 4.1
of this Agreement had such action or event occurred after the date of this
Agreement.
Section 3.9. Litigation. Except as publicly disclosed by XXXXXXX in
the XXXXXXX SEC Reports, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of XXXXXXX, threatened against
XXXXXXX or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect
on XXXXXXX or could reasonably be expected to prevent or delay the
consummation of the transactions contemplated by this Agreement. Except as
publicly disclosed by XXXXXXX in the XXXXXXX SEC Reports, XXXXXXX is not
subject to any outstanding order, writ, injunction or decree which, insofar
as can be reasonably foreseen in the future, could reasonably be expected
to have a Material Adverse Effect on XXXXXXX or could reasonably be
expected to prevent or delay the consummation of the transactions
contemplated hereby.
Section 3.10. Compliance with Applicable Law. Except as publicly
disclosed by XXXXXXX in the XXXXXXX SEC Reports, XXXXXXX holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of their respective businesses
(the `'XXXXXXX Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have
a Material Adverse Effect on XXXXXXX. Except as publicly disclosed by
XXXXXXX in the XXXXXXX SEC Reports, XXXXXXX is in compliance with the terms
of the XXXXXXX Permits, except where the failure so to comply would not
have a Material Adverse Effect on XXXXXXX. Except as publicly disclosed by
XXXXXXX in the XXXXXXX SEC Reports, the business of XXXXXXX is not being
conducted in violation of any law, ordinance or regulation of any
Governmental Entity except that no representation or warranty is made in
this Section 2.10 with respect to Environmental Laws (as defined in Section
2.12 below) and except for violations or possible violations which do not,
and, insofar as reasonably can be foreseen, in the future will not, have a
Material Adverse Effect on XXXXXXX. Except as publicly disclosed by XXXXXXX
in the XXXXXXX SEC Reports, no investigation or review by any Governmental
Entity with respect to XXXXXXX is pending or, to the knowledge of XXXXXXX,
threatened, nor, to the knowledge of XXXXXXX, has any Governmental Entity
indicated an intention to conduct the same, other than, in each case, those
which XXXXXXX reasonably believes will not have a Material Adverse Effect
on XXXXXXX.
Section 3.11. Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program, policy,
arrangement and contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of ERISA), maintained or
contributed to at any time by XXXXXXX, any of its subsidiaries or any
entity required to be aggregated with XXXXXXX or any of its subsidiaries
pursuant to Section 414 of the Code (each, a "XXXXXXX Employee Plan"), no
event has occurred and, to the knowledge of XXXXXXX, no condition or set of
circumstances exists in connection with which XXXXXXX or any of its
subsidiaries could reasonably be expected to be subject to any liability
which would have a Material Adverse Effect on XXXXXXX.
(b) (i) No XXXXXXX Employee Plan is or has been subject to Title IV of
ERISA or Section 412 of the Code; and (ii) each XXXXXXX Employee Plan
intended to qualify under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code is the subject of a
favorable Internal Revenue Service determination letter, and nothing has
occurred which could reasonably be expected to adversely affect such
determination.
(c) Section 3.11(c) of the XXXXXXX Disclosure Schedule sets forth a
true and complete list, as of the date of this Agreement, of each person
who holds any XXXXXXX Stock Options, together with the number of XXXXXXX
Shares which are subject to such option, the date of grant of such option,
the extent to which such option is vested (or will become vested as a
result of the Merger), the option price of such option (to the extent
determined as of the date hereof), whether such option is a nonqualified
stock option or is intended to qualify as an incentive stock option within
the meaning of Section 422(b) of the Code, and the expiration date of such
option. Section 3.11(c) of the XXXXXXX Disclosure Schedule also sets forth
the total number of such incentive stock options and such nonqualified
options. XXXXXXX has furnished CATHAYONLINE with complete copies of the
plans pursuant to which the XXXXXXX Stock Options were issued. Other than
the automatic vesting of XXXXXXX Stock Options that may occur without any
action on the part of XXXXXXX or its officers or directors, XXXXXXX has not
taken any action that would result in any XXXXXXX Stock Options that are
unvested becoming vested in connection with or as a result of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(d) XXXXXXX has made available to CATHAYONLINE (i) a description of
the terms of employment and compensation arrangements of all officers of
XXXXXXX and a copy of each such agreement currently in effect; (ii) copies
of all agreements with consultants who are individuals obligating XXXXXXX
to make annual cash payments in an amount exceeding $60,000; (iii) a
schedule listing all officers of XXXXXXX who have executed a
non-competition agreement with XXXXXXX and a copy of each such agreement
currently in effect; (iv) copies (or descriptions) of all severance
agreements, programs and policies of XXXXXXX with or relating to its
employees, except programs and policies required to be maintained by law;
and (v) copies of all plans, programs, agreements and other arrangements of
the XXXXXXX with or relating to its employees which contain change in
control provisions.
