RUBD.OB - Rub A Dub Soap Inc.
8K 10.29.07 - r\m with China Company
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 18, 2007
Rub A Dub Soap, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 000-52142 84-1609495
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(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
2591 Dallas Parkway, Suite 102, Frisco, Texas 75034
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(Address of principal execute offices, including zip code)
(469) 633-0101
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 Entry into a Material Definitive Agreement
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On October 26, 2007, Registrant entered into a Stock Purchase Agreement
with Zhongsen International Company Group, Ltd., a Hong Kong corporation (the
"Company") and its sole shareholder, Kai Chen, as the Seller for the issuance
and sale to the Seller of shares of common stock equal to 96.5% of all shares
outstanding, in exchange for 100% of the outstanding common stock of the
Company. The purchase price was determined on the basis of arms-length
negotiations between unrelated parties. Closing will occur upon satisfaction of
all conditions in the Agreement. Prior to the issuance, Registrant has been a
shell company with limited assets and no operations other than seeking the
acquisition of an operating company. The Company owns subsidiaries in the
People's Republic of China and overseas that are engaged in the distribution and
sale of tires and rubber.
ITEM 9.01 Financial Statements and Exhibits
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2.01 - Stock Purchase Agreement dated October 26, 2007.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 26, 2007 Rub A Dub Soap, Inc.
(Registrant)
By:/s/ Kevin Halter, Jr.
------------------------
Kevin Halter, Jr., President and
Chief Executive Officer
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement") made this 26th day of October, 2007
by and among Rub A Dub Soap, Inc., a Nevada corporation ("Parent"), Zhongsen
International Company Group, Ltd. ("the Company") a Hong Kong ("HK") limited
liability corporation, and Kai Chen, the sole shareholder of the Company
("Seller").
R E C I T A L S:
A. The respective Boards of Directors of Parent and the Company have
determined that an acquisition of the Company by Parent, upon the terms and
subject to the conditions set forth in this Agreement, would be fair and in the
best interests of their respective shareholders, and such Boards of Directors
have approved such transaction, pursuant to which all shares of Common Stock of
the Company ("Company Common Stock") issued and outstanding immediately prior to
the Closing (as defined in Section 1.03) will be exchanged for the right to
receive shares of Common Stock of Parent representing 96.5% of shares
outstanding after the sale hereby (the "Sale").
B. Parent, Seller and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Sale and also to prescribe various conditions to the Sale.
C. For federal income tax purposes, the parties intend that the Sale
shall qualify as a reorganization under the provisions of Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE SALE
1.01 Stock Split. Immediately following the execution of this Agreement,
Parent shall take all actions required to affect a 2.12-for one forward split of
the outstanding Common Stock of Parent, and shall redeem for their par value
approximately 2,197 shares of Parent Common Sock from Halter Capital Corporation
("HCC"), so that after such split and redemption there will be issued and
outstanding 910,000 shares of common stock.
1.02 Transfer of Stock. At the Closing, the Seller will transfer to
Parent 10,000 shares of the Company Common Stock, representing 100% of the
issued and outstanding shares of the common stock of the Company free and clear
of all liens, claims and encumbrances. In exchange therefor, the Company will
issue and convey to Seller 25,090,000 post-split shares of common stock (the
"Purchase Price Shares"). Such shares shall be restricted from transfer under
the rules and interpretations of the U.S. Securities and Exchange Commission.
1.03 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.01 and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing of the Sale (the "Closing") will take place at 10:00
a.m. on the business day after satisfaction of the conditions set forth in
Article VI (or as soon as practicable thereafter) (the "Closing Date"), at the
offices of Baker & McKenzie in New York, unless another date, time or place is
agreed to in writing by the parties hereto. The Sale and all other transactions
contemplated hereby shall become effective on the Closing Date.
ARTICLE II
RESERVED
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company. Except as set forth
in the Company Disclosure Schedule delivered by the Company to the Parent at the
time of execution of this Agreement, the Company represents and warrants to
Parent as follows:
(a) Organization, Standing and Corporate Power. The Company is
duly organized, validly existing and in good standing under the laws of
Hong Kong and has the requisite corporate power and authority to carry
on its business as now being conducted. The Company is duly qualified or
licensed to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than
in such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse
effect with respect to the Company.
(b) Subsidiaries. The Company owns 100% of its subsidiaries,
Qingdao (Free-Trading Zone) Sentaida International Trade Co., Ltd.,
Qingdao Sentaida Tires Co., Ltd., Zhongsen Holdings Co., Ltd.(BVI),
formed respectively under the laws of the People's Republic of China and
the British Virgin Islands.
(c) Capital Structure. The authorized capital stock of the
Company consists of 10,000 authorized shares of Company Common Stock.
There are 10,000 shares of Common Stock outstanding, all of which are
owned by Seller. Except as set forth above, no shares of capital stock
or other equity securities of the Company are issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no
outstanding bonds, debentures, notes or other indebtedness or other
securities of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters
on which shareholders of the Company may vote. Except as set forth
above, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any
kind to which the Company is a party or by which it is bound obligating
the Company to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other equity or voting
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securities of the Company or obligating the Company to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no
outstanding contractual obligations, commitments, understandings or
arrangements of the Company to repurchase, redeem or otherwise acquire
or make any payment in respect of any shares of capital stock of the
Company. There are no agreements or arrangements pursuant to which the
Company is or could be required to register shares of Company Common
Stock or other securities under the Securities Act of 1933, as amended
(the "Securities Act") or other agreements or arrangements with or among
any security holders of the Company with respect to securities of the
Company.
(d) Authority; Noncontravention. The Company has the requisite
corporate and other power and authority to enter into this Agreement and
to consummate the transactions hereby to which it is a party. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
the Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions hereof will not, conflict with, or result in any breach or
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of or "put" right with respect to any obligation or to loss
of a material benefit under, or result in the creation of any lien upon
any of the properties or assets of the Company under, (i) the Articles
of Incorporation or Bylaws of the Company, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the
Company, its properties or assets, or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule, regulation or
arbitration award applicable to the Company, its properties or assets.
No consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to, any federal, state or local
government or any court, administrative agency or commission or other
governmental authority, agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company in connection
with the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby.
