EXHIBIT 2.1
SECURITIES PURCHASE AGREEMENT
-----------------------------
AND PLAN OF REORGANIZATION
--------------------------
THIS SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION (the
"AGREEMENT") is entered into on September 9, 2004 by and among: (i) DISCOVERY
INVESTMENTS, INC., a Nevada corporation ("DISCOVERY"); (ii) EVERGREEN ASSET
GROUP LIMITED, an International Business Company organized under the laws of the
British Virgin Islands (the "COMPANY"); and (iii) the shareholders of the
Company who have executed this Agreement on the signature page attached hereto
as EXHIBIT A (the "COMPANY SHAREHOLDERS").
R E C I T A L S
---------------
A. The Company has authorized capital consisting of 50,000 ordinary
shares of capital stock, par value US$1.00 each (the "Ordinary Shares"), of
which 200 Ordinary Shares are issued and outstanding as of the date of this
Agreement (the "ISSUED SHARES"), and the Company expects to issue additional
Ordinary Shares to one or more of the Company Shareholders on or prior to the
Closing (as defined herein) (the "ADDITIONAL SHARES", which together with the
Issued Shares shall be collectively referred to herein as the "COMPANY SHARES").
B. Discovery has authorized capital stock consisting of 100,000,000
shares of common stock ("DISCOVERY COMMON STOCK"), $0.001 par value, of which
28,370,130 shares of Discovery Common Stock are issued and outstanding as of the
date of this Agreement. Prior to the Closing (as defined below), Discovery will
cause its shareholders to cancel and return to treasury, for no consideration,
13,370,130 outstanding shares of Discovery Common Stock so that there shall be
15,000,000 shares of Discovery Common Stock issued and outstanding immediately
prior to the Closing.
C. The Company Shareholders wish to sell, and Discovery wishes to
acquire, all of the issued and outstanding Company Shares in exchange for
Discovery's issuance of a total of 85,000,000 shares of Discovery Common Stock
("DISCOVERY Shares") to the Company Shareholders, such that, the Company
Shareholders shall own 85% of the issued and outstanding share capital of
Discovery on a fully diluted basis, subject to and upon the terms and conditions
hereinafter set forth (the "REORGANIZATION").
A G R E E M E N T
-----------------
ARTICLE 1
SECURITIES PURCHASE AND REORGANIZATION
It is agreed as follows:
1.1 INCORPORATION OF RECITALS. The provisions and recitals set forth
above are hereby referred to and incorporated herein and made a part of this
Agreement by reference.
1.2 AGREEMENT TO EXCHANGE SECURITIES. Subject to the terms and upon the
conditions set forth herein, each Company Shareholder agrees to sell, assign,
transfer and deliver to Discovery, and Discovery agrees to purchase from each
Company Shareholder, at the Closing, all of the Company Shares owned by the
respective Company Shareholder, in exchange for the issuance, at the Closing, by
Discovery to each such Company Shareholder a pro rata share of the Discovery
Shares. Each Company Shareholder's pro rata share of the Discovery Shares shall
be determined by multiplying the total number of the Discovery Shares (i.e.,
85,000,000 shares of Discovery Common Stock) by a fraction, the numerator of
which is the total number of Company Shares owned by the Company Shareholder at
1
the Closing and the denominator of which is the total number of Company Shares
issued and outstanding at the Closing. No fractional shares of Discovery Common
Stock shall be issued upon exchange of any Company Shares pursuant to this
Section 1.2. In lieu thereof, each recipient of Discovery Common Stock who would
otherwise be entitled to a fraction of a share of Discovery Common Stock (after
aggregating all fractional shares of Discovery Common Stock to be received by
such holder) shall be entitled to receive one whole share of Discovery Common
Stock.
1.3 CLOSING. The closing ("Closing") of the exchange of the Company
Shares and the Discovery Shares shall take place at the offices of Ronald J.
Stauber, Esq., located at 1880 Century Park East, Suite 300, Los Angeles,
California 90067, at 10:00 a.m., local time, on October 1, 2004, or at such
other time and place as may be agreed to by the Company and Discovery ("Closing
Date").
1.4 INSTRUMENTS OF TRANSFER.
(a) COMPANY SHARES. Each Company Shareholder shall deliver to
Discovery on the Closing Date evidence of the Company Shares owned by the
Company Shareholder ("COMPANY CERTIFICATES"), if any, along with duly executed
assignments of such Company Certificates, in order to effectively vest in
Discovery all right, title and interest in and to the Company Shares owned by
the Company Shareholder. From time to time after the Closing Date, and without
further consideration, the Company Shareholder will execute and deliver such
other instruments of transfer and take such other actions as Discovery may
reasonably request in order to more effectively transfer to Discovery the
securities intended to be transferred hereunder.
(b) DISCOVERY SHARES. Discovery shall deliver to the Company
Shareholders on the Closing Date original certificates evidencing the Discovery
Shares, in form and substance satisfactory to the Company Shareholders, in order
to effectively vest in each Company Shareholder its respective right, title and
interest in and to the Discovery Shares. From time to time after the Closing
Date, and without further consideration, Discovery will execute and deliver such
other instruments and take such other actions as the Company Shareholders may
reasonably request in order to more effectively issue to them the Discovery
Shares.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Discovery as follows:
2.1 DISCLOSURE SCHEDULE. The disclosure schedule attached hereto as
EXHIBIT 2.1 (the "COMPANY DISCLOSURE SCHEDULE") is divided into sections that
correspond to the sections of this Article 2. The Company Disclosure Schedule
comprises a list of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and warranties set
forth in the remaining sections of this Article 2.
2.2 CORPORATE ORGANIZATION, ETC. The Company is an International
Business Company duly organized, validly existing and in good standing under the
laws of the British Virgin Islands with the requisite corporate power and
authority to carry on its business as it is now being conducted and to own,
operate and lease its properties and assets, is duly qualified or licensed to do
business as a foreign corporation in good standing in every other jurisdiction
in which the character or location of the properties and assets owned, leased or
operated by it or the conduct of its business requires such qualification or
licensing, except in such jurisdictions in which the failure to be so qualified
or licensed and in good standing would not, individually or in the aggregate,
have a Material Adverse Effect (as defined below) on the Company. Complete and
2
correct copies of the Company's articles of association and memorandum of
association have previously been made available to Discovery. Except as set
forth on the Company Disclosure Schedule, the Company does not own or control
any capital stock of any corporation or any interest in any partnership, joint
venture or other entity.
