Exhibit 2.2
SUPPLEMENT TO SHARE EXCHANGE AGREEMENT
SUPPLEMENT TO SHARE EXCHANGE AGREEMENT, dated as of April 29, 2000 (this
"Supplement"), among Creative Master International, Inc., a Delaware corporation
(the "Company"), XxxxxxxXxx.xxx LLC, a Minnesota limited liability company
("PNC"), and the members of PNC and other persons and entities listed on the
signature pages hereto (collectively, the "Members").
RECITALS:
WHEREAS, the Company, PNC and certain of the Members have entered into that
certain Share Exchange Agreement dated as of February 17, 2000 (the "Exchange
Agreement"); and
WHEREAS, each of the Members owns or has the right to acquire membership
interests in PNC as set forth in Schedule 3.1(b) to this Supplement; and
WHEREAS, the parties desire to supplement the Exchange Agreement as set
forth in this Supplement to address certain matters not provided for in the
Exchange Agreement and to clarify certain of the terms and conditions thereof.
NOW, THEREFORE, in consideration of the premises, and in reliance on the
representations, warranties and covenants contained in the Exchange Agreement
and herein, the parties hereby agree as follows:
ARTICLE I
THE EXCHANGE
Section 1.1. EXCHANGE; EXCHANGE PROCEDURES. Sections 1.01, 1.02 and 1.04
of the Exchange Agreement are hereby deleted in their entirety and the following
new Sections 1.01 and 1.02 substituted therefor:
1.01 THE EXCHANGE.
(a) At the closing (the "Closing") of the transactions contemplated by
the Exchange Agreement, as amended and supplemented by this Supplement, all
membership interests ("MI's") issued and outstanding immediately prior to
the Closing shall be surrendered and assigned to the Company by the Members
in exchange for the Company's sale and issuance to the Members, pro rata in
accordance with their relative ownership of MI's, of an aggregate of
21,500,000 shares (the "Exchange Shares") of validly issued, fully paid and
nonassessable shares of common stock, $.0001 par value per share, of the
Company ("Common Stock").
(b) If as a result of the foregoing any of the Members would receive a
fractional share of the Common Stock, such fractional share shall be rounded
up to the nearest whole share of the Common Stock.
(c) Prior to the Closing, the Company shall not effect any change in its
capital. For purposes of this Supplement, a "change" in the capital of the
Company shall include any issuance of capital stock, options, warrants or
other right to purchase shares of capital stock in the Company (other than
pursuant to the exercise of the currently outstanding stock options and
warrants enumerated in Section 2.1(b) below) or any stock dividend, stock
split, combination, recapitalization, reorganization or similar event.
(d) All references in this Supplement to the Exchange means the exchange
of MI's by the Members for the Exchange Shares contemplated by the Exchange
Agreement and this Supplement.
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1.02 EXCHANGE PROCEDURES. At the Closing, the Company shall deliver to
the Members certificates representing the Exchange Shares to which they are
entitled as provided in Section 1.01(a), against the Members' delivery to
the Company of all of the issued and outstanding MI's, free and clear of all
liens, claims and encumbrances, by means of a fully executed Assignment of
Membership Interest pursuant to which Members assign all of their right,
title and interest in and to the MI's to the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Section 2.1. CAPITAL STRUCTURE. Section 3.02 of the Exchange Agreement is
hereby deleted in its entirety and the following new Section 3.02 substituted
therefor:
3.02 CAPITAL STRUCTURE OF THE COMPANY.
(a) AUTHORIZED AND OUTSTANDING CAPITAL STOCK. As of the date hereof,
the authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, of which 4,999,322 shares are issued and outstanding. All
outstanding shares of Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and free of preemptive rights.
Except as provided in Section 3.02(b) below, the Company has no outstanding
securities convertible into or exchangeable for Common Stock, no contracts,
rights, options, warrants or other agreements or commitments to purchase or
otherwise issue any shares of Common Stock or securities convertible into or
exchangeable therefor, or any shares reserved for issuance under any stock
option, employee benefit or other plans or otherwise. No security of the
Company is entitled to any preemptive or similar rights to purchase
securities from the Company.
(b) CAPITAL STOCK OF COMPANY AT CLOSING. On the date of Closing, and
just prior to completion of the Exchange, (i) the authorized capital stock
of the Company will consist of 125,000,000 shares of Common Stock and
5,000,000 shares of "blank check" preferred stock, (ii) the Company will
have 4,999,322 shares of Common Stock issued and outstanding (plus any
shares issued subsequent to the date hereof upon the exercise of any of the
options or warrants described in clause (iii) that follows), and
(iii) 462,607 shares (less any shares subject to options or warrants that
are exercised or terminated subsequent to the date hereof) reserved for
issuance pursuant to (A) options for the purchase of an aggregate of 337,607
shares of Common Stock at an exercise price of $5.00 per share and
(B) warrants for the purchase of 125,000 shares of Common Stock at an
exercise price of $8.25 per share.
Section 2.2. AUTHORITY. Section 3.03 of the Exchange Agreement is hereby
deleted in its entirety and the following new Section 3.03 substituted therefor:
3.03 AUTHORITY. The Company's Board of Directors has, on or prior to
the date of this Supplement, subject to receipt of the fairness opinion
referred to in Section 6.3(e), (a) declared that as of such date that the
Exchange was advisable and in the best interests of the Company and its
stockholders, (b) approved the Exchange Agreement and this Supplement and
resolved to recommend the approval of the Exchange Agreement and this
Supplement and the transactions contemplated thereby and hereby by the
Company's stockholders, and (c) directed that the Exchange Agreement and
this Supplement and the transactions contemplated thereby and hereby be
submitted to the Company's stockholders for approval. The Company has all
requisite corporate power and authority to enter into the Exchange Agreement
and this Supplement and to consummate the transactions contemplated hereby.