(e) Financial Statements (i) The Parent has received a copy of
the audited consolidated financial statements of the Company and Company
Subs for the fiscal year ended December 31, 2006 and 2005 and unaudited
financial statements for the six-months ended June 30, 2007 and 2006
("Financial Statements"). The Financial Statements fairly present the
financial condition of the Company at the dates indicated and its
results of their operations and cash flows for the periods then ended
and, except as indicated therein, reflect all claims against, debts and
liabilities of the Company, fixed or contingent, and of whatever nature.
(ii) Since June 30, 2007 (the "Balance Sheet Date"), there has been no
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material adverse change in the assets or liabilities, or in the business
or condition, financial or otherwise, or in the results of operations or
prospects, of the Company, whether as a result of any legislative or
regulatory change, revocation of any license or rights to do business,
fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation, act of God, public force or otherwise and no
material adverse change in the assets or liabilities, or in the business
or condition, financial or otherwise, or in the results of operation or
prospects, of the Company except in the ordinary course of business.
(iii) Since the Balance Sheet Date, the Company has not suffered any
damage, destruction or loss of physical property (whether or not covered
by insurance) affecting its condition (financial or otherwise) or
operations (present or prospective), nor has the Company issued, sold or
otherwise disposed of, or agreed to issue, sell or otherwise dispose of,
any capital stock or any other security of the Company and has not
granted or agreed to grant any option, warrant or other right to
subscribe for or to purchase any capital stock or any other security of
the Company or has incurred or agreed to incur any indebtedness for
borrowed money.
(f) Absence of Certain Changes or Events. Since June 30, 2007,
the Company has conducted its business only in the ordinary course
consistent with past practice, and there is not and has not been: (i)
any material adverse change with respect to the Company; (ii) any
condition, event or occurrence which individually or in the aggregate
could reasonably be expected to have a material adverse effect or give
rise to a material adverse change with respect to the Company; (iii) any
event which, if it had taken place following the execution of this
Agreement, would not have been permitted by Section 4.01 without prior
consent of Parent; or (iv) any condition, event or occurrence which
could reasonably be expected to prevent, hinder or materially delay the
ability of the Company to consummate the transactions contemplated by
this Agreement.
(g) Litigation; Labor Matters; Compliance with Laws.
(i) There is no suit, action or proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any basis for any
such suit, action, proceeding or investigation that,
individually or in the aggregate, could reasonably be expected
to have a material adverse effect with respect to the Company or
prevent, hinder or materially delay the ability of the Company
to consummate the transactions contemplated by this Agreement,
nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the
Company having, or which, insofar as reasonably could be
foreseen by the Company, in the future could have, any such
effect.
(ii) The Company is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is
it the subject of any proceeding asserting that it has committed
an unfair labor practice or seeking to compel it to bargain with
any labor organization as to wages or conditions of employment
nor is there any strike, work stoppage or other labor dispute
involving it pending or, to its knowledge, threatened, any of
which could have a material adverse effect with respect to the
Company.
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(iii) The conduct of the business of the Company
complies with all statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees or arbitration awards
applicable thereto.
(h) Benefit Plans. The Company is not a party to any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) under which the Company
currently has an obligation to provide benefits to any current or former
employee, officer or director of the Company (collectively, "Benefit
Plans").
(i) Certain Employee Payments. The Company is not a party to any
employment agreement which could result in the payment to any current,
former or future director or employee of the Company of any money or
other property or rights or accelerate or provide any other rights or
benefits to any such employee or director as a result of the
transactions contemplated by this Agreement, whether or not (i) such
payment, acceleration or provision would constitute a "parachute
payment" (within the meaning of Section 280G of the Code), or (ii) some
other subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered.
(j) Tax Returns and Tax Payments. The Company has timely filed
all Tax Returns required to be filed by it, has paid all Taxes shown
thereon to be due and has provided adequate reserves in its financial
statements for any Taxes that have not been paid, whether or not shown
as being due on any returns. No material claim for unpaid Taxes has been
made or become a lien against the property of the Company or is being
asserted against the Company, no audit of any Tax Return of the Company
is being conducted by a tax authority, and no extension of the statute
of limitations on the assessment of any Taxes has been granted by the
Company and is currently in effect. As used herein, "taxes" shall mean
all taxes of any kind, including, without limitation, those on or
measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium value added, property or
windfall profits taxes, customs, duties or similar fees,, assessments or
charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign. As used herein, "Tax
Return" shall mean any return, report or statement required to be filed
with any governmental authority with respect to Taxes.
(k) Environmental Matters. The Company is in compliance with all
applicable Environmental Laws. "Environmental Laws" means all applicable
federal, state and local statutes, rules, regulations, ordinances,
orders, decrees and common law relating in any manner to contamination,
pollution or protection of human health or the environment, and similar
state laws.
(l) Material Contract Defaults. The Company is not, or has not
received any notice or has any knowledge that any other party is, in
default in any respect under any Material Contract; and there has not
5
occurred any event that with the lapse of time or the giving of notice
or both would constitute such a material default. For purposes of this
Agreement, a Material Contract means any contract, agreement or
commitment that is effective as of the Closing Date to which the Company
is a party (i) with expected receipts or expenditures in excess of
$100,000, (ii) requiring the Company to indemnify any person, (iii)
granting exclusive rights to any party, (iv) evidencing indebtedness for
borrowed or loaned money in excess of $100,000 or more, including
guarantees of such indebtedness, or (v) which, if breached by the
Company in such a manner would (A) permit any other party to cancel or
terminate the same (with or without notice of passage of time) or (B)
provide a basis for any other party to claim money damages (either
individually or in the aggregate with all other such claims under that
contract) from the Company or (C) give rise to a right of acceleration
of any material obligation or loss of any material benefit under any
such contract, agreement or commitment.
(m) Properties. The Company has good, clear and marketable title
to all the tangible properties and tangible assets reflected in the
latest balance sheet as being owned by the Company or acquired after the
date thereof which are, individually or in the aggregate, material to
the Company's business (except properties sold or otherwise disposed of
since the date thereof in the ordinary course of business), free and
clear of all material liens.
