SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported): October 1, 2005
ETERNAL TECHNOLOGIES GROUP, INC.
(Exact name of Registrant as specified in its charter)
0-27929
(Commission file number)
Nevada 62-1655508
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification Number)
Sect. D, 5/F, Block A. Innotech Tower,
235 Nanjing Rd. Heping District, Tianjin 300052
(Address of principal executive offices) (Zip code)
011-86-22-2721-7020
(Registrant's telephone number, including area code)
__________________________________________
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions. (see General Instruction A.2. below).
* Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
* Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
* Pre-commencement communications pursuant to Rule 14d-2(b) uner the Exchange
Act (17 CFR 240.14d-2(b)).
Item 2.01 Completion of Acquisition or Disposition of Assets
Effective as the close of business on September 30, 2005, the Company
acquired all of the issued and outstanding shares of E-"Sea Biomedical
Engineering Co. International, Ltd. ("E-Sea") for 18,500,00 RMB (US$ 2,283,950)
in cash and 18,500,00 RMB in restricted securities of Company (priced at US$ .40
per share, the closing price of the stock as of the date the transaction was
negotiated) or 5,709,875 shares.
E-Sea holds three Chinese patents and manufactures mammary gland detection
instruments at its facilities in Shenzhen, China. These devices takes
approximately four minutes to conduct an examination of the breasts and has an
accuracy rate of more than 96% in the early detection of breast cancer.
For the six months ended June 30, 2005, E-Sea reported net earnings after
taxes of US$1,867,983 and had equity of US$4,277,622. E-Sea will continue to
operate as a separate subsidiary of the Company.
Item 2.02 Results of Operations and Financial Conditions
On June 7, 2005, the Company issued a press release updating the market on
its year to date business. Because of a translation problem, the press release
stated that "the signed contracts represent $15,974,688 in revenue year to
date." The release should have stated that the contract will produce a revenue
stream over the term of the contract of $15,974,688. The bulk of the revenue
from the contracts will be earned during the third and fourth calendar quarters
of 2005. A copy of the corrected press release is included as an Exhibit to this
filing. The corrections to the original press release are underscored.
Item 9.01. Financial Statements and Exhibits
2.1 Financial Statements of E-Sea Biomedical Engineering Co. International Ltd.
2.2 Exchange Agreement by and between Eternal Technologies Group, Inc. and
E-Sea Biomedical Engineering Co. International Ltd.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ETERNAL TECHNOLOGIES GROUP, INC.
October 1, 2005 /s/ JiJun Wu
President and Chief Executive Officer
2.1 Financial Statements of E-Sea Biomedical Engineering Co. International Ltd.
E-SEA BIOMEDICAL ENGINEERING CO. INTERNATIONAL, LTD.
CONSOLIDATED BALANCE SHEET
December 31, 2004
(UNITED STATES DOLLARS)
2004
---------------------
ASSETS
CURRENT ASSETS
Cash and Cash equivalents $ 1,077,078
Accounts receivable 9,025
Inventories 51,146
----------------------
TOTAL CURRENT ASSETS 1,137,249
FIXED ASSETS (NET) 632,626
(net of accumulated depreciation of $69,898 in 2004)
PATENT USE RIGHTS (NET) 1,373,494
----------------------
(net of accumulated amortization of $72,289 in 2004)
TOTAL ASSETS $ 3,143,369
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Tax Payable $ 84,255
----------------------
TOTAL CURRENT LIABILITIES 84,255
----------------------
SHAREHOLDERS' EQUITY
Common shares - 50,000 shares authorized, at $1.00 par,
1,000 shares issued and outstanding at December 31, 2004 1,000
Paid - in capital 2,408,639
Retained earnings 649,475
----------------------
TOTAL SHAREHOLDERS' EQUITY 3,059,114
----------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,143,369
======================
E-SEA BIOMEDICAL ENGINEERING CO. INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2004
(UNITED STATES DOLLARS)
2004
----------------------
SALES $ 1,433,962
COST OF SALES 376,347
SELLING TAX $ 3,442
----------------------
GROSS PROFIT 1,054,173
DEPRECIATION AND AMORTIZATION 152,531
SELLING AND ADMINISTRATIVE EXPENSES 137,554
----------------------
NET INCOME BEFORE INCOME TAXES 764,088
----------------------
INCOME TAXES 114,613
----------------------
NET INCOME $ 649,475
======================
EARNINGS PER SHARE $ 649
======================
Weighted average number of common
shares outstanding
Basic and diluted 1,000
======================
E-SEA BIOMEDICAL ENGINEERING CO. INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2004
(UNITED STATES DOLLARS)
Common Common
Stock Stock Paid - Retained
in
Share Amount Capital Earnings Total
---------- --------------- ----------- ------------ ----------
Common stock 1,000 $ 1,000 $ - $ - $ 1,000
Shareholder investment - - 2,408,639 - 2,408,639
Net income - - - 649,475 649,475
---------- ---------------- ----------- ----------- -----------
Balance, December 31, 2004 1,000 $ 1,000 $ 2,408,639 $ 649,475 $3,059,114
========== ================ =========== =========== ===========
E-SEA BIOMEDIICAL ENGINEERING CO. INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2004
(UNITED STATES DOLLARS)
December 31
----------------
2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 649,475
Depreciation and amortization 142,187
(Increase) decrease in assets:
Inventories (51,146)
Accounts receivable (9,025)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 84,255
Net cash provided by (used in) operating activities 815,746
----------------
CASH FLOW FROM INVESTING ACTIVITIES
Fixed assets (702,524)
Patent use right (1,445,783)
Net cash provided by investing activities (2,148,307)
----------------
CASH FLOW FROM FINANCING ACTIVITIES
Common stock 1,000
Paid-in capital 2,408,639
Net cash provided by financing activities 2,409,639
----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,077,078
Cash and bank balances, beginning of period -
----------------
Cash and bank balance, at end of period $ 1,077,078
================
E-SEA BIOMEDICAL ENGINEERING CO. INTERNATIONAL, LTD.
