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) January 23, 1997
________________
BUREAU OF ELECTRONIC PUBLISHING, INC.
_____________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE
_____________________________________________
(State or other Jurisdiction of Incorporation)
1-13890 22-2894444
_____________________ ___________________________________
(Commission File No.) (I.R.S. Employer Identification No.)
745 Alexander Road, Princeton, New Jersey 08540
__________________________________________________
(Address of principal executive offices) (zip code)
Registrant's telephone number including area code (609) 514-1600
_____________
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Item 1. Changes in Control of Registrant
On January 23, 1997, Bureau of Electronic Publishing, Inc. (the
"Company") executed and closed transactions pursuant to an Agreement and Plan of
Merger between the Company, BEPI Acquisition Corporation ("Subsidiary"), Pacific
Chemical Group Limited ("PCG"), and Jinan Chemical Fibre Corporation ("JCF")
(the "Agreement"). Subsidiary was a British Virgin Islands ("BVI") corporation
which was wholly-owned by the Company. PCG was a privately-held British Virgin
Islands corporation. JCF is a Peoples Republic of China ("PRC") corporation
which operates a chemical fiber production complex in the city of Jinan in
northern China. JCF is owned by the local government of Jinan. PCG owns 51% and
JCF owns 49% of a joint venture, Jinan Dayang Chemical Fibre Corporation (the
"Joint Venture"), which operates JCF's former Plant No. 1 production facility
for purified terephthalic acid ("PTA").
At the closing, Subsidiary merged into PCG in a merger carried out
pursuant to the laws of the BVI (the "Merger"). In connection with the Merger,
the stockholders of PCG transferred 100% ownership of PCG to the Company and the
stockholders of PCG received an aggregate of 833,671.66 shares of Series A
Preferred Stock of the Company. Each share of Series A Preferred Stock is
automatically convertible into 100 shares of the Company's Common Stock when the
number of authorized shares of the Company's Common Stock is increased to
300,000,000, has 100 votes per share and votes with the Common Stock as one
class, and has a preference of $100 per share in the event of liquidation. The
Company intends to seek stockholder approval for the increase in authorized
Common Stock in the near future. Prior to this transaction the Company had
approximately 4,650,000 shares of Common Stock outstanding. As a result of the
Merger, PCG became a wholly-owned subsidiary of the Company and the former
stockholders of PCG acquired control of a substantial majority of the voting
stock of the Company. As explained below, Mr. Jin Shan is the largest
stockholder of PCG and alone holds a majority of the voting stock of the
Company.
On January 21, 1997, Mr. Jao Shun Pan was elected to the Board of
Directors of the Company. At the closing all other directors and officers
of the Company resigned and Mr. Bryan Finkel was re-elected as a director. After
the closing, Mr. Jin Shan was elected Chairman-elect and President of the
Company, Mr. Li De Yuan was elected Vice Chairman-elect and Secretary, and Mr.
Pan was elected Vice President, Chief Financial Officer and Assistant Secretary.
Each of Messrs. Jin, Li, and Pan occupied equivalent positions in PCG and
Messrs. Jin and Li are also executive officers and directors of JCF. The Company
expects that additional directors affiliated with JCF will be elected to the
Board as soon as the Company meets the information requirements in connection
therewith in accordance with the provisions of Section 14(f) of the Securities
Exchange Act of 1934.
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As a result of this transaction, control of the Company has effectively
passed to the former stockholders of PCG. The only stockholder holding more than
5% of the total voting stock (Common Stock and Series A, B, and C Preferred
Stock) of the Company is Jin Shan, who holds approximately 69.8% of the total
voting stock of the Company. Together the former stockholders of PCG, including
Mr. Jin, hold an aggregate of approximately 93.1% of the Company's total voting
stock.
Reference is made to Items 2 and 5 and the exhibits and financial
statements referenced under Item 7 hereof for additional disclosures.
Item 2. Acquisition or Disposition of Assets.
On January 23, 1997, the Company acquired PCG by merging Subsidiary
into PCG. PCG's only asset is its 51% interest in the Joint Venture. Under the
Agreement, the holders of PCG stock received an aggregate of 833,671.66 shares
of the Company's Series A Preferred Stock. The consideration paid by the Company
was determined by arm's length negotiations between PCG and the Company. There
were no material relationships between any officer or director of the Company
and PCG prior to the Merger.
The Joint Venture has succeeded to the business of manufacturing and
sale of PTA originally conducted by the No. 1 Plant. No. 1 Plant is
principally engaged in the manufacture of PTA for further processing by other
production units of JCF into polyester chip, film, staple and filament. A small
portion of the PTA is produced for sale to third parties. The Joint Venture was
established on February 9, 1996 by PCG and JCF pursuant to a joint venture
agreement entered into pursuant to the PRC laws governing Sino-foreign joint
ventures (the "Joint Venture Agreement"). Pursuant to the Joint Venture
Agreement, the Company is required to pay US$14,995,000 in cash as its capital
contribution for 51% of the equity interests in the Joint Venture. In the event
that the capital contribution is not paid within three years of the formation of
the joint venture, for whatever reason including the lack of ability to finance,
the Company may forfeit its claim on its equity interests in the Joint Venture.
JCF owns 49% of the equity interests in the Joint Venture and has contributed
part of its production facilities and other assets including certain plant and
equipment of the No. 1 Plant to the Joint Venture as its capital investment. In
addition, JCF has leased to the Joint Venture certain other production assets of
No. 1 Plant.
Other key provisions of the Joint Venture Agreement include: (i) the
joint venture period is fifty years from the formal incorporation date of the
Joint Venture on March 27, 1996; (ii) the profit and loss sharing ratio is the
same as the respective equity interests; (iii) the Board of Directors consists
of seven members -- four designated by the Company and three designated by JCF
with
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major issues requiring approval of two-thirds of the directors; (iv) the first
80,000 tons of PTA produced annually by the Joint Venture must first be offered
to JCF before sale to third parties; (v) JCF will provide certain management and
administrative services to the Joint Venture for a management fee; and (vi) JCF
will transfer to the Joint Venture the right to use electricity and water and
the use of certain fixed assets.
The Company has received an opinion from Chartered Capital Advisers,
Inc., independent investment advisers, that the amount of stock issued as
consideration in the Merger is fair to the Company and its stockholders from a
financial point of view.
Reference is made to Item 1 and the exhibits and financial statements
referenced under Item 7 hereof for additional disclosures.
Item 5. Other Events.
In connection with the Merger, the Company is carrying out a private
placement to obtain funds to be used in the operations of the Joint Venture
and to defray certain costs of the Merger. To date, the Company has issued in
the private placement 15.5 shares of Series B Preferred Stock and 500,000 shares
of Series C Preferred Stock. Each share of Series B Preferred Stock is
automatically convertible into 100,000 shares of the Company's Common Stock one
year after issuance. The Series B Preferred Stock is also convertible at a price
per share which is equal to the lesser of (a) US$1.00 or (b) 75% of the average
of the closing bid price of one share of Common Stock during the last five
trading days immediately prior to the date of such conversion. Conversions are
also subject to an increase in the number of authorized shares of Common Stock
to 300,000,000. Each share of Series B Preferred Stock also has 100,000 votes
per share and votes with the Common Stock as one class, and has a preference of
$100,000 per share in the event of liquidation. Each share of Series C Preferred
Stock is convertible into two shares of the Company's Common Stock at $.50 per
share when the number of authorized shares of the Company's Common Stock is
increased to 300,000,000, has one vote per share and votes with the Common Stock
as one class, and has a preference of $1.00 per share in the event of
liquidation. To date, the Company has received total proceeds of $2,050,000 from
the private placement. Brookehill Equities, Inc. is acting as a placement agent
and will receive a fee equal to 10% of the funds raised through the placement.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
(b) Pro Forma Financial Information
Pro forma and audited financial statements will be filed at a later date within
the time period prescribed by Item 7(a)(4) and (b)(2).
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(c) Exhibits
1 Agreement and Plan of Merger dated January 23, 1997, by and
among the Company, Subsidiary, PCG, and JCF.
2 Joint Venture Agreement, dated as of February 9, 1996, by
and among PCG and JCF.
3 Certificate of Designation of Series A Preferred Stock.
4 Fairness Opinion of Chartered Capital Advisers, Inc.
dated January 23, 1997.
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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 thereunto duly authorized.
BUREAU OF ELECTRONIC PUBLISHING, INC.
By: /s/ J. S. Pan
--------------------------------
J. S. Pan, Vice President and
Chief Financial Officer
Date: February 6, 1997
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
January 23, 1997 by and among BUREAU OF ELECTRONIC PUBLISHING, INC., a Delaware
corporation having its principal place of business at 745 Alexander Road,
Princeton, New Jersey 08540 ("BEPI"), PACIFIC CHEMICAL GROUP LIMITED, a British
Virgin Islands corporation having an office c/o S.L. Chen & Associates, 805
Third Avenue, New York 10022 ("PCG"), JINAN CHEMICAL FIBRE CORPORATION, a
Peoples Republic of China corporation ("JCF"), and BEPI ACQUISITION CORPORATION,
a British Virgin Islands corporation which is wholly owned by BEPI and has a
principal place of business c/o BEPI ("Subsidiary"). PCG is sometimes referred
to herein as the "Surviving Corporation." Subsidiary and PCG are each sometimes
referred to herein as a "Constituent Corporation" or collectively as the
"Constituent Corporations."
Preliminary Statement
JCF produces polyester fiber in a facility in Jinan, Peoples Republic of China
("PRC"). JCF produces purified terephthalic acid ("PTA"), which is a raw
material used in the production of polyester fiber, in Plant 1 of such facility.
Pursuant to a joint venture agreement in the form set forth in the PCG
Disclosure Schedule referred to below (the "Joint Venture Agreement"), JCF will
at the Closing hereunder transfer Plant 1 to Jinan Dayang Chemical Fibre
Company, Ltd., which is a newly formed joint venture (the "Joint Venture") of
which PCG owns 51% and JCF owns 49%. The Joint Venture will after the Closing
use Plant 1 to produce PTA for sale to JCF as well as for third parties. The
transaction in which the assets of Plant 1 are transferred and leased by JCF to
the Joint Venture pursuant to the Joint Venture Agreement is referred to herein
as the "Asset Transfer."
PCG and/or BEPI will at the Closing receive not less than U.S. $1,000,000 from
the sale of securities with an additional $1,000,000 to be received from such
sales within 60 days. Under the Joint Venture Agreement, PCG's ownership
interest in the Joint Venture will be transferred to JCF on February 9, 1999
unless PCG theretofore contributes U.S. $12,995,000 to the Joint Venture.
The Boards of Directors of BEPI and the Constituent Corporations and the
shareholders of PCG and Subsidiary have each determined that it is in the best
interest of each such corporation to consummate the Merger set forth herein.
IN CONSIDERATION of the foregoing and the mutual agreements and covenants
contained herein, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "PCG Common Stock" shall mean the common stock of PCG.
(b) "Effective Date" or "Closing Date" shall mean the effective
date of the Merger, which shall be the date and time of filing
of the certificate of merger required to be filed hereunder
which date may be simultaneous with the execution of this
Agreement.
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(c) "BEPI Common Stock" shall mean the common stock of BEPI.
(d) "Preferred" shall have the meaning set forth in Section 5(b).
