5 EXHIBIT 2.1
SHARE EXCHANGE AGREEMENT
AMONG
THE ENCHANTED VILLAGE, INC.
AS BUYER
XXXXXXX REVERSE MERGER FUND, LLC
AS PRINCIPAL SHAREHOLDER
AND
FAIRFORD HOLDINGS LIMITED
WITH RESPECT TO
RUILI GROUP RUIAN AUTO PARTS CO., LTD.
AND
THE SELLING SHAREHOLDERS
April 2, 2004
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TABLE OF CONTENTS
SHARE EXCHANGE AGREEMENT ..................................................... 1
W I T N E S S E T H: ......................................................... 1
ARTICLE I - EXCHANGE OF SHARES ............................................... 2
1.1 Incorporation of Recitals .............................................. 2
1.2 Exchange of Shares ..................................................... 2
1.3 Deposit of Funds ....................................................... 2
1.4 Closing. ............................................................... 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................... 2
2.1 Due Organization and Qualification; Subsidiaries; Due Authorization .... 3
2.2 No Conflicts or Defaults ............................................... 3
2.3 Capitalization ......................................................... 3
2.4 Financial Statements ................................................... 4
2.5 Further Financial Matters .............................................. 4
2.6 Taxes .................................................................. 4
2.7 Indebtedness; Contracts; No Defaults ................................... 5
2.8 Real Property .......................................................... 5
2.9 Compliance With Law .................................................... 5
2.10 Permits and Licenses ................................................... 5
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2.11 Litigation ............................................................. 6
2.12 Insurance .............................................................. 6
2.13 Certificate of Incorporation and By-laws; Minute Books ................. 6
2.14 Employee Benefit Plans ................................................. 6
2.15 Patents; Trademarks and Intellectual Property Rights ................... 7
2.16 Brokers ................................................................ 7
2.17 Affiliate Transactions ................................................. 7
2.18 Trading ................................................................ 7
2.19 Compliance ............................................................. 7
2.20 Filings ................................................................ 7
2.21 Consents ............................................................... 7
2.22 Schedules .............................................................. 7
2.23 Environmental Matters .................................................. 8
2.24 Representations and Warranties ......................................... 8
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLERS .................. 8
3.1 Due Organization and Qualification; Subsidiaries; Due Authorization .... 8
3.2 No Conflicts or Defaults ............................................... 9
3.3 Capitalization ......................................................... 9
3.4 Financial Statements ...................................................10
3.5 Further Financial Matters ..............................................10
3.6 Taxes ..................................................................10
3.7 Indebtedness; Contracts; No Defaults ...................................11
3.8 Real Property ..........................................................11
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3.9 Compliance with Law ................................................... 11
3.10 No Adverse Changes .................................................... 12
3.11 Litigation ............................................................ 12
3.12 Patents; Trademarks and Intellectual Property Rights .................. 12
3.13 Brokers ............................................................... 12
3.14 Purchase for Investment ............................................... 13
3.15 Investment Experience ................................................. 13
3.16 Information ........................................................... 13
3.17 Restricted Securities ................................................. 13
3.18 Permits and Licenses .................................................. 13
3.19 Assets Necessary to Business .......................................... 14
3.20 Governmental Permits .................................................. 14
3.21 Schedules ............................................................. 14
3.22 Representations and Warranties ........................................ 14
3.23 Insurance ............................................................. 14
ARTICLE IV - INDEMNIFICATION ................................................ 14
4.1 Indemnity of the Company and the Shareholder .......................... 14
4.2 Indemnity of the Sellers .............................................. 15
4.3 Indemnification Procedure ............................................. 15
ARTICLE V - DELIVERIES ...................................................... 15
5.1 Items to be delivered to the Sellers prior to or at the Closing by
the Company ......................................................... 15
5.2 Items to be delivered to the Company prior to or at Closing by
the Sellers ......................................................... 16
ARTICLE VI - CONDITIONS PRECEDENT ........................................... 16
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6.1 Conditions to Obligations of the Sellers .............................. 16
6.2 Conditions to Obligations of the Company .............................. 17
6.3 Conditions to Each Party's Obligations ................................ 18
6.4 Conduct of Business of the Company .................................... 18
6.5 Conduct of Business of the Ruili ...................................... 20
ARTICLE VII - TERMINATION AND RESCISSIION ................................... 21
7.1 Termination ........................................................... 21
7.2 Rescission ............................................................ 21
7.3 Event of Default ...................................................... 21
7.4 Procedure ............................................................. 21
ARTICLE VIII - MISCELLANEOUS ................................................ 22
8.1 Survival of Representations, Warranties and Agreements ................ 22
8.2 Access to Books and Records ........................................... 22
8.3 Further Assurances .................................................... 22
8.4 Notice ................................................................ 22
8.5 Entire Agreement ...................................................... 23
8.6 Successors and Assigns ................................................ 23
8.7 Governing Law ......................................................... 23
8.8 Counterparts .......................................................... 23
8.9 Construction .......................................................... 24
8.10 Severability .......................................................... 24
8.11 Arbitration ........................................................... 24
8.12 Antidilution .......................................................... 24
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8.13 Reporting Requirements .................................................24
8.14 Officers and Directors of the Company ..................................24
8.15 Confidentiality; Public Disclosure .....................................25
8.16 Notification of Certain Matters ........................................25
8.17 Currency ...............................................................25
8.18 Rules of Construction ..................................................25
8.19 Delivery of Schedules ..................................................25
DISCLOSURE ATTACHMENTS
SCHEDULE I - SELLERS' IDENTIFICATION
ITEM 2.3 - REGISTRATION RIGHTS
ITEM 2.4 - FINANCIAL STATEMENTS (Company)
ITEM 2.16 - BROKERS
ITEM 3.1 - SUBSIDIARIES
ITEM 3.4 - FINANCIAL STATEMENTS (Sellers')
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ITEM 3.5 - MATERIAL LIABILITIES
ITEM 3.7 - MATERIAL AGREEMENTS, ETC.
ITEM 3.11 - LITIGATION, ETC.
ITEM 3.23 - INSURANCE
ITEM 8.14 - DIRECTORS
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT, dated as of the 2nd day of April, 2004 (the
"Agreement"), is by and among The Enchanted Village, Inc., a Delaware
corporation (the "Company") and Xxxxxxx Reverse Merger Fund, LLC (the
"Shareholder") and ,Xxxxxxxx Xxxxx Xxxxxxxx Xxxxx and Xxxxxxx Xxx (collectively
the "Sellers") and Fairford Holdings Limited, a Hong Kong limited liability
corporation. Each of the Company, the Shareholder and the Sellers is referred to
herein as a "Party," and they may be referred to collectively as "Parties."
W I T N E S S E T H:
WHEREAS, the Sellers presently own all of the capital stock (the "Fairford
Shares") of Fairford, which in turn owns 90% of the capital stock of Ruili Group
Ruian Auto Parts Co., Ltd., a sino-foreign equity joint venture established
pursuant to the Laws of the People's Republic of China on Chinese-Foreign Equity
Joint Venture ("Ruili"); and,
WHEREAS, Ruili received a License of Joint Venture from the State
Administration of Industry and Commerce in Zhejiang Province on May 4, 2003 as
amended on May 17, 2003; and
WHEREAS, the Shareholder is a principal shareholder of the Company and
will benefit by the transaction contemplated herein; and
WHEREAS, the Company has authorized capital stock consisting of 50,000,000
shares of common stock ("Company Common Stock"), $0.002 par value, of which
4,982,200 shares are issued and outstanding as of the date of this Agreement and
1,000,000 shares of preferred stock ("Company Preferred Stock"), $1.00 par
value, of which no shares are issued and outstanding as of the date of this
Agreement; and
WHEREAS, the Company desires to acquire from the Sellers, and the Sellers
desire to sell to the Company, the Fairford Shares in exchange (the "Exchange")
for the issuance by the Company of an aggregate of 1,000,000 shares of the
Company's Preferred Stock, which is convertible into an aggregate of 194,305,800
shares of Company Common Stock, to be issued to the Sellers and/or their
designees, as set forth in Schedule 1, on the terms and conditions set forth
below; and
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WHEREAS The Company will have 1,000,000 shares of Company Preferred Stock
issued and outstanding as of the consummation of the Exchange which will be
convertible, at a conversion ratio of 194.3058 shares of Company Common Stock
for each share of Company Preferred Stock, into an aggregate of approximately
194,305,800 shares of Company Common Stock, on a fully diluted basis which will
constitute approximately 97.5% of the Company's issued and outstanding common
stock after giving effect to the Exchange; and
WHEREAS, concurrently with the Exchange, the Sellers will make a cash
payment in the amount of Three Hundred Twenty Thousand Dollars ($320,000.00 USD)
to Xxxxxxx Securities, LLC ("Xxxxxxx Securities") in consideration of financial
services rendered to the Company; and
WHEREAS, the Parties agree that this Agreement constitutes the sole and
entire agreement by and among the Parties with respect to the Exchange and the
matters contained herein and that this Agreement and the terms and conditions
hereof supercede and take precedence over any and all prior agreements by and
among the Parties whether in English or in Chinese;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and agreements set forth herein, the Parties hereto
agree as follows:
ARTICLE I - EXCHANGE OF SHARES
1.1 Incorporation of Recitals: The provisions and recitals set forth above
are hereby referred to and incorporated herein and made a part of this Agreement
by reference.
