Document/Exhibit Description Pages Size
1: 8-K Current Report 11 41K
2: EX-2.1 Plan of Acquisition, Reorganization, Arrangement, 59 243K
Liquidation or Succession
EX-2.1 — Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Exhibit Table of Contents
EXCHANGE AGREEMENT
BY AND AMONG
PUREZZA GROUP, INC.,
PUDA INVESTMENT HOLDING LIMITED,
EACH MEMBER OF PUDA INVESTMENT HOLDING LIMITED,
SHANXI PUDA RESOURCES CO, LTD.,
AND TAIYUAN PUTAI BUSINESS CONSULTING CO., LTD.
DATED AS OF JUNE 20, 2005
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as
of June 20, 2005, by and among Purezza Group, Inc., a Florida corporation
("Purezza"), Taiyuan Putai Business Consulting Co., Ltd. ("Putai"), a limited
liability company under the Company Law of The People's Republic of China (the
"PRC"), Shanxi Puda Resources Co, Ltd. ("Puda"), a limited liability company
formed by natural persons under the laws of the PRC, Puda Investment Holding
Limited, an International Business Company incorporated in the British Virgin
Islands (the "Company"), and each of the persons listed under the caption
"Members" on the signature page hereof, together with each person becoming a
Member prior to the closing of the transactions contemplated hereunder who shall
execute a counterpart signature of this Agreement, such persons being all of the
members of the Company. The Members shall be referred to herein collectively as
the "Members" and individually as the "Member".
RECITALS
A. The Members own all of the Shares (as defined in Section 1.1) of the
Company.
B. The Company owns all of the registered capital of Putai, a wholly
foreign owned enterprise under the wholly foreign-owned enterprises laws of the
PRC.
C. Puda is a limited liability company formed by natural persons under the
laws of the PRC and a domestic enterprise with exclusively domestic capital
registered in Shanxi Province in the PRC whose registered capital is owned
directly by the Members, and who is engaged in the business of coal crushing,
preparation and cleaning in the PRC.
D. Putai has agreed to advise, consult, manage and operate Puda's business
in consideration for certain payments by Puda to Putai pursuant to certain
agreements to be entered into by the parties prior to Closing including, without
limitation, an Exclusive Consulting Agreement, ("Consulting Agreement"), an
Operating Agreement, ("Operating Agreement"), and a Technology License
Agreement, ("License Agreement") (collectively, theses agreements are referred
to herein as the "Restructuring Agreements"), each of which shall be acceptable
to Purezza.
E. Keating Reverse Merger Fund, LLC, a Delaware limited liability company
("KRM Fund"), owns the majority of the outstanding shares of common stock of
Purezza.
F. Purezza desires to acquire all of the Shares and equity ownership of
the Members of the Company in exchange for certain of equity securities of
Purezza, and the Members desire to transfer and contribute all of their Shares
and equity ownership of the Company to Purezza in exchange for certain equity
securities of Purezza, on the terms and conditions hereinafter set forth.
G. As a condition and inducement to Purezza's willingness to enter into
this Agreement, at or prior to the Closing (as defined in Section 1.2), KRM Fund
and each Member of the Company will enter into a voting agreement in
substantially the form attached hereto as Exhibit A (the "Voting Agreement").
H. The parties intend, by executing this Agreement, to adopt a plan of
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code") or implement a tax-deferred exchange of property governed
by Section 351 of the Code.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
EXCHANGE OF SHARES
1.1 Exchange. At the Closing and subject to and upon the terms and
conditions of this Agreement, the Members of the Company agree to contribute,
transfer, assign and deliver to Purezza, and Purezza agrees to acquire from the
Members, all of the outstanding shares of capital stock of the Company
("Shares") owned by the Members as specifically set forth on Schedule 1.1
hereto. As of the Closing Date, the Shares shall constitute all of the issued
and outstanding Shares and equity ownership interests of the Company. The
exchange of Shares contemplated hereunder and the other transactions
contemplated hereunder shall be referred to herein as the "Transaction" or the
"Transactions".
1.2 Closing. Unless this Agreement shall have been terminated pursuant to
Article IX hereof, the closing of the Transaction (the "Closing") shall take
place at the offices of Stephen A. Zrenda, Jr., Esq., 2440 Bank One Center, 100
N. Broadway, Oklahoma City, OK 73102 at a time and date to be specified by the
parties, which shall be no later than the third business day after the
satisfaction or waiver of the conditions set forth in Article VII, or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
1.3 Exchange Consideration. In exchange for the Shares of the Company,
Purezza shall issue 1,000,000 shares of Series A Convertible Preferred Stock,
par value $0.01 per share, of Purezza (the "Preferred Shares"), which shall be
convertible into 678,500,000 shares of Purezza's Common Stock (the "Conversion
Shares"), subject to Stockholder Approval as defined in Section 4.3(a) hereof.
The Conversion Shares shall represent 92% of the issued and outstanding shares
of common stock of Purezza, on an as converted and fully diluted basis
immediately following the Closing, after giving effect to any Shares, ownership
interests, equity securities, convertible securities, warrants, options, or
other derivative securities of Purezza or the Company issued or to be issued to
any Person (as defined herein), or assumed or to be assumed by Purezza, in
connection with or following the Transactions (including any shares of Purezza's
common stock to be issued to any finder, consultant or advisor engaged by the
Company with respect to this Transaction), but excluding outstanding options to
purchase 1,650,000 shares of Purezza'a common stock held by third parties.
1.4 Allocation of Preferred Shares. At the Closing, the Preferred Shares
to be issued to the Members of the Company in exchange for the Shares shall be
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issued to the respective Members in proportion to their respective ownership of
the Shares as described in Schedule 1.1 hereto.
1.5 Delivery of Assignment of Shares. At Closing, the Company shall
deliver to Purezza a certificate duly executed and authorized by the registered
agent of the Company and each of the officers and directors of the Company
certifying to the ownership of the Shares by each Member as set forth on
Schedule 1.1 hereof, and each Member shall deliver an assignment, stock power or
other acceptable instrument of transfer of the Shares owned by such Member, duly
executed by such Member with (i) all certificates representing the Shares and
such other documents as may be reasonably requested to vest in Purezza good and
marketable title to the Shares free and clear of any and all Liens (as defined
in Section 2.3 hereof) and (ii) all reasonably necessary other documentary
stamps. The Company shall record the transfer of the Shares described in this
Section 1.5 on its transfer books.
1.6 Issuance of Certificates Representing Purezza's Preferred Shares.
At Closing, Purezza will issue the Preferred Shares to the Members as provided
in Section 1.4 above. The Preferred Shares, when issued, shall be restricted
shares and may not be sold, transferred or otherwise disposed of by the Members
without registration under the Securities Act of 1933, as amended ("Securities
Act") or an available exemption from registration under the Securities Act. The
certificates representing the Preferred Shares will contain the appropriate
restrictive legends.
1.7 Tax Consequences. It is intended by the parties hereto that the Members
contributions and transfers of the Shares to Purezza in exchange for the
Preferred Shares constitutes a plan of reorganization under Section 368 of the
Code or a tax-deferred exchange of property within the meaning of Section 351 of
the Code.
1.8 Taking of Necessary Action; Further Action. If, at any time after
the Closing, any further action is necessary or desirable to carry out the
purposes of this Agreement, including qualifying the Transaction as a plan of
reorganization within the meaning of Section 368 of the Code or a tax-deferred
exchange of property within the meaning of Section 351 of the Code, and to vest
Purezza with full right, title and possession to the Shares, the Members of the
Company and Purezza will take all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MEMBERS WITH RESPECT TO SHARES
Each Member of the Company for himself only, and not with respect to
any other Member, hereby severally represents and warrants to, and covenants
with, Purezza with respect to such Member as follows:
2.1 Ownership of Shares. Each Member of the Company is both the record
and beneficial owner of the Shares set forth beside such Member's name on
Schedule 1.1 hereto. Each Member is not the record or beneficial owner of any
other Shares. The information set forth on Schedule 1.1 with respect to each
Member is accurate and complete.
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2.2 Authority of Members. Each Member that is a natural person has full
power and authority and is competent to (i) execute, deliver and perform this
Agreement, and each ancillary document which each such Member has executed or
delivered or is to execute or deliver pursuant to this Agreement (including the
Voting Agreement and Restructuring Agreements), and (ii) carry out each such
Member's obligations hereunder and thereunder, without the need for any
Governmental Action/Filing (as defined herein). Each Member that is a corporate
or other entity has obtained all due authorization and has full power for the
execution, delivery and performance of this Agreement and each ancillary
document which each such Member has executed or delivered or is to execute or
deliver pursuant to this Agreement (including the Voting Agreement and
Restructuring Agreements) and to carry out each such Member's obligations
hereunder and thereunder without the need for any Governmental Action/Filing.
The execution, delivery and performance by each Member of this Agreement and
each ancillary document does not and will not conflict with, result in a breach
of, or constitute a default or require a consent or action under, any agreement
or other instrument to or by which such Member is a party or is bound or to
which any of the Shares of such Member are subject, or, to such Member's
knowledge, any Legal Requirement (as defined herein) to which such Member is
subject, or result in the creation of any Lien (as defined in Section 2.3) on
the Shares. This Agreement, and each Member's ancillary documents to be executed
and delivered by such Member at the Closing, has been duly executed and
delivered by such Member (and each ancillary document to be executed and
delivered by such Member at or after the Closing will be duly executed and
delivered by such Member), and this Agreement constitutes, and each ancillary
document, when executed and delivered by such Member will constitute, and
assuming the due authorization, execution and delivery thereof by the other
parties hereto and thereto, as applicable, such Member's legal, valid and
binding obligation, enforceable against such Member in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity and public policy. For purposes of this
Agreement, (x) the term "Governmental Action/Filing" shall mean any franchise,
license, certificate of compliance, authorization, consent, order, permit,
approval, consent or other action of, or any filing, registration or
qualification with, any federal, state, municipal, foreign or other
governmental, administrative or judicial body, agency or authority, and (y) the
term "Legal Requirements" means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity (as defined in Section 3.5(b)),
and all requirements set forth in applicable Contracts (as defined in Section
3.19(a)).
2.3 Title To Shares. Each Member has and shall transfer to Purezza at
the Closing, good and marketable title to the Shares shown as owned of record by
such Member on Schedule 1.1 to this Agreement, free and clear of all liens,
claims, charges, encumbrances, pledges, mortgages, security interests, options,
rights to acquire, proxies, voting trusts or similar agreements, restrictions on
transfer or adverse claims of any nature whatsoever ("Liens").
2.4 Pre-emptive Rights. At Closing, no Member has any pre-emptive
rights or any other rights to acquire any Shares of the Company that have not
been waived or exercised.
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2.5 Repayment of Obligations. At the Closing Date, all amounts owed to
the Company, Putai or Puda or any Subsidiary of the foregoing (as defined in
Section 3.2 hereof) by each Member of the Company (regardless of whether such
amounts are due and payable) shall have been paid in full.
2.6 Acquisition of Preferred Shares for Investment.
(a) Each Member is acquiring the Preferred Shares for
investment for Member's own account and not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and each Member has no
present intention of selling, granting any participation in, or otherwise
distributing the same. Each Member further represents 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 Preferred Shares.
(b) Each Member understands that the Preferred Shares are not
registered under the Securities Act, that the issuance of the Preferred Shares
(and the underlying Conversion Shares) is intended to be exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and that
Purezza's reliance on such exemption is predicated on the Member's
representations set forth herein. Each Member represents and warrants that: (i)
he is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the Act, (ii) he can bear the economic risk of his respective
investments, and (iii) he possesses such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
the investment in Purezza and its securities.
(c) Each Member acknowledges that neither the U.S. Securities
and Exchange Commission ("SEC"), nor the securities regulatory body of any state
or other jurisdiction, has received, considered or passed upon the accuracy or
adequacy of the information and representations made in this Agreement.
(d) Each Member acknowledges that he has carefully reviewed
such information as he has deemed necessary to evaluate an investment in Purezza
and its securities. To the full satisfaction of each Member, he has been
furnished all materials that he has requested relating to Purezza and the
issuance of the Preferred Shares hereunder, and each Member has been afforded
the opportunity to ask questions of Purezza's representatives to obtain any
information necessary to verify the accuracy of any representations or
information made or given to the Members. Notwithstanding the foregoing, nothing
herein shall derogate from or otherwise modify the representations and
warranties of Purezza set forth in this Agreement, on which each of the Members
have relied in making an exchange of his Shares of the Company for the Preferred
Shares of Purezza.
(e) Each Member understands that the Preferred Shares (and the
underlying Conversion Shares) may not be sold, transferred, or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Preferred Shares (and the underlying Conversion Shares) or any
available exemption from registration under the Securities Act, the Preferred
Shares (and the underlying Conversion Shares) may have to be held indefinitely.
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Each Member further acknowledges that the Preferred Shares (and the underlying
Conversion Shares) may not be sold pursuant to Rule 144 promulgated under the
Securities Act unless all of the conditions of Rule 144 are satisfied
(including, without limitation, Purezza's compliance with the reporting
requirements under the Securities Exchange Act of 1934, as amended ("Exchange
Act")).
ARTICLE III
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COMPANY, PUDA AND PUTAI
Zhao Ming, Zhao Yao, the Company, Putai and Puda hereby jointly and
severally represent and warrant to, and covenant with, Purezza, as follows:
3.1 Organization and Qualification.
(a) The Company is a company organized as an International
Business Company under the laws of the British Virgin Islands, is duly formed or
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being or currently planned by the Company to be conducted. The Company is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Approvals") necessary
to own, lease and operate the properties it purports to own, operate or lease
and to carry on its business as it is now being conducted, and to consummate the
Transactions contemplated under this Agreement, except where the failure to have
such Approvals could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect (as defined in Section 11.2(b)) on
the Company. Complete and correct copies of the articles of organization and
bylaws or similar governing, organization or charter documents (collectively
referred to herein as "Charter Documents") of the Company, as amended and
currently in effect, have been heretofore delivered to Purezza. The Company is
not in violation of any of the provisions of the Company's Charter Documents.
The Company is duly qualified or licensed to do business as a foreign company
and is in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company. The minute books or the equivalent contain true, complete and
accurate records of meetings and consents in lieu of meetings of its board of
directors (and any committees thereof), similar governing bodies and
stockholders ("Corporate Records") of the Company, since the time of the
Company's organization. Copies of such Corporate Records of the Company have
been heretofore delivered to Purezza. The ownership records of the Company'
Shares are true, complete and accurate records of the ownership of the Shares as
of the date of such records and contain all transfers of such Shares since the
time of the Company's organization ("Share Records"). Copies of such Share
Records of the Company have been heretofore delivered to Purezza.
(b) Putai is a limited liability company organized under the
Company Law of the PRC and a wholly foreign owned enterprise under the wholly
foreign-owned enterprises laws of the PRC, is duly formed or organized, validly
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existing and in good standing under the laws of its jurisdiction of organization
and has the requisite power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being or currently
planned by Putai to be conducted. Putai is in possession of all Approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease, to carry on its business as it is now being conducted, to consummate
the Transactions contemplated under this Agreement, to enter into and perform
all of its obligations under the Restructuring Agreements, to become, and
maintain its status as, a wholly foreign owned enterprise under the laws of the
PRC, and to exchange currency of the PRC into currency of the United States and
vice versa without limitation, except where the failure to have such Approvals
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Putai. Complete and correct copies of the Charter
Documents of Putai, as amended and currently in effect, have been heretofore
delivered to Purezza. Putai is not in violation of any of the provisions of
Putai's Charter Documents. Putai is duly qualified or licensed to do business as
a foreign company and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Putai. The Corporate Records of Putai contain true, complete
and accurate records of meetings and consents in lieu of meetings of its board
of directors (and any committees thereof), similar governing bodies and holders
of its registered capital, since the time of Putai's organization. Copies of
such Corporate Records of Putai have been heretofore delivered to Purezza. The
ownership records of Putai's registered capital are true, complete and accurate
records of such ownership as of the date of such records and contain all
transfers of such registered capital since the time of Putai's organization, and
copies of such records of Putai have been heretofore delivered to Purezza.
(c) Puda is a limited liability company formed by natural
persons under the laws of the PRC and a domestic company with exclusively
domestic capital under the laws of the PRC, is duly formed or organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being or currently
planned by Puda to be conducted. Puda is in possession of all Approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease, to carry on its business as it is now being conducted, to consummate
the Transactions contemplated under this Agreement, and to enter into and
perform all of its obligations under the Restructuring Agreements, except where
the failure to have such Approvals could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Puda. Complete and
correct copies of the Charter Documents of Puda, as amended and currently in
effect, have been heretofore delivered to Purezza. Puda is not in violation of
any of the provisions of Puda's Charter Documents. Puda is duly qualified or
licensed to do business as a foreign company and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Puda. The Corporate Records of
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Puda contain true, complete and accurate records of meetings and consents in
lieu of meetings of its board of directors (and any committees thereof), similar
governing bodies and holders of its registered capital, since the time of Puda's
organization. Copies of such Corporate Records of Puda have been heretofore
delivered to Purezza. The ownership records of Puda's registered capital are
true, complete and accurate records of such ownership as of the date of such
records and contain all transfers of such registered capital since the time of
Puda's organization, and copies of such records of Puda have been heretofore
delivered to Purezza.
3.2 Subsidiaries. Set forth in Schedule 3.2 hereto is a true and
complete list of all Subsidiaries of the Company, Putai and Puda stating, with
respect to each Subsidiary, its jurisdiction of incorporation or organization,
date of incorporation or organization, capitalization and equity ownership. Each
Subsidiary is a corporation duly incorporated or organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its businesses as they are now being
conducted, and no Subsidiary is required to qualify to do business as a foreign
corporation in any other jurisdiction. All of the outstanding shares of capital
stock or the registered capital of each Subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable, have not been issued
in violation of any preemptive or other right of stockholders (or any other
Person) or of any Legal Requirements, and are owned beneficially and of record
by the Company as specified on Schedule 3.2, free and clear of any Lien.
Complete and correct copies of the Charter Documents of each Subsidiary, as
amended and currently in effect, have heretofore been delivered to Purezza. No
Subsidiary is in violation of any of the provisions of its Charter Documents.
Except as described in Schedule 3.2 hereto, neither the Company, Putai
or Puda nor any Subsidiary owns, directly or indirectly, any ownership, equity,
profits or voting interest in any Person (other than the Company, Putai, Puda or
the Subsidiaries) or has any agreement or commitment to purchase any such
interest, and the Company, Putai, Puda and its Subsidiaries have not agreed and
are not obligated to make nor are bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan,
commitment or undertaking of any nature, as of the date hereof or any date
hereafter, under which any of them may be obligated to make any future
investment in or capital contribution to any other entity.
For purposes of this Agreement, (i) the term "Subsidiary" shall mean
any Person in which the Company, Puda, Putai or any Subsidiary directly or
indirectly, owns beneficially securities or interests representing more than 50%
of (x) the aggregate equity or profit interests, or (y) the combined voting
power of voting interests ordinarily entitled to vote for management or
otherwise, (ii) the term "Person" shall mean and include an individual, a
corporation, a partnership (general or limited), a joint venture, an
association, a limited liability company, a trust or any other organization or
entity, including a government or political subdivision or an agency or
instrumentality thereof, and (iii) the term "Affiliated Company" or "Affiliated
Companies" shall mean the Company, Puda and Putai, individually or collectively,
as the case may be.
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3.3 Capitalization.
(a) The authorized capital stock of the Company consists of
50,000 shares of capital stock, par value US$1.00 per share, or an authorized
capital of US$50,000. At the close of business on the business day prior to the
date hereof, Schedule 1.1 hereto contains all of the outstanding equity
securities of the Company. At Closing, the Company shall deliver to Purezza a
current and updated Schedule 1.1 showing all equity securities outstanding
immediately prior to Closing, which Schedule 1.1 shall be substituted for and
replace the Schedule 1.1 attached hereto as of the date of this Agreement with
all references to Schedule 1.1 herein referring to the Schedule 1.1 to be
delivered at Closing. All Shares on Schedule 1.1 have been validly issued, fully
paid and are nonassessable. Except as set forth in Schedule 1.1 and Schedule
3.3, there are no outstanding securities, convertible securities, options,
warrants or derivative securities, and there are no agreements or commitments
obligating the Company to issue or grant any of the foregoing, including any
pre-emptive or similar rights. All outstanding Shares, options, warrants and
other securities of the Company have been issued in compliance with (i) all
applicable securities laws and (in all material respects) other applicable laws
and regulations, and (ii) all requirements set forth in any applicable
contracts. Except as described in Schedule 3.3 hereto, there are no commitments
or agreements of any character to which the Company is bound obligating the
Company to accelerate the vesting of any options or warrants as a result of the
Transactions. The Company has heretofore delivered to Purezza true, complete and
accurate copies of all options, warrants and other securities of the Company, if
any, including any and all documents and agreements relating thereto.
(b) Putai has a registered capital of US$20,000 and an
invested capital of US$20,000. At the close of business on the business day
prior to the date hereof, all of the registered capital of Putai is owned
beneficially and of record by the Company. All of Putai's registered capital has
been validly issued, fully paid and are nonassessable. Except as set forth in
Schedule 3.3, there are no outstanding registered capital, ownership interests,
securities, convertible securities, options, warrants or derivative securities,
and there are no agreements or commitments obligating Putai to issue or grant
any of the foregoing, including any pre-emptive or similar rights. All
outstanding registered capital, options, warrants and other securities of Putai
have been issued in compliance with (i) all applicable securities laws and (in
all material respects) other applicable laws and regulations, and (ii) all
requirements set forth in any applicable contracts. Except as described in
Schedule 3.3 hereto, there are no commitments or agreements of any character to
which Putai is bound obligating Putai to accelerate the vesting of any options
or warrants as a result of the Transactions. Putai has heretofore delivered to
Purezza true, complete and accurate copies of all options, warrants and other
securities of Putai, if any, including any and all documents and agreements
relating thereto.
(c) Puda has a registered capital of RMB22,500,000 and an
invested capital of RMB22,500,000. At the close of business on the business day
prior to the date hereof, Zhao Ming owns 80% of the registered capital of Puda
and Zhao Yao owns 20% of the registered capital of Puda. All the registered
capital of Puda has been validly issued, fully paid and are nonassessable.
Except as set forth in Schedule 3.3, there are no outstanding registered
capital, ownership interests, securities, convertible securities, options,
warrants or derivative securities, and there are no agreements or commitments
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obligating Puda to issue or grant any of the foregoing, including any
pre-emptive or similar rights. All outstanding registered capital, options,
warrants and other securities of Puda have been issued in compliance with (i)
all applicable securities laws and (in all material respects) other applicable
laws and regulations, and (ii) all requirements set forth in any applicable
contracts. Except as described in Schedule 3.3 hereto, there are no commitments
or agreements of any character to which Puda is bound obligating Puda to
accelerate the vesting of any options or warrants as a result of the
Transactions. Puda has heretofore delivered to Purezza true, complete and
accurate copies of all options, warrants and other securities of Puda, if any,
including any and all documents and agreements relating thereto.
(d) Except as set forth in this Section 3.3 or in Schedule 3.3
hereto, there are no registered capital, equity securities, partnership
interests or similar ownership interests of any class of any equity security of
the Affiliated Companies, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as set
forth in this Section 3.3 or in Schedule 3.3 hereof, and except for that certain
Exclusive Option Agreement by and among Putai, Puda, Zhao Ming and Zhao Yao
("Option Agreement"), which shall be entered into prior to the Closing and shall
be acceptable to Purezza, there are no registered capital, subscriptions,
options, warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Affiliated Companies or any Member are
a party or by which they are bound obligating them to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any registered
capital, shares of capital stock, partnership interests or similar ownership
interests of the Affiliated Companies or obligating the Affiliated Companies to
grant, extend, accelerate the vesting of or enter into any such subscription,
option, warrant, equity security, call, right, commitment or agreement.
(e) Except as contemplated by this Agreement and except as set
forth in Schedule 3.3 hereto, and except for those certain Authorizations by and
among Putai, Puda, Zhao Ming and Zhao Yao ("Authorizations") which shall be
entered into prior to Closing and be acceptable to Purezza, there are no
registration rights, and there is no voting trust, voting agreement, proxy,
rights plan, anti-takeover plan or other agreement or understanding to which the
Affiliated Companies or any Member are a party or by which they are bound with
respect to any shares of capital stock, registered capital, equity securities,
partnership interests or similar ownership interests of any class of the
Affiliated Companies, and there are no agreements to which the Affiliated
Companies are a party, or which the Affiliated Companies have knowledge of,
which conflict with this Agreement or the transactions contemplated herein or
otherwise prohibit the consummation of the transactions contemplated hereunder.
3.4 Authority Relative to this Agreement. Each Affiliated Company has
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and, to consummate the
transactions contemplated hereby (including the Transaction). The execution and
delivery of this Agreement and the consummation by each Affiliated Company of
the transactions contemplated hereby (including the Transaction) have been duly
and validly authorized by all necessary action on the part of each Affiliated
10
Company (including the approval by its stockholders), and no other proceedings
on the part of each Affiliated Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each Affiliated Company and, assuming
the due authorization, execution and delivery thereof by the other parties
hereto, constitutes the legal and binding obligation of each Affiliated Company,
enforceable against each of them in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity and public policy.
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each
Affiliated Company does not, and the performance of this Agreement by each
Affiliated Company shall not, (i) conflict with or violate their respective
Charter Documents, (ii) conflict with or violate any Legal Requirements, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or materially
impair the Affiliated Company's rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of any Affiliated Company or its
Subsidiaries pursuant to, any Material Contracts (as defined below), except,
with respect to clauses (ii) or (iii), for any such conflicts, violations,
breaches, defaults or other occurrences that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Affiliated Companies and their Subsidiaries.
(b) The execution and delivery of this Agreement by each
Affiliated Company does not, and the performance of obligations of each
Affiliated Company hereunder will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any court,
administrative agency, commission, governmental or regulatory authority,
domestic or foreign (a "Governmental Entity"), except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, state securities
laws ("Blue Sky Laws"), and the rules and regulations thereunder, and
appropriate documents with the relevant authorities of other jurisdictions in
which the Company is qualified to do business, and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Affiliated
Companies or, after the Closing, Purezza, or prevent consummation of the
Transaction or otherwise prevent the parties hereto from performing their
obligations under this Agreement.
3.6 Compliance. Each Affiliated Company and any Subsidiaries have
complied with and are not in violation of any Legal Requirements with respect to
the conduct of their business, or the ownership or operation of their business,
except for failures to comply or violations which, individually or in the
aggregate, have not had and are not reasonably likely to have a Material Adverse
Effect on the Affiliated Companies and the Subsidiaries. To the each Affiliated
Company's knowledge, the businesses and activities of the Affiliated Company and
any Subsidiaries have not been and are not being conducted in violation of any
Legal Requirements. Each Affiliated Company and any Subsidiaries are not in
11
default or violation of any term, condition or provision of any applicable
Charter Documents or Contracts. Except as set forth on Schedule 3.6, no written
notice of non-compliance with any Legal Requirements relating or with respect to
the business of the Affiliated Companies or any Subsidiaries has been received
by the Affiliated Companies or any Subsidiaries (and each Affiliated Company has
no knowledge of any material such notice delivered to any other Person). To each
Affiliated Company's knowledge, the Affiliated Companies and any Subsidiaries
are not in violation of any material term of any contract or covenant relating
to employment, patents, proprietary information disclosure, non-competition or
non-solicitation.
3.7 Financial Statements.
(a) The Company will provide Purezza a correct and complete
copy of its audited financial statements, on a consolidated basis with Putai and
Puda, with Puda's financial statements being the historical financial statements
of the consolidated group for financial reporting purposes (including, in each
case, any related notes thereto) for the last two fiscal years, which statements
were prepared in accordance with generally accepted accounting principles of the
United States ("U.S. GAAP") applied on a consistent basis throughout the period
involved (except as may be indicated in the notes thereto), and such statements
fairly present in all material respects the financial position of the Company,
on a consolidated basis, at the date thereof and the results of its operations
and cash flows for the periods indicated on a consolidated basis, and does not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The Company will provide to Purezza a correct and complete
copy of its unaudited financial statements, on a consolidated basis with Putai
and Puda, with Puda's financial statements being the historical financial
statements of the consolidated group for financial reporting purposes
(including, in each case, any related notes thereto) for the three-month period
ended March 31, 2005, complied as to form in all material respects with, and
prepared in accordance with U.S. GAAP applied on a consistent basis throughout
the period involved (except as may be indicated in the notes thereto), and such
statements fairly present in all material respects the financial position of the
Company, on a consolidated basis, at the date thereof and the results of its
operations and cash flows for the period indicated on a consolidated basis,
except that the unaudited interim financial statements were or are subject to
normal adjustments which were not or are not expected to have a Material Adverse
Effect on the Company or Puda.
(c) The books of account and other financial records of the
Company and Puda have been maintained in accordance with good business practice,
and the Company and Puda maintain a system of internal controls to assure the
accuracy of their financial records and statements.
3.8 No Undisclosed Liabilities. Except as set forth in Schedule 3.8
hereto, the Affiliated Companies have no liabilities individually in excess of
$25,000 and in the aggregate in excess of $100,000 (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
12
accordance with U.S. GAAP which are, individually or in the aggregate, material
to the business, results of operations or financial condition of the Affiliated
Companies and any Subsidiaries, except: (i) liabilities provided for in or
otherwise disclosed in the consolidated balance sheets of the Company (including
Puda and Putai) as of December 31, 2004, prepared in accordance with U.S. GAAP,
which have been delivered to Purezza, and (ii) such liabilities arising in the
ordinary course of business of the Affiliated Companies and any Subsidiaries
since December 31, 2004, none of which would have a Material Adverse Effect on
the Affiliated Companies and any Subsidiaries.
3.9 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.9 hereto or in the consolidated balance sheets of the Company
(including Puda and Putai) as of December 31, 2004, since December 31, 2004, or
except with respect to the Restructuring Agreements, there has not been, with
respect to any Affiliated Company or any Subsidiaries: (i) any Material Adverse
Effect, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, securities or property) in respect of, any
of equity securities, or any purchase, redemption or other acquisition of any of
equity securities or any options, warrants, calls or rights to acquire any
equity securities or other securities, (iii) any split, combination or
reclassification of any equity securities, (iv) any granting of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, or any granting of any increase in
severance or termination pay or any entry into any currently effective
employment, severance, termination or indemnification agreement or any agreement
the benefits of which are contingent or the terms of which are materially
altered upon the occurrence of a transaction of the nature contemplated hereby,
(v) entry into any licensing or other agreement with regard to the acquisition
or disposition of any Intellectual Property (as defined in Section 3.18 hereof)
other than licenses in the ordinary course of business consistent with past
practice or any amendment or consent with respect to any licensing agreement
filed or required to be filed with respect to any Governmental Entity, (vi) any
material change in its accounting methods, principles or practices, (vii) any
change in the auditors, (vii) any issuance of securities, or (viii) any
revaluation of any of their respective assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable or any sale of assets other than in the ordinary course of business.
3.10 Litigation. Except as disclosed in Schedule 3.10 hereto, there are
no claims, suits, actions or proceedings pending, or to the knowledge of any
Affiliated Company, threatened against the Affiliated Companies or any
Subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement or which
could reasonably be expected, either individually or in the aggregate with all
such claims, actions or proceedings, to have a Material Adverse Effect on the
Affiliated Companies or any Subsidiaries or have a Material Adverse Effect on
the ability of the parties hereto to consummate the Transaction.
13
3.11 Employee Benefit Plans.
(a) To each Affiliated Company's knowledge, all employee
compensation, incentive, fringe or benefit plans, programs, policies,
commitments or other arrangements (whether or not set forth in a written
document) covering any active or former employee, director or consultant of the
Affiliated Companies or any Subsidiary, or any trade or business (whether or not
incorporated) which is under common control with the Affiliated Companies or any
Subsidiary, with respect to which the Affiliated Companies or any Subsidiary has
liability (collectively, the "Plans") has been maintained and administered in
all material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Plans, and all liabilities with respect to the Plans have
been properly reflected in the consolidated financial statements of the Company
(including Puda and Putai). No suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course of Plan activities) has been
brought or is continuing, or to the knowledge of each Affiliated Company is
threatened, against or with respect to any such Plan. To each Affiliated
Company's knowledge, there are no audits, inquiries or proceedings pending or,
to the knowledge of each Affiliated Company, threatened by any governmental
agency with respect to any Plans. To each Affiliated Company's knowledge, all
contributions, reserves or premium payments required to be made or accrued as of
the date hereof to the Plans have been timely made or accrued. To each
Affiliated Company's knowledge, each Plan can be amended, terminated or
otherwise discontinued after the Closing in accordance with its terms, without
liability to Purezza or the Affiliated Companies or any Subsidiary (other than
ordinary administration expenses and expenses for benefits accrued but not yet
paid).
(b) Except as disclosed on Schedule 3.11 hereto, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any stockholder, officer, director or employee of the Affiliated Companies or
any Subsidiary under any Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any Plan, or (iii) result in the acceleration
of the time of payment or vesting of any such benefits
3.12 Labor Matters. Except as disclosed in Schedule 3.12 hereto, the
Affiliated Companies and any Subsidiaries are not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Affiliated Companies or any Subsidiary nor does any Affiliated
Company know of any activities or proceedings of any labor union to organize any
such employees.
3.13 Restrictions on Business Activities. Except as disclosed on
Schedule 3.13 hereto, to each Affiliated Company's knowledge there is no
agreement, commitment, judgment, injunction, order or decree binding upon the
Affiliated Companies or any Subsidiary or to which the Affiliated Companies or
any Subsidiary is a party which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of the
Affiliated Companies or any Subsidiary, any acquisition of property by the
Affiliated Companies or any Subsidiary or the conduct of business by the
Affiliated Companies or any Subsidiary as currently conducted other than such
effects, individually or in the aggregate, which have not had and could not
reasonably be expected to have a Material Adverse Effect on the Affiliated
Companies or any Subsidiaries.
14
3.14 Title to Property.
(a) All real property owned by the Affiliated Companies and any
Subsidiary (including land use rights, improvements and fixtures thereon,
easements and rights of way) (the "Real Property") is shown or reflected on the
U.S. GAAP Financial Statements (as defined in Section 6.4(c) hereof). The
Affiliated Companies and any Subsidiary have good, valid and marketable title to
the Real Property, and except as set forth in the U.S. GAAP Financial Statements
or on Schedule 3.14 hereto, all of the Real Property is held free and clear of
all Liens, rights of way, easements, restrictions, exceptions, variances,
reservations, covenants or other title defects or limitations of any kind, other
than liens for taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from the value of
or materially interfere with the present use of the property affected thereby.
Schedule 3.14 hereto is a list of all options or other contracts under which any
Affiliated Company or any Subsidiary has a right to acquire any interest in real
property.
(b) All leases of real property held by the Affiliated Companies and
any Subsidiary and all personal property and other property and assets of the
Affiliated Companies and any Subsidiary (other than Real Property) owned, used
or held for use in connection with the business of the Affiliated Companies and
any Subsidiaries (the "Personal Property") are shown or reflected on the U.S.
GAAP Financial Statements. The Affiliated Companies and any Subsidiary own and
have good and marketable title to the Personal Property, and all such assets and
properties are in each case held free and clear of all Liens, except for Liens
disclosed in the U.S. GAAP Financial Statements or in Schedule 3.14 hereto, none
of which Liens has or will have, individually or in the aggregate, a Material
Adverse Effect on such property or on the present or contemplated use of such
property in the businesses of the Affiliated Companies or any Subsidiaries.
(c) All leases pursuant to which an Affiliated Company or a
Subsidiary leases from others material real or personal property are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing material default or event of default of the
Affiliated Companies or any Subsidiary or, to each Affiliated Company's
knowledge, any other party (or any event which with notice or lapse of time, or
both, would constitute a material default), except where the lack of such
validity and effectiveness or the existence of such default or event of default
could not reasonably be expected to have a Material Adverse Effect on the
Affiliated Companies or any Subsidiaries.
3.15 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or "Taxes" refers to any and all federal, state, local and foreign taxes,
including, without limitation, gross receipts, income, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, assessments, governmental
charges and duties together with all interest, penalties and additions imposed
with respect to any such amounts and any obligations under any agreements or
arrangements with any other person with respect to any such amounts and
including any liability of a predecessor entity for any such amounts.
15
(b) Tax Returns and Audits. Except as set forth in Schedule 3.15
hereto, to each Affiliated Company's knowledge:
(i) The Affiliated Companies and each Subsidiary have timely
filed all federal, state, local and foreign returns, estimates, information
statements and reports relating to Taxes ("Returns") required to be filed by the
Affiliated Companies and each Subsidiary with any Tax authority prior to the
date hereof, except such Returns which are not material to the Affiliated
Companies or any Subsidiary. All such Returns are true, correct and complete in
all material respects. The Affiliated Companies and each Subsidiary have paid
all Taxes shown to be due on such Returns.
(ii) All Taxes that the Affiliated Companies and each
Subsidiary are required by law to withhold or collect have been duly withheld or
collected, and have been timely paid over to the proper governmental authorities
to the extent due and payable.
(iii) The Affiliated Companies and each Subsidiary have not
been delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against the Affiliated Companies or
any Subsidiary, nor have the Affiliated Companies or any Subsidiary executed any
unexpired waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the
Affiliated Companies or any Subsidiary by any Tax authority is presently in
progress, nor have the Affiliated Companies or any Subsidiary been notified of
any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by the
Affiliated Companies or any Subsidiary has been proposed in writing, formally or
informally, by any Tax authority to the Affiliated Companies or any Subsidiary
or any representative thereof.
(vi) The Affiliated Companies and each Subsidiary have no
liability for any material unpaid Taxes which have not been accrued for or
reserved on Puda's balance sheets included in the audited financial statements
for the most recent fiscal year ended, whether asserted or unasserted,
contingent or otherwise, which is material to the Affiliated Companies or any
Subsidiaries, other than any liability for unpaid Taxes that may have accrued
since the end of the most recent fiscal year in connection with the operation of
the business of the Affiliated Companies or any Subsidiary in the ordinary
course of business, none of which is material to the business, results of
operations or financial condition of the Affiliated Companies or any
Subsidiaries.
(vii)The Affiliated Companies have not taken any action and
does not know of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Transaction from qualifying as a reorganization
under Section 368 of the Code or a tax-deferred exchange of property within the
meaning of Section 351 of the Code.
3.16 Environmental Matters. Except as disclosed in Schedule 3.16
hereto and except for such matters that, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect, to each Affiliated
16
Company's knowledge: (i) the Affiliated Companies and each Subsidiary have
complied with all applicable Environmental Laws; (ii) the properties currently
owned or operated by the Affiliated Companies and each Subsidiary (including
soils, groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances; (iii) the properties formerly owned
or operated by the Affiliated Companies and each Subsidiary were not
contaminated with Hazardous Substances during the period of ownership or
operation by the Affiliated Companies or any Subsidiary; (iv) the Affiliated
Companies and each Subsidiary are not subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) the
Affiliated Companies and each Subsidiary have not been associated with any
release or threat of release of any Hazardous Substance; (vi) the Affiliated
Companies and each Subsidiary have not received any notice, demand, letter,
claim or request for information alleging that the Affiliated Companies or any
Subsidiary may be in violation of or liable under any Environmental Law; and
(vii) the Affiliated Companies and each Subsidiary are not subject to any
orders, decrees, injunctions or other arrangements with any Governmental Entity
or subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances.
As used in this Agreement, the term "Environmental Law" means any
federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment, health and safety,
or natural resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
As used in this Agreement, the term "Hazardous Substance" means any
substance that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is the
subject of regulatory action by any Governmental Entity pursuant to any
Environmental Law
3.17 Brokers; Third Party Expenses. Except as set forth on Schedule 3.17,
neither the Affiliated Companies nor, to each Affiliated Company's knowledge,
Zhao Ming and Zhao Yao have incurred, nor will they incur, directly or
indirectly, any liability for brokerage, finders' fees, agent's commissions or
any similar charges in connection with this Agreement or any transactions
contemplated hereby. Except as disclosed on Schedule 3.17, no ownership
interests, equity securities, convertible securities, warrants, options, or
other derivative securities of the Affiliated Companies or Purezza are payable
to any third party by the Affiliated Company or any Member as a result of this
Transaction.
3.18 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following: (i)
patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof
("Patents") worldwide; (ii) inventions (whether patentable or not), invention
17
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating to
any of the foregoing; (iii) registered copyrights and applications therefor, and
all other rights corresponding thereto, worldwide; (iv) material domain names,
uniform resource locators ("URLs") and other names and locators associated with
the Internet ("Domain Names"); (v) registered industrial designs and
applications therefor, worldwide; (vi) registered trade names, logos, trademarks
and service marks, and any applications therefor (collectively, "Trademarks"),
worldwide; (vii) all databases and data collections and all rights therein; and
(viii) all moral and economic rights of authors and inventors, however
denominated.
"the Company Intellectual Property" shall mean any Intellectual
Property that is owned by, or licensed to, the Affiliated Companies or any
Subsidiary.
"the Company Products" means all current versions of products or
services of the Affiliated Companies or any Subsidiary.
(a) Except as disclosed on Schedule 3.18, to each Affiliated
Company's knowledge, the Company Intellectual Property and the Company Products
are not subject to any material proceeding or outstanding decree, order,
judgment, contract, license, agreement or stipulation restricting in any manner
the use, transfer or licensing thereof by the Affiliated Companies or any
Subsidiary, or which may affect the validity, use or enforceability of such the
Company Intellectual Property or the Company Product, which in any such case
could reasonably be expected to have a Material Adverse Effect on the Affiliated
Companies and any Subsidiaries.
(b) Except as disclosed on Schedule 3.18 hereto, to each Affiliated
Company's knowledge, the Affiliated Companies and any Subsidiaries either own
and have good and marketable title to each material item of the Company
Intellectual Property owned by it free and clear of any Liens (excluding
licenses and related restrictions granted in the ordinary course) or have one or
more licenses sufficient for use of the Company Intellectual Property by the
Affiliated Companies and any Subsidiary; and the Affiliated Companies and any
Subsidiaries are the owner or licensee of all material Trademarks used in
connection with the operation or conduct of the business of the Affiliated
Companies and any Subsidiaries including the sale of any the Company Products.
(c) The operation of the business of the Affiliated Companies and
any Subsidiaries as such business currently is conducted, including the use of
any product, device or process, to each Affiliated Company's knowledge and
except as could not reasonably be expected to have a Material Adverse Effect,
has not and does not infringe or misappropriate the Intellectual Property of any
third party or constitute unfair competition or trade practices under the laws
of any jurisdiction.
3.19 Agreements, Contracts and Commitments.
(a) Except as otherwise disclosed in the U.S. GAAP Financial
Statements (as defined in Section 6.4(b)), Schedule 3.19 hereto sets forth a
complete and accurate list of all Material Contracts (as hereinafter defined),
specifying the parties thereto. For purposes of this Agreement, (i) the term
18
"Contracts" shall mean all written contracts, agreements, leases, mortgages,
indentures, notes, bonds, liens, licenses, arbitration awards, judgments,
decrees, orders, documents, instruments, understandings and commitments to which
the Affiliated Companies or any Subsidiary is a party or by or to which any of
the properties or assets of the Affiliated Companies or any Subsidiary may be
bound, subject or affected (including without limitation notes or other
instruments payable to the Affiliated Companies), and (ii) the term "Material
Contracts" shall mean (x) each Contract (I) providing for payments (present or
future) to the Affiliated Companies or any Subsidiary in excess of $100,000 in
the aggregate, or (II) under which or in respect of which the Affiliated
Companies presently have any liability or obligation of any nature whatsoever
(absolute, contingent or otherwise) in excess of $100,000, and (y) without
limitation of subclause (x), each of the following Contracts:
(i) any mortgage, indenture, note, installment obligation or
other instrument, agreement or arrangement for or relating to any borrowing of
money by or from the Affiliated Companies or any Subsidiary;
(ii) any guaranty, direct or indirect, by the Affiliated
Companies or any Subsidiary or any officer, director or 5% or more stockholder
("Insider") of the Affiliated Companies or any Subsidiary of any obligation of
the Affiliated Companies or any Subsidiary for borrowings, or otherwise,
excluding endorsements made for collection in the ordinary course of business;
(iii) any Contract made other than in the ordinary course of
business or (x) providing for the grant of any preferential rights to purchase
or lease any asset of the Affiliated Companies or any Subsidiary or (y)
providing for any right (exclusive or non-exclusive) to sell or distribute, or
otherwise relating to the sale or distribution of, any product or service of the
Affiliated Companies or any Subsidiary;
(iv) any obligation to register any shares of the capital
stock or other securities of the Affiliated Companies or any Subsidiary with any
Governmental Entity;
(v) any obligation to make payments, contingent or otherwise,
arising out of the prior acquisition of the business, assets or stock of other
Persons;
(vi) any collective bargaining agreement with any labor union;
(vii) any lease or similar arrangement for the use by the
Affiliated Companies or any Subsidiary of personal property;
(viii) any Contract granting or purporting to grant, or
otherwise in any way relating to, any mineral rights or any other interest
(including, without limitation, a leasehold interest) in real property; and
(ix) any Contract with the Affiliated Companies or any
Subsidiary to which any Insider of the Affiliated Companies or Subsidiary is a
party.
19
(b) Each Material Contract was entered into at arms' length and in
the ordinary course, is in full force and effect and, to each Affiliated
Company's knowledge, is valid and binding upon and enforceable against each of
the parties thereto. True, correct and complete copies of all Material Contracts
have been heretofore delivered to Purezza. The Restructuring Agreements, the
Option Agreement and the Authorization are each valid and binding upon and
enforceable against each of the parties thereto under the laws of the PRC and
the laws of any other jurisdiction which may be applicable, and true, correct
and complete copies of each such agreement have been attached as Exhibits
hereto.
(c) Except as set forth in Schedule 3.19, neither the Affiliated
Companies or any Subsidiary nor, to each Affiliated Company's knowledge, any
other party thereto, is in breach of or in default under, and no event has
occurred which with notice or lapse of time or both would become a breach of or
default under, any Material Contract, which breach, individually or in the
aggregate, could be reasonably likely to have a Material Adverse Effect on the
Affiliated Companies and any Subsidiaries, and no party to any Material Contract
has given any written notice of any claim of any such breach, default or event,
which, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect on the Affiliated Companies and any Subsidiaries. Each
Material Contract to which the Affiliated Companies or any Subsidiary is a party
or by which it is bound that has not expired by its terms is in full force and
effect, except where such failure to be in full force and effect is not
reasonably likely to have a Material Adverse Effect on the Affiliated Companies
and any Subsidiaries.
3.20 Insurance. Schedule 3.20 sets forth the insurance policies covering
the assets, business, equipment, properties, operations, employees, officer and
directors (collectively, the "Insurance Policies") of the Affiliated Company and
any Subsidiaries which the Affiliated Companies reasonably believe are adequate
in amount and scope for the business in which they are engaged.
3.21 Governmental Actions/Filings; Approvals. Except as set forth in
Schedule 3.21, the Affiliated Companies and each Subsidiary hold, and/or have
made, all Governmental Actions/Filings and Approvals reasonably necessary for
the conduct by the Affiliated Companies and any Subsidiaries of their business
(as presently conducted and to be conducted following the Closing) including,
without limitation: (i) with respect to Putai, the receipt of any and all
certifications and approvals required to qualify as a wholly foreign owned
enterprise ("WFOE Certification"), which WFOE certifications by their terms do
not expire for a period of 15 years from the date of issuance on November 5,
2004, and (ii) with respect to Putai, it has filed the required applications and
has received any and all foreign exchange certifications and approvals from the
appropriate national and local branches of the State Administration of Foreign
Exchange ("SAFE Certifications") in the PRC, which SAFE Certifications were
issued on December 8, 2004 and allow Putai to exchange currency of the PRC into
currency of the United States and vice versa, except with respect to any
Governmental Actions/Filings and Approvals the failure of which to hold or make
would not reasonably be likely to have a Material Adverse Effect on the
Affiliated Companies and any Subsidiaries.
For purposes of this Agreement, the term "Governmental Action/Filing"
shall mean any franchise, license, certificate of compliance, authorization,
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consent, order, permit, approval, consent or other action of, or any filing,
registration or qualification with, any federal, state, municipal, foreign or
other governmental, administrative or judicial body, agency or authority.
3.22 Interested Party Transactions. Except as set forth in the Schedule
3.22 hereto, no employee, officer, director or stockholder of the Affiliated
Companies or any Subsidiary or a member of his or her immediate family is
indebted to the Affiliated Companies or any Subsidiary, nor are the Affiliated
Companies or any Subsidiary indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of the Affiliated Companies and any Subsidiaries, and (iii) for other employee
benefits made generally available to all employees. Except as set forth in
Schedule 3.22, to each Affiliated Company's knowledge, none of such individuals
has any direct or indirect ownership interest in any Person with whom the
Affiliated Companies or any Subsidiary is affiliated or with whom the Affiliated
Companies or any Subsidiary has a contractual relationship, or any Person that
competes with the Affiliated Companies or any Subsidiary, except that each
employee, officer, director or stockholder of the Affiliated Companies and any
Subsidiary and members of their respective immediate families may own less than
5% of the outstanding stock in publicly traded companies that may compete with
the Affiliated Companies or any Subsidiary. Except as set forth in Schedule
3.22, to the knowledge of the Affiliated Companies, no employee, officer,
director or stockholder or any member of their immediate families is, directly
or indirectly, interested in any material contract with the Affiliated Companies
or any Subsidiary (other than such contracts as relate to any such individual
ownership of interests in or securities of the Affiliated Companies).
3.23 Board of Director Approval. The board of directors of the Affiliated
Companies or similar governing body has, as of the date of this Agreement,
unanimously approved, subject to the approval of all of the members or
stockholders, this Agreement and the transactions contemplated hereby, and
resolved to seek the members' or stockholders' approval and adoption of this
Agreement and approval of the Transaction as provided in the applicable Charter
Documents.
3.24 Management. During the past five year period, to each Affiliated
Company's knowledge, no current or former officer or director or member or
stockholder of the Affiliated Companies or any Subsidiary has been the subject
of:
(a) a petition under bankruptcy laws or any other insolvency or
moratorium law or has a receiver, fiscal agent or similar officer been appointed
by a court for such person, or any partnership in which such person was a
general partner at or within two years before the time of such filing, or any
corporation or business association of which such person was an executive
officer at or within two years before the time of such filing;
(b) a conviction in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations that do not relate to
driving while intoxicated or driving under the influence);
(c) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining any such person from, or otherwise limiting, the following
activities:
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(i) Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the United States
Commodity Futures Trading Commission or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation of
securities laws or commodities laws;
(d) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any authority barring, suspending or otherwise limiting
for more than 60 days the right of any such person to engage in any activity
described in the preceding sub-paragraph, or to be associated with persons
engaged in any such activity;
(e) a finding by a court of competent jurisdiction in a civil action
or by the U.S. Securities and Exchange Commission ("SEC") or other authority to
have violated any securities law, regulation or decree and the judgment in such
civil action or finding by the SEC or any other authority has not been
subsequently reversed, suspended or vacated; or
(f) a finding by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding has not been
subsequently reversed, suspended or vacated.
3.25 Representations and Warranties Complete. The representations and
warranties of Zhao Ming, Zhao Yao, the Company, Putai and Puda included in this
Agreement and any Schedule provided pursuant to this Agreement, 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. Any disclosure on one schedule will be
deemed notice of and disclosure in respect of any other representation and
warranty.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PUREZZA
Purezza represents and warrants to, and covenants with, the Company, as
follows:
4.1 Organization and Qualification.
(a) Purezza is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Florida and has the requisite
corporate power and authority to own, lease and operate its assets and
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properties and to carry on its business as it is now being or currently planned
by Purezza to be conducted. To its knowledge, Purezza is in possession of all
Approvals necessary to own, lease and operate the properties it purports to own,
operate or lease and to carry on its business as it is now being or currently
planned by Purezza to be conducted, except where the failure to have such
Approvals could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Purezza. Complete and correct copies of the
Charter Documents of Purezza, as amended and currently in effect, have been
heretofore delivered to the Company. Purezza is not in violation of any of the
provisions of Purezza's Charter Documents.
(b) Purezza is duly qualified or licensed to do business as a
foreign corporation and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Purezza.
4.2 Subsidiaries. As of the date of this Agreement, Purezza has no
Subsidiaries and does not own, directly or indirectly, any ownership, equity,
profits or voting interest in any Person and, other than this Agreement, has no
agreement or commitment to purchase any such interest, and Purezza has not
agreed and is not obligated to make nor is bound by any written, oral or other
agreement, contract, subcontract, lease, binding understanding, instrument,
note, option, warranty, purchase order, license, sublicense, insurance policy,
benefit plan, commitment or undertaking of any nature, as of the date hereof or
as may hereafter be in effect under which it may become obligated to make, any
future investment in or capital contribution to any other entity.
4.3 Capitalization.
(a) The authorized capital stock of Purezza consists of 100,000,000
shares of common stock, par value $0.001 per share ("Purezza Common Stock") and
5,000,000 shares of preferred stock, par value $0.01 per share ("Purezza
Preferred Stock"), of which 1,100,000 shares will be designated as Series A
Convertible Preferred Stock pursuant to the Certificate of Designations of
Series A Convertible Preferred Stock ("Certificate of Designations"), which are
attached hereto as Exhibit B. At the close of business on the business day prior
to the date hereof, (i) 59,000,000 shares of Purezza Common Stock were issued
and outstanding, all of which are validly issued, fully paid and nonassessable;
(ii) no shares of Purezza Preferred Stock were issued and outstanding; (iii)
1,650,000 shares of Purezza Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase the Company Common Stock granted to
certain Persons, of which 150,000 options are exercisable at $0.10 per share and
1,500,000 options are exercisable at $1.00 per share ("the Company Stock
Options"); (iv) no shares of Purezza Common Stock were reserved for issuance
upon the exercise of outstanding warrants to purchase Purezza Common Stock
("Purezza Warrants"); (v) no shares of Purezza Preferred Stock were reserved for
issuance to any party (other than the Members in accordance with this
Agreement); and (vi) no shares of Purezza Common Stock were reserved for
issuance upon the conversion of Purezza Preferred Stock or any outstanding
convertible notes, debentures or securities ("Convertible Securities"). All
outstanding shares of Purezza Common Stock have been issued and granted in
compliance with (i) all applicable securities laws and (in all material
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respects) other applicable laws and regulations, and (ii) all requirements set
forth in any applicable Contracts. Prior to Closing, there will be an aggregate
of 1,100,000 shares of authorized but unissued shares of Series A Convertible
Preferred Stock, par value $0.01 per share ("Series A Preferred Stock"), which,
subject to the approval of Purezza's stockholders to effect the Reverse Split
(as defined below) and to increase the number of authorized capital stock of
Purezza, which in any case shall be required to have occurred subsequent to the
Closing ("Stockholder Approval"): (i) shall be convertible into 746,350,000
shares of Common Stock on a pre-Reverse Split basis, based on a conversion rate
of 678.5 shares of Common Stock on a pre-Reverse Split basis for each share of
Series A Preferred Stock. Upon the issuance of the shares of the Series A
Preferred Stock, and, subject to the Stockholder Approval, the Conversion Shares
issuable upon conversion thereof, when issued, will be validly issued, fully
paid and non-assessable. The term "Reverse Split" is defined in Section 6.15(a)
hereof. Immediately following the Transaction, the Members will own 92% of the
total combined voting power of all classes of Purezza stock entitled to vote.
(b) There are no equity securities, partnership interests or similar
ownership interests of any class of any equity security of Purezza, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for this Agreement or as set forth
in Schedule 4.3, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which Purezza is a party or by which it is bound obligating Purezza to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
Purezza or obligating Purezza to grant, extend, accelerate the vesting of or
enter into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. To Purezza's knowledge, there is no plan or arrangement
to issue Purezza Common Stock or Purezza Preferred Stock except as set forth in
this Agreement. Except as contemplated by this Agreement and except as set forth
in Schedule 4.3 hereto, there are no registration rights, and there is no voting
trust, proxy, rights plan, anti-takeover plan or other agreement or
understanding to which Purezza is a party or by which it is bound with respect
to any equity security of any class of Purezza.
4.4 Authority Relative to this Agreement. Purezza has full corporate power
and authority to: (i) execute, deliver and perform this Agreement, and each
ancillary document which Purezza has executed or delivered or is to execute or
deliver pursuant to this Agreement, and (ii) carry out Purezza's obligations
hereunder and thereunder and, to consummate the transactions contemplated hereby
(including the Transaction). The execution and delivery of this Agreement and
the consummation by Purezza of the transactions contemplated hereby (including
the Transaction) have been duly and validly authorized by all necessary
corporate action on the part of Purezza (including the approval by its Board of
Directors), and no other corporate proceedings on the part of Purezza are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
24
delivered by Purezza and, assuming the due authorization, execution and delivery
thereof by the other parties hereto, constitutes the legal and binding
obligation of Purezza, enforceable against Purezza in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity and public policy. Upon the Stockholder Approval,
which in any case shall be required to have occurred subsequent to the Closing,
the Series A Preferred Stock will be convertible into duly authorized, validly
issued, fully paid and nonassessable shares of Purezza's Common Stock.
4.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Purezza and the
execution and delivery of each ancillary document to be delivered by Purezza
hereunder do not, and the performance of this Agreement and each such ancillary
document by Purezza shall not: (i) conflict with or violate Purezza's Charter
Documents, (ii) conflict with or violate any Legal Requirements, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or materially impair Purezza's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of Purezza pursuant to, any Contracts, except, with respect to clauses
(ii) or (iii), for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually or in the aggregate, have a Material
Adverse Effect on Purezza.
(b) Except for: (i) the filing of the Certificate of Designations
with the appropriate authorities and pursuant to the laws of the State of
Florida, and (ii) the requirement to obtain the Stockholder Approval which in
any case shall be required to have occurred subsequent to the Closing, the
execution and delivery of this Agreement by Purezza does not, and the
performance of its obligations hereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, and the rules and regulations
thereunder, and appropriate documents with the relevant authorities of other
jurisdictions in which Purezza is qualified to do business, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Purezza, or prevent
consummation of the Transaction or otherwise prevent the parties hereto from
performing their obligations under this Agreement.
4.6 Compliance. To Purezza's knowledge, Purezza has complied with, and is
not in violation of, any Legal Requirements with respect to the conduct of its
business, or the ownership or operation of its business, except for failures to
comply or violations which, individually or in the aggregate, have not had and
are not reasonably likely to have a Material Adverse Effect on Purezza. To
Purezza's knowledge, the businesses and activities of Purezza have not been and
are not being conducted in violation of any Legal Requirements. Purezza is not
in default or violation of any material term, condition or provision of its
Charter Documents. Except as set forth on Schedule 4.6, to Purezza's knowledge,
no written notice of non-compliance with any Legal Requirements has been
received by Purezza.
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4.7 SEC Filings; Financial Statements.
(a) Purezza has made available to the Company a correct and complete
copy, or there has been available on EDGAR copies, of each report, registration
statement and definitive proxy statement filed by Purezza with the SEC for the
36 months prior to the date of this Agreement (the "Purezza SEC Reports"),
which, to Purezza's knowledge, are all the forms, reports and documents filed by
Purezza with the SEC for the 36 months prior to the date of this Agreement. As
of their respective dates, to Purezza's knowledge, the Purezza SEC Reports: (i)
were prepared in accordance and complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Purezza SEC
Reports, and (ii) did not at the time they were filed (and if amended or
superseded by a filing prior to the date of this Agreement then on the date of
such filing and as so amended or superceded) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the extent set forth in
the preceding sentence, Purezza makes no representation or warranty whatsoever
concerning the Purezza SEC Reports as of any time other than the time they were
filed.
(b) To Purezza's knowledge, each set of financial statements
(including, in each case, any related notes thereto) contained in the Purezza
SEC Reports comply as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with U.S. GAAP applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, do not contain footnotes as permitted by Form 10-QSB promulgated
under the Exchange Act) and each fairly presents in all material respects the
financial position of Purezza at the respective dates thereof and the results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal adjustments
which were not or are not expected to have a Material Adverse Effect on Purezza
taken as a whole.
(c) Purezza has previously furnished to the Company a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Purezza with the SEC
pursuant to the Securities Act or the Exchange Act.
4.8 No Undisclosed Liabilities. Except as set forth in Schedule 4.8
hereto, Purezza has no liabilities (absolute, accrued, contingent or otherwise)
of a nature required to be disclosed on a balance sheet or in the related notes
to the financial statements prepared in accordance with U.S. GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Purezza, except (i) liabilities provided
for in or otherwise disclosed in Purezza SEC Reports filed prior to the date
hereof, (ii) liabilities incurred since March 31, 2005 in the ordinary course of
business, none of which would have a Material Adverse Effect on Purezza, and
(iii) those liabilities and obligations specifically set forth in Section 6.11.
26
4.9 Absence of Certain Changes or Events. Except as set forth in Schedule
4.9 hereto or in Purezza SEC Reports filed prior to the date of this Agreement,
and except as contemplated by this Agreement, since March 31, 2005, there has
not been: (i) any Material Adverse Effect on Purezza, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of, any of Purezza's capital stock, or any
purchase, redemption or other acquisition by Purezza of any of Purezza's capital
stock or any other securities of Purezza or any options, warrants, calls or
rights to acquire any such shares or other securities, (iii) except for the
designation of the Series A Preferred Stock, any split, combination or
reclassification of any of Purezza's capital stock, (iv) any granting by Purezza
of any increase in compensation or fringe benefits, except for normal increases
of cash compensation in the ordinary course of business consistent with past
practice, or any payment by Purezza of any bonus, except for bonuses made in the
ordinary course of business consistent with past practice, or any granting by
Purezza of any increase in severance or termination pay or any entry by Purezza
into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Purezza of the nature contemplated hereby, (v) entry by
Purezza into any licensing or other agreement with regard to the acquisition or
disposition of any Intellectual Property other than licenses in the ordinary
course of business consistent with past practice or any amendment or consent
with respect to any licensing agreement filed or required to be filed by Purezza
with respect to any Governmental Entity, (vi) any material change by Purezza in
its accounting methods, principles or practices, except as required by
concurrent changes in U.S. GAAP, (vii) any change in the auditors of Purezza,
(vii) any issuance of capital stock of Purezza, except for the issuance of
1,000,000 shares of Purezza Common Stock to a financial consultant on April 4,
2005 for services rendered, or (viii) any revaluation by Purezza of any of their
respective assets, including, without limitation, writing down the value of, or
any sale of, assets of Purezza other than in the ordinary course of business.
4.10 Litigation. Except as set forth on Schedule 4.10 hereto or in Purezza
SEC Reports, there are no claims, suits, actions or proceedings pending or to
Purezza's knowledge, threatened against Purezza, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which could reasonably be expected, either
individually or in the aggregate with all such claims, actions or proceedings,
to have a Material Adverse Effect on Purezza or have a Material Adverse Effect
on the ability of the parties hereto to consummate the Transaction.
4.11 Employee Benefit Plans. Except as disclosed on Schedule 4.11 hereto
or in Purezza SEC Reports, Purezza does not maintain, and has no liability
under, any Plan, and neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any stockholder, director or employee of Purezza,
or (ii) result in the acceleration of the time of payment or vesting of any such
benefits.
27
4.12 Labor Matters. Purezza is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by
Purezza, nor does Purezza know of any activities or proceedings of any labor
union to organize any such employees.
4.13 Restrictions on Business Activities. To Purezza's knowledge, there is
no agreement, commitment, judgment, injunction, order or decree binding upon
Purezza or to which Purezza is a party which has or could reasonably be expected
to have the effect of prohibiting or materially impairing any business practice
of Purezza, any acquisition of property by Purezza or the conduct of business by
Purezza as currently conducted other than such effects, individually or in the
aggregate, which have not had and could not reasonably be expected to have, a
Material Adverse Effect on Purezza.
4.14 Title to Property. Purezza does not own or lease any Real Property or
Personal Property. There are no options or other contracts under which Purezza
has a right or obligation to acquire or lease any interest in Real Property or
Personal Property.
4.15 Taxes. Except as set forth in Schedule 4.15 hereto, to Purezza's
knowledge:
(a) Purezza has timely filed all Returns required to be filed by
Purezza with any Tax authority prior to the date hereof, except such Returns
which are not material to Purezza. All such Returns are true, correct and
complete in all material respects. Purezza has paid all Taxes shown to be due on
such Returns.
(b) All Taxes that Purezza is required by law to withhold or collect
have been duly withheld or collected, and have been timely paid over to the
proper governmental authorities to the extent due and payable.
(c) Purezza has not been delinquent in the payment of any material
Tax nor is there any material Tax deficiency outstanding, proposed or assessed
against Purezza, nor has Purezza executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(d) No audit or other examination of any Return of Purezza by any
Tax authority is presently in progress, nor has Purezza been notified of any
request for such an audit or other examination.
(e) No adjustment relating to any Returns filed by Purezza has been
proposed in writing, formally or informally, by any Tax authority to Purezza or
any representative thereof.
(f) Purezza has no liability for any material unpaid Taxes which
have not been accrued for or reserved on Purezza's balance sheets included in
the audited financial statements for the most recent fiscal year ended, whether
asserted or unasserted, contingent or otherwise, other than any liability for
unpaid Taxes that may have accrued since the end of the most recent fiscal year
in connection with the operation of the business of Purezza in the ordinary
course of business.
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(g) Purezza has not taken any action and does not know of any fact,
agreement, plan or other circumstance that is reasonably likely to prevent the
Transaction from qualifying as a reorganization under Section 368 of the Code or
a tax-deferred exchange of property within the meaning of Section 351 of the
Code. Purezza is not an investment company within the meaning of Section 351(e)
of the Code.
4.16 Environmental Matters. Except as disclosed in Schedule 4.16 hereto
and except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect, to Purezza's knowledge: (i)
Purezza has complied with all applicable Environmental Laws; (ii) the properties
currently owned or operated by Purezza (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by Purezza were not
contaminated with Hazardous Substances during the period of ownership or
operation by Purezza; (iv) Purezza is not subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) Purezza has
not been associated with any release or threat of release of any Hazardous
Substance; (vi) Purezza has not received any notice, demand, letter, claim or
request for information alleging that Purezza may be in violation of or liable
under any Environmental Law; and (vii) Purezza is not subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances.
4.17 Brokers. Except for Purezza's obligations under the Financial
Advisory Agreement (as defined in Section 6.11), Purezza has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agent's commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby. The Shares owned and held by
Worldwide Gateway Co., Ltd. ("Gateway") as shown on Schedule 1.1 hereto are in
full settlement of any and all compensation due and payable to Gateway and its
affiliates and controlling persons for any and all services provided in
connection with this Agreement or any transactions contemplated hereby.
4.18 Intellectual Property. Purezza does not own, license or otherwise
have any right, title or interest in any Intellectual Property.
4.19 Agreements, Contracts and Commitments.
(a) Except for the Financial Advisory Agreement, any agreement with
Fidelity Transfer Company ("Transfer Agent"), the agreement with Vero
Management, LLC which will be terminated prior to Closing, or except as set
forth on Schedule 4.19 or in Purezza SEC Reports, to Purezza's knowledge, there
are no contracts, agreements, leases, mortgages, indentures, note, bond, liens,
license, arbitration awards, judgments, decrees, orders, documents, instruments,
understandings and commitments, to which Purezza is a party or by or to which
any of the properties or assets of Purezza may be bound, subject or affected,
which are not cancelable by Purezza with 30 days notice ("Purezza Contracts").
29
(b) To Purezza's knowledge, each Purezza Contract was entered into
at arms' length and in the ordinary course, is in full force and effect and is
valid and binding upon and enforceable against each of the parties thereto.
True, correct and complete copies of all Purezza Contracts (or written summaries
in the case of oral Purezza Contracts) and of all outstanding offers or
proposals of Purezza have been heretofore delivered to the Company.
(c) Neither Purezza nor, to the knowledge of Purezza, any other
party thereto is in breach of or in default under, and no event has occurred
which with notice or lapse of time or both would become a breach of or default
under, any Purezza Contract, and no party to any Purezza Contract has given any
written notice of any claim of any such breach, default or event, which,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect on Purezza. Each agreement, contract or commitment to which
Purezza is a party or by which it is bound that has not expired by its terms is
in full force and effect, except where such failure to be in full force and
effect is not reasonably likely to have a Material Adverse Effect on Purezza.
4.20 Insurance. Purezza does not maintain any Insurance Policies.
4.21 Governmental Actions/Filings. To its knowledge, Purezza has been
granted and holds, and has made, all Governmental Actions/Filings necessary to
the conduct by Purezza of its businesses (as presently conducted) or used or
held for use by Purezza, all of which are listed in Schedule 4.21 hereto, and
true, complete and correct copies of which have heretofore been delivered to the
Company. Each such Governmental Action/Filing is in full force and effect and,
expect as disclosed in Schedule 4.21 hereto, will not expire prior to December
31, 2005, and Purezza is in compliance with all of its obligations with respect
thereto. To Purezza's knowledge, no event has occurred and is continuing which
requires or permits, or after notice or lapse of time or both would require or
permit, and consummation of the transactions contemplated by this Agreement or
the ancillary documents will not require or permit (with or without notice or
lapse of time, or both), any modification or termination of any such
Governmental Actions/Filings. Except as set forth in Schedule 4.21, to Purezza's
knowledge, no Governmental Action/Filing is necessary to be obtained, secured or
made by Purezza to enable it to continue to conduct its businesses and
operations and use its properties after the Closing in a manner which is
consistent with current practice.
4.22 Interested Party Transactions. Except as set forth in the Schedule
4.22 hereto or in Purezza's SEC Reports, no employee, officer, director or
stockholder of Purezza or a member of his or her immediate family is indebted to
Purezza, nor is Purezza indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of Purezza, and (iii) for other employee benefits made generally available to
all employees. Except as set forth in Schedule 4.22, to Purezza's knowledge,
none of such individuals has any direct or indirect ownership interest in any
Person with whom Purezza is affiliated or with whom Purezza has a material
contractual relationship, or any Person that competes with Purezza, except that
each employee, stockholder, officer or director of Purezza and members of their
respective immediate families may own less than 5% of the outstanding stock in
publicly traded companies that may compete with Purezza. Except as set forth in
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Schedule 4.22, to Purezza's knowledge, no officer, director or stockholder or
any member of their immediate families is, directly or indirectly, interested in
any material contract with Purezza (other than such contracts as relate to any
such individual ownership of capital stock or other securities of Purezza).
4.23 Indebtedness; Purezza Assets. Except as set forth on Schedule 4.23,
Purezza has no indebtedness for borrowed money. Immediately prior to the
Closing, Purezza will have no assets, except for cash reserves earmarked for the
payment of certain accounts payable and accrued expenses of Purezza with respect
to the period prior to Closing which remain unpaid, which Purezza shall be
responsible for payment following the Closing pursuant to Section 6.11 hereof
("Cash Reserve").
4.24 Over-the-Counter Bulletin Board Quotation. Purezza Common Stock is
quoted on the NASD Over-the-Counter Electronic Bulletin Board ("OTC BB"). There
is no action or proceeding pending or, to Purezza's knowledge, threatened
against Purezza by NASDAQ or NASD, Inc. ("NASD") with respect to any intention
by such entities to prohibit or terminate the quotation of Purezza Common Stock
on the OTC BB.
4.25 Exchange Act Compliance. Purezza is in compliance with, and current
in, all of the reporting, filing and other requirements under the Exchange Act,
except where a failure to so comply is not reasonably likely to have a Material
Adverse Effect on Purezza.
4.26 Board Approval. The Board of Directors of Purezza (including any
required committee or subgroup of the Board of Directors of Purezza) has, as of
the date of this Agreement, unanimously approved this Agreement and the
transactions contemplated hereby.
4.27 Representations and Warranties Complete. The representations and
warranties of Purezza included in this Agreement and 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. Any disclosure on one schedule will be deemed notice of
and disclosure by Purezza in respect of any other representation and warranty of
Purezza.
ARTICLE V
CONDUCT PRIOR TO CLOSING
5.1 Conduct of Business by the Affiliated Companies and Purezza. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement pursuant to its terms or the Closing, the
Affiliated Companies and any Subsidiaries and Purezza shall, except to the
extent that the other party shall otherwise consent in writing, carry on its
business in the usual, regular and ordinary course consistent with past
practices, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations (except where noncompliance
would not have a Material Adverse Effect), pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, pay or perform other
material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve substantially intact
its present business organization, (ii) keep available the services of its
present officers, managers and employees, and (iii) preserve its relationships
with customers, suppliers, distributors, licensors, licensees, and others with
which it has significant business dealings. In addition, except as permitted or
required by the terms of this Agreement or set forth on the Schedule 5.1 hereto,
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without the prior written consent of the other party, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Closing, the Affiliated Companies
and any Subsidiaries and Purezza shall not do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or (except
as specifically provided for herein) change the period of exercisability of
options or restricted stock, or reprice options granted under any employee,
consultant, director or other stock plans or authorize cash payments in exchange
for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer, manager
or employee except pursuant to applicable law, written agreements outstanding,
or policies existing on the date hereof and as previously or concurrently
disclosed in writing or made available to the other party, or adopt any new
severance plan, or amend or modify or alter in any manner any severance plan,
agreement or arrangement existing on the date hereof;
(c) Except with respect to the Restructuring Agreements, transfer or
license to any person or otherwise extend, amend or modify any material rights
to any Intellectual Property, or enter into grants to transfer or license to any
person future patent rights, other than in the ordinary course of business
consistent with past practices provided that in no event shall any party license
on an exclusive basis or sell any Intellectual Property;
(d) Except for employment agreements in the ordinary course or
otherwise scheduled or set forth in this Agreement, declare, set aside or pay
any dividends on or make any other distributions (whether in cash, stock, equity
securities or property) in respect of any capital stock, membership interests or
ownership interests, or split, combine or reclassify any capital stock,
membership interests or ownership interests, or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for any
capital stock, membership interests or ownership interests;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock, membership interests or ownership interests, except
repurchases of unvested shares, membership interests or ownership interests at
cost in connection with the termination of the employment relationship with any
employee pursuant to stock option or purchase agreements in effect on the date
hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber,
or agree to any of the foregoing with respect to, any shares of capital stock,
membership interests or ownership interests or any securities convertible into
or exchangeable for shares of capital stock, membership interests or ownership
interests, or subscriptions, rights, warrants or options to acquire any shares
of capital stock, membership interests or ownership interests or any securities
convertible into or exchangeable for shares of capital stock, membership
interests or ownership interests, or enter into other agreements or commitments
32
of any character obligating it to issue any such shares, membership interests,
ownership interests or convertible or exchangeable securities (except relating
to employment and similar agreements);
(g) Amend its Charter Documents;
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets 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
business of Purezza or the Affiliated Companies or any Subsidiary, as
applicable, or enter into any joint ventures, strategic partnerships or
alliances or other arrangements that provide for exclusivity of territory or
otherwise restrict such party's ability to compete or to offer or sell any
products or services;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice and, except for the sale, lease or
disposition (other than through licensing) of property or assets which are not
material, individually or in the aggregate, to the business of such party;
(j) Incur any indebtedness for borrowed money in excess of $100,000
in the aggregate or guarantee any such indebtedness of another person, issue or
sell any debt securities or options, warrants, calls or other rights to acquire
any debt securities of Purezza or the Affiliated Companies or any Subsidiary, as
applicable, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the economic
effect of any of the foregoing other than in the ordinary course of business of
such party;
(k) Adopt or amend any employee benefit plan, policy or arrangement,
any employee stock purchase or employee stock option plan, or enter into any
employment contract or collective bargaining agreement (other than offer letters
and agreements entered into in the ordinary course of business consistent with
past practice), pay any special bonus or special remuneration to any director or
employee, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants, except in the ordinary course of business consistent with past
practices and other than for new hires in the ordinary course;
(l) Pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practices or in accordance with
their terms, or liabilities recognized or disclosed in the most recent financial
statements (or the notes thereto) of the Affiliated Companies or of any
Subsidiary or of Purezza, as applicable, or incurred since the date of such
financial statements, or waive the benefits of, agree to modify in any manner,
terminate, release any person from or knowingly fail to enforce any
confidentiality or similar agreement to which the Affiliated Companies or any
Subsidiary or Purezza is a party or a beneficiary;
33
(m) Except in the ordinary course of business consistent with past
practices, modify, amend or terminate any Material Contract of the Affiliated
Companies or any Subsidiary or Purezza, as applicable, or waive, delay the
exercise of, release or assign any material rights or claims thereunder;
(n) Except as required by U.S. GAAP, revalue any of its assets or
make any change in accounting methods, principles or practices;
(o) Incur or enter into any agreement, contract or commitment
requiring such party to pay in excess of $100,000 in any 12 month period, other
than in the ordinary course or otherwise provided in this Agreement and
employment agreements which may be entered into by the Affiliated Companies or
any Subsidiary;
(p) Engage in any action that could reasonably be expected to cause
the Transaction to fail to qualify as a reorganization under Section 368 of the
Code or a tax-deferred exchange of property under Section 351 of the Code;
(q) Settle any litigation;
(r) Make or rescind any Tax elections that, individually or in the
aggregate, could be reasonably likely to adversely affect in any material
respect the Tax liability or Tax attributes of such party, settle or compromise
any material income tax liability or, except as required by applicable law,
materially change any method of accounting for Tax purposes or prepare or file
any Return in a manner inconsistent with past practice;
(s) Form, establish or acquire any Subsidiary;
(t) Permit any Person to exercise any of its discretionary rights
under any Plan to provide for the automatic acceleration of any outstanding
options, the termination of any outstanding repurchase rights or the termination
of any cancellation rights issued pursuant to such plans; or
(u) Agree in writing or otherwise agree, commit or resolve to take
any of the actions described in Section 5.1 (a) through (t) above.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Board of Directors of Purezza. At Closing, the current board of
directors of Purezza shall deliver duly adopted resolutions to: (a) set the size
of Purezza's board of directors to three (3) members effective as of the
Closing; and (b) elect the following persons to Purezza's board of directors
effective as of the Closing: (i) Zhao Ming, who shall be a management member of
Purezza's board of directors ("Management Member"); and (ii) one member
designated by KRM Fund, which person shall be an independent director and a
financial expert, qualified and available to serve on Purezza's audit and
compensation committee, and otherwise acceptable to Zhao Ming, which acceptance
shall not be unreasonably withheld ("KRM Fund Member"); and (iii) one person who
shall have been selected by Zhao Ming and shall be an independent director
("Independent Member"); and (c) accepting the resignations of the current
officers and directors of Purezza effective as of the Closing ("Resolutions").
At Closing, the current officers and director of Purezza shall deliver their
resignations, as appropriate, as officers and directors of Purezza to be
effective upon the Closing (the "Resignations"). Prior to Closing, the Company
34
shall deliver or cause to be delivered to Purezza completed and signed director
and officer questionnaires ("Questionnaires") in the English language for the
Management Member, KRM Fund Member, Independent Member and each officer to be
appointed by Purezza following Closing. The foregoing designations of the KRM
Fund Member and Independent Member (and the officers to be appointed by Purezza
following Closing) shall be subject to Purezza's receipt of the completed and
signed Questionnaires ("D&O Information"). Each Member shall execute and deliver
at Closing the Voting Agreement which shall provide, among other things, that
such Members will vote their Purezza's Preferred Shares (or in the event of
conversion, the Conversion Shares) to elect the KRM Fund Member and Independent
Member to Purezza's board of directors for a period of one year following the
Closing.
6.2 Undertaking by Accountant. On or before the Closing, the Company shall
obtain, and deliver to Purezza, an undertaking from Moore Stephens
("Accountant"), in a form and substance satisfactory to Purezza, providing that:
(i) the Accountant has agreed to an engagement with Purezza to serve as its
certified public accountants following the Closing for its fiscal year ending
December 31, 2005 for purposes of auditing and reviewing the financial
statements of Purezza and the Affiliated Companies, on a consolidated basis, to
comply with Purezza's ongoing reporting requirements under the Exchange Act
including, without limitation, the filing of Forms 10-Q, 10-K, and 8-K, (ii) the
transaction contemplated hereunder will not disqualify or otherwise prohibit the
Accountant from rendering the foregoing engagement services or from undertaking
such services in a timely manner, (iii) the Accountant is duly registered with
the U.S. Public Company Accounting Oversight Board ("PCAOB"), (iv) the
Accountant shall provide its consent to the use of Purezza's audited financial
statements and accompanying reports, including consolidated financial
statements, in any regulatory filing by Purezza prior to or following the
Closing, (v) consenting to the use of its name and the disclosure of its
engagement by Purezza in the Change of Accountant Form 8-K (as defined in
Section 6.3) ("Accountant Undertaking"), and (vi) the Accountant shall have
determined to the satisfaction of Purezza that the financial statements of
Purezza and the Affiliated Companies may be consolidated for financial reporting
purposes under U.S. GAAP and SEC rules following the Closing. A signed copy of
the engagement letter between Purezza and the Accountant shall be attached to
the Accountant Undertaking.
6.3 Change of Accountants. At Closing, Purezza shall prepare the Form 8-K
announcing the change in Purezza's certifying accountants from Durland &
Company, CPAs, P.A. ("Purezza's Accountant") to the Accountant effective as of
or following the Closing ("Change of Accountant Form 8-K"), in a form acceptable
to the Company and in a format acceptable for EDGAR filing. The Change of
Accountant Form 8-K shall be filed with the SEC at or within four (4) business
days following Closing, and prior to the filing thereof, Purezza's Accountant
shall have issued its resignation letter to Purezza resigning from the
engagement and consenting to the use of its name and the disclosure of its
resignation in the Change of Accountant Form 8-K ("Resignation Letter").
35
6.4 Other Actions.
(a) At least five (5) days prior to Closing, the Company shall
prepare the Form 8-K announcing the Closing, which shall include all information
required by such form, as determined by counsel to the Company, the U.S. GAAP
Financial Statements and the Company Pro Forma Financial Statements (as defined
below) ("Transaction Form 8-K"), which shall be in a form reasonably acceptable
to Purezza and in a format acceptable for EDGAR filing. Prior to Closing, the
Company shall prepare the press release announcing the consummation of the
Transaction hereunder ("Press Release"). At the Closing, Purezza shall file the
Transaction Form 8-K with the SEC and distribute the Press Release.
(b) At least ten (10) days prior to the Closing, the Company, shall
deliver to Purezza its audited financial statements, on a consolidated basis
with Putai and Puda, with Puda's financial statements being the historical
financial statements of the consolidated group for financial reporting purposes,
for the last two fiscal years ended, which financials statements shall comply in
all material respects with the published rules and regulations of the SEC, shall
be prepared in accordance with U.S. GAAP applied on a consistent basis
throughout the period involved, and shall fairly present in all material
respects the financial position of the Company, on a consolidated basis, at the
respective dates thereof and the results of its operations and cash flows for
the periods indicated on a consolidated basis (the "U.S. GAAP Financial
Statements").
(c) The U.S. GAAP Financial Statements shall have been audited by
the Accountant.
(d) At least ten (10) days prior to the Closing, the Company shall
deliver to Purezza pro forma financial statements for the Company, Puda and
Putai and Purezza, on a consolidated basis, giving effect to the Transaction,
for such periods as required by the SEC to be included in a Form 8-K or any
other report or form required to be filed with the SEC at or after Closing with
respect to the Transaction, all prepared in all material respects with the
published rules and regulations of the SEC and in accordance with U.S. GAAP
applied on a consistent basis throughout the periods involved (the "Pro Forma
Financial Statements"). The Pro Forma Financial Statements shall have been
reviewed by, the Accountant and shall be in a format acceptable for inclusion on
the Transaction 8-K.
The Affiliated Companies and Purezza shall cooperate with each other and
use their respective commercially reasonable efforts to take or cause to be
taken all actions, and do or cause to be done all things, necessary, proper or
advisable on its part under this Agreement and applicable laws to consummate the
Transaction and the other transactions contemplated hereby as soon as
practicable, including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as soon as practicable all consents, registrations, approvals, permits
and authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Transaction or any of
the other transactions contemplated hereby. Subject to applicable laws relating
to the exchange of information and the preservation of any applicable
attorney-client privilege, work-product doctrine, self-audit privilege or other
similar privilege, each of the Affiliated Companies and Purezza shall have the
36
right to review and comment on in advance, and to the extent practicable each
will consult the other on, all the information relating to such party, and any
Subsidiaries, that appear in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Transaction and the other transactions contemplated hereby. In exercising
the foregoing right, each of the Affiliated Companies and Purezza shall act
reasonably and as promptly as practicable.
6.5 Required Information. In connection with the preparation of the
Transaction Form 8-K and Press Release, and for such other reasonable purposes,
the Affiliated Companies and Purezza each shall, upon request by the other,
furnish the other with all information concerning themselves, their respective
subsidiaries, directors, officers, managers, managing members, stockholders and
members (including the directors and officers of Purezza to be elected effective
as of the Closing pursuant to Section 6.1 hereof) and such other matters as may
be reasonably necessary or advisable in connection with the Transaction, or any
other statement, filing, notice or application made by or on behalf of the
Affiliated Companies and Purezza or any of their respective subsidiaries to any
third party and/or any Governmental Entity in connection with the Transaction
and the other transactions contemplated hereby. Each party warrants and
represents to the other party that all such information shall be true and
correct in all material respects and will 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, in light of the
circumstances under which they were made, not misleading.
6.6 Confidentiality; Access to Information.
(a) Any confidentiality agreement or letter of intent previously
executed by the parties shall be superseded in its entirety by the provisions of
this Agreement. Each party agrees to maintain in confidence any non-public
information received from the other party, and to use such non-public
information only for purposes of consummating the transactions contemplated by
this Agreement. Such confidentiality obligations will not apply to (i)
information which was known to the one party or their respective agents prior to
receipt from the other party; (ii) information which is or becomes generally
known; (iii) information acquired by a party or their respective agents from a
third party who was not bound to an obligation of confidentiality; and (iv)
disclosure required by law. In the event this Agreement is terminated as
provided in Article IX hereof, each party will return or cause to be returned to
the other all documents and other material obtained from the other in connection
with the Transaction contemplated hereby.
(b) Access to Information.
(i) The Company will afford Purezza and its financial
advisors, accountants, counsel and other representatives reasonable access
during normal business hours, upon reasonable notice, to the properties, books,
records and personnel of the Company and its Subsidiaries during the period
prior to the Closing to obtain all information concerning the business,
including the status of product development efforts, properties, results of
operations and personnel of the Affiliated Companies and any Subsidiaries, as
Purezza may reasonably request. No information or knowledge obtained by Purezza
in any investigation pursuant to this Section 6.6 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Transaction.
37
(ii) Purezza will afford the Company and its financial
advisors, underwriters, accountants, counsel and other representatives
reasonable access during normal business hours, upon reasonable notice, to the
properties, books, records and personnel of Purezza during the period prior to
the Closing to obtain all information concerning the business, including the
status of product development efforts, properties, results of operations and
personnel of Purezza, as the Company may reasonably request. No information or
knowledge obtained by the Company in any investigation pursuant to this Section
6.6 will affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the
Transaction.
6.7 No Solicitation. Other than with respect to the Transaction, each of
the Affiliated Companies and Purezza agrees that neither it nor any of its
officers, directors, managers, or managing members shall, and that it shall
direct and use its reasonable best efforts to cause its and its agents and other
representatives (including any investment banker, attorney or accountant
retained by it) not to, directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer with
respect to (i) a merger, reorganization, share exchange, consolidation or
similar transaction involving it, (ii) any sale, lease, exchange, mortgage,
pledge, transfer or purchase of all or substantially all of the assets or equity
securities of it, taken as a whole, in a single transaction or series of related
transactions or (iii) any tender offer or exchange offer for 20% or more of the
outstanding shares of Purezza Common Stock or the Company's Shares (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal").
Each of the Affiliated Companies and Purezza further agree that they and their
officers, directors, managers, or managing members shall, and that they shall
direct and use their reasonable best efforts to cause their agents and
representatives not to, directly or indirectly, engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
Each of the Affiliated Companies and Purezza agree that they will immediately
cease and cause to be terminated any existing discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Each
of the Affiliated Companies and Purezza agree that they will take the necessary
steps to promptly inform the individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 6.7.
Notwithstanding anything contained in this Agreement to the contrary,
nothing contained in this Agreement shall prevent the board of directors of
Purezza, or their respective representatives from, prior to the Closing (A)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal, if applicable, or otherwise complying with the Exchange
Act; (B) providing information in response to a request therefore by a person
who has made a bona fide unsolicited Acquisition Proposal; (C) engaging in any
negotiations or discussions with any person who has made a bona fide unsolicited
Acquisition Proposal or otherwise facilitating any effort or attempt to
implement an Acquisition Proposal; or (D) withdrawing or modifying the approval
or recommendation by Purezza's board of directors of this Agreement, approving
or recommending any Acquisition Proposal or causing the applicable party to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement relating to any Acquisition Proposal, if, and only to
the extent that in each such case referred to in clause (B), (C) or (D) above,
Purezza's board of directors determines in good faith, after consultation with
outside legal counsel that such action is necessary to act in a manner
38
consistent with the directors' fiduciary duties under applicable law and
determines in good faith after consultation with its financial advisors that the
person or group making such Acquisition Proposal has adequate sources of
financing to consummate such Acquisition Proposal and that such Acquisition
Proposal, if consummated as proposed, is materially more favorable to the
stockholders of Purezza from a financial point of view (any such more favorable
Acquisition Proposal being referred to as a "Superior Proposal") and determines
in good faith that such Superior Proposal is reasonably capable of being
consummated, taking into account legal, financial, regulatory and other aspects
of the proposal and the person making the proposal.
6.8 Public Disclosure. Except to the extent previously disclosed or to the
extent the parties believe that they are required by applicable law or
regulation to make disclosure, prior to Closing, no party shall issue any
statement or communication to the public regarding the Transaction without the
consent of the other party, which consent shall not be unreasonably withheld. To
the extent a party hereto believes it is required by law or regulation to make
disclosure regarding the Transaction, it shall, if possible, immediately notify
the other party prior to such disclosure. Notwithstanding the foregoing, the
parties hereto agree that Purezza will prepare and file a Current Report on Form
8-K pursuant to the Exchange Act reasonably acceptable to the Company to report
the execution of this Agreement and that any party hereto may file any reports
as required by the Exchange Act including, without limitation, any reports on
Schedule 13D.
6.9 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its commercially reasonable 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 Transaction and the other transactions contemplated by
this Agreement, including using commercially reasonable efforts to accomplish
the following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VII to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all consents, approvals or waivers from third parties required as a result of
the transactions contemplated in this Agreement, (iv) the defending of any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (v) the execution or delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, Purezza and its board of directors and the
Affiliated Companies and any Subsidiaries and the Members shall, if any state
39
takeover statute or similar statute or regulation is or becomes applicable to
the Transaction, this Agreement or any of the transactions contemplated by this
Agreement, use its commercially reasonable efforts to enable the Transaction and
the other transactions contemplated by this Agreement to be consummated as
promptly as practicable on the terms contemplated by this Agreement.
Notwithstanding anything herein to the contrary, nothing in this Agreement shall
be deemed to require Purezza or any Affiliated Company to agree to any
divestiture by itself or any of its affiliates of shares of capital stock,
membership interests or ownership interest or of any business, assets or
property, or the imposition of any material limitation on the ability of any of
them to conduct their business or to own or exercise control of such assets,
properties and stock.
(b) The Affiliated Companies and Members shall give prompt notice to
Purezza upon becoming aware that any representation or warranty made by them
contained in this Agreement has become untrue or inaccurate, or of any failure
of the Affiliated Companies or Members to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
them under this Agreement, in each case, such that the conditions set forth in
Article VII would not be satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
(c) Purezza shall give prompt notice to the Affiliated Companies and
Members upon becoming aware that any representation or warranty made by it
contained in this Agreement has become untrue or inaccurate, or of any failure
of Purezza to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in Article VII would
not be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
6.10 Treatment as a Reorganization or Tax-Deferred Exchange. Neither
Purezza nor the Affiliated Companies nor Members shall take any action prior to
or following the Transaction that could reasonably be expected to cause the
Transaction to fail to qualify as a reorganization under Section 368 of the Code
or a tax-deferred exchange of property within the meaning of Section 351 of the
Code. The Company and the Members agree to report the Transaction as a
reorganization or a tax-deferred exchange within the meaning of the Code for
Federal income tax purposes.
6.11 Absence of Material Liabilities. Immediately prior to Closing,
Purezza shall have no material liabilities or obligations requiring the payment
of monies, other than obligations under or with respect to: (i) a certain
Financial Advisory Agreement, in the form attached hereto as Exhibit C
("Financial Advisory Agreement"), (ii) any agreement with the Transfer Agent,
(iii) Purezza Contracts disclosed under Section 4.19 hereto, and (iv) accounts
payable and accrued expenses of Purezza with respect to the period prior to
Closing. Purezza will establish the Cash Reserve provided for in Section 4.23 in
an amount equal to the monetary obligations of Purezza in respect of all unpaid
accounts payable and accrued expenses of Purezza as of Closing (other than under
the Financial Advisory Agreement) (collectively, the "Pre-Closing Cash
Obligations"). Following Closing, to the extent not satisfied by Purezza prior
to or at Closing, the Pre-Closing Cash Obligations will be paid in full from the
Cash Reserve. Following the Closing, the Affiliated Companies shall pay and
satisfy Purezza's obligations under the agreement with the Transfer Agent and
the Purezza Contracts which arise with respect to the period following Closing.
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6.12 Cash Payments at Closing. At Closing, the Affiliated Companies shall
pay, on behalf of Purezza, the reverse merger fees of $400,000 under the
Financial Advisory Agreement (such sum being referred to herein, as the "Company
Closing Payment") to Keating Securities, LLC ("Keating Securities").
6.13 Business Records. At Closing, Purezza shall cause to be delivered to
the Company all records and documents relating to Purezza, which Purezza
possesses, including, without limitation, books, records, government filings,
Returns, Charter Documents, Corporate Records, Stock Records, consent decrees,
orders, and correspondence, director and stockholder minutes and resolutions,
stock ownership records, financial information and records, electronic files
containing any financial information and records, and other documents used in or
associated with Purezza ("Business Records").
6.14 Registration Statements; Registration Rights. In addition to any
registration rights agreements currently in existence between Purezza and any
current stockholder of Purezza as set forth in Schedule 4.3 granting piggyback
registration rights with respect the securities held by them, Purezza and the
Company hereby agree that, effective as of the Closing, all shares of Purezza's
Common Stock currently owned by KRM Fund shall be granted piggyback registration
rights. KRM Fund shall be a third-party beneficiary of the provisions of this
Section and may enforce the same as if it was a party to this Agreement.
6.15 Post-Closing Stockholder Actions. As soon as practicable after the
Closing, Purezza shall prepare and mail to its stockholders, a stockholder
notice (together with any amendments or supplements thereto, the "Notice") in
connection with the approval and adoption of the following matters (the
"Stockholder Matters"):
(a) To approve a 1 for 10 reverse stock split, with special
treatment for certain of Purezza's stockholders to preserve round lot
stockholders if so determined by Purezza's board of directors ("Reverse Split");
(b) To approve the change of the name of Purezza to a name selected
by the Members;
(c) To approve an increase in the number of authorized common stock
of Purezza from 100,000,000 to 150,000,000; and
(d) All such other actions as shall be necessary or desirable in
connection with or related to the foregoing actions in (a) through (c) above.
The Notice shall comply as to form and substance in all material respects
with the laws of the State of Florida and shall be mailed to Purezza's
stockholders in the time required by the laws of the State of Florida. The
Affiliated Companies shall provide such information as may be necessary or
required, in the reasonable determination of counsel to the Company and to
Purezza, for Purezza to prepare the Notice.
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As soon as practicable following the Closing, Purezza shall obtain the
written consent of each Member and KRM Fund approving the Stockholder Matters.
Upon receipt of such written consent, Purezza will mail the Notice to the
holders of Purezza's securities entitled to vote at a meeting of stockholders.
ARTICLE VII
CONDITIONS TO THE TRANSACTION
7.1 Conditions to Obligations of Each Party to Effect the Transaction. The
respective obligations of each party to this Agreement to effect the Transaction
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Transaction illegal or
otherwise prohibiting consummation of the Transaction, substantially on the
terms contemplated by this Agreement. All waiting periods, if any, under any law
in any jurisdiction in which the Affiliated Companies or Purezza has material
operations relating to the transactions contemplated hereby have expired or
terminated early and all material approvals required to be obtained prior to the
Transaction in connection with the transactions contemplated hereby shall have
been obtained. The parties expressly acknowledge and agree that any SEC
rulemaking requiring enhanced disclosure of reverse merger transactions with a
public shell will not be a reason for either party to terminate this Agreement
or deemed a failure of any condition set forth herein.
(b) Debt Holder Consents. The lenders under any of the Affiliated
Companies or any Subsidiary credit facilities, secured loans, mortgages and
other indebtedness for borrowed money shall have consented in writing to the
Transaction (if such consent is required in connection with this Transaction).
(c) Required Approvals. This Agreement and the Transaction have been
duly approved and adopted, by the requisite vote of the Members under the laws
of the jurisdiction of its organization and the Company's Charter Documents, and
by the requisite actions of the Board of Directors of Purezza under the laws of
the State of Florida and Purezza's Charter Documents.
(d) Certificate of Designations. Prior to Closing, the Board of
Directors of Purezza shall have adopted, and Purezza shall have filed with, and
had accepted by, the Secretary of State of the State of Florida, the Certificate
of Designations attached hereto as Exhibit B.
(e) Release by Gateway. Gateway shall have delivered an executed
release in favor of all parties to this Agreement, KRM Fund and Keating
Securities that the Shares owned or to be owned and held by it as shown on
Schedule 1.1 hereto are in full settlement of any and all compensation due and
payable to it and its affiliates and controlling persons for any and all
services provided in connection with this Agreement or any transactions
contemplated hereby.
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(f) Agreement of All Members. All Members owning any Shares or
equity securities of the Company prior to or at Closing (including Gateway)
shall have executed this Agreement evidencing his agreement to exchange his
Shares or equity securities of the Company into Purezza's Preferred Shares on
the same terms and conditions as each other Member. To the extent applicable,
the Company shall have obtained modification agreements to all options,
warrants, and other agreements eliminating any and all rights to acquire
securities of the Affiliated Companies or any Subsidiary and terminating all
pre-emptive rights.
(g) Financial Statements; Transaction Form 8-K. The Company shall
have delivered to Purezza the U.S. GAAP Financial Statements and the Pro Forma
Financial Statements as required by Sections 6.4(b) and 6.4(d) and the
Transaction Form 8-K as required by Section 6.4(a). Purezza shall have filed the
Transaction Form 8-K with the SEC at Closing.
(h) Vero Termination Agreement. Purezza shall have terminated its
agreement with Vero Management, LLC, effective at Closing.
(i) Voting Agreement. KRM Fund and each Member shall have executed
and delivered the Voting Agreement by and between the Members and KRM Fund, in
the form attached hereto as Exhibit A.
(j) Blue Sky Laws. Purezza's Preferred Stock to be issued under this
Agreement are exempt from, or have been qualified under, the Blue Sky Laws of
each appropriate jurisdiction to the satisfaction of Purezza and the Company and
their respective counsels.
(k) Restructuring Agreements. The Restructuring Agreements, the
Option Agreement and the Authorization, each in a form reasonably acceptable to
Purezza, have been duly authorized and executed by the parties thereto, with a
copy of each of the foregoing having been delivered to Purezza at or prior to
Closing.
7.2 Additional Conditions to Obligations of the Members and the Company.
The obligations of the Company and the Members to consummate and effect the
Transaction shall be subject to the satisfaction at or prior to the Closing Date
of each of the following conditions, any of which may be waived, in writing,
exclusively and only by the Company:
(a) Representations and Warranties. Each representation and warranty
of Purezza contained in this Agreement (i) shall have been true and correct as
of the date of this Agreement and (ii) shall be true and correct on and as of
the Closing Date with the same force and effect as if made on the Closing Date.
The Company and the Members shall have received a certificate with respect to
the foregoing signed on behalf of Purezza by an authorized officer of Purezza
("Purezza Closing Certificate").
(b) Agreements and Covenants. Purezza shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
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(c) Director and Officer Resignations and Appointments. Purezza
shall have delivered to the Company the Resignations and Resolutions in a form
satisfactory to the Company, effective as of the Closing. Purezza shall also
have delivered to the Company evidence satisfactory to the Company of the
appointment of new directors of Purezza in accordance with Section 6.1 hereof.
(d) Consents. Purezza shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby, other than consents, waivers and approvals the absence of
which, either alone or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Purezza.
(e) Material Adverse Effect. No Material Adverse Effect with respect
to Purezza shall have occurred since the date of this Agreement.
(f) No Financial Obligations. Immediately prior to the Closing,
Purezza shall have no liabilities or obligations, other than as set forth in
Section 6.11 hereof.
(g) SEC Compliance; OTC BB Quotation. Immediately prior to Closing,
Purezza shall be in compliance with the reporting requirements under the
Exchange Act and shall be quoted on the OTC BB.
(h) Business Records; Resignation Letter. Purezza shall have
delivered to the Company the Business Records and the Resignation Letter from
Purezza's Accountants.
(i) Tax Opinion. Prior to the Closing, the Company shall have
received a written opinion from its tax counsel, in form and substance
reasonably satisfactory to the Company, to the effect that the Transaction will
constitute a reorganization under Section 368 of the Code or a tax-deferred
exchange of property within the meaning of Section 351 of the Code and such
opinions shall not have been withdrawn prior to the implementation of the
Transaction. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
(j) Other Deliveries. At Closing, Purezza shall have delivered to
the Company and/or its Members: (i) certificates representing Purezza's
Preferred Shares to the Members as set forth in Schedule 1.1 hereof and in
accordance with Section 1.6, except for the Escrowed Preferred Shares held
pursuant to Section 10.2 hereof, (ii) copies of resolutions and actions taken by
Purezza's board of directors in connection with the approval of this Agreement
and the Transactions contemplated hereunder, and (iii) such other documents or
certificates as shall reasonably be required by the Company and its counsel in
order to consummate the transactions contemplated hereunder.
7.3 Additional Conditions to the Obligations of Purezza. The obligations
of Purezza to consummate and effect the Transaction shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Purezza:
(a) Representations and Warranties. Each representation and warranty
of the Affiliated Companies and the Members contained in this Agreement (i)
shall have been true and correct as of the date of this Agreement and (ii) shall
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be true and correct on and as of the Closing Date with the same force and effect
as if made on and as of the Closing. Purezza shall have received a certificate
with respect to the foregoing signed on behalf of the Affiliated Companies by an
authorized officer of the Affiliated Companies and by each Member with respect
to the foregoing ("Closing Certificate").
(b) Agreements and Covenants. The Affiliated Companies and Members
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by
them at or prior to the Closing Date.
(c) Consents. The Affiliated Company and any Subsidiaries shall have
obtained all consents, waivers and approvals required in connection with the
consummation of the transactions contemplated hereby, including the transactions
contemplated by the Restructuring Agreements, other than consents, waivers and
approvals the absence of which, either alone or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Affiliated
Companies and any Subsidiaries. The Affiliated Companies and any Subsidiaries
have received all approvals and permits required by any applicable national,
foreign, provincial and local governing bodies and regulatory authorities to
permit the Affiliated Companies and any Subsidiaries: (i) to be listed or
quoted, through Purezza's ownership of all Shares of the Company, as a public
company on a U.S. exchange or quotation system following the Closing, and (ii)
to operate their respective businesses following the Closing) including, without
limitation, receipt by all WFOE Certifications and SAFE Registrations.
(d) Material Adverse Effect. No Material Adverse Effect with respect
to the Affiliated Companies or any Subsidiaries shall have occurred since the
date of this Agreement.
(e) Accountant Undertaking. The Company shall have delivered to
Purezza in a timely manner the Accountant Undertaking, in a form satisfactory to
Purezza.
(f) Closing Payments. At Closing, the Affiliated Companies shall
have made the Company Closing Payment required by Section 6.12.
(g) D&O Information. The Company shall have delivered the
Questionnaires in a timely manner, and the D&O Information shall be acceptable
to Purezza.
(h) Change of Accountant Form 8-K; Press Release. The Company shall
have delivered the Change of Accountant Form 8-K and Press Release to Purezza,
each in a form acceptable to Purezza.
(i) Financial Advisory Agreement. The Financial Advisory Agreement
between Purezza and Keating Securities in the form of Exhibit C hereto, has been
duly executed by the parties and authorized and approved by Purezza's board of
directors.
(j) Legal Opinion by PRC Counsel. The legal counsel of Puda and
Putai in the PRC shall have issued its legal opinion, in the English language
and addressed to Purezza and KRM Fund, that (i) each of Puda and Putai are duly
formed or organized, validly existing and in good standing under the laws of its
jurisdiction of organization and have the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being or currently planned to be conducted, (ii) that the authorized and
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registered capital and the shares of capital stock outstanding of Puda and Putai
are in accordance with the representations set forth in Section 3.3 hereof,
(iii) that the Restructuring Agreements, the Option Agreement and the
Authorization are each valid and binding upon and enforceable against each of
the parties thereto under the laws of the PRC and the laws of any other
jurisdiction which may be applicable, (iv) with respect to Putai, the all
certifications and approvals required to qualify as a wholly foreign owned
enterprise ("WFOE Certification") have been received by Putai, and such WFOE
certifications by their terms do not expire and are not revocable for a period
of 15 years from the date of issuance, (v) with respect to Putai, it has filed
the applications for and has received any and all foreign exchange
certifications and approvals as required from the appropriate national and local
branches of the State Administration of Foreign Exchange ("SAFE Certifications")
in the PRC, which SAFE Certifications were issued on December 8, 2004 and allow
Putai to exchange currency of the PRC into currency of the United States and
vice versa, and (vi) the WFOE Certifications and SAFE Certifications and the
continuation thereof are not subject to any conditions which have not already
been satisfied, (vii) Putai is entitled to all tax benefits under the PRC and
its subdivisions that are enjoyed by a wholly foreign owned enterprise ("WFOE"),
(viii) Puda is in compliance with all environmental and tax laws in the PRC, and
owns all real estate (including land use rights) for each property on which Puda
is currently operating in the PRC, (ix) nothing contained in this Agreement or
the transactions contemplated hereunder will affect in any way Putai's status
and continued status as a WFOE, and (x) Puda and Putai have all proper authority
to enter into this Agreement and the transactions contemplated hereunder, and
this Agreement and the transactions contemplated hereunder have been duly
authorized and approved by each of their board of directors or comparable
governing body and their members or stockholders, and this Agreement and the
transactions contemplated hereunder do not require any consents or approvals
from any governmental bodies or authorities in the PRC or its subdivisions.
(k) Legal Opinion by Company's Counsel. The legal counsel of the
Company shall have issued its legal opinion, in the English language and
addressed to Purezza and KRM Fund, that (i) the Company is duly formed or
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being or currently planned to be conducted, (ii) that the authorized and
registered capital and the shares of capital stock outstanding of the Company is
in accordance with the representations set forth in Section 3.3 hereof, and
(iii) the Company has all proper authority to enter into this Agreement and the
transactions contemplated hereunder, and this Agreement and the transactions
contemplated hereunder have been duly authorized and approved by its board of
directors or comparable governing body and its members or stockholders, and this
Agreement and the transactions contemplated hereunder do not require any
consents or approvals from any governmental bodies or authorities.
(l) Repayment of Affiliate Obligations. At the Closing Date, all
amounts owed to the Affiliated Companies or any Subsidiary by each Member and
any person to become an officer or director of Purezza following Closing and
their respective affiliates (regardless of whether such amounts are due and
payable) shall have been paid in full.
46
(m) Other Deliveries. At Closing, the Affiliated Companies and/or
Members shall have delivered to Purezza: (i) documents evidencing the exchange
of Shares owned by Members, in accordance with Section 1.5, (ii) copies of
resolutions and actions taken the each Affiliated Company's board of directors
or comparable governing body and its members or stockholders in connection with
the approval of this Agreement and the transactions contemplated hereunder, and
(iii) such other documents or certificates as shall reasonably be required by
Purezza and its counsel in order to consummate the transactions contemplated
hereunder.
ARTICLE VIII
SURVIVAL
Except as specifically set forth in Sections 6.11, 6.12, 6.14 and 6.15,
and Articles II, III, X and XI hereof ("Surviving Provisions"), all
representations, warranties, agreements and covenants contained in or made
pursuant to this Agreement by any party hereto or contained in any Schedule
hereto shall not survive the Closing, and no claims made by virtue of such
representations, warranties, agreements and covenants shall be made or commenced
by any party hereto from and after the Closing. The agreements and covenants of
any party contained in the Surviving Provisions which require or contemplate
performance by such party after the Closing shall survive (and not be affected
in any respect by) the Closing and may be enforced by the parties hereto
(including KRM Fund, to the extent it is a third party beneficiary with respect
to such provisions). Each Member, for himself only, and not with respect to any
other Member, hereby indemnifies and holds harmless, and agrees to indemnify and
hold harmless, Purezza (from and after the Closing), and its respective
directors, officers, shareholders, employees and agents (collectively, the
"Indemnified Parties") against (i) any and all liabilities, obligations, losses,
damages, claims, actions, Liens and deficiencies which exist, or which may be
imposed on, incurred by or asserted against any one or more of the Indemnified
Parties, (1) based upon, resulting from or arising out of, or as to which there
was, any material breach or inaccuracy of any representation or warranty
contained in Articles II or III of this Agreement, or (2) based upon, resulting
from or arising out of any present or future claim, action, suit or proceeding
brought or asserted against any Indemnified Party by or on behalf of any Person
who, at any time prior to the Closing, had (or purports to have had) any
interest in the Shares held by such Member, and (ii) any cost or expense
(including reasonable attorneys' fees and court costs) incurred by the
Indemnified Parties or any of them in connection with the foregoing (including,
without limitation, any cost or expense incurred by the Indemnified Parties in
enforcing their rights hereunder. The provisions of this Article VIII shall
survive (and not be affected in any respect by) the Closing.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
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(a) by mutual written agreement of Purezza and the Affiliated
Companies;
(b) by either Purezza or any of the Affiliated Companies if the
Transaction shall not have been consummated for any reason by July 30, 2005;
provided, however, that the right to terminate this Agreement under this Section
9.1(b) shall not be available to any party whose action or failure to act has
been a principal cause of or resulted in the failure of the Transaction to occur
on or before such date and such action or failure to act constitutes a breach of
this Agreement;
(c) by either Purezza or any of the Affiliated Companies if a
Governmental Entity shall have issued an order, decree or ruling or taken any
other action, in any case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Transaction, which order, decree, ruling
or other action is final and nonappealable;
(d) by any of the Affiliated Companies, upon a material breach of
any representation, warranty, covenant or agreement on the part of Purezza set
forth in this Agreement, or if any representation or warranty of Purezza shall
have become materially untrue, in either case such that the conditions set forth
in Section 7.1 or Section 7.2 would not be satisfied as of the time of such
breach or as of the time such representation or warranty shall have become
untrue, provided, that if such inaccuracy in Purezza's representations and
warranties or breach by Purezza is curable by Purezza prior to the Closing Date,
then no Affiliated Company may not terminate this Agreement under this Section
9.1(d) for thirty (30) days after delivery of written notice from an Affiliated
Company to Purezza of such breach, provided Purezza continues to exercise
commercially reasonable efforts to cure such breach (it being understood that no
Affiliated Company may not terminate this Agreement pursuant to this Section
9.1(d) if it shall have materially breached this Agreement or if such breach by
Purezza is cured during such thirty (30)-day period); or
(e) by Purezza, upon a material breach of any representation,
warranty, covenant or agreement on the part of the Affiliated Companies or
Members set forth in this Agreement, or if any representation or warranty of the
Affiliated Companies or Members shall have become materially untrue, in either
case such that the conditions set forth in Section 7.1 or Section 7.3 would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided, that if such inaccuracy in any
Affiliated Company's or Members' representations and warranties or breach by the
Affiliated Companies or Members is curable by the Affiliated Companies or
Members prior to the Closing Date, then Purezza may not terminate this Agreement
under this Section 9.1(e) for thirty (30) days after delivery of written notice
from Purezza to the Affiliated Companies and Members of such breach, provided
the Affiliated Companies and Members continues to exercise commercially
reasonable efforts to cure such breach (it being understood that Purezza may not
terminate this Agreement pursuant to this Section 9.1(e) if it shall have
materially breached this Agreement or if such breach by the Affiliated Companies
or Members is cured during such thirty (30)-day period).
9.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 9.1 above will be effective immediately upon (or, if the
termination is pursuant to Section 9.1(d) or Section 9.1(e) and the proviso
48
therein is applicable, thirty (30) days after) the delivery of written notice of
the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 9.1, this Agreement shall
be of no further force or effect and the Transaction shall be abandoned, except
as set forth in this Section 9.2, Section 9.3 and Article XI (General
Provisions), each of which shall survive the termination of this Agreement.
9.3 Fees and Expenses. Except as provided in Sections 6.11 and 6.12, all
fees and expenses incurred in connection with this Agreement and the
Transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Transaction is consummated. The parties further
agree that, whether or not the Transaction is consummated, the Affiliated
Companies shall be responsible for any and all costs and expenses incurred in
connection with the preparation and filing of the Transaction Form 8-K
(including the U.S. GAAP Financial Statements and the Pro Forma Financial
Statements contained therein).
9.4 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of
Purezza, each Affiliated Company and each Member.
9.5 Extension; Waiver. At any time prior to the Closing, any party hereto
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.
ARTICLE X
POST-CLOSING COVENANTS
10.1 Post-Closing Covenants. The Affiliated Companies acknowledge that the
agreements contained in this Section 10.1 are an integral part of the
transactions contemplated by this Agreement and that, without these agreements,
Purezza would not enter into this Agreement. The parties hereto acknowledge and
agree that the failure by Purezza or the Affiliated Companies to satisfy,
perform and comply with the covenants set forth in this Section 10.1
("Post-Closing Covenants") following the Closing will have a material adverse
effect on Purezza and the investment of KRM Fund in Purezza. During the period
beginning upon the Closing and ending on the first anniversary of the Closing,
Purezza agrees to satisfy, perform and comply with, and the Affiliated Companies
agrees to cause Purezza to satisfy, perform, and comply with, the following
agreements and covenants:
(a) Not later than August 15, 2005, Purezza and the Affiliated
Companies shall: (i) complete the interim financial statements for the Company,
on a consolidated with Puda and Putai, for the three month period ended March
31, 2005, which financials statements shall be reviewed by the Accountant,
comply in all material respects with the published rules and regulations of the
SEC, be prepared in accordance with U.S. GAAP applied on a consistent basis
49
throughout the periods involved, and fairly present in all material respects the
financial position of Puda at the respective dates thereof and the results of
its operations and cash flows for the periods indicated ("Q1 Financial
Statements"), and (ii) complete and file the Form 8-K/A which includes the Q1
Financial Statements and such other information (financial or otherwise) that
may from time to time be required by the SEC to be included on any report,
statement or form to be filed with the SEC in connection with a reverse merger
transaction ("Form 8-K/A") .
(b) Not later than August15, 2005, Purezza and the Affiliated
Companies shall: (i) complete the interim financial statements for Purezza and
the Affiliated Companies, on a consolidated basis, for the six month period
ended June 30, 2005, which financials statements shall be reviewed by the
Accountant, comply in all material respects with the published rules and
regulations of the SEC, be prepared in accordance with U.S. GAAP applied on a
consistent basis throughout the periods involved, and fairly present in all
material respects the financial position of Purezza and the Affiliated
Companies, on a consolidated basis, at the respective dates thereof and the
results of its operations and cash flows for the periods indicated ("Q2
Financial Statements"), and (ii) complete and file the Form 10-QSB which
includes the Q2 Financial Statements and such other information (financial or
otherwise) that may from time to time be required by the SEC to be included on a
Form 10-QSB .
(c) Respond promptly, and to the satisfaction of the SEC, to any
review or inquiry by the SEC to the Transaction Form 8-K, the Form 8-K/A or any
other form, report or document filed by Purezza with the SEC, and file within
the statutory time limits any required filings or notifications with the SEC,
NASDAQ, NASD and any other federal, state, foreign government or regulatory
agency including any agency or organization with jurisdiction over any exchange
on which the Purezza's securities are listed or quoted.
(d) Comply with the terms and conditions of the Voting Agreement.
(e) Hold meetings of Purezza's board of directors at least once each
fiscal quarter during the fiscal years ending December 31, 2005 and 2006; and
schedule regular meetings for the audit and compensation committee, with advance
notice to all directors, and insure that such committee meetings are properly
held as scheduled.
(f) Engage certified public accountants that are at all times
registered with PCAOB and, in the event Purezza's certified public accountants
resign or are terminated for any reason, Purezza shall promptly engage a new
certified public accountant registered with PCAOB.
(g) Add independent directors, create audit, compensation and other
committees, and comply with the provisions of the Sarbanes-Oxley Act of 2002,
and take such other actions as required by applicable laws and regulations
regarding corporate governance.
(h) Adopt proper disclosure, insider trading and code of ethics
policies to the extent required by law or applicable regulation.
(i) Pay, when due, all transfer agent fees, listing fees and any
other fees the non-payment of which may adversely effect compliance with
applicable laws and regulations (including securities laws and regulations) or
the listing or quotation of Purezza's securities.
50
(j) File all tax returns of any kind in a timely manner, and pay,
when due, all tax obligations of any kind or nature.
(k) Engage an investors relations firm and an independent research
firm, acceptable to KRM Fund, within sixty (60) days after the Closing.
(l) (i) Remain in compliance with and current in its reporting
requirements under the Exchange Act, (ii) remain quoted on, at a minimum, the
OTC BB, (iii) certify in writing to any person holding restricted stock of
Purezza as of the date of this Agreement that Purezza has filed all of the
reports required to be filed by it under the Exchange Act to enable such person
to sell such person's restricted stock under Rule 144 or 145, as may be
applicable in the circumstances, or will inform such person in writing that it
has not filed any such report or reports, upon being informed in writing by such
person of its intent to sell any shares under Rule 144 or Rule 145 promulgated
under the Securities Act (including any rule adopted in substitution or
replacement thereof), and (iv) if any certificate representing any shares of
restricted stock of Purezza is presented to Purezza's transfer agent for
registration of transfer in connection with any sale theretofore made under Rule
144 or 145, provided such certificate is duly endorsed for transfer by the
appropriate person(s) or accompanied by a separate stock power duly executed by
the appropriate person(s) in each case with reasonable assurances that such
endorsements are genuine and effective, and is accompanied by an opinion of
counsel satisfactory to Purezza and its counsel that such transfer has complied
with the requirements of Rule 144 or 145, as the case may be, promptly instruct
its transfer agent to register such transfer and to issue one or more new
certificates representing such shares to the transferee and, if appropriate
under the provisions of Rule 144 or 145, as the case may be, free of any stop
transfer order or restrictive legend.
10.2 Liquidated Damages. The parties hereto acknowledge and agree that to
the extent that there is a breach of Section 10.1 (a), (b) or (c), or a material
breach of any of the other Post-Closing Covenants which is not cured by Purezza
or the Affiliated Companies within thirty (30) days upon written notice from KRM
Fund, Zhao Ming and Zhao Yao shall forfeit and surrender to Purezza for
immediate cancellation ten percent (10%) of the number of Preferred Shares
received by each of them as set forth on Schedule 1.1 (or, in event of the
conversion of such Preferred Shares, the common stock issued in respect thereof)
("Escrowed Shares"). Certificates representing the Escrowed Shares shall be
delivered to KRM Fund, at Closing, together with duly executed stock powers in
blank with medallion signature guarantees. Purezza shall instruct the Transfer
Agent in writing to cancel such Escrowed Shares upon the occurrence of any event
of breach set forth in this Article X. The surrender of the Escrowed Shares
shall be treated as liquidated damages and as its sole source of damages for any
breach of the Post-Closing Covenants.
10.3 Other Provisions. Notwithstanding anything contained herein to the
contrary, the provisions of this Article X shall survive (and not be affected in
any respect by) the Closing. KRM Fund shall be a third-party beneficiary of the
provisions of this Article X and may enforce the same as if it was a party to
this Agreement.
51
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Purezza, to:
Purezza Group, Inc.
936 Beachland Boulevard, Suite 13
Vero Beach, FL USA 32963
Attn: Kevin R. Keating, President
(772) 231-7544 telephone
(772) 231-5947 telecopy
(b) if to the Affiliated Companies or Members, to:
Puda Investment Holding Limited
c/o Zhao Ming and Zhao Yao
Unit 16-1, 5 Xiang
Tian Di Tan
Xing Hua Ling District
Tai Yuan City
Shan Xi
China
86 351 2281300/7034401/7034410 telephone
86 351 7034401/2281300 telecopy
with a copy to:
Stephen A. Zrenda, Jr., Esq.
Stephen A. Zrenda, Jr., P.C.
2440 Bank One Center
100 N. Broadway
Oklahoma City, OK 73102
(405) 235-2111 telephone
(405) 235-2157 telecopy
52
11.2 Interpretation.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "Material Adverse
Effect" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect, individually or when aggregated
with other changes, events, violations, inaccuracies, circumstances or effects,
that is materially adverse to the business, assets (including intangible
assets), revenues, financial condition or results of operations of such entity
and its Subsidiaries, if any, taken as a whole (it being understood that neither
of the following alone or in combination shall be deemed, in and of itself, to
constitute a Material Adverse Effect: (a) changes attributable to the public
announcement or pendency of the transactions contemplated hereby, (b) changes in
general national or regional economic conditions, (c) changes affecting the
industry generally in which the Affiliated Companies or Purezza operates, or (d)
any SEC rulemaking requiring enhanced disclosure of reverse merger transactions
with a public shell.
(c) For purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity. (b) For purposes of this Agreement, all monetary amounts
set forth herein are referenced in United States dollars, unless otherwise
noted.
11.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
11.4 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Schedules hereto (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
it being understood that the Letter of Intent between Purezza and the Company
dated September 10, 2004 shall terminate upon the execution of this Agreement;
and (b) are not intended to confer upon any other person any rights or remedies
hereunder (except as specifically provided in this Agreement). KRM Fund is a
53
third-party beneficiary of the certain provisions contained herein to which KRM
Fund derives a benefit and, with respect to such provisions, KRM Fund has the
right to enforce them as if it were a signatory to this Agreement.
11.5 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
11.6 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
11.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, USA, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
11.8 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.
11.9 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the first sentence of this Section 11.9, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
11.10 Arbitration. Any disputes or claims arising under or in connection
with this Agreement or the transactions contemplated hereunder shall be resolved
by binding arbitration. Notice of a demand to arbitrate a dispute by either
party shall be given in writing to the other at their last known address.
Arbitration shall be commenced by the filing by a party of an arbitration demand
with the American Arbitration Association ("AAA") in its office in Denver,
Colorado USA. The arbitration and resolution of the dispute shall be resolved by
a single arbitrator appointed by the AAA pursuant to AAA rules. The arbitration
shall in all respects be governed and conducted by applicable AAA rules, and any
award and/or decision shall be conclusive and binding on the parties. The
arbitration shall be conducted in Denver, Colorado USA. The arbitrator shall
54
supply a written opinion supporting any award, including a statement of facts
and conclusions of law, and judgment may be entered on the award in any court of
competent jurisdiction. Each party shall pay its own fees and expenses for the
arbitration, except that any costs and charges imposed by the AAA and any fees
of the arbitrator for his services shall be assessed against the losing party by
the arbitrator. In the event that preliminary or permanent injunctive relief is
necessary or desirable in order to prevent a party from acting contrary to this
Agreement or to prevent irreparable harm prior to a confirmation of an
arbitration award, then either party is authorized and entitled to commence a
lawsuit solely to obtain equitable relief against the other pending the
completion of the arbitration in a court having jurisdiction over the parties.
All rights and remedies of the parties shall be cumulative and in addition to
any other rights and remedies obtainable from arbitration.
[Remainder of this page intentionally left blank.]
55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
PUREZZA GROUP, INC.
By: /s/ Kevin R. Keating
--------------------------------
Kevin R. Keating, President
PUDA INVESTMENT HOLDING LIMITED
By: /s/ Zhao Ming
--------------------------------
Zhao Ming, Chairman and CEO
SHANXI PUDA RESOURCES CO, LTD.
By: /s/ Zhao Ming
--------------------------------
Zhao Ming, Chairman and CEO
TAIYUAN PUTAI BUSINESS CONSULTING CO., LTD
By: /s/ Zhao Ming
--------------------------------
Zhao Ming, Chairman and CEO
MEMBERS:
/s/ Zhao Ming
--------------------------------
Zhao Ming, Individually
/s/ Zhao Yao
--------------------------------
Zhao Yao, Individually
WORLDWIDE GATEWAY CO., LTD.
By: /s/ Andy Lai
--------------------------------
Andy Lai, Chairman and CEO
56
Index of Exhibits and Schedules
Exhibits
Exhibit A -Voting Agreement
Exhibit B - Certificate of Designations of Series A Convertible Preferred Stock
Exhibit C - Financial Advisory Agreement
Schedules
Schedule Description
Schedule 1.1 Company Share Ownership and Allocation
Company Schedules
Schedule 3.2 Subsidiaries
Schedule 3.3 Capitalization
Schedule 3.6 Compliance
Schedule 3.8 No Undisclosed Liabilities
Schedule 3.9 Absence of Certain Changes or Events
Schedule 3.10 Litigation
Schedule 3.11 Employee Benefit Plans
Schedule 3.12 Labor Matters
Schedule 3.13 Restrictions on Business Activities
Schedule 3.14 Title to Property
Schedule 3.15 Taxes
Schedule 3.16 Environmental Matters
57
Schedule 3.17 Brokers; Third Party Expenses
Schedule 3.18 Intellectual Property
Schedule 3.19 Agreements; Contracts; Commitments
Schedule 3.20 Insurance
Schedule 3.21 Government Actions/Filings; Approvals
Schedule 3.22 Interested Party Transactions
Purezza Schedules
Schedule 4.3 Capitalization
Schedule 4.6 Compliance
Schedule 4.8 No Undisclosed Liabilities
Schedule 4.9 Absence of Certain Changes or Events
Schedule 4.10 Litigation
Schedule 4.11 Employee Benefit Plans
Schedule 4.15 Taxes
Schedule 4.16 Environmental Matters
Schedule 4.19 Contracts; Agreements; Commitments
Schedule 4.21 Government Actions/Filings; Approvals
Schedule 4.22 Interested Party Transactions
Schedule 4.23 Indebtedness; Purezza Assets
Conduct Pending Closing
Schedule 5.1 Parties' Conduct Prior to Closing
58
Dates Referenced Herein and Documents Incorporated by Reference
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