(e) "Merger" shall mean the merger of Subsidiary with and into
PCG, and in consideration for which the stockholders of PCG
will receive shares of Preferred in accordance with the terms
of this Agreement.
(f) "Subsidiary's Common Stock" shall mean the common stock of
Subsidiary.
(g) "Surviving Corporation" shall mean PCG, the corporation that
survives the Merger.
2. Merger into PCG; Closing
(a) Surviving Corporation. Upon the approval and adoption of this
Agreement by the stockholders of each of the Constituent
Corporations in accordance with the laws of the British
Virgin Islands and the satisfaction or waiver of the
conditions set forth herein to the obligations of the parties
hereto, a certificate of merger shall, subject to the rights
of termination and abandonment hereinafter set forth, be
filed with the appropriate office in the British Virgin
Islands . Effective as of the close of business on the date
on which the certificate of merger is filed, Subsidiary shall
merge with and into PCG, and PCG as the Surviving Corporation
shall continue its corporate existence under the laws of the
British Virgin Islands under its current name. The date and
time of such filings is herein referred to as the "Effective
Date" or the "Closing Date."
(b) Further Documentation. From time to time as and when
requested by the Surviving Corporation or BEPI or their
successors or assigns, BEPI, PCG and Subsidiary and their
proper (or former) officers and directors, shall execute and
deliver, or cause to be executed and delivered, all deeds and
other instruments and shall take or cause to be taken all
such other and further actions as the Surviving Corporation
or BEPI may deem necessary or appropriate in order to more
fully vest in the Surviving Corporation title to and
possession of all of the rights, privileges, powers,
immunities, purposes and franchises of PCG and Subsidiary and
to carry out the intent and purposes of this Agreement.
3. Closing. Concurrently with the filing of the certificate of merger the
parties shall execute and deliver to and among themselves the Closing Documents
(as hereinafter defined) at a closing (the "Closing") to occur at the offices of
Oscar D. Folger, 521 Fifth Avenue, New York, New York 10175 on the Closing Date.
The term "Closing Documents" means the agreements, instruments and documents
which are contemplated by this Agreement to be executed and delivered by the
parties on the Closing Date. This Agreement may be executed simultaneously with
the Closing.
4. Certificate of Incorporation, By-laws, Directors and Officers
(a) Certificate of Incorporation. The certificate of incorporation
of PCG in effect on the Effective Date shall be the
certificate of incorporation of the Surviving Corporation
until amended as provided by law.
(b) By-Laws. The by-laws of PCG in effect on the Effective Date
shall be the by-laws of the Surviving Corporation until
amended or repealed as provided by law.
(c) Directors and Officers. The current directors and officers of
the Surviving Corporation shall hold office as provided in
the by-laws of the Surviving Corporation.
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5. Conversion and Exchange of Shares
(a) Upon consummation of the Merger, all shares of Subsidiary's
Common Stock outstanding immediately prior to the Effective
Date shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and
exchanged for all of the issued and outstanding shares of
capital stock of the Surviving Corporation. All such shares
shall be fully paid and non-assessable.
(b) The shares of PCG Common Stock which shall be outstanding
immediately prior to the Effective Date shall, by virtue of
the Merger and without any action on the part of the holder
thereof, be converted as of the Effective Date into the right
to receive an aggregate of 833,671.66 shares of Class A
Preferred Stock of BEPI (the "Preferred"). The Preferred
shall be created on or before the Closing pursuant to a
Certificate of Designation in the form set forth in the BEPI
Disclosure Schedule. Without limiting the generality of the
foregoing, each share of Preferred shall be automatically
converted into 100 shares of BEPI Common Stock when the
number of authorized shares of BEPI Common Stock is increased
to 300,000,000, shall have 100 votes per share and shall vote
with the holders of the common stock as one class and shall
have a $100 preference in liquidation.
(c) Each holder of record on the Effective Date of shares of PCG
Common Stock shall be entitled, upon the surrender to BEPI or
any exchange agent selected by BEPI of the certificate for his
or her shares of PCG Common Stock for cancellation, to receive
a certificate or certificates representing the number of
shares of Preferred into which the holder's shares of the PCG
Common Stock shall have been converted in the Merger.
(d) Except for the issuance of shares of Preferred upon conversion
of shares of PCG Common Stock, the Merger shall effect no
change in the shares of BEPI capital stock and none of BEPI's
shares shall be converted as a result of the Merger.
(e) After the Effective Date, there shall be no registration of
transfers on the stock transfer books of PCG of the shares
which were outstanding immediately prior to the Effective
Date.
(f) No fractional shares will be issued in the Merger, and any
fractional shares will be canceled.
(g) JCF and PCG acknowledge, on behalf of themselves and on behalf
of each shareholder of PCG, that each such shareholder:
(i) will acquire the Preferred and any shares of common
stock issuable on conversion of the Preferred
(collectively "Securities") only for his own account,
for investment, and without a view to the
distribution thereof;
(ii) has carefully reviewed the public filings of BEPI;
(iii) has been given access to all exhibits referred to in
such registration statements and reports, and he has
had the opportunity to discuss BEPI's affairs with
the BEPI's officers;
(iv) understands that he may sell or otherwise transfer
Securities only if such transaction is duly
registered under the Securities Act of 1933, as
amended (the "Act") or if he shall have received the
favorable opinion of counsel to the BEPI to the
effect that such sale or other transfer may be made
in the absence of registration under the Act;
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(v) acknowledges that the certificates representing
Securities will be legended to reflect these
restrictions, and stop transfer instructions will
apply; and
(vi) realizes that the Securities are not a liquid
investment, and that he may lose his entire
investment as a result of the Merger and his receipt
of Securities.
6. Certain Other Agreements and Conditions.
(a) Prior to the Closing, the Board of Directors of BEPI shall
elect a nominee of PCG to the Board (the "PCG Director").
Effective upon the Closing, all persons who were (other than
the PCG director) directors of BEPI immediately prior to the
Closing (other than the PCG director) shall submit their
resignations at the Closing. At the Closing, PCG, BEPI, and
such persons shall execute mutual releases which generally
release each other from all claims and liabilities and
agreements, known and unknown, except for rights to
indemnification to which such resigning directors may be
entitled under BEPI's certificate of incorporation and
by-laws.
(b) All persons who were officers of BEPI immediately prior to the
Closing shall submit their resignations at the Closing. At the
Closing, PCG, BEPI and such persons shall execute mutual
releases which generally release each other from all claims
and liabilities and agreements, known and unknown, except for
rights to indemnification to which such resigning officers may
be entitled under BEPI's certificate of incorporation and
by-laws.
(c) Concurrently with the Merger:
(i) JCF and PCG will effectuate the Asset Transfer; and
(ii) BEPI will pay a finder's fee to Brookehill Equities,
Inc. equal to 10% of the funds received in the
private placement referred to in Section 6(d) below
(d) It shall be a condition precedent to the Merger that BEPI
shall at the Closing issue an aggregate of up to 5 shares of
Series B Preferred Stock at $100,000 per share and shares of
Series C Preferred Stock convertible into 1,000,000 shares of
BEPI Common Stock at $.50 per share in a private placement to
be conducted by Brookehill Equities, Inc. The Series B and
Series C Preferred Stock shall be created on or before the
Closing pursuant to a Certificate of Designation in the form
set forth in the BEPI Disclosure Schedule. In the event that
the net assets of BEPI as shown on the Closing Balance Sheet
(as defined in Section 11(iv)) are less than $700,000, BEPI
shall issue, at PCG's option, up to an additional 15 shares
of Series B Preferred Stock in the private placement
sufficient to provide BEPI with net assets of approximately
$2,700,000 immediately following the Closing.
(e) On or before the 180th day after the Closing Date, BEPI shall
at its expense file a registration statement for the public
sale of (i) 1,468,000 shares of common stock (the "1996
Stock") and (ii) 1,868,000 shares of common stock issuable
pursuant to warrants, which , together with the 1996 Stock,
were issued by
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BEPI in a private placement in June and July 1996
(iii) for all shares of Common Stock issuable upon conversion
of the Series B and Series C Preferred Stock issued in the
private placement referred to in Section 6(d) and (iv) 127,750
shares of BEPI Common Stock issued by BEPI to settle certain
outstanding claims of BEPI.
(f) BEPI hereby agrees no later than January 9, 1998 to issue to
holders of the 1996 Stock additional shares of Common Stock
such that the total number of shares issued to such 1996
Stockholders will be the number of shares which would have
been issuable if the purchase price of such 1996 Stock had
been equal to the lowest price at which Series B Preferred
Stock was converted during 1997; provided , however, that (i)
such additional shares of Common Stock shall only be issued
if Series B Preferred Stock is actually converted during 1997
and (ii) such additional shares of Common Stock shall only be
issued to original holders of the 1996 Stock and only to the
extent that such holders still hold 1996 Stock on January 9,
1998.
(g) As soon as practicable after the Merger, BEPI shall use its
best efforts to amend its certificate of incorporation to
increase its authorized shares of common stock from 12,000,000
to 300,000,000, and to change the name of BEPI to Pacific
Chemical, Inc.
(h) For a period of five years after the Effective Date, BEPI
will file with the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") all documents and
notices which are required by NASDAQ of companies whose
securities are quoted by NASDAQ, use its best efforts to
maintain the NASDAQ quotation for its Common Stock to the
extent such Common Stock is then outstanding, and maintain in
the United States of America a transfer and warrant agent
and, if necessary under the jurisdiction of its incorporation,
a registrar (which may be the same entity as the transfer
agent) for its Common Stock and its Common Stock purchase
warrants.
7. Representations and Warranties of JCF and PCG. JCF and PCG jointly and
severally represent and warrant to BEPI and Subsidiary that, except as set forth
in the PCG Disclosure Schedule which was executed and delivered by PCG to BEPI
on the date hereof (the "PCG Disclosure Schedule") with a reference to the
relevant Section of this Agreement:
(a) Organization and Capitalization. PCG is a corporation duly
organized, validly existing and in good standing under the
laws of the British Virgin Islands. All of the issued and
outstanding shares of PCG's Common Stock are duly authorized,
validly issued, fully paid and nonassessable and were issued
and sold in compliance with all applicable securities laws
and regulations; and there are no other equity securities of
any class authorized, issued, reserved for issuance or
outstanding, and there are no preemptive rights as to any
shares. There are no outstanding options, warrants,
agreements or rights to subscribe for or to purchase, or
commitments to issue, shares of PCG capital stock. Except for
its interest in the Joint Venture, PCG does not own, directly
or indirectly, any outstanding capital stock or securities
convertible into capital stock of any other corporation or
any participating interest in any partnership, joint venture
or other business enterprise. All subsidiaries and the
directors and officers of each subsidiary are listed on the
PCG Disclosure Schedule.
(b) Power and Authority. PCG has all requisite power and authority
to own, lease and operate its properties and to conduct its
businesses as presently conducted and as proposed to be
conducted. PCG is not required to be qualified or licensed as
a foreign corporation in any jurisdiction other than the
jurisdiction of its incorporation.
(c) Certificate of Incorporation and By-Laws of PCG. The copy of
the Certificate of Incorporation of PCG, certified by the
appropriate officer of the British Virgin Islands and the
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By-Laws of PCG, certified by its Secretary, heretofore
delivered to BEPI, are true, complete and correct.