1.2 Exchange of Shares. Subject to the terms and conditions of this
Agreement and the Escrow Agreement, on the Closing Date (as hereinafter
defined):
(a) the Company shall issue (and deliver to the Escrow Agent, as
defined in the Escrow Agreement) to each of the Sellers and/or their designees,
and to the Financial Consultants respectively, an aggregate of 1,000,000 newly
issued shares of Company Preferred Stock in the names and denominations as set
forth on Schedule 1 hereto, and
(b) each Seller agrees to deliver to the Escrow Agent, (i) original
stock certificates evidencing the number of issued shares of Fairford as set
forth opposite such Seller's name on Schedule 1 hereto along with appropriately
executed transfer documents in favor of the Company, in order to effectively
vest in the Company all right, title and interest in and to the Fairford Shares.
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1.3 Deposit of Funds.
(a) On the Closing Date, the Sellers shall transfer by wire transfer
to Xxxxxxx Securities, funds in the amount of Three Hundred Twenty Thousand
Dollars ($320,000.00 USD) in consideration of financial services rendered by it
to the Company.
1.4 Closing. The closing of the Exchange contemplated hereby (the
"Closing") shall take place as practicable after the date hereof (the "Closing
Date") upon the satisfaction of the terms set forth in Article V below. All
parties agree that all representations, covenants and warranties set forth
herein shall be true and correct as of the Closing Date and the same shall be as
condition to Closing.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Shareholder jointly and severally represent and
warrant to the Sellers and to Fairford that now and/or as of the Closing:
2.1 Due Organization and Qualification; Subsidiaries; Due Authorization.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of formation, with full
corporate power and authority to own, lease and operate its respective business
and properties and to carry on its respective business in the places and in the
manner as presently conducted. The Company is in good standing as a foreign
corporation in each jurisdiction in which the properties owned, leased or
operated, or the business conducted, by it requires such qualification except
for any failure, which when taken together with all other failures, is not
likely to have a material adverse effect on the business of the Company, taken
as a whole.
(b) The Company does not have any subsidiaries and does not own,
directly or indirectly, any capital stock, equity or interest in any
corporation, firm, partnership, joint venture or other entity.
(c) The Company has all requisite corporate power and authority to
execute and deliver this Agreement, and to consummate the transactions
contemplated hereby and thereby. The Company has taken all corporate action
necessary for the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, and this Agreement constitutes the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its respective terms, except as may be affected by bankruptcy,
insolvency, moratoria or other similar laws affecting the enforcement of
creditors' rights generally and subject to the qualification that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefore may be brought. This Agreement, the
Actions, and the transactions contemplated hereby have been unanimously approved
by the Board of Directors of the Company and by the holders of a majority of the
outstanding shares of Common Stock of the Company.
2.2 No Conflicts or Defaults. The execution and delivery of this Agreement
by the Company and the consummation of the transactions contemplated hereby do
not and shall not (a) contravene the Certificate of Incorporation or By-laws of
the Company or (b) with or without the giving of notice or the passage of time
(i) violate, conflict with, or result in a breach of, or a default or loss of
rights under, any material covenant, agreement, mortgage, indenture, lease,
instrument, permit or license to which the Company is a party or by which the
Company is bound, or any judgment, order or decree, or any law, rule or
regulation to which the Company is subject, (ii) result in the creation of, or
give any party the right to create, any lien, charge, encumbrance or any other
right or adverse interest ("Liens") upon any of the assets of the Company, (iii)
terminate or give any party the right to terminate, amend, abandon or refuse to
perform, any material agreement, arrangement or commitment to which the Company
is a party or by which the Company's assets are bound, or (iv) accelerate or
modify, or give any party the right to accelerate or modify, the time within
which, or the terms under which, the Company is to perform any duties or
obligations or receive any rights or benefits under any material agreement,
arrangement or commitment to which it is a party.
2.3 Capitalization. The authorized capital stock of the Company,
immediately prior to giving effect to the Exchange is 1,000,000 shares of
preferred stock, none of which is issued and outstanding, and 50,000,000 shares
of Common Stock, par value $0.002 per share, of which 4,982,200 shares (the
"Company Shares") are as of the date hereof, issued and outstanding. All of the
Company Shares and those shares of Company Preferred Stock when issued in
accordance
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with the terms hereof, will be, duly authorized, validly issued, fully paid and
nonassessable, and have not been or, with respect to the Company Shares, and
those shares of Company Preferred Stock when issued in accordance with the terms
hereof will not be issued in violation of any preemptive right of stockholders.
The Company Shares are not, and those shares of Company Preferred Stock when
issued in accordance with the terms hereof will not be, subject to any
preemptive or subscription right. There is no outstanding voting trust agreement
or other contract, agreement, arrangement, option, warrant, call, commitment or
other right of any character obligating or entitling the Company to issue, sell,
redeem or repurchase any of its securities, and there is no outstanding security
of any kind convertible into or exchangeable for Common Stock, nor has the
Company, or any of its agents orally agreed to issue any of the foregoing. The
Board of Directors of the Company has unanimously approved a resolution
authorizing the Actions. There are no declared or accrued unpaid dividends with
respect to any shares of the Company's Common Stock. The Company has granted
registration rights to certain of its shareholders as more fully set forth in
the Minutes of the Company's Board of Directors and a Registration Rights
Agreement executed in accordance with the Board of Directors resolutions as set
forth in Item 2.3 of the Disclosure Schedule The Company has never adopted or
maintained any stock option plans or other plan providing for equity
compensation of any person. There are no outstanding shares of Company Common
Stock that are subject to vesting. The Company has no other capital stock
authorized, issued or outstanding.
2.4 Financial Statements.
(a) Item 2.4 of the Disclosure Schedule to this Agreement includes
copies the balance sheets of the Company at January 31, 2003 and 2002, and the
related statements of operations and stockholders' cash flows for the fiscal
years then ended, including the notes thereto, as audited by Xxxx & Associates
LLP and Went & Ender CPA, P.C. independent accountants. All the Company's
existing financial statements, together with the notes thereto, have been
prepared in accordance with U.S. generally accepted accounting principles
applied on a basis consistent throughout all periods presented. These Company
existing financial statements present fairly the financial position of the
Company as of the dates and for the periods indicated. The books of account and
other financial records of the Company have been maintained in accordance with
good business practices.
2.5 Further Financial Matters. The Company does not have any (a) assets of
any kind or (b) liabilities or obligations, whether secured or unsecured,
accrued, determined, absolute or contingent, asserted or unasserted or
otherwise, which are required to be reflected or reserved in a balance sheet or
the notes thereto under generally accepted accounting principles, and which are
not reflected in the Company Financial Statements.
