Exhibit 2.1
STOCK PURCHASE
AGREEMENT
This Stock Purchase Agreement (this
“Agreement”) is made and entered into as of July 29,
2009 by and among Bay Acquisition Corp., f/k/a SecureLogic Corp., a
Nevada corporation (“SecureLogic” or the
“Purchaser”), Zhejiang LeDi Electronic Technology Co.,
Ltd., a People’s Republic of China (“PRC”)
corporation (“LeDi Electronic”), Hong Kong Bestron
Group Limited (“Bestron”), a Hong Kong corporation,
Hero Horse Limited, a Samoan corporation (“Hero Horse”)
and Max Yang (the “Stockholder”).
RECITALS
A. WHEREAS,
the Stockholder owns all of the issued and outstanding capital
stock of Hero Horse (the “Hero Horse
Stock”).
B. WHEREAS,
Hero Horse owns all of the issued and outstanding capital stock of
Bestron (the “Bestron Stock”).
C. WHEREAS,
Bestron owns all of the issued and outstanding capital stock of
LeDi Electronic (the “LeDi Electronic Stock”)
(collectively, the Stockholder, Hero Horse, LeDi Electronic and
Bestron shall be referred to herein as the
“Seller”).
D. WHEREAS,
subject to the terms and conditions set forth herein, the
Stockholder wishes to sell to Purchaser and Purchaser desires to
purchase from the Stockholder all of the Hero Horse Stock for the
purchase price set forth below.
E. WHEREAS,
immediately prior to the closing of the transaction contemplated
herein, Hero Horse will complete a private placement in an amount
of not less than $5,000,000 less customary placement agent fees and
expenses.
AGREEMENT
In consideration of the terms
hereof, the parties hereto agree as follows:
ARTICLE I - PURCHASE AND SALE OF
STOCK;
PRIVATE PLACEMENT
1.1
Purchase and Sale of Stock
Subject to the terms and conditions hereof, on
the Closing Date (as defined below), the Stockholder shall sell,
convey, transfer, assign and deliver to Purchaser, and Purchaser
shall purchase from the Stockholder (the
“Transaction”), all of the issued and outstanding
common shares of Hero Horse.
1.2
The Closing
The closing of this Agreement (the
“Closing”) shall occur on August 15, 2009 (the
“Closing Date”) at 10:00 a.m. local time at the offices
of Cyruli Shanks Hart & Zizmor, LLP, or such other time or
location as the parties hereto shall agree. At the Closing, each of
the parties hereto shall deliver all such documents,
instruments, certificates and other items as may be required under
this Agreement or the Operative Documents (as defined in Section
2.3 hereof) or otherwise.
1.3
Purchase Price
Subject to the terms and conditions of this
Agreement, the total purchase price for the Hero Horse Stock (the
“Purchase Price”) shall be 228,887 newly issued shares
of Purchaser’s Series A Preferred Stock, par value $.001 per
share (the "Consideration Shares") (the “Purchase Price
Schedule”), subject to adjustment as set forth in Section 1.4
below. Each share of Series A Preferred Stock shall be
entitled to vote together with shareholders of common stock of
Purchaser on all matters and each share of Series A Preferred Stock
shall have the equivalent voting rights of 1,000 shares of common
Stock. Further, each share of Series A Preferred Stock
shall be convertible, at the option of the holder into 1,000 shares
of Purchaser Common Stock.
At the Closing, the Stockholder shall place or
cause to be placed 45,778 shares of the Consideration Shares (the
“Performance Shares”) into escrow for a period of up to
two (2) years with Sichenzia Ross Friedman Ference LLP, as escrow
agent, to be released to either the Stockholder or Purchaser for
cancellation as described below and pursuant to an escrow
agreement to be executed between the parties.
1.4
Purchase Price Adjustment/Performance Threshold
The Purchase Price set forth in Section 1.3
above shall be subject to adjustment as follows based upon the
financial performance of LeDi Electronic during years ended
September 30, 2009 and 2010 (the “Performance
Thresholds”).