(n) Trademarks and Related Contracts. To the knowledge of the
Company:
(i) As used in this Agreement, the term "Trademarks"
means trademarks, service marks, trade names, Internet domain
names, designs, slogans, and general intangibles of like nature;
the term "Trade Secrets" means technology; trade secrets and
other confidential information, know-how, proprietary processes,
formulae, algorithms, models, and methodologies; the term
"Intellectual Property" means patents, copyrights, Trademarks,
applications for any of the foregoing, and Trade Secrets; the
term "Company License Agreements" means any license agreements
granting any right to use or practice any rights under any
Intellectual Property (except for such agreements for
off-the-shelf products that are generally available or less than
$25,000), and any written settlements relating to any
Intellectual Property, to which the Company is a party or
otherwise bound; and the term "Software" means any and all
computer programs, including any and all software
implementations of algorithms, models and methodologies, whether
in source code or object code.
(ii) To the knowledge of the Company, none of the
Company's Intellectual Property or Company License Agreements
infringe upon the rights of any third party that may give rise
to a cause of action or claim against the Company or its
successors.
(o) Board Recommendation. The Board of Directors of the Company
has unanimously determined that the terms of the Sale are fair to and in
the best interests of the shareholders of the Company and recommended
that the Seller execute this Agreement.
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3.02 Representations and Warranties of Company Subs. Except as set forth
in the Company Disclosure Schedule delivered by the Company to the Parent at the
time of execution of this Agreement, the Company represents and warrants to
Parent as follows:
(a) Organization, Standing and Corporate Power. Company Subs are
duly organized, validly existing and in good standing under the laws of
the People's Republic of China, the State of California and the British
Virgin Islands and have the requisite corporate power and authority to
carry on their respective business as now being conducted. Company Subs
are duly qualified or licensed to do business and are in good standing
in each jurisdiction in which the nature of their business or the
ownership or leasing of their properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure
to be so qualified or licensed (individually or in the aggregate) would
not have a material adverse effect (as defined in Section 9.02) with
respect to Company Subs.
(b) Subsidiaries. The Company Subs are 100% owned by the Company
and shall remain wholly owned subsidiaries of the Company following the
Sale.
(c) Capital Structure. Except as set forth in the Financial
Statements, no shares of capital stock or other equity securities of
Company Subs are issued, reserved for issuance or outstanding. All
outstanding equity ownership interest in Company Subs are duly
authorized, validly issued, fully paid and nonassessable and not subject
to preemptive rights. There are no outstanding bonds, debentures, notes
or other indebtedness or other securities of Company Subs having the
right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of
Company Subs may vote. The Company Disclosure Schedule sets forth the
outstanding Capitalization of Company Subs. Except as set forth above,
there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to
which Company Subs are a party or by which they are bound obligating
Company Subs to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other equity or voting
securities of Company Subs or obligating Company Subs to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no
outstanding contractual obligations, commitments, understandings or
arrangements of Company Subs to repurchase, redeem or otherwise acquire
or make any payment in respect of any shares of capital stock of Company
Subs. There are no agreements or arrangements pursuant to which Company
Subs are or could be required to register shares of Company Common Stock
or other securities under the Securities Act of 1933, as amended (the
"Securities Act") or other agreements or arrangements with or among any
security holders of Company Subs with respect to securities of Company
Subs.
(d) Authority; Noncontravention. Each of the Company Subs has
the requisite corporate and other power and authority to enter into this
Agreement and to make the representations contained herein. This
Agreement has been duly executed and delivered by Company Subs and
constitutes a valid and binding obligation of Company Subs, enforceable
against Company Subs in accordance with its terms. The execution and
7
delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions hereof will not, conflict with, or result in any breach or
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of or "put" right with respect to any obligation or to loss
of a material benefit under, or result in the creation of any lien upon
any of the properties or assets of Company Subs under, (i) the Articles
of Incorporation or Bylaws of Company Subs, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to
Company Subs, its properties or assets, or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule,
regulation or arbitration award applicable to Company Subs, their
properties or assets. No consent, approval, order or authorization of,
or registration, declaration or filing with, or notice to, any federal,
state or local government or any court, administrative agency or
commission or other governmental authority, agency, domestic or foreign
(a "Governmental Entity"), is required by or with respect to Company
Subs in connection with the execution and delivery of this Agreement by
Company Subs or the consummation by Company Subs of the transactions
contemplated hereby, except, as set forth in the Company Disclosure
Schedule.
(e) Absence of Certain Changes or Events. Since June 30, 2007,
other than the ownership interest transfer to the Company, if
applicable, each of the Company Subs has conducted its business only in
the ordinary course consistent with past practice, and there is not and
has not been: (i) any material adverse change with respect to Company
Subs; (ii) any condition, event or occurrence which individually or in
the aggregate could reasonably be expected to have a material adverse
effect or give rise to a material adverse change with respect to Company
Subs; (iii) any event which, if it had taken place following the
execution of this Agreement, would not have been permitted by Section
4.01 without prior consent of Parent; or (iv) any condition, event or
occurrence which could reasonably be expected to prevent, hinder or
materially delay the ability of Company Subs to consummate the
transactions contemplated by this Agreement.
(f) Litigation; Labor Matters; Compliance with Laws.
(i) There is no suit, action or proceeding or
investigation pending or, to the knowledge of Company Subs,
threatened against or affecting Company Subs or any basis for
any such suit, action, proceeding or investigation that,
individually or in the aggregate, could reasonably be expected
to have a material adverse effect with respect to Company Subs
or prevent, hinder or materially delay the ability of Company
Subs to consummate the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator outstanding
against Company Subs having, or which, insofar as reasonably
could be foreseen by Company Subs, in the future could have, any
such effect.
(ii) None of the Company Subs is a party to, or bound
by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor
8
organization, nor is any the subject of any proceeding asserting
that it has committed an unfair labor practice or seeking to
compel it to bargain with any labor organization as to wages or
conditions of employment nor is there any strike, work stoppage
or other labor dispute involving it pending or, to its
knowledge, threatened, any of which could have a material
adverse effect with respect to Company Subs.
(iii) The conduct of the business of Company Subs
complies with all statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees or arbitration awards
applicable thereto.
(g) Benefit Plans. None of the Company Subs is a party to any
collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) under which it currently
has an obligation to provide benefits to any current or former employee,
officer or director of Company Subs (collectively, "Benefit Plans").