(e) Except as disclosed in Section 3.11(e) of the XXXXXXX Disclosure
Schedule there shall be no payment, accrual of additional benefits,
acceleration of payments, or vesting in any benefit under any XXXXXXX
Employee Plan or any agreement or arrangement disclosed under this Section
3.11 solely by reason of entering into or in connection with the
transactions contemplated by this Agreement.
(f) There are no controversies pending or, to the knowledge of XXXXXXX
threatened, between XXXXXXX or any of its subsidiaries and any of their
respective employees, which controversies have or could reasonably be
expected to have a Material Adverse Effect on XXXXXXX. Neither XXXXXXX nor
any of its subsidiaries is a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by XXXXXXX or
any of its subsidiaries (and neither XXXXXXX nor any of its subsidiaries
has any outstanding material liability with respect to any terminated
collective bargaining agreement or labor union contract), nor does XXXXXXX
know of any activities or proceedings of any labor union to organize any of
its or any of its subsidiaries' employees. XXXXXXX has no knowledge of any
strike, slowdown, work stoppage, lockout or threat thereof by or with
respect to any of its or any of its subsidiaries' employees.
Section 3.12. Environmental Laws and Regulations.
(a) Except as disclosed by XXXXXXX, (i) each of XXXXXXX and its
subsidiaries is in material compliance with all Environmental Laws, except
for non-compliance that would not have a Material Adverse Effect on
XXXXXXX, which compliance includes, but is not limited to, the possession
by XXXXXXX and its subsidiaries of all material permits and other
governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof; (ii) none of XXXXXXX
or its subsidiaries has received written notice of, or, to the knowledge of
XXXXXXX, is the subject of, any Environmental Claim that could reasonably
be expected to have a Material Adverse Effect on XXXXXXX; and (iii) to the
knowledge of XXXXXXX, there are no circumstances that are reasonably likely
to prevent or interfere with such material compliance in the future.
(b) Except as disclosed by XXXXXXX, there are no Environmental Claims
which could reasonably be expected to have a Material Adverse Effect on
XXXXXXX that are pending or, to the knowledge of XXXXXXX, threatened
against XXXXXXX or any of its subsidiaries or, to the knowledge of XXXXXXX,
against any person or entity whose liability for any Environmental Claim
XXXXXXX or its subsidiaries has or may have retained or assumed either
contractually or by operation of law.
Section 3.13. Tax Matters. Except as set forth in Section 3.13 of the
XXXXXXX Disclosure Schedule: (i) XXXXXXX and each of its subsidiaries has
filed or has had filed on its behalf in a timely manner (within any
applicable extension periods) with the appropriate Governmental Entity all
income and other material Tax Returns with respect to Taxes of XXXXXXX and
each of its subsidiaries and all Tax Returns were in all material respects
true, complete and correct; (ii) all material Taxes with respect to XXXXXXX
and each of its subsidiaries have been paid in full or have been provided
for in accordance with GAAP on XXXXXXX'x most recent balance sheet which is
part of the XXXXXXX SEC Documents; (iii) there are no outstanding
agreements or waivers extending the statutory period of limitations
applicable to any federal, state, local or foreign income or other material
Tax Returns required to be filed by or with respect to XXXXXXX or its
subsidiaries; (iv) to the knowledge of XXXXXXX none of the Tax Returns of
or with respect to XXXXXXX or any of its subsidiaries is currently being
audited or examined by any Governmental Entity; and (v) no deficiency for
any income or other material Taxes has been assessed with respect to
XXXXXXX or any of its subsidiaries which has not been abated or paid in
full.
Section 3.14. Title to Property. XXXXXXX and each of its subsidiaries
have good and defensible title to all of their properties and assets, free
and clear of all liens, charges and encumbrances except liens for taxes not
yet due and payable and such liens or other imperfections of title, if any,
as do not materially detract from the value of or interfere with the
present use of the property affected thereby or which, individually or in
the aggregate, would not have a Material Adverse Effect on XXXXXXX; and, to
XXXXXXX'x knowledge, all leases pursuant to which XXXXXXX or any of its
subsidiaries lease from others real or personal property are in good
standing, valid and effective in accordance with their respective terms,
and there is not, to the knowledge of XXXXXXX, under any of such leases,
any existing material default or event of default (or event which with
notice or lapse of time, or both, would constitute a material default and
in respect of which XXXXXXX or such subsidiary has not taken adequate steps
to prevent such a default from occurring) except where the lack of such
good standing, validity and effectiveness, or the existence of such default
or event of default would not have a Material Adverse Effect on XXXXXXX.
Section 3.15. Intellectual Property.
(a) Each of XXXXXXX and its subsidiaries owns, or possesses adequate
licenses or other valid rights to use, all existing United States and
foreign patents, trademarks, trade names, services marks, copyrights, trade
secrets, and applications therefore that are material to its business as
currently conducted (the "XXXXXXX Intellectual Property Rights").