CONSOLIDATED BALANCE SHEET
December 31, 2004 and June 30, 2005
(UNITED STATES DOLLARS)
June 30
2005
-------------
ASSETS
CURRENT ASSETS
Cash and Cash equivalents $ 924,680
Accounts receivable 47,136
Prepayments 578,313
Inventories 113,036
------------
TOTAL CURRENT ASSETS 1,663,165
LONG-TERM INVESTMENT 506,024
FIXED ASSETS (NET) 546,008
(net of accumulated depreciation of $69,898 in 2004)
PATENT USE RIGHTS (NET) 1,590,361
------------
(net of accumulated amortization of $72,289 in 2004)
TOTAL ASSETS $ 4,305,558
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 3,146
Tax Payable 24,790
------------
TOTAL CURRENT LIABILITIES 27,936
------------
SHAREHOLDERS' EQUITY
Common shares - 50,000 shares authorized, at $1.00 par,
1,000 shares issued and outstanding at December 31, 2004 and June 30, 2005 1,000
Paid - in capital 2,408,639
Retained earnings 1,867,983
------------
TOTAL SHAREHOLDERS' EQUITY 4,277,622
------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,305,558
============
E-SEA BIOMEDICAL ENGINEERING CO. INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2005
(UNITED STATES DOLLARS)
June 30
2005
------------------
SALES $ 1,257,104
COST OF SALES 380,958
SELLING TAX $ 3,017
-----------------
GROSS PROFIT 873,129
DEPRECIATION AND AMORTIZATION 82,691
SELLING AND ADMINISTRATIVE EXPENSES 293,732
OTHER INCOME 1,445,783
------------------
NET INCOME BEFORE INCOME TAXES 1,942,489
------------------
INCOME TAXES 74,506
------------------
NET INCOME $ 1,867,983
==================
EARNINGS PER SHARE $ 1,868
==================
Weighted average number of common
shares outstanding
Basic and diluted 1,000
==================
E-SEA BIOMEDICAL ENGINEERING CO. INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR SIX MONTHS ENDED JUNE 30, 2005
(UNITED STATES DOLLARS)
Common Common
Stock Stock Paid - in Retained
Share Amount Capital Earnings Total
------------- -------------- ----------------- ------------ ------------
Balance, December 1,000 $ 1,000 $ 2,408,639 $ 649,475 $ 3,059,114
31, 2004
Earnings - - - (649,475) (649,475)
distributed
Net income - - - 1,867,983 1,867,983
--------- ------------ ----------------- ------------ ------------
Balance, June 30, 1,000 $ 1,000 $ 2,408,639 $ 1,867,983 $ 4,277,622
2005
========= ============ ================= ============ ============
E-SEA BIOMEDIICAL ENGINEERING CO. INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 2005
(UNITED STATES DOLLARS)
June 30
----------------
2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (227,275)
Depreciation and amortization 231,196
(Increase) decrease in assets:
Inventories (61,890)
Accounts receivable (38,111)
Prepayments and deposits (578,313)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (56,319)
Net cash provided by (used in) operating activities (730,712)
----------------
CASH FLOW FROM INVESTING ACTIVITIES
Project in construction (selling units) (506,024)
Assets acquired by investment (361,445)
Net cash provided by investing activities (867,469)
----------------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contributed 1,445,783
Net cash provided by financing activities 1,445,783
----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (152,398)
Cash and bank balances, beginning of period 1,077,078
----------------
Cash and bank balance, at end of period $ 924,680
================
EXCHANGE AGREEMENT
Between
Eternal Technologies Group, Inc.
and
E-Sea Biomedical Engineering Co. International Ltd.
Dated: September 30, 2005
TABLE OF CONTENTS
ARTICLE I REPRESENTATIONS, COVENANTS, AND WARRANTIES OF E-SEA BIOMEDICAL ENGINEERING CO INTERNATIONAL LTD.
1.01 Organization.......................................................... 2
1.02 Capitalization........................................................ 2
1.03 Subsidiaries and Predecessor Corporations............................. 2
1.04 Financial Statements.................................................. 2
1.05 Information........................................................... 2
1.06 Options and Warrants.................................................. 2
1.07 Title and Related Matters............................................. 2
1.08 Litigation and Proceedings............................................ 3
1.09 Contracts............................................................. 3
1.10 Material Contract Defaults............................................ 3
1.11 No Conflict With Other Instruments.................................... 3
1.12 Governmental Authorizations........................................... 4
1.13 Compliance With Laws and Regulations.................................. 4
1.14 Insurance............................................................. 4
1.15 Approval of Agreement................................................. 4
1.16 Material Transactions or Affiliations................................. 4
1.17 Labor Relations....................................................... 4
1.18 E-Sea Schedules....................................................... 4
1.19 Bank Accounts; Power of Attorney...................................... 5
1.20 Valid Obligation...................................................... 5
ARTICLE II REPRESENTATIONS, COVENANTS, AND WARRANTIES OF ETERNAL TECHNOLOGIES GROUP, INC.
2.01 Organization.......................................................... 5
2.02 Capitalization........................................................ 6
2.03 Subsidiaries and Predecessor Corporations ............................ 6
2.04 Securities Filings; Financial Statements.............................. 6
2.05 Options and Warrants.................................................. 6
2.06 Litigation and Proceedings............................................ 6
2.07 Material Contract Defaults............................................ 6
2.08 No Conflict With Other Instruments.................................... 6
2.09 Governmental Authorizations........................................... 6
2.10 Compliance With Laws and Regulations.................................. 7
2.11 Approval of Agreement................................................. 7
2.12 Continuity of Business Enterprises.................................... 7
2.13 Valid Obligation...................................................... 7
ARTICLE III PLAN OF EXCHANGE
3.01 The Exchange.......................................................... 7
3.02 Closing............................................................... 7
3.03 Closing Events........................................................ 8
3.04 Termination........................................................... 8
ARTICLE IV SPECIAL COVENANTS
4.01 Access to Properties and Records...................................... 9
4.02 Delivery of Books and Records......................................... 9
4.03 Third Party Consents and Certificates................................. 9
4.04 Consent of the E-Sea Shareholders..................................... 10
4.05 Actions Prior to Closing.............................................. 10
4.06 Sales Under Rule 144 or 145, If Applicable............................ 10
4.07 Indemnification....................................................... 11
4.08 Retention of Shares................................................... 11
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF ETERNAL TECHNOLOGIES GROUP, INC.
5.01 Accuracy of Representations and Performance of Covenants.............. 11
5.02 Officer's Certificates................................................ 11
5.03 No Material Adverse Change............................................ 12
5.04 Good Standing......................................................... 12
5.05 Approval by E-Sea Shareholders........................................ 12
5.06 No Governmental Prohibitions.......................................... 12
5.07 Consents.............................................................. 12
5.08 Other Items........................................................... 12
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF E-SEA BIOMEDICAL ENGINEERING CO INTERNATIONAL LTD. AND THE E-SEA BIOMEDICAL
ENGINEERING CO INTERNATIONAL LTD. SHAREHOLDERS
6.01 Accuracy of Representations and Performance of Covenants.............. 12
6.02 Officer's Certificate................................................. 12
6.03 No Material Adverse Change............................................ 13
6.04 Good Standing......................................................... 13
6.05 No Governmental Prohibition........................................... 13
6.06 Consents.............................................................. 13
6.07 Other Items........................................................... 13
ARTICLE VII MISCELLANEOUS
7.01 Brokers............................................................... 13
7.02 Governing Law......................................................... 13
7.03 Notices............................................................... 13
7.04 Attorney's Fees....................................................... 14
7.05 Confidentiality....................................................... 14
7.06 Public Announcements and Filings...................................... 14
7.07 Schedules; Knowledge.................................................. 14
7.08 Third Party Beneficiaries............................................. 14
7.09 Expenses.............................................................. 14
7.10 Entire Agreement...................................................... 15
7.11 Survival; Termination................................................. 15
7.12 Counterparts.......................................................... 15
7.13 Amendment or Waiver................................................... 15
7.14 Best Effortss......................................................... 15
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement") is entered
into as of this ___ day of September by and between Eternal Technologies Group,
Inc. a Nevada corporation (hereinafter referred to as "Eternal")and E-Sea
Biomedical Engineering Co. International, Ltd., a British Virgin Islands
corporation (hereinafter referred to as "E-Sea"), upon the following premises:
Premises
WHEREAS, Eternal is a publicly held corporation organized under the laws of
the State of Nevada and engaged in animal husbandry and meat processing;
WHEREAS, E-Sea is a privately held corporation organized under the laws of
the British Virgin Islands and engaged in the ownership and operation of animal
husbandry and meat processing company;
WHEREAS, management of the constituent corporations entered into a letter
of intent (the "Letter of Intent") dated July 31, 2005 pursuant to which Eternal
agreed to acquire 100% of the issued and outstanding securities of E-Sea in
exchange for the issuance of certain shares of Eternal and the payment of cash
(the "Exchange") and E-Sea agreed to use its best efforts to cause its
shareholders (the "E-Sea Shareholders") to exchange their securities of E-Sea on
the terms described herein; and
WHEREAS, Eternal and E-Sea desire to set forth the specific terms of the
Exchange.
Agreement
NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF E-SEA
As an inducement to, and to obtain the reliance of Eternal, except as set
forth on the E-Sea Schedules (as hereinafter defined), E-Sea represents and
warrants as follows:
Section 1.01 Organization. E-Sea is a corporation duly organized, validly
existing, and in good standing under the laws of the British Virgin Islands and
has the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states or countries
in which the character and location of the assets owned by it or the nature of
the business transacted by it requires qualification, except where failure to be
so qualified would not have a material adverse effect on its business. Included
in the E-Sea Schedules are complete and correct copies of the Memorandum and
articles of association of E-Sea as in effect on the date hereof. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, violate any provision of E-Sea's
Memorandum and articles of association. E-Sea has taken all actions required by
law, its articles of incorporation, or otherwise to authorize the execution and
delivery of this Agreement. E-Sea has full power, authority, and legal right and
has taken all action required by law, its articles of incorporation, and
otherwise to consummate the transactions herein contemplated.
Section 1.02 Capitalization. The authorized capitalization of E-Sea
consists of 50,000 shares of common stock, $1.00 par value, of which 1,000
shares are currently issued and outstanding and no shares of preferred stock.
All issued and outstanding shares are legally issued, fully paid, and
non-assessable and not issued in violation of the preemptive or other rights of
any person.
Section 1.03 Subsidiaries and Predecessor Corporations. E-Sea does not have
any predecessor corporation(s) but does have subsidiaries as disclosed on
Schedule 1.03, and does not own, beneficially or of record, any shares of any
other corporation, except as disclosed in Schedule 1.03. For purposes
hereinafter, the term "E-Sea" also includes those subsidiaries, if any, set
forth on Schedule 1.03.
Section 1.04 Financial Statements.
(a) Included in the E-Sea Schedules are (i) the unaudited balance sheets
and the related statements of operations of E-Sea as of and for the period ended
December 31, 2004 and June 30, 2005.
(b) All such financial statements have been prepared in accordance with
generally accepted accounting principles. The E-Sea balance sheet present a true
and fair view as of the date of such balance sheet of the financial condition of
E-Sea. E-Sea did not have, as of the date of such balance sheets, except as and
to the extent reflected or reserved against therein, any liabilities or
obligations (absolute or contingent) which should be reflected in the balance
sheets or the notes thereto, prepared in accordance with generally accepted
accounting principles, and all assets reflected therein are properly reported
and present fairly the value of the assets of E-Sea in accordance with generally
accepted accounting principles.
(c) E-Sea has no liabilities with respect to the payment of any federal,
province, county, local or other taxes (including any deficiencies, interest or
penalties), except for taxes accrued but not yet due and payable.
(d) E-Sea has filed all provincial, federal or local income and/or
franchise tax returns required to be filed by it from inception to the date
hereof. Each of such income tax returns reflects the taxes due for the period
covered thereby, except for amounts which, in the aggregate, are immaterial.
(e) The books and records, financial and otherwise, of E-Sea are in all
material respects complete and correct and have been maintained in accordance
with good business and accounting practices.
(f) All of E-Sea's assets are reflected on its financial statements, and,
except as set forth in the E-Sea Schedules or the financial statements of E-Sea
or the notes thereto, E-Sea has no material liabilities, direct or indirect,
matured or unmatured, contingent or otherwise.
Section 1.05 Information. The information concerning E-Sea set forth in
this Agreement and in the E-Sea Schedules is complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, not misleading. In addition,
E-Sea has fully disclosed in writing to Eternal (through this Agreement or the
E-Sea Schedules) all information relating to matters involving E-Sea or its
assets or its present or past operations or activities which (i) indicated or
may indicate, in the aggregate, the existence of a greater than $25,000 of
diminution in value, (ii) have led or may lead to a competitive disadvantage on
the part of E-Sea or (iii) either alone or in aggregation with other information
covered by this Section, otherwise have led or may lead to a material adverse
effect on the transactions contemplated herein or on E-Sea, its assets, or its
operations or activities as presently conducted or as contemplated to be
conducted after the Closing Date, including, but not limited to, information
relating to governmental, employee, environmental, litigation and securities
matters and transactions with affiliates.
Section 1.06 Options or Warrants. There are no existing options, warrants,
calls, or commitments of any character relating to the authorized and unissued
common stock,
Section 1.07 Title and Related Matters. E-Sea has good and marketable title
to all of its properties, inventory, interests in properties, and assets, real
and personal, which are reflected in the June 30, 2005 balance sheet (except
properties, inventory, interests in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business) free and clear
of all liens, pledges, charges, or encumbrances except (a) statutory liens or
claims not yet delinquent; (b) such imperfections of title and easements as do
not and will not materially detract from or interfere with the present or
proposed use of the properties subject thereto or affected thereby or otherwise
materially impair present business operations on such properties; and (c) as
described in the E-Sea Schedules. Except as set forth in the E-Sea Schedules,
E-Sea owns, free and clear of any liens, claims, encumbrances, royalty
interests, or other restrictions or limitations of any nature whatsoever, any
and all products it is currently manufacturing, including the underlying
technology and data, and all procedures, techniques, marketing plans, business
plans, methods of management, or other information utilized in connection with
E-Sea's business. Except as set forth in the E-Sea Schedules, no third party has
any right to, and E-Sea has not received any notice of infringement of or
conflict with asserted rights of others with respect to any product, technology,
data, trade secrets, know-how, propriety techniques, trademarks, service marks,
trade names, or copyrights which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a materially
adverse effect on the business, operations, financial condition, income, or
business prospects of E-Sea or any material portion of its properties, assets,
or rights.
Section 1.08 Litigation and Proceedings. Except as set forth in the E-Sea
Schedules, there are no actions, suits, proceedings, or investigations pending
or, to the knowledge of E-Sea after reasonable investigation, threatened by or
against E-Sea or affecting E-Sea or its properties, at law or in equity, before
any court or other governmental agency or instrumentality, domestic or foreign,
or before any arbitrator of any kind. E-Sea does not have any knowledge of any
material default on its part with respect to any judgment, order, injunction,
decree, award, rule, or regulation of any court, arbitrator, or governmental
agency or instrumentality or of any circumstances which, after reasonable
investigation, would result in the discovery of such a default.