The execution and delivery of the Exchange Agreement and this Supplement by
the Company and the consummation by the Company of the transactions
contemplated thereby and hereby have been duly authorized by all necessary
action on the part of the Board of Directors of the Company, and (assuming
the valid authorization,
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execution and delivery of the Exchange Agreement and this Supplement by PNC
and the Members) the Exchange Agreement and this Supplement constitute valid
and binding obligations of the Company enforceable against it in accordance
with their respective terms. When issued in accordance with the terms of the
Exchange Agreement and this Supplement, the Exchange Shares will be duly
authorized, validly issued, fully paid and nonassessable.
Section 2.3. SEC REPORTS. Section 3.04 of the Exchange Agreement is hereby
deleted in its entirety and the following new Section 3.04 substituted therefor:
3.04 SEC REPORTS. The Company has filed all forms, reports and
documents required to be filed by it with the Securities and Exchange
Commission (the "SEC") since December 31, 1998 and has heretofore made
available to PNC and the Members, in the form filed with the SEC (excluding
any exhibits thereto), (i) its Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1999, and (ii) all other forms, reports,
registration statements and other documents filed by the Company with the
SEC since December 31, 1997 (the forms, reports, registration statements and
other documents referred to in clauses (i) and (ii) above being referred to
herein, collectively, as the "Company SEC Reports"). The Company SEC Reports
and any other forms, reports and other documents filed by the Company with
the SEC after the date of this Supplement (i) were or will be prepared in
accordance with the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as the case may be, and the rules and regulations
thereunder and (ii) did not at the time they were filed, or will not at the
time they are filed, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order
to make the statements made therein, in the light of the circumstances under
which they were or are made, not misleading.
Section 2.4. ADDITIONAL REPRESENTATIONS AND WARRANTIES. In addition to the
representations and warranties under Article III of the Exchange Agreement, the
Company hereby represents and warrants to PNC and the Members as follows:
(a) CONSENTS AND APPROVALS. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state),
foreign or supranational court, commission, governmental body, regulatory
agency, authority or tribunal (a "Governmental Entity") is required by or
with respect to the Company or any subsidiary of the Company in connection
with the execution and delivery of the Exchange Agreement and this
Supplement by the Company or is necessary for the consummation of the
transactions contemplated by the Exchange Agreement and this Supplement,
except for (i) the filing with the SEC of (A) the proxy statement for the
meeting of the Company's stockholders to be held for the purpose of
obtaining the approvals required for the transactions contemplated hereby
(the "Proxy Statement"); and (B) such reports and information under the
Exchange Act, as may be required in connection with the Exchange Agreement
and this Supplement and the transactions contemplated thereby and hereby,
(ii) such as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (iii) applicable
requirements, if any, of Blue Sky Laws, National Association of Securities
Dealers and Nasdaq Stock Market, and (iv) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which
to be obtained or made would not, individually or in the aggregate, have a
material adverse effect on the Company, or prevent or materially delay the
consummation of the Exchange.
(b) BROKERS. Neither the Company, any of the Company subsidiaries nor
any of their respective directors, officers or employees has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or similar payments in connection with the
transactions contemplated by the Exchange Agreement or this Supplement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PNC AND THE MEMBERS
Section 3.1. JOINT REPRESENTATIONS AND WARRANTIES OF PNC AND THE
MEMBERS. In addition to the representations and warranties under Article II of
the Exchange Agreement, PNC and each of the Members hereby represent and warrant
to the Company as follows:
(a) PNC is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Minnesota and has the
requisite company power and authority to own, lease or operate its
properties and to carry on its business as now being conducted. PNC owns no
shares of capital stock or other equity interest or investment in any
corporation, limited liability company, joint venture or other entity other
than XxxxxxxXxx.xxx Limited, a Hong Kong company, and Grand Scheme
Profits, Ltd, a British Virgin Islands company (the "PNC subsidiaries"). PNC
owns, of record and beneficially, all of the outstanding shares of capital
stock of the PNC subsidiaries as described on Schedule 3.1(a), in each case,
free and clear of all liens, claims and encumbrances.
(b) The authorized and outstanding MI's are as set forth in
Schedule 3.1(b). Except as described in Schedule 3.1(b), PNC has no
outstanding securities convertible into or exchangeable for MI's, no
contracts, rights, options, warrants or other agreements or commitments to
purchase or otherwise issue any MI's or securities convertible into or
exchangeable therefor, or any MI's reserved for issuance under any option,
employee benefit or other plans or otherwise.
(c) PNC has all requisite company power and authority to enter into the
Exchange Agreement and this Supplement and to perform its obligations
thereunder and hereunder. The execution and delivery of the Exchange
Agreement and this Supplement by PNC and the performance of its obligations
thereunder and hereunder have been duly authorized by all necessary company
action on the part of PNC. The Exchange Agreement and this Supplement have
been duly executed and delivered by PNC and the Members and (assuming the
valid authorization, execution and delivery of the Exchange Agreement and
this Supplement by the Company) constitute the valid and binding obligations
of PNC and the Members enforceable against PNC and the Members in accordance
with their respective terms except to the extent that (a) enforcement may be
limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or
limiting creditors' remedies and (b) the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court or other tribunal
before which any proceeding therefor may be brought.
(d) No filing or registration with, or authorization, consent or
approval of, any Governmental Entity is required by or with respect to PNC,
the PNC subsidiaries or any of the Members in connection with the execution
and delivery of the Exchange Agreement and this Supplement by PNC or any of
the Members or is necessary for the consummation of the transactions
contemplated by the Exchange Agreement and this Supplement, except for
(A) such as may be required under the HSR Act, and (B) such consents,
orders, authorizations, registrations, declarations and filings the failure
of which to be obtained or made would not, individually or in the aggregate,
have a material adverse effect on PNC, the PNC subsidiaries, or prevent or
materially delay the consummation of the Exchange.