2.3 CAPITALIZATION. The Company Disclosure Schedule sets forth the
total number of Company issued and outstanding as of the date of this Agreement.
All issued and outstanding Company Shares are duly authorized, validly issued,
fully paid and nonassessable and are without, and were not issued in violation
of, preemptive rights. Other than as set forth on the Company Disclosure
Schedule or as contemplated by this Agreement, there is no subscription, option,
warrant, call, right, contract, agreement, commitment, understanding or
arrangement to which the Company is a party, or by which it is bound, with
respect to the issuance, sale, delivery or transfer of the capital securities of
the Company, including any right of conversion or exchange under any security or
other instrument.
2.4 AUTHORIZATION, ETC. The Company has all requisite corporate power
and authority to enter into, execute, deliver, and perform its obligations under
this Agreement. This Agreement has been duly and validly executed and delivered
by the Company and is the valid and binding legal obligation of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, moratorium, principles of equity and other limitations limiting the
rights of creditors generally.
2.5 NON-CONTRAVENTION. Except as set forth in the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement, nor
the consummation of the transactions contemplated herein will:
(a) violate, contravene or be in conflict with any provision
of the articles of association or memorandum of association of the
Company;
(b) be in conflict with, or constitute a default, however
defined (or an event which, with the giving of due notice or lapse of
time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to any right
of termination, cancellation, imposition of fees or penalties under any
debt, note, bond, lease, mortgage, indenture, license, obligation,
contract, commitment, franchise, permit, instrument or other agreement
or obligation to which the Company is a party or by which the Company
or any of the Company's properties or assets is or may be bound;
(c) result in the creation or imposition of any pledge, lien,
security interest, restriction, option, claim or charge of any kind
whatsoever ("ENCUMBRANCES") upon any property or assets of the Company
under any debt, obligation, contract, agreement or commitment to which
the Company is a party or by which the Company or any of the Company's
assets or properties are bound; or
(d) materially violate any statute, treaty, law, judgment,
writ, injunction, decision, decree, order, regulation, ordinance or
other similar authoritative matters (referred to herein individually as
a "LAW" and collectively as "LAWS") of any foreign, federal, state or
local governmental or quasi-governmental, administrative, regulatory or
judicial court, department, commission, agency, board, bureau,
instrumentality or other authority (referred to herein individually as
an "AUTHORITY" and collectively as "AUTHORITIES").
2.6 CONSENTS AND APPROVALS. Except as set forth in the Company
Disclosure Schedule or those received or to be received by the Company prior to
the Closing, with respect to the Company, no consent, approval, order or
authorization of or from, or registration, notification, declaration or filing
with ("CONSENT") any individual or entity, including without limitation any
3
Authority, is required in connection with the execution, delivery or performance
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated herein.
2.7 FINANCIAL STATEMENTS. The Company will, on or prior to the Closing,
deliver (i) a copy of the audited balance sheet of the Company as of December
31, 2003 (the "BALANCE SHEET") and an audited statement of income for the
Company for the twelve-month period ended December 31, 2003 (the "INCOME
STATEMENT"), and (ii) a copy of the unaudited statement of income for the
Company for an interim period to be agreed by the Company and Discovery
(collectively, the "FINANCIAL STATEMENTS"). Except as disclosed therein or in
the Company Disclosure Schedule, the aforesaid Financial Statements: (i) will be
in accordance with the books and records of the Company and have been prepared
in conformity with good accounting practices (except as stated therein or in the
notes thereto); and (ii) will be true, complete and accurate in all material
respects and fairly present the financial position of the Company as of the date
thereof, and the income or loss for the period then ended, except that the
unaudited interm statement of income will not contain all required footnotes and
will be subject to normal year-end adjustments.
2.8 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have any
material liabilities, obligations or claims of any kind whatsoever, whether
secured or unsecured, accrued or unaccrued, fixed or contingent, matured or
unmatured, known or unknown, direct or indirect, contingent or otherwise and
whether due or to become due (referred to herein individually as a "LIABILITY"
and collectively as "LIABILITIES"), other than: (a) Liabilities that are fully
reflected or reserved for in the Balance Sheet; (b) Liabilities that are set
forth on the Company Disclosure Schedule; (c) Liabilities incurred by the
Company in the ordinary course of business after the date of the Balance Sheet
and consistent with past practice; (d) Liabilities in an amount not to exceed
US$1,000,000 individually or in the aggregate unless such amounts are disclosed
on the Company Disclosure Schedule; or (e) Liabilities for express executory
obligations to be performed after the Closing under the contracts described in
Section 2.14 of the Company Disclosure Schedule.
2.9 ABSENCE OF CERTAIN CHANGES. Except as set forth in the Company
Disclosure Schedule, since the date of the Balance Sheet, the Company has owned
and operated its assets, properties and business in the ordinary course of
business and consistent with past practice. Without limiting the generality of
the foregoing, subject to the aforesaid exceptions:
(a) the Company has not experienced any change that has had or
could reasonably be expected to have a Material Adverse Effect on the
Company; and
(b) the Company has not suffered (i) any loss, damage,
destruction or other property or casualty (whether or not covered by
insurance) or (ii) any loss of officers, employees, dealers,
distributors, independent contractors, customers or suppliers, which
had or may reasonably be expected to result in a Material Adverse
Effect on the Company.
2.10 ASSETS. Except as set forth in the Company Disclosure Schedule,
the Company has valid title to all of its assets and properties owned by it,
that relate to or are necessary for the Company to conduct its business and
operations as currently conducted (collectively, the "ASSETS"), free and clear
of any mortgage, pledge, lien, security interest, conditional or installment
sales agreement, encumbrance, claim, easement, right of way, tenancy, covenant,
encroachment, restriction or charge of any kind or nature (whether or not of
record) (a "LIEN"), other than (i) liens securing specific Liabilities shown on
the Balance Sheet with respect to which no breach, violation or default exists;
(ii) mechanics', carriers', workers' or other like liens arising in the ordinary
course of business; (iii) minor imperfections of title that do not individually
or in the aggregate, impair the continued use and operation of the Assets to
which they relate in the operation of the Company as currently conducted; and
(iv) liens for current taxes not yet due and payable or being contested in good
faith by appropriate proceedings ("PERMITTED LIENS").
4
2.11 RECEIVABLES AND PAYABLES.
(a) Except as set forth on the Company Disclosure Schedule,
all accounts receivable of the Company represent sales in the ordinary
course of business and, to the Company's knowledge, are current and
collectible net of any reserves shown on the Balance Sheet and none of
such receivables is subject to any Lien other than a Permitted Lien.
(b) Except as set forth on the Company Disclosure Schedule,
all payables by the Company arose in bona fide transactions in the
ordinary course of business.
2.12 INTELLECTUAL PROPERTY RIGHTS. The Company owns or has the
unrestricted right to use all patents, patent applications, patent rights,
registered and unregistered trademarks, trademark applications, tradenames,
service marks, service mark applications, copyrights, internet domain names,
computer programs and other computer software, inventions, know-how, trade
secrets, technology, proprietary processes, trade dress, software and formulae
(collectively, "INTELLECTUAL PROPERTY RIGHTS") used in, or necessary for, the
operation of its Business as currently conducted or proposed to be conducted.
Except as set forth on the Company Disclosure Schedule, to the Company's
knowledge, the use of all Intellectual Property Rights necessary or required for
the conduct of the Business of the Company as presently conducted and as
proposed to be conducted does not infringe or violate the Intellectual Property
Rights of any person or entity. Except in the ordinary course of business or
except as described on the Company Disclosure Schedule, to the Company's
knowledge: (a) the Company does not own or use any Intellectual Property Rights
pursuant to any written license agreement; and (b) the Company has not granted
any person or entity any rights, pursuant to a written license agreement or
otherwise, to use the Intellectual Property Rights. All license agreements
relating to Intellectual Property Rights are binding and there is not, under any
of such licenses, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default, or would
constitute a basis for a claim on non-performance) on the part of the Company
or, to the knowledge of the Company, any other party thereto. The Company
Disclosure Schedule contains a list of all patents, trademarks and domain names
owned or licensed by the Company.
2.13 LITIGATION. Except as set forth in the Company Disclosure
Schedule, there is no legal, administrative, arbitration, or other proceeding,
suit, claim or action of any nature or investigation, review or audit of any
kind, or any judgment, decree, decision, injunction, writ or order pending,
noticed, scheduled, or, to the knowledge of the Company, threatened or
contemplated by or against or involving the Company, its assets, properties or
business or its directors, officers, agents or employees (but only in their
capacity as such), whether at law or in equity, before or by any person or
entity or Authority, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by the parties hereto pursuant to
this Agreement or in connection with the transactions contemplated herein.
2.14 CONTRACTS AND COMMITMENTS; NO DEFAULT.
(a) True and complete copies (or summaries, in the case of
oral items) of the following agreements (the "COMPANY Contracts") have
been made available to Discovery for review:
(i) Form of employment agreements, and, if any,
non-competition, consulting or severance agreement, collective
bargaining agreement, or pension, profit-sharing, incentive
compensation, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance
pay or retirement plan or agreement;
(ii) indenture, mortgage, note, installment
obligation, agreement or other instrument relating to the
borrowing of money by the Company;
5
(iii) contract, agreement, lease (real or personal
property) or arrangement that (A) is not terminable on less
than 30 days' notice without penalty, (B) is not over one year
in length of obligation of the Company, or (C) involves an
obligation of more than US$1,000,000 over its term;
(iv) contract, agreement, commitment or license
relating to Intellectual Property Rights or contract,
agreement or commitment of any other type, whether or not
fully performed, not otherwise disclosed pursuant to this
Section 2.14;
(v) obligation or requirement to provide funds to or
make any investment (in the form of a loan, capital
contribution or otherwise) in any person or entity; or
(vi) outstanding sales or purchase contracts,
commitments or proposals that will result in any material loss
upon completion or performance thereof after allowance for
direct distribution expenses, or bound by any outstanding
contracts, bids, sales or service proposals quoting prices
that are not reasonably expected to result in a normal profit.
(b) Except as set forth in the Company Disclosure Schedule,
all of the Company Contracts items are valid and enforceable by and
against the Company in accordance with their terms. Except as set forth
in the Company Disclosure Schedule, the Company is not in breach,
violation or default, however defined, in the performance of any of its
material obligations under any of the Company Contracts, and no facts
and circumstances exist which, whether with the giving of due notice,
lapse of time, or both, would constitute such breach, violation or
default thereunder or thereof, which, in each case, had or may
reasonably be expected to result in a Material Adverse Effect on the
Company, and, to the knowledge of the Company, no other parties thereto
are in a breach, violation or default, however defined, thereunder or
thereof, and no facts or circumstances exist which, whether with the
giving of due notice, lapse of time, or both, would constitute such a
breach, violation or default thereunder or thereof which had or may
reasonably be expected to result in a Material Adverse Effect on the
Company.
2.15 COMPLIANCE WITH LAW; PERMITS AND OTHER OPERATING RIGHTS. Except as
set forth in the Company Disclosure Schedule, the Assets, properties, business
and operations of the Company are and have been in compliance in all respects
with all Laws applicable to the Company's assets, properties, business and
operations, except where the failure to comply would not have a Material Adverse
Effect. The Company possesses all material permits, licenses and other
authorizations from all Authorities necessary to permit it to operate its
business in the manner in which it presently is conducted and the consummation
of the transactions contemplated by this Agreement will not prevent the Company
from being able to continue to use such permits and operating rights. The
Company has not received notice of any violation of any such applicable Law, and
is not in default with respect to any order, writ, judgment, award, injunction
or decree of any Authority.
2.16 ISSUANCE OF DISCOVERY COMMON STOCK. To the Company's knowledge, as
of the date of this Agreement and as of the Effective Time, no facts or
circumstances exist or will exist that could cause the issuance of Discovery
Common Stock pursuant to the Merger to fail to meet the exemption from the
registration requirements of Section 4(2) of the Securities Act and Rule 506 of
Regulation D under of the Securities Act.
2.17 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other material records of the Company, all of which have been
made available to Discovery, are complete and correct in all material respects
and have been maintained in accordance with reasonable business practices. The
minute books of the Company contain accurate and complete records of all formal
6
meetings held of, and corporate action taken by, the members, the managers and
committees of the managers of the Company. At the Closing, all of those books
and records will be in the possession of the Company.
2.18 BUSINESS GENERALLY; ACCURACY OF INFORMATION. No representation or
warranty made by the Company in this Agreement, the Company Disclosure Schedule,
or in any document, agreement or certificate furnished or to be furnished to
Discovery at the Closing by or on behalf of the Company in connection with any
of the transactions contemplated by this Agreement contains or will contain any
untrue statement of material fact or omit or will omit to state any material
fact necessary in order to make the statements herein or therein not misleading
in light of the circumstances in which they are made, and all of the foregoing
completely and correctly present the information required or purported to be set
forth herein or therein.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDERS
Each Company Shareholder, severally and not jointly, represents,
warrants and covenants to and with Discovery with respect to himself, as
follows:
3.1 POWER AND AUTHORITY. The Company Shareholder has all requisite
power and authority to enter into and to carry out all of the terms of this
Agreement and all other documents executed and delivered in connection herewith
(collectively, the "DOCUMENTS"). All action on the part of the Company
Shareholder necessary for the authorization, execution, delivery and performance
of the Documents by the Company Shareholder has been taken and no further
authorization on the part of the Company Shareholder is required to consummate
the transactions provided for in the Documents. When executed and delivered by
the Company Shareholder, the Documents shall constitute the valid and legally
binding obligation of the Company Shareholder enforceable in accordance with
their respective terms.
3.2 OWNERSHIP OF AND TITLE TO SECURITIES. EXHIBIT A to this Agreement
accurately and completely sets forth all of the Company Shares owned by the
Company Shareholder as of the date hereof. The Company Shareholder represents
that the Company Shareholder will transfer to Discovery good and marketable
title to the Company Shares which he owns or will own, free and clear of all
pledges, security interests, mortgages, liens, claims, charges, restrictions or
encumbrances, except for any restrictions imposed by federal or state securities
laws.
3.3 INVESTMENT AND RELATED REPRESENTATIONS.
(a) SECURITIES LAWS COMPLIANCE. The Company Shareholder is
aware that neither the Discovery Shares nor the offer or sale thereof to the
Company Shareholder has been registered under the Securities Act, or under any
state securities law. The Company Shareholder understands that the Discovery
Shares will be characterized as "restricted" securities under federal securities
laws inasmuch as they are being acquired in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act only in certain limited
circumstances. The Company Shareholder agrees that the Company Shareholder will
not sell all or any portion of Discovery Shares except pursuant to registration
under the Securities Act or pursuant to an available exemption from registration
under the Securities Act. The Company Shareholder understands that each
certificate for Discovery Shares issued to the Company Shareholder or to any
subsequent transferee shall be stamped or otherwise imprinted with the legend
set forth below summarizing the restrictions described in this Section 3.3 and
that Discovery shall refuse to transfer the Discovery Shares except in
accordance with such restrictions:
7
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"). THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF A CURRENT AND EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT WITH RESPECT TO SUCH SHARES,
OR AN OPINION OF THE ISSUER'S COUNSEL TO THE EFFECT THAT REGISTRATION
IS NOT REQUIRED UNDER THE 1933 ACT.
(b) INVESTMENT REPRESENTATION. This Agreement is made with the
Company Shareholder in reliance upon the Company Shareholder's representation,
which by the Company Shareholder's execution of this Agreement the Company
Shareholder hereby confirms, that the Discovery Shares to be received by the
Company Shareholder are being acquired pursuant to this Agreement for investment
and not with a view to the public resale or distribution thereof unless pursuant
to an effective registration statement or exemption under the Securities Act.
(c) NO PUBLIC SOLICITATION. The Company Shareholder is
acquiring the Discovery Shares after private negotiation and has not been
attracted to the acquisition of the Discovery Shares by any press release,
advertising or publication.
(d) ACCESS TO INFORMATION. The Company Shareholder
acknowledges having received and reviewed Discovery's Annual Report on Form
10-KSB for the year ended December 31, 2003 ("2003 ANNUAL REPORT") and the
reports filed by Discovery with the Securities and Exchange Commission ("SEC")
subsequent thereto (collectively the "SEC REPORTS").
(e) INVESTOR SOLICITATION AND ABILITY TO BEAR RISK TO LOSS.
The Company Shareholder, if a corporation or a partnership, has not been
organized for the purpose of acquiring the Discovery Shares. The Company
Shareholder acknowledges that it is able to protect its interests in connection
with the acquisition of the Discovery Shares and can bear the economic risk of
investment in such securities without producing a material adverse change in the
Company Shareholder's financial condition. The Company Shareholder otherwise has
such knowledge and experience in financial or business matters that the Company
Shareholder is capable of evaluating the merits and risks of the investment in
the Discovery Shares.
(f) ACCREDITED INVESTOR STATUS. The Company Shareholder is an
"accredited investor" as that term is defined in Regulation D promulgated under
the Securities Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF DISCOVERY
Discovery represents and warrants to the Company and the Company
Shareholders as follows:
4.1 DISCLOSURE SCHEDULE. The disclosure schedule attached hereto as
EXHIBIT 4.1 (the "DISCOVERY DISCLOSURE SCHEDULE") is divided into sections that
correspond to the sections of this Article 4. The Discovery Disclosure Schedule
comprises a list of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and warranties set
forth in the remaining sections of this Article 4.
4.2 CORPORATE ORGANIZATION, STANDING AND POWER. Discovery is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Discovery has all corporate power and authority to own
8
its properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a Material Adverse Effect on
Discovery. Discovery does not own or control any capital stock of any
corporation or any interest in any partnership, joint venture or other entity.
4.3 AUTHORIZATION. Discovery has all the requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated herein. The Board of Directors of Discovery has taken all action
required by law, their respective articles of incorporation and bylaws or
otherwise to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein. This Agreement is
the valid and binding legal obligation of Discovery enforceable against
Discovery in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
that affect creditors' rights generally.
4.4 CAPITALIZATION. The Discovery Disclosure Schedule sets forth the
authorized capital securities of Discovery. All issued and outstanding shares of
Discovery Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are without, and were not issued in violation of, preemptive
rights. There are no subscriptions, options, warrants, calls, rights, contracts,
agreements, commitments, understandings or arrangements to which Discovery is a
party, or by which it is bound, with respect to the issuance, sale, delivery or
transfer of the capital securities of Discovery, including any right of
conversion or exchange under any security or other instrument.
4.5 NON-CONTRAVENTION. Neither the execution, delivery and performance
of this Agreement nor the consummation of the transactions contemplated herein
will:
(a) violate any provision of the articles of incorporation or
bylaws of Discovery; or
(b) be in conflict with, or constitute a default, however
defined (or an event which, with the giving of due notice or lapse of
time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to, any right
of termination, cancellation, imposition of fees or penalties under,
any debt, note, bond, lease, mortgage, indenture, license, obligation,
contract, commitment, franchise, permit, instrument or other agreement
or obligation to which Discovery is a party or by which Discovery or
any of their respective properties or assets is or may be bound;
(c) result in the creation or imposition of any Encumbrance
upon any property or assets of Discovery under any debt, obligation,
contract, agreement or commitment to which Discovery is a party or by
which Discovery or any of their respective assets or properties is or
may be bound; or
(d) violate any Law of any Authority.
4.6 CONSENTS AND APPROVALS. No Consent is required by any person or
entity, including without limitation any Authority, in connection with the
execution, delivery and performance by Discovery of this Agreement, or the
consummation of the transactions contemplated herein, other than any Consent
which, if not made or obtained, will not, individually or in the aggregate, have
a Material Adverse Effect on the business of Discovery.
9
4.7 VALID ISSUANCE. The Discovery Common Stock to be issued in
connection with this Agreement will be duly authorized and, when issued,
delivered and paid for as provided in this Agreement, will be validly issued,
fully paid and non-assessable.
4.8 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Discovery has delivered or made available to the Company
accurate and complete copies (excluding copies of exhibits) of the SEC
Reports. All statements, reports, schedules, forms and other documents
required to have been filed by Discovery with the SEC have been so
filed on a timely basis. As of the time it was filed with the SEC (or,
if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the SEC
Reports complied in all material respects with the applicable
requirements of the Securities Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and (ii) none of the SEC Reports
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The consolidated financial statements contained in the SEC
Reports: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii)
were prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered (except as may be indicated in the notes
to such financial statements and, in the case of unaudited statements,
as permitted by Form 10-QSB of the SEC); and (iii) fairly present, in
all material respects, the consolidated financial position of Discovery
and its consolidated subsidiaries as of the respective dates thereof
and the consolidated results of operations of Discovery and its
consolidated subsidiaries for the periods covered thereby. All
adjustments considered necessary for a fair presentation of the
financial statements have been included.
4.9 NO LIABILITIES. Discovery does not have any Liabilities, except for
(i) Liabilities expressly stated in the most recent balance sheet included in
the SEC Reports or the notes thereto, or (ii) Liabilities which do not exceed
US$1,000 in the aggregate.
4.10 NO ASSETS. As of the Closing, Discovery will not have any assets
or operations of any kind, except as identified in the most recent balance sheet
and notes thereto included in the Discovery SEC Reports or the Discovery
Disclosure Schedule.
4.11 ABSENCE OF CERTAIN CHANGES. Except as set forth in the Discovery
Disclosure Schedule, Discovery has owned and operated its assets, properties and
business in the ordinary course of business and consistent with past practice.
Without limiting the generality of the foregoing, subject to the aforesaid
exceptions, Discovery has not experienced any change that has had or could
reasonably be expected to have a Material Adverse Effect on Discovery.
4.12 LITIGATION. Except as disclosed in the Discovery Disclosure
Schedule, there is no legal, administrative, arbitration, or other proceeding,
suit, claim or action of any nature or investigation, review or audit of any
kind, or any judgment, decree, decision, injunction, writ or order pending,
noticed, scheduled, or, to the knowledge of Discovery, threatened or
contemplated by or against or involving Discovery, its assets, properties or
business or its directors, officers, agents or employees (but only in their
capacity as such), whether at law or in equity, before or by any person or
entity or Authority, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by the parties hereto pursuant to
this Agreement or in connection with the transactions contemplated herein.
4.13 CONTRACTS AND COMMITMENTS; NO DEFAULT. Except as disclosed in the
Discovery Disclosure Schedule, Discovery is not a party to, nor are any of its
Assets bound by, any contract (a "DISCOVERY CONTRACT") that is not disclosed in
10
the SEC Reports. Except as disclosed in the Discovery Disclosure Schedule, none
of the Discovery Contracts contains a provision requiring the consent of any
party with respect to the consummation of the transactions contemplated by this
Agreement. Discovery is not in breach, violation or default, however defined, in
the performance of any of its obligations under any of the Discovery Contracts,
and no facts and circumstances exist which, whether with the giving of due
notice, lapse of time, or both, would constitute such breach, violation or
default thereunder or thereof, and, to the knowledge of the Discovery, no other
parties thereto are in a breach, violation or default, however defined,
thereunder or thereof, and no facts or circumstances exist which, whether with
the giving of due notice, lapse of time, or both, would constitute such a
breach, violation or default thereunder or thereof.
4.14 NO BROKER OR FINDER. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Discovery.
4.15 INTERCOMPANY AND AFFILIATE TRANSACTIONS; INSIDER INTERESTS. Except
as expressly identified in the Discovery Disclosure Schedule, there are, and
during the last two years there have been, no transactions, agreements or
arrangements of any kind, direct or indirect, between Discovery, on the one
hand, and any director, officer, employee, stockholder, or affiliate of
Discovery, on the other hand, including, without limitation, loans, guarantees
or pledges to, by or for Discovery or from, to, by or for any of such persons,
that are currently in effect.
ARTICLE 5
COVENANTS OF THE PARTIES
5.1 CONDUCT OF BUSINESS. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, the
Company and Discovery will each conduct its business and operations according to
its ordinary and usual course of business consistent with past practices.
Without limiting the generality of the foregoing, and, except as otherwise
expressly provided in this Agreement or as otherwise disclosed on the Company
Disclosure Schedule or Discovery Disclosure Schedule, respectively, prior to the
Closing Date, without the prior written consent of the other party, Discovery
and the Company will not:
(a) amend its articles of incorporation, articles of
association, bylaws or memorandum of association, as the case may be;
(b) issue, reissue, sell, deliver or pledge or authorize or
propose the issuance, reissuance, sale, delivery or pledge of shares of
capital stock or Company Shares of any class, or securities convertible
into capital stock or Company Shares of any class, or any rights,
warrants or options to acquire any convertible securities, capital
stock or Company Shares;
(c) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any Company Shares or shares of its capital stock,
or any of its other securities;
(d) declare, set aside or pay any dividend or distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock or Company Shares, redeem or otherwise
acquire any Company Shares, shares of its capital stock or other
securities, or alter any term of any of its outstanding securities;
11
(e) (i) except as required under any employment agreement,
increase in any manner the compensation of any of its directors,
officers or other employees; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required or
permitted by any existing plan, agreement or arrangement to any such
director, officer or employee, whether past or present; or (iii) commit
itself to any additional pension, profit-sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or to any employment agreement
or consulting agreement (arising out of prior employment ) with or for
the benefit of any person, or, except to the extent required to comply
with applicable law, amend any of such plans or any of such agreements
in existence on the date of this Agreement;
(f) hire any additional personnel;
(g) incur, assume, suffer or become subject to, whether
directly or by way of guarantee or otherwise, any Liabilities which,
individually or in the aggregate, exceed US$1,000 in the case of
Discovery or US$100,000 in the case of the Company;
(h) make or enter into any commitment for capital expenditures
in excess of US$1,000 in the case of Discovery or US$100,000 in the
case of the Company;
(i) pay, lend or advance any amount to, or sell, transfer or
lease any properties or assets (real, personal or mixed, tangible or
intangible) to, or enter into any agreement or arrangement with, any of
its officers or directors or any affiliate or associate of any of its
officers or directors;
(j) terminate, enter into or amend in any material respect any
contract, agreement, lease, license or commitment, or take any action
or omit to take any action which will cause a breach, violation or
default (however defined) under any contract, except in the ordinary
course of business and consistent with past practice;
(k) acquire any of the business or assets of any other person
or entity;
(l) permit any of its current insurance (or reinsurance)
policies to be cancelled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage equal to
or greater than coverage remaining under those cancelled, terminated or
lapsed are in full force and effect;
(m) enter into other material agreements, commitments or
contracts not in the ordinary course of business or in excess of
current requirements;
(n) settle or compromise any suit, claim or dispute or
threatened suit, claim or dispute; or
(o) agree in writing or otherwise to take any of the foregoing
actions or any action which would make any representation or warranty
in this Agreement untrue or incorrect in any material respect.
5.2 FULL ACCESS. Throughout the period prior to the Closing, each party
will afford to the other and its directors, officers, employees, counsel,
accountants, investment advisors and other authorized representatives and
agents, reasonable access to the facilities, properties, books and records of
the party in order that the other may have full opportunity to make such
investigations as it will desire to make of the affairs of the disclosing party.
Each party will furnish such additional financial and operating data and other
12
information as the other will, from time to time, reasonably request, including
without limitation access to the working papers of its independent certified
public accountants; PROVIDED, HOWEVER, that any such investigation will not
affect or otherwise diminish or obviate in any respect any of the
representations and warranties of the disclosing party.
5.3 CONFIDENTIALITY. Each of the parties hereto agrees that it will not
use, or permit the use of, any of the information relating to any other party
hereto furnished to it in connection with the transactions contemplated herein
("INFORMATION") in a manner or for a purpose detrimental to such other party or
otherwise than in connection with the transaction, and that they will not
disclose, divulge, provide or make accessible (collectively, "DISCLOSE"), or
permit the Disclosure of, any of the Information to any person or entity, other
than their respective directors, officers, employees, investment advisors,
accountants, counsel and other authorized representatives and agents, except as
may be required by judicial or administrative process or, in the opinion of such
party's counsel, by other requirements of Law; provided, however, that prior to
any Disclosure of any Information permitted hereunder, the disclosing party will
first obtain the recipients' undertaking to comply with the provisions of this
Section with respect to such information. The term "INFORMATION" as used herein
will not include any information relating to a party that the party disclosing
such information can show: (i) to have been in its possession prior to its
receipt from another party hereto; (ii) to be now or to later become generally
available to the public through no fault of the disclosing party; (iii) to have
been available to the public at the time of its receipt by the disclosing party;
(iv) to have been received separately by the disclosing party in an unrestricted
manner from a person entitled to disclose such information; or (v) to have been
developed independently by the disclosing party without regard to any
information received in connection with this transaction. Each party hereto also
agrees to promptly return to the party from whom it originally received such
information all original and duplicate copies of written materials containing
Information should the transactions contemplated herein not occur. A party
hereto will be deemed to have satisfied its obligations to hold the Information
confidential if it exercises the same care as it takes with respect to its own
similar information.
5.4 FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the terms and
conditions herein provided, the parties hereto will use their best efforts to
take or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation obtaining all Consents of any person or
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not in
limitation of the foregoing, it is the intent of the parties to consummate the
transactions contemplated herein at the earliest practicable time, and they
respectively agree to exert commercially reasonable efforts to that end,
including without limitation: (i) the removal or satisfaction, if possible, of
any objections to the validity or legality of the transactions contemplated
herein; and (ii) the satisfaction of the conditions to consummation of the
transactions contemplated hereby.
5.5 FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(a) Each party hereto will, before, at and after Closing,
execute and deliver such instruments and take such other actions as the
other party or parties, as the case may be, may reasonably require in
order to carry out the intent of this Agreement. Without limiting the
generality of the foregoing, at any time after the Closing, at the
reasonable request of Discovery and without further consideration, the
Company will execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as
Discovery may reasonably deem necessary or desirable in order to more
effectively consummate the transactions contemplated hereby.
13
(b) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the occurrence of
any event which it reasonably believes will or may result in a failure
by such party to satisfy the conditions specified in this Article 5.
5.6 PUBLIC ANNOUNCEMENTS. None of the parties hereto will make any
public announcement with respect to the transactions contemplated herein without
the prior written consent of the other parties, which consent will not be
unreasonably withheld or delayed; PROVIDED, HOWEVER, that any of the parties
hereto may at any time make any announcements that are required by applicable
Law so long as the party so required to make an announcement promptly upon
learning of such requirement notifies the other parties of such requirement and
discusses with the other parties in good faith the exact proposed wording of any
such announcement.
5.7 SATISFACTION OF CONDITIONS PRECEDENT. Each party will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent that are applicable to them, and to cause the transactions
contemplated by this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all material consents and authorizations
of third parties and to make filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order to
effect the transactions contemplated hereby.
5.8 RESIGNATION OF OFFICERS AND DIRECTORS. At the Closing, the
pre-Closing officers and directors of Discovery shall submit their written
resignations from such offices effective as of the Closing. Prior to their
resignations, the pre-Closing directors of Discovery shall appoint to the board
of directors of Discovery the persons designated by the Company Shareholders
effective as of the Closing.
5.9 14F-1 NOTICES. Discovery shall file with the SEC at least ten (10)
days prior to Closing the appropriate notice under Rule 14f-1 of Exchange Act
concerning the intended change in control of the board of directors of
Discovery.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF DISCOVERY
Notwithstanding any other provision of this Agreement to the contrary,
the obligation of Discovery to effect the transactions contemplated herein will
be subject to the satisfaction at or prior to the Closing, or waiver by
Discovery, of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company and the Company Shareholders contained in this
Agreement, including without limitation in the Company Disclosure Schedule
initially delivered to Discovery as Exhibit 2.1, will be true, complete and
accurate in all material respects as of the date when made and at and as of the
Closing Date as though such representations and warranties were made at and as
of such time, except for changes specifically permitted or contemplated by this
Agreement, and except insofar as the representations and warranties relate
expressly and solely to a particular date or period, in which case they will be
true and correct at the Closing with respect to such date or period.
6.2 PERFORMANCE. The Company will have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by the Company on or
prior to the Closing.
14
6.3 REQUIRED APPROVALS AND CONSENTS.
(a) All action required by law and otherwise to be taken by
the members of the Company to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will have been duly and validly taken.
(b) All Consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, will have been
delivered, made or obtained, and Discovery will have received copies
thereof.
6.4 AGREEMENTS AND DOCUMENTS. Discovery will have received the
following agreements and documents, each of which will be in full force and
effect:
(a) a certificate executed on behalf of the Company by its
Chief Executive Officer confirming that the conditions set forth in
Sections 6.1, 6.2, 6.3, 6.5, 6.6 and 6.7 have been duly satisfied; and
(b) a certificate of good standing of the Company from the
British Virgin Islands and any other states where the Company is
qualified to do business, as of the most recent practicable date.
6.5 ADVERSE CHANGES. No material adverse change will have occurred in
the business, financial condition, prospects, assets or operations of the
Company other than those disclosed in the Financial Statements or to Discovery
prior to the Closing.
6.6 NO PROCEEDING OR LITIGATION. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will have
been instituted or threatened which delays or questions the validity or legality
of the transactions contemplated hereby or which, if successfully asserted,
would, in the reasonable judgment of Discovery, individually or in the
aggregate, otherwise have a Material Adverse Effect on the Company's business,
financial condition, prospects, assets or operations or prevent or delay the
consummation of the transactions contemplated by this Agreement.
6.7 LEGISLATION. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby or
any of the conditions to the consummation of such transaction.
6.8 APPROPRIATE DOCUMENTATION. Discovery will have received, in a form
and substance reasonably satisfactory to Discovery, dated the Closing Date, all
certificates and other documents, instruments and writings to evidence the
fulfillment of the conditions set forth in this Article 6 as Discovery may
reasonably request.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND MEMBERS
Notwithstanding anything in this Agreement to the contrary, the
obligations of the Company and Company Shareholders to effect the transactions
contemplated herein will be subject to the satisfaction at or prior to the
Closing, or waiver by the Company only, of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Discovery contained in this Agreement will be true, complete and
accurate in all material respects as of the date when made and at and as of the
Closing, as though such representations and warranties were made at and as of
such time, except for changes permitted or contemplated in this Agreement, and
15
except insofar as the representations and warranties relate expressly and solely
to a particular date or period, in which case they will be true and correct at
the Closing with respect to such date or period.
7.2 PERFORMANCE. Discovery will have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by Discovery at or
prior to the Closing, including the obligations of the pre- Closing officers and
directors of Discovery set forth in Section 5.8 and the cancellation of
13,370,130 outstanding shares of Discovery Common Stock.
7.3 REQUIRED APPROVALS AND CONSENTS.
(a) All action required by law and otherwise to be taken by
the directors and stockholders of the Discovery to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will have been
duly and validly taken.
(b) All Consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, will have been
delivered, made or obtained, and the Company will have received copies
thereof.
7.4 AGREEMENTS AND DOCUMENTS. The Company will have received the
following agreements and documents, each of which will be in full force and
effect:
(a) a certificate executed on behalf of Discovery by its Chief
Executive Officer confirming that the conditions set forth in Sections
7.1, 7.2, 7.3, 7.5, 7.6 and 7.7 have been duly satisfied;
(b) resolutions of the board of directors of Discovery,
certified by the secretary of Discovery, approving the transactions
contemplated by this Agreement, including the cancellation of
13,370,130 outstanding shares of Discovery Common Stock and the
issuance of the Discovery Shares and the matters referred to in
Sections 5.8 and 5.9 of this Agreement;
(c) certificates representing the Discovery Shares registered
in the names of the Company Shareholders;
(d) a certified list of the record holders of Discovery Common
Stock as of the most recent practicable date evidencing all of the
shares of Discovery Common Stock issued and outstanding; and
(f) a certificate of good standing of Discovery from the State
of Nevada and any other states where Discovery is qualified to do
business, as of the most recent practicable date.
7.5 ADVERSE CHANGES. No material adverse change will have occurred in
the business, financial condition, prospects, assets or operations of Discovery
since June 30, 2004.
7.6 NO PROCEEDING OR LITIGATION. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will have
been instituted or threatened which delays or questions the validity or legality
of the transactions contemplated hereby or which, if successfully asserted,
would, in the reasonable judgment of the Company, individually or in the
aggregate, otherwise have a Material Adverse Effect on Discovery's business,
financial condition, prospects, assets or operations or prevent or delay the
consummation of the transactions contemplated by this Agreement.
16
7.7 LEGISLATION. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby or
any of the conditions to the consummation of such transaction.
7.8 No Assets and Liabilities. Discovery shall not have any
Liabilities, assets or operation and shall have delivered certificates issued by
the President of Discovery and, if requested by the Company, the auditor of
Discovery, in form and substance satisfactory to the Company to confirm the
foregoing.
7.9 PRESS RELEASE. Discovery shall have made such press releases, in
form and substance satisfactory to the Company, as may be requested by the
Company to comply with any disclosure requirements under the U.S. securities
regulations.
7.10 APPROPRIATE DOCUMENTATION. The Company will have received, in a
form and substance reasonably satisfactory to Company, dated the Closing Date,
all certificates and other documents, instruments and writings to evidence the
fulfillment of the conditions set forth in this Article 7 as the Company may
reasonably request.
ARTICLE 8
TERMINATION AND ABANDONMENT
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time prior to the Closing by the written consent of the Company and
Discovery.
8.2 TERMINATION BY EITHER THE COMPANY OR DISCOVERY. This Agreement may
be terminated by either the Company or Discovery if the Closing is not
consummated by October 31, 2004 (provided that the right to terminate this
Agreement under this Section 8.2 will not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such date).
8.3 PROCEDURE AND EFFECT OF TERMINATION. In the event of termination of
this Agreement and abandonment of the transactions contemplated hereby by the
Company or Discovery pursuant to this Article 8, written notice thereof will be
given to all other parties and this Agreement will terminate and the
transactions contemplated hereby will be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as provided herein:
(a) Each of the parties will, upon request, redeliver all
documents, work papers and other material of the other parties relating
to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing the same;
(b) No party will have any liability for a breach of any
representation, warranty, agreement, covenant or the provision of this
Agreement, unless such breach was due to a willful or bad faith action
or omission of such party or any representative, agent, employee or
independent contractor thereof; and
(c) All filings, applications and other submissions made
pursuant to the terms of this Agreement will, to the extent
practicable, be withdrawn from the agency or other person to which
made.