(b) Except as set forth in Section 3.15(b) of the XXXXXXX Disclosure
Schedule the validity of the XXXXXXX Intellectual Property Rights and the
title thereto of XXXXXXX or any subsidiary, as the case may be, is not
being questioned in any litigation to which XXXXXXX or any subsidiary is a
party.
(c) The conduct of the business of XXXXXXX and its subsidiaries as now
conducted does not, to XXXXXXX'x knowledge, infringe any valid patents,
trademarks, tradenames, service marks or copyrights of others. The
consummation of the transactions contemplated hereby will not result in the
loss or impairment of any XXXXXXX Intellectual Property Rights.
(d) Each of XXXXXXX and its subsidiaries has taken steps it believes
appropriate to protect and maintain its trade secrets as such, except in
cases where XXXXXXX has elected to rely on patent or copyright protection
in lieu of trade secret protection.
Section 3.16. Insurance. XXXXXXX currently does not maintain general
liability and other business insurance.
Section 3.17. Vote Required. The affirmative vote of the holders of at
least a majority of the outstanding XXXXXXX Shares is the only vote of the
holders of any class or series of XXXXXXX'x capital stock necessary to
approve and adopt this Agreement and the Merger.
Section 3.18. Tax Treatment. Neither XXXXXXX nor, to the knowledge of
XXXXXXX, any of its affiliates has taken or agreed to take any action that
would prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code.
Section 3.19. Affiliates. Except for the directors and executive
officers of XXXXXXX, each of whom is listed in Section 3.19 of the XXXXXXX
Disclosure Schedule, there are no persons who, to the knowledge of XXXXXXX,
may be deemed to be affiliates of XXXXXXX under Rule 1-02(b) of Regulation
S-X of the SEC (the "XXXXXXX Affiliates").
Section 3.20. Certain Business Practices. None of XXXXXXX, any of its
subsidiaries or any directors, officers, agents or employees of XXXXXXX or
any of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity, (ii) made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the FCPA, or (iii) made any other
unlawful payment.
Section 3.21. Insider Interests. Except as set forth in Section 3.21
of the XXXXXXX Disclosure Schedule, no officer or director of XXXXXXX has
any interest in any material property, real or personal, including without
limitation, any computer software or XXXXXXX Intellectual Property Rights,
used in or pertaining to the business of XXXXXXX or any subsidiary, except
for the ordinary rights of a stockholder or employee stock optionholder.
Section 3.22. Opinion of Financial Adviser. No advisers, as of the
date hereof, have delivered to the XXXXXXX Board a written opinion to the
effect that, as of such date, the exchange ratio contemplated by the Merger
is fair to the holders of XXXXXXX Shares.
Section 3.23. Brokers. No broker, finder or investment banker (other
than the XXXXXXX Financial Adviser, a true and correct copy of whose
engagement agreement has been provided to CATHAYONLINE) is entitled to any
brokerage, finders or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of XXXXXXX.
Section 3.24. Disclosure. No representation or warranty of XXXXXXX in
this Agreement or any certificate, schedule, document or other instrument
furnished or to be furnished to CATHAYONLINE pursuant hereto or in
connection herewith contains, as of the date of such representation,
warranty or instrument, or will contain any untrue statement of a material
fact or, at the date thereof, omits or will omit to state a material fact
necessary to make any statement herein or therein, in light of the
circumstances under which such statement is or will be made, not
misleading.
Section 3.25. No Existing Discussions. As of the date hereof, XXXXXXX
is not engaged, directly or indirectly, in any discussions or negotiations
with any other party with respect to any Third Party Acquisition (as
defined in Section 5.4).
Section 3.26. Material Contracts.
(a) XXXXXXX has delivered or otherwise made available to CATHAYONLINE
true, correct and complete copies of all contracts and agreements (and all
amendments, modifications and supplements thereto and all side letters to
which XXXXXXX is a party affecting the obligations of any party thereunder)
to which XXXXXXX or any of its subsidiaries is a party or by which any of
their properties or assets are bound that are, material to the business,
properties or assets of XXXXXXX and its subsidiaries taken as a whole,
including, without limitation, to the extent any of the following are,
individually or in the aggregate, material to the business, properties or
assets of XXXXXXX and its subsidiaries taken as a whole, all: (i)
employment, product design or development, personal services, consulting,
non-competition, severance, golden parachute or indemnification contracts
(including, without limitation, any contract to which XXXXXXX is a party
involving employees of XXXXXXX); (ii) licensing, publishing, merchandising
or distribution agreements; (iii) contracts granting rights of first
refusal or first negotiation; (iv) partnership or joint venture agreements;
(v) agreements for the acquisition, sale or lease of material properties or
assets or stock or otherwise. (vi) contracts or agreements with any
Governmental Entity; and (vii) all commitments and agreements to enter into
any of the foregoing (collectively, together with any such contracts
entered into in accordance with Section 5.2 hereof, the 'XXXXXXX
Contracts"). Neither XXXXXXX nor any of its subsidiaries is a party to or
bound by any severance, golden parachute or other agreement with any
employee or consultant pursuant to which such person would be entitled to
receive any additional compensation or an accelerated payment of
compensation as a result of the consummation of the transactions
contemplated hereby.