Section 1.09 Contracts.
(a) Except as included or described in the E-Sea Schedules, there are no
"material" contracts, agreements, franchises, license agreements, debt
instruments or other commitments to which E-Sea is a party or by which it or any
of its assets, products, technology, or properties are bound other than those
incurred in the ordinary course of business (as used in this Agreement, a
"material" contract, agreement, franchise, license agreement, debt instrument or
commitment is one which (i) will remain in effect for more than six (6) months
after the date of this Agreement or (ii) involves aggregate obligations of at
least fifty thousand dollars ($50,000));
(b) All contracts, agreements, franchises, license agreements, and other
commitments to which E-Sea is a party or by which its properties are bound and
which are material to the operations of E-Sea taken as a whole are valid and
enforceable by E-Sea in all respects, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally;
(c) E-Sea is not a party to or bound by, and the properties of E-Sea are
not subject to any contract, agreement, other commitment or instrument; any
charter or other corporate restriction; or any judgment, order, writ,
injunction, decree, or award which materially and adversely affects, the
business operations, properties, assets, or condition of E-Sea; and
(d) Except as included or described in the E-Sea Schedules or reflected in
the most recent June 30, 2005 balance sheet, E-Sea is not a party to any oral or
written (i) contract for the employment of any officer or employee which is not
terminable on 30 days, or less notice; (ii) profit sharing, bonus, deferred
compensation, stock option, severance pay, pension benefit or retirement plan,
(iii) agreement, contract, or indenture relating to the borrowing of money, (iv)
guaranty of any obligation, other than one on which E-Sea is a primary obligor,
for the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties of obligations which, in the aggregate do not
exceed more than one year or providing for payments in excess of $25,000 in the
aggregate; (vi) collective bargaining agreement; or (vii) agreement with any
present or former officer or director of E-Sea.
Section 1.10 Material Contract Defaults. E-Sea is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets or condition of E-Sea and there is no event of default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which E-Sea has not taken adequate steps to prevent such a default
from occurring.
Section 1.11 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
an event of default under, or terminate, accelerate or modify the terms of any
material indenture, mortgage, deed of trust, or other material contract,
agreement, or instrument to which E-Sea is a party or to which any of its
properties or operations are subject.
Section 1.12 Governmental Authorizations. Except as set forth in the E-Sea
Schedules, E-Sea has all licenses, franchises, permits, and other governmental
authorizations that are legally required to enable it to conduct its business in
all material respects as conducted on the date hereof. Except for compliance
with federal and state securities and corporation laws, as hereinafter provided,
no authorization, approval, consent, or order of, or registration, declaration,
or filing with, any court or other governmental body is required in connection
with the execution and delivery by E-Sea of this Agreement and the consummation
by E-Sea of the transactions contemplated hereby.
Section 1.13 Compliance With Laws and Regulations. Except as set forth in
the E-Sea Schedules, to the best of its knowledge E-Sea has complied with all
applicable statutes and regulations of any federal, state, or other governmental
entity or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets, or
condition of E-Sea or except to the extent that noncompliance would not result
in the occurrence of any material liability for E-Sea.
Section 1.14 Insurance. All of the properties of E-Sea are fully insured
for their full replacement cost.
Section 1.15 Approval of Agreement. The board of directors of E-Sea has
authorized the execution and delivery of this Agreement by E-Sea and has
approved this Agreement and the transactions contemplated hereby, and will
recommend to the E-Sea Shareholders that the Exchange be accepted by them.
Section 1.16 Material Transactions or Affiliations. Set forth in the E-Sea
Schedules is a description of every contract, agreement, or arrangement between
E-Sea and any predecessor and any person who was at the time of such contract,
agreement, or arrangement an officer, director, or person owning of record, or
known by E-Sea to own beneficially, 5% or more of the issued and outstanding
common stock of E-Sea and which is to be performed in whole or in part after the
date hereof or which was entered into not more than three years prior to the
date hereof. Except as disclosed in the E-Sea Schedules or otherwise disclosed
herein, no officer, director, or 5% shareholder of E-Sea has, or has had since
inception of E-Sea any known interest, direct or indirect, in any transaction
with E-Sea which was material to the business of E-Sea. There are no commitments
by E-Sea, whether written or oral, to lend any funds, or to borrow any money
from, or enter into any other transaction with, any such affiliated person.
Section 1.17 Labor Relations. E-Sea has not had work stoppage resulting
from labor problems. To the knowledge of E-Sea no union or other collective
bargaining organization is organizing or attempting to organize any employee of
E-Sea.
Section 1.18 E-Sea Schedules. E-Sea has delivered to Eternal the following
schedules, which are collectively referred to as the " E-Sea Schedules" and
which consist of separate schedules dated as of the date of execution of this
Agreement, all certified by the chief executive officer of E-Sea as complete,
true, and correct as of the date of this Agreement in all material respects:
(a) a schedule containing complete and correct copies of the memorandum and
articles of association of E-Sea in effect as of the date of this Agreement;
(b) a schedule containing the financial statements of E-Sea identified in
paragraph 1.04(a);
(c) a Schedule 1.19(c) containing a list indicating the name and address of
each shareholder of E-Sea together with the number of shares owned by him, her
or it;
(d) a schedule containing a description of all real property owned by
E-Sea, together with a description of every mortgage, deed of trust, pledge,
lien, agreement, encumbrance, claim, or equity interest of any nature whatsoever
in such real property;
(e) copies of all licenses, permits, and other governmental authorizations
(or requests or applications therefor) pursuant to which E-Sea carries on or
proposes to carry on its business (except those which, in the aggregate, are
immaterial to the present or proposed business of E-Sea);
(f) a schedule listing the accounts receivable and notes and other
obligations receivable of E-Sea as of June 30, 2005 or thereafter other than in
the ordinary course of business of E-Sea indicating the debtor and amount, and
classifying the accounts to show in reasonable detail the length of time, if
any, overdue, and stating the nature and amount of any refunds, set offs,
reimbursements, discounts, or other adjustments, which are in the aggregate
material and due to or claimed by such debtor;
(g) a schedule listing the accounts payable and notes and other obligations
payable of E-Sea as of June 30, 2005, or that arose thereafter other than in the
ordinary course of the business of E-Sea indicating the creditor and amount,
classifying the accounts to show in reasonable detail the length of time, if
any, overdue, and stating the nature and amount of any refunds, set offs,
reimbursements, discounts, or other adjustments, which in the aggregate are
material and due to or claimed by E-Sea respecting such obligations;
(h) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the E-Sea Schedules by
Sections 1.01 through 1.19.
E-Sea shall cause the E-Sea Schedules and the instruments and data
delivered to Eternal hereunder to be promptly updated after the date hereof up
to and including the Closing Date.
It is understood and agreed that not all of the schedules referred to above
have been completed or are available to be furnished by E-Sea. E-Sea shall have
until November 30, 2005 to provide such schedules. If E-Sea cannot or fails to
do so, or if E-Sea acting reasonably finds any such schedules or updates
provided after the date hereof to be unacceptable according to the criteria set
forth below, Eternal may terminate this Agreement by giving written notice to
E-Sea within five (5) days after the schedules or updates were due to be
produced or were provided. For purposes of the foregoing, Eternal may consider a
disclosure in the E-Sea Schedules to be "unacceptable" only if that item would
have a material adverse impact on the financial statements listed in Section
1.04(a), taken as a whole.