(d) Authority for Agreement, Joint Venture Agreement and Asset
Transfer. The Board of Directors and the Shareholders of JCF
and PCG have approved this Agreement and the Joint Venture
Agreement, and have authorized the execution and delivery
hereof and thereof and the Asset Transfer. JCF and PCG each
has full power, authority and legal right to enter into this
Agreement and the Joint Venture Agreement, to effect the
Asset Transfer, and to consummate the transactions
contemplated hereby. Any and all governmental approvals or
consents required therefor and for the operation of the Joint
Venture after the Closing have been obtained. This Agreement
and the Joint Venture Agreement are valid and binding on JCF
and PCG, and are enforceable in accordance with their terms
(except as may be limited by bankruptcy, moratorium or other
laws affecting creditors' rights generally.).
(e) No Violation to Result. The execution and delivery of this
Agreement and the Joint Venture Agreement, and the
consummation of the Asset Transfer and the other transactions
contemplated hereby and thereby:
(i) are not in violation or breach of, do not conflict
with or constitute a default under, and will not
accelerate or permit the acceleration of the
performance required by, any of the terms of the
charter documents or by-laws of JCF or PCG or any
note, debt instrument, security agreement or
mortgage, or any other contract or agreement, written
or oral, to which JCF or PCG or its shareholders is a
party or by which JCF or PCG or any of such
shareholders or any of their respective properties or
assets are bound;
(ii) will not be an event which, after notice or lapse of
time or both, will result in any such violation,
breach, conflict, default, or acceleration;
(iii) will not result in a violation under any law,
judgment, decree, order, rule, regulation or other
legal requirement of any governmental authority,
court or arbitration tribunal whether federal, state,
provincial, municipal or local (within the PRC, the
U.S. or otherwise) at law or in equity, and
applicable to JCF or PCG or any of its shareholders;
and
(iv) will not result in the creation or imposition of any
lien, possibility of lien, encumbrance, security
agreement, equity, option, claim, charge, pledge or
restriction in favor of any third person upon any of
the properties or assets of JCF or PCG.
(f) No Existing Defaults. Neither JCF nor PCG is in default in
any respect which is material to PCG:
(i) under any of the terms of any note, debt instrument,
security agreement or mortgage or under any other
commitment, contract, agreement, license, lease or
other instrument, whether written or oral, to which
JCF or PCG is a party or by which it or any of its
properties or assets are bound;
(ii) under any law, judgment, decree, order, rule
regulation or other legal requirement or any
governmental authority, court or arbitration tribunal
whether federal, state, provincial, municipal or
local (within the U.S. or otherwise), at law or in
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equity, and applicable to JCF or PCG or to any of its
properties or assets; or
(iii) in the payment of any of monetary obligations or
debts.
(g) Financial Statements, etc.
(i) The audited financial statements of Plant 1 of JCF as
of and for the years ended December 31, 1995, 1994
and 1993 and the unaudited financial statements of
Plant 1 of JCF for its ten months ended October 30,
1996 (which financial statements, including, without
limitation, any notes thereto and reports thereon are
hereinafter collectively called the "Plant 1
Financial Statements," and which financial statements
for the year ended December 31, 1995 are hereinafter
referred to as the "Plant 1 1995 Financial
Statements"), all of which have been delivered to
BEPI, correctly and fairly present the financial
position of Plant 1 of JCF and the results of
operations as of the respective dates and for the
periods indicated thereon and have been prepared in
accordance with generally accepted accounting
principles applied on a consistent basis.
(ii) Prior to the date of this Agreement, PCG has not
engaged in any business activities other than its
organization and its entry into the Joint Venture
Agreement. It has no material assets or liabilities
other than its rights and obligations under the Joint
Venture Agreement.
(h) No Adverse Changes. To the extent material to PCG, from
December 31, 1995 to the date of this Agreement:
(i) there has been no damage, destruction or loss, by
reason of fire, explosion, earthquake, casualty,
labor trouble, requisition or taking of property by
any government or agency thereof, windstorm, embargo,
riot, act of God or the public enemy, flood, volcanic
eruption, accident, other calamity or other similar
or dissimilar event (whether or not covered by
insurance); and
(ii) there have been no adverse changes in the condition
(financial or otherwise), business, net worth,
assets, properties, liabilities or obligations
(fixed, contingent, known, unknown or otherwise) of
Plant 1 of JCF, and there has been no occurrence,
circumstance or combination thereof which might
reasonably be expected to result in any such adverse
effect before or after the Effective Date.
(i) Taxes. To the extent material to PCG, JCF has prepared (or
caused to be prepared) and timely and properly filed (or
caused to be timely and properly filed) with the appropriate
federal, state, provincial, municipal or local authorities
(within the PRC or otherwise) all tax returns, information
returns and other reports required to be filed and has paid or
accrued (or caused to be so paid or accrued) in full all
taxes, interest, penalties, assessments or deficiencies, if
any, due to, or claimed to be due by, any taxing authority.
The Plant 1 Financial Statements set forth appropriate
provisions for all taxes, interest, penalties, assessments or
deficiencies, if any, for the periods indicated thereon to the
extent not theretofore paid. To the extent material to PCG,
JCF has not executed or filed with any taxing authority any
agreement extending the period for assessment or collection of
any taxes. To the extent material to PCG, JCF is not a party
to any pending action or proceeding, nor is any such action or
proceeding threatened, by any governmental authority for the
assessment or collection of taxes, and no claim for assessment
or collection of taxes has been asserted against JCF, and
during the course of any audit currently in process or not
7
<PAGE>
completed, no issues have been suggested by any representative
of any such governmental authority that, if asserted, would
result in a proposed assessment of taxes, interest or
penalties, against JCF.
(j) Pending Transactions. The PCG Disclosure Schedule sets forth a
list of all pending transactions of Plant 1 which are out of
the ordinary course of business and would involve the
expenditure or commitment of in excess of US $500,000.
(k) Intellectual Property. JCF owns or possess, and by the Asset
Transfer will transfer to the Joint Venture, adequate licenses
or other rights to use all trademarks, certification marks,
trade names, service marks, copyrights, patents, patent
applications, trade secrets, product composition formulae,
computer programs, product development records and other
proprietary processes and information used in its business,
and the same are sufficient in all respects to conduct the
business of Plant 1 and the Joint Venture as currently
conducted and as proposed to be conducted. Except as described
in the PCG Disclosure Schedule or the Joint Venture Agreement,
the Joint Venture will not after the Asset Transfer be
required to pay any royalty, license fee or similar type of
compensation in connection with the conduct of its business as
it is now or heretofore has been conducted or as proposed to
be conducted. All patents, patent applications and rights to
inventions or discoveries (whether or not patentable) owned or
held by any officer, director, stockholder, employee,
consultant or agent of JCF and relating to the business of the
Joint Venture have been duly and effectively transferred to
JCF and will be further transferred to the Joint Venture in
the Asset Transfer: and, to the extent material to PCG and
except as described on the PCG Disclosure Schedule the
operations of JCF do not infringe, and no one has asserted
that such operations do infringe, the patents, patent
applications, trademarks, certifications marks, trade names,
service marks, trade secrets or other intellectual property
rights of anyone.
(l) Brokers. Except for Brookehill Equities, Inc., S.L. Chen &
Associates, Inc. and Oscar D. Folger, JCF and PCG has not
expressly or impliedly engaged any broker, finder, investment
banker, or agent with respect to this Agreement or any
transaction contemplated hereby, or agreed to pay any fee to
any such person or entity.
(m) Litigation. To the extent material to PCG and except as set
forth in the PCG Disclosure Schedule, there is no litigation,
suit, proceeding, action, claim or (to the knowledge of JCF or
PCG) investigation, at law or in equity, pending or (to the
knowledge of JCF or PCG) threatened against PCG or JCF or
involving any of its property or assets, before any court,
agency, authority or arbitration tribunal, including, without
limitation, any product liability, workers' compensation or
wrongful dismissal claims, or claims, actions, suits or
proceedings relating to toxic materials, hazardous substances,
pollution or the environment.
(n) Compliance with Laws. JCF and PCG have complied with all laws,
municipal by-laws, regulations, rules, orders, judgments,
decrees and other requirements and policies imposed by any
governmental authority applicable to them or their properties
and which are material to PCG.
(o) Employee Compensation and Agreements with Affiliates. The PCG
Disclosure Schedule contains a true and complete list of all
employees of Plant 1 who earn or receive more than US$60,000
annually from JCF.
(p) Survival of Representations and Warranties; Notice of Changes.
(i) The representations and warranties of PCG and JCF
made in this Agreement, are correct, true and
8
<PAGE>
complete as of the date hereof and will be correct,
true and complete as at the Effective Date with the
same force and effect as though such representations
and warranties had been made at the Effective Date,
and shall survive the Effective Date for six months.
(ii) PCG and JCF shall give to BEPI prompt written notice
of any fact or circumstance which would render
incorrect any representation or warranty by them.
8. Representations and Warranties of BEPI and Subsidiary. BEPI represents and
warrants to JCF and PCG that, except as set forth in the disclosure schedule
which was executed and delivered by BEPI and the Subsidiary to JCF and PCG on
the date hereof (the "BEPI Disclosure Schedule") with a reference to the
relevant Section of this Agreement:
(a) Organization and Capitalization of BEPI. BEPI is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Delaware. All of the issued and
outstanding shares of BEPI are duly authorized, validly
issued, fully paid and nonassessable; and, except as set forth
in the BEPI Disclosure Schedule, there are no other equity
securities of any class of BEPI authorized, issued, reserved
for issuance or outstanding; and there are no preemptive
rights as to any shares. Except as set forth on the BEPI
Disclosure Schedule, there are no outstanding options,
warrants, agreements or rights to subscribe for or to
purchase, or commitments to issue, shares of BEPI Common
Stock. All subsidiaries of BEPI and the officers and directors
of each subsidiary are listed on the BEPI Disclosure Schedule
(b) Organization and Capitalization of Subsidiary. Subsidiary is a
corporation duly organized, validly existing and in good
standing under the laws of British Virgin Islands with an
authorized capital consisting solely of 1,000 shares Common
Stock ("Subsidiary's Common Stock"), of which 100 shares are
issued and outstanding; all of such 100 issued and outstanding
shares of Subsidiary's Common Stock are duly authorized,
validly issued, fully paid and nonassessable; and there are no
other equity securities of any class of BEPI Subsidiary
authorized, issued, reserved for issuance or outstanding.
There are no outstanding options, warrants, agreements or
rights to subscribe for or to purchase, or commitments to
issue, shares of Subsidiary's Common Stock.
(c) Ownership of Subsidiary. BEPI owns or prior to the Effective
Date will own 100 shares of Subsidiary's Common Stock, which
shares represent all of the issued and outstanding shares of
the Subsidiary.
(d) Power and Authority. The Board of Directors of BEPI and
Subsidiary have each approved this Agreement. Each of BEPI and
Subsidiary has all requisite power and authority to own, lease
and operate its properties and to conduct its business as
presently conducted and as proposed to be conducted and is
duly qualified or licensed as a foreign corporation in good
standing in each jurisdiction in which the character of its
properties or the nature of its business activities require
such qualification. All such jurisdictions are listed in the
BEPI Disclosure Schedule.
(e) Certificate of Incorporation and By-Laws of BEPI and
Subsidiary. The copies of the Certificate of Incorporation of
BEPI and Subsidiary, each certified by the Secretary of State
of its respective state of incorporation, and the By-Laws of
BEPI and Subsidiary, certified by their respective
Secretaries, heretofore delivered by BEPI and Subsidiary to
PCG, are true, complete and correct.
9
<PAGE>
(f) Authority for Agreement. The Board of Directors of each of
BEPI and Subsidiary, and the shareholder of Subsidiary, have
each approved this Agreement and have authorized the execution
and delivery hereof. BEPI and Subsidiary each has full power,
authority and legal right to enter into this Agreement and to
consummate the transactions contemplated hereby. This
Agreement is valid and binding on BEPI and Subsidiary, and is
enforceable in accordance with its terms (except as may be
limited by bankruptcy, insolvency, moratorium or other laws
affecting creditors' rights generally.)
(g) No Violation to Result. Except as set forth in the BEPI
Disclosure Schedule, the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby:
(i) are not in violation or breach of, do not conflict
with or constitute a default under, and will not
accelerate or permit the acceleration of the
performance required by, any of the terms of the
charter documents or by-laws of BEPI or Subsidiary or
(after the consents referred to in the BEPI
Disclosure Schedule are obtained) any note, debt
instrument, security agreement or mortgage, or any
other contract or agreement, written or oral, to
which BEPI or Subsidiary is a party or by which BEPI
or Subsidiary or any of their properties or assets
are bound;
(ii) will not be an event which, after notice or lapse of
time or both, will result in any such violation,
breach, conflict, default, or acceleration;
(iii) will not result in violation under any law, judgment,
decree, order, rule, regulation or other legal
requirement of any governmental authority, court or
arbitration tribunal whether federal, state,
provincial, municipal or local (within the U.S. or
otherwise) at law or in equity, and applicable to
BEPI or Subsidiary; and
(iv) will not result in the creation or imposition of any
lien, possibility of lien, encumbrance, security
agreement, equity, option, claim, charge, pledge or
restriction in favor of any third person upon any of
the properties or assets of BEPI or Subsidiary.
(h) No Existing Defaults. Except as set forth in the BEPI
Disclosure Schedule, BEPI and Subsidiary are not in material
default in any material respect:
(i) under any of the terms of any note, debt instrument,
security agreement or mortgage or under any other
commitment, contract, agreement, license, lease or
other instrument, whether written or oral, to which
it is a party or by which it or any of its properties
or assets is bound;
(ii) under any law, judgment, decree, order, rule,
regulation or other legal requirement or any
governmental authority, court or arbitration tribunal
whether federal, state, provincial, municipal or
local (within the U.S. or otherwise), at law or in
equity, and applicable to it or to any of its
properties or assets; or
(iii) in the payment of any of its monetary obligations or
debts.
(i) Reports and Financial Statements.
(i) BEPI has previously furnished to PCG and JCF with
true and complete copies of its (i) Annual Report on
Form 10-KSB for the year ended December 31,1995, as
filed with the United States Securities and Exchange
Commission (the "Commission"), (ii) Quarterly Report
on Form 10-QSB filed for the fiscal quarter and nine
months ended September 30, 1996 (the "BEPI Quarterly
10
<PAGE>
Report"), (iii) proxy statements relating to all
meetings of its stockholders (whether annual or
special) since December 31, 1995, and (iv) all other
reports, registration statements and other written
materials filed by BEPI with the Commission since
December 31, 1995. The financial statements included
in such reports were prepared in accordance with
generally accepted accounting principles,
consistently applied, and present fairly the
financial position and the results of operations of
BEPI for the periods indicated. There has been no
material adverse change in BEPI's business or
financial condition since September 30, 1996, except
that as set forth in the BEPI Disclosure Schedule.
The Closing Balance Sheet (as defined in Section
11(iv)) will be prepared in accordance with generally
accepted accounting principles, consistently applied,
and will fairly present the financial position of
BEPI as of the date of the Closing Balance Sheet.
(ii) As of their respective dates, such reports,
statements and other written materials did not
contain any untrue statement of a material fact or
omit to state a material fact required to be stated
therein or necessary to make the statements therein,
in light of the circumstances under which they were
made, not misleading.
(iii) The audited consolidated financial statements and any
unaudited interim financial statements of BEPI
included in such reports have been prepared in
accordance with generally accepted accounting
principles applied on a consistent basis and fairly
present the financial position of BEPI and its
subsidiaries as at the dates thereof and the results
of their operations and changes in financial position
for the periods then ended, except as indicated
therein or in the notes thereto.
(j) No Adverse Changes. From September 30, 1996 to the date of
this Agreement, except as disclosed in the BEPI Disclosure
Schedule and except as otherwise permitted herein:
(i) BEPI and Subsidiary have not sustained any damage,
destruction or loss, by reason of fire, explosion,
earthquake, casualty, labor trouble, requisition or
taking of property by any government or agency
thereof, windstorm, embargo, riot, act of God or the
public enemy, flood, volcanic eruption, accident,
other calamity or other similar or dissimilar event
(whether or not covered by insurance) adversely
affecting the business, properties, financial
condition or operations of BEPI; and
(ii) there have been no adverse changes in the condition
(financial or otherwise), business, net worth,
assets, properties, liabilities or obligations
(fixed, contingent, known, unknown or otherwise) of
BEPI and Subsidiary which individually or in the
aggregate have had or may have a material adverse
effect on the business, properties, financial
condition or operations of BEPI and Subsidiary, taken
as a whole, and there has been no occurrence,
circumstance or combination thereof which might
reasonably be expected to result in any such adverse
effect before or after the Effective Date.
(k) BEPI and Subsidiary Employee Plans and Agreements. Except as
otherwise set forth in the BEPI Disclosure Schedule, BEPI has
no employee benefit plans whatsoever.
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<PAGE>
(l) Taxes. BEPI and Subsidiary have each prepared (or caused to be
prepared) and timely and properly filed (or caused to be
timely and properly filed) with the appropriate federal,
state, provincial, municipal or local authorities (within the
U.S. or otherwise) all tax returns, information returns and
other reports required to be filed and have paid or accrued
(or caused to be so paid or accrued) in full all taxes,
interest, penalties, assessments or deficiencies, if any, due
to, or claimed to be due by, any taxing authority. The balance
sheet included in the BEPI Quarterly Report include
appropriate provisions for all such taxes, interest,
penalties, assessments or deficiencies, if any, for the
periods indicated therein to the extent not theretofore paid.
Neither BEPI nor Subsidiary has executed or filed with any
taxing authority any agreement extending the period for
assessment or collection of any taxes. Neither BEPI nor
Subsidiary is a party to any pending action or proceeding,
nor, to the knowledge of BEPI or Subsidiary, is any such
action or proceeding threatened, by any governmental authority
for the assessment or collection of taxes, and no claim for
assessment or collection of taxes has been asserted against
BEPI or Subsidiary, and during the course of any audit
currently in process or not completed, no issues have been
suggested by any representative of any such governmental
authority that, if asserted, would result in a proposed
assessment of taxes, interest or penalties, against BEPI or
Subsidiary.
(m) Pending Transactions. The BEPI Disclosure Schedule sets forth
a list of all pending transactions (whether or not PCG is
legally bound to enter therein) which are out of the ordinary
course of business and would involve the expenditure or
commitment of in excess of $20,000.
(n) Intellectual Property. The BEPI Disclosure Schedule contains a
true and complete list of all trademarks, certification marks,
trade names, service marks, copyrights, patents, patent
applications and product composition formulae owned or used by
BEPI and Subsidiary which are material to the current business
of BEPI. BEPI and Subsidiary own or possess adequate licenses
or other rights to use all trademarks, certification marks,
trade names, service marks, copyrights, patents, patent
applications, trade secrets, product composition formulae,
computer programs, product development records and other
proprietary processes and information used in its business,
and the same are sufficient in all respects to conduct the
business as now conducted or as proposed to be conducted.
Except as described in the BEPI Disclosure Schedule, neither
BEPI nor Subsidiary is required to pay any royalty, license
fee or similar type of compensation in connection with the
conduct of its business as it is now or heretofore has been
conducted. All patents, patent applications and rights to
inventions or discoveries (whether or not patentable) owned or
held by any officer, director, stockholder, employee,
consultant or agent of BEPI or Subsidiary and relating to its
business in any manner have been duly and effectively
transferred to BEPI or Subsidiary; and, except as described on
the BEPI Disclosure Schedule, the operations of BEPI and
Subsidiary do not infringe, and no one has asserted that such
operations do infringe, the patents, patent applications,
trademarks, certifications marks, trade names, service marks,
trade secrets or other intellectual property rights of anyone.
(o) Machinery and Equipment. BEPI or Subsidiary owns or has
adequate rights to all machinery and equipment (including,
without limitation, machinery and equipment under development
or construction) used or necessary for use in its trade or
business, and all such material machinery and equipment is in
substantially good operating condition.
(p) Brokers. Neither BEPI nor Subsidiary has expressly or
impliedly engaged any broker, finder, investment banker, or
agent with respect to this Agreement or any transaction
12
<PAGE>
contemplated hereby, or agreed to pay any fee to any such
person or entity.
(q) Contracts. The BEPI Disclosure Schedule contains a true and
complete list of each contract or agreement, requiring
aggregate payments by BEPI or Subsidiary, or receipts by BEPI
or Subsidiary, in excess of $25,000, to which BEPI or
Subsidiary is a party, or by which BEPI or Subsidiary is
bound, in any respect.
(r) Litigation. Except as set forth in the BEPI Disclosure
Schedule, there is no material litigation, suit, proceeding,
action, claim or (to the knowledge of BEPI) investigation, at
law or in equity, pending or (to the knowledge of BEPI)
threatened against or affecting BEPI or Subsidiary or
involving any of their property or assets, before any court,
agency, authority or arbitration tribunal, including, without
limitation, any product liability, workers' compensation or
wrongful dismissal claims, or claims, actions, suits or
proceedings relating to toxic materials, hazardous substances,
pollution or the environment. There are no facts which, if
known to customers, governmental authorities or other persons,
might result in any such litigation, suit, proceeding, action,
claim or investigation. Except as set forth in the BEPI
Disclosure Schedule, neither BEPI nor Subsidiary is subject to
or in default with respect to any notice, order, writ,
injunction or decree of any court, agency, authority or
arbitration tribunal.
(s) Compliance with Laws. BEPI and Subsidiary have each complied
with all laws, municipal by-laws, regulations, rules, orders,
judgments, decrees and other requirements and policies imposed
by any governmental authority applicable to it, its properties
or the operation of its business.
(t) Licenses, Permits and Approvals. BEPI and Subsidiary each have
all material licenses, permits, approvals, qualifications or
the like, issued or to be issued to BEPI and Subsidiary by any
government or any governmental unit, agency, body or
instrumentality, whether federal, state, provincial, municipal
or local (within the U.S. or otherwise) necessary for the
conduct of its trade or business, and all such items are in
full force and effect, and are listed in the BEPI Disclosure
Schedule.
(u) Employee Compensation and Agreements with Affiliates. The BEPI
Disclosure Schedule contains a true and complete list of all
employees of BEPI and Subsidiary earning or receiving more
than $60,000 annually from BEPI.
(v) Bank Accounts. The BEPI Disclosure Schedule contains a true
and complete list of (i) all accounts of BEPI with any bank,
trust company or other deposit taking institution, together
with the names of the persons authorized to draw thereon, and
(ii) the names of all persons holding powers of attorney from
BEPI and a summary statement of the terms thereof.