(b) Each of the XXXXXXX Contracts is valid and enforceable in
accordance with its terms, and there is no default under any XXXXXXX
Contract so listed either by XXXXXXX or, to the knowledge of XXXXXXX, by
any other party thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a default thereunder
by XXXXXXX or, to the knowledge of XXXXXXX, any other party, in any such
case in which such default or event could reasonably be expected to have a
Material Adverse Effect on XXXXXXX.
(c) No party to any such XXXXXXX Contract has given notice to XXXXXXX
of or made a claim against XXXXXXX with respect to any breach or default
thereunder, in any such case in which such breach or default could
reasonably be expected to have a Material Adverse Effect on XXXXXXX.
ARTICLE 4
Covenants
Section 4.1. Conduct of Business of CATHAYONLINE. Except as
contemplated by this Agreement or as described in Section 4.1 of the
CATHAYONLINE Disclosure Schedule, during the period from the date hereof to
the Effective Time, CATHAYONLINE will conduct its operations in the
ordinary course of business consistent with past practice and, to the
extent consistent therewith, with no less diligence and effort than would
be applied in the absence of this Agreement, seek to preserve intact its
current business organization, keep available the service of its current
officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement or as described in Section 4.1 of the
CATHAYONLINE Disclosure Schedule, prior to the Effective Time, CATHAYONLINE
will not, without the prior written consent of XXXXXXX:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend the terms of any stock of any class or any other securities
(except bank loans) or equity equivalents.
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution
in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any
of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of CATHAYONLINE (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings or issuances of letters of credit
under existing lines of credit in the ordinary course of business; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person. (iii) make any loans, advances or capital contributions to,
or investments in, any other person; (iv) pledge or otherwise encumber
shares of capital stock of CATHAYONLINE; or (v) mortgage or pledge any of
its material assets, or create or suffer to exist any material Lien
thereupon (other than tax Liens for taxes not yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (f) shall not prevent CATHAYONLINE from (i) entering into
employment agreements or severance agreements with employees in the
ordinary course of business and consistent with past practice or (ii)
increasing annual compensation and/or providing for or amending bonus
arrangements for employees for fiscal 1999 in the ordinary course of
year-end compensation reviews consistent with past practice and paying
bonuses to employees for fiscal 1999 in amounts previously disclosed to
XXXXXXX (to the extent that such compensation increases and new or amended
bonus arrangements do not result in a material increase in benefits or
compensation expense to CATHAYONLINE);
(g) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions (other than in the ordinary
course of business);
(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(i) revalue in any material respect any of its assets including,
without limitation, writing down the value of inventory or writing-off
notes or accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any
contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to CATHAYONLINE;
(iii) authorize any new capital expenditure or expenditures which,
individually is in excess of $1,000 or, in the aggregate, are in excess of
$5,000; provided, however that none of the foregoing shall limit any
capital expenditure required pursuant to existing contracts;
(k) make any tax election or settle or compromise any income tax
liability material to CATHAYONLINE;
(l) settle or compromise any pending or threatened suit, action or
claim which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on
CATHAYONLINE;
(m) commence any material research and development project or
terminate any material research and development project that is currently
ongoing, in either case, except pursuant to the terms of existing contracts
or in the ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(m) or any action which would make
any of the representations or warranties of contained in this Agreement
untrue or incorrect.
Section 4.2. Conduct of Business of XXXXXXX. Except as contemplated by
this Agreement or as described in Section 4.2 of the XXXXXXX Disclosure
Schedule during the period from the date hereof to the Effective Time,
XXXXXXX will conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with
no less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organization, keep
available the service of its current officers and employees and preserve
its relationships with customers, suppliers and others having business
dealings with it to the end that goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, except as otherwise expressly provided in this Agreement or as
described in Section 4.2 of the XXXXXXX Disclosure Schedule, prior to the
Effective Time, XXXXXXX will not, without the prior written consent of:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (except bank
loans) or equity equivalents (including, without limitation, any stock
options or stock appreciation rights;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution
in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any
of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger consolidation, restructuring, recapitalization or other
reorganization of XXXXXXX (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings or issuances of letters of credit
under existing lines of credit in the ordinary course of business. (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person; (iii) make any loans, advances or capital contributions to or
investments in, any other person; (iv) pledge or otherwise encumber shares
of capital stock of XXXXXXX or its subsidiaries; or (v) mortgage or pledge
any of its material assets, or create or suffer to exist any material Lien
thereupon (other than tax Liens for taxes not yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (f) shall not prevent XXXXXXX or its subsidiaries from (i)
entering into employment agreements or severance agreements with employees
in the ordinary course of business and consistent with past practice or
(ii) increasing annual compensation and/or providing for or amending bonus
arrangements for employees for fiscal 1999 in the ordinary course of year
end compensation reviews consistent with past practice and paying bonuses
to employees for fiscal 1999 in amounts previously disclosed to (to the
extent that such compensation increases and new or amended bonus
arrangements do not result in a material increase in benefits or
compensation expense to XXXXXXX);
(g) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions other than in the ordinary
course of business;
(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(i) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory of writing-off
notes or accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership, or other business organization or
division thereof or any equity interest therein; (ii) enter into any
contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to XXXXXXX; (iii)
authorize any new capital expenditure or expenditures which, individually,
is in excess of $1,000 or, in the aggregate, are in excess of $5,000:
provided, however that none of the foregoing shall limit any capital
expenditure required pursuant to existing contracts;
(k) make any tax election or settle or compromise any income tax
liability material to XXXXXXX and its subsidiaries taken as a whole;
(l) settle or compromise any pending or threatened suit, action or
claim which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on
XXXXXXX;
(m) commence any material research and development project or
terminate any material research and development project that is currently
ongoing, in either case, except pursuant to the terms of existing contracts
or except in the ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.2(a) through 4.2(m) or any action which would make
any of the representations or warranties of the XXXXXXX contained in this
Agreement untrue or incorrect.