Section 1.19 Bank Accounts; Power of Attorney. Set forth in Schedule 1.21
is a true and complete list of (a) all accounts with banks, money market mutual
funds or securities or other financial institutions maintained by E-Sea within
the past twelve (12) months, the account numbers thereof, and all persons
authorized to sign or act on behalf of E-Sea, (b) all safe deposit boxes and
other similar custodial arrangements maintained by E-Sea within the past twelve
(12) months, and (c) the names of all persons holding powers of attorney from
E-Sea or who are otherwise authorized to act on behalf of E-Sea with respect to
any matter, other than its officers and directors, and a summary of the terms of
such powers or authorizations.
Section 1.20 Valid Obligation. This Agreement and all agreements and other
documents executed by E-Sea in connection herewith constitute the valid and
binding obligation of E-Sea, enforceable in accordance with its or their terms,
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and subject to the
qualification that the availability of equitable remedies is subject to the
discretion of the court before which any proceeding therefor may be brought.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF ETERNAL TECHNOLOGIES GROUP, INC.
As an inducement to, and to obtain the reliance of E-Sea and the E-Sea
Shareholders, except as set forth in the Eternal Schedules (as hereinafter
defined), Eternal represents and warrants as follows:
Section 2.01 Organization. Eternal is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada and has the
corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets, to carry on its business in
all material respects as it is now being conducted, and except where failure to
be so qualified would not have a material adverse effect on its business, there
is no jurisdiction in which it is not qualified in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification. Included in the Eternal Schedules are complete and
correct copies of the certificate of incorporation and bylaws of Eternal as in
effect on the date hereof. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
violate any provision of Eternal 's certificate of incorporation or bylaws.
Eternal has taken all action required by law, its certificate of incorporation,
its bylaws, or otherwise to authorize the execution and delivery of this
Agreement, and Eternal has full power, authority, and legal right and has taken
all action required by law, its certificate of incorporation, bylaws, or
otherwise to consummate the transactions herein contemplated.
Section 2.02 Capitalization. Eternal 's authorized capitalization consists
of 95,000,000 shares of common stock, par value $.001 of which 30,913,531 shares
are issued and outstanding and 5,000,000 shares of Preferred Stock, par value
$.001, of which no shares are issued and outstanding. All issued and outstanding
shares are legally issued, fully paid, and non-assessable and not issued in
violation of the preemptive or other rights of any person.
Section 2.03 Subsidiaries and Predecessor Corporations. Eternal's
predecessor corporation was Waterford Sterling Corporation. Its subsidiaries are
disclosed in Schedule 2.03. For purposes hereinafter, the term " Eternal " also
includes those subsidiaries, if any, set forth on Schedule 2.03.
Section 2.04 Securities Filings; Financial Statements.
(a) Since December 12, 2002, the effective date of its acquisition by
Waterford Sterling, Eternal has timely filed all forms, reports and documents
required to be filed with the Securities and Exchange Commission, and has
heretofore delivered to E-Sea, in the form filed with the Commission, (i) all
quarterly and annual reports on Forms 10-QSB and 10-KSB filed since December 12,
2002, (ii) all other reports filed by Eternal with the Securities and Exchange
Commission since December 31, 2004 (collectively, the "SEC Reports") and (iv)
all comment letters from the Securities and Exchange Commission with respect to
the SEC Reports. The SEC Reports (i) were prepared in accordance with the
requirements of the Securities Exchange Act of 1934 or the Securities Act of
1933, as appropriate, and (ii) 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 the light of the
circumstances under which they were made, not misleading.
Section 2.05 Options or Warrants. There are no existing options, warrants,
calls, or commitments of any character relating to the authorized and unissued
stock of Eternal.
Section 2.06 Litigation and Proceedings. There are no actions, suits,
proceedings or investigations pending or, to the knowledge Eternal after
reasonable investigation, threatened by or against Eternal or affecting Eternal
or its properties, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind except as disclosed in Schedule 2.06. Eternal has no knowledge of any
default on its part with respect to any judgement, order, writ, injunction,
decree, award, rule or regulation of any court, arbitrator, or governmental
agency or instrumentality or any circumstance which after reasonable
investigation would result in the discovery of such default.
Section 2.07 Material Contract Defaults. Eternal is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets or condition of Eternal and there is no event of default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which Eternal has not taken adequate steps to prevent such a default
from occurring.
Section 2.08 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
a default under, or terminate, accelerate or modify the terms of, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which
Eternal is a party or to which any of its assets or operations are subject.
Section 2.09 Governmental Authorizations. Eternal has all licenses,
franchises, permits, and other governmental authorizations, that are legally
required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with federal and
state securities or corporation laws, as hereinafter provided, no authorization,
approval, consent or order of, of registration, declaration or filing with, any
court or other governmental body is required in connection with the execution
and delivery by Eternal of this Agreement and the consummation by Eternal of the
transactions contemplated hereby.
Section 2.10 Compliance With Laws and Regulations. To the best of its
knowledge, Eternal has complied with all applicable statutes and regulations of
any federal, state, or other applicable governmental entity or agency thereof,
except to the extent that noncompliance would not materially and adversely
affect the business, operations, properties, assets or condition of Eternal or
except to the extent that noncompliance would not result in the occurrence of
any material liability. This compliance includes, but is not limited to, the
filing of all reports to date with federal and state securities authorities.
Section 2.11 Approval of Agreement. The board of directors of Eternal has
authorized the execution and delivery of this Agreement by Eternal and has
approved this Agreement and the transactions contemplated hereby and will
recommend to its shareholders that they approve this Agreement and the
transactions contemplated hereby.
Section 2.12 Continuity of Business Enterprises. Eternal has no commitment
or present intention to liquidate Eternal or sell or otherwise dispose of a
material portion of Eternal's business or assets following the consummation of
the transactions contemplated hereby.
Section 2.13 Valid Obligation. This Agreement and all agreements and other
documents executed by Eternal in connection herewith constitute the valid and
binding obligation of Eternal, enforceable in accordance with its or their
terms, except as may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought.
ARTICLE III
PLAN OF EXCHANGE
Section 3.01 The Exchange. On the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3.03), each
E-Sea Shareholder who shall elect to accept the exchange offer described herein
(the "Accepting Shareholders"), shall assign, transfer and deliver, free and
clear of all liens, pledges, encumbrances, charges, restrictions or known claims
of any kind, nature, or description, the number of shares of common stock of
E-Sea set forth on Schedule 1.18(c) attached hereto, in the aggregate
constituting 100% of the issued and outstanding shares of common stock of E-Sea
held by each of such shareholders; the objective of such Exchange being the
acquisition by Eternal of 100% of the issued and outstanding common stock of
E-Sea. In exchange for the transfer of such securities by the E-Sea
Shareholders, Eternal shall issue to the E-Sea Shareholders (1) an aggregate of
_________ shares of common stock such amount totaling $18,500,000 RMB based as
the average closing price of ETLT:OB over the prior calendar month and
$18,500,000 reminbi of Eternal to the E-Sea Shareholders as of the Closing Date.