(w) Survival of Representations and Warranties; Notice of Changes.
(i) The representations and warranties of each of BEPI
and Subsidiary made in this Agreement are correct,
true and complete as of the date hereof and will be
correct, true and complete as at the Effective Date
with the same force and effect as though such
representations and warranties had been made at the
Effective Date, and shall survive the Effective Date
for six months.
(ii) BEPI shall give to PCG prompt written notice of any
fact or circumstance which would render incorrect any
representation and warranty made by it or Subsidiary.
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<PAGE>
9. Conduct and Transactions Prior to Closing, and Certain Other Agreements
(a) Access to Properties and Records. Each party shall afford to the
officers, employees, attorneys, accountants and other authorized
representatives of the other, free and full access to all of its
assets, properties, books and records, in order to afford each party as
full an opportunity of review, examination and investigation as it
shall desire to make of the affairs of the other, and each shall be
permitted to make extracts from, or take copies of, such books, records
(including the stock record and minute books) or other documentation or
to obtain temporary possession of any thereof as may be reasonably
necessary; and each shall furnish or cause to be furnished to the other
such reasonable financial and operating data and other information
about its business, properties and assets which any of such party's
respective officers, employees, attorneys, accountants or other
authorized representatives may reasonably request. Each party agrees to
maintain in confidence all information thus acquired unless such
information is or becomes publicly available otherwise than through
breach of this Agreement.
(b) Interim Covenants of each Party. Unless this Agreement is executed
simultaneously with the Closing, from the date of this Agreement until
the Effective Date, except to the extent expressly permitted by this
Agreement or otherwise consented to by an instrument in writing signed
by each other party or as otherwise set forth in the BEPI Disclosure
Schedule or the PCG Disclosure Schedule, each party shall conduct its
operations only in the ordinary course, narrowly construed, and it
shall not make any change in its constituent documents, i.e.,
Certificate of Incorporation or by-laws.
(c) Information. Each party will furnish to the other parties all
information concerning the first party which is reasonably required for
inclusion in any filing with any governmental or regulatory body in
connection with the transactions contemplated by this Agreement or
otherwise required by law.
(d) Notice of Breach.
(i) BEPI and Subsidiary will immediately give notice to
PCG of the occurrence of any event or the failure of
any event to occur that results in a breach of any
representation or warranty by BEPI and Subsidiary
contained herein or a failure by BEPI and Subsidiary
to comply with any covenant, condition or agreement
contained herein.
(ii) PCG and JCF will immediately give notice to BEPI and
Subsidiary of the occurrence of any event or the
failure of any event to occur that results in a
breach of any representation or warranty by PCG and
JCF contained herein or a failure by PCG or JCF to
comply with any covenant, condition or agreement
contained herein.
(e) Representations. BEPI, Subsidiary, PCG and JCF (a) will take
all action necessary to render accurate as of the Effective
Date their respective representations and warranties contained
herein, (b) will refrain from taking any action which would
render any such representation or warranty inaccurate in any
material respect as of such time, and (c) will perform or
cause to be satisfied each covenant or condition to be
performed or satisfied by them.
(f) Negotiations with Third Parties. The parties will not, without
the prior written approval of the others, furnish any
information to, or initiate or participate in discussions or
negotiations with, third parties relating to any merger, sale
or other disposition of any substantial part of its assets or
14
<PAGE>
stock or any other sale by stockholders of such party of any
of their shares of its Common Stock.
10. Conditions to Obligations of BEPI and Subsidiary. In addition to the
conditions set forth in Section 6, all obligations of BEPI and Subsidiary under
this Agreement are subject to the fulfillment and satisfaction, prior to or at
the time at which the Effective Date is scheduled to occur, of each of the
following conditions, any one or more of which may be waived by BEPI and
Subsidiary.
(i) Representations and Warranties True at the Effective
Date. At the Effective Date, the representations and
warranties of JCF and PCG set forth in this Agreement
will be true and correct in all material respects at
and as of such time, and unless this Agreement is
executed simultaneously with the Closing, at the
Effective Date PCG shall have delivered to BEPI and
Subsidiary a certificate to such effect signed by an
executive officer of JCF and PCG.
(ii) Performance. Each of the obligations of PCG and JCF
to be performed by it on or before the Effective Date
pursuant to the terms of this Agreement shall have
been duly performed in all material respects at the
Effective Date, and unless this Agreement is executed
simultaneously with the Closing, at the Effective
Date PCG shall have delivered to BEPI and Subsidiary
a certificate to such effect signed by an executive
officer of PCG and JCF.
(iii) Authority. All action required to be taken by, or on
the part of, PCG and JCF to authorize the execution,
delivery and performance of this Agreement by PCG and
JCF and the consummation of the transactions
contemplated hereby shall have been duly and validly
taken by the Board of Directors and stockholders of
each of PCG and JCF.
(iv) Fairness Opinion. BEPI's Board of Directors shall
have received an opinion from a financial advisor
selected by BEPI to the effect that the consideration
to be provided by BEPI to PCG in connection with the
transactions contemplated by Section 5 of this
Agreement is fair to the BEPI stockholders from a
financial point of view to BEPI and its stockholders.
(v) Legal Opinions.
(A) PCG and BEPI's Board of Directors shall have
received an opinion from Wilentz, Goldman &
Spitzer, P.A., to the effect that (i) except
as otherwise set forth in this Agreement, no
approval or consent of the BEPI shareholders
is necessary in order to consummate the
transactions contemplated by this Agreement,
(ii) this Agreement has been duly
authorized, executed and delivered by BEPI
and no consent, approval, authorization,
qualification or other order of, or any
filing or registration with, any regulatory
body, administrative agency or governmental
body or other third party is legally
required for BEPI to consummate the
transactions which are contemplated to occur
prior to the Closing in accordance with the
terms of this Agreement; and (iii) neither
the execution and delivery of this Agreement
by BEPI nor the consummation of the
transactions contemplated hereby will
violate its certificate of incorporation or
by-laws or any law by which BEPI or its
property is bound,
(B) PCG and BEPI's Boards of Directors shall
have received an opinion from counsel
reasonably acceptable to PCG and BEPI to the
effect that (i) that PCG and Subsidiary are
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<PAGE>
each duly incorporated, validly existing and
in good standing under the laws of the
respective jurisdictions in which they are
incorporated, (ii) this Agreement has been
duly authorized, executed and delivered by
PCG and Subsidiary and is a valid and
binding agreement of each of PCG and
Subsidiary enforceable against such entities
in accordance with its terms except as the
enforcement thereof may be limited by
bankruptcy, insolvency, moratorium or other
laws effecting creditors' rights generally,
(iii) neither the execution and delivery of
this Agreement by PCG or Subsidiary nor the
consummation of the transactions
contemplated hereby will violate their
respective certificates of incorporation or
by-laws or any law by which such entities or
their property are bound, (iv) except as
otherwise set forth in this Agreement, no
approval or consent of the shareholders of
PCG or Subsidiary is necessary in order to
consummate the transactions contemplated by
this Agreement, (v) no consent, approval,
authorization, qualification or other order
of, or any filing or registration with any
regulatory body, administrative agency or
governmental body or other third party is
legally required for PCG or Subsidiary to
consummate the transactions which are
contemplated to occur in accordance with the
terms of this Agreement, and (vi) the Merger
has duly and validly been effected. PCG will
supply to BEPI any confirmatory legal
information which PCG receives relating to
PRC law.
11. Conditions to Obligations of JCF and PCG. In addition to the conditions set
forth in Section 6 and 10(v), all obligations of JCF and PCG under this
Agreement are subject to the fulfillment and satisfaction, prior to or at the
time at which the Effective Date is scheduled to occur, of each of the following
conditions, any one or more of which may be waived by PCG.
(i) Representations and Warranties True at the Effective
Date. At the Effective Date, the representations and
warranties of BEPI and Subsidiary set forth in this
Agreement will be true and correct in all material
respects at and as of such time, and, unless this
Agreement is executed simultaneously with the
Closing, at the Effective Date, BEPI and Subsidiary
shall have delivered to PCG a certificate to such
effect signed by the President and the Chief
Operating Officer of BEPI and by the President of
Subsidiary.
(ii) BEPI and Subsidiary's Performance. Each of the
obligations of BEPI and Subsidiary to be performed by
it on or before the Effective Date pursuant to the
terms of this Agreement shall have been duly
performed in all material respects at the Effective
Date, and unless this Agreement is executed
simultaneously with the Closing, at the Effective
Date BEPI and Subsidiary shall have delivered to JCF
and PCG a certificate to such effect signed by the
President and the Chief Operating Officer of BEPI and
by the President of Subsidiary.
(iii) Authority. All action required to be taken by, or on
the part of, BEPI and Subsidiary to authorize the
execution, delivery and performance of this Agreement
by BEPI and the consummation of the transactions
contemplated hereby shall have been duly and validly
taken by the Board of Directors of each of BEPI and
Subsidiary.
(iv) Interim Balance Sheet. BEPI shall have supplied to
PCG and JCF an interim balance sheet as of a date no
16
<PAGE>
more than five business days prior to the Closing
Date (the "Closing Balance Sheet").
12. Best Efforts. Each party shall use its best efforts to cause all conditions
to the Closing to be fulfilled as soon as possible.
13. Termination. Any party who has not theretofore breached any provision of
this Agreement (including such party's obligations to use its best efforts to
satisfy conditions for the Closing) may terminate this Agreement by notice to
the other parties if all conditions to the Closing shall not have been satisfied
by the close of business on January 31, 1997. Such termination shall not limit
any other right or remedies which the terminating party may have against any
other party.
14. Indemnity
(a) The term "Representing Group" means each of (i) PCG and JCF,
and (ii) BEPI and Subsidiary.
(b) Indemnity. Each member of each Representing Group (each, an
"Indemnitor") hereby jointly and severally agrees to indemnify
each member of the other Representing Group (each, an
"Indemnitee") and hold it and them harmless against and in
respect of the following:
(A) any and all loss, liability or damage
suffered or incurred by the Indemnitee by
reason of any untrue representation, breach
of warranty or non-fulfillment of any
covenant by any Indemnitor; and
(B) any and all actions, suits, proceedings,
claims, demands, assessments, judgments,
costs, and expenses, including, without
limitation, legal fees and expenses,
incident to any of the foregoing or incurred
in investigating or attempting to avoid the
same or to oppose the imposition thereof, or
in enforcing this indemnity.
14 Miscellaneous
(a) Successors, Assigns and Third Parties. This Agreement shall
inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns; provided,
however, that, except as otherwise expressly provided herein,
none of the parties hereto may make any assignment of this
Agreement or any interest herein without the prior written
consent of the other parties hereto. Nothing herein expressed
or implied is intended or shall be construed to confer upon or
give to any person, firm or corporation, other than the
parties hereto and their respective successors and assigns,
any rights or remedies under or by reason of this Agreement.
(b) Governing Law; Jurisdiction. This Agreement shall in all
respects be interpreted, construed and governed by and in
accordance with the internal substantive laws of the State of
Delaware, disregarding principles of conflict of laws and the
like. The federal and state courts in New York or New Jersey
shall have exclusive jurisdiction over all matters relating to
this Agreement.
(c) Severability. Each section, subsection and lesser section of
this Agreement constitutes a separate and distinct
undertaking, covenant and/or provision hereof. In the event
that any provision of this Agreement shall finally be
determined to be unlawful, such provision shall be deemed
17
<PAGE>
severed from this Agreement, but every other provision of this
Agreement shall remain in full force and effect.