2.6 Taxes. The Company has filed all United States federal, state, county,
local and foreign, national, provincial and local returns and reports which were
required to be filed on or prior to the Closing Date hereof in respect of all
income, withholding, franchise, payroll, excise, property, sales, use,
value-added or other taxes or levies, imposts, duties, license and registration
fees, charges, assessments or withholdings of any nature whatsoever (together,
"Taxes"), and has paid all Taxes (and any related penalties, fines and interest)
which have become due pursuant to such returns or reports or pursuant to any
assessment which has become payable, or, to the extent its liability for any
Taxes (and any related penalties, fines and interest) has not been fully
discharged, the same have been properly reflected as a liability on the books
and records of the Company and adequate reserves therefore have been
established. All such returns and reports
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filed on or prior to the date hereof have been properly prepared and are true,
correct (and to the extent such returns reflect judgments made by the Company,
as the case may be, such judgments were reasonable under the circumstances) and
complete in all material respects. The amount shown on the Company's most recent
balance sheet as provision for taxes is sufficient in all material respects to
pay all accrued and unpaid federal, state, local and foreign taxes for the
period then ended and all prior periods. No tax return or tax return liability
of the Company has been audited or, presently under audit. The Company has not
given or been requested to give waivers of any statute of limitations relating
to the payment of any Taxes (or any related penalties, fines and interest).
There are no claims pending or, to the knowledge of the Company, threatened,
against the Company for past due Taxes. All payments for withholding taxes,
unemployment insurance and other amounts required to be paid for periods prior
to the date hereof to any governmental authority in respect of employment
obligations of the Company, including, without limitation, amounts payable
pursuant to the Federal Insurance Contributions Act, have been paid or shall be
paid prior to the Closing and have been duly provided for on the books and
records of the Company and in the Financial Statements.
2.7 Indebtedness; Contracts; No Defaults.
(a) The Company has no material instruments, agreements, indentures,
mortgages, guarantees, notes, commitments, accommodations, letters of credit or
other arrangements or understandings, whether written or oral, to which the
Company is a party.
(b) Neither the Company, nor, to the Company's knowledge, any other
person or entity is in breach, or in default under any contract, agreement,
arrangement, commitment or plan to which the Company is a party, and no event or
action has occurred, is pending or is threatened, which, after the giving of
notice, passage of time or otherwise, would constitute or result in such a
breach or default by the Company or, to the knowledge of the Company, any other
person or entity. The Company has not received any notice of default under any
contract, agreement, arrangement, commitment or plan to which it is a party,
which default has not been cured to the satisfaction of, or duly waived by, the
party claiming such default on or before the date hereof.
2.8 Real Property. The Company does not own or lease any real property.
2.9 Compliance With Law.
(a) The Company is not conducting its respective business or affairs
in violation of any applicable federal, state or local law, ordinance, rule,
regulation, court or administrative order, decree or process, or any requirement
of insurance carriers. The Company has not received any notice of violation or
claimed violation of any such law, ordinance, rule, regulation, order, decree,
process or requirement.
(b) The Company is in compliance with all applicable federal, state,
local and foreign laws and regulations. There are no claims, notices, actions,
suits, hearings, investigations, inquiries or proceedings pending or, to the
knowledge of the Company, threatened against the Company, and there are no past
or present conditions that the Company has reason to believe are likely to give
rise to any material liability or other obligations of the Company under any
circumstances.
2.10 Permits and Licenses. The Company has all certificates of occupancy,
rights, permits, certificates, licenses, franchises, approvals and other
authorizations as are reasonably
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necessary to conduct its respective business and to own, lease, use, operate and
occupy its assets, at the places and in the manner now conducted and operated,
except those the absence of which would not materially adversely affect its
respective business. The Company has not received any written or oral notice or
claim pertaining to the failure to obtain any material permit, certificate,
license, approval or other authorization required by any federal, state or local
agency or other regulatory body, the failure of which to obtain would materially
and adversely affect its business.
2.11 Litigation.
(a) There is no claim, dispute, action, suit, inquiry, proceeding or
investigation pending or, to the knowledge of the Company, threatened, against
or affecting the business of the Company, or challenging the validity or
propriety of the transactions contemplated by this Agreement, at law or in
equity or admiralty or before any federal, state, local, foreign or other
governmental authority, board, agency, commission or instrumentality, nor has
any such claim, dispute, action, suit, proceeding or investigation been pending
or threatened, during the 12 month period preceding the date hereof;
(b) There is no outstanding judgment, order, writ, ruling,
injunction, stipulation or decree of any court, arbitrator or federal, state,
local, foreign or other governmental authority, board, agency, commission or
instrumentality, against or affecting the business of the Company; and
(c) The Company has not received any written or verbal inquiry from
any federal, state, local, foreign or other governmental authority, board,
agency, commission or instrumentality concerning the possible violation of any
law, rule or regulation or any matter disclosed in respect of its business.
2.12 Insurance. The Company does not currently maintain any form of
insurance.
2.13 Certificate of Incorporation and By-laws; Minute Books. The copies of
the Certificate of Incorporation and By-laws (or similar governing documents) of
the Company, and all amendments to each are true, correct and complete. The
minute books of the Company contain true and complete records of all meetings
and consents in lieu of meetings of their respective Board of Directors (and any
committees thereof), or similar governing bodies, since the time of their
respective organization. The stock books of the Company are true, correct and
complete.
2.14 Employee Benefit Plans. The Company does not maintain, nor has the
Company maintained in the past, any employee benefit plans ("as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any plans, programs, policies, practices, arrangements or
contracts (whether group or individual) providing for payments, benefits or
reimbursements to employees of the Company, former employees, their
beneficiaries and dependents under which such employees, former employees, their
beneficiaries and dependents are covered through an employment relationship with
the Company, any entity required to be aggregated in a controlled group or
affiliated service group with the Company for purposes of ERISA or the Internal
Revenue Code of 1986 (the "Code") (including, without limitation, under Section
414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA, at any relevant
time ("Benefit Plans").
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2.15 Patents; Trademarks and Intellectual Property Rights. The Company
does not own or possess any patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, Internet web site(s) or
proprietary rights of any nature. The business conducted by the Company has not
and will not cause the Company to infringe or violate any of the patents,
trademarks, service marks, trade names, copyrights, mask-works, licenses, trade
secrets, processes, data, know-how or other intellectual property rights of any
other Person.
2.16 Brokers. Except as set forth in Item 2.16 of the Disclosure Schedule,
all negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by the Company directly with the Sellers without
the intervention of any person on behalf of the Company in such a manner as to
give rise to any valid claim by any person against any Seller for a finder's
fee, brokerage commission or similar payment.
2.17 Affiliate Transactions. Neither the Company nor any officer, director
or employee of the Company (or any of the relatives or Affiliates of any of the
aforementioned Persons) is a party to any agreement, contract, commitment or
transaction with the Company or affecting the business of the Company, or has
any interest in any property, whether real, personal or mixed, or tangible or
intangible, used in or necessary to the Company which will subject the Company,
the Sellers and/or Fairford to any liability or obligation from and after the
Closing Date.
2.18 Trading. The Company Common Stock is currently listed for trading on
the OTC Bulletin Board (the "Bulletin Board"), and the Company has received no
notice that its Common Stock is subject to being delisted therefrom.
2.19 Compliance. The Company has complied with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Securities Act of 1933, as amended (the "Securities Act"), and is current in its
filings under the Exchange Act and the Securities Act.
2.20 Filings. To the knowledge of the Company, none of the filings made by
the Company under the Securities Act or the Exchange Act make any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in light of the circumstances under which they were
made, not misleading.
2.21 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") is
required by or with respect to the Company in connection with the execution and
delivery of this Agreement and any related agreements to which the Company is a
party or the consummation of the transactions contemplated hereby and thereby,
except for such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws.
2.22 Schedules. All lists or other statements, information or documents
set forth in, attached to any Schedule provided pursuant to this Agreement or
delivered hereunder shall be deemed to be representations and warranties by the
Company with the same force and effect as if
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such lists, statements, information and documents were set forth herein. Any
list, statement, document or any information set forth in, attached to any
Schedule provided pursuant to this Agreement or delivered hereunder shall not be
deemed to constitute disclosure for any other Schedule provided pursuant to this
Agreement unless specific cross reference is made and shall survive after
closing.
2.23 Environmental Matters. The Company has never: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity or
by applicable foreign, federal, state, or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, and urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws),
but excluding office and janitorial supplies properly and safely maintained
2.24 Representations and Warranties. The representations and warranties of
the Company included in this Agreement and any list, statement, document or
information set forth in, attached to any Schedule provided pursuant to this
Agreement or delivered hereunder, are true and complete in all material respects
and do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, under the circumstance under which they were
made and shall survive after closing as set forth herein.
ARTICLE III- REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers and Fairford represent and warrant to the Company that
now and/or as of the Closing:
3.1 Due Organization and Qualification; Subsidiaries; Due Authorization.
(a) Each of Fairford and Ruili is a company duly organized, validly
existing and in good standing under the laws of its jurisdiction of formation,
with full corporate power and authority to own, lease and operate its business
and properties and to carry on its business in the places and in the manner as
presently conducted or proposed to be conducted. Each of Fairford and Ruili is
in good standing as a foreign corporation in each jurisdiction in which the
properties owned, leased or operated, or the business conducted, by it require
such qualification except for any such failure, which when taken together with
all other failures, is not likely to have a material adverse effect on the
business of Fairford taken as a whole. This Agreement and the transactions
contemplated hereby have been unanimously approved by the Board of Directors of
Fairford and Ruili.
(b) Fairford does not own, directly or indirectly, any capital
stock, equity or interest in any corporation, firm, partnership, joint venture
or other entity, other than those (each, a "Subsidiary" and together, the
"Subsidiaries") set forth in Item 3.1 of the Disclosure Schedule.
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Except as set forth in Statement, each Subsidiary is wholly owned by Fairford,
all the outstanding shares of capital stock of each Subsidiary are owned free
and clear of all liens, there is no contract, agreement, arrangement, option,
warrant, call, commitment or other right of any character obligating or
entitling any Subsidiary to issue, sell, redeem or repurchase any of its
securities, and there is no outstanding security of any kind convertible into or
exchangeable for securities of Fairford.
(c) Each of the Sellers and Fairford has all requisite power and
authority to execute and deliver this Agreement, and to consummate the
transactions contemplated hereby and thereby. Each of the Sellers and Fairford
has taken all action necessary for the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and this Agreement
constitutes the valid and binding obligation of each of the Sellers and
Fairford, enforceable, respectively, against each of the Sellers and Fairford in
accordance with its terms, except as may be affected by bankruptcy, insolvency,
moratoria or other similar laws affecting the enforcement of creditors' rights
generally and subject to the qualification that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefore may be brought.
3.2 No Conflicts or Defaults. The execution and delivery of this Agreement
by, each of the Sellers and Fairford and the consummation of the transactions
contemplated hereby do not and shall not
(a) contravene the governing documents of said Seller and/or Ruili,
or (b) with or without the giving of notice or the passage of time, (1) violate,
conflict with, or result in a breach of, or a default or loss of rights under,
any material covenant, agreement, mortgage, indenture, lease, instrument, permit
or license to which Fairford, any of the Subsidiaries or any Seller is a party
or by which Fairford, any of the Subsidiaries or any Seller or any of their
respective assets are bound, or any judgment, order or decree, or any law, rule
or regulation to which Fairford, any of the Subsidiaries or any Seller or any of
their respective assets are subject, (2) result in the creation of, or give any
party the right to create, any lien upon any of the assets of Fairford or any of
the Subsidiaries, (3) terminate or give any party the right to terminate, amend,
abandon or refuse to perform, any material agreement, arrangement or commitment
to which Fairford or any of the Subsidiaries is a party or by which Fairford or
any of the Subsidiaries or any of their respective assets are bound, or (4)
accelerate or modify, or give any party the right to accelerate or modify, the
time within which, or the terms under which Fairford or any of the Subsidiaries
is to perform any duties or obligations or receive any rights or benefits under
any material agreement, arrangement or commitment to which it is a party.
3.3 Capitalization. The outstanding capital stock of Fairford consists of
1,000 shares, par value $1.00. Set forth in Schedule 1 is a list of all holders
of the capital stock of Fairford,
9
setting forth their names, addresses and number of shares owned as of the
Closing. All of the outstanding shares of Fairford are, and the Fairford Shares
when transferred in accordance with the terms hereof, will be, duly authorized,
validly issued, fully paid and nonassessable, and have not been, or with respect
to Fairford Shares will not be, transferred in violation of any rights of third
parties. The Fairford Shares are not subject to any preemptive or subscription
right, any voting trust agreement or other contract, agreement, arrangement,
option, warrant, call, commitment or other right of any character obligating or
entitling Fairford to issue, sell, redeem or repurchase any of its securities,
and there is no outstanding security of any kind convertible into or
exchangeable for Common Stock. All of the Fairford Shares are owned of record
and beneficially by the Sellers free and clear of any liens, claims,
encumbrances, or restrictions of any kind. The transfer and delivery of the
Fairford Shares, as contemplated by this Agreement, will be sufficient to
transfer good and marketable record and beneficial title to the Fairford Shares,
free and clear of liens, claims, encumbrances, and restrictions of any kind.
3.4 Financial Statements. The Sellers have delivered to the Company a copy
of the audited consolidated balance sheets of Ruili at December 31, 2002 and
2003 and the related statements of operations, change in stockholders' equity
and cash flows for the years then ended, including the notes thereto with
convenience conversion into US Dollars (all such statements being the "Ruili
Financial Statements") as set forth in Item 3.4 of the Disclosure Schedule. The
Ruili Financial Statements, together with the notes thereto, have been audited
by an independent certified public accounting firm, Xxxxxx and Co., P.L.L.C.,
and have been prepared in accordance with United States generally accepted
accounting standards applied on a basis consistent throughout all the years
presented. The Ruili Financial Statements present fairly and accurately the
financial position of Ruili and as of the dates and for the years indicated. The
books of account and other financial records of Ruili have been maintained in
accordance with good business practices.
3.5 Further Financial Matters. Except as set forth in Item 3.5 of the
Disclosure Schedule, neither Fairford, Ruili, nor any of its Subsidiaries has
any liabilities or obligations, whether secured or unsecured, accrued,
determined, absolute or contingent, asserted or unasserted or otherwise, which
are required to be reflected or reserved in a balance sheet or the notes thereto
under generally accepted accounting principles, but which are not reflected in
the Ruili Financial Statements.
3.6 Taxes. Fairford and Ruili have filed all returns and reports which
were required to be filed on or prior to the date hereof, and have paid all
Taxes (and any related penalties, fines and interest) which have become due
pursuant to such returns or reports or pursuant to any assessment which has
become payable, or, to the extent its liability for any Taxes (and any related
penalties, fines and interest) has not been fully discharged, the same have been
properly reflected as a liability on the books and records of Fairford and Ruili
and adequate reserves therefore have been established. All such returns and
reports filed on or prior to the date hereof have been properly prepared and are
true, correct (and to the extent such returns reflect judgments made by Fairford
and Ruili such judgments were reasonable under the circumstances) and complete
in all material respects. Except as indicated in Item 3.6 of the Disclosure
Schedule, no extension for the filing of any such return or report is currently
in effect. Except as indicated in Item 3.6 of the Disclosure Schedule, no tax
return or tax return liability of Fairford or Ruili has been audited or,
presently is under audit. All taxes and any penalties, fines
10
and interest which have been asserted to be payable as a result of any audits
have been paid. Except as indicated in Item 3.6 of the Disclosure Schedule,
neither Fairford nor Ruili has given or been requested to give waivers of any
statute of limitations relating to the payment of any Taxes (or any related
penalties, fines and interest). There are no claims pending for past due Taxes.
Except as indicated in Item 3.6 of the Disclosure Schedule, all payments for
withholding taxes, unemployment insurance and other amounts required to be paid
for periods prior to the date hereof to any governmental authority in respect of
employment obligations of Ruili have been paid or shall be paid prior to the
Closing and have been duly provided for on the books and records of Ruili and in
the Ruili Financial Statements.
3.7 Indebtedness; Contracts; No Defaults.
(a) Item 3.7 of the Disclosure Schedule sets forth a true, complete
and correct list of all material instruments, agreements, indentures, mortgages,
guarantees, notes, commitments, accommodations, letters of credit or other
arrangements or understandings, whether written or oral, to which Fairford is a
party (collectively, the "Operating Agreements"). An agreement shall not be
considered material for the purposes of this Section 3.7(a) if it provides for
expenditures or receipts of less than One Hundred Thousand Dollars($100,000.00
USD) and has been entered into by Fairford in the ordinary course of business.
The Operating Agreements constitute all of the contracts, agreements,
understandings and arrangements required for the operation of Fairford's
business of manufacturing automotive parts or which have a material effect
thereon.
(b) Except as disclosed in Item 3.7 of the Disclosure Schedule,
Ruili nor to the best of Sellers' knowledge, any other person or entity is in
breach in any material respect of, or in default in any material respect under,
any material contract, agreement, arrangement, commitment or plan to which Ruili
is a party, and no event or action has occurred, is pending or is threatened,
which, after the giving of notice, passage of time or otherwise, would
constitute or result in such a material breach or material default by Ruili or
to the knowledge of the Sellers any other person or entity. Ruili has received
any notice of default under any contract, agreement, arrangement, commitment or
plan to which it is a party, which default has not been cured to the
satisfaction of, or duly waived by, the party claiming such default on or before
the date hereof.
3.8 Real Property. Item 3.8 of the Disclosure Schedule sets forth all of
the real property that Ruili owns or leases.
3.9 Compliance with Law.
(a) Ruili is conducting its business and affairs in material
compliance with all applicable law, ordinance, rule, regulation, court or
administrative order, decree or process, or any requirement of insurance
carriers material to its business. Ruili has not received any notice of
violation or claimed violation of any such law, ordinance, rule, regulation,
order, decree, process or requirement.
(b) Ruili is in compliance in all material respects with all
applicable, local and governmental laws and regulations relating to the
protection of the environment and human health. There are no claims, notices,
actions, suits, hearings, investigations, inquiries or proceedings pending or
threatened against Ruili that are based on or related to any environmental
11
matters or the failure to have any required environmental permits, and there are
no past or present conditions with respect to which Ruili has reason to believe
are likely to give rise to any material liability or other obligations of Ruili
under any environmental laws.
3.10 No Adverse Changes. Except as set forth in Item 3.10 of the
Disclosure Schedule, since the date of the Most Recent Quarter End, there has
not been (a) any material adverse change in the business, prospects, the
financial or other condition, or the respective assets or liabilities of Ruili
as reflected in the Ruili Financial Statements, (b) any material loss sustained
by Ruili including, but not limited to any loss on account of theft, fire,
flood, explosion, accident or other calamity, whether or not insured, which has
materially and adversely interfered, or may materially and adversely interfere,
with the operation of Ruili's business, or (c) any event, condition or state of
facts, including, without limitation, the enactment, adoption or promulgation of
any law, rule or regulation, the occurrence of which materially and adversely
does or would affect the results of operations or the business or financial
condition of Ruili.
3.11 Litigation.
(a) Except as set forth in Item 3.11 of the Disclosure Schedule,
there is no claim, dispute, action, suit, proceeding or investigation pending
or, to the knowledge of the Sellers, threatened, against or affecting the
business of Ruili or challenging the validity or propriety of the transactions
contemplated by this Agreement, at law or in equity or admiralty or before any
federal, state, local, foreign or other governmental authority, board, agency,
commission or instrumentality, nor to the knowledge of Sellers, has any such
claim, dispute, action, suit, proceeding or investigation been pending or
threatened, during the 12 month period preceding the date hereof;
(b) There is no outstanding judgment, order, writ, ruling,
injunction, stipulation or decree of any court, arbitrator or federal, state,
local, foreign or other governmental authority, board, agency, commission or
instrumentality, against or materially affecting the business of Ruili; and
(c) Ruili has received any written or verbal inquiry from any
federal, state, local, foreign or other governmental authority, board, agency,
commission or instrumentality concerning the possible violation of any law, rule
or regulation or any matter disclosed in respect of its business.
3.12 Patents; Trademarks and Intellectual Property Rights. Ruili owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, internet web
site(s) proprietary rights and processes necessary for its business as now
conducted without any conflict with or infringement of the rights of others.
There are no outstanding options, licenses or agreements of any kind relating to
the foregoing, and Ruili is not bound by, or a Party to, any options, licenses
or agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity.
3.13 Brokers. Except as set forth on Item 3.13 of the Disclosure Schedule,
all negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by the Sellers directly with the Company without
the intervention of any person on
12
behalf of the Sellers in such a manner as to give rise to any valid claim by any
person against any Seller or Fairford for a finder's fee, brokerage commission
or similar payment.
3.14 Purchase for Investment.
(a) Each Seller is acquiring the Company Shares for investment for
Sellers own account and not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and such Sellers have no present
intention of selling, granting any participation in, or otherwise distributing
the same. Each Seller further represent that he does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Company Shares.
(b) Each Seller understands that the Company Shares are not
registered under the Act on the ground that the sale and the issuance of
securities hereunder is exempt from registration under the Act pursuant to
Section 4(2) thereof, and that the Company's reliance on such exemption is
predicated on Sellers' representations set forth herein. Each Seller represents
that he is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the Act. Sellers acknowledge that neither the Securities and
Exchange Commission, nor the securities regulatory body of any state has
received, considered or passed upon the accuracy or adequacy of the information
and representations made in this Agreement.
3.15 Investment Experience. Each Seller acknowledges that he can bear the
economic risk of their respective investments, and each has such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the investment in the Company Shares.
3.16 Information. The Sellers have carefully reviewed such information as
each Seller deemed necessary to evaluate an investment in the Company Shares. To
the full satisfaction of each Seller, it has been furnished all materials that
it has requested relating to the Company and the issuance of the Company Shares
hereunder, and each Seller has been afforded the opportunity to ask questions of
representatives of the Company to obtain any information necessary to verify the
accuracy of any representations or information made or given to the Sellers.
Notwithstanding the foregoing, nothing herein shall derogate from or otherwise
modify the representations and warranties of the Company set forth in this
Agreement, on which each of the Sellers has relied in making an exchange of the
Fairford Shares for the Company Shares.
3.17 Restricted Securities. Each Seller understands that the Company
Shares may not be sold, transferred, or otherwise disposed of without
registration under the Act or an exemption there from, and that in the absence
of an effective registration statement covering the Company Shares or any
available exemption from registration under the Act, the Company Shares must be
held indefinitely. Each Seller is aware that the Company Shares may not be sold
pursuant to Rule 144 promulgated under the Act unless all of the conditions of
that Rule are met. Among the conditions for use of Rule 144 may be the
availability of current information to the public about the Company.
3.18 Permits and Licenses. Ruili has all certificates of occupancy,
rights, permits, certificates, licenses, franchises, approvals and other
authorizations as are reasonably necessary to conduct its business and to own,
lease, use, operate and occupy its assets, at the places and in
13
the manner now conducted and operated, except those the absence of which would
not materially adversely affect its business. Ruili has not received any written
or oral notice or claim pertaining to the failure to obtain any material permit,
certificate, license, approval or other authorization required by any federal,
state or local agency or other regulatory body, the failure of which to obtain
would materially and adversely affect their business.
3.19 Assets Necessary to Business. Ruili owns or leases all properties and
assets, real, personal, and mixed, tangible and intangible, and is a party to
all licenses, permits and other agreements necessary to permit it to carry on
its business as presently conducted.
3.20 Governmental Permits. Ruili possesses all licenses, permits and other
authorizations necessary to own or lease and operate its properties and to
conduct its business as now conducted. All of such licenses, permits and
authorizations are hereinafter collectively the "Permits."
3.21 Schedules. All lists or other statements, information or documents
set forth in, attached to any Schedule provided pursuant to this Agreement or
delivered hereunder shall be deemed to be representations and warranties by
Fairford and Ruili with the same force and effect as if such lists, statements,
information and documents were set forth herein. Any list, statement, document
or any information set forth in, attached to any Schedule provided pursuant to
this Agreement or delivered hereunder shall not be deemed to constitute
disclosure for any other Schedule provided pursuant to this Agreement unless
specific cross reference is made.
3.22 Representations and Warranties. The representations and warranties of
Fairford, included in this Agreement and any list, statement, document or
information set forth in, attached to any Schedule provided pursuant to this
Agreement or delivered hereunder, are true and complete in all material respects
and do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, under the circumstance under which they were
made.
3.23 Insurance. Item 3.23 of the Disclosure Schedule sets forth a true,
correct and complete of all insurance policies maintained by Fairford including
name of insurance carrier, policy number, policy coverage and respective
coverage amounts.
ARTICLE IV- INDEMNIFICATION
4.1 Indemnity of the Company and the Shareholder. The Company and the
Shareholder each agree to jointly and severally defend, indemnify and hold
harmless each Seller from and against, and to reimburse each Seller with respect
to, all liabilities, losses, costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements (collectively the "Losses")
asserted against or incurred by such Seller by reason of, arising out of, or in
connection with, any material breach of any representation or warranty contained
in the Agreement made by the Company or any document or certificate delivered by
the Company or the Shareholder pursuant to this Agreement or in connection with
the transaction contemplated hereby. All claims to be asserted hereunder must be
made by the first anniversary of the Closing.
14
4.2 Indemnity of the Sellers. Each of the Sellers agrees to jointly and
severally defend, indemnify and hold harmless the Company from and against, and
to reimburse the Company with respect to, all liabilities, losses, costs and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, asserted against or incurred by the Company by reason of, arising
out of, or in connection with any material breach of any representation or
warranty contained in this Agreement and made by the applicable Seller or in any
document or certificate delivered by the applicable Seller pursuant to the
provisions of this Agreement or in connection with the transactions contemplated
hereby, it being understood that each Seller shall have responsibility hereunder
only for the representations and warranties made by such Seller. All claims to
be asserted hereunder must be made by the first anniversary of the Closing.
4.3 Indemnification Procedure. A party (an "Indemnified Party") seeking
indemnification shall give prompt notice to the other party (the "Indemnifying
Party") of any claim for indemnification arising under this Article 4. The
Indemnifying Party shall have the right to assume and to control the defense of
any such claim with counsel reasonably acceptable to such Indemnified Party, at
the Indemnifying Party's own cost and expense, including the cost and expense of
reasonable attorneys' fees and disbursements in connection with such defense, in
which event the Indemnifying Party shall not be obligated to pay the fees and
disbursements of separate counsel for such in such action. In the event,
however, that such Indemnified Party's legal counsel shall determine that
defenses may be available to such Indemnified Party that are different from or
in addition to those available to the Indemnifying Party, in that there could
reasonably be expected to be a conflict of interest if such Indemnifying Party
and the Indemnified Party have common counsel in any such proceeding, or if the
Indemnified Party has not assumed the defense of the action or proceedings, then
such Indemnifying Party may employ separate counsel to represent or defend such
Indemnified Party, and the Indemnifying Party shall pay the reasonable fees and
disbursements of counsel for such Indemnified Party. No settlement of any such
claim or payment in connection with any such settlement shall be made without
the prior consent of the Indemnifying Party which consent shall not be
unreasonably withheld.
ARTICLE V - DELIVERIES
5.1 Items to be delivered to the Sellers prior to or at the Closing by the
Company.
(a) Full and complete responses to the due diligence request of the
Sellers including but not limited to the following: (1) articles of
incorporation and amendments thereto, by-laws and amendments thereto,
certificate of good standing in the Company's state of incorporation; (2) all
minutes and resolutions of the board of directors and of the shareholders (and
meetings of shareholders) in possession of the Company; (3) shareholder list of
the Company; (4) all financial statements and tax returns in possession of the
Company, including the financial statements required in Section 2.4;
15
(b) all applicable schedules hereto;
(c) resolution from the Company's current directors appointing
Sellers' designees to the Company's Board of Directors; (d) letters of
resignation from the Company's current officers and directors to be effective
upon Closing and confirming that they have no claim against the Company in
respect of any outstanding remuneration or fees of whatever nature to be
effective upon closing and after the appointments described in this section; (e)
certificates representing 1,000,000 Company Preferred Shares to the Sellers
and/or their designees and the Financial Consultants issued in the denominations
as set forth opposite their respective names on Schedule 1 to this Agreement,
duly authorized, validly issued, fully paid for and non-assessable; (f) copies
of board, and shareholder resolutions certified by the President or Chief
Executive Officer of the Company, approving this transaction and authorizing the
issuances of the shares hereto; (g) any other document reasonably requested by
the Sellers that the Sellers deems necessary for the consummation of this
transaction;
5.2 Items to be delivered to the Company prior to or at Closing by the
Sellers.
(a) Full and complete responses to the due diligence request list of
the Company, including Officer and Director Questionnaires completed by each of
the Sellers' designees and delivered to the Company.
(b) all applicable schedules hereto;
(c) instructions from the Sellers appointing designees of the
Sellers to the Company's Board of Directors; (d) documents from the Sellers
requesting the issuance of designated amounts of Preferred Stock to the
designees as set forth in Schedule 1 to this Agreement; (e) financial statements
required in Item 3.4 of the Disclosure Schedule; (f) any other document
reasonably requested by the Company that it deems necessary for the consummation
of this transaction; (g) payment to Xxxxxxx Securities of Three Hundred Twenty
Thousand Dollars ($320,000.00 USD) via wire transfer.
ARTICLE VI - CONDITIONS PRECEDENT
6.1 Conditions to Obligations of the Sellers. The obligations of the
Sellers shall be subject to fulfillment prior to or at the Closing, of each of
the following conditions, subject to the right of the Sellers to waive any such
conditions:
(a) The Company shall have paid all of the costs and expenses of the
Company associated with the acquisition of the Sellers Shares by the Company;
16
(b) As of the Closing, the Company shall have no assets and no
liabilities whatsoever, contingent or otherwise;
(c) The shares of the Company's Common Stock shall continue to be
traded on the Over-the-Counter Bulletin Board, and the Company shall not have
received any notification (either oral or written) materially adversely
effecting such status;
(d) Each of the representations and warranties of the Company
contained herein shall be true and correct at the time of the Closing Date as if
such representations and warranties were made at such time;
(e) The Company shall have performed or complied with all
agreements, terms and conditions required by this Agreement to be performed or
complied with by it prior to or at the time of the Closing;
(f) The Sellers shall be fully satisfied in the exercise of their
sole discretion with the results of the investigation and review it conducts (or
its representatives conduct), prior to the Closing Date, of the business,
properties and/or affairs of the Company;
(g) The Company shall have complied with Rule 14(f)(1).
6.2 Conditions to Obligations of the Company. The obligations of the
Company shall be subject to fulfillment prior to or at the Closing, of each of
the following conditions, subject to the right of the Company to waive any such
conditions:
(a) The Sellers shall have paid the costs and expenses of the
Sellers and Fairford associated with the acquisition of the Sellers' Shares by
the Company.
(b) Each of the representations and warranties of the Sellers and of
Fairford and the Sellers' designees contained herein shall be true and correct
at the time of the Closing Date as if such representations and warranties were
made at such time;
(c) The Sellers shall have performed or complied with all
agreements, terms and conditions required by this Agreement to be performed or
complied with by them prior to or at the time of the Closing; and
(d) The Company shall be fully satisfied in the exercise of its sole
discretion with the results of the investigation and review conducted by the
principals or their agents prior to the Closing Date, of the business,
properties or affairs of Ruili.
(e) The Sellers shall have provided an undertaking that all funds
received by Ruili shall be kept in segregated accounts and not commingled with,
nor distributed to, any related entities, together with an undertaking from
Ruili's accountants that they have been engaged to assist in the preparation of
financial statements to be filed by the Company to comply with its reporting
requirements pursuant to the Securities Exchange Act of 1934.
(f) The Sellers shall provide an undertaking to comply with Rules
14(c) and 14(f) of the Securities Exchange Act of 1934 in order to amend the
Company's Articles of Incorporation to increase the number of shares of common
stock the Company is authorized to issue; to effect a 1-for-15 reverse stock
split; to effect a change in the Company's name to SORL Autoparts, Inc.; to
convert the Company Preferred Stock issued hereunder to Company Common Stock and
within ten (10) days of the Closing to add independent directors and create both
an audit as well as a compensation committee in order to fulfill corporate
governance standards and
17
requirements of any exchange upon which the Company's securities are listed as
well as those set forth by the Sarbannes - Oxley Act of 2002 and the Rules
promulgated thereunder.
(g) The Sellers shall have delivered an opinion of PRC counsel to
the satisfaction of the Company and the Shareholder with respect to the legal
status of Ruili; the organization, restructuring, and capitalization of
Fairford; the business, government licenses and approvals and management of
Ruili; the asset acquisition by Fairfold of Ruili and other related matters as
more fully set forth in Item 6.2(g) of the Disclosure Schedule.
6.3 Conditions to Each Party's Obligations. The obligation of each
Party to consummate the Exchange contemplated by this Agreement is subject to
the satisfaction, at or before the consummation of such Exchange, of each of the
following conditions:
(a) the stockholders of Fairford shall have duly approved the
Exchange in accordance with applicable law;
(b) no action shall have been taken, and no statute, rule,
regulation or order shall have been promulgated, enacted, entered, enforced or
deemed applicable to the transactions contemplated herein by any federal, state
or foreign government or governmental authority or by any court, domestic or
foreign, including the entry of a preliminary or permanent injunction, which
would (i) make the Exchange illegal, or (ii) if the Exchange is consummated,
subject any officer, director or employee of the Company or Fairford to criminal
penalties or to civil liability not adequately covered by insurance or
enforceable indemnification arrangements maintained by the Company or Fairford;
(c) no action or proceeding before any court or governmental
authority domestic or foreign, by any government or governmental authority or by
any other person, domestic or foreign, shall be threatened, instituted or
pending which would reasonably be expected to result in any of the consequences
referred to in clauses (i) and (ii) of paragraph (c) above; and (d) all
transactions contemplated herein shall have become effective.
6.4 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing Date, the Company agrees to carry on the Company's
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay the debts and taxes of the Company when
due, to pay or perform other obligations when due, and, to the extent consistent
with such business, use their commercially reasonable efforts consistent with
past practice and policies to preserve intact the Company's present business
organizations, keep available the services of the Company's present officers and
key employees and preserve the Company's relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, all with the goal of preserving unimpaired the Company's
goodwill and ongoing businesses at the Closing Date. The Company shall promptly
notify the Sellers of any event or occurrence or emergency not in the ordinary
course of business of the Company and any material event involving the Company.
The Company shall not, without the prior written consent of the
Sellers:
18
(a) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of the capital
stock of the Company (or options, warrants or other rights exercisable
therefore);
(b) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue or purchase any such shares
or other convertible securities, or accelerate the vesting of any stock options;
(c) cause or permit any amendments to its Articles of Incorporation
or Bylaws except to the extent required to comply with applicable law;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Company's
business;
(e) sell, lease, license or otherwise dispose or agree to do the
same with respect to any of its material properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;
(g) grant any loans to others or purchase debt securities of others
or amend the terms of any outstanding loan agreement;
(h) grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee;
(i) adopt any employee benefit plan, or enter into any employment
contract, pay or agree to pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates of its employees
other than in connection with the regularly scheduled performance reviews of
individual employees;
(j) revalue 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;
(k) make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(l) enter into any agreement, contract, or commitment;
(m) change its methods of accounting or change its fiscal year; or
(n) take, or agree in writing or otherwise to take, any of the
actions described in Sections (a) through (m) above, or any other action that
would prevent the Company from
19
performing or cause the Company not to perform its covenants hereunder, or any
other action not in the ordinary course of the Company's business and consistent
with past practice.
6.5 Conduct of Business of the Ruili. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing Date, Sellers warrant that Ruili will carry on the its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay it's debts and taxes when due, to pay or
perform other obligations when due, and, to the extent consistent with such
business, use their commercially reasonable efforts consistent with past
practice and policies to preserve intact the it's present business
organizations, keep available the services of the it's present officers and key
employees and preserve the it's relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
all with the goal of preserving unimpaired the it's goodwill and ongoing
businesses at the Closing Date. Fairford and Ruili shall promptly notify the
Company of any event or occurrence or emergency not in its ordinary course of
business and any material event involving Ruili.
Fairford and Ruili shall not, without the prior written consent of the
Company:
(a) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its or the Company's capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue or purchase any such shares
or other convertible securities;
(b) acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to Fairford's
business;
(c) sell, lease, license or otherwise dispose or agree to do the
same with respect to any of its material properties or assets;
(d) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;
(e) grant any loans to others or purchase debt securities of others
or amend the terms of any outstanding loan agreement;
(f) adopt any employee benefit plan, or enter into any employment
contract, pay or agree to pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates of its employees
other than in connection with the regularly scheduled performance reviews of
individual employees;
(g) revalue 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;
(h) make or change any material election in respect of taxes, adopt
or change any accounting method in respect of taxes, enter into any closing
agreement, settle any claim or
20
assessment in respect of taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of taxes;
(i) enter into any material agreement, contract, or commitment;
(j) change its methods of accounting or change its fiscal year; or
(k) take, or agree in writing or otherwise to take, any action not
in the ordinary course of the Fairford's business and consistent with past
practice.
ARTICLE VII - TERMINATION AND RESCISSIION
7.1 Termination. This Agreement may be, terminated:
(a) at any time before, or at, Closing by the mutual written
agreement of the Sellers and the Company or in the event the Closing does not
occur within thirty (30) days of the date of this Agreement;
(b) at Closing, by a Party if any provision of this Agreement that
is applicable to or required to be performed by the other Party shall be
materially untrue or fail to be accomplished;
(c) upon termination of this Agreement for any reason, in accordance
with the terms and conditions set forth in this paragraph, each Party shall bear
all costs and expenses as that Party has incurred.
7.2 Rescission. Following the Closing, this Agreement will terminate and
the Exchange rescinded in the event ("Event of Default") that the Company fails
to file, within the statutory time frame, pursuant to the Securities Exchange
Act of 1934 ("Act") a Form 8-K, disclosing this Agreement, including the
required financial statements, and the transaction contemplated hereby;
7.3 Release from Escrow. No Event of Default will occur following the
timely filing of a Current Report on Form 8-K or Amendment thereto disclosing
the transaction contemplated hereby and containing the required financial
statements. Upon the occurrence of the foregoing the Escrow Agent shall deliver
the Company Shares to the Sellers and its duties hereunder will be discharged.
7.4 Procedure. Upon an Event of Default:
(a) the Company will immediately secure the resignation of its then
officers and directors and appoint Xxxxx X. Xxxxxxx as the sole member of the
Board of Directors;
(b) the Escrow Agent shall return to the Sellers the Fairford Shares
and the Company Preferred Shares and any Company Common Shares issued upon the
conversion of the Company Preferred Shares pursuant to the Exchange shall be
promptly cancelled;
(c)the Company will not be required to repay to the Sellers the cash
payment of Three Hundred and Twenty Thousand Dollars ($320,000.00 USD) paid in
connection with the Exchange and such cash payment shall be deemed to constitute
liquidated damages;
21
ARTICLE VIII- MISCELLANEOUS
8.1 Survival of Representations, Warranties and Agreements. All
representations, warranties and statements made by a Party to in this Agreement
or in any document or certificate delivered pursuant hereto shall survive the
Closing Date. Each of the Parties hereto is executing and carrying out the
provisions of this Agreement in reliance upon the representations, warranties
and covenants and agreements contained in this agreement or at the closing of
the transactions herein provided for and not upon any investigation which it
might have made or any representations, warranty, agreement, promise or
information, written or oral, made by the other Party or any other person other
than as specifically set forth herein.
8.2 Access to Books and Records. During the course of this transaction
through Closing, each Party agrees to make available for inspection all
corporate books, records and assets, and otherwise afford to each other and
their respective representatives, reasonable access to all documentation and
other information concerning the business, financial and legal conditions of
each other for the purpose of conducting a due diligence investigation thereof.
Such due diligence investigation shall be for the purpose of satisfying each
Party as to the business, financial and legal condition of each other for the
purpose of determining the desirability of consummating the proposed
transaction. The Parties further agree to keep confidential and not use for
their own benefit, except in accordance with this Agreement any information or
documentation obtained in connection with any such investigation.
8.3 Further Assurances. If, at any time after the Closing, the Parties
hereby mutually agree that any further deeds, assignments or assurances in law
or that any other things are necessary, desirable or proper to complete the
transactions contemplated hereby in accordance with the terms of this agreement
or to vest, perfect or confirm, of record or otherwise, the title to any
property or rights of the Parties hereto, the Parties agree that their proper
officers and directors shall execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary, desirable or
proper to vest, perfect or confirm title to such property or rights and
otherwise to carry out the purpose of this Agreement, and that the proper
officers and directors the Parties are fully authorized to take any and all such
action.