In the event the Exchange is consummated, as provided in Section 5.05, but less
than 100% of the common stock of E-Sea is delivered to Eternal, the number of
Shares and cash issuable by Eternal to the E-Sea Shareholders as described above
shall be reduced proportionately. At the Closing, each E-Sea Shareholder shall,
on surrender of his certificate or certificates representing such E-Sea shares
to Eternal or its registrar or transfer agent, be entitled to receive a
certificate or certificates evidencing his proportionate interest in the Initial
Shares. Upon consummation of the transaction contemplated herein, assuming
participation by all of the E-Sea Shareholders, all of the shares of capital
stock of E-Sea shall be held by Eternal.
In the event, that the average closing price of the shares of ETLT:OB for
the one calendar month subsequent to Closing is less than that for the one month
prior to Closing, such number of additional shares shall be issued by Eternal to
E-Sea as equals 125% of the price differential multiplied by the number of
shares previously issued.
Section 3.02 Closing. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date") but not later than October 31, 2005, subject
to the right of Eternal or E-Sea to extend such Closing Date by up to an
additional thirty (30) days. Such Closing shall take place at a mutually
agreeable time and place.
Section 3.03 Closing Events. At the Closing, Eternal, E-Sea and each of the
Accepting Shareholders shall execute, acknowledge, and deliver (or shall ensure
to be executed, acknowledged, and delivered) any and all certificates, opinions,
financial statements, schedules, agreements, resolutions, rulings or other
instruments required by this Agreement to be so delivered at or prior to the
Closing, together with such other items as may be reasonably requested by the
parties hereto and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby. Among other things, E-Sea shall
provide an opinion of counsel acceptable to Eternal as to such matters as
Eternal may reasonably request, which shall include, but not be limited to, a
statement, to the effect that (i) to such counsel's best knowledge, after
reasonable investigation, from inception until the Closing Date, E-Sea has
complied with all applicable statutes and regulations of any federal, state, or
other applicable governmental entity or agency thereof, except to the extent
that noncompliance would not materially and adversely affect the business,
operations, properties, assets or condition of E-Sea or except to the extent
that noncompliance would not result in the occurrence of any material liability
(such compliance including, but not being limited to, the filing of all reports
to date with federal and state securities authorities).
Section 3.04 Termination.
(a) This Agreement may be terminated by the board of directors of either
Eternal or E-Sea at any time prior to the Closing Date if:
(i) there shall be any actual or threatened action or proceeding before any
court or any governmental body which shall seek to restrain, prohibit, or
invalidate the transactions contemplated by this Agreement and which, in the
judgement of such board of directors, made in good faith and based upon the
advice of its legal counsel, makes it inadvisable to proceed with the Exchange;
or
(ii) any of the transactions contemplated hereby are disapproved by any
regulatory authority whose approval is required to consummate such transactions
(which does not include the Securities and Exchange Commission) or in the
judgement of such board of directors, made in good faith and based on the advice
of counsel, there is substantial likelihood that any such approval will not be
obtained or will be obtained only on a condition or conditions which would be
unduly burdensome, making it inadvisable to proceed with the Exchange.
In the event of termination pursuant to this paragraph (a) of Section 3.04, no
obligation, right or liability shall arise hereunder, and each party shall bear
all of the expenses incurred by it in connection with the negotiation, drafting,
and execution of this Agreement and the transactions herein contemplated in
accordance with the Expense Sharing Agreement attached hereto as Exhibit "B".
(b) This Agreement may be terminated by the board of directors of Eternal
at any time prior to the Closing Date if:
(i) there shall have been any change after the date of the latest balance
sheet of E-Sea in the assets, properties, business, or financial condition of
E-Sea , which could have a materially adverse effect on the financial statements
of E-Sea listed in Section 1.04(a) taken as a whole, except any changes
disclosed in the E-Sea Schedules;
(ii) the board of directors of Eternal determines in good faith that one or
more of E-Sea's conditions to Closing has not occurred, through no fault of
E-Sea.
(iii) on or before October 30, 2005 Eternal notifies E-Sea that Eternal's
investigation pursuant to Section 4.01 below has uncovered information which it
finds unacceptable by the same criteria set forth in Section 1.18; or
(iv) E-Sea shall fail to comply in any material respect with any of its
covenants or agreements contained in this Agreement or if any of the
representations or warranties of E-Sea contained herein shall be inaccurate in
any material respect, where such noncompliance or inaccuracy has not been cured
within ten (10) days after written notice thereof.
If this Agreement is terminated pursuant to this paragraph (b) of Section 3.04,
this Agreement shall be of no further force or effect, and no obligation, right
or liability shall arise hereunder, except that E-Sea shall bear its own costs
as well as the reasonable costs of Eternal in connection with the negotiation,
preparation, and execution of this Agreement and qualifying the offer and sale
of securities to be issued in the Exchange under the registration requirements,
or exemption from the registration requirements, of state and federal securities
laws.
(c) This Agreement may be terminated by the board of directors of E-Sea at
any time prior to the Closing Date if:
(i) the board of directors of E-Sea determines in good faith that one or
more of Eternal's conditions to Closing has not occurred, through no fault of
Eternal;
(ii) on or before October 30, 2004 E-Sea notifies Eternal that E-Sea's
investigation pursuant to Section 4.01 below has uncovered information which it
finds unacceptable.
(iii) Eternal shall fail to comply in any material respect with any of its
covenants or agreements contained in this Agreement or if any of the
representations or warranties of Eternal contained herein shall be inaccurate in
any material respect, where such noncompliance or inaccuracy has not been cured
within ten (10) days after written notice thereof.
If this Agreement is terminated pursuant to this paragraph (c) of Section 3.04,
this Agreement shall be of no further force or effect, and no obligation, right
or liability shall arise hereunder, except that Eternal shall bear its own costs
as well as the reasonable costs of E-Sea and its principal shareholders incurred
in connection with the negotiation, preparation and execution of this Agreement.
ARTICLE IV
SPECIAL COVENANTS
Section 4.01 Access to Properties and Records. Eternal and E-Sea will each
afford to the officers and authorized representatives of the other full access
to the properties, books and records of Eternal or E-Sea , as the case may be,
in order that each may have a full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other, and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of Eternal or E-Sea, as the
case may be, as the other shall from time to time reasonably request. Without
limiting the foregoing, as soon as practicable after the end of each fiscal
quarter (and in any event through the last fiscal quarter prior to the Closing
Date), each party shall provide the other with quarterly internally prepared and
unaudited financial statements.
Section 4.02 Delivery of Books and Records. At the Closing, E-Sea shall
deliver to Eternal the originals of the corporate minute books, books of
account, contracts, records, and all other books or documents of E-Sea now in
the possession of E-Sea or its representatives.
Section 4.03 Third Party Consents and Certificates. Eternal and E-Sea agree
to cooperate with each other in order to obtain any required third party
consents to this Agreement and the transactions herein contemplated.
Section 4.04 Consent of E-Sea Shareholders. E-Sea shall use its best
efforts to obtain the consent of all E-Sea Shareholders to participate in the
Exchange.
Section 4.05 Actions Prior to Closing.
(a) From and after the date of this Agreement until the Closing Date and
except as set forth in the E-Sea Schedules or as permitted or contemplated by
this Agreement, Eternal (subject to paragraph (d) below) and E-Sea respectively,
will each:
(i) carry on its business in substantially the same manner as it has
heretofore;
(ii) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary wear and tear
and damage due to casualty;
(iii) maintain in full force and effect insurance comparable in amount and
in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligations under material
contracts, leases, and instruments relating to or affecting its assets,
properties, and business;
(v) use its best efforts to maintain and preserve its business organization
intact, to retain its key employees, and to maintain its relationship with its
material suppliers and customers; and
(vi) fully comply with and perform in all material respects all obligations
and duties imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by federal or state governmental authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither Eternal nor E-Sea will:
(i) make any changes in their articles or certificate of incorporation or
bylaws;
(ii) take any action described in Section 1.07.
(iii) enter into or amend any contract, agreement, or other instrument of
any of the types described in such party's schedules, except that a party may
enter into or amend any contract, agreement, or other instrument in the ordinary
course of business involving the sale of goods or services; or
Section 4.06 Sales Under Rule 144 or 145,If Applicable.
(a) Eternal will use its best efforts to at all times comply with the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including timely filing of all periodic reports required under
the provisions of the Exchange Act and the rules and regulations promulgated
thereunder.
(b) Upon being informed in writing by any such person holding restricted
stock of Eternal that such person intends to sell any shares under Rule 144,
Rule 145 or Regulation S promulgated under the Securities Act (including any
rule adopted in substitution or replacement thereof), Eternal will certify in
writing to such person that it has filed all of the reports required to be filed
by it under the Exchange Act to enable such person to sell such person's
restricted stock under Rule 144, 145 or Regulation S, as may be applicable in
the circumstances, or will inform such person in writing that it has not filed
any such report or reports.
(c) If any certificate representing any such restricted stock is presented
to Eternal's transfer agent for registration of transfer in connection with any
sale theretofore made under Rule 144, 145 or Regulation S, provided such
certificate is duly endorsed for transfer by the appropriate person(s) or
accompanied by a separate stock power duly executed by the appropriate person(s)
in each case with reasonable assurances that such endorsements are genuine and
effective, and is accompanied by an opinion of counsel satisfactory to Eternal
and its counsel that the stock transfer has complied with the requirements of
Rule 144, 145 or Regulation S, as the case may be, Eternal will promptly
instruct its transfer agent to register such shares and to issue one or more new
certificates representing such shares to the transferee and, if appropriate
under the provisions of Rule 144, 145 or Regulation S, as the case may be, free
of any stop transfer order or restrictive legend. The provisions of this Section
4.16 shall survive the Closing and the consummation of the transactions
contemplated by this Agreement.
Section 4.07 Indemnification.
(a) E-Sea hereby agrees to indemnify Eternal and each of the officers,
agents and directors of Eternal as of the date of execution of this Agreement
against any loss, liability, claim, damage, or expense (including, but not
limited to, any and all expense whatsoever reasonably incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim whatsoever), to which it or they may become subject arising out of or
based on any inaccuracy appearing in or misrepresentations made under Article I
of this Agreement. The indemnification provided for in this paragraph shall
survive the Closing and consummation of the transactions contemplated hereby and
termination of this Agreement.
(b) Eternal hereby agrees to indemnify E-Sea and each of the officers,
agents, and directors of E-Sea and each of the E-Sea Shareholders as of the date
of execution of this Agreement against any loss, liability, claim, damage, or
expense (including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever), to which it or
they may become subject arising out of or based on any inaccuracy appearing in
or misrepresentation made under Article II of this Agreement. The
indemnification provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of this
Agreement.
Section 4.08 Retention of Shares. Eternal hereby warrants to E-Sea and its
Shareholders that Eternal is acquiring the shares for investment purposes only
and not with an intent to resale the shares. Furthermore, Eternal represents to
E-Sea and its Shareholders that on a date two years from the date of Closing, it
will own a minimum of 60% of the issued and outstanding shares of E-Sea.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF ETERNAL TECHNOLOGIES GROUP, INC.
The obligations of Eternal under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.01 Accuracy of Representations and Performance of Covenants. The
representations and warranties made by E-Sea in this Agreement were true when
made and shall be true at the Closing Date with the same force and effect as if
such representations and warranties were made at and as of the Closing Date
(except for changes therein permitted by this Agreement). E-Sea shall have
performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by E-Sea prior to or at the Closing.
Eternal shall be furnished with a certificate, signed by a duly authorized
executive officer of E-Sea and dated the Closing Date, to the foregoing effect.
Section 5.02 Officer's Certificate. Eternal shall have been furnished with
a certificate dated the Closing Date and signed by a duly authorized officer of
E-Sea to the effect that no litigation, proceeding, investigation, or inquiry is
pending, or to the best knowledge of E-Sea threatened, which might result in an
action to enjoin or prevent the consummation of the transactions contemplated by
this Agreement, or, to the extent not disclosed in the E-Sea Schedules, by or
against E-Sea, which might result in any material adverse change in any of the
assets, properties, business, or operations of Sea.
Section 5.03 No Material Adverse Change. Prior to the Closing Date, there
shall not have occurred any change in the financial condition, business, or
operations of E-Sea nor shall any event have occurred which, with the lapse of
time or the giving of notice, is determined to be unacceptable using the
criteria set forth in Section 1.19.
Section 5.04 Good Standing. E-Sea shall have received a certificate of good
standing from the British Virgin Islands, dated as of a date within ten days
prior to the Closing Date certifying that E-Sea is in good standing as a
corporation in the British Virgin Islands.
Section 5.05 Approval by E-Sea Shareholders. The Exchange shall have been
approved, and shares delivered in accordance with Section 3.01, by the holders
of not less than ninety percent (90%) of the outstanding common stock of E-Sea,
unless a lesser number is agreed to by Eternal.
Section 5.06 No Governmental Prohibition. No order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 5.07 Consents. All consents, approvals, waivers or amendments
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of Eternal and E-Sea after the Closing Date on the basis as presently
operated shall have been obtained.
Section 5.08 Other Items.
(a) Eternal shall have received a list of E-Sea's shareholders containing
the name, address, and number of shares held by each E-Sea shareholder as of the
date of Closing, certified by an executive officer of E-Sea as being true,
complete and accurate; and
(b) Eternal shall have received such further opinions, documents,
certificates or instruments relating to the transactions contemplated hereby as
Eternal may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF E-SEA BIOMEDICAL
ENGINEERING CO INTERNATIONAL LTD.
AND THE E-SEA BIOMEDICAL ENGINEERING CO INTERNATIONAL LTD.
SHAREHOLDERS
The obligations of E-Sea and the E-Sea Shareholders under this Agreement
are subject to the satisfaction, at or before the
Closing Date, of the following conditions:
Section 6.01 Accuracy of Representations and Performance of Covenants. The
representations and warranties made by Eternal in this Agreement were true when
made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Section 6.02 Officer's Certificate. E-Sea shall have been furnished with
certificates dated the Closing Date and signed by duly authorized executive
officers of Eternal, to the effect that no litigation, proceeding, investigation
or inquiry is pending, or to the best knowledge of Eternal threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement or by or against Eternal which might
result in any material adverse change in any of the assets, properties or
operations of Eternal.