Section 3.2. SEVERAL REPRESENTATIONS AND WARRANTIES OF THE MEMBERS. Each
of the Members, for himself, herself or itself, but not on behalf of any other
Member, further represents and warrants to the Company, to the best of such
Member's knowledge, as follows:
(a) No claim is pending or threatened to the effect that the present or
past operations of PNC or the PNC subsidiaries infringes upon or conflicts
with the rights of others with respect to
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any intellectual property (including, without limitation, licenses, patents,
patent rights, patent applications, trademarks, trademark applications,
trade names, copyrights, drawings, trade secrets, know-how and computer
software) necessary to permit PNC and the PNC subsidiaries to conduct their
businesses as now operated (the "PNC Intellectual Property") and no claim is
pending or threatened to the effect that any of the PNC Intellectual
Property is invalid or unenforceable. PNC and the PNC subsidiaries own, or
have the right to use, all PNC Intellectual Property material to the conduct
of PNC's business as presently conducted. No contract, agreement or
understanding between PNC or the PNC subsidiaries and any other party exists
which would, following the transactions contemplated hereby, impede or
prevent the continued use by the Company, PNC and the PNC subsidiaries of
the entire right, title and interest of PNC and the PNC subsidiaries in and
to the PNC Intellectual Property.
(b) Attached as Schedule 3.2(b) are the audited consolidated financial
statements of PNC as of and for the period ended December 31, 1999. The
parties agree that all references in Section 2.10 of the Exchange Agreement
to the "financial statements of PNC" shall mean the audited financial
statements of PNC attached as Schedule 3.2(b) and that the fourth sentence
in Section 4.01 of the Exchange Agreement is hereby deleted.
(c) Except as described in Schedule 3.2(c), neither PNC nor any of the
PNC subsidiaries is a party to (i) any lease, installment purchase agreement
or other contract with respect to any real property used or proposed to be
used in its operations, except, in each case, items reflected in
Schedule 3.2(c), (ii) any contract or agreement for the purchase of any
personal property, commodity, material, fixed asset or equipment in excess
of $100,000; (iii) any mortgage, lease, contract or agreement creating an
obligation of $100,000 or more; (iv) any contract or agreement involving
payments in excess of $100,000 which by its terms does not terminate or is
not terminable without penalty to it within one year after the date hereof;
(v) any loan agreement, indenture, promissory note, conditional sales
agreement or other similar type of arrangement; or (vi) any material license
agreement. Each of the foregoing mortgages, leases, contracts, agreements
and other arrangements to which PNC or any of the PNC subsidiaries is a
party are valid and enforceable in accordance with their terms, except as
such enforceability may be limited by (i) bankruptcy laws and other similar
laws affecting creditors' rights generally and (ii) general principles of
equity, whether asserted in a proceeding in equity or at law; PNC and the
PNC subsidiaries and all other parties to each of the foregoing have
performed all material obligations required to be performed to date
thereunder; neither PNC nor any of the PNC subsidiaries, nor any such other
party is in default or in arrears under the terms of any of the foregoing;
and no condition exists or event has occurred which, with the giving of
notice or lapse of time or both, would constitute a default under any of
them.
(d) Neither PNC, the Members, any of the PNC subsidiaries nor any of
their respective governors, directors, officers, managers or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or similar payments in connection
with the transactions contemplated by the Exchange Agreement or this
Supplement.
ARTICLE IV
ADDITIONAL REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE MEMBERS
In addition to the representations and warranties under Article II of the
Exchange Agreement and Article III of this Supplement, each Member, for himself,
herself or itself, but not on behalf of any other Member, hereby represents and
warrants to, and covenants with, the Company as follows:
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Section 4.1. TITLE. Such Member is the beneficial and record owner of the
number of MI's listed opposite his/her/its name in Schedule 3.1(b) to this
Supplement and owns such MI's free and clear of all liens, claims, encumbrances
and restrictions, which MI's constitutes the Member's entire ownership interest
in PNC. Except as expressly contemplated in Schedule 3.1(b), such Member shall
not sell, transfer, assign or convey any of such MI's, or any interest therein.
Section 4.2. UNREGISTERED SECURITIES; INVESTMENT INTENT. Such Member
acknowledges and agrees that the Exchange Shares have not been, and will not be,
registered under the Securities Act or relevant foreign or state securities laws
pursuant to exemptions from registration under the Securities Act and such laws,
and that the Company's reliance upon such exemptions is predicated in part on
such Member's representations to the Company as contained herein. Such Member
understands and agrees that the Exchange Shares must be held indefinitely unless
they are subsequently registered for resale under the Securities Act or unless
transferred in reliance upon an available exemption from such registration
requirements. Such Member further acknowledges and agrees that there is no
understanding or agreement to register the Exchange Shares. The Exchange Shares
are being purchased for the account of such Member for investment only and
without the intention of reselling, transferring or redistributing the same.
Such Member has no agreement for the transfer or disposition of any of the
Exchange Shares.
Section 4.3. RESTRICTIONS ON TRANSFER. Such Member acknowledges that the
Company will place an appropriate restrictive legend on the certificate(s)
representing the Exchange Shares to be received by such Member in the Exchange
reflecting that such shares will constitute "restricted securities" within the
meaning of the Securities Act.
Section 4.4. WAIVERS. Such Member hereby agrees, concurrent with and
conditioned upon the consummation of the transactions contemplated by the
Exchange Agreement and this Supplement, to waive (i) any provision of law and
any and all contract rights which grant or granted to such Member a preemptive
right to purchase any MI's or other interest in PNC; (ii) any rights of first
refusal and similar rights to purchase any MI of any other Member; and
(iii) any and all provisions of the Articles of Organization or Member Control
Agreement of PNC and any other contract or agreement, the operation of which
would impair or impede or prevent the Exchange as contemplated by the Exchange
Agreement and this Supplement.