17
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 EXPENSES. Discovery and the Company will each bear their own costs
and expenses relating to the transactions contemplated hereby, including without
limitation, fees and expenses of legal counsel, accountants, investment bankers,
brokers or finders, printers, copiers, consultants or other representatives for
the services used, hired or connected with the transactions contemplated hereby.
9.2 AMENDMENT AND MODIFICATION. Subject to applicable Law, this
Agreement may be amended or modified only by the Company, Discovery and Company.
All such amendments and modifications to this Agreement must be in writing duly
executed by all of the parties hereto.
9.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by Discovery, on the one hand, and the Company and the Company
Shareholders, on the other, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition will not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. No single or partial exercise of a right or remedy will preclude any
other or further exercise thereof or of any other right or remedy hereunder.
Whenever this Agreement requires or permits the consent by or on behalf of a
party, such consent will be given in writing in the same manner as for waivers
of compliance.
9.4 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement will
entitle any person or entity (other than a party hereto and his, her or its
respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind.
9.5 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder will be made in writing and will be deemed to
have been duly given and effective: (i) on the date of delivery, if delivered
personally; or (ii) on the date of transmission, if sent by facsimile, telecopy,
telegraph, telex or other similar telegraphic communications equipment, or to
such other person or address as a party will furnish to the other parties hereto
in writing in accordance with this subsection.
If to the Company: With a copy to:
Evergreen Asset Group Limited Preston Gates & Ellis LLP
c/o Orient Financial Services Limited, 1900 Main Street, Suite 600
18th Floor, Irvine, California 92614
One International Finance Centre, Attn: Daniel K. Donahue
1 Harbour View Street, Fax: (949) 253-0902
Central, Hong Kong
Attn: Mr. Pu Chong Liang
Fax: 011-852-2810-8797
or to such other person or address as the Company will furnish to the other
parties hereto in writing in accordance with this subsection.
If to Discovery, to the address set forth on EXHIBIT A attached hereto.
If to the Discovery: With a copy to:
Discovery Investments, Inc. Ronald J. Stauber, Esq.
6767 W. Tropicana Avenue, Suite 207 Attorney at Law
Las Vegas, Nevada 89103 1880 Century Park East, Suite 300
Attn: Donald Bell, President Los Angeles, California 90067
Fax: (702) 248-1047 Fax: (310) 556-3687
18
or to such other person or address as Discovery will furnish to the other
parties hereto in writing in accordance with this subsection.
9.6 ASSIGNMENT. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned (whether
voluntarily, involuntarily, by operation of law or otherwise) by any of the
parties hereto without the prior written consent of the other parties.
9.7 GOVERNING LAW. This Agreement and the legal relations among the
parties hereto will be governed by and construed in accordance with the internal
substantive laws of California (without regard to the laws of conflict that
might otherwise apply) as to all matters, including without limitation matters
of validity, construction, effect, performance and remedies.
9.8 COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.9 HEADINGS. The table of contents and the headings of the sections
and subsections of this Agreement are inserted for convenience only and will not
constitute a part hereof.
9.10 ENTIRE AGREEMENT. This Agreement, the Disclosure Schedules and the
exhibits and other writings referred to in this Agreement or in the Disclosure
Schedules or any such exhibit or other writing are part of this Agreement,
together they embody the entire agreement and understanding of the parties
hereto in respect of the transactions contemplated by this Agreement and
together they are referred to as this "Agreement" or the "Agreement." There are
no restrictions, promises, warranties, agreements, covenants or undertakings,
other than those expressly set forth or referred to in this Agreement. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to the transaction or transactions contemplated by this Agreement.
Provisions of this Agreement will be interpreted to be valid and enforceable
under applicable Law to the extent that such interpretation does not materially
alter this Agreement; PROVIDED, HOWEVER, that if any such provision becomes
invalid or unenforceable under applicable Law such provision will be stricken to
the extent necessary and the remainder of such provisions and the remainder of
this Agreement will continue in full force and effect.
9.11 REMEDIES AND INJUNCTIVE RELIEF. It is expressly agreed among the
parties hereto that monetary damages would be inadequate to compensate a party
hereto for any breach by any other party of its covenants in Article 5 hereof.
Accordingly, the parties agree and acknowledge that any such violation or
threatened violation will cause irreparable injury to the other and that, in
addition to any other remedies which may be available, such party will be
entitled to injunctive relief against the threatened breach of Article 5 hereof
or the continuation of any such breach without the necessity of proving actual
damages and may seek to specifically enforce the terms thereof.
9.12 DEFINITION OF MATERIAL ADVERSE EFFECT. "MATERIAL ADVERSE EFFECT"
with respect to a party means a material adverse change in or effect on the
business, operations, financial condition, properties or liabilities of the
party taken as a whole; provided, however, that a Material Adverse Effect will
not be deemed to include (i) changes as a result of the announcement of this
transaction, (ii) events or conditions arising from changes in general business
or economic conditions or (iii) changes in generally accepted accounting
principles.
19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DISCOVERY INVESTMENTS, INC. EVERGREEN ASSET GROUP LIMITED
By: /S/ DONALD BELL By: /S/ PU CHONG LIANG
-------------------------------- -------------------------
Donald Bell, President Pu Chong Liang
"COMPANY SHAREHOLDERS"
Signatures Appear on Exhibit A
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
20
EXHIBIT A
---------
COMPANY SHAREHOLDER SIGNATURE PAGE
- ------------------------------------ -------------------------------------------
NAME OF COMPANY SHAREHOLDER SIGNATURE
- ------------------------------------ -------------------------------------------
Pu Chongliang /S/ PU CHONG LIANG
--------------------------------
- ------------------------------------ -------------------------------------------
Wei Jianfeng /S/ WEI JIANFENG
--------------------------------
- ------------------------------------ -------------------------------------------
Jiang Shirong /S/ JIANG SHIRONG
--------------------------------
- ------------------------------------ -------------------------------------------
Niu Xiangping /S/ NIU XIANGPING
--------------------------------
- ------------------------------------ -------------------------------------------
Pu Tingli /S/ PU TINGLI
--------------------------------
- ------------------------------------ -------------------------------------------
1