STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), is effective
as of July 30, 2005, and is entered into by and among WORLD FITNESS SALES, a
Cayman Island corporation ("Seller"), and GOODWAY HOLDING CO, ("Purchaser").
RECITALS:
A. Seller is the owner of seventy percent (70%) of the issued
and outstanding shares of capital stock and related equity interests (the
"Shares") of Xiamen Cowell Industrial, Ltd, a company incorporated under the
laws of The People's Republic of China (the "Company"); and
B. Purchaser desires to purchase from Seller, and Seller
desires to sell to Purchaser, all of the Shares, subject to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
ARTICLE I
PURCHASE AND SALE; REPURCHASE OPTION
SECTION 1.1 Purchase and Sale. Upon the terms and subject to
the conditions set forth in this Agreement, Seller hereby sells, assigns,
transfers and delivers to Purchaser, and Purchaser hereby purchases from Seller,
the Shares, free and clear of all options, pledges, security interests, liens or
other encumbrances or restrictions on voting or transfer ("Encumbrances"), other
than restrictions imposed by Federal, state or other governmental securities
laws (and other than restrictions that will be imposed following the
consummation of the transactions contemplated hereby pursuant to Section 1.4
hereof).
SECTION 1.2 Purchase Price. Subject to the terms and
conditions set forth in this Agreement, in reliance on the representations,
warranties, covenants and agreements of the parties contained herein and
inconsideration of the sale, assignment, transfer and delivery of the Shares,
Purchaser shall pay to Seller the sum of Ten Million Fourteen and 57/100 Dollars
($10,000,014.57) (the "Purchase Price"), the receipt and sufficiency of which is
acknowledged by Seller. The Purchase Price shall be paid through the
satisfaction in full of, and irrevocable and unconditional release of all claims
for payment in respect of, all amounts due from Seller to Purchaser with respect
to the invoices set forth on Exhibit A hereto (the "Accounts").
SECTION 1.3 Closing.
(a) Contemporaneously with the execution of this Agreement,
Seller shall deliver or cause to be delivered to Purchaser a stock certificate
evidencing the Shares duly endorsed in blank or accompanied by stock powers duly
executed in blank.
(b) Purchaser's execution of this Agreement shall constitute
its satisfaction in full of, and irrevocable and unconditional release of all
claims for payment in respect of, all amounts due from Seller to Purchaser with
respect to the Accounts, and, at such time, all such Accounts shall be deemed
paid in full.
SECTION 1.4 Repurchase Option and Right of First Refusal. As a
material inducement to Seller to enter into this Agreement, the parties hereby
covenant and agree (a) within forty-five (45) days from the date hereof to
negotiate in good faith the execution and delivery of an agreement with respect
to the granting of an option (the "Option") to Seller to repurchase the Shares
on such terms and for such price as the parties shall agree and provide for in
the Option, if, as, and when executed, and (b) the Purchaser hereby grants to
the Seller a right of first refusal on any of transfer, sale or other
disposition of the Shares by Purchaser and agrees in the case of any such
transfer to give the Seller not less than thirty days notice (the "Notice
Period") of any such proposed sale of the Shares by the Purchaser together with
the proposed terms of sale and the consideration to be paid therefore during
which Notice Period the Seller may elect by written notice to the Purchaser to
purchase all but not less than all of the Shares on the same terms and for the
same consideration specified in the notice of proposed transfer within
forty-five (45) days from the Seller's notice to Purchaser of its election to
purchase the Shares.
SECTION 1.5 Supply Agreement. As a material inducement to the
Purchaser to enter into the Agreement, the parties hereby covenant and agree
within forty-five (45) days following the date of this Agreement to negotiate in
good faith the execution and delivery of a supply agreement on terms and
conditions mutually satisfactory to each of the parties.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
All of the following representations and warranties are made
only with respect to the Company and its assets as it and they will be
transferred to the Purchaser pursuant to this Agreement. Based on the foregoing
limitation, Seller represents and warrants to Purchaser as of the date hereof as
follows:
SECTION 2.1 Ownership of Stock. The Shares are owned by Seller
free and clear of all Encumbrances, other than restrictions imposed by Federal
and state securities laws. Upon the consummation of the transactions
contemplated hereby, Purchaser will acquire title to the Shares, free and clear
of all Encumbrances, other than restrictions imposed by Federal and state
securities laws.
SECTION 2.2 Consents, Absence of Conflicts. The execution,
delivery and performance of this Agreement by Seller has been duly authorized by
all necessary corporate or shareholder action. The execution and delivery of
this Agreement by Seller does not, and the consummation of the transactions
contemplated hereby and performance by Seller of its obligations hereunder,
assuming the receipt of the consents, approvals and waivers required pursuant to
Section 6.2, will not violate or conflict with any term, condition or provision
of any agreement to which Seller is a party or by which its properties are bound
and which violation or conflict would reasonably be expected to have a material
adverse effect on the Company.
SECTION 2.3 No Other Representations or Warranties. Except as
expressly set forth in this Article II, Seller makes no representations,
warranties or guarantees concerning the Company, the Shares or the assets of the
Company, including, without limitation, with respect to financial condition,
value, prospects, operations, physical condition, merchantability or fitness for
a particular purpose, all of which are expressly disclaimed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the date
hereof as follows:
SECTION 3.1 Accounts. The Accounts are good and valid Accounts
representing bona fide indebtedness incurred by Seller and are not subject to
any other credits by Purchaser. Purchaser owns all of the Accounts free and
clear of any encumbrance.
SECTION 3.2 Power and Authority; Consents and Approvals; No
Violations. Purchaser has all requisite power and authority to execute, deliver
and perform this Agreement and each other agreement, instrument and document to
be executed and delivered by or on behalf of Purchaser in connection herewith,
including without limitation the power and authority to forgive all amounts owed
by Seller to Purchaser under the Accounts. Neither the execution, delivery or
performance of this Agreement by Purchaser nor the consummation by Purchaser of
the transactions contemplated hereby will (i) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Purchaser is a party or by which any of his properties or assets may be
bound; (ii) violate any order, writ, judgment, injunction, decree, law, statute,
rule or regulation applicable to Purchaser, or any of his properties or assets;
or (iii) require on the part of Purchaser any filing or registration with,
notification to, or authorization, consent or approval of, any governmental
entity; except in the case of such violations, breaches or defaults which, or
filings, registrations, notifications, authorizations, consents or approvals the
failure of which to obtain would not materially adversely affect the ability of
Purchaser to consummate the transactions contemplated by this Agreement.
SECTION 3.3 Investigation by Purchaser. In entering into this
Agreement, Purchaser:
(a) acknowledges that neither Seller nor any of its respective
directors, officers, employees, affiliates, agents, advisors or representatives
has made or makes any representation or warranty, either express or implied, as
to the accuracy or completeness of any of the information provided or made
available to Purchaser or his agents or representatives;
(b) acknowledges that it has had the opportunity to conduct an
independent investigation of the financial condition, results of operations,
assets, liabilities, properties and projected operations of the Company and, in
making its determination to proceed with the transactions contemplated by this
Agreement, Purchaser has relied solely on the results of such investigation and
the representations and warranties of Seller set forth herein. Such
representations and warranties by Seller constitute the sole and exclusive
representations and warranties of Seller to Purchaser in connection with the
transactions contemplated hereby, and Purchaser acknowledges and agrees that
Seller is not making any representation or warranty whatsoever, express or
implied, beyond those expressly given in this Agreement; and
(c) agrees, to the fullest extent permitted by law, that
neither Seller nor any of its directors, officers, employees, shareholders,
affiliates, agents, advisors or representatives shall have any liability or
responsibility whatsoever to Purchaser on any basis (including, without
limitation, in contract or tort, under federal or state securities laws or
otherwise) based upon any information provided or made available, or statements
made, to Purchaser, except that the foregoing limitations shall not (a) apply to
Seller to the extent Seller makes the specific representations and warranties
set forth in Article II of this Agreement, but always subject to the limitations
and restrictions contained herein, or (b) preclude Purchaser from seeking any
remedy for fraud.
SECTION 3.4 Securities. Purchaser hereby acknowledges that the
Share are not registered under any applicable securities laws of the United
States, any state of the United States or any other governmental entity.
Purchaser is acquiring the Shares for its own account as principal, for
investment and not with a view toward the sale or distribution thereof.
Purchaser has sufficient knowledge and experience in financial and business
matters to enable it to evaluate the risks of investment in the Shares and has
the ability to bear the economic risks of such investment.
SECTION 3.5 No Other Representations or Warranties. Purchaser
acknowledges that except as expressly set forth in Article II hereof, Seller
makes no representations, warranties or guarantees concerning the Company, the
Shares or the assets of the Company, including, without limitation, with respect
to financial condition, value, prospects, operations, physical condition,
merchantability or fitness for a particular purpose, all of which are expressly
disclaimed. Purchaser acknowledges that, as a current shareholder or affiliate
of a shareholder of the Company, it is familiar with and knowledgeable of the
business, financial condition, prospects and operation of the Company, and has
had the opportunity to inspect the assets of the Company, which shall be
acquired in their "as-is" and "where-is" condition.
SECTION 3.6 Investment Intent. Purchaser hereby represents
that it:
(a) has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
acquiring the Company. Purchaser will acquire its interest in the Company for
investment only, and not with a view toward or for sale in connection with any
distribution thereof or with any present intention of distributing or selling
any interest therein. Purchaser understands that the transactions contemplated
hereby have not been, and will not be registered or qualified under the
Securities Act of 1933, as amended, nor any state or any other applicable
securities law, by reason of a specific exemption from the registration or
qualification provisions of those laws, based in part upon Purchaser's
representations in this Agreement. Purchaser understands that no part of the
interest in the Company which Purchaser acquires may be resold unless such
resale is registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state securities laws or an exemption
from such registration and qualification is available;
(b) is in a financial position to hold the Shares for an
indefinite period of time and is able to bear the economic risk and withstand a
complete loss of its investment therein; and
(c) recognizes that such investment involves a high degree of
risk, including, but not limited to, the risk of economic losses from operations
of the Company.
ARTICLE IV
COVENANTS
SECTION 4.1 Approvals and Consents; Cooperation;
Notification.
(a) The parties hereto shall use their respective best
efforts, and cooperate with each other, to obtain as promptly as practicable all
governmental and third party authorizations, approvals, assignments, consents or
waivers required in order to consummate the transactions contemplated by this
Agreement.
(b) Seller and Purchaser shall take all actions necessary to
file as soon as practicable all notifications, filings and other documents
required to obtain all governmental authorizations, approvals, consents or
waivers, and to respond as promptly as practicable to any inquiries from any
governmental entity for additional information or documentation and to respond
as promptly as practicable to all inquiries and requests received from any other
governmental entity in connection therewith.
SECTION 4.2 Further Assurances. Each of the parties hereto
agrees to use its respective best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement.
SECTION 4.3 Assumption of Debt and Indemnity. As a material
inducement to Seller to enter into this agreement, Purchaser agrees to
unconditionally assume all debts and obligations of Company, without exception,
and to pay and satisfy the same as and when such debts and obligations become
due. Seller further agrees to indemnify Seller and hold Seller harmless from and
against all debts and obligations of Company, including all costs, expenses and
attorneys' fees that may be incurred by Seller in relation thereto.
ARTICLE V
INDEMNIFICATION
SECTION 5.1 Indemnification. No party shall be entitled to
recover from the other more than the Purchase Price in the aggregate pursuant to
this Section 5.1.
(a) Indemnification by Seller. Subject to the limits set forth
in this Section 5.1, Seller agrees to indemnify, defend and hold Purchaser, its
agents and affiliates, harmless from and in respect of any and all losses,
damages, costs and reasonable expenses (including, without limitation,
reasonable expenses of investigation and defense fees and disbursements of
counsel and other professionals), (collectively, "Losses"), that they may incur
arising out of or due to any inaccuracy of any representation or the breach of
any warranty, covenant, undertaking or other agreement of Seller contained in
this Agreement.
(b) Indemnification by Purchaser. Subject to the limits set
forth in this Section 5.1, Purchaser agrees to indemnify, defend and hold
Seller, its officers, directors, agents and affiliates, harmless from and in
respect of any and all Losses that they may incur (i) arising out of or due to
any inaccuracy of any representation or the breach of any warranty, covenant,
undertaking or other agreement of Purchaser contained in this Agreement and (ii)
arising out of or in connection with the assets, businesses, operations,
conduct, products and/or employees (including former employees) of the Company,
and that do not arise out of a breach of Seller's representations and warranties
in, or a default in the performance of any of Seller's covenants under, this
Agreement.
(c) Survival of Representations and Warranties. The
representations and warranties of the parties contained in this Agreement or in
any instrument delivered pursuant hereto will survive the Closing Date and will
remain in full force and effect thereafter for a period of one year from the
Closing Date; provided, however, that such representations or warranties shall
survive (if at all) beyond such period with respect to any inaccuracy therein or
breach thereof, notice of which shall have been duly given within such
applicable period in accordance with Section 5.1(d) hereof.
(d) Notice and Opportunity to Defend. If there occurs an event
which a party asserts is an indemnifiable event pursuant to Section 5.1(a) or
5.1(b), the party seeking indemnification shall notify the other party obligated
to provide indemnification (the "Indemnifying Party") promptly. If such event
involves (i) any claim or (ii) the commencement of any action or proceeding by a
third person, the party seeking indemnification will give such Indemnifying
Party prompt written notice of such claim or the commencement of such action or
proceeding, provided, however, that the failure to provide prompt notice as
provided herein will relieve the Indemnifying Party of its obligations hereunder
only to the extent that such failure prejudices the Indemnifying Party
hereunder. In case any such action shall be brought against any party seeking
indemnification and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such party seeking indemnification and, after notice
from the Indemnifying Party to such party seeking indemnification of such
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to the party seeking indemnification hereunder for any legal expenses of
other counsel or any other expenses subsequently incurred by such party in
connection with the defense thereof. The party seeking indemnification agrees to
cooperate fully with the Indemnifying Party and its counsel in the defense
against any such asserted liability. The party seeking indemnification shall
have the right to participate at its own expense in the defense of such asserted
liability. In no event shall an Indemnifying Party be liable for any settlement
effected without its consent.
ARTICLE VIARTICLE VI
MISCELLANEOUS
SECTION 6.1 Counterparts; Facsimile. This Agreement may be
executed by facsimile and in multiple counterparts, all of which shall together
be considered one and the same agreement.
SECTION 6.2 Entire Agreement; Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein), (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided herein, are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
SECTION 6.3 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
SECTION 6.4 Governing Law. This
Agreement shall be governed and construed in accordance with the laws of the
State of Utah applicable to contracts to be made and performed entirely therein
without giving effect to the principles of conflicts of law thereof or of any
other jurisdiction.
SECTION 6.5 Jurisdiction. Each of the parties hereto hereby
expressly and irrevocably submits to the non-exclusive personal jurisdiction of
any state or federal court located in the State of Utah (collectively, the "Utah
Courts"), preserving, however, all rights of removal to federal court under 28
U.S.C. Section 1441. Each party hereby waives the right to any other
jurisdiction or venue for any litigation arising out of or in connection with
this Agreement or the transactions contemplated hereby to which any of them may
be entitled by reason of its present or future domicile. Notwithstanding the
foregoing, each of the parties hereto agrees that each of the other parties
shall have the right to bring any action or proceeding for enforcement of a
judgment entered by the Utah Courts in any other court or jurisdiction.
ECTION 6.6 Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with the transactions contemplated
hereby, this Agreement and the consummation of the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses, whether or
not the transactions contemplated hereby are consummated.
SECTION 6.7 Headings. Headings of the articles and sections of
this Agreement and the Table of Contents are for convenience of the parties
only, and shall be given no substantive or interpretative effect whatsoever.
SECTION 6.8 Waivers. Except as otherwise
provided in this Agreement, any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the party
or parties entitled to the benefits thereof only by a written instrument signed
by the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
SECTION 6.9 Governing Language. This Agreement shall be
prepared in two (2) English counterparts, each of which shall be equally
effective. One or more of the parties may choose to prepare a Chinese
translation of this Agreement for recording with the Examination and Approval
Authority. In the event of any discrepancy between this Agreement and any
Chinese translation hereof, the English version shall govern.
{Remainder of page intentionally left blank}
Signature page follows
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed as of the date first written above.
"SELLER"
WORLD FITNESS SALES, Cayman Island corporation
By: /s/ Lynn Brenchley
Name: Lynn Brenchley
Title: President
"PURCHASER"
GOODWAY HOLDING CO, a [ ]
corporation
By: /s/ Johnny Lee
Name: Johnny Lee
Title: President
EXHIBIT A
(Satisfied Invoices)