ARTICLE V
ADDITIONAL PROVISIONS
Section 5.1. CERTAIN REFERENCES. References to "Shares," "Shareholders"
and "corporate" in the Exchange Agreement, and in particular, Article II
thereof, when referring to PNC or the Members, were erroneous and unintended,
and should be read as referring to MI's, the Members of PNC and actions by a
limited liability company, as the case may be.
Section 5.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Company, PNC and the Members contained
herein shall survive the Closing for a period of two years.
Section 5.3. COMPANY STOCKHOLDER MEETING. The Company shall call its
Annual Meeting of stockholders as promptly as practicable for the purpose of
having the stockholders of the Company vote with respect to: (a) approving the
transactions contemplated hereby, including, but not limited to, the issuance of
the Exchange Shares; (b) changing the name of the Company to a name to be
specified by PNC prior to the initial filing of the Proxy Statement;
(c) approving an increase in the number of authorized shares of Common Stock to
125,000,000 shares and authorizing the issuance of up to 5,000,000 shares of
"blank check" preferred stock, $.0001 par value per share, of the Company;
(d) approving an appropriate amendment to the Company's 1998 Stock Option Plan
to increase the number of shares available for issuance thereunder from 650,000
to 5,000,000; and (e) approving such
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other matters as the Company's Board of Directors shall determine. The Company
shall, as soon as is practicable after the execution of this Supplement, prepare
and file with the SEC the Proxy Statement for the purpose of soliciting proxies
for the matters brought before the Annual Meeting. Subject to its prior receipt
of the fairness opinion contemplated in Section 6.3(e), the Company will,
through the Company's Board of Directors, recommend to its stockholders approval
of such matters and shall not withdraw such recommendation; provided, however,
that the Company's Board of Directors or any committee thereof shall not be
required to make, or if already made shall be entitled to withdraw, such
recommendation if and only if the Company's Board of Directors or any committee
thereof concludes in good faith on the basis of the advice of counsel that the
making of, or the failure to withdraw, such recommendation might violate the
fiduciary obligations of the Company's Board of Directors or any committee
thereof under applicable law; provided further, however, that in no case shall
any change in the trading price of Common Stock be used as the sole basis for
any such conclusion. No withdrawal of the recommendation by the Company's Board
of Directors or any committee thereof that is permitted by this Section 5.3,
shall affect the Company's obligation to call the Annual Meeting as provided in
this Section 5.3; provided, however, that PNC and the Members acknowledge and
agree that the Company will not be obligated to call its Annual Meeting for the
purposes referenced above, file the Proxy Statement or recommend to its
stockholders the transactions contemplated by the Exchange Agreement and this
Supplement unless and until it shall have received the opinion of its fairness
advisor as contemplated in Section 6.3(e).
Section 5.4. EXERCISE OF FIDUCIARY DUTIES. Nothing in the Exchange
Agreement or this Supplement shall prohibit or restrict the Company and its
Board of Directors from taking such actions as the Board of Directors of the
Company determines in good faith, after consultation with counsel, are necessary
in order to comply with its fiduciary duties to the Company or the Company's
stockholders under applicable law, including, without limitation,
(i) responding to, or negotiating or entering into agreements with respect to,
alternative proposals that the Board of Directors determines have a reasonable
likelihood of resulting in a more favorable transaction for the Company and its
stockholders than the Exchange and (ii) making any disclosures to the Company's
stockholders regarding such alternative proposals, or otherwise, which, if not
made, could be inconsistent with the fiduciary duties of the Board of Directors
to the Company or its stockholders or its obligations under applicable law.
Section 5.5. PREPARATION OF THE PROXY STATEMENT.
(a) The Company shall use its reasonable best efforts to prepare and
file with the SEC a Proxy Statement and related proxy which meets the
requirements of Regulation 14A of the Exchange Act. The Proxy Statement
shall solicit proxies in respect to the matters described in Section 5.3
above.
(b) Each of the Company and PNC, as to itself and its subsidiaries, and
each of the Members agree to cooperate in the preparation of the Company's
Proxy Statement and that none of the information supplied or to be supplied
by it for inclusion or incorporation by reference in the Proxy Statement and
any amendment or supplement thereto will, at the date of mailing to the
Company stockholders, 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 were made, not misleading.
Section 5.6. FEES AND EXPENSES OF PNC. All expenses incurred by or on
behalf of PNC and the Members in connection with the Exchange and related
transactions shall be expenses of PNC and PNC shall pay the same.
Section 5.7. PUBLIC ANNOUNCEMENTS. PNC and the Company each shall consult
with the other prior to issuing any press releases or otherwise making public
announcements with respect to the Exchange and the other transactions
contemplated by the Exchange Agreement and this Supplement
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and prior to making any filings with any third party and/or any Governmental
Entity with respect thereto, except as may be required by law or by obligations
pursuant to any listing agreement with or rules of Nasdaq.
Section 5.8. STATE TAKEOVER LAWS. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby, the
Company and PNC and their Board of Directors and Board of Governors,
respectively, shall use their commercially reasonable efforts to grant such
approvals and take such actions as are necessary so that the transactions
contemplated hereby by the Exchange Agreement and this Supplement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to minimize the effects of any such statute or regulation on the
transactions contemplated hereby
Section 5.9. INSURANCE. After the Closing, the Company shall maintain in
effect, without modification, until the normal expiration of the policy term
ending December 23, 2001, its current policy (policy number NDA 0151652) of
directors and officers liability insurance with Reliance Insurance Company of
Illinois (Reliance National Risk Specialists, Inc.). Neither the Company nor PNC
or any of the Members will take any action which would have the effect of
limiting the coverage available under such policy to the directors or officers
or former directors or former officers of the Company or rendering such coverage
unavailable to such persons, each of whom is an intended beneficiary of this
Section 5.9.