A. 2009 Performance Threshold
. LeDi Electronic shall endeavor to achieve revenue for
the year ended September 30, 2009 of at least $88,800,000 (the
“2009 Performance Threshold”) as reported in its 2009
audited financial statements. In the event that LeDi
Electronic achieves at least 90% ($79,920,000) or more of the 2009
Performance Threshold, 22,889 of the Performance Shares shall be
returned forthwith to the Stockholder. In the event that
LeDi Electronic achieves at least 80% ($71,040,000) but less than
90% ($79,920,000) of the 2009 Performance Threshold, then 11,444 of
the Performance Shares will be returned forthwith to the
Stockholder and the remaining 11,445 Performance Shares will be
returned to Purchaser for cancellation. In the event
that LeDI Electronic achieves less than 80% of the 2009 Performance
Threshold, then 22,889 Performance Shares shall be returned to
Purchaser for cancellation.
B. 2010 Performance Threshold
. LeDi Electronic shall endeavor to achieve revenue for
the year ended September 30, 2010 of at least $144,000,000 (the
“2010 Performance Threshold”) as reported in its 2010
audited financial statements. In the event that LeDi
Electronic achieves at least 90% ($129,960,000) or more of the 2010
Performance Threshold, 22,889 of the Performance Shares shall be
returned forthwith to the Stockholder. In the
event that LeDi Electronic achieves at least 80% ($115,200,000) but
less than 90% ($129,960,000) of the 2010 Performance Threshold,
then 11,444 of the Performance Shares will be returned forthwith to
the Stockholder and the remaining 11,445 Performance Shares will be
returned to Purchaser for cancellation. In the event
that LeDI Electronic achieves less than 80% of the 2010 Performance
Threshold, then 22,889 Performance Shares shall be returned to
Purchaser for cancellation.
C. Notwithstanding anything to the
contrary contained in this Section 1.4, the 2009 Performance
Threshold and the 2010 Performance Threshold shall be independent
of each other and the Stockholder shall be entitled to earn all of
the 22,889 of the Performance Shares allocated to the 2010
Performance Threshold regardless of whether any of the 22,889
Performance Shares allocated to the 2009 Performance Threshold were
earned by the Stockholder.
1.5
Private Placement
It is contemplated by the parties that in
connection with the Transaction and immediately prior to the
Closing, Hero Horse shall conduct a private placement to accredited
investors of Hero Horse common stock and warrants utilizing Channel
Capital, LLC, a registered broker/dealer, as placement agent, in an
amount of not less than Five Million ($5,000,000.00) Dollars and
not greater than Ten Million ($10,000,000.00) Dollars (the
“Private Placement”).
At the Closing, each share of Hero Horse common
stock sold in the Private Placement shall be converted, pursuant to
a separate agreement, into a maximum of 114,425,191 shares of
Purchaser Common Stock (the “Investor Stock”) and each
Hero Horse warrant shall be converted into 0.125 five year warrants
to purchase Purchaser common stock (the “Investor
Warrants”). The Private Placement shall be
conducted pursuant to a separate placement agent agreement between
Hero Horse and Channel Capital, LLC, reasonably acceptable to the
Purchaser and the Sellers and customary placement agent fees and
expenses shall be deducted from the proceeds of the Private
Placement.
1.6
Assistance in Consummation of the Purchase and Sale of
Stock
The Sellers and Purchaser shall provide all
reasonable assistance to, and shall cooperate with, each other to
bring about the consummation of the Transaction and the other
transactions contemplated herein as soon as possible in accordance
with the terms and conditions of this Agreement.
1.7
Tax and Accounting Consequences
It is intended by the parties hereto
that the Transaction shall constitute a reorganization
within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended. The parties hereto adopt this
Agreement as a “plan of reorganization” within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United
States Income Tax Regulations.