Section 4.3. Preparation of 8-X. XXXXXXX and CATHAYONLINE shall
promptly prepare and file with the SEC an 8-K disclosing this merger.
Section 4.4. Other Potential Acquirers.
(a) XXXXXXX, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore
with respect to any Third Party Acquisition.
Section 4.5. Meetings of Stockholders. XXXXXXX shall take all action
necessary, in accordance with the respective General Corporation Law of its
respective state, and its respective certificate of incorporation and
bylaws, to duly call, give notice of, convene and hold a meeting of its
stockholders as promptly as practicable, to consider and vote upon the
adoption and approval of this Agreement and the transactions contemplated
hereby. The stockholder votes required for the adoption and approval of the
transactions contemplated by this Agreement. XXXXXXX will, through its
Boards of Directors, recommend to their respective stockholders approval of
such matters
Section 4.6. OTC:BB Listing. The parties shall use all reasonable
efforts to cause the CATHAYONLINE Shares, subject to Rule 144, to be traded
on the Over-The-Counter Bulletin Board (OTC:BB).
Section 4.7. Access to Information.
(a) Between the date hereof and the Effective Time, CATHAYONLINE will
give XXXXXXX and its authorized representatives, and XXXXXXX will give
CATHAYONLINE and its authorized representatives, reasonable access to all
employees, plants, offices, warehouses and other facilities and to all
books and records of itself and its subsidiaries, will permit the other
party to make such inspections as such party may reasonably require and
will cause its officers and those of its subsidiaries to furnish the other
party with such financial and operating data and other information with
respect to the business and properties of itself and its subsidiaries as
the other party may from time to time reasonably request.
(b) Between the date hereof and the Effective Time, CATHAYONLINE shall
furnish to XXXXXXX, and XXXXXXX will furnish to CATHAYONLINE, within 25
business days after the end of each quarter, quarterly statements prepared
by such party in conformity with its past practices) as of the last day of
the period then ended.
(c) Each of the parties hereto will hold and will cause its
consultants and advisers to hold in confidence all documents and
information furnished to it in connection with the transactions
contemplated by this Agreement.
Section 4.8. Additional Agreements, Reasonable Efforts. Subject to the
terms and conditions herein provided, each of the parties hereto agrees to
use all reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including,
without limitation, (i) cooperating in the preparation and filing of the 8-
K, any filings that may be required under the HSR Act, and any amendments
to any thereof; (ii) obtaining consents of all third parties and
Governmental Entities necessary, proper or advisable for the consummation
of the transactions contemplated by this Agreement; (iii) contesting any
legal proceeding relating to the Merger and (iv) the execution of any
additional instruments necessary to consummate the transactions
contemplated hereby. Subject to the terms and conditions of this Agreement,
XXXXXXX and CATHAYONLINE agree to use all reasonable efforts to cause the
Effective Time to occur as soon as practicable after the stockholder votes
with respect to the Merger. In case at any time after the Effective Time
any further action is necessary to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall
take all such necessary action.
Section 4.9. Indemnification.