Section 5.10. TRANSFER TAXES. All transfer, documentary, sales, use,
registration, value-added and other similar taxes and related fees (including
any penalties, interest an additions to tax) (collectively, "Transfer Taxes")
incurred by any party hereto in connection with this Supplement and the
transactions contemplated hereby shall be paid by the Company. The Company and
the Members shall cooperate in timely making all filings, returns, reports and
forms as may be required to comply with the provisions of such Transfer Tax
laws.
Section 5.11. COMPANY STOCK OPTIONS. Notwithstanding any provision of the
Exchange Agreement and this Supplement to the contrary, PNC and the Members
understand and agree that the Board of Directors of the Company has resolved to
accelerate the vesting of all of the stock options currently outstanding under
the Company's 1998 Stock Option Plan, such that all such options shall
immediately vest and become exercisable three business days following the
Closing.
Section 5.12. CERTAIN TRANSACTIONS. Prior to the Closing, PNC shall not
sell or issue any MI's or other ownership interest in PNC or any option, warrant
or other right to purchase or acquire any MI's or other ownership interest in
PNC, or any securities convertible into or exchangeable for MI's, unless
(a) PNC provides at least three days prior written notice to the Company and
(b) the recipient of such MI's or other ownership interest, or option, warrant,
or other right, enters into an appropriate amendment or supplement to the
Exchange Agreement and this Supplement by which it (i) agrees to be a party to
the Exchange Agreement and this Supplement, (ii) makes the same representations
and warranties to the Company as are made by the Members under the Exchange
Agreement and this Supplement, (iii) agrees to sell and assign to the Company at
the Closing in exchange for its pro rata share of the Exchange Shares as
provided in Section 1.01(a) of the Exchange Agreement, as amended by this
Supplement, any and all MI's it may own or have the right to acquire. The notice
required by this Section shall not apply to the issuance of any MI's pursuant to
any currently outstanding option or other commitment described in
Schedule 3.1(b) attached hereto. Not later than three days prior to the Closing,
PNC and the Members shall update Schedule 3.1(b) as of the Closing and deliver
the updated Schedule 3.1(b) to the Company, which updated Schedule shall be true
and complete as of the date of the Closing.
Section 5.13. NO DIVIDENDS, DISTRIBUTIONS OR SPECIAL PAYMENTS. Prior to
the Closing, neither the Company nor PNC will (a) declare or pay any dividends
or make other distributions with respect to its
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Common Stock or MI's or (b) pay or become obligated to pay in the future any
bonuses, consulting fees or other compensation outside the recurring, ordinary
course of business to or for the benefit of any shareholder, Member, director,
governor, management person or other, unless such compensation is pursuant to an
agreement disclosed in the Proxy Statement.
Section 5.14. QUARTERLY FINANCIAL INFORMATION. Prior to the Closing, the
Company and PNC shall deliver to the other copies of quarterly unaudited
consolidated financial statements as of and for the three months ended
March 31, 2000 and such other financial information as the other reasonably
requests. Such unaudited quarterly financial statements will be prepared from
the respective books of the Company and PNC, will be in compliance with U. S.
generally accepted accounting principles consistently applied and will contain
and reflect all adjustments and disclosures necessary for a fair presentation of
financial condition and results of operation.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
EXCHANGE. The respective obligations of each party to effect the Exchange shall
be subject to the fulfillment at or prior to the Closing of the conditions
contained in Article IV of the Exchange Agreement and the following additional
conditions, each of which may be waived only with the consent in writing of each
party not obligated to satisfy the condition:
(a) The Exchange Agreement and this Supplement and the Exchange shall
have been duly approved by the requisite vote of stockholders of the Company
in accordance with applicable law and the Certificate of Incorporation and
Bylaws of the Company.
(b) The Exchange Shares shall have been authorized for listing on the
Nasdaq National Market upon official notice of issuance.
(c) The waiting period applicable to the consummation of the Exchange
under the HSR Act shall have expired or been terminated. All authorizations,
consents, orders, declarations or approvals of, or filings with, any
Governmental Entity, which the failure to obtain, make or occur would have
the effect of making the Exchange or any of the transactions contemplated
hereby illegal or would have a material adverse effect on either of the
Company or PNC (assuming the Exchange had taken place), shall have been
obtained or shall have been made.
(d) There shall not be instituted or pending any suit, action or
proceeding by a Governmental Entity or any other person as a result of this
Supplement or the Exchange Agreement or any of the transactions contemplated
herein or therein which would have a material adverse effect on either the
Company or PNC (assuming for purposes of this paragraph (d) that the
Exchange shall have occurred) or which seeks to prevent or restrict the
consummation of the Exchange or seeks monetary damages in connection
therewith.
(e) No court or other Governmental Entity having jurisdiction over PNC
or the Company, or any of their respective subsidiaries, shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of
making this Supplement, the Exchange Agreement, the Exchange or any of the
transactions contemplated hereby or thereby illegal.
(f) Sections 2.11 and 3.11 of the Exchange Agreement are deleted in
their entirety and the following new Sections 2.11 and 3.11 substituted
therefor:
2.11 [3.11] NO ADVERSE CHANGE. There shall have been no material adverse
change in the assets, as a whole, or the business, prospects, financial
condition or results of operations of PNC and the PNC Subsidiaries taken as a
whole since December 31, 1999.