ARTICLE II - REPRESENTATIONS AND
WARRANTIES
OF THE SELLERS
As of the date of this Agreement and as of the
Closing, Hero Horse, Bestron, LeDi Electronic and the Stockholder
jointly and severally with each other, represent and warrant to
Purchaser (which representations and warranties shall survive the
Closing to the extent provided in Section 10.3 hereof) all as
follows in this Article II:
2.1
Good Title
The Stockholder owns all of the issued and
outstanding shares of Hero Horse Stock free and clear of any lien,
encumbrance, adverse claim, restriction on sale or transfer (other
than restrictions imposed by applicable securities laws),
preemptive right or option. Hero Horse owns all of the issued and
outstanding shares of Bestron Stock free and clear of any lien,
encumbrance, adverse claim, restriction on sale or transfer
(other than restrictions imposed by applicable securities laws),
preemptive right or option. Bestron owns all of the
issued and outstanding shares of LeDi Electronic Stock free and
clear of any lien, encumbrance, adverse claim, restriction on sale
or transfer (other than restrictions imposed by applicable
securities laws), preemptive right or option.
2.2
Organization, Good Standing
Each of the corporate Sellers is a corporation
duly organized, validly existing and in good standing, and no
certificates of dissolution have been filed under the laws of their
respective jurisdictions of organization. Each of the Sellers has
all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to
carry on their respective businesses as presently conducted and to
own, hold and operate their respective properties and assets as now
owned, held and operated, except where the failure to be so
organized, existing and in good standing or to have such authority
and power, governmental licenses, authorizations, consents or
approvals would not have a material adverse effect upon its
business, business prospects, assets, operations or financial
condition (a “Material Adverse Effect”).
Each of the corporate Sellers has delivered or
made available to Purchaser a true and correct copy of, as the case
may be, Certificates of Incorporation, Memorandum and Articles of
Association and/or other equivalent organizational documents, each
as amended to date. None of the corporate Sellers is in material
violation of any of the provisions of its respective Memorandum and
Articles of Association, Bylaws or equivalent organizational
documents. The organizational documents of each of the corporate
Sellers are valid and subsisting and neither is in material
violation or breach of any of the provisions of its organizational
documents
2.3
Authorization
Each of the corporate Sellers has full corporate
power and authority and the Stockholder has the full power, right
and authority to enter into this Agreement and each of the
documents to which it or he is a party in relation to the
Transaction contemplated herein (collectively, the “Operative
Documents”), and to carry out the Transaction. This Agreement
is, and each Operative Document to which the Sellers are a party
will be, on the Closing Date, duly executed and delivered by each
of the Sellers, as applicable, and this Agreement is, and each
Operative Document to which the Sellers are a party will be, on the
Closing Date, a legal, valid and binding obligation of each, as
applicable, enforceable against each of them in accordance with
their respective terms of this Agreement and each such Operative
Document, subject, as to enforceability, to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other laws of
general applicability affecting the rights of creditors and to
general principles of equity.
2.4
Authorized Capitalization
Hero Horse’s authorized capital stock
consists solely of 1,000,000 share, par value $1.00 per share
(“Hero Horse’s Common Stock”) of which 1,000,000
shares are issued and outstanding on the date of this Agreement and
entirely held by the Stockholder. All issued and
outstanding shares of Hero Horse’s Common Stock are validly
issued, fully paid and nonassessable. There are no outstanding or
authorized subscriptions, options, warrants, calls, rights,
commitments or other agreements of any character which obligate or
may obligate Hero Horse to issue any additional shares of any
of its capital stock or any securities convertible into or
evidencing the right to subscribe for any shares of any such
capital stock. There are no voting trusts or other
agreements or understandings with respect to the capital stock of
Hero Horse to which Hero Horse or the Stockholder are a party
or by which the Stockholder or Hero Horse are bound.
Bestron’s authorized capital stock
consists solely 100,000 shares, par value HK$1 per share
(“Bestron Common Stock”) of which ___________ shares
are issued and outstanding on the date of this Agreement and
entirely held by Hero Horse. All issued and outstanding
shares of Bestron Common Stock are validly issued, fully paid and
nonassessable. There are no outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments or
other agreements of any character which obligate or may obligate
Bestron to issue any additional shares of any of its capital stock
or any securities convertible into or evidencing the right to
subscribe for any shares of any such capital
stock. There are no voting trusts or other agreements or
understandings with respect to the capital stock of Bestron to
which Bestron or Hero Horse are a party or by which the Bestron or
Hero Horse are bound.
LeDi Electronic’s registered
capital is US $7,000,000 (“LeDi Registered
Capital”) of which US $7,000,000 has been fully paid up. LeDi
Electronic is a wholly foreign owned entity and the sole owner of
all the equity interest in LeDi Electronic is
Bestron. There are no outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments or
other agreements of any character which obligate or may obligate
LeDi Electronic to increase its registered capital. There are no
voting trusts or other agreements or understandings with respect to
the capital stock of Bestron to which Bestron or LeDi Electronic
are a party or by which Bestron or LeDi Electronic are
bound.
2.5
Subsidiaries and Affiliates
A. Hero Horse has no Subsidiaries
except Bestron. Except for Bestron, Hero Horse does not own,
directly or indirectly, any ownership, equity, profits or voting
interest in, or otherwise control, any corporation, partnership,
joint venture or other entity, and has no agreement or commitment
to purchase any such interest.
B. Bestron has no Subsidiaries except
LeDi Electronic. Except for LeDi Electronic, Bestron does not own,
directly or indirectly, any ownership, equity, profits or voting
interest in, or otherwise control, any corporation, partnership,
joint venture or other entity, and has no agreement or commitment
to purchase any such interest.
C. LeDi Electronic has no
Subsidiaries and LeDi Electronic does not own, directly or
indirectly, any ownership, equity, profits or voting interest in,
or otherwise control, any corporation, partnership, joint venture
or other entity, and has no agreement or commitment to purchase any
such interest.
As used in this Agreement,
“Subsidiary”, when used in reference to any Person (as
defined in Section 2.6 of this Agreement), shall mean any
corporation of which outstanding securities having ordinary voting
power to elect a majority of the Board of Directors of such
corporation are owned directly or indirectly by such
Person.
2.6
No Approvals or Notices Required; No Conflicts With
Instruments
The execution, delivery and performance of this
Agreement and the Operative Documents by the Sellers and the
consummation of the transactions contemplated hereby and thereby
will not in any way which would result in a Material Adverse
Effect, (a) constitute a violation (with or without the giving of
notice or lapse of time, or both) of any provision of law or any
judgment, decree, order, regulation or rule of any court or other
governmental authority applicable to any of the Sellers, (b)
require any consent, approval or authorization of, or declaration,
filing or registration with, any person, corporation, partnership,
joint venture, association, organization, other entity or
governmental or regulatory authority (a “Person”) (the
consent of all such Persons to be duly obtained by the Sellers
at or prior to the Closing), (c) result in a default (with or
without the giving of notice or lapse of time, or both) under,
acceleration or termination of, or the creation in any party of the
right to accelerate, terminate, modify or cancel, any agreement,
lease, note or other restriction, encumbrance, obligation or
liability to which any of the Sellers is a party or by which either
of them is bound or to which any of their assets are subject, (d)
result in the creation of any lien or encumbrance upon the assets
of any of the Sellers or upon any of the capital stock of any of
the Sellers except as otherwise provided in this Agreement, in
particular, with regard to the deposit of Performance Shares by the
Stockholder in the escrow account in Sections 1.3 and 1.4 above,
(e) conflict with or result in a breach of or constitute a default
under any provision of any organizational documents of any of the
corporate Sellers, or (f) invalidate or materially adversely affect
any permit, license, authorization or status used in the conduct of
the business of the corporate Sellers.
2.7
Financial Statements
Hero Horse has delivered to Purchaser, prior to
the Closing, its consolidated audited financial statements
including a balance sheet, statement of operations and
comprehensive income, statements of cash flows and statements of
shareholder equity of Hero Horse, Bestron and LeDi Electronic,
together with the related notes thereto for the 12-month periods
ending September 30, 2008 and 2007 (collectively, the
“Audited Financial Statements”). The Audited
Financial Statements are complete and correct in all material
respects and fairly present the financial condition of the
corporate Sellers as of the dates thereof and the results of their
operations for the fiscal years ended on such dates and each has
been prepared on a basis consistent with prior accounting periods
and in accordance with United States generally accepted accounting
principles and the rules of the Public Company Accounting Oversight
Board consistently applied. The Audited Financial Statements
present fairly the financial position, results of operations and
changes in financial position of the corporate Sellers as of the
dates and for the periods indicated.
The corporate Sellers have no
material liability or obligation of any nature (absolute,
contingent or otherwise) which is not fully reflected or reserved
against in the Audited Financial Statements, except for liability
reserves or obligations incurred since the date of the Audited
Financial Statements (i) in the ordinary course of business and
consistent with past practice and not in excess of $25,000 in the
aggregate or $5,000 individually or (ii) specifically set forth in
Schedule 2.7.
2.8
Absence or Certain Changes or Events
Except as specifically set forth in Schedule
2.8, the Audited Financial Statements or as specifically
contemplated by this Agreement, since September 30, 2008, none of
the corporate Sellers nor any of their officers or directors in
their representative capacity on behalf of any of the corporate
Sellers have:
(a) taken
any action or entered into or agreed to enter into any transaction,
agreement or commitment other than in the ordinary course of
business;
(b) forgiven
or canceled any indebtedness or waived any claims or rights of
material value (including, without limitation, any indebtedness
owing by the Stockholder or any officer, director or employee of
LeDi Electronic, Hero Horse or Bestron);
(c) suffered
any material adverse change in its working capital, assets,
liabilities (absolute, accrued, contingent or otherwise), earnings
or reserves or in its financial condition, business, business
prospects or operations;
(d) borrowed
or agreed to borrow any funds, assumed or become subject to,
whether directly or by way of guarantee or otherwise, any
obligation or liability (absolute or contingent), or incurred any
liabilities or obligations (absolute, accrued, contingent or
otherwise) which exceed in the aggregate $25,000 (counting
obligations or liabilities arising from one transaction or a series
of similar transactions, and all periodic installments or payments
under any lease or other agreement providing for periodic
installments or payments, as a single obligation or liability),
except liabilities and obligations reflected in the balance sheet
contained within the Audited Financial Statements (the “2008
Balance Sheet”) or incurred since the date of the 2008
Balance Sheet in the ordinary course of business and
consistent with past practice which do not exceed $25,000 in
the aggregate, or increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad debt,
contingency or other reserves;
(e) permitted
or allowed any of its material property or assets (real, personal
or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or
charge, except for (i) assessments for current taxes not yet due
and payable, (ii) landlord's liens for rental payments and
other lease-related performance incurred in the ordinary course of
business and not yet due and payable, and (iii) mechanics',
materialmen's, carriers' and other similar liens securing
indebtedness that was incurred in the ordinary course of business
and is not yet due and payable;
(f) written
down the value of any material inventory (including write-downs by
reason of shrinkage or markdown) or written off as uncollectible
any material notes or accounts receivable;
(g) sold,
transferred or otherwise disposed of any of its properties or
assets (real, personal or mixed, tangible or intangible), except in
the ordinary course of business and consistent with past
practice;
(h) disposed
of or permitted to lapse any rights to the use of any trademark,
trade name, patent or copyright, or trade secrets of LeDi
Electronic;
(i) made
any capital expenditure or commitment to make a capital expenditure
for additions to property, plant, equipment or intangible capital
assets in excess of $50,000.00;
(j) made
any change in any method of accounting or accounting
practice;
(k) issued
any capital stock or other securities or declared, paid or set
aside for payment any dividend or other distribution in respect of
its capital stock or redeemed, purchased or acquired, directly or
indirectly, any shares of capital stock or other securities of LeDi
Electronic, or otherwise permitted the material withdrawal by any
of the holders of capital stock of LeDi Electronic of any cash or
other assets (real, personal or mixed, tangible or intangible), in
compensation, indebtedness or otherwise, other than payments of
compensation in the ordinary course of business and consistent with
past practice;
(l) paid,
loaned or advanced any amount to, or sold, transferred or leased
any properties or assets (real, personal or mixed, tangible or
intangible), with the exception of travel or other employment
related advances, to, or entered into any agreement or arrangement
with, any of the holders of capital stock of LeDi Electronic, or
any affiliate of such holder or any of its officers or directors,
except for compensation paid to officers at rates not exceeding the
rate of compensation as of January 1, 2009;
(m) entered
into or agreed to enter into, or otherwise suffered to be
outstanding, any power of attorney of LeDi Electronic or any
obligations or liabilities (whether absolute, accrued, contingent
or otherwise) of LeDi Electronic, as guarantor, surety, co-signer,
endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any other Person other than in the ordinary course of
business and consistent with past practice; or
(n) received
notice of, or otherwise obtained actual knowledge
of: (i) any claim, action, suit, arbitration, proceeding
or investigation involving, pending against or threatened against
LeDi Electronic before or by any court or governmental or
non-governmental department, commission, board, bureau, agency or
instrumentality, or any other Person; (ii) any valid basis for any
material claim, action, suit, arbitration, proceeding,
investigation or the application of any fine or penalty materially
adverse to LeDi Electronic before or by any Person, which if true
would have a Material Adverse Effect on LeDi Electronic; or (iii)
any outstanding or unsatisfied judgments, orders, decrees or
stipulations to which LeDi Electronic is a party which relate
directly to the transactions contemplated herein or which would
otherwise have a Material Adverse Effect upon the
business, business prospects, assets or financial condition of LeDi
Electronic.
2.9
Taxes
The Sellers have (a) duly and timely filed, with
the PRC and other appropriate governmental agencies (domestic and
foreign) all tax returns, information returns and reports for all
Taxes (as defined below) required to have been filed with respect
to each Seller and (b) paid in full or provided for all Taxes,
interest and other governmental charges which are shown to be due
on such returns or reports. “Taxes” shall mean all
taxes, charges, fees, levies or other assessments, including, but
not limited to, income, severance, excise, gross receipts,
property, sales, use, ad valorem, transfer, franchise, profit,
license, withholding, payroll, employment, severance, stamp,
occupation, windfall profit, social security and unemployment or
other taxes imposed by the Chinese government, the Samoan
government, the United States or any agency or instrumentality
thereof, any state, county, local or foreign government, or any
agency or instrumentality thereof, and any interest or fines, and
any and all penalties or additions relating to such taxes, charges,
fees, levies or other assessments. Furthermore, except as described
in Schedule 2.9, (i) the reserves and provisions for Taxes
reflected in the 2008 Balance Sheet are adequate; (ii) no
unresolved claim for assessment or collection of Taxes has been
asserted or threatened against any of the Sellers and no audit or
investigation by governmental authorities is under way with respect
to Taxes, interest or other governmental charges; (iii) no state of
facts exists or has existed which would constitute a reasonable
basis for the assessment against any of the Sellers of any
additional tax liability with respect to any period for which tax
returns have been filed; and (iv) none of the Sellers has filed or
entered into any election, consent or extension agreement or any
waiver that extends any applicable statute of
limitations.
2.10
Property
The Sellers, as of the date hereof, shall have
good and valid title to all of their respective properties,
interests in properties and assets, real and personal, reflected in
the 2008 Balance Sheet or acquired after the 2008 Balance Sheet
Date (except properties, interests in properties and assets sold or
otherwise disposed of since the 2008 Balance Sheet Date in the
ordinary course of business) (the “Real Property and Personal
Property”, respectively), or in the case of leased properties
and assets, valid leasehold interests in, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (i) the lien of current taxes not yet due and
payable, (ii) such imperfections of title, liens and easements as
do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or
otherwise materially impair business operations involving such
properties, (iii) liens securing debt which is reflected on the
2008 Balance Sheet, and (iv) liens that in the aggregate would not
have a Material Adverse Effect on Company. The property and
equipment of LeDi Electronic that is used in the operations of its
businesses are in good operating condition and repair, except where
the failure to be in good operating condition or repair would not
have a Material Adverse Effect. All properties used in the
operations of LeDi Electronic are reflected in the 2008 Balance
Sheet to the extent generally accepted accounting principles
require the same to be reflected. Schedule 2.10 identifies each
parcel of real property owned or leased by each of the
corporate Sellers. Neither the whole nor any portion of any assets
or property of the Sellers are subject to any currently outstanding
governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, has any such
condemnation, expropriation or taking been proposed.
2.11
Contracts
Schedule 2.11 contains a complete and accurate
list of all material contracts, oral or written, to which LeDi
Electronic is a party or by which LeDi Electronic is bound,
including, without limitation, security agreements, conditional
sales agreements, instruments relating to the borrowing of money,
and broker or distributorship agreements; provided, however, that
Schedule 2.11 does not include: (a) purchase orders received by
LeDi Electronic in the ordinary course of its business from its
customers; (b) purchase orders issued by LeDi Electronic in the
ordinary course of its business to its suppliers and subcontractors
involving less than $50,000 in the aggregate; or (c) other
contracts cancelable within 30 days without penalty or involving
less than $5,000 individually and $15,000 in the
aggregate. Except as set forth in Schedule 2.11, all
material contracts are valid, binding and enforceable in accordance
with their terms against each party thereto, are in full force and
effect, LeDi Electronic has performed all material obligations
imposed upon it thereunder, and to the actual knowledge of the
Sellers, neither LeDi Electronic nor any other party thereto is in
material default thereunder, nor is there any event which with
notice or lapse of time, or both, would constitute a material
default thereunder. True and complete copies of each such contracts
have been heretofore delivered to Purchaser.
2.12
Customers and Suppliers
Schedule 2.12 sets forth: (a) a list of the
customers of LeDi Electronic accounting for 5% or more of LeDi
Electronic 's sales during fiscal year 2008 showing the approximate
total sales by LeDi Electronic to each such customer during the
fiscal year last ended and (b) a current list of the suppliers of
LeDi Electronic from whom LeDi Electronic has purchased more than
5% of the goods purchased by LeDi Electronic in
fiscal year 2008. LeDi Electronic has no reasonable
basis to expect any material modification to its relationship with
any customer or supplier named in Schedule 2.12. Except
as set forth in Schedule 2.12, LeDi Electronic has not had any
customer who accounted, directly or indirectly, for more than 5% of
its sales during fiscal years 2008 and 2007, and LeDi Electronic
has no supplier from whom it has purchased more than 5% of the
goods or services which it purchased during fiscal years 2008 and
2007. LeDi Electronic is not bound by, any contract which prohibits
the use or publication by LeDi Electronic of the name of any party
to such contract and LeDi Electronic is not a party to or bound by,
any contract which prohibits or in any way restricts LeDi
Electronic from freely providing services to any other customer of
LeDi Electronic or any potential customer of LeDi
Electronic. Except as set forth in Schedule 2.12, none
of LeDi Electronic's customers has canceled or substantially
reduced or, to the knowledge of LeDi Electronic, is currently
attempting or threatening to cancel a contract of more than $50,000
or materially reduce utilization of the services provided by LeDi
Electronic. Schedule 2.12 sets forth all of LeDi Electronic's
material vendor authorizations and vendor relationships.
2.13
Orders, Commitments and Returns
Schedule 2.13 lists all of LeDi Electronic
backlog orders which are in excess of $50,000. There were no
outstanding claims against LeDi Electronic as of the date hereof to
return merchandise or credits against licensing fees with an
aggregate value in excess of $50,000 by reason of alleged over
shipments, defective merchandise, missed delivery dates, warranty
claims, incorrect quantities or otherwise, or of merchandise in
the hands of customers under an understanding that such
merchandise would be returnable.
2.14
Litigation; Claims and Legal Proceedings
To the actual knowledge of the Sellers, none of
the Sellers is a party to or the subject of any pending litigation,
claims, decrees, orders, stipulations or governmental investigation
or otherwise disclosed herein, and there are no lawsuits, claims,
assessments, investigations, or similar matters, against or
affecting any of the Sellers, its management or its properties.
Each of the Sellers has complied in all material respects with all
laws, statutes, ordinances, regulations, rules, decrees or orders
applicable to it except that any material breach of the same will
not have a Material Adverse Effect on LeDi Electronic.
Except as set forth in Schedule 2.14
and to the actual knowledge of the Sellers, there are no material
claims, actions, suits, arbitrations or proceedings pending or
involving or threatened against, or investigations involving any of
the Sellers before or by any court or governmental or
nongovernmental department, commission, board, bureau, agency or
instrumentality, or any other Person. There is no valid basis for
any material claim, action, suit, arbitration, proceeding or
investigation (other than as noted in Schedule 2.14) adverse
to the business, business prospects, assets, operations or
condition (financial or other) of any of the Sellers before or by
any Person. There are no outstanding or unsatisfied judgments,
orders, decrees or stipulations to which any of the Sellers is a
party which involve the transactions contemplated herein or which
would have a Material Adverse Effect.