(h) Certain Employee Payments. None of the Company Subs is a
party to any employment agreement which could result in the payment to
any current, former or future director or employee of Company Subs of
any money or other property or rights or accelerate or provide any other
rights or benefits to any such employee or director as a result of the
transactions contemplated by this Agreement, whether or not (i) such
payment, acceleration or provision would constitute a "parachute
payment" (within the meaning of Section 280G of the Code), or (ii) some
other subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered.
(i) Tax Returns and Tax Payments. Each of the Company Subs has
timely filed all Tax Returns required to be filed by it, has paid all
Taxes shown thereon to be due and has provided adequate reserves in its
financial statements for any Taxes that have not been paid, whether or
not shown as being due on any returns. No material claim for unpaid
Taxes has been made or become a lien against the property of Company
Subs or is being asserted against Company Subs, no audit of any Tax
Return of Company Subs is being conducted by a tax authority, and no
extension of the statute of limitations on the assessment of any Taxes
has been granted by Company Subs and is currently in effect. As used
herein, "taxes" shall mean all taxes of any kind, including, without
limitation, those on or measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium value added, property or windfall profits taxes, customs, duties
or similar fees,, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, domestic or
foreign. As used herein, "Tax Return" shall mean any return, report or
statement required to be filed with any governmental authority with
respect to Taxes.
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(j) Environmental Matters. Each of the Company Subs is in
material compliance with all applicable Environmental Laws.
"Environmental Laws" means all applicable federal, state and local
statutes, rules, regulations, ordinances, orders, decrees and common law
relating in any manner to contamination, pollution or protection of
human health or the environment, and similar state laws.
(k) Material Contract Defaults. None of the Company Subs is, nor
have they received any notice or has any knowledge that any other party
is, in default in any respect under any Material Contract; and there has
not occurred any event that with the lapse of time or the giving of
notice or both would constitute such a material default. For purposes of
this Agreement, a Material Contract means any contract, agreement or
commitment that is effective as of the Closing Date to which Company
Subs is a party (i) with expected receipts or expenditures in excess of
$100,000, (ii) requiring Company Subs to indemnify any person, (iii)
granting exclusive rights to any party, (iv) evidencing indebtedness for
borrowed or loaned money in excess of $100,000 or more, including
guarantees of such indebtedness, or (v) which, if breached by Company
Subs in such a manner would (A) permit any other party to cancel or
terminate the same (with or without notice of passage of time) or (B)
provide a basis for any other party to claim money damages (either
individually or in the aggregate with all other such claims under that
contract) from Company Subs or (C) give rise to a right of acceleration
of any material obligation or loss of any material benefit under any
such contract, agreement or commitment.
(l) Properties. Each of the Company Subs has good, clear and
marketable title to all the tangible properties and tangible assets
reflected in the latest balance sheet as being owned by Company Subs or
acquired after the date thereof which are, individually or in the
aggregate, material to Company Subs's business (except properties sold
or otherwise disposed of since the date thereof in the ordinary course
of business), free and clear of all material liens.
(m) Trademarks and Related Contracts. To the knowledge of
Company Subs:
(i) As used in this Agreement, the term "Trademarks"
means trademarks, service marks, trade names, Internet domain
names, designs, slogans, and general intangibles of like nature;
the term "Trade Secrets" means technology; trade secrets and
other confidential information, know-how, proprietary processes,
formulae, algorithms, models, and methodologies; the term
"Intellectual Property" means patents, copyrights, Trademarks,
applications for any of the foregoing, and Trade Secrets; the
term "Company License Agreements" means any license agreements
granting any right to use or practice any rights under any
Intellectual Property (except for such agreements for
off-the-shelf products that are generally available or less than
$25,000), and any written settlements relating to any
Intellectual Property, to which Company Subs is a party or
otherwise bound; and the term "Software" means any and all
computer programs, including any and all software
implementations of algorithms, models and methodologies, whether
in source code or object code.
10
(ii) To the knowledge of Company Subs, none of Company
Subs's Intellectual Property or Company License Agreements
infringe materially upon the rights of any third party that may
give rise to a cause of action or claim against Company Subs or
their successors.
3.03 Representations and Warranties of Parent. Except as set forth in
the disclosure schedule delivered by Parent to the Company at the time of
execution of this Agreement (the "Parent Disclosure Schedule"), Parent
represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power. Parent is duly
organized, validly existing and in good standing under the laws of the
State of Nevada, and has the requisite corporate power and authority to
carry on its business as now being conducted. Parent is duly qualified
or licensed to do business and is in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than
in such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse
effect with respect to Parent.
(b) Subsidiaries. The Parent has no subsidiaries.
(c) Capital Structure. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock, par value $0.001,
of which 430,282 shares are issued and outstanding (the "Parent Common
Stock"). No shares of Parent Common Stock are issuable upon the exercise
of outstanding warrants, convertible notes, options and otherwise.
Except as set forth above, no shares of capital stock or other equity
securities of Parent are issued, reserved for issuance or outstanding.
All outstanding shares of capital stock of Parent are, and all shares
which may be issued pursuant to this Agreement will be, when issued,
duly authorized, validly issued, fully paid and nonassessable, not
subject to preemptive rights, and issued in compliance with all
applicable state and federal laws concerning the issuance of securities.
There are no outstanding bonds, debentures, notes or other indebtedness
or other securities of Parent having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any
matters on which shareholders of Parent may vote. Except as set forth
above, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any
kind to which Parent is a party or by which it is bound obligating
Parent to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity securities of
Parent or obligating Parent to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
equity securities of Parent or obligating Parent to issue, grant, extend
or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no
outstanding contractual obligations, commitments, understandings or
arrangements of Parent to repurchase, redeem or otherwise acquire or
make any payment in respect of any shares of capital stock of Parent.
(d) Authority; Noncontravention. Parent has all requisite
corporate authority to enter into this Agreement and to consummate the
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transactions contemplated by this Agreement. The execution and delivery
of this Agreement by Parent and the consummation by Parent of the
transactions contemplated by this Agreement have been (or at Closing
will have been) duly authorized by all necessary corporate action on the
part of Parent. This Agreement has been duly executed and delivered by
and constitutes a valid and binding obligation of Parent, enforceable
against each such party in accordance with its terms. The execution and
delivery of this agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
breach or violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of or "put" right with respect to any
obligation or to loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of Parent
under (i) the articles of incorporation or bylaws of Parent, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to Parent or its respective properties or assets, or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law,
ordinance, rule, regulation or arbitration award applicable to Parent or
its respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, breaches, violations, defaults,
rights, losses or liens that individually or in the aggregate could not
have a material adverse effect with respect to Parent or could not
prevent, hinder or materially delay the ability of Parent to consummate
the transactions contemplated by this Agreement. No consent, approval,
order or authorization of, or registration, declaration or filing with,
or notice to, any Governmental Entity is required by or with respect to
Parent in connection with the execution and delivery of this Agreement
by Parent or the consummation by Parent of any of the transactions
contemplated by this Agreement.
(e) SEC Documents; Undisclosed Liabilities. Parent has filed all
reports, schedules, forms, statements and other documents as required by
the Securities and Exchange Commission (the "SEC"), and Parent has
delivered or made available to the Company all reports, schedules,
forms, statements and other documents filed with the SEC (collectively,
and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC documents, and none of the Parent SEC
Documents (including any and all consolidated financial statements
included therein) as of such date contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Except
to the extent revised or superseded by a subsequent filing with the SEC
(a copy of which has been provided to the Company prior to the date of
this Agreement), none of the Parent SEC Documents, to the knowledge of
Parent's management, contains any untrue statement of a material fact or
omits to state any material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of Parent
12
included in such Parent SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the
case of unaudited consolidated quarterly statements, as permitted by
Form 10-QSB of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of Parent and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of operations and changes in cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments as determined by Parent's independent
accountants). Except as set forth in the Parent SEC Documents, at the
date of the most recent financial statements of Parent included in the
Parent SEC Documents, Parent had not incurred any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect with respect to Parent.
(f) Absence of Certain Changes or Events. Except as disclosed in
the Parent SEC Documents, since the date of the most recent financial
statements included in the Parent SEC Documents, Parent has conducted
its business only in the ordinary course consistent with past practice
in light of its current business circumstances, and there is not and has
not been: (i) any material adverse change with respect to Parent; (ii)
any condition, event or occurrence which, individually or in the
aggregate, could reasonably be expected to have a material adverse
effect or give rise to a material adverse change with respect to Parent;
(iii) any event which, if it had taken place following the execution of
this Agreement, would not have been permitted by Section 4.01 without
the prior consent of the Company; or (iv) any condition, event or
occurrence which could reasonably be expected to prevent, hinder or
materially delay the ability of Parent to consummate the transactions
contemplated by this Agreement.
(g) Litigation; Labor Matters; Compliance with Laws.
(i) There is no suit, action or proceeding or
investigation pending or, to the knowledge of Parent, threatened
against or affecting Parent or any basis for any such suit,
action, proceeding or investigation that, individually or in the
aggregate, could reasonably be expected to have a material
adverse effect with respect to Parent or prevent, hinder or
materially delay the ability of Parent to consummate the
transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Parent having, or
which, insofar as reasonably could be foreseen by Parent, in the
future could have, any such effect.
(ii) Parent is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is
it the subject of any proceeding asserting that it has committed
an unfair labor practice or seeking to compel it to bargain with
any labor organization as to wages or conditions of employment
nor is there any strike, work stoppage or other labor dispute
involving it pending or, to its knowledge, threatened, any of
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which could have a material adverse effect with respect to
Parent.
(iii) The conduct of the business of Parent complies
with all statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees or arbitration awards applicable
thereto.
(h) Benefit Plans. Parent is not a party to any Benefit Plan
under which Parent currently has an obligation to provide benefits to
any current or former employee, officer or director of Parent.
(i) Certain Employee Payments. Parent is not a party to any
employment agreement which could result in the payment to any current,
former or future director or employee of Parent of any money or other
property or rights or accelerate or provide any other rights or benefits
to any such employee or director as a result of the transactions
contemplated by this Agreement, whether or not (i) such payment,
acceleration or provision would constitute a "parachute payment" (within
the meaning of Section 280G of the Code), or (ii) some other subsequent
action or event would be required to cause such payment, acceleration or
provision to be triggered.
(j) Tax Returns and Tax Payments. Parent has timely filed all
Tax Returns required to be filed by it, has paid all Taxes shown thereon
to be due and has provided adequate reserves in its financial statements
for any Taxes that have not been paid, whether or not shown as being due
on any returns. No material claim for unpaid Taxes has been made or
become a lien against the property of Parent or is being asserted
against Parent, no audit of any Tax Return of Parent is being conducted
by a tax authority, and no extension of the statute of limitations on
the assessment of any Taxes has been granted by Parent and is currently
in effect.
(k) Environmental Matters. Parent is in material compliance with
all applicable Environmental Laws.
(l) Material Contract Defaults. Parent is not, or has not,
received any notice or has any knowledge that any other party is, in
default in any respect under any Material Contract; and there has not
occurred any event that with the lapse of time or the giving of notice
or both would constitute such a material default. For purposes of this
Agreement, a Material Contract means any contract, agreement or
commitment that is effective as of the Closing Date to which Parent is a
party (i) with expected receipts or expenditures in excess of $10,000,
(ii) requiring Parent to indemnify any person, (iii) granting exclusive
rights to any party, (iv) evidencing indebtedness for borrowed or loaned
money in excess of $10,000 or more, including guarantees of such
indebtedness, or (v) which, if breached by Parent in such a manner would
(A) permit any other party to cancel or terminate the same (with or
without notice of passage of time) or (B) provide a basis for any other
party to claim money damages (either individually or in the aggregate
with all other such claims under that contract) from Parent or (C) give
rise to a right of acceleration of any material obligation or loss of
any material benefit under any such contract, agreement or commitment.
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(m) Properties. Parent has good, clear and marketable title to
all the tangible properties and tangible assets reflected in the latest
balance sheet as being owned by Parent or acquired after the date
thereof which are, individually or in the aggregate, material to
Parent's business (except properties sold or otherwise disposed of since
the date thereof in the ordinary course of business), free and clear of
all material liens.
(n) Trademarks and Related Contracts. Parent does not hold any
Trademarks, Trade Secrets, or Intellectual Property, and is not party to
any license agreements regarding such.
(o) Board Recommendation. The Board of Directors of Parent has
unanimously determined that the terms of this Agreement are fair to and
in the best interests of the shareholders of Parent.
3.04 Representations and Warranties of the Seller. The Seller
represents, warrants and undertakes to the Parent that, except as set forth in
the Disclosure Schedule:
(a) Transfer of Title. Seller shall transfer all right, title
and interest in and to the Company Common Stock to the Parent free and
clear of all liens, security interests, pledges, encumbrances, charges,
restrictions, demands and claims, of any kind or nature whatsoever,
whether direct or indirect or contingent.
(i) Due Execution. This Agreement has been duly executed
and delivered by the Seller.
(ii) Valid Agreement. This Agreement constitutes, and
upon execution and delivery thereof by the Seller, will
constitute, a valid and binding agreement of the Seller
enforceable against the Seller in accordance with its terms.
(iii) Authorization. The execution, delivery and
performance by the Seller of this Agreement and the delivery by
the Seller of the Company Common Stock have been duly and
validly authorized by the Company, and no further consent or
authorization of the Seller, the Company, its Board of
Directors, or its stockholders is required.
(iv) Seller's Title to the Company Common Stock; No
Liens or Preemptive Rights; Valid Issuance. Seller has and at
the Closing will have good and valid title and control of the
Company Common Stock; there will be no existing impediment or
encumbrance to the sale and transfer of such Company Common
Stock to the Parent; and on delivery to the Parent of the
Company Common Stock, good and valid title to all the Company
Common Stock will pass to Parent and all of the Company Common
Stock will be free and clear of all taxes, liens, security
interests, pledges, rights of first refusal or other preference
rights, encumbrances, charges, restrictions, demands, claims or
assessments of any kind or any nature whatsoever whether direct,
indirect or contingent and shall not be subject to preemptive
rights, tag-along rights, or similar rights of any of the
stockholders of the Company. The Company Common Stock have been
legally and validly issued in compliance with all applicable
15
U.S. federal and state securities laws, and are fully paid and
non-assessable shares of the Company's common stock; and the
Company Common Stock have all been issued under duly authorized
resolutions of the Board of Directors of the Company. At the
Closing, Seller shall deliver to the Parent certificates
representing the Company Common Stock free and clear of all
liens, security interests, pledges, encumbrances, charges,
restrictions, demands or claims in any other party whatsoever
with appropriate stock powers with medallion guarantees.
(b) No Governmental Action Required. The execution and delivery
by the Seller of this Agreement does not and will not, and the
consummation of the transactions contemplated hereby will not, require
any action by or in respect of, or filing with, any governmental body,
agency or governmental official.
(c) Compliance with Applicable Law and Corporate Documents. The
execution and delivery by the Seller and the Company of this Agreement
does not and will not, and the sale by the Seller of the Company Common
Stock and the consummation of the other transactions contemplated by
this Agreement does not and will not contravene or constitute a default
under or violation of (i) any provision of applicable law or regulation,
or (ii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Seller or the Company's assets, or result in
the creation or imposition of any lien on any asset of the Seller.
(d) Not a Voting Trust: No Proxies. None of the Company Common
Stock is or will be subject to any voting trust or agreement. No person
holds or has the right to receive any proxy or similar instrument with
respect to the Company Common Stock. Except as provided in this
Agreement, the Seller is not a party to any agreement which offers or
grants to any person the right to purchase or acquire any of the Company
Common Stock. There is no applicable local, state or federal law, rule,
regulation, or decree which would, as a result of the sale contemplated
by this Agreement, impair, restrict or delay any voting rights with
respect to the Company Common Stock.
(e) Adoption of Company's Representations. The Seller adopts and
remakes as its own each and every representation, warranty and
undertaking made by the Company and the Company Subs in Sections 3.01
and 3.02 as if it had made such representations, warranties and
undertakings to the Parent directly.
(f) Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission payable by the
Parent or the Company or Seller in connection with the transactions
contemplated by this Agreement.
(g) Investment Intent. Seller represents that it is acquiring
and will acquire, as the case may be, the Purchase Price Shares issuable
pursuant hereto solely for its own account for investment purposes only
and not with a view toward resale or distribution thereof other than
pursuant to an effective registration statement or applicable exemption
from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Seller understands that such Purchase
Price Shares will be issued in reliance upon an exemption from the
registration requirements of the Securities Act and that subsequent sale
16
or transfer of such securities is prohibited absent registration or
exemption from the provisions of the Securities Act. Seller hereby
agrees that it will not sell, assign, transfer, pledge or otherwise
convey any of the Purchase Price Shares issuable pursuant hereto, except
in compliance with the provisions of the Securities Act and in
accordance with any transfer restrictions or similar terms set forth on
the certificates representing such securities or otherwise set forth
herein. Seller acknowledges receiving copies of the most recent Parent
SEC Documents.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
PRIOR TO CLOSING
4.01 Conduct of Company and Parent. From the date of this Agreement and
until the Closing, or until the prior termination of this Agreement, Company and
Parent shall not, unless mutually agreed to in writing:
(a) engage in any transaction, except in the normal and ordinary
course of business, or create or suffer to exist any Lien or other
encumbrance upon any of their respective assets or which will not be
discharged in full prior to the Closing;
(b) sell, assign or otherwise transfer any of their assets, or
cancel or compromise any debts or claims relating to their assets, other
than for fair value, in the ordinary course of business, and consistent
with past practice;
(c) fail to use reasonable efforts to preserve intact their
present business organizations, keep available the services of their
employees and preserve its material relationships with customers,
suppliers, licensors, licensees, distributors and others, to the end
that its good will and on-going business not be impaired prior to the
Closing;
(d) except for matters related to complaints by former employees
related to wages, suffer or permit any material adverse change to occur
with respect to Company and Parent or their business or assets; or
(e) make any material change with respect to their business in
accounting or bookkeeping methods, principles or practices, except as
required by GAAP.