B-9
Section 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE MEMBERS TO EFFECT
THE EXCHANGE. In addition to the conditions contained in Section 6.01 of the
Exchange Agreement, the obligation of the Members to effect the Exchange shall
be subject to the fulfillment at or prior to the Closing of the following
additional conditions, each of which may be waived by the Members in writing:
(a) The Company shall have performed in all material respects each of
its agreements contained in the Exchange Agreement and this Supplement
required to be performed on or prior to the date of Closing, each of the
representations and warranties of the Company contained in the Exchange
Agreement and this Supplement shall be true and correct in all material
respects on and as of the date of Closing as if made on and as of such date
in each case except as contemplated or permitted by the Exchange Agreement
or this Supplement, and the Members shall have received a certificate signed
on behalf of the Company by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(b) The Company's Certificate of Incorporation shall be amended to adopt
the changes to the Company's capital structure contemplated in Section 5.3
of this Supplement.
(c) Xxxx & Xxxxx shall have delivered to the Members its opinion, in
form and content satisfactory to PNC, to the effects set forth in Exhibit 1
to this Supplement.
Section 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT
THE EXCHANGE. The obligations of the Company to effect the Exchange shall be
subject to the fulfillment at or prior to the date of Closing of the conditions
contained in Section 6.02 of the Exchange Agreement and the following additional
conditions, each of which may be waived by the Company in writing:
(a) PNC and the Members shall have performed in all material respects
each of their agreements contained in the Exchange Agreement and this
Supplement required to be performed by them on or prior to the date of
Closing, each of the representations and warranties of PNC and the Members
contained in the Exchange Agreement and this Supplement shall be true and
correct in all material respects on and as of the date of Closing as if made
on and as of such date in each case except as contemplated or permitted by
the Exchange Agreement or this Supplement, and the Company shall have
received a certificate signed on behalf of PNC by its President and Chief
Executive Officer and its Vice President of Finance and Operations to such
effect.
(b) Any and all securities convertible into or exchangeable for MI's,
and any and all other contracts, rights, options, warrants and other rights
to purchase or otherwise acquire any MI's or securities convertible into or
exchangeable therefor (including, without limitation, those set forth on
Schedule 3.1(b)) shall have been exercised in full or shall have been
terminated without any liability on the part of PNC.
(c) All necessary third-party consents, waivers, approvals and
authorizations set forth hereto shall have been obtained.
(d) Xxxxxx and Xxxxxx, P.A. shall have delivered to the Company its
opinion, in form and content satisfactory to the Company, to the effects set
forth in Exhibit 2 to this Supplement, and the Company shall have received
such opinions of counsel to the Members as it may reasonably request with
respect to the due authorization, execution and delivery of the Exchange
Agreement and this Supplement and the enforceability thereof and hereof
against the Members.
(e) The Board of Directors of the Company shall have received, as of the
date of the Proxy Statement referred to in Section 5.3 of this Supplement
and as of the Closing, the advice and written opinion, in form and content
satisfactory to it, of Xxxx Capital Partners, its fairness adviser, to the
effect that the Exchange is fair to the stockholders of the Company from a
financial point of view.
(f) All outstanding indebtedness of the Members to PNC shall have been
repaid in full.
B-10
ARTICLE VII
TERMINATION
Section 7.1. TERMINATION. The Exchange Agreement and this Supplement may
be terminated at any time prior to the Closing, whether before or after any
approval of the matters presented in connection with the Exchange by the
stockholders of the Company:
(a) by mutual written consent of the Company, PNC and all the Members;
and
(b) by the Company on the one hand, or PNC or the Members holding, in
aggregate, a majority of the MI's on the other hand, if the Exchange has not
been effected on or prior to the close of business on September 30, 2000
(the "Termination Date"); provided, however, that the right to terminate
this Supplement pursuant to this Section 7.1(b) shall not be available to
any party whose failure to fulfill any of its obligations contained in the
Exchange Agreement and this Supplement has been the cause of, or resulted
in, the failure of the Exchange to have occurred on or prior to the
aforesaid date.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. ENTIRE AGREEMENT. The Exchange Agreement is hereby
incorporated herein by this reference. In the event of any conflict or
inconsistency between the terms of the Exchange Agreement and this Supplement,
the terms of this Supplement shall control. Except as expressly set forth in
this Supplement, the Exchange Agreement shall remain in full force and effect.
Section 8.2. COUNSEL TO PNC. Xxxxxx and Xxxxxx, P.A. has served as counsel
to PNC in connection with this Supplement. Xxxxxx and Xxxxxx, P.A. does not
represent or advise, or undertake to represent or advise, any Member of PNC in
connection with the Exchange Agreement or this Supplement or the transactions
contemplated thereby or hereby.
Section 8.3. CONTROLLING LAW. Section 7.06 of the Exchange Agreement is
deleted. The parties hereby agree that the Exchange Agreement and this
Supplement and all questions relating to their validity, interpretation,
performance and enforcement, shall be governed by and construed in accordance
with the laws of the State of Delaware, notwithstanding any Delaware or other
conflict-of-law provisions to the contrary. Any legal action or other legal
proceeding relating to this Supplement or the enforcement of any provision of
the Exchange Agreement and this Supplement may be brought or otherwise commenced
in any state or federal court located either in California or Minnesota. Each
party to the Exchange Agreement and this Supplement (i) expressly and
irrevocably consents and submits to the nonexclusive jurisdiction of each state
and federal court located in either California or Minnesota (and each appellate
court located in either such state in connection with any such legal
proceeding); (ii) agrees that each state and federal court located in either
such state shall be deemed to be a convenient forum; and (iii) agrees not to
assert (by way of motion, as a defense or otherwise) in any such legal
proceeding commenced in any state or federal court located in either such state,
any claim that such party is not subject personally to the jurisdiction of such
court, that such legal proceeding has been brought in an inconvenient forum,
that the venue of such proceeding is improper or that this Supplement or the
subject matter of the Exchange Agreement and this Supplement may not be enforced
in or by such court.