(d) Notices. Except as otherwise expressly provided herein, any
notice, service of process, consent, or other communication
required or permitted to be given hereunder shall be in
writing and shall be deemed to have been given when received,
and shall be addressed as follows:
(i) If to BEPI or Subsidiary, to it at:
c/o BEPI at its address set forth above,
with a copy to:
John T. Kelly, Esq.
Wilentz Goldman & Spitzer, PA
90 Woodbridge Center Drive
Woodbridge, New Jersey 07095
(i) If to PCG or to JCF, to it at
c/o S.L. Chen & Associates,
805 Third Avenue,
New York, New York 10022
Attn: J.S. Pan
with a copy to:
Oscar D. Folger, Esq.
Law Offices of Oscar D. Folger
Fifth Avenue - 24th Floor
New York, New York 10175
or at such other address or addresses as the party addressed
may from time to time designate in writing. Any communication
dispatched by telegram or telex shall be confirmed by letter.
(a) Expenses. All legal and other costs and expenses incurred in
connection herewith and the transactions contemplated hereby
shall be paid by the party incurring such expenses. Without
limiting the generality of the foregoing, any and all fees and
expenses of any attorneys of the Constituent Corporations
incurred in connection with this Agreement or the transactions
contemplated hereby shall be borne by the Constituent
Corporation incurring such expense and shall not be assumed by
any other Constituent Corporation.
(b) Headings. The headings in this Agreement are intended solely
for convenience of reference and shall be given no effect in
the construction or interpretation of this Agreement.
(c) Counterparts and Facsimiles. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original but all of which shall constitute the same agreement.
This Agreement may be signed by facsimile.
(d) Entire Agreement. This Agreement sets forth all understandings
of the parties. It may not be changed or terminated orally.
IN WITNESS WHEREOF, the parties hereto have caused their signatures to be
affixed to this Agreement as of the date first above written.
18
<PAGE>
BUREAU OF ELECTRONIC PUBLISHING, INC. JINAN CHEMICAL FIBRE CORPORATION
By: /s/ Bryan Finkel By: /s/ Li De Yuan
--------------------------------- ------------------------------
Title: Director Title: Vice Chairman
------------------------------ ---------------------------
BEPI ACQUISITION CORPORATION PACIFIC CHEMICAL GROUP LIMITED
By: /s/ Bryan Finkel By: /s/ Li De Yuan
--------------------------------- ------------------------------
Title: Director Title: Vice Chairman
------------------------------ ---------------------------
19
Jinan Dayang Chemical Fiber Co., Ltd.
Sino-American Joint Venture Contract
February 9, 1996
Table of Contents
Chapter 1 General
Chapter 2 Contracting parties
Chapter 3 Joint venture
Chapter 4 Purpose, scope and scale of operations
Chapter 5 Total investment and registered capital
Chapter 6 Responsibilities of the contracting parties
Chapter 7 Sale
Chapter 8 Board of directors
Chapter 9 Operations management
Chapter 10 Purchase of equipment and raw materials
Chapter 11 Labor management
Chapter 12 Taxes, finance and auditing
Chapter 13 Duration of the joint venture
Chapter 14 Liquidation
Chapter 15 Insurance
Chapter 16 Amendment, alteration and termination
Chapter 17 Default
Chapter 18 Force majeure
Chapter l9 Application of laws
Chapter 20 Resolution of disputes
Chapter 21 Language
Chapter 22 Miscellaneous
<PAGE>
Chapter 1 General
In accordance with the Joint Venture Law of the People's Republic of China
("PRC") and the principles of equality and mutual benefit, all of the
contracting parties agree to establish a joint venture in the city of Jinan,
Shandong Province.
Chapter 2 Contracting parties
Article 1
The contracting parties are
Party A: Jinan Chemical Fiber Corporation
(Registered in Jinan, Shandong, PRC)
No. 2 Hua Xian Road, East Suburb, Jinan, Shandong, PRC
Legal representative: Jin Shan, General Manager (Nationality:
PRC)
Party B: American Pacific Chemical Fibre Corporation
(aka Pacific Chemical Group Limited, see attached Supplementary
Agreement)
(Incorporated in the British Virgin Islands)
British Virgin Islands
Legal representative: Chen Zheng Hao, Representative
(Nationality: U.S.A.)
Chapter 3 Joint venture
Article 2
In accordance with the Joint Venture Law and other relevant laws of the PRC,
Party A and Party B consent to establish a joint venture, Jinan Dayang Chemical
Fiber Co., Ltd. (the "Joint Venture").
Article 3
The name of the Joint Venture is Jinan Dayang Chemical Fiber Co., Ltd. The
address of the Joint Venture is No. 2 Hua Xian Road, East Suburb, Jinan,
Shandong, PRC.
Article 4
All of the activities of the Joint Venture shall be governed by the laws of the
PRC.
Article 5
The Joint Venture is a limited liability company and the contracting parties
shall bear liabilities and receive profits in accordance with their respective
investments.
Chapter 4 Purpose, scope and scale of operations
<PAGE>
Article 6
The purpose of the operations is to introduce advanced technology and
management, develop new products, increase product quality, strengthen
competitive advantages and achieve higher profits.
Article 7
The scope of operations is the production and sale of Purified Terephthalic Acid
("PTA").
Article 8
The scale of operations is an annual output of 75,000 tons of PTA.
Chapter 5 Total investment and registered capital
Article 9
The total investment is US$29,420,000.
Article 10
Registered capital is US$29,420,000. The investment proportions are as follows:
Party A US$14,425,000 49%
Party B US$14,995,000 51%
Article 11
Party A's investment shall take the form of facilities, equipment, land and
trademarks (net value US$14,425,000). Party B shall invest US$14,995,000 in
cash.
Article 12
Both parties shall invest their respective total registered investments in lump
sums within the period specified by the Joint Venture Law of the PRC starting
the date on which the joint venture business license is issued.
An auditor registered in the PRC will audit the company and provide both
parties with final audited financial statements.
Article 13
Any party desiring to transfer its shares in the Joint Venture to a third party
shall be permitted to do so by the other contracting party. Furthermore, the
other contracting party shall have the right of first refusal to purchase the
shares.
Article 14
The Joint Venture will lease land, plants, buildings, construction equipment,
certain production equipment (including pipelines) and residential apartments
from Party A. (The lease will be signed separately.)
<PAGE>
Party A will provide the Joint Venture with water, electricity, steam,
compressed air, and nitrogen, and shall be compensated accordingly. (The supply
contract will be signed separately.)
Article 15
With regard to current assets, raw materials, supplementary equipment and
low-cost supplies will be audited and sold to the Joint Venture by Party A as
soon as the Joint Venture commences operations. If the Joint Venture is not able
to pay for such assets, then liabilities shall be reflected on the balance sheet
and the payment shall be deducted from loans provided to the Joint Venture by
Party A.
With regard to intangible assets, Party A's electricity usage rights, water
usage rights and patents shall be audited by the State-Owned Assets Bureau, then
transferred to the Joint Venture for compensation. The Joint Venture shall
compensate Party A with a single payment. If the Joint Venture is not able to
pay for such assets, then the payment shall be deducted from loans provided to
the Joint Venture by Party A.
Once the Joint Venture starts operating independently, Party A shall handle such
peripheral matters as security, fire prevention and environmental protection.
Party A will also charge the Joint Venture an appropriate management fee. (The
scope, type and rate of service shall be addressed in a separate agreement.)
Chapter 6 Responsibilities of the contracting parties
Article 16
Party A's responsibilities are to:
1. Apply for the joint venture business license and register with the PRC
government;
2. Provide cash, equipment, plants and construction equipment as specified in
Articles 11, 12 and 14;
3. Be responsible for production and technical management, and supervise the
design and construction of the Joint Venture plants and other facilities;
4. Assist Party B with customs and export procedures and to arrange product
transportation;
5. Assist the Joint Venture to purchase or lease equipment, materials, raw
materials, office supplies, vehicles and communications facilities in the
PRC;
6. Assist the Joint Venture to hire local Chinese managers and other workers;
7. Assist foreign employees to apply for entry visas and work and travel
permits; and
8. Be responsible for other matters as entrusted by the Joint Venture.
Party B's responsibilities are to:
<PAGE>
1. Invest as specified in Articles 11 and 12, and be responsible for shipping
equipment (part of the Party B's investment) to China's Qingdao Harbor;
2. Assist the Joint Venture to purchase spare parts and raw materials outside
of the PRC;
3. Train technical and other workers employed by the Joint Venture if and when
Party B invests in the form of equipment and industrial properties;
4. Provide the Joint Venture with relevant information on international markets;
5. Transfer technology and be responsible for product quality taking into
account the intended capacity and the intended time frame; and
6. Be responsible for other matters as entrusted by the Joint Venture.
Chapter 7 Sale
Article 17
The Joint Venture's production shall first meet Party A's annual demand [for
PTA] for the production of 80,000 tons of polyester fiber. (A sales contract
will be signed separately.)
The Joint Venture shall have its own sales mechanism.
Article 18
The Joint Venture shall be permitted to use Party A's brand name if the Joint
Venture's products meet Party A's quality standards.
With the consent of the board of directors, the Joint Venture may use its own
brand name.
Cbapter 8 Board of directors
Article 19
The board of directors' tenure shall begin on the date the joint venture
business license is issued.
Article 20
The board of directors will consist of seven directors, five of which are
appointed by Party A and two of which are appointed by Party B. The terms of the
directors and chairman are four years each. The chairman and directors may be
re-appointed by the party that first appointed them.
Article 21
The board of directors is the highest authority of the Joint Venture and makes
all important decisions for the Joint Venture. The following matters must be
decided by unanimous consent of the board of directors:
<PAGE>
1. Amendment to the Joint Venture regulations
2. Termination of the Joint Venture
3. Increase and/or transfer of registered capital
4. Merger with other entities
Other major issues require consent by at least two-thirds of the board of
directors.
Article 22
The chairman is the legal representative of the Joint Venture and the vice
chairman or another director shall be appointed legal representative of the
Joint Venture if and when the chairman is not able to perform his/her duties.
Article 23
A meeting of the board of directors shall be held at least once a year and shall
be presided over by the chairman. An impromptu meeting may be held by the
chairman. Minutes of the meeting shall be put on file.
Chapter 9 Operations management
Article 24
The Joint Venture's operations management team shall be led by the general
manager. The general manager shall be recommended by Party A. There will be
three assistant general managers and one chief accountant. The general manager,
assistant general managers and chief accountant shall be hired by the board of
directors and may be re-appointed. The terms of the general manager, assistant
general managers and chief accountant are four years each.
Article 25
The responsibilities of the general manager are to execute all of the decisions
made by the board of directors and to manage the Joint Venture's daily
operations and administrative activities. The assistant general managers'
primary responsibility is to assist the general manager in performing his/her
duties. The management team may consist of a few department heads. All
department heads are supervised by the general manager and assistant general
managers.
Article 26
The board of directors may replace the general manager or any assistant general
manager at any time in case of graft or serious misconduct.
Article 27
A resignation by any director or manager must be approved by the board of
directors. One month's advance notice is also required.
Chapter 10 Purchase of equipment and raw materials
<PAGE>
Article 28
Raw materials, equipment, fuel, transportation equipment and office supplies
shall be sourced first in the PRC.
Article 29
If Party B is entrusted by the Joint Venture to purchase equipment overseas,
Party A shall also be invited to participate.
Chapter 11 Labor management
Article 30
Matters relating to employee recruitment, dismissal, wages, labor insurance and
benefits shall be handled by the labor union of the Joint Venture based on
directives drawn up by the board of directors in accordance with the Joint
Venture Labor Management Regulations of the PRC. Decisions made on such matters
shall be binding in the form of employment contracts. As soon as an employment
contract is established, it must be filed with the local labor management
authority.
Article 31
The board of directors decides on issues such as the hiring, wage levels,
treatment, business trip reimbursement, social security and benefits of the
senior managers who are recommended by both parties.
Chapter 12 Taxes, finance and auditing
Article 32
The Joint Venture shall pay all taxes in accordance with the tax laws of the
PRC.
Article 33
Employees shall pay income taxes in accordance with the Joint Venture Law of the
PRC.
Article 34
In accordance with the Joint Venture Law of the PRC, the Joint Venture can draw
money from profits for a reserve fund, development fund and bonus fund. The
amounts shall be decided and drawn by the board of directors based on the Joint
Venture's performance.
Article 35
The fiscal year of the Joint Venture is January 1 to December 31. All account
records, documents and financial statements and reports shall be kept in
Chinese.
<PAGE>
Article 36
The financial statements of the Joint Venture shall be audited by an auditing
firm registered in the PRC. If Party B feels the need to use an auditor from
another country, it shall be responsible for any related expenses. Furthermore,
Party A's consent is required.
Article 37
The balance sheet, profit (loss) statement and profit distribution plan for each
operating year shall be submitted to the board of directors for evaluation in
the first quarter of the following year.
Article 38
Issues regarding foreign currency shall be handled in accordance with the
Foreign Currency Management Law of the PRC and other related laws.
Chapter 13 Duration of the Joint Venture
Article 39
The duration of the Joint Venture is 25 years and is valid from the date the
joint venture business license is issued. With unanimous consent of the board of
directors, the Joint Venture may apply for an extension of the duration with the
Foreign Economics and Trade Commission (or another organization entrusted by the
Commission) within six months of the expiration date.
Chapter 14 Liquidation
Article 40
Upon expiration, or termination prior to expiration due to unforeseen events, of
the Joint Venture, the liquidation amount of the Joint Venture shall be
distributed to the two parties in proportion with their investment.
Chapter 15 Insurance
Article 41
All insurance shall be provided by a registered insurance company. The type,
amount and duration shall be determined by the board of directors.
Chapter 16 Amendment, alteration and termination
Article 42
Amendments to the Contract shall only be effective with the written approval of
both contracting parties.
<PAGE>
Article 43
If the Contract can no longer be fulfilled due to force majeure or long-term
financial loss of the Joint Venture (for consecutive years) resulting in the
failure to continue operating, the Contract may be terminated early with
unanimous consent of the board of directors and permission from the original
government regulatory authority.
Article 44
If one party does not fulfill its obligations as defined by the Contract and its
amendments or seriously violates the Contract or causes the Joint Venture to
stop operating, such party shall be considered to be terminating the Contract
unilaterally. The observant party is not only entitled to demand indemnities,
terminating but also to file with the original government regulatory authority
to terminate the Contract. If both parties agree to continue the Joint Venture's
operations, then the delinquent party shall compensate for any financial losses
suffered by the Joint Venture.
Article 45
The contracting parties may sign other supplementary agreements as attachments
to the Contract. The supplements will be equally effective in legal terms as the
original Contract.
Chapter 17 Default
Article 46
If either one of the two parties does not make payment according to the payment
schedule described in Chapter 5 of the Contract or fails to fulfill the Contract
60 days after the observant party or the Joint Venture gives notice of such
failure or causes the violation or termination of the Contract, such delinquent
party must pay 5% of the tota1 investment as penalty. The observant party is not
only entitled to demand indemnities, but also reserves the right to file with
the original government regulatory authority to terminate the Contract.
Article 47
If either one of the two parties intentionally does not fulfill the Contract or
engages in serious misconduct resulting in violation or termination of the
Contract, such party shall compensate the other party for any losses suffered.
If both parties are responsible for such violation or termination, then both
parties shall assume responsibility.
Chapter 18 Force majeure
<PAGE>
Article 48
Force majeure, e.g., earthquake, typhoon, flood, fire or war, is a force that
cannot be foreseen, the occurrence and effects of which cannot be prevented or
avoided, but directly affects fulfillment of the Contract under the agreed upon
conditions. Any party experiencing force majeure shall telegram the other party
immediately and provide the other party within 15 days with detailed information
on the force majeure as well as documents from the local notary authority where
the force majeure occurred. Such documents shall state the reasons that the
Contract cannot be fulfilled, or can only be partially fulfilled, and requires
extension. Depending on the degree to which the force majeure affects
fulfillment of the Contract, the parties shall negotiate and decide if the
Contract must be terminated early, if the responsibilities defined by the
Contract need to be partially waived, and if deadlines need to be rescheduled.
Chapter 19 Application of laws
Article 49
The signing, authentication, interpretation, fulfillment and dispute of the
Joint Venture Contract are governed by the laws of the PRC.
Chapter 20 Resolution of disputes
Article 50
Disputes caused by or relating to the Contract shall be resolved first through
friendly negotiations. If the dispute cannot be resolved through negotiations,
the matter shall be arbitrated by the Foreign Affairs Arbitration Committee of
China's International Trade Facilitating Committee. Final decisions made through
arbitration are binding and apply to all parties involved.
Chapter 21 Language
Article 51
The Contract is written in Chinese.
Chapter 22 Miscellaneous
Article 52
The documents in the appendices, including the Joint Venture regulations, and
other agreements, are a part of this Contract.
<PAGE>
Article 53
This Contract and its appendices shall come into effect as soon as they are
approved by the Foreign Economics and Trade Commission (or other organization
entrusted by the Commission).
Article 54
Original copies of fax and telegram notices regarding each party's rights and
duties shall follow by mail. The legal address of Party A and the contact
address of Party B are the mailing addresses.
Article 55
The Contract was signed by the representatives of Party A and Party B in Jinan,
Shandong, PRC, on February 9, 1995.
Party A: Jinan Chemical Fiber Corporation
Representative: /s/ Jin Shan
Party B: Pacific Chemical Group Limited
Representative: /s/ Chen Zheng Hao
<PAGE>
Appendix I
Investment Agreement
The following Agreement is based on the condition that Party B invests cash and
Party A invests in the form of physical assets as defined in Article 11 of the
Contract:
A. Both parties shall invest in accordance with Articles 11 and 12 of the
Contract. Article 46 shall apply in case one or both party(ies) is/are unable
to make payments on schedule.
B. Party A's investment of physical assets, which were audited at US$14,425,000,
shall be transferred to the Joint Venture together with technical documents
of the equipment. Party B shall invest US$14,995,000 in cash.
C. In order for the Joint Venture to proceed successfully, both parties shall
inject capital into the Joint Venture in case the Joint Venture develops
cashflow problems. The board of directors shall decide whether to categorize
the additional capital as investment or loans, and how much interest to
charge in the case of loans.
D. This Agreement is considered to be part of the Contract, and is equally
effective in legal terms as the Contract.
E. Other issues relating to the Contract shall be decided by the board of
directors.
F. This Agreement is written in Chinese.
G. This Agreement was signed in Jinan in 1996.
Party A Party B
Jinan Chemical Fiber Corporation Pacific Chemical Group Limited
<PAGE>
Supplementary Agreement
Party A: Jinan Chemical Fiber Corporation
Party B: Pacific Chemical Group Limited
In accordance with the Joint Venture Contract signed by both parties on February
9, 1996 (the "Original Contract"), the contracting parties agree to make the
following amendments
A. Party B's name appeared on the Original Contract as "American Pacific
Chemical Fiber Corporation." It has been changed to Pacific Chemical Group
Limited. The party remains to be a company registered in the British Virgin
Islands. Its new legal representative is J.S. Pan.
B. Article 12 of the Original Contract states that "Both parties shall invest
their respective total registered investments in lump sums within the period
specified by the Joint Venture Law of the PRC starting the date on which the
joint venture business license is issued." That clause is hereby changed to
"Both parties shall invest their respective total registered investments
within the period specified by the Joint Venture Law of the PRC starting the
date on which the joint venture business license is issued."
C. Article 20 of the Original Contract states that "The board of directors will
consist of seven directors, five of which are appointed by Party A and two of
which are appointed by Party B." That clause is hereby changed to "The board
of directors will consist of seven directors, three of which are appointed by
Party A and four of which are appointed by Party B."
D. Article 39 of the Original Contract states that "The duration of the Joint
Venture is 25 years..." That clause is hereby changed to "The duration of the
Joint Venture is 50 years..."
E. Article 44 Of the Original Contract states that "If one party does not
fulfill its obligations as defined by the Contract and its amendments or
seriously violates the Contract or causes the Joint Venture to stop
operating, such party shall be considered to be terminating the Contract
unilaterally. The observant party is not only entitled to demand indemnities,
but also to file with the original government regulatory authority to
terminate the Contract. If both parties agree to continue the Joint Venture's
operations, then the delinquent party shall compensate for any financial
losses suffered by the Joint Venture." That article is hereby changed to "If
one party does not fulfill its obligations as defined by the Contract and its
amendments, or seriously violates the Contract or causes the Joint Venture to
stop operating, such party shall be considered to be in breach of contract.
The observant party reserves the right to resort to any measures provided for
by the regulations of the original government regulatory authority."
F. Article 46 of the Original Contract states that "If either one of the two
parties does not make payment according to the payment schedule described in
Chapter 5 of the Contract or fails to fulfill the Contract 60 days after the
observant party or the Joint Venture gives notice of such failure or causes
the violation or termination of the Contract, such delinquent party must pay
5% of the total investment as penalty. The observant party is not only
entitled to demand indemnities, but also reserves the right to file with the
original government regulatory authority to terminate the Contract." This
article is hereby changed to "If either one of the two parties does not make
payment according to the payment schedule described in Chapter 5 of the
Contract, the observant party and the Joint Venture reserve the right to
settle the problem in accordance with Article 44 of the Original Contract."
Party A: Jinan Chemical Fiber Corporation
Representative: Jin Shan
Date: April 2, 1996
Party B: Pacific Chemical Group Limited
Representative: J.S. Pan
Date: April 2, 1996
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A PREFERRED STOCK OF
BUREAU OF ELECTRONIC PUBLISHING, INC.
BUREAU OF ELECTRONIC PUBLISHING, INC. (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware.
DOES HEREBY CERTIFY:
THAT, pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the Corporation, as amended, and pursuant
to the provisions of the Section 151 of the Delaware General Corporation Law,
said Board of Directors, by the unanimous written consent of its members, filed
with the minutes of the Board of Directors, duly adopted a resolution creating a
class of 833,671.66 shares of preferred stock designated as "Series A Preferred
Stock" as follows:
RESOLVED, that pursuant to the authority expressly granted and vested
in the Board of Directors of the Corporation in accordance with the provisions
of the corporation's Certificate of Incorporation, as amended, a class of the
preferred stock of the Corporation is hereby created, and that the designation
and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights, qualifications, limitations
and restrictions thereof shall be as follows:
1. Designation And Amount. This share shall be designated as "Series A
Preferred Stock" and the number of shares constituting such class shall be
833,671.66. The par value of such class shall be $0.001 per share. Such class
shall be referred to herein as the "Series A Stock".