Section 6.03 No Material Adverse Change. Prior to the Closing Date, there
shall not have occurred any change in the financial condition, business or
operations of Eternal.
Section 6.04 Good Standing. E-Sea shall have received a certificate of good
standing from the Secretary of State of the State of Nevada or other appropriate
office, dated as of a date within ten days prior to the Closing Date certifying
that Eternal is in good standing as a corporation in the State of Nevada and has
filed all tax returns required to have been filed by it to date and has paid all
taxes reported as due thereon.
Section 6.05 No Governmental Prohibition. No order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 6.06 Consents. All consents, approvals, waivers or amendments
pursuant to all contracts, licenses.
Section 6.07 Other Items. E-Sea shall have received further opinions,
documents, certificates, or instruments relating to the transactions
contemplated hereby as E-Sea may reasonably request. In addition, E-Sea shall
have the right to designate one person to the board of directors of Eternal.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Brokers. Eternal and E-Sea agree that, except as set out on
Schedule 7.01 attached hereto, there were no finders or brokers involved in
bringing the parties together or who were instrumental in the negotiation,
execution or consummation of this Agreement. Eternal and E-Sea each agree to
indemnify the other against any claim by any third person other than those
described above for any commission, brokerage, or finder's fee arising from the
transactions contemplated hereby based on any alleged agreement or understanding
between the indemnifying party and such third person, whether express or implied
from the actions of the indemnifying party.
Section 7.02 Governing Law. This Agreement shall be governed by, enforced,
and construed under and in accordance with the laws of the United States of
America and, with respect to the matters of state law, with the laws of the
State of N, without giving effect to principles of conflicts of law thereunder.
Each of the parties (a) irrevocably consents and agrees that any legal or
equitable action or proceedings arising under or in connection with this
Agreement shall be brought exclusively in the federal courts of the United
States.
Section 7.03 Notices. Any notice or other communications required or
permitted hereunder shall be in writing and shall be sufficiently given if
personally delivered to it or sent by telecopy, overnight courier or registered
mail or certified mail, postage prepaid, addressed as follows:
If to Eternal, to: Sect. D, 5/F, Block A.
Innotech Tower,
235 Nanjing Rd. Heping District,
Tianjin 300052
Attn: Jijun Wu
With copies to: Hank Vanderkam, Esq.
Vanderkam & Associates
1301 Travis, #1200
Houston, Texas 77002
If to E-Sea, to: 607-612 Block B, Yingdali Digital Park
Hongmian Rod
Futian Bonded Zane
Shenzhen, China 518038
86-0755-2533-1121 telephone
86-0755-2533-1151 facsimile
Coffee322@163.com
Attn: Mr. Liu Tielian
With copies to: _______________________
_______________________
_______________________
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given (i) upon receipt, if personally delivered, (ii) on
the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if
transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3)
days after mailing, if sent by registered or certified mail.
Section 7.04 Attorney's Fees. In the event that either party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the prevailing party shall be reimbursed by the
losing party for all costs, including reasonable attorney's fees, incurred in
connection therewith and in enforcing or collecting any judgement rendered
therein.
Section 7.05 Confidentiality. Each party hereto agrees with the other that,
unless and until the transactions contemplated by this Agreement have been
consummated, it and its representatives will hold in strict confidence all data
and information obtained with respect to another party or any subsidiary thereof
from any representative, officer, director or employee, or from any books or
records or from personal inspection, of such other party, and shall not use such
data or information or disclose the same to others, except (i) to the extent
such data or information is published, is a matter of public knowledge, or is
required by law to be published; or (ii) to the extent that such data or
information must be used or disclosed in order to consummate the transactions
contemplated by this Agreement. In the event of the termination of this
Agreement, each party shall return to the other party all documents and other
materials obtained by it or on its behalf and shall destroy all copies, digests,
work papers, abstracts or other materials relating thereto, and each party will
continue to comply with the confidentiality provisions set forth herein.
Section 7.06 Public Announcements and Filings. Unless required by
applicable law or regulatory authority, none of the parties will issue any
report, statement or press release to the general public, to the trade, to the
general trade or trade press, or to any third party (other than its advisors and
representatives in connection with the transactions contemplated hereby) or file
any document, relating to this Agreement and the trans actions contemplated
hereby, except as may be mutually agreed by the parties. Copies of any such
filings, public announcements or disclosures, including any announcements or
disclosures mandated by law or regulatory authorities, shall be delivered to
each party at least one (1) business day prior to the release thereof.
Section 7.07 Schedules; Knowledge. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 7.08 Third Party Beneficiaries. This contract is strictly between
Eternal and E-Sea, and, except as specifically provided, no director, officer,
stockholder (other than the E-Sea Shareholders), employee, agent, independent
contractor or any other person or entity shall be deemed to be a third party
beneficiary of this Agreement.
Section 7.09 Expenses. Subject to Sections 3.05 and 7.04 above, whether or
not the Exchange is consummated, each of Eternal and E-Sea will bear their own
respective expenses, including legal, accounting and professional fees, incurred
in connection with the Exchange or any of the other transactions contemplated
hereby.
Section 7.10 Entire Agreement. This Agreement represents the entire
agreement between the parties relating to the subject matter thereof and
supersedes all prior agreements, understandings and negotiations, written or
oral, with respect to such subject matter.
Section 7.11 Survival; Termination. The representations, warranties, and
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for a period of two years.
Section 7.12 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument. For purposes of this agreement,
facsimile signatures shall be deemed original signatures.
Section 7.13 Amendment or Waiver. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may by amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance may be extended by a writing
signed by the party or parties for whose benefit the provision is intended.
Section 7.14 Best Efforts. Subject to the terms and conditions herein
provided, each party shall use its best efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by it under this
Agreement so that the transactions contemplated hereby shall be consummated as
soon as practicable. Each party also agrees that it shall use its best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective this Agreement and the transactions contemplated
herein.
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement
to be executed by their respective officers, hereunto duly authorized, as of the
date first-above written.
ATTEST: /s/_____________.
/s/ BY: Eternal Technologies Group,Inc.
Secretary or Assistant Secretary Chairman
JiJun Wu
ATTEST: /s/_____________
/s/ BY: E-Sea Biomedical Engineering Co.
International, Ltd.
Chairman
Secretary or Assistant Secretary Liu Tielian
The undersigned shareholders of E-Sea through their designated
representatives, Mr. Liu Tielian and Mr. Ou Liming hereby agree to participate
in the Exchange on the terms set forth above. Subject to Section 7.11 above,
each of the undersigned hereby represents and affirms that he has read each of
the representations and warranties of E-Sea set out in Article I hereof and
that, to the best of his knowledge, all of such representations and warranties
are true and correct.
/s/_________, individually
Mr. Liu Tielian
/s/_________, individually
Ou Liming
99.1 Corrected Press Release dated June 7, 2005