B-11
IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Supplement to be executed by their respective duly authorized officers all as of
the date first written above.
PNC: COMPANY:
XXXXXXXXXX.XXX LLC CREATIVE MASTER INTERNATIONAL, INC.
By: /s/ XXXX XXXX By: /s/ XXXX XX XXXX XXXX
------------------------------------- -------------------------------------
Xxxx Xxxx Xxxx Xx Xxxx Xxxx,
PRESIDENT AND CHIEF EXECUTIVE OFFICER CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MEMBERS:
/s/ XXXX XXXX /s/ WAN XXXX XXX*
------------------------------------------- -------------------------------------------
Xxxx Xxxx Wan Xxxx Xxx
/s/ XXX XX* /s/ XXXXX XXXXXX*
------------------------------------------- -------------------------------------------
Xxx Xx Xxxxx Xxxxxx
/s/ XXXX XXXXXXX* /s/ XXXX XXXXX-XXX XXXX*
------------------------------------------- -------------------------------------------
Xxxx Xxxxxxx Xxxx Xxxxx-Xxx Xxxx
Pure Technology International Limited /s/ XXXXX XXX*
-------------------------------------------
Xxxxx Xxx
By: *
-------------------------------------
Name: -------------------------------
Title:
--------------------------------
/s/ OEI HONG XXXXX*
-------------------------------------------
Oei Hong Xxxxx
Fortune E-Commerce Limited B2B Limited
By: * By: *
------------------------------------- -------------------------------------
Name: ------------------------------- Name: -------------------------------
Title: Title:
-------------------------------- --------------------------------
B-12
Sino Mart Management Ltd. Eastern Road Group Limited
By: * By: *
------------------------------------- -------------------------------------
Name: ------------------------------- Name: -------------------------------
Title: Title:
-------------------------------- --------------------------------
Green Plant, Inc. Asia Pulp & Paper
By: * By: *
------------------------------------- -------------------------------------
Name: ------------------------------- Name: -------------------------------
Title: Title:
-------------------------------- --------------------------------
Alpha One Limited /s/ XXXXX XXX*
-------------------------------------------
Xxxxx Xxx
By: *
-------------------------------------
Name: -------------------------------
Title:
--------------------------------
/s/ XXXXXXXXX MA*
-------------------------------------------
Xxxxxxxxx Ma
*By Xxxx X. Xxxx, Attorney-in-Fact.
B-13
SCHEDULE 3.1(a)
PNC JOINT VENTURE OWNERSHIP
PNC China Holding I, has been renamed "XxxxxxxXxx.xxx China Limited" ("PNC
China") and is a joint venture funded/owned 51% by PNC and 49% by APP China
Group, Ltd., a company established under the laws of Bermuda ("APP China"). PNC
China was formed to provide electronic commerce and website development services
and information technology services initially to APP China and thereafter to
third parties located in the People's Republic of China ("PRC").
PNC II Joint Venture ("PNC II") is a joint venture yet to be formed which
the parties anticipate will be funded/owned 20% by PNC and 80% by APP China. PNC
II will be formed to act as a holding company for another foreign company which
will own two wholly-owned subsidiaries in Shanghai China, "PNC China B2B" and
"PNC China Logistics". PNC China B2B will initially develop and operate an
electronic commerce website for use by APP China, its suppliers and customers,
and subsequently offer these services to third parties in the PRC. PNC China
Logistics would provide back-end electronic commerce services to APP China
initially and third parties in PRC subsequently.
B-14
SCHEDULE 3.1(B)
A. OUTSTANDING MEMBERSHIP INTERESTS IN PNC:
MEMBERSHIP INTERESTS
-------------------------
NAME AND ADDRESS OF MEMBER NUMBER PERCENTAGE
-------------------------- --------- ----------
Xxxx X. Xxxx ............................................... 800,000 8.62%
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Sino Mart Management Ltd. .................................. 800,000 8.62%
Xxxxx Xxxxxxxx
00 Xx Xxxxxx Xxxxxx
Wickhams Cay I
Road Town, Tortola, British Virgin Islands
Wan Sang Xxx, Xxxxxxx ...................................... 300,000 3.23%
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Xx Xxx, Xxxxx .............................................. 100,000 1.08%
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Green Plant, Inc. .......................................... 730,000 7.86%
c/o Caribbean Corporate Services Limited
Third Floor, Xxxx Xxxxx Building
Wickams Cay I
X.X. Xxx 000
Xxxx Xxxx, Xxxxxxx, Xxxxxxx Xxxxxx Xxxxxxx
Alpha One Limited .......................................... 500,000 5.38%
00xx Xxxxx
Xxxx Xxxxxxxx House
00 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx
Pure Technology International Ltd. ......................... 300,000 3.23%
X.X. Xxx 000
Offshore Incorporation Centre
Road Town, Tortola, British Virgin Islands
Fortune E-Commerce Ltd. .................................... 1,320,000 14.22%
Xxxx 0000-0
15/F Tower A, Regent Centre
63 Wo Yi Hop Road
Xxxx Xxxxx, N.T., Hong Kong
B2B Ltd. ................................................... 3,000,000 32.31%
52/F Bank of Xxxxx Xxxxx
0 Xxxxxx Xxxx
Xxxx Xxxx
X-00
MEMBERSHIP INTERESTS
-------------------------
NAME AND ADDRESS OF MEMBER NUMBER PERCENTAGE
-------------------------- --------- ----------
Oei Hong Xxxxx ............................................. 1,000,000 10.77%
x/x 00/X Xxxx xx Xxxxx Tower
0 Xxxxxx Xxxx
Xxxx Xxxx
Xxxxxxx Xxxx Group Limited ................................. 285,714 3.08%
000 Xxxx xx Xxxxxxx Tower
00 Xxxxxxxx Xxxx
Xxxx Xxxx
Xxxxx Xxxxxx ............................................... 50,000 0.54%
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Xxxx Xxxxxxx ............................................... 100,000 1.08%
Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
--------- ------
9,285,714 100.0%
B. OPTIONS, RIGHTS AND OTHER COMMITMENTS TO ISSUE MEMBERSHIP INTERESTS IN PNC:
NUMBER OF VESTING
NAME OF RIGHTS HOLDER TYPE MIS EXERCISE PRICE SCHEDULE
--------------------- -------- --------- -------------- ------------
Xxxx X. Xxxx.................................... options 150,000 $2.50 fully vested
Xxxxxxx Xxx..................................... options 150,000 $2.50 fully vested
Xxxxx Xxx....................................... options 50,000 $2.50 fully vested
Xxxx Xxxx....................................... options 100,000 $2.50 fully vested
B2B Ltd......................................... options 1,000,000 $2.50 fully vested
Oei Hong Xxxxx.................................. options 150,000 $2.50 fully vested
APP China Group Limited......................... options 1,000,000 (1) fully vested
Xxxxx Xxx....................................... options 100,000 $2.50 fully vested
Li Xxxx Xxx..................................... options 100,000 $2.50 fully vested
Xxxxx Xxx....................................... options 100,000 $2.50 fully vested
Xxxxxxxxx Ma.................................... options 100,000 $2.50 fully vested
------------------------
(1) APP China Group Limited has the right to exercise its options at an exercise
price equal to $5.00 per unit payable in cash and stock of APP. Total cash
to be paid is $2.5 million.