2. Series A Stock. The voting powers, preferences and relative,
participating optional and other special rights, qualifications, limitations and
restrictions of Series A Stock shall be as follows:
(a) Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of Series
A Stock are entitled to receive out of assets of the Corporation available for
distribution to stockholders, before any distribution of assets is made to
holders of Common Stock or any other stock ranking junior as to liquidation
preference to the Series A Stock, a liquidation distribution in the amount of
$100.00 per share. The liquidation preference for the Series A Stock shall be on
a parity with the liquidation preference for all other series of preferred stock
of the Corporation.
After the payment of all preferential amounts required to be paid to
the holders of Series A Stock, upon the dissolution, liquidation or winding up
of the Corporation, the holders of shares of Common Stock, par value $0.001 per
share (the "Common Stock") of the Corporation then outstanding shall be entitled
to receive the remaining assets and funds of the Corporation available for
distribution to its stockholders.
<PAGE>
The merger or consolidation of the Corporation into or with another
corporation (except if the Corporation is the surviving entity), or the sale of
all or substantially all of the assets of the Corporation, shall be deemed to be
a liquidation, dissolution or winding up of the Corporation for purposes of this
paragraph 2(a).
(b) Voting Rights. Each share of Series A Stock shall entitle the
holder thereof to 100 votes per share, and each such holder shall be entitled to
vote on all matters as to which holders of the Corporation's Common Stock shall
be entitled to vote in the same manner and with the same effect as such holders
of Common Stock, voting together with the holders of Common Stock as one class.
In all cases where the holders of the Series A Stock have the right to vote
separately as a class, in addition to the voting rights described above, all
such holders shall be entitled to one vote for each share held by them.
(c) Conversion Rights.
(i) Mandatory Conversion. Each share of Series A Stock shall
be automatically converted into 100 fully paid and non-assessable shares of
Common Stock immediately upon the effectiveness of an amendment to the
Corporation's Certificate of Incorporation increasing the number of authorized
shares of the Corporation's Common Stock to 300,000,000 shares (the "Conversion
Event").
(ii) Procedure Upon Conversion. Upon the occurrence of the
Conversion Event, the outstanding shares of Series A Stock shall be converted
automatically without any further action by the holders of such shares and
regardless of whether the certificates representing such shares are surrendered
to the Corporation; provided, however, that the Corporation shall not be
obligated to issue to any such holder certificates evidencing the shares of
Common Stock issuable upon such conversion unless certificates evidencing such
shares of Series A Stock are surrendered to the Corporation. The Conversion Date
shall be the date of the Conversion Event. As promptly as practicable after the
Conversion Date (and after surrender of the certificate or certificates
representing shares of the Series A Stock to the Corporation), the Corporation
shall issue and deliver to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled. The holder in
whose name the certificate or certificates for Common Stock are to be issued
shall be deemed to have become a holder of such Common Stock on the Conversion
Date.
(iii) Effect of Conversion. All shares of Series A Stock which
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and vote, shall immediately cease and
termination the Conversion Date, except the right of the holders thereof to
receive shares of Common Stock in exchange therefor as provided herein shall
survive. Any shares of Series A Stock so converted shall be retired and
cancelled.
3. Amendments. The Corporation may alter or change the designations,
preferences and relative, anticipating, optional or other special rights of the
Series A Stock with the affirmative vote or written consent as a class of the
holders of at least a majority of the shares of Series A Stock then outstanding
(unless the consent or approval of a greater number of shares shall then
<PAGE>
be required by law).
FURTHER RESOLVED, that upon the Conversion Event, the Corporation shall
reserve, at all times so long as any shares of Series A Stock remain
outstanding, free from preemptive rights, out of its treasury stock or its
authorized but unissued shares of Common Stock, or both, solely for the purpose
of effecting the conversion of the shares of Series A Stock, a sufficient number
of shares of Common Stock to provide for the exchange or conversion of all
outstanding shares of Series A Stock in accordance with the provisions hereof.
IN WITNESS WHEREOF, Bureau of Electronic Publishing, Inc. has caused
this Certificate to be signed by Larry Shiller, its President, and attested by
Brent Subkowsky, its Secretary, as of this 23rd day of January, 1997.
ATTEST: BUREAU OF ELECTRONIC PUBLISHING, INC.
By: /s/ Brent Subkowsky By: /s/ Larry Shiller
------------------------- ---------------------------
BRENT SUBKOWSKY LARRY SHILLER
Secretary President
CHARTERED CAPITAL ADVISERS, INC.
Board of Directors
January 23, 1997
Page 1
CHARTERED CAPITAL ADVISERS, INC.
145 FOURTH AVENUE
NEW YORK, NEW YORK 10003
(212) 505-9743 o (212) 533-9680 FAX
January 23, 1997
Board of Directors
Bureau of Electronic Publishing, Inc.
745 Alexander Road
Princeton, NJ 08540
Dear Members of the Board of Directors:
We understand that Bureau of Electronic Publishing, Inc. ("BEPI") has
signed a nonbinding letter of intent to merge (the "Merger") with Pacific
Chemical Group Limited ("PCG"). The principal asset of PCG is a joint venture
(the "Joint Venture") between PCG and Jinan Chemical Fibre Corporation ("JCFC")
pertaining to JCFC's Plant One ("JCFC1"). PCG will own 51% of the Joint Venture.
Under the terms of the Joint Venture Agreement,1 JCFC will contribute the
production facilities, plant, machinery, and other assets of the Joint Venture
as its capital investment; PCG must contribute $14,995,000 in cash to the Joint
Venture (the "Deferred Purchase Price"). In the event that the Deferred Purchase
Price is not paid by February 9, 1999, PCG may forfeit its claim on its equity
interest in the Joint Venture. The consideration (the "Consideration") to be
provided by BEPI to PCG will consist of a new class of BEPI preferred stock that
will be convertible into approximately 83.4 million shares of BEPI common stock.
You have requested our opinion of the Merger with respect to fairness,
from a financial point of view, to BEPI and its shareholders. Chartered Capital
Advisers, Inc. is customarily engaged in the valuation of businesses and their
securities in connection with mergers & acquisitions, private placements,
shareholder transactions, estate and gift taxes, litigation, and for other
purposes.
In connection with rendering our opinion we have, among other things:
(1) Reviewed the Letter of Intent signed by BEPI and PCG that was
dated November 7, 1996;
(2) Reviewed a draft of the Agreement and Plan of Merger by and among
BEPI, PCG, JCFC, and BEPI Acquisition Corporation;
(3) Reviewed the Joint Venture Agreement;
(4) Analyzed financial information with respect to JCFC1, including
but not limited to unaudited financial statements as of and for
the ten months ended October 31, 1995 and
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1 Sino-American Joint Venture Contract dated February 9, 1996 between
JCFC and American Pacific Chemical Fibre Corporation (aka Pacific Chemical Group
Limited), referred to herein as the "Joint Venture Agreement."
<PAGE>
CHARTERED CAPITAL ADVISERS, INC.
Board of Directors
January 23, 1997
Page 2
1996, and audited financial statements as of and for the three
years ended December 31, 1995;
(5) Analyzed financial statements with respect to BEPI, including but
not limited to audited financial statements as of and for the two
years ended December 31, 1995, an unaudited income statement for
the year ended December 31, 1993, and unaudited financial
statements as of and for the three quarters ended September 30,
1996;
(6) Analyzed various unaudited balance sheet data with respect to
BEPI reflecting balances subsequent to September 30, 1996;
(7) Reviewed the draft dated October 7, 1996 of the PCG Offering
Document;
(8) Reviewed the draft dated December 9, 1996 of the BEPI Offering
Memorandum, as well as a draft of a supplement thereto dated
January 14, 1997;
(9) Reviewed various documents filed by BEPI with the Securities and
Exchange Commission, including the Prospectus dated August 11,
1995, the Form 10-KSB for the year ending December 31, 1995, and
the Forms 10-QSB for the three quarters ended September 30, 1996;
(10) Visited the facilities of JCFC1 in China, and held discussions
with certain members of the management of JCFC1, PCG, and BEPI
and their advisers concerning the past, current, and planned
operations, financial condition, and business prospects of JCFC1,
PCG, and BEPI;
(11) Reviewed a financial statement detailing the pro forma effect of
the Merger on the combined operations of BEPI and PCG;
(12) Analyzed historical stock prices of BEPI;
(13) Discussed with the legal advisors of BEPI the results of their
due diligence;
(14) Considered financial data of PCG and JCFC1, and have compared
that data with similar data for publicly held companies with
investment characteristics applicable to PCG and JCFC1;
(15) Considered financial data of PCG and JCFC1, and have compared
that data with similar data for certain business combinations and
other transactions that have recently been effectuated; and
(16) Considered such other information, financial studies, and
analyses as we deemed relevant, and performed such analyses,
studies, and investigations as we deemed appropriate.
Chartered Capital Advisers, Inc. has assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by us. We have assumed
<PAGE>
CHARTERED CAPITAL ADVISERS, INC.
Board of Directors
January 23, 1997
Page 3
that, based on representations by the management of PCG: (1) PCG will be able to
pay the Deferred Purchase Price within the three-year period required under the
Joint Venture Agreement; (2) any dilution in the ownership of the post-Merger
entity as a result of raising money to fund the Deferred Purchase Price will be
on terms and values that are fair and reasonable; and (3) terms that are not
explicitly detailed in the Joint Venture Agreement will be interpreted and
applied in a manner that is fair to PCG.2 We make no representations with
respect to the enforceability of the Joint Venture Agreement, or with respect to
PCG's rights under the Joint Venture Agreement. We have not performed an
appraisal of the assets, liabilities, or intellectual property of PCG, JCFC1, or
BEPI. We have assumed that the Merger will be completed on a tax-free basis. We
have assumed that the representations of management have been made in good
faith, and that they reflect the best currently available management judgments
as to the matters covered. Our opinion is necessarily based upon economic,
market, and other conditions as in effect on, and the information made available
to us as of, the date of this letter. Our opinion is limited to the fairness of
the Merger as of the date hereof, from a financial point of view. We make no
representations with respect to the business decision to undertake the Merger,
or any other terms of the Merger. This opinion does not represent our opinion as
to the value of BEPI, PCG, or JCFC1 as of the date of this letter.
We understand that in considering the Merger, the Board of Directors of
BEPI may have considered a wide range of financial and nonfinancial factors,
many of which may be beyond the scope of this letter. This letter is not
intended to substitute for the Board's exercise of its own business judgment in
reviewing the Merger.
Based upon and subject to the foregoing considerations, it is our
opinion as financial advisors that the Consideration to be provided by BEPI in
the Merger is fair from a financial point of view to BEPI and the shareholders
of BEPI.
The foregoing opinion is to be used solely for the information and
assistance of BEPI. Accordingly, it is understood and agreed that no person
other than BEPI and its officers and directors shall be allowed to use or rely
upon this opinion.
Very truly yours,
CHARTERED CAPITAL ADVISERS, INC.
Ronald G. Quintero, CPA, CFA
Managing Director
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2 The most significant assumption is that the purchase price by JCFC for
PTA produced by JCFC1 will be no less than the price set by the People's
Republic of China Price Bureau.