2.15
Labor Matters
There are no material disputes, employee
grievances or disciplinary actions pending or to the knowledge of
LeDi Electronic threatened or involving LeDi Electronic or any of
its present or former employees which would have a Material Adverse
Effect. LeDi Electronic has, to its knowledge, substantially
complied with all provisions of all applicable law relating to
employment and employment practices, terms and conditions of
employment, workers compensation, wages and hours, where the
failure to comply with which would have a Material Adverse Effect
upon the business, business prospects, assets, operations or
condition (financial or other) of LeDi Electronic. LeDi Electronic
is not engaged in any unfair labor practice and has no liability
for any arrears of wages or penalties for failure to comply with
any such provisions of law where such liability or failure would
have a Material Adverse Effect. There is no labor strike, dispute,
slowdown or stoppage pending or affecting LeDi Electronic, and LeDi
Electronic has not experienced any work stoppage or other labor
difficulty. No collective bargaining agreement is binding on LeDi
Electronic. LeDi Electronic has no knowledge of any organizational
efforts presently being made on behalf of any labor union with
respect to employees of LeDi Electronic, and LeDi Electronic has
not been requested by any group of employees or others to enter
into any collective bargaining agreement or other agreement with
any labor union or other employee organization.
2.16
Employee Benefit Plans
Except as set forth in Schedule
2.16, LeDi Electronic has no bonus, deferred compensation,
incentive, severance pay, pension, profit-sharing, retirement,
stock purchase, stock option or any other employee benefit plan,
employee fringe benefit plan, arrangement or practice with regard
to present or former employees as to which LeDi Electronic has any
liability (“Employee Benefit Plan”).
2.17
Intellectual Property.
Except as set forth on Schedule 2.17, LeDi
Electronic owns, and has all licenses to use or otherwise possess
legally enforceable and unencumbered rights to use, any patents,
trademarks, trade names, service marks, domain names, copyrights,
and any applications therefor, trade secrets, computer software
programs, and tangible or intangible proprietary information or
material that are used in the business of LeDi Electronic, the
failure to possess of any of the foregoing would have a Material
Adverse Effect on LeDi Electronic. LeDi Electronic has a license
from the PRC to import scrap copper for recycling.
2.18
Accounts Receivable
All accounts receivable of LeDi Electronic
reflected in the Audited Financial Statements, or existing at the
Closing, represent sales actually made in the ordinary course of
business, as recognized in accordance with United States generally
accepted accounting principals. Except as described in
Schedule 2.18 and in the Audited Financial Statements, LeDi
Electronic has no reason to believe that any such account
receivable is not or shall not, be collected in the amounts shown.
LeDi Electronic's bad debt reserves and sales return allowances as
reflected in the Audited Financial Statements are adequate based on
LeDi Electronic 's bad debts and sales returns experience to
date.
2.19
Restrictions on Business
Activities.
Each of the Sellers has obtained, as of the date
hereof, each governmental consent, license, permit, grant, or other
authorization of a governmental authority (i) pursuant to which
each of the Sellers currently operates or holds any interest in any
of its properties or (ii) that is required for the operation
of any of the Sellers’ business or the holding of any such
interest ((i) and (ii) herein collectively called
‘‘Company Authorizations’’), and all of
such Company Authorizations are in full force and effect, except
where the failure to obtain or have any of such Company
Authorizations or where the failure of such Company Authorizations
to be in full force and effect would not reasonably be expected to
have a Material Adverse Effect on any of the Sellers.
2.20
Corporate Books and Records
Each of the corporate Sellers has furnished to
Purchaser or its representatives for their examination true and
complete copies of its (a) applicable organizational documents
including all amendments thereto, (b) minute books, and (c) stock
register books.
2.21
Foreign Corrupt Practices Act
.
None of the Sellers, nor any director, officer,
key employee, or other person associated with or acting on behalf
of either, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect
unlawful payment to any governmental authority from corporate
funds; or made any bribe, rebate, payoff, influence payment,
kickback or other similar payment in connection with the operations
of any of the Seller