B-16
SCHEDULE 3.2(b)
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
OF XXXXXXXXXX.XXX LLC
B-17
SCHEDULE 3.2(c)
SCHEDULE OF CONTRACTS OR AGREEMENTS IN EXCESS OF $100,000
DESCRIPTION REMAINING COMMITMENT
------------------------------------------------------------ --------------------
PNC subsidiary is party to a noncancelable office lease for
Hong Kong office space through 2001....................... $183,000
PNC has a funding commitment for APP China Joint Venture
pursuant to that certain Subscription Agreement dated as
of 3/31/00 between APP China Group Limited and PNC.
Funding required subsequent to 4/30/00.................... $510,000
PNC has a funding commitment for North America Trade Center
in a quarterly amount of $100,000 beginning 7/1/00........ $400,000
B-18
EXHIBIT 1
[FORM OF XXXX & XXXXX OPINION]
Based upon the foregoing, but subject to the qualifications and limitations
which follow, we are of the opinion that:
(a) The Company is validly existing and in good standing under the laws of
the State of Delaware and has the requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as presently
conducted.
(b) The Company has the requisite corporate power and authority to execute
and deliver the [Acquisition Documents] and to carry out the transactions
contemplated thereby, and the execution, delivery and performance of the
[Acquisition Documents] by the Company have been duly authorized by all
requisite corporate action of the Company.
(c) Each of the [Acquisition Documents] to which the Company is a party has
been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
(d) The capitalization of the Company is as described in the Proxy
Statement and, to such counsel's knowledge, there are no outstanding options,
warrants or other rights to subscribe for or purchase any shares of capital
stock of the Company other than as described in the Proxy Statement.
(e) All of the outstanding shares of common stock of the Company have been
duly authorized and are validly issued, fully-paid and non-assessable.
(f) The sale, assignment, and transfer to the Members of the Exchange
Shares pursuant to the [Acquisition Documents] does not (i) conflict with or
violate the Certificate of Incorporation or By-laws of the Company or any
agreement known to such counsel to which the Company is a party or by which it
or its assets or the Exchange Shares are bound or affected, or (ii) give rise to
any preemptive or similar right on the part of any person or entity.
* * *
The foregoing opinions will be subject to usual and customary
qualifications.
B-19
EXHIBIT 2
[FORM OF XXXXXX AND XXXXXX OPINION]
Based upon the foregoing, but subject to the qualifications and limitations
which follow, we are of the opinion that:
(a) PNC and XxxxxxxXxx.xxx, Ltd. is validly existing under the laws of its
jurisdiction of organization and has the requisite company power and authority
to own, lease and operate its properties and to carry on its business as
presently conducted.
(b) *PNC has the requisite corporate power and authority to execute and
deliver the [Acquisition Documents] and to carry out the transactions
contemplated thereby, and the execution, delivery and performance of the
[Acquisition Documents] by PNC have been duly authorized by all requisite
company action of PNC.
(c) *Each of the [Acquisition Documents] to which PNC is a party has been
duly executed and delivered by PNC and constitutes the legal, valid and binding
obligation of PNC, enforceable against PNC in accordance with its terms.
(d) The [MI's] constitute all of the outstanding membership interests in
PNC and, to such counsel's knowledge, there are no outstanding options, warrants
or other rights to subscribe for or purchase any membership interest in PNC
other than the [PNC Employee Options].
(e) The [MI's] have been duly authorized and are validly issued, fully-paid
and non-assessable.
(f) Except for such conflicts, violations and rights as have been validly
waived, the sale, assignment, and transfer to the Company of the [MI's] pursuant
to the [Acquisition Documents] does not (i) conflict with or violate the
Articles of Organization or Member Control Agreement or other charter document
of PNC or any agreement known to such counsel to which PNC is a party or by
which it or its assets or MI's are bound or affected, or (ii) give rise to any
preemptive or similar right on the part of any person or entity.
* * *
The foregoing opinions will be subject to usual and customary
qualifications.
------------------------
* Xxxxxx and Xxxxxx need not express the opinions under these paragraphs with
respect to the Exchange Agreement or the Supplement to Exchange Agreement.
B-20
