-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UqGcuzT5xB/IdGq7ntESUdI4F+4OL2ow9w7/N2Q82+ZKg0j52Rt6EfSnYIesG16E y/h608gIlryRTuEW8xU/kQ== 0001010549-05-000057.txt : 20050121 0001010549-05-000057.hdr.sgml : 20050121 20050121160423 ACCESSION NUMBER: 0001010549-05-000057 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 20050120 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Changes in Registrant.s Certifying Accountant ITEM INFORMATION: Changes in Control of Registrant ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050121 DATE AS OF CHANGE: 20050121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDINA COFFEE INC CENTRAL INDEX KEY: 0001117171 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING & DRINKING PLACES [5810] IRS NUMBER: 880442833 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-49712 FILM NUMBER: 05541690 BUSINESS ADDRESS: STREET 1: P O BOX 741 CITY: BELLEVUE STATE: WA ZIP: 98009 BUSINESS PHONE: 4254530334 MAIL ADDRESS: STREET 1: P O BOX 741 CITY: BELLEVUE STATE: WA ZIP: 98009 8-K 1 medina8k011805.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 20, 2005 Medina Coffee, Inc. -------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Nevada 000-49712 88-0442833 - ---------------------------- ------------------------ ------------------- (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) BAK Industrial Park, No. 1 BAK Street Kuichong Town, Longgang District Shenzhen, Peoples Republic of China 518119 Ph: (86-755) 8977-0093 -------------------------------------------------------- (Address of Principal Executive Offices) 12890 Hilltop Road, Argyle, Texas 76226 --------------------------------------- (Former Name or Former Address, if Changed since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ SECTION 1--REGISTRANT'S BUSINESS AND OPERATIONS Item 1.01. Entry into a Material Definitive Agreement On January 20, 2005, Medina Coffee, Inc., a Nevada corporation, completed a stock exchange transaction with the stockholders of BAK International, Ltd., a company incorporated under the laws of Hong Kong ("BAK International"). The exchange was consummated under Nevada law and pursuant to the terms of that certain Securities Exchange Agreement dated effective as of January 20, 2005 (the "Exchange Agreement"). A copy of the Exchange Agreement is filed as an exhibit to this Current Report on Form 8-K. Pursuant to the Exchange Agreement, the Company issued 39,826,075 shares of its common stock, par value $0.001 per share, to the stockholders of BAK International, representing approximately 97.2% of the Company's post-exchange issued and outstanding common stock, in exchange for 100% of the outstanding capital stock of BAK International. Immediately, after giving effect to the exchange, the Company had 40,978,533 shares of its common stock outstanding. Pursuant to the exchange, BAK International became a wholly-owned subsidiary of the Company. The Company presently carries on the business of Shenzhen BAK Battery Co., Ltd., a Chinese corporation and BAK International's wholly-owned subsidiary ("BAK Battery"). The shares of the Company's common stock issued to stockholders of BAK International in connection with the exchange were not registered under the Securities Act of 1933, as amended (the "Securities Act") and, as a result, are "restricted securities" that may not be offered or sold in the United States absent registration or an applicable exemption from registration. Certificates representing these shares contain a legend stating the same. The Company has relocated its executive offices to those of BAK Battery at BAK Industrial Park, No. 1 BAK Street, Kuichong Town, Longgang District, Shenzhen, People's Republic of China, and its telephone number is (86-755) 8977-0093. The Company issued a press release on January 20, 2005 regarding the stock exchange transaction. The press release and the stock exchange agreement are filed herewith as Exhibits and are incorporated herein in their entirety by this reference. SECTION 2--FINANCIAL INFORMATION Item 2.01. Completion of Acquisition or Disposition of Assets. THE SHARE EXCHANGE On January 20, 2005, the Company, BAK International and the stockholders of BAK International consummated the transactions contemplated by the Exchange Agreement. The Exchange Agreement specified that the Company would acquire all 39,826,075 shares of the issued and outstanding stock of BAK International in exchange for the issuance of 39,826,075 shares of the common stock of the Company. On the exchange closing date, the Company issued an aggregate of 39,826,075 shares of its common stock to the stockholders of BAK International, representing 97.2% of the Company's issued and outstanding common stock immediately following the exchange. All of the Company's business operations are now conducted through BAK International's wholly-owned subsiary, BAK Battery. DESCRIPTION OF THE COMPANY'S PREDECESSOR BUSINESS The Company originally began operations as a Nevada corporation known as Medina Copy, Inc. The Company was incorporated in Nevada on October 4, 1999 and subsequently changed its name to Medina Coffee, Inc. ("Medina"), on October 6, 1999. Medina commenced operations on December 1, 2002 and was considered a development stage company. Medina was formed originally for the purpose of building a retail specialty coffee business that sold specialty coffee and espresso drinks through company owned and operated espresso carts. Medina incurred operating losses since its inception and therefore looked to combine with a privately-held company that was profitable or that management considered to have growth potential. 1 DESCRIPTION OF CURRENT BUSINESS Except as otherwise indicated by the context, references in this Current Report to "we," "us," or "our" are to the combined business of Medina and its wholly-owned direct subsidiary, BAK International, and its wholly-owned subsidiary, BAK Battery. References to "China" or to the "PRC" are references to the People's Republic of China. General Our current operations were originally a business division of our affiliate, BAK Battery, which was originally formed as a Chinese limited liability company in August 2001. As of January 17, 2005, all legal procedures of BAK International's acquisition of 100% of the equity shares in BAK Battery were completed. Thereafter, we entered into a stock exchange transaction on January 20, 2005 with the stockholders of BAK International, pursuant to which we acquired from them all of the issued and outstanding common capital stock of BAK International in exchange for 39,826,075 shares of our common stock. As a result of this exchange transaction, we succeeded to the operations of BAK International and BAK Battery. Overview We presently serve as a holding company for our China-based subsidiaries, BAK International and BAK Battery. Our subsidiaries are focused on the manufacture, commercialization and distribution of a wide variety of standard and customized lithium ion rechargeable batteries for use in a wide array of applications. We also have internal research and development facilities engaged primarily in furthering lithium ion related technologies. We believe that our technologies allow us to offer batteries that are flexibly configured, lightweight and generally achieