Exhibit 10.1
SHARE EXCHANGE AGREEMENT
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This SHARE EXCHANGE AGREEMENT (this "Agreement"), dated as of September
7, 2006, is by and among BTHC III, Inc., a Delaware corporation (the "Parent"),
SUTOR STEEL TECHNOLOGY CO., LTD, a British Virgin Islands company (the
"Company"), and the Stockholders of the Company signatory hereto (the
"Stockholders"). Each of the parties to this Agreement are individually referred
to herein as a "Party" and collectively, as the "Parties."
BACKGROUND
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The Company has 50,000 shares of capital stock (the "Company Stock")
outstanding, all of which are held by the Stockholders. Each of the Stockholders
is the record and beneficial owner of the number of shares of Company Stock set
forth opposite such Stockholder's name on Exhibit A. Each of the Stockholders
has agreed to transfer all of his, her or its (hereinafter "its") shares of
Company Stock in exchange for a number of newly issued shares of Common Stock,
par value $0.001 per share, of the Parent (the "Parent Stock") that will, in the
aggregate, constitute at least 50.1% of the issued and outstanding capital stock
of the Parent on a fully-diluted basis as of and immediately after the Closing,
and after giving effect to the Financing (as defined in Section 7.12 hereof).
The number of shares of Parent Stock to be received by each Stockholder shall be
listed opposite such Stockholder's name on Exhibit A, which Exhibit A, will be
in the form attached to this Agreement and mutually agreed upon by the parties
at or prior to the Closing. The aggregate number of shares of Parent Stock that
will be reflected on Exhibit A is referred to herein as the (the "Shares").
The exchange of Company Stock for Parent Stock is intended to
constitute a reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986 (the "Code"), as amended or such other tax free
reorganization exemptions that may be available under the Code.
The Board of Directors of the Parent and the Company have determined
that it is desirable to effect this plan of reorganization and share exchange.
AGREEMENT
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NOW THEREFORE, the parties agree as follows:
ARTICLE I
Exchange of Shares
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SECTION 1.01. Exchange by Stockholders. At the Closing (as defined in
Section 1.02), each of the Stockholders shall sell, transfer, convey, assign and
deliver to the Parent its Company Stock free and clear of all Liens (as defined
below) in exchange for the Parent Stock to be listed on Exhibit A opposite such
Stockholder's name.
SECTION 1.02. Closing. The closing (the "Closing") of the transactions
contemplated hereby (the "Transactions") shall take place at the offices of
Thelen Reid & Priest LLP in Washington, DC commencing at 9:00 a.m. local time on
the second business day following the satisfaction or waiver of all conditions
to the obligations of the parties to consummate the Transactions contemplated
hereby (other than conditions with respect to actions the respective parties
will take at the Closing itself), or such other date and time as the parties may
mutually determine (the "Closing Date").
ARTICLE II
Representations and Warranties of Stockholders
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Each of the Stockholders hereby severally (and not jointly) represents
and warrants to the Parent with respect to itself, as follows:
SECTION 2.01. Good Title. The Stockholder is the record and beneficial
owner, and has good title to its Company Stock, with the right and authority to
sell and deliver such Company Stock. Upon delivery of any certificate or
certificates duly assigned, representing the same as herein contemplated and/or
upon registering of the Parent as the new owner of such Company Stock in the
share register of the Company, the Parent will receive good title to such
Company Stock, free and clear of all liens, security interests, pledges,
equities and claims of any kind, voting trusts, stockholder agreements and other
encumbrances (collectively, "Liens").
SECTION 2.02. Organization. Each Stockholder that is an entity is duly
organized and validly existing in its jurisdiction of organization.
SECTION 2.03. Power and Authority. Each Stockholder that is an entity
has the legal power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. All acts required to be taken by the
Stockholders to enter into this Agreement and to carry out the Transactions have
been properly taken. This Agreement constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against such Stockholder in
accordance with the terms hereof.
SECTION 2.04. No Conflicts. The execution and delivery of this
Agreement by the Stockholder and the performance by the Stockholder of its
obligations hereunder in accordance with the terms hereof: (i) will not require
the consent of any third party or any federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign ("Governmental Entity") under any statutes, laws, ordinances, rules,
regulations, orders, writs, injunctions, judgments, or decrees (collectively,
"Laws"); (ii) will not violate any Laws applicable to such Stockholder and (iii)
will not violate or breach any contractual obligation to which such Stockholder
is a party.
SECTION 2.05. No Finder's Fee. The Stockholder has not created any
obligation for any finder's, investment banker's or broker's fee in connection
with the Transactions.
SECTION 2.06. Purchase Entirely for Own Account. The Parent Stock
proposed to be acquired by the Stockholder hereunder will be acquired for
investment for its own account, and not with a view to the resale or
distribution of any part thereof, and the Stockholder has no present intention
of selling or otherwise distributing the Parent Stock, except in compliance with
applicable securities laws.
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SECTION 2.07. Available Information. The Stockholder has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Parent.
SECTION 2.08. Non-Registration. The Parties understand that the Parent
Stock has not been registered under the Securities Act of 1933, as amended (the
"Securities Act") and, if issued in accordance with the provisions of this
Agreement, will be issued by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of the
Stockholder's representations as expressed herein. The non-registration shall
have no prejudice with respect to any rights, interests, benefits and
entitlements attached to the Parent Stock in accordance with the Parent charter
documents or the laws of its jurisdiction of incorporation.
SECTION 2.09. Restricted Securities. The Stockholder understands that
the Parent Stock is characterized as "restricted securities" under the
Securities Act inasmuch as this Agreement contemplates that, if acquired by the
Stockholder pursuant hereto, the Parent Stock would be acquired in a transaction
not involving a public offering. The Stockholder further acknowledges that if
the Parent Stock is issued to the Stockholder in accordance with the provisions
of this Agreement, such Parent Stock may not be resold without registration
under the Securities Act or the existence of an exemption therefrom. The
Stockholder represents that it is familiar with Rule 144 promulgated under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
SECTION 2.10. Legends. It is understood that the Parent Stock will bear
the following legend or one that is substantially similar to the following
legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR
UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED
THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL (WHICH OPINION IS REASONABLY SATISFACTORY TO
THE COMPANY) CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTION. THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY
SUCH SECURITIES TO THE EXTENT PERMITTED BY APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.
(a) Any legend required by the "blue sky" laws of any state to
the extent such laws are applicable to the securities represented by
the certificate so legended.
SECTION 2.11. Accredited Investor. The Stockholder is an "accredited
investor" within the meaning of Rule 501 under the Securities Act and was not
organized for the specific purpose of acquiring the Parent Stock.
ARTICLE III
Representations and Warranties of the Company
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The Company represents and warrants to the Parent that, except as set
forth in the Company Disclosure Letter (as defined below, and regardless of
whether or not the Company Disclosure Letter is referenced below with respect to
any particular representation or warranty), which will be delivered by the
Company to the Parent in accordance with Section 7.09 hereof (the "Company
Disclosure Letter"):
SECTION 3.01. Organization, Standing and Power. Each of the Company and
its subsidiaries (the "Company Subsidiaries") is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to conduct its businesses as presently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and would not reasonably be
expected to have a material adverse effect on the Company, a material adverse
effect on the ability of the Company to perform its obligations under this
Agreement or on the ability of the Company to consummate the Transactions (a
"Company Material Adverse Effect"). The Company and each Company Subsidiary is
duly qualified to do business in each jurisdiction where the nature of its
business or its ownership or leasing of its properties make such qualification
necessary except where the failure to so qualify would not reasonably be
expected to have a Company Material Adverse Effect. The Company has delivered to
the Parent true and complete copies of the memorandum and articles of
association of the Company and such other constituent instruments of the Company
as may exist, each as amended to the date of this Agreement (as so amended, the
"Company Constituent Instruments"), and the comparable charter, organizational
documents and other constituent instruments of each Company Subsidiary, in each
case as amended through the date of this Agreement.
SECTION 3.02. Company Subsidiaries; Equity Interests.
(a) The Company Disclosure Letter lists each Company
Subsidiary and its jurisdiction of organization. Except as specified in
the Company Disclosure Letter, all the outstanding shares of capital
stock or equity investments of each Company Subsidiary have been
validly issued and are fully paid and nonassessable and are as of the
date of this Agreement owned by the Company, by another Company
Subsidiary or by the Company and another Company Subsidiary, free and
clear of all Liens.
(b) Except for its interests in the Company Subsidiaries, the
Company does not as of the date of this Agreement own, directly or
indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any
person.
SECTION 3.03. Capital Structure. The authorized capital stock of the
Company consists of 50,000 ordinary shares of which, 50,000 ordinary shares are
issued and outstanding. Except as set forth above, no shares of capital stock or
other voting securities of the Company are issued, reserved for issuance or
outstanding. Except as specified in the Company Disclosure Letter, the Company
is the sole record and beneficial owner of all of the issued and outstanding
capital stock of each Company Subsidiary. All outstanding shares of the capital
stock of the Company and each Company Subsidiary are duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in violation
of any purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the applicable
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corporate laws of the British Virgin Islands, the Company Constituent
Instruments or any Contract (as defined in Section 3.05) to which the Company is
a party or otherwise bound. Except as set forth in this section 3.03 and in the
Company Disclosure Letter, there are not any bonds, debentures, notes or other
indebtedness of Company or any Company Subsidiary having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which holders of Company Stock or the common stock of any Company
Subsidiary may vote ("Voting Company Debt"). Except as set forth above, as of
the date of this Agreement, there are not any options, warrants, rights,
convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights, stock-based performance units, commitments, Contracts,
arrangements or undertakings of any kind to which the Company or any Company
Subsidiary is a party or by which any of them is bound (i) obligating the
Company or any Company Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, the Company or any
Company Subsidiary or any Voting Company Debt, (ii) obligating the Company or
any Company Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, Contract, arrangement or undertaking
or (iii) that give any person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights occurring to holders
of the capital stock of the Company or of any Company Subsidiary. Except as set
forth in the Company Disclosure Letter, as of the date of this Agreement, there
are not any outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of capital stock of Parent.
SECTION 3.04. Authority; Execution and Delivery; Enforceability. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the Transactions. The execution and delivery by
the Company of this Agreement and the consummation by the Company of the
Transactions have been duly authorized and approved by the Board of Directors of
the Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the Transactions. When executed and
delivered, this Agreement will be enforceable against the Company in accordance
with its terms.
SECTION 3.05. No Conflicts; Consents.
(a) Except as set forth in the Company Disclosure Letter, the
execution and delivery by the Company of this Agreement does not, and
the consummation of the Transactions and compliance with the terms
hereof and thereof will not, conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of the
Company or any Company Subsidiary under, any provision of (i) the
Company Constituent Instruments or the comparable charter or
organizational documents of any Company Subsidiary, (ii) any material
contract, lease, license, indenture, note, bond, agreement, permit,
concession, franchise or other instrument (a "Contract") to which the
Company or any Company Subsidiary is a party or by which any of their
respective properties or assets is bound or (iii) subject to the
filings and other matters referred to in Section 3.05(b), any material
judgment, order or decree ("Judgment") or material Law applicable to
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the Company or any Company Subsidiary or their respective properties or
assets, other than, in the case of clauses (ii) and (iii) above, any
such items that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse
Effect.
(b) Except as set forth in the Company Disclosure Letter and
except for required filings with the Securities and Exchange Commission
(the "SEC") and applicable "Blue Sky" or state securities commissions,
no material consent, approval, license, permit, order or authorization
("Consent") of, or registration, declaration or filing with, or permit
from, any Governmental Entity is required to be obtained or made by or
with respect to the Company or any Company Subsidiary in connection
with the execution, delivery and performance of this Agreement or the
consummation of the Transactions.
SECTION 3.06. Taxes.
(a) Each of the Company and each Company Subsidiary has timely
filed, or has caused to be timely filed on its behalf, all Tax Returns
required to be filed by it, and all such Tax Returns are true, complete
and accurate, except to the extent any failure to file or any
inaccuracies in any filed Tax Returns, individually or in the
aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect. All Taxes shown to be due on such Tax
Returns, or otherwise owed, have been timely paid, except to the extent
that any failure to pay, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material Adverse
Effect. There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim.
(b) The Company Financial Statements (as defined in Section
3.15) reflect an adequate reserve for all Taxes payable by the Company
and the Company Subsidiaries (in addition to any reserve for deferred
Taxes to reflect timing differences between book and Tax items) for all
Taxable periods and portions thereof through the date of such financial
statements. No deficiency with respect to any Taxes has been proposed,
asserted or assessed against the Company or any Company Subsidiary, and
no requests for waivers of the time to assess any such Taxes are
pending, except to the extent any such deficiency or request for
waiver, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect.
(c) For purposes of this Agreement:
"Taxes" includes all forms of taxation, whenever created or imposed,
and whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, foreign, federal or other Governmental Entity,
or in connection with any agreement with respect to Taxes, including all
interest, penalties and additions imposed with respect to such amounts.
"Tax Return" means all federal, state, local, provincial and foreign
Tax returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes.
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SECTION 3.07. Benefit Plans.
(a) Except as set forth in the Company Disclosure Letter, the
Company does not have or maintain any collective bargaining agreement
or any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or
former employee, officer or director of the Company or any Company
Subsidiary (collectively, "Company Benefit Plans"). Except as set forth
in the Company Disclosure Letter, as of the date of this Agreement
there are not any severance or termination agreements or arrangements
between the Company or any Company Subsidiary and any current or former
employee, officer or director of the Company or any Company Subsidiary,
nor does the Company or any Company Subsidiary have any general
severance plan or policy.
(b) Since June 30, 2006, there has not been any adoption or
amendment in any material respect by the Company or any Company
Subsidiary of any Company Benefit Plan.
SECTION 3.08. Litigation. There is no action, suit, inquiry, notice of
violation, proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility ("Action") which (i) adversely affects or challenges the
legality, validity or enforceability of any of this Agreement or the Shares or
(ii) could, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Company Material
Adverse Effect. Neither the Company nor any subsidiary, nor any director or
officer thereof (in his or her capacity as such), is or has been the subject of
any Action involving a claim or violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty.
SECTION 3.09. Compliance with Applicable Laws. The Company and the
Company Subsidiaries are in compliance with all applicable Laws, including those
relating to occupational health and safety and the environment, except for
instances of noncompliance that, individually and in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse Effect.
Except as set forth in the Company Disclosure Letter, the Company has not
received any written communication during the past two years from a Governmental
Entity that alleges that the Company is not in compliance in any material
respect with any applicable Law. This Section 3.09 does not relate to matters
with respect to Taxes, which are the subject of Section 3.06.
SECTION 3.10. Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
the Company.
SECTION 3.11. Contracts. Except as disclosed in the Company Disclosure
Letter, there are no Contracts that are material to the business, properties,
assets, condition (financial or otherwise), results of operations or prospects
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of the Company and its subsidiaries taken as a whole. Neither the Company nor
any Company Subsidiary is in violation of or in default under (nor does there
exist any condition which upon the passage of time or the giving of notice would
cause such a violation of or default under) any Contract to which it is a party
or by which it or any of its properties or assets is bound, except for
violations or defaults that would not, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect.
SECTION 3.12. Title to Properties. Except as set forth in the
Disclosure Letter, the Company and the Company Subsidiaries do not own any real
property. Each of the Company and the Company Subsidiaries has sufficient title
to, or valid leasehold interests in, all of its properties and assets used in
the conduct of its businesses. All such assets and properties, other than assets
and properties in which the Company or any of the Company Subsidiaries has
leasehold interests, are free and clear of all Liens other than those set forth
in the Company Disclosure Letter and except for Liens that, in the aggregate, do
not and will not materially interfere with the ability of the Company and the
Company Subsidiaries to conduct business as currently conducted.
SECTION 3.13. Intellectual Property. The Company and the Company
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, service marks, service mark rights, copyrights and other
proprietary intellectual property rights and computer programs (collectively,
"Intellectual Property Rights") which are material to the conduct of the
business of the Company and the Company Subsidiaries taken as a whole. The
Company Disclosure Letter sets forth a description of all Intellectual Property
Rights which are material to the conduct of the business of the Company and the
Company Subsidiaries taken as a whole. There are no claims pending or, to the
knowledge of the Company, threatened that the Company or any of the Company
Subsidiaries is infringing or otherwise adversely affecting the rights of any
person with regard to any Intellectual Property Right. To the knowledge of the
Company, no person is infringing the rights of the Company or any of the Company
Subsidiaries with respect to any Intellectual Property Right.
SECTION 3.14. Labor Matters. There are no collective bargaining or
other labor union agreements to which the Company or any of the Company
Subsidiaries is a party or by which any of them is bound. No material labor
dispute exists or, to the knowledge of the Company, is imminent with respect to
any of the employees of the Company.
SECTION 3.15. Financial Statements. Prior to the Closing the Company
will deliver to the Parent its audited consolidated financial statements for the
fiscal years ended June 30, 2006, 2005 and 2004 (collectively, the "Company
Financial Statements"). Upon delivery, the Company Financial Statements will
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. The Company
Financial Statements will fairly present in all material respects the financial
condition and operating results of the Company, as of the dates, and for the
periods, indicated therein. The Company will not have any material liabilities
or obligations, contingent or otherwise, other than (i) liabilities incurred in
the ordinary course of business subsequent to June 30, 2006, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the Company Financial Statements, which, in both cases,
individually and in the aggregate would not be reasonably expected to result in
a Company Material Adverse Effect.
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SECTION 3.16. Insurance. The Company and its subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
in accordance with any applicable laws under their respective jurisdictions of
organization and in such amounts as are customary in the businesses in which the
Company and its subsidiaries are engaged and in the geographic areas where they
engage in such businesses. The Company has no reason to believe that it will not
be able to renew its and its subsidiaries' existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business on terms consistent with market for
the Company's and such subsidiaries' respective lines of business.
SECTION 3.17. Transactions With Affiliates and Employees. Except as set
forth in the Company Disclosure Letter and Company Financial Statements, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
SECTION 3.18. Internal Accounting Controls. The Company and its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures for the Company and
designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its subsidiaries, is made known
to the officers by others within those entities. The Company's officers have
evaluated the effectiveness of the Company's controls and procedures. Since
December 31, 2005, there have been no significant changes in the Company's
internal controls or, to the Company's knowledge, in other factors that could
significantly affect the Company's internal controls.
SECTION 3.19. Solvency. Based on the financial condition of the Company
as of the closing date (and assuming that the closing shall have occurred), (i)
the Company's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
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when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
SECTION 3.20. Application of Takeover Protections. The Company has
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's charter documents or the laws of its state of incorporation that is or
could become applicable to the Stockholders as a result of the Stockholders and
the Company fulfilling their obligations or exercising their rights under this
Agreement, including, without limitation, the issuance of the Shares and the
Stockholders' ownership of the Shares.
SECTION 3.21. No Additional Agreements. The Company does not have any
agreement or understanding with any Stockholders with respect to the
transactions contemplated by this Agreement other than as specified in this
Agreement.
SECTION 3.22. Investment Company. The Company is not, and is not an
affiliate of, and immediately following the Closing will not have become, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 3.23. Disclosure. The Company confirms that neither it nor any
person acting on its behalf has provided any Stockholder or its respective
agents or counsel with any information that the Company believes constitutes
material, non-public information except insofar as the existence and terms of
the proposed transactions hereunder may constitute such information and except
for information that will be disclosed by the Parent under a current report on
Form 8-K filed within one business days after the Closing. The Company
understands and confirms that the Stockholders will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Stockholders regarding the Company, its
business and the transactions contemplated hereby, furnished by or on behalf of
the Company (including the Company's representations and warranties set forth in
this Agreement) are true and correct and do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
SECTION 3.24. Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
notice that is required to be sent to the stockholders of the Parent pursuant to
Rule 14f-1 (the "14f-1 Notice") promulgated under the Securities Exchange Act of
1934 (the "Exchange Act") will, at the date it is first mailed to the Parent's
stockholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
SECTION 3.25. Absence of Certain Changes or Events. Except as disclosed
in the Company Financial Statements or in the Company Disclosure Letter, from
June 30, 2006 to the date of this Agreement, the Company has conducted its
business only in the ordinary course, and during such period there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Company or any Company Subsidiary, except
changes in the ordinary course of business that have not caused, in the
aggregate, a Company Material Adverse Effect;
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(b) any damage, destruction or loss, whether or not covered by
insurance, that would have a Company Material Adverse Effect;
(c) any waiver or compromise by the Company or any Company
Subsidiary of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company or any Company
Subsidiary, except in the ordinary course of business and the
satisfaction or discharge of which would not have a Company Material
Adverse Effect;
(e) any material change to a material Contract by which the
Company or any Company Subsidiary or any of its respective assets is
bound or subject;
(f) any mortgage, pledge, transfer of a security interest in,
or lien, created by the Company or any Company Subsidiary, with respect
to any of its material properties or assets, except liens for taxes not
yet due or payable and liens that arise in the ordinary course of
business and do not materially impair the Company's or such Company
Subsidiary's ownership or use of such property or assets;
(g) any loans or guarantees made by the Company or any Company
Subsidiary to or for the benefit of its employees, officers or
directors, or any members of their immediate families, other than
travel advances and other advances made in the ordinary course of its
business;
(h) any alteration of the Company's method of accounting or
the identity of its auditors;
(i) any declaration or payment of dividend or distribution of
cash or other property to Stockholders or any purchase, redemption or
agreements to purchase or redeem any shares of Company Stock;
(j) any issuance of equity securities to any officer, director
or affiliate, except pursuant to existing Company stock option plans;
or
(k) any arrangement or commitment by the Company or any
Company Subsidiary to do any of the things described in this Section
3.25.
SECTION 3.26. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Company, its
subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
SECTION 3.27. Foreign Corrupt Practices. Neither the Company, nor any
of its subsidiaries, nor, to the Company's knowledge, any director, officer,
agent, employee or other person acting on behalf of the Company or any of its
11
subsidiaries has, in the course of its actions for, or on behalf of, the Company
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
ARTICLE IV
Representations and Warranties of the Parent
--------------------------------------------
The Parent represents and warrants to each of the Stockholders and the
Company that, except as set forth in the reports, schedules, forms, statements
and other documents filed by Parent with the SEC and publicly available prior to
the date of the Agreement (the "Filed Parent SEC Documents") or in the letter,
which will be delivered by the Parent to the Company and the Stockholders in
accordance with Section 7.09 hereof (the "Parent Disclosure Letter"):
SECTION 4.01. Organization, Standing and Power. Parent is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to conduct its businesses as presently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and would not reasonably be
expected to have a material adverse effect on Parent, a material adverse effect
on the ability of Parent to perform its obligations under this Agreement or on
the ability of Parent to consummate the Transactions (a "Parent Material Adverse
Effect"). Parent is duly qualified to do business in each jurisdiction where the
nature of its business or their ownership or leasing of its properties make such
qualification necessary and where the failure to so qualify would reasonably be
expected to have a Parent Material Adverse Effect. Parent has delivered to the
Company true and complete copies of the certificate of incorporation of Parent,
as amended to the date of this Agreement (as so amended, the "Parent Charter"),
and the Bylaws of Parent, as amended to the date of this Agreement (as so
amended, the "Parent Bylaws").