(a) To the extent, if any, not provided by an existing right under one
of the parties' directors and officers liability insurance policies, from
and after the Effective Time, CATHAYONLINE shall, to the fullest extent
permitted by applicable law, indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, a director, officer or employee of the
parties hereto or any subsidiary thereof (each an "Indemnified Party" and,
collectively, the ''Indemnified Parties") against all losses, expenses
(including reasonable attorneys' fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next succeeding sentence,
amounts paid in settlement arising out of actions or omissions occurring at
or prior to the Effective Time and whether asserted or claimed prior to, at
or after the Effective Time) that are in whole or in part (i) based on, or
arising out of the fact that such person is or was a director, officer or
employee of such party or a subsidiary of such party or (ii) based on,
arising out of or pertaining to the transactions contemplated by this
Agreement. In the event of any such loss expense, claim, damage or
liability (whether or not arising before the Effective Time), (i)
CATHAYONLINE shall pay the reasonable fees and expenses of counsel selected
by the Indemnified Parties, which counsel shall be reasonably satisfactory
to CATHAYONLINE, promptly after statements therefore are received and
otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, in either case to the extent not
prohibited by the NGCL or its certificate of incorporation or bylaws, (ii)
CATHAYONLINE will cooperate in the defense of any such matter and (iii) any
determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under the NGCL and
CATHAYONLINE's certificate of incorporation or bylaws shall be made by
independent counsel mutually acceptable to CATHAYONLINE and the Indemnified
Party; provided, however, that CATHAYONLINE shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld). The Indemnified Parties as a group may retain only
one law firm with respect to each related matter except to the extent there
is, in the opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, c conflict on any significant issue
between positions of any two or more Indemnified Parties.
(b) In the event CATHAYONLINE or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity or such consolidation or
merger or (ii) transfers all or substantially all of its properties and
assets to any person, then and in either such case, proper provision shall
be made so that the successors and assigns of CATHAYONLINE shall assume the
obligations set forth in this Section 4.11.
(c) To the fullest extent permitted by law, from and after the
Effective Time, all rights to indemnification now existing in favor of the
employees, agents, directors or officers of CATHAYONLINE and XXXXXXX and
their subsidiaries with respect to their activities as such prior to the
Effective Time, as provided in CATHAYONLINE's and XXXXXXX'x certificate of
incorporation or bylaws, in effect on the date thereof or otherwise in
effect on the date hereof, shall survive the Merger and shall continue in
full force and effect for a period of not less than six years from the
Effective Time.
(d) The provisions of this Section 4.11 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 4.10. Notification of Certain Matters. The parties hereto
shall give prompt notice to the other parties, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would
be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time, (ii) any material failure of such party to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or
both, would become a default, received by such party or any of its
subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any contract or agreement material to the financial
condition, properties, businesses or results of operations of such party
and its subsidiaries taken as a whole to which such party or any of its
subsidiaries is a party or is subject, (iv) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions
contemplated by this Agreement, or (v) any material adverse change in their
respective financial condition, properties, businesses, results of
operations or prospects taken as a whole, other than changes resulting from
general economic conditions; provided, however, that the delivery of any
notice pursuant to this Section 4.12 shall not cure such breach or
non-compliance or limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
ARTICLE 5
Conditions to Consummation of the Merger
Section 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the
Merger are subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of XXXXXXX;
(b) this Agreement shall have been approved and adopted by the Board
of Directors of CATHAYONLINE and XXXXXXX;
(c) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which
prohibits, restrains, enjoins or restricts the consummation of the Merger;
(d) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired, and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received; and
Section 5.2. Conditions to the Obligations of CATHAYONLINE. The
obligation of CATHAYONLINE to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) the representations of XXXXXXX contained in this Agreement or in
any other document delivered pursuant hereto shall be true and correct
(except to the extent that the breach thereof would not have a Material
Adverse Effect on XXXXXXX) at and as of the Effective Time with the same
effect as if made at and as of the Effective Time (except to the extent
such representations specifically related to an earlier date, in which case
such representations shall be true and correct as of such earlier date),
and at the Closing XXXXXXX shall have delivered to CATHAYONLINE a
certificate to that effect;
(b) each of the covenants and obligations of XXXXXXX to be performed
at or before the Effective Time pursuant to the terms of this Agreement
shall have been duly performed in all material respects at or before the
Effective Time and at the Closing XXXXXXX shall have delivered to
CATHAYONLINE a certificate to that effect;
(d) XXXXXXX shall have obtained the consent or approval of each person
whose consent or approval shall be required in order to permit the Merger
as relates to any obligation, right or interest of XXXXXXX under any loan
or credit agreement, note, mortgage, indenture, lease or other agreement or
instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of CATHAYONLINE,
individually or in the aggregate, have a Material Adverse Effect on
XXXXXXX;
(e) there shall have been no events, changes or effects with respect
to XXXXXXX or its subsidiaries having or which could reasonably be expected
to have a Material Adverse Effect on XXXXXXX; and
Section 5.3. Conditions to the Obligations of XXXXXXX. The respective
obligations of XXXXXXX to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions:
(a) the representations of CATHAYONLINE contained in this Agreement or
in any other document delivered pursuant hereto shall be true and correct
(except to the extent that the breach thereof would not have a Material
Adverse Effect on CATHAYONLINE) at and as of the Effective Time with the
same effect as if made at and as of the Effective Time (except to the
extent such representations specifically related to an earlier date, in
which case such representations shall be true and correct as of such
earlier date), and at the Closing CATHAYONLINE shall have delivered to
XXXXXXX a certificate to that effect;
(b) each of the covenants and obligations of CATHAYONLINE to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or
before the Effective Time and at the Closing CATHAYONLINE shall have
delivered to XXXXXXX a certificate to that effect;
(c) there shall have been no events, changes or effects with respect
to CATHAYONLINE having or which could reasonably be expected to have a
Material Adverse Effect on CATHAYONLINE.