8.4 Notice. All communications, notices, requests, consents or demands
given or required under this Agreement shall be in writing and shall be deemed
to have been duly given when delivered to, or received by prepaid registered or
certified mail or recognized overnight courier addressed to, or upon receipt of
a facsimile sent to, the Party for whom intended, as follows, or to such other
address or facsimile number as may be furnished by that Party by notice in the
manner provided herein:
If to the Company:
The Enchanted Village, Inc. 000X Xxxxxxxxx
Xxxx., Xxxxx 00 Xxxx Xxxxx, XX 00000 Attn: Xxxxx
X. Xxxxxxx, President
With a copy to:
22
Xxxxxxxx X. Xxxxx, Esq. Xxxxxxx Investments, LLC
0000 XXX Xxxxxxx, Xxxxx 0000 Xxxxxxxxx Xxxxxxx, XX
00000-0000
If to the Sellers to:
Ruili Group Ruian Auto Parts Co., Ltd.
No. 1169 Yumeng Road
Economic Development District
Ruian City
Zhejiang Province, China
Attn: Xxxxxxxx Xxxxx, Chairman and Chief Executive Officer ,
With a copy to:
Xxxxx X. Xxxxxxxx, Esq.
Loeb & Loeb
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
8.5 Entire Agreement. This Agreement, the Exhibits and Schedules hereto
and any instruments and agreements to be executed pursuant to this Agreement,
set forth the entire understanding of the Parties hereto with respect to its
subject matter, merges and supersedes all prior and contemporaneous
understandings with respect to its subject matter and may not be waived or
modified, in whole or in part, except by a writing signed by each of the Parties
hereto. No waiver of any provision of this Agreement in any instance shall be
deemed to be a waiver of the same or any other provision in any other instance.
Failure of any party to enforce any provision of this Agreement shall not be
construed as a waiver of its rights under such provision.
8.6 Successors and Assigns. This Agreement shall be binding upon,
enforceable against and inure to the benefit of, the Parties hereto and their
respective heirs, administrators, executors, personal representatives,
successors and assigns, and nothing herein is intended to confer any right,
remedy or benefit upon any other person. This Agreement may not be assigned by
any Party hereto except with the prior written consent of the other Parties,
which consent shall not be unreasonably withheld.
8.7 Governing Law. This Agreement shall in all respects be governed by and
construed in accordance with the laws of Colorado that are applicable to
agreements made and fully to be performed in such state, without giving effect
to conflicts of law principles.
8.8 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
23
8.9 Construction. Headings contained in this Agreement are for convenience
only and shall not be used in the interpretation of this Agreement. References
herein to Articles, Sections and Exhibits are to the articles, sections and
exhibits, respectively, of this Agreement. The Schedules hereto are hereby
incorporated herein by reference and made a part of this Agreement. As used
herein, the singular includes the plural, and the masculine, feminine and neuter
gender each includes the others where the context so indicates.
8.10 Severability. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, this Agreement
shall be interpreted and enforceable as if such provision were severed or
limited, but only to the extent necessary to render such provision and this
Agreement enforceable.
8.11 Arbitration. Any controversy arising out of, connected to, or
relating to any matters herein of the transactions with the Parties hereto on
behalf of the undersigned, or this Agreement, or the breach thereof, including,
but not limited to any claims of violations of federal and/or state securities
laws, banking statutes, consumer protection statutes, federal and/or state
anti-racketeering (e.g. RICO) claims as well as any common law claims and any
state law claims of fraud, negligence, negligent misrepresentations, and/or
conversion, or the laws of any territory, country or jurisdiction, shall be
settled by arbitration; and in accordance with this paragraph any judgment on
the arbitrator's award may be entered in any court having jurisdiction thereof.
In the event of such a dispute, each party agrees to arbitration conducted
through the auspices of American Arbitration Association. Venue for any action
shall lie in Denver, Colorado.
8.12 Antidilution. Fairford will provide an undertaking that for a period
of twelve (12) months from the Closing, the Company will not issue any
additional shares of Company Preferred or Company Common Stock convertible into
or representing more than ten percent (10%) of the outstanding shares of Common
Stock of the Company to consultants and/or insiders. Notwithstanding the
foregoing, the Company shall be permitted to issue any number of its shares of
Common Stock in connection with management or employee compensation plans, with
a private or public offering of Company Common Stock for the purpose of raising
additional capital or in connection with the acquisition of real property or
strategic transactions consistent with its plan of, operations or in connection
with a merger or acquisition.
8.13 Reporting Requirements. The Company will file such reports as
required under the Securities Exchange Act for the Exchange, including the
resignation of Xxxxx X. Xxxxxxx as an officer and director, and such matters as
required under Form 8-K or other applicable form, with the United States
Securities and Exchange Commission, as well as any applicable state securities
commissions.
8.14 Officers and Directors of the Company. At Effective Date of the Share
Exchange, the directors of the Company shall cause the election of the
individuals named on Item 8.14 of the Disclosure Schedule to serve as directors
of the Company and, together with all the officers of the Corporation, shall
resign from all their respective offices and directorships with the Company,
provided that such designees have completed and delivered to the Company Officer
and Director Questionnaires no later that five (5) business days prior to the
Closing. The newly
24
elected directors shall then cause the individuals named on Schedule 8.14 to be
elected to the offices set forth beside their respective names on such Schedule.
8.15 Confidentiality; Public Disclosure. Each of the parties hereto hereby
agrees that the information obtained pursuant to the negotiation and execution
of this Agreement shall be treated as confidential and not be disclosed to third
parties who are not agents of one of the Parties to this Agreement.
8.16 Notification of Certain Matters. Each Party shall give prompt notice
to the other of (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate
and (ii) any failure of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
shall not limit or otherwise affect any remedies available to the party
receiving such notice. Further, disclosure pursuant to this Section shall not be
deemed to amend or supplement the Schedules hereto or prevent or cure any
misrepresentations, breach of warranty or breach of covenant.
8.17 Currency. The parties hereto agree that all monetary amounts set
forth herein are referenced in United States dollars, unless otherwise stated.
8.18 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.19 Delivery of Schedules. As soon as possible after the execution of
this Agreement, Seller will deliver to the Company all Schedules required
pursuant to Article III.
[Signatures to Follow]
25
IN WITNESS WHEREOF, each of the Parties hereto has executed this Agreement
as of the date first set forth above.
THE ENCHANTED VILLAGE, INC.
By: _______________________________
Xxxxx X. Xxxxxxx, President
PRINCIPAL SHAREHOLDER
Xxxxxxx Reverse Merger Fund, LLC
By: _______________________________
Xxxxxxx X. Xxxxxxx, Managing Member
SELLER
By: _______________________________
Xxxxxxxx Xxxxx
SELLER
By: _______________________________
Xxxxxxx Xxxxx
SELLER
By: _______________________________
Xxxxxxx Xxx
FAIRFORD HOLDINGS LIMITED
By: _______________________________
Xxxxxxxx Xxxxx,
Chairman of the Board and Chief Executive Officer
26
SCHEDULE I
SELLERS' IDENTIFICATION
Allocation
of Number of Convertible
Seller's and Designee's Fairford Company Prefer into Company
Name And Address Shares Shares Common Shares
---------------- ------ ------ -------------
Xxxxxxxx Xxxxx 800 701538 136312992
Xxxxxxxx Xxxxx 100 87692 17039124
Xxxxxxx Xxx 100 87692 17039124
Xxxxxxxx Xxxxx 0 20513 3985760
Xxxxxxxx Xxxx 0 15385 2989320
Xxxxxxxx Xxx 0 15385 2989320
Xxxxx Xxxxx 0 2564 498220
Xxxxxx Xxxx 0 5128 996440
Bizhu Lei 0 7692 1494660
Novell Partners Limited 0 30769 5978640
FirstAllance Financial Group,Inc 0 25641 4982200
---- ------- ---------
Total 1000 1000000 194305800
==== ======= =========
27
ITEM 2.3
REGISTRATION RIGHTS
1
ITEM 2.4
FINANCIAL STATEMENTS (Company)
See SEC Filings
2
ITEM 2.16
BROKERS
3
ITEM 3.1
SUBSIDIARIES
4
ITEM 3.4
FINANCIAL STATEMENTS (Sellers')
5
ITEM 3.5
MATERIAL LIABILITIES
6
ITEM 3.7
MATERIAL AGREEMENTS, ETC.
7
ITEM 3.11
LITIGATION, ETC.
8
ITEM 3.23
INSURANCE
9
ITEM 8.14
DIRECTORS
10