SECTION 4.02. Subsidiaries; Equity Interests. Parent does not own,
directly or indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any person.
SECTION 4.03. Capital Structure. The authorized capital stock of Parent
consists of 40,000,000 shares of Parent Common Stock, par value $0.001 per
share, and 10,000,000 shares of preferred stock, par value $0.001 per share. As
of the date hereof (i) 500,000 shares of Parent Common Stock are issued and
outstanding, (ii) no shares of preferred stock are outstanding and (iii) no
shares of Parent Common Stock or preferred stock are held by Parent in its
treasury. Except as set forth above, no shares of capital stock or other voting
securities of Parent were issued, reserved for issuance or outstanding. All
outstanding shares of the capital stock of Parent are, and all such shares that
may be issued prior to the date hereof will be when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to or issued in
violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
12
the General Corporation Law of the State of Delaware, the Parent Charter, the
Parent Bylaws or any Contract to which Parent is a party or otherwise bound.
There are not any bonds, debentures, notes or other indebtedness of Parent
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which holders of Parent Common Stock
may vote ("Voting Parent Debt"). Except as set forth above, as of the date of
this Agreement, there are not any options, warrants, rights, convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, Contracts, arrangements or
undertakings of any kind to which Parent is a party or by which it is bound (i)
obligating Parent to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity interests in, or any
security convertible or exercisable for or exchangeable into any capital stock
of or other equity interest in, Parent or any Voting Parent Debt, (ii)
obligating Parent to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, Contract, arrangement or undertaking
or (iii) that give any person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights occurring to holders
of the capital stock of the Parent. As of the date of this Agreement, there are
not any outstanding contractual obligations of Parent to repurchase, redeem or
otherwise acquire any shares of capital stock of Parent. Except as set forth in
Schedule 4.03, the Parent is not a party to any agreement granting any
securityholder of the Parent the right to cause the Parent to register shares of
the capital stock or other securities of the Parent held by such securityholder
under the Securities Act. The stockholder list to be provided at closing to the
Company shall be a current shareholder list generated by its stock transfer
agent, and such list shall accurately reflect all of the issued and outstanding
shares of the Parent's Common Stock.
SECTION 4.04. Authority; Execution and Delivery; Enforceability. The
execution and delivery by the Parent of this Agreement and the consummation by
the Parent of the Transactions have been duly authorized and approved by the
Board of Directors of the Parent and no other corporate proceedings on the part
of the Parent, except for the filing of a Certificate of Completion (as
hereinafter defined), are necessary to authorize this Agreement and the
Transactions. This Agreement constitutes a legal, valid and binding obligation
of the Parent, enforceable against the Parent in accordance with the terms
hereof.
SECTION 4.05. No Conflicts; Consents.
(a) Except as set forth in the Parent Disclosure Letter, the
execution and delivery by Parent of this Agreement, does not, and the
consummation of Transactions and compliance with the terms hereof and
thereof will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any Lien upon any of the
properties or assets of Parent under, any provision of (i) Parent
Charter or Parent Bylaws, (ii) any material Contract to which Parent is
a party or by which any of its properties or assets is bound or (iii)
subject to the filings and other matters referred to in Section
4.05(b), any material Judgment or material Law applicable to Parent or
its properties or assets, other than, in the case of clauses (ii) and
(iii) above, any such items that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Parent
Material Adverse Effect.
13
(b) No Consent of, or registration, declaration or filing
with, or permit from, any Governmental Entity is required to be
obtained or made by or with respect to Parent in connection with the
execution, delivery and performance of this Agreement or the
consummation of the Transactions, other than the (A) filing with the
SEC of a 14f-1 Notice and (B) filing with the SEC of reports under
Sections 13 and 16 of the Exchange Act, and (C) filings under state
"blue sky" laws, as may be required in connection with this Agreement
and the Transactions.
SECTION 4.06. SEC Documents; Undisclosed Liabilities.
(a) Parent has filed all reports, schedules, forms, statements
and other documents required to be filed by Parent with the SEC since
April 4, 2006, pursuant to Sections 13(a), 14 (a) and 15(d) of the
Exchange Act (the "Parent SEC Documents").
(b) As of its respective filing date, each Parent SEC Document
complied in all material respects with the requirements of the Exchange
Act and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC Document, and did 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. Except to the extent that information contained in any
Parent SEC Document has been revised or superseded by a later filed
Parent SEC Document, none of the Parent SEC Documents contains any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of Parent
included in the Parent SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been
prepared in accordance with the U.S. generally accepted accounting
principals ("GAAP") (except, in the case of unaudited statements, as
permitted by the rules and regulations of the SEC) applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated
financial position of Parent and its consolidated subsidiaries as of
the dates thereof and the consolidated results of their operations and
cash flows for the periods shown (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(c) Except as set forth in the Filed Parent SEC Documents,
Parent has no liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a balance sheet of Parent or in the notes thereto. The Parent
Disclosure Letter sets forth all financial and contractual obligations
and liabilities (including any obligations to issue capital stock or
other securities of the parent) due after the date hereof. As of the
date hereof the Parent has total liabilities of less than $30,000, all
of which liabilities shall be paid off at or prior to the Closing and
shall in no event remain liabilities of the Parent, the Company or the
Stockholders following the Closing.
SECTION 4.07. Information Supplied. None of the information supplied or
to be supplied by Parent for inclusion or incorporation by reference in the
14f-1 Notice will, at the date it is first mailed to the Parent's stockholders,
14
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
SECTION 4.08. Absence of Certain Changes or Events. Except as disclosed
in the Filed Parent SEC Documents or in the Parent Disclosure Letter, from the
date of the most recent audited financial statements included in the Filed
Parent SEC Documents to the date of this Agreement, Parent has conducted its
business only in the ordinary course, and during such period there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Parent from that reflected in the Parent
SEC Documents, except changes in the ordinary course of business that
have not caused, in the aggregate, a Parent Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, that would have a Parent Material Adverse Effect;
(c) any waiver or compromise by the Parent of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Parent, except in the
ordinary course of business and the satisfaction or discharge of which
would not have a Parent Material Adverse Effect;
(e) any material change to a material Contract by which the
Parent or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(g) any resignation or termination of employment of any
officer of the Parent;
(h) any mortgage, pledge, transfer of a security interest in,
or lien, created by the Parent, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable and
liens that arise in the ordinary course of business and do not
materially impair the Parent's ownership or use of such property or
assets;
(i) any loans or guarantees made by the Parent to or for the
benefit of its employees, officers or directors, or any members of
their immediate families, other than travel advances and other advances
made in the ordinary course of its business;
(j) any declaration, setting aside or payment or other
distribution in respect of any of the Parent's capital stock, or any
direct or indirect redemption, purchase, or other acquisition of any of
such stock by the Parent;
(k) any alteration of the Parent's method of accounting or the
identity of its auditors;
15
(l) any issuance of equity securities to any officer, director
or affiliate, except pursuant to existing Parent stock option plans; or
(m) any arrangement or commitment by the Parent to do any of
the things described in this Section 4.08.
SECTION 4.09. Taxes.
(a) Parent has timely filed, or has caused to be timely filed
on its behalf, all Tax Returns required to be filed by it, and all such
Tax Returns are true, complete and accurate, except to the extent any
failure to file or any inaccuracies in any filed Tax Returns,
individually or in the aggregate, have not had and would not reasonably
be expected to have a Parent Material Adverse Effect. All Taxes shown
to be due on such Tax Returns, or otherwise owed, has been timely paid,
except to the extent that any failure to pay, individually or in the
aggregate, has not had and would not reasonably be expected to have a
Parent Material Adverse Effect.
(b) The most recent financial statements contained in the
Filed Parent SEC Documents reflect an adequate reserve for all Taxes
payable by Parent (in addition to any reserve for deferred Taxes to
reflect timing differences between book and Tax items) for all Taxable
periods and portions thereof through the date of such financial
statements. No deficiency with respect to any Taxes has been proposed,
asserted or assessed against Parent, and no requests for waivers of the
time to assess any such Taxes are pending, except to the extent any
such deficiency or request for waiver, individually or in the
aggregate, has not had and would not reasonably be expected to have a
Parent Material Adverse Effect.
(c) There are no Liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of Parent. Parent is not bound
by any agreement with respect to Taxes.
SECTION 4.10. Absence of Changes in Benefit Plans. From the date of the
most recent audited financial statements included in the Filed Parent SEC
Documents to the date of this Agreement, there has not been any adoption or
amendment in any material respect by Parent of any collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding (whether or
not legally binding) providing benefits to any current or former employee,
officer or director of Parent (collectively, "Parent Benefit Plans"). As of the
date of this Agreement there are not any employment, consulting,
indemnification, severance or termination agreements or arrangements between the
Parent and any current or former employee, officer or director of the Parent,
nor does the Parent have any general severance plan or policy.
SECTION 4.11. ERISA Compliance; Excess Parachute Payments. The Parent
does not, and since its inception never has, maintained, or contributed to any
"employee pension benefit plans" (as defined in Section 3(2) of ERISA),
"employee welfare benefit plans" (as defined in Section 3(1) of ERISA) or any
other Parent Benefit Plan for the benefit of any current or former employees,
consultants, officers or directors of Parent.
16
SECTION 4.12. Litigation. Except as disclosed in the Filed Parent SEC
Documents or in the Parent Disclosure Letter, there is no Action which (i)
adversely affects or challenges the legality, validity or enforceability of any
of this Agreement or the Shares or (ii) could, if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be expected to
result in a Parent Material Adverse Effect. Neither the Parent nor any
subsidiary, nor any director or officer thereof (in his or her capacity as
such), is or has been the subject of any Action involving a claim or violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty.
SECTION 4.13. Compliance with Applicable Laws. Except as disclosed in
the Filed Parent SEC Documents or in the Parent Disclosure Letter, Parent is in
compliance with all applicable Laws, including those relating to occupational
health and safety and the environment, except for instances of noncompliance
that, individually and in the aggregate, have not had and would not reasonably
be expected to have a Parent Material Adverse Effect. Except as set forth in the
Filed Parent SEC Documents or in the Parent Disclosure Letter, Parent has not
received any written communication during the past two years from a Governmental
Entity that alleges that Parent is not in compliance in any material respect
with any applicable Law. The Parent is in compliance with all effective
requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Parent
Material Adverse Effect. This Section 4.13 does not relate to matters with
respect to Taxes, which are the subject of Section 4.09.
SECTION 4.14. Contracts. Except as disclosed in the Parent Filed SEC
Documents, there are no Contracts that are material to the business, properties,
assets, condition (financial or otherwise), results of operations or prospects
of the Parent taken as a whole. Parent is not in violation of or in default
under (nor does there exist any condition which upon the passage of time or the
giving of notice would cause such a violation of or default under) any Contract
to which it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that would not, individually or in the
aggregate, reasonably be expected to result in a Parent Material Adverse Effect.
SECTION 4.15. Title to Properties. Parent has good title to, or valid
leasehold interests in, all of its properties and assets used in the conduct of
its businesses. All such assets and properties, other than assets and properties
in which the Parent has leasehold interests, are free and clear of all Liens
other than those set forth in the Parent Disclosure Letter and except for Liens
that, in the aggregate, do not and will not materially interfere with the
ability of the Parent to conduct business as currently conducted. Parent has
complied in all material respects with the terms of all material leases to which
it is a party and under which it is in occupancy, and all such leases are in
full force and effect. Parent enjoys peaceful and undisturbed possession under
all such material leases.
SECTION 4.16. Intellectual Property. Parent owns, or is validly
licensed or otherwise has the right to use, all Intellectual Property Rights
which are material to the conduct of the business of the Parent taken as a
whole. The Parent Disclosure Letter sets forth a description of all Intellectual
Property Rights which are material to the conduct of the business of the Parent
taken as a whole. Except as set forth in the Parent Disclosure Letter no claims
are pending or, to the knowledge of the Parent, threatened that the Parent is
infringing or otherwise adversely affecting the rights of any person with regard
to any Intellectual Property Right. To the knowledge of the Parent, no person is
infringing the rights of the Parent with respect to any Intellectual Property
Right.
17
SECTION 4.17. Labor Matters. There are no collective bargaining or
other labor union agreements to which the Parent is a party or by which it is
bound. No material labor dispute exists or, to the knowledge of the Parent, is
imminent with respect to any of the employees of the Parent.
SECTION 4.18. Market Makers. The Parent has at least two market makers
for its common shares and such market makers have obtained all permits and made
all filings necessary in order for such market makers to continue as market
makers of the Parent.
SECTION 4.19. Transactions With Affiliates and Employees. Except as set
forth in the Filed Parent SEC Documents and Parent Disclosure Letter, none of
the officers or directors of the Parent and, to the knowledge of the Parent,
none of the employees of the Parent is presently a party to any transaction with
the Parent or any subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Parent, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
SECTION 4.20. Internal Accounting Controls. The Parent maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Parent has established disclosure
controls and procedures for the Parent and designed such disclosure controls and
procedures to ensure that material information relating to the Parent is made
known to the officers by others within those entities. The Parent's officers
have evaluated the effectiveness of the Parent's controls and procedures. Since
December 31, 2005, there have been no significant changes in the Parent's
internal controls or, to the Parent's knowledge, in other factors that could
significantly affect the Parent's internal controls.
SECTION 4.21. Solvency. Based on the financial condition of the Parent
as of the closing date (and assuming that the closing shall have occurred), (i)
the Parent's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Parent's existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Parent's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Parent, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Parent, together with the proceeds the Parent would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Parent does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
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SECTION 4.22. Application of Takeover Protections. The Parent has taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Parent's
charter documents or the laws of its state of incorporation that is or could
become applicable to the Stockholders as a result of the Stockholders and the
Parent fulfilling their obligations or exercising their rights under this
Agreement, including, without limitation, the issuance of the Shares and the
Stockholders' ownership of the Shares.
SECTION 4.23. No Additional Agreements. The Parent does not have any
agreement or understanding with the Stockholders with respect to the
transactions contemplated by this Agreement other than as specified in this
Agreement.
SECTION 4.24. Investment Company. The Parent is not, and is not an
affiliate of, and immediately following the Closing will not have become, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.25. Disclosure. The Parent confirms that neither it nor any
person acting on its behalf has provided any Stockholder or its respective
agents or counsel with any information that the Parent believes constitutes
material, non-public information except insofar as the existence and terms of
the proposed transactions hereunder may constitute such information and except
for information that will be disclosed by the Parent under a current report on
Form 8-K filed within one business days after the Closing. The Parent
understands and confirms that the Stockholders will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Parent. All disclosure provided to the Stockholders regarding the Parent, its
business and the transactions contemplated hereby, furnished by or on behalf of
the Parent (including the Parent's representations and warranties set forth in
this Agreement) are true and correct and do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.26. Certain Registration Matters. Except as specified in the
Parent Disclosure Letter and Filed Parent SEC Documents, the Parent has not
granted or agreed to grant to any person any rights (including "piggy-back"
registration rights) to have any securities of the Parent registered with the
SEC or any other governmental authority that have not been satisfied.
SECTION 4.27. Listing and Maintenance Requirements. The Parent is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with the listing and maintenance requirements for continued
listing of the Parent Stock on the trading market on which the Parent Stock are
currently listed or quoted. The issuance and sale of the Shares under this
Agreement does not contravene the rules and regulations of the trading market on
which the Parent Stock are currently listed or quoted, and no approval of the
stockholders of the Parent is required for the Parent to issue and deliver to
the Stockholders the Shares contemplated by this Agreement.
SECTION 4.28. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Parent, its subsidiaries
or their respective business, properties, prospects, operations or financial
condition, that would be required to be disclosed by the Parent under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Parent of its Common Stock and which has
not been publicly announced.
19
SECTION 4.29. Foreign Corrupt Practices. Neither the Parent, nor any of
its subsidiaries, nor, to the Parent's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Parent or any of its
subsidiaries has, in the course of its actions for, or on behalf of, the Parent
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
ARTICLE V
Deliveries
----------
SECTION 5.01. Deliveries of the Stockholders.
(a) Concurrently herewith each Stockholder is delivering to
the Parent this Agreement executed by the Stockholder.
(b) On Closing date, each Stockholder shall deliver to the
Parent:
(i) certificates representing its Company Stock; and
(ii) duly executed stock powers for transfer by the
Stockholder of its Company Stock to the Parent.
SECTION 5.02. Deliveries of the Parent.
(a) Concurrently herewith, the Parent is delivering:
(i) to each Stockholder and to the Company, a copy of
this Agreement executed by Parent;
(ii) to the Company, a certificate from the Parent,
signed by its Secretary or Assistant Secretary certifying that
the attached copies of the Parent Charter, Parent Bylaws and
resolutions of the Board of Directors of the Parent approving
the Agreement and the Transactions, are all true, complete and
correct and remain in full force and effect;
(b) At or prior to the Closing, the Parent shall deliver:
(i) to the Company, a letter of resignation of
Timothy Halter from all offices he holds with the Parent
effective upon the Closing and from his position as a director
of the Parent that will become effective upon the 10th day
following the mailing by the Parent to its stockholders the
14f-1 Notice;
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(ii) to the Company, evidence of the election of Ni
Guoxiang as a director and as the Chief Executive Officer and
President of the Parent effective upon the Closing;
(iii) to the Company, such pay-off letters and
releases relating to liabilities as the Company shall request
and such pay-off letters and releases shall be in form and
substance satisfactory to the Company; and
(iv) to the Company the results of UCC, judgment lien
and tax lien searches with respect to the Parent, the results
of which indicate no liens on the assets of the Parent.
(c) On Closing date, the Parent shall deliver:
(i) to each Stockholder, certificates representing
the new shares of Parent Common Stock issued to such
Stockholder as set forth on Exhibit A; and
(ii) to the Company, consent letters of the
accounting firms of Parent confirming each such firm's
respective consent to the use by the Parent of reports
prepared by such firm regarding the financial statements of
the Parent in all future registration statements filed with
the SEC.
SECTION 5.03. Deliveries of the Company.
(a) Concurrently herewith, the Company is delivering to the
Parent:
(i) this Agreement executed by Company; and
(ii) a certificate from the Company, signed by its
authorized officer certifying that the attached copies of the
Company Constituent Instruments and resolutions of the Board
of Directors of the Company approving the Agreement and the
Transactions are all true, complete and correct and remain in
full force and effect.
ARTICLE VI
Conditions to Closing
---------------------
SECTION 6.01. Stockholder and Company Conditions Precedent. The
obligations of the Stockholders and the Company to enter into and complete the
Closing is subject, at the option of the Stockholders and the Company, to the
fulfillment on or prior to the Closing Date of the following conditions.
(a) Representations and Covenants. The representations and
warranties of the Parent contained in this Agreement shall be true in
all material respects on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date. The Parent
shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or
complied with by the Parent on or prior to the Closing Date. The Parent
shall have delivered to the Stockholders and the Company, a
certificate, dated the Closing Date, to the foregoing effect.
21
(b) Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body or
instituted or threatened by any governmental or regulatory body to
restrain, modify or prevent the carrying out of the Transactions or to
seek damages or a discovery order in connection with such Transactions,
or which has or may have, in the reasonable opinion of the Company or
any Stockholders, a materially adverse effect on the assets,
properties, business, operations or condition (financial or otherwise)
of the Parent or the Company.
(c) No Material Adverse Change. There shall not have been any
occurrence, event, incident, action, failure to act, or transaction
since December 31, 2005 which has had or is reasonably likely to cause
a Parent Material Adverse Effect.
(d) Post-Closing Capitalization. At, and immediately after,
the Closing, the authorized capitalization, and the number of issued
and outstanding shares of the capital stock of the Company and the
Parent, on a fully-diluted basis, as indicated on a schedule to be
delivered by the Parties at or prior to the Closing, shall be
acceptable to the Stockholders in their sole and absolute discretion.
(e) SEC Reports. The Parent shall have filed all reports and
other documents required to be filed by Parent under the U.S. federal
securities laws through the Closing Date.
(f) OTCBB Quotation. The Parent shall have maintained its
status as a Company whose common stock is quoted on the
Over-the-Counter Bulletin Board and no reason shall exist as to why
such status shall not continue immediately following the Closing.
(g) Deliveries. The deliveries specified in Section 5.02 shall
have been made by the Parent.
(h) No Suspensions of Trading in Parent Stock; Listing.
Trading in the Parent Stock shall not have been suspended by the SEC or
any trading market (except for any suspensions of trading of not more
than one trading day solely to permit dissemination of material
information regarding the Parent) at any time since the date of
execution of this Agreement, and the Parent Stock shall have been at
all times since such date listed for trading on a trading market.
(i) Satisfactory Completion of Due Diligence. The Company and
the Stockholders shall have completed their legal, accounting and
business due diligence of the Parent and the results thereof shall be
satisfactory to the Company and the Stockholders in their sole and
absolute discretion.
(j) Delivery of Audit Report and Financial Statements. The
Company shall have completed the Company Financial Statements and shall
have received an audit report from an independent audit firm that is
registered with the Public Company Accounting Oversight Board relating
to the fiscal years ended June 30, 2006, 2005 and 2004.
22
(k) Completion of Financing. The Financing (as defined in
Section 7.12 below) shall have been completed or shall be completed
simultaneously with the Closing.
(l) Delivery of PRC Legal Opinion. The Company shall have
received an opinion from its legal counsel in the People's Republic of
China that confirms the legality under Chinese law of the restructuring
being effected by the Company in connection with the Transactions and
that is otherwise satisfactory to the Company, the Stockholders, the
Parent and the investors investing in the Financing.
(m) Agreement as to Exchange Ratio. The Company and the
Stockholders shall have agreed with the Parent regarding the exchange
ratio of shares of Parent Stock for Shares of Company Stock and each of
the Parties shall have mutually agreed on the completion of Exhibit A
hereto.
SECTION 6.02. Parent Conditions Precedent. The obligations of the
Parent to enter into and complete the Closing is subject, at the option of the
Parent, to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by the Parent in writing.
(a) Representations and Covenants. The representations and
warranties of the Stockholders and the Company contained in this
Agreement shall be true in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of
the Closing Date. The Stockholders and the Company shall have performed
and complied in all material respects with all covenants and agreements
required by this Agreement to be performed or complied with by the
Stockholders and the Company on or prior to the Closing Date. The
Company shall have delivered to the Parent, if requested, a
certificate, dated the Closing Date, to the foregoing effect.
(b) Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body or
instituted or threatened by any governmental or regulatory body to
restrain, modify or prevent the carrying out of the Transactions or to
seek damages or a discovery order in connection with such Transactions,
or which has or may have, in the reasonable opinion of the Parent, a
materially adverse effect on the assets, properties, business,
operations or condition (financial or otherwise) of the Parent.
(c) No Material Adverse Change. There shall not have been any
occurrence, event, incident, action, failure to act, or transaction
since December 31, 2005 which has had or is reasonably likely to cause
a Company Material Adverse Effect.
(d) Deliveries. The deliveries specified in Section 5.01 and
Section 5.03 shall have been made by the Stockholders and the Company,
respectively.
(e) Audited Financial Statements and Form 10 Disclosure. The
Company shall have provided the Parent and the Stockholders with
reasonable assurances that the Parent will be able to comply with its
obligation to file a current report on Form 8-K within one (1) business
days following the Closing containing the requisite audited
consolidated financial statements of the Company and the requisite Form
10-type disclosure regarding the Company.
23
(f) Post-Closing Capitalization. At, and immediately after,
the Closing, the authorized capitalization, and the number of issued
and outstanding shares of the capital stock of the Company and the
Parent, on a fully-diluted basis, as indicated on a schedule to be
delivered by the Parties at or prior to the Closing, shall be
acceptable to the Parent in its sole and absolute discretion.
(g) Satisfactory Completion of Due Diligence. The Parent shall
have completed its legal, accounting and business due diligence of the
Company and the Stockholders and the results thereof shall be
satisfactory to the Parent in its sole and absolute discretion.
(h) Delivery of Audit Report and Financial Statements. The
Company shall have completed the Company Financial Statements and shall
have received an audit report from an independent audit firm that is
registered with the Public Company Accounting Oversight Board relating
to the fiscal years ended June 30, 2006, 2005 and 2004. The form and
substance of the Financial Statements shall be satisfactory to the
Parent in its sole and absolute discretion.
(i) Completion of Financing. The Financing (as defined in
Section 7.12 below) shall have been completed or shall be completed
simultaneously with the Closing.
(j) Delivery of PRC Legal Opinion. The Parent shall have
received an opinion from the Company's legal counsel in the People's
Republic of China that confirms the legality under Chinese law of the
restructuring being effected by the Company in connection with the
Transactions and that is otherwise satisfactory to the Company, the
Stockholders, the Parent and the investors investing in the Financing.
(k) Agreement as to Exchange Ratio. The Company and the
Stockholders shall have agreed with the Parent regarding the exchange
ratio of shares of Parent Stock for Shares of Company Stock and each of
the Parties shall have mutually agreed on the completion of Exhibit A
hereto.
(l) Registration Rights Agreement. The Company shall have
entered into a registration rights agreement with such parties as
indicated by the Parent and the form and substance of such registration
rights agreement shall be reasonably satisfactory to the Parent.
ARTICLE VII
Covenants
---------
SECTION 7.01. Preparation of the 14f-1 Notice; Blue Sky Laws;
Certificate of Completion.
(a) As soon as possible following the Closing and in any
event, within two business days thereafter, the Company and Parent
24
shall prepare and file with the SEC the 14f-1 Notice in connection with
the consummation of this Agreement. The Parent shall cause the 14f-1
Notice to be mailed to the Parent's stockholders as promptly as
practicable thereafter.
(b) Parent shall take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified)
required to be taken under any applicable state securities laws in
connection with the issuance of Parent Stock in connection with this
Agreement.
(c) Within 3 business days of the Closing, the Parent shall
have filed with the United States Bankruptcy Court for the Northern
District of Texas, Dallas Division, a Certificate of Completion (the
"Certificate of Completion") evidencing the closing of the transactions
contemplated herein and for the purpose of satisfying the Parent's
final obligation under its confirmed plan of bankruptcy.
SECTION 7.02. Public Announcements. Parent and the Company will consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the Agreement and the Transactions and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable Law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
SECTION 7.03. Fees and Expenses. All fees and expenses incurred in
connection with this Agreement shall be paid by the Party incurring such fees or
expenses, whether or not this Agreement is consummated.
SECTION 7.04. Continued Efforts. Each Party shall use commercially
reasonable efforts to (a) take all action reasonably necessary to consummate the
Transactions, and (b) take such steps and do such acts as may be necessary to
keep all of its representations and warranties true and correct as of the
Closing Date with the same effect as if the same had been made, and this
Agreement had been dated, as of the Closing Date.
SECTION 7.05. Conduct of Business. During the period from the date
hereof through the Closing Date, Parent and the Company shall carry on their
respective businesses in the ordinary and usual course consistent with past
practice.
SECTION 7.06. Exclusivity. The Parent shall not (i) solicit, initiate,
or encourage the submission of any proposal or offer from any person relating to
the acquisition of any capital stock or other voting securities of the Parent,
or any assets of the Parent (including any acquisition structured as a merger,
consolidation, share exchange or other business combination), (ii) participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any person to do or seek any of the foregoing, or (iii)
take any other action that is inconsistent with the Transactions and that has
the effect of avoiding the Closing contemplated hereby. The Parent shall notify
the Company immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
SECTION 7.07. Filing of 8-K and Press Release. Parent shall file,
within one business day of the Closing Date, a current report on Form 8-K and
attach as exhibits all relevant agreements with the SEC disclosing the terms of
this Agreement and other requisite disclosure regarding the Transactions and
25
including the requisite audited consolidated financial statements of the Company
and the requisite Form 10 disclosure regarding the Company. In addition, the
Parent shall issue a press release prior to 9:30 a.m. (New York Time) on the
business day following the Closing Date, announcing the closing of the
transaction.
SECTION 7.08. Furnishing of Information. As long as any Stockholder
owns the Shares, the Parent covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Parent after the date hereof pursuant to the
Exchange Act. As long as any Stockholder owns Shares, if the Parent is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Stockholders and make publicly available in accordance with Rule 144(c)
promulgated by the SEC pursuant to the Securities Act, such information as is
required for the Stockholder to sell the Shares under Rule 144. The Parent
further covenants that it will take such further action as any holder of Shares
may reasonably request, all to the extent required from time to time to enable
such person to sell the Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.
SECTION 7.09. Preparation of Disclosure Letters. The Parties
acknowledge and agree that (i) neither the Company nor the Parent has yet
delivered the Company Disclosure Letter or the Parent Disclosure Letter,
respectively, and (ii) none of the Company, the Stockholders nor the Parent has
completed its respective due diligence investigation of the Parent or the
Company and the Stockholders, respectively, nor has any of them been provided
with copies of, nor had an opportunity to review, the items to be referred to on
the Company Disclosure Letter or the Parent Disclosure Letter. The Company and
the Stockholders shall deliver to the Parent the Company Disclosure Letter and
the Parent shall deliver to the Company and the Stockholders the Parent
Disclosure Letter, including copies of all agreements, and other documents
referred to thereon, in final form within at least 10 business days prior to the
Closing. The Parent, on the one hand, and the Company and the Stockholders, on
the other hand, shall have 10 business days following delivery of the Company
Disclosure Letter and the Parent Disclosure Letter, along with all related
agreements and other documents referred to thereon, respectively, in which to
terminate this Agreement if the Parent or the Company and the Stockholders, as
the case may be, object to any information contained in such disclosure letters
or the contents of any such agreement or other document and the Parties cannot
agree on mutually satisfactory modifications thereto.
SECTION 7.10. Access. Each Party shall permit representatives of each
other Party to have full access to all premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
such Party.
SECTION 7.11. Preservation of Business. From the date of this Agreement
until the Closing Date, each of the Company and the Parent shall operate only in
the ordinary and usual course of business consistent with past practice
(provided, however, that Parent shall not issue any securities without the prior
written consent of the Company), and shall use reasonable commercial efforts to
(a) preserve intact its respective business organization, (b) preserve the good
will and advantageous relationships with customers, suppliers, independent
contractors, employees and other Persons material to the operation of its
respective business, and (c) not permit any action or omission which would cause
any of its respective representations or warranties contained herein to become
inaccurate or any of its respective covenants to be breached in any material
respect.
26
SECTION 7.12. Financing. Parent shall use commercially reasonable
efforts to raise at least $25 million in an equity financing transaction on
terms that are satisfactory to the Company and the Stockholders (the
"Financing"), which Financing shall be consummated simultaneously with the
Closing.
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the Parties at the following addresses (or at such other
address for a Party as shall be specified by like notice):
If to the Parent, to:
BTHC III, INC.
12890 Hilltop Road
Argyle, Texas 76226
Attention: Timothy Halter
Facsimile: (972) 233 - 0300
If to the Company, to:
SUTOR STEEL TECHNOLOGY CO., LTD
Dongbang Industrial Park
Huaye Road No.8,Changshu,Jiangsu,China
Attention: Chairman
Facsimile: (86-512) 52687771
If to Stockholders at the addresses set forth in Exhibit A hereto.
with a copy to:
Thelen, Reid & Priest, LLP
701 Eighth Street, N.W.
Washington, D.C. 20001
Attention: Louis A. Bevilacqua, Esq.
Facsimile: (202) 654-1804
SECTION 8.02. Amendments; Waivers; No Additional Consideration. No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company, Parent and the Stockholders holding a majority
of the Shares. No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either Party to exercise any right hereunder in any manner impair the exercise
of any such right. No consideration shall be offered or paid to any Stockholder
to amend or consent to a waiver or modification of any provision of any
transaction document unless the same consideration is also offered to all
Stockholders who then hold Shares.
27
SECTION 8.03. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) The Company, the Stockholders and the Parent may
terminate this Agreement by mutual written consent at any time
prior to the Closing;
(ii) The Parent may terminate this Agreement by
giving written notice to the Company and the Stockholders at
any time prior to the Closing (A) in the event the Company or
any of the Stockholders have breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Parent has notified the
Company and/or the Stockholders of the breach, and the breach
has continued without cure for a period of twenty days after
the notice of breach, or (B) if the Closing shall not have
occurred on or before May 31, 2007 by reason of the failure of
any condition precedent under Section 6.02 hereof (unless the
failure results primarily from the Parent itself breaching any
representation, warranty, or covenant contained in this
Agreement); and
(iii) The Company may terminate this Agreement by
giving written notice to the Parent at any time prior to the
Closing (A) in the event the Parent has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Company has notified
the Parent of the breach, and the breach has continued without
cure for a period of twenty days after the notice of breach or
(B) if the Closing shall not have occurred on or before May
31, 2007, by reason of the failure of any condition precedent
under Section 6.01 hereof (unless the failure results
primarily from the Company or the Stockholders themselves
breaching any representation, warranty, or covenant contained
in this Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 8.03(a) above, all rights and obligations
of the Parties hereunder shall terminate without any Liability of any
Party to any other Party to consummate its obligations hereunder or to
complete the transactions contemplated by this Agreement, except for
any Liability of any Party then in breach.
SECTION 8.04. Replacement of Securities. If any certificate or
instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the
Parent shall issue or cause to be issued in exchange and substitution for and
upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Parent of such loss, theft or destruction and customary and
reasonable indemnity, if requested. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Shares. If a replacement
certificate or instrument evidencing any Shares is requested due to a mutilation
thereof, the Parent may require delivery of such mutilated certificate or
instrument as a condition precedent to any issuance of a replacement.
SECTION 8.05. Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each of
the Stockholders, Parent and the Company will be entitled to specific
28
performance under this Agreement. The Parties agree that monetary damages may
not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
SECTION 8.06. Independent Nature of Stockholders' Obligations and
Rights. The obligations of each Stockholder under this Agreement are several and
not joint with the obligations of any other Stockholder, and no Stockholder
shall be responsible in any way for the performance of the obligations of any
other Stockholder under this Agreement. The decision of each Stockholder to
acquire Shares pursuant to this Agreement has been made by such Stockholder
independently of any other Stockholder. Nothing contained herein, and no action
taken by any Stockholder pursuant hereto, shall be deemed to constitute the
Stockholders as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Stockholders are in any way acting
in concert or as a group with respect to such obligations or the transactions
contemplated herein. Each Stockholder acknowledges that no other Stockholder has
acted as agent for such Stockholder in connection with making its investment
hereunder and that no Stockholder will be acting as agent of such Stockholder in
connection with monitoring its investment in the Shares or enforcing its rights
under this Agreement. Each Stockholder shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Stockholder
to be joined as an additional party in any proceeding for such purpose. Each of
the Company and Parent acknowledge that each of the Stockholders has been
provided with this same Agreement for the purpose of closing a transaction with
multiple Stockholders and not because it was required or requested to do so by
any Stockholder.
SECTION 8.07. Limitation of Liability. Notwithstanding anything herein
to the contrary, each of the Parent and the Company acknowledge and agree that
the liability of a Stockholder arising directly or indirectly, under any
transaction document of any and every nature whatsoever shall be satisfied
solely out of the assets of such Stockholder, and that no trustee, officer,
other investment vehicle or any other affiliate of such Stockholder or any
investor, shareholder or holder of shares of beneficial interest of such
Stockholder shall be personally liable for any liabilities of such Stockholder.
SECTION 8.08. Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
SECTION 8.09. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that Transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.10. Counterparts; Facsimile Execution. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
29
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 Parties. Facsimile
execution and delivery of this Agreement is legal, valid and binding for all
purposes.
SECTION 8.11. Entire Agreement; Third Party Beneficiaries. This
Agreement, taken together with the Company Disclosure Letter and the Parent
Disclosure Letter, (a) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, among the Parties with
respect to the Transactions and (b) are not intended to confer upon any person
other than the Parties any rights or remedies.
SECTION 8.12. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.13. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the Parties without the prior
written consent of the other Parties. Any purported assignment without such
consent shall be void. Subject to the preceding sentences, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the Parties and
their respective successors and assigns.
[Signature Page Follows]
30
The Parties hereto have executed and delivered this Share Exchange
Agreement as of the date first above written.
The Parent:
BTHC III, INC.
By: /s/ Timothy Halter
--------------------------------
Name: Timothy Halter
Title: CEO and President
The Company:
SUTOR STEEL TECHNOLOGY CO., LTD
By: /s/ Ni Guoxiang
--------------------------------
Name: Ni Guoxiang
Title: CEO
[Stockholder Share Exchange Agreement Signature Pages Follow]
The undersigned Stockholder hereby executes this Share Exchange
Agreement as of the date first above written.
For Individuals:
/s/ Gao Feng
--------------------------------
Gao Feng
/s/ Chen Lifang
--------------------------------
Chen Lifang
--------------------------------
For Entities:
--------------------------------
Print Name Above
By:
--------------------------------
Name:
Title:
EXHIBIT A
Shareholders of SUTOR STEEL TECHNOLOGY CO. LTD
----------------------------------------------
As of the date of this Agreement, this Exhibit A shall only contain the
name and address of each Stockholder and the number of shares of Company Stock
held by each stockholder. Prior to the Closing, this Exhibit A shall be amended
in a manner that is satisfactory to all of the Parties so that the missing
information is provided.
- ----------------------------------------------- ----------------- ------------- ----------------- ----------------
Percentage of
Number of Total Company Number of
Tax ID Shares of Shares Shares of
Number of Company Represented By Parent Stock
Stockholder (if Stock Being Shares Being to be Received
Name and Address of Stockholder Applicable) Exchanged Exchanged by Stockholder
- ----------------------------------------------- ----------------- ------------- ----------------- ----------------
Gao Feng Door 51,Group 4, WuLi 29500 59%
Village,Nan Yang
Town,Xiao Shan District,Hangzhou City,China
- ----------------------------------------------- ----------------- ------------- ----------------- ----------------
Chen Lifang Rm.101, Middle 20500 41%
Unit,Block 1,FuLi
Garden,Xiao Shan District,Hangzhou City,China
- ----------------------------------------------- ----------------- ------------- ----------------- ----------------
TOTAL: 100%
- ----------------------------------------------- ----------------- ------------- ----------------- ----------------