4.02 Access to Information; Confidentiality.
(a) The Company shall, and shall cause its officers, employees,
counsel, financial advisors and other representatives to, afford to
Parent and its representatives reasonable access during normal business
hours during the period prior to the Closing to its and to Company
Subs's properties, books, contracts, commitments, personnel and records
and, during such period, the Company shall, and shall cause its and
Company Subs's officers, employees and representatives to, furnish
promptly to Parent all information concerning their respective business,
properties, financial condition, operations and personnel as such other
party may from time to time reasonably request. For the purposes of
determining the accuracy of the representations and warranties of the
Parent set forth herein and compliance by the Parent of its obligations
17
hereunder, during the period prior to the Closing, Parent shall provide
the Company and its representatives with reasonable access during normal
business hours to its properties, books, contracts, commitments,
personnel and records as may be necessary to enable the Company to
confirm the accuracy of the representations and warranties of Parent set
forth herein and compliance by Parent of its obligations hereunder, and,
during such period, Parent shall, and shall cause its subsidiaries,
officers, employees and representatives to, furnish promptly to the
Company upon its request (i) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and
(ii) all other information concerning its business, properties,
financial condition, operations and personnel as such other party may
from time to time reasonably request. Except as required by law, each of
the Company and Parent will hold, and will cause its respective
directors, officers, employees, accountants, counsel, financial advisors
and other representatives and affiliates to hold, any nonpublic
information in confidence.
(b) No investigation pursuant to this Section 4.02 shall affect
any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
4.03 Best Efforts. Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Sale and the other transactions contemplated by this
Agreement. Parent and the Company will use their best efforts and cooperate with
one another (i) in promptly determining whether any filings are required to be
made or consents, approvals, waivers, permits or authorizations are required to
be obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments and promptly making any such filings, in furnishing information
required in connection therewith and in timely seeking to obtain any such
consents, approvals, permits or authorizations and (ii) in facilitating each
other's due diligence investigations. Parent and the Company shall mutually
cooperate in order to facilitate the achievement of the benefits reasonably
anticipated from the Sale.
4.04 Public Announcements. Parent, on the one hand, and the Company, on
the other hand, will consult with each other before issuing, and provide each
other the opportunity to review and comment upon, any press release or other
public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law or court process. The parties agree that the initial press release or
releases to be issued with respect to the transactions contemplated by this
Agreement shall be mutually agreed upon prior to the issuance thereof.
Notwithstanding the foregoing, Company may disclose the contemplated Sale as
required in filings with the SEC.
4.05 No Solicitation. Except as previously agreed to in writing by the
other party, neither Company or Parent shall authorize or permit any of its
officers, directors, agents, representatives, or advisors to (a) solicit,
18
initiate or encourage or take any action to facilitate the submission of
inquiries, proposals or offers from any person relating to any matter concerning
any merger, consolidation, business combination, recapitalization or similar
transaction involving Company or Parent, respectively, other than the
transaction contemplated by this Agreement or any other transaction the
consummation of which would or could reasonably be expected to impede, interfere
with, prevent or delay the Sale or which would or could be expected to dilute
the benefits to the Company of the transactions contemplated hereby. Company or
Parent will immediately cease and cause to be terminated any existing
activities, discussions and negotiations with any parties conducted heretofore
with respect to any of the foregoing.
ARTICLE V
OTHER AGREEMENTS
5.01 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
5.02 Directors and Officers. Upon the Closing, all officers and
directors of the Parent shall resign and Parent shall have taken all action to
cause the people nominated by the Company to be elected as and to serve in their
capacity as the Chairman of its Board of Directors, the Chief Executive Officer,
the Chief Financial Officer, as the Chief Operation Officer, and as the
Directors of the Parent.
5.03 Registration Rights. Parent shall include Halter Capital
Corporation and its affiliates ("HCC") as selling shareholders in any
registration statements filed during the three years following the Closing that
register for resale shares of Parent Common Stock issued in private placement
financing transactions during such period. HCC shall be entitled to all of the
rights and remedies as shall be set forth in a registration rights agreement
and/or subscription agreement executed between the Parent and the investors in
such placements.
5.04 Transfer Agent. Following the Closing, the Parent shall retain
Securities Transfer Corporation for a period of three years as the transfer
agent and registrar for the Parent.
ARTICLE VI
CONDITIONS PRECEDENT
6.01 Conditions to Each Party's Obligation to Close. The respective
obligation of each party hereto is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Opinions of Counsel. Execution and delivery of the
following: (i) to the Company, an opinion of counsel from Parent's legal
counsel that the terms, conditions and structure of the Sale satisfy
Nevada law; (ii) to the Parent, an opinion of counsel from the Company's
legal counsel that the terms, conditions and structure of the Sale
satisfy Hong Kong law; and (iii) to the Parent, an opinion of counsel
from Company Subs's legal counsel that the terms, conditions and
structure of the Sale satisfy the People's Republic of China law.
19
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Sale shall be in effect.
6.02 Conditions to Obligations of Parent. The obligations of Parent to
effect the Sale are further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company and Seller set forth in this Agreement shall
be true and correct in all material respects, in each case as of the
date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date. Parent shall have received a certificate signed
on behalf of the Company by the president of the Company to such effect.
(b) Performance of Obligations of the Company. The Company and
Seller shall have performed the obligations required to be performed by
it under this Agreement at or prior to the Closing Date (except for such
failures to perform as have not had or could not reasonably be expected,
either individually or in the aggregate, to have a material adverse
effect with respect to the Company or adversely affect the ability of
the Company to consummate the transactions herein contemplated or
perform its obligations hereunder), and Parent shall have received a
certificate signed on behalf of the Company by the president of the
Company to such effect.
(c) Consents, etc. Parent shall have received evidence, in form
and substance reasonably satisfactory to it, that such licenses,
permits, consents, approvals, authorizations, qualifications and orders
of governmental authorities and other third parties as necessary in
connection with the transactions contemplated hereby have been obtained.
(d) No Litigation. There shall not be pending or threatened by
any Governmental Entity any suit, action or proceeding (or by any other
person any suit, action or proceeding which has a reasonable likelihood
of success), (i) challenging or seeking to restrain or prohibit the
consummation of the Sale or any of the other transactions contemplated
by this Agreement or seeking to obtain from Parent any damages that are
material in relation to Parent taken as a whole, (ii) seeking to
prohibit or limit the ownership or operation by the Company, Company
Subs or Parent of any material portion of the business or assets of the
Company, Company Subs or Parent, or to dispose of or hold separate any
material portion of the business or assets of the Company, Company Subs
or Parent, as a result of the Sale or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose limitations on
the ability of Parent to acquire or hold, or exercise full rights of
ownership of, any shares of Company Common Stock, including, without
limitation, the right to vote the Company Common Stock on all matters
properly presented to the shareholders of the Company, or (iv) seeking
to prohibit Parent from effectively controlling in any material respect
the business or operations of the Company.
20
(e) Due Diligence Investigation. Parent shall be satisfied with
the results of its due diligence investigation of the Company and
Company Subs in its sole and absolute discretion.
(f) Form 8-K. The Company shall file a Form 8-K with the SEC
within four business days of the Closing Date containing Form 10
information about the combined Parent and Company and audited financial
statements of the Company as required by Regulation S-B. Such Form 8-K
shall be in form and substance acceptable to Parent and its counsel
prior to Closing.
6.03 Conditions to Obligation of the Company. The obligation of the
Company to effect the Sale is further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth in this Agreement shall be true and
correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date. The Company shall have received a certificate signed on
behalf of Parent by the president of Parent to such effect.
(b) Performance of Obligations of Parent. Parent shall have
performed the obligations required to be performed by it under this
Agreement at or prior to the Closing Date (except for such failures to
perform as have not had or could not reasonably be expected, either
individually or in the aggregate, to have a material adverse effect with
respect to Parent or adversely affect the ability of Parent to
consummate the transactions herein contemplated or perform its
obligations hereunder), and the Company shall have received a
certificate signed on behalf of Parent by the president of Parent to
such effect.
(c) No Litigation. There shall not be pending or threatened any
suit, action or proceeding before any court, Governmental Entity or
authority (i) pertaining to the transactions contemplated by this
Agreement or (ii) seeking to prohibit or limit the ownership or
operation by the Company, Company Subs or Parent, or to dispose of or
hold separate any material portion of the business or assets of the
Company, Company Subs or Parent.
(d) Consents, etc. Company shall have received evidence, in form
and substance reasonably satisfactory to it, that such licenses,
permits, consents, approvals, authorizations, qualifications and orders
of governmental authorities and other third parties as necessary in
connection with the transactions contemplated hereby have been obtained.
(e) Resignations. Parent shall deliver to the Company written
resignations of all of the officers and directors of the Parent and
evidence of election of those new directors and officers as further
described in Section 5.02 herein.
(f) Form 8-K. The Company shall file a Form 8-K with the SEC
within four business days of the Closing Date containing Form 10
information about the combined Parent and Company and audited financial
statements of the Company as required by Regulation S-B. Such Form 8-K
21
shall be inform and substance acceptable to Parent and its counsel prior
to Closing.
(g) Section 14(f) Compliance. Parent shall have filed with the
SEC an Information Statement pursuant to Section 14(f) of the Securities
Exchange Act of 1934 and mailed same to its shareholders at least ten
days prior to Closing.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination. This Agreement may be terminated and abandoned at any
time prior to the Closing:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Sale and
such order, decree, ruling or other action shall have become final and
nonappealable; and
(c) if the Closing shall not have occurred for any reason by
December 31, 2007.
7.02 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent or the Company. Nothing contained in this
Section shall relieve any party for any breach of the representations,
warranties, covenants or agreements set forth in this Agreement.
7.03 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
7.04 Extension; Waiver. Subject to Section 7.01(c), at any time prior to
the Closing, the parties may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement, or (c) waive compliance with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
7.05 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver of this Agreement
pursuant to Section 7.04 shall, in order to be effective, require in the case of
Parent or the Company, action by its Board of Directors.
22
7.06 Return of Documents. In the event of termination of this Agreement
for any reason, Parent and Company will return to the other party all of the
other party's documents, work papers, and other materials (including copies)
relating to the transactions contemplated in this Agreement, whether obtained
before or after execution of this Agreement. Parent and Company will not use any
information so obtained from the other party for any purpose and will take all
reasonable steps to have such other party's information kept confidential.
ARTICLE VIII
GENERAL PROVISIONS
8.01 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by facsimile, electronic mail, or
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Parent Representative, to:
2591 Dallas Pkwy, Suite 102
Frisco, Texas 75034
Attention: Kevin B. Halter, Jr.
(b) if to the Company, to:
No. 177 Chengyang Section
308 National Highway
Danshan Industrial Area
Quingdao 266109
China
Attention: Kai Chen
8.02 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) "material adverse change" or "material adverse effect"
means, when used in connection with the Company or Parent, any change or
effect that either individually or in the aggregate with all other such
changes or effects is materially adverse to the business, assets,
properties, condition (financial or otherwise) or results of operations
of such party and its subsidiaries taken as a whole (after giving effect
in the case of Parent to the consummation of the Sale);
(c) "person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other
entity; and
(d) a "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership
23
interests of which is sufficient to elect at least a majority of its
board of Directors or other governing body (or, if there are no such
voting interests, fifty percent (50%) or more of the equity interests of
which) is owned directly or indirectly by such first person.
8.03 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
8.04 Entire Agreement; No Third-Party Beneficiaries. This Agreement and
the other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This Agreement
is not intended to confer upon any person other than the parties any rights or
remedies.
8.05 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Nevada, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
8.06 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
8.07 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
8.08 Counterparts. This Agreement may be executed in one or more
identical counterparts, all of which shall be considered one and the same
instrument and shall become effective when one or more such counterparts shall
have been executed by each of the parties and delivered to the other parties.
8.09 Survival. The representations and warranties herein shall not
survive the Closing. All covenants and agreements that by their terms extend
past the Closing shall survive the Closing for the full period of limitations
applicable to such agreements.
[Signature Page Follows]
24
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
officers to execute this Agreement as of the date first above written.
RUB A DUB SOAP, INC.
By: /s/ Kevin Halter, Jr.
---------------------
Kevin Halter, Jr., President & CEO
ZHONGSEN INTERNATIONAL COMPANY
GROUP, LTD.
By: /s/ Kai Chen
------------
Name: Kai Chen
Title: President
/s/ Kai Chen
------------
KAI CHEN, Seller
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