ARTICLE 6
Termination; Amendment; Waiver
Section 6.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval and adoption of this Agreement by CATHAYONLINE's
or XXXXXXX'x stockholders:
(a) by mutual written consent of CATHAYONLINE and XXXXXXX;
(b) by XXXXXXX or CATHAYONLINE if (i) any court of competent
jurisdiction in the United States or other United States Governmental
Entity shall have issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action is or shall have become
nonappealable or (ii) the Merger has not been consummated by January 31,
2000; provided, however, that no party may terminate this Agreement
pursuant to this clause (ii) if such party's failure to fulfill any of its
obligations under this Agreement shall have been the reason that the
Effective Time shall not have occurred on or before said date;
(c) by CATHAYONLINE if (i) there shall have been a breach of any
representation or warranty on the part of XXXXXXX set forth in this
Agreement, or if any representation or warranty of XXXXXXX shall have
become untrue, in either case such that the conditions set forth in Section
5.2(a) would be incapable of being satisfied by January 18, 2000 (or as
otherwise extended), (ii) there shall have been a breach by XXXXXXX of any
of their respective covenants or agreements hereunder having a Material
Adverse Effect on XXXXXXX or materially adversely affecting (or materially
delaying) the consummation of the Merger, and XXXXXXX, as the case may be,
has not cured such breach within 20 business days after notice by
CATHAYONLINE thereof, provided that CATHAYONLINE has not breached any of
its obligations hereunder, (iii) CATHAYONLINE shall have convened a meeting
of its stockholders to vote upon the Merger and shall have failed to obtain
the requisite vote of its stockholders; or (iv) CATHAYONLINE shall have
convened a meeting of its Board of Directors to vote upon the Merger and
shall have failed to obtain the requisite vote;
(d) by XXXXXXX if (i) there shall have been a breach of any
representation or warranty on the part of CATHAYONLINE set forth in this
Agreement, or if any representation or warranty of CATHAYONLINE shall have
become untrue, in either case such that the conditions set forth in Section
5.3(a) would be incapable of being satisfied by January 18, 2000 (or as
otherwise extended), (ii) there shall have been a breach by CATHAYONLINE of
its covenants or agreements hereunder having a Material Adverse Effect on
CATHAYONLINE or materially adversely affecting (or materially delaying) the
consummation of the Merger, and CATHAYONLINE, as the case may be, has not
cured such breach within twenty business days after notice by XXXXXXX
thereof, provided that XXXXXXX has not breached any of its obligations
hereunder, (iii) the CATHAYONLINE Board shall have recommended to
CATHAYONLINE's stockholders a Superior Proposal, (iv) the CATHAYONLINE
Board shall have withdrawn, modified or changed its approval or
recommendation of this Agreement or the Merger, or hold a stockholders'
meeting to vote upon the Merger, or shall have adopted any resolution to
effect any of the foregoing, (v) XXXXXXX shall have convened a meeting of
its stockholders to vote upon the Merger and shall have failed to obtain
the requisite vote of its stockholders.
Section 6.2. Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 6.1, this Agreement
shall forthwith become void and have no effect, without any liability on
the part of any party hereto or its affiliates, directors, officers or
stockholders, other than the provisions of this Section 6.2 and Sections
4.7(c) and 6.3 hereof. Nothing contained in this Section 6.2 shall relieve
any party from liability for any breach of this Agreement.
Section 6.3. Fees and Expenses. Except as specifically provided in
this Section 6.3, each party shall bear its own expenses in connection with
this Agreement and the transactions contemplated hereby.
Section 6.4. Amendment. This Agreement may be amended by action taken
by CATHAYONLINE and XXXXXXX at any time before or after approval of the
Merger by the stockholders of CATHAYONLINE and XXXXXXX (if required by
applicable law) but, after any such approval, no amendment shall be made
which requires the approval of such stockholders under applicable law
without such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
Section 6.5. Extension; Waiver. At any time prior to the Effective
Time, each party hereto may (i) extend the time for the performance of any
of the obligations or other acts of any other party, (ii) waive any
inaccuracies in the representations and warranties of any other party
contained herein or in any document, certificate or writing delivered
pursuant hereto or (iii) waive compliance by any other party with any of
the agreements or conditions contained herein. Any agreement on the part of
any party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The
failure of any party hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights.
ARTICLE 7
Miscellaneous
Section 7.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall
not limit any covenant or agreement of the parties hereto which by its
terms requires performance after the Effective Time.
Section 7.2. Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings both written and oral, between the parties with respect to
the subject matter hereof and (b) shall not be assigned by operation of law
or otherwise.
Section 7.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby,
and to such end, the provisions of this Agreement are agreed to be
severable.
Section 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return
receipt requested), to each other party as follows:
If to XXXXXXX:
Xxxxxxx Financial Asset Recovery, Inc.
0000 Xxxx Xxxxxxxx Xx. Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
with a copy to:
Xxxxxx X. Xxxxxxxxxx
Xxxxxx Xxxxx & Xxxxxxxxxx
0000 Xxxx Xxxxxxxx Xx. Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
(000) 000-0000
(000) 000-0000
if to CATHAYONLINE:
Cathayonline, Inc.
0 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.
Section 7.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without
regard to the principles of conflicts of law thereof.
Section 7.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 7.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 4.9 and 4.11, nothing
in this Agreement, express or implied, is intended to or shall confer upon
any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 7.8. Certain Definitions. For the purposes of this Agreement,
the term:
(a) "affiliate" means (except as otherwise provided in Sections 2.19,
3.19 and 4.13) a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person;
(b) "business day" means any day other than a day on which Nasdaq is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "knowledge'' or "known'' means, with respect to any matter in
question, if an executive officer of CATHAYONLINE or XXXXXXX or its
subsidiaries, as the case may be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(f) "subsidiary" or "subsidiaries" of CATHAYONLINE, XXXXXXX or any
other person, means any corporation, partnership, limited liability
company, association, trust, unincorporated association or other legal
entity of which CATHAYONLINE, XXXXXXX or any such other person, as the case
may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the capital stock, the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity.
Section 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part
of any direct or indirect stockholder of CATHAYONLINE, XXXXXXX or Newco or
any officer, director, employee, agent, representative or investor of any
party hereto.
Section 7.10. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on
its part to the consummation of the Merger, will cause irreparable injury
to the other parties for which damages, even if available, will not be an
adequate remedy. Accordingly, each party hereby consents to the issuance of
injunctive relief by any court of competent jurisdiction to compel
performance of such party's obligations and to the granting by any court of
the remedy of specific performance of its obligations hereunder; provided,
however, that, if a party hereto is entitled to receive any payment or
reimbursement of expenses pursuant to Sections 6.3(a), (b) or (c), it shall
not be entitled to specific performance to compel the consummation of the
Merger.
Section 7.11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
In Witness Whereof, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
CATHAYONLINE, INC
By:/s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: President
XXXXXXX FINANCIAL ASSET RECOVERY, INC.
By:/s/ Xxxx Xxxx
Name: Xxxx X. Xxxx
Title: President
CATHAYONLINE DISCLOSURE SCHEDULE
Schedule 2.1 Organization See Amended Articles/Bylaws
Schedule 2.6 Consents & Approvals None Provided
Schedule 2.7 No Default Not Applicable
Schedule 2.8 No Undisclosed Liability None Exist
Schedule 2.9 Litigation None Exist
Schedule 2.10 Compliance with Applicable Law None
Schedule 2.11 Employee Benefit Plans None Provided
Schedule 2.12 Environmental Laws and Regs Not Applicable
Schedule 2.13 Tax Matters None Exist
Schedule 2.14 Title to Property None Exist
Schedule 2.15 Intellectual Property None Exist
Schedule 2.16 Insurance None Exist
Schedule 2.17 Vote Required None Required
Schedule 2.18 Tax Treatment Not Applicable
Schedule 2.19 Affiliates None Provided
Schedule 2.20 Certain Business Practices None Exist
Schedule 2.21 Insider Interest None Exist
Schedule 2.22 Opinion of Financial Adviser Waived - None Exist
Schedule 2.23 Broker None Exist
Schedule 4.1 Conduct of Business None Provided
XXXXXXX DISCLOSURE SCHEDULE
Schedule 3.2(b) Subsidiary Stock None Exist
Schedule 3.2(c) Capital Stock Rights None Exist other than as
in Articles
Schedule 3.2(d) Securities conversions None Exist
Schedule 3.2 (f) Subsidiaries None Exist
Schedule 3.6 Consents & Approvals Provided
Schedule 3.7 No Default Not Applicable
Schedule 3.8 No Undisclosed Liability None Exist
Schedule 3.9 Litigation None Exist
Schedule 3.10 Compliance with Applicable Law Not Applicable - full
disclosed in 10KSB
Schedule 3.11 Employee Benefit Plans Section 3.11( c)No Options
Exist
Section 3.11(e) No Agreements Exist
Schedule 3.12 Environmental Laws and Regs Not Applicable
Schedule 3.13 Tax Matters None Exist
Schedule 3.14 Title to Property None Exist
Schedule 3.15(b) Intellectual Property None Exist
Schedule 3.16 Insurance None Exist
Schedule 3.17 Vote Required See Shareholder Meeting
Certificate
Schedule 3.18 Tax Treatment Not Applicable
Schedule 3.19 Affiliates Xxxx Xxxx
Schedule 3.20 Certain Business Practices None Exist
Schedule 3.21 Insider Interest None Exist
Schedule 3.22 Opinion of Financial Adviser Waived - None Exist
Schedule 2.23 Broker None Exist
Schedule 4.2 Conduct of Business See Amended & Restated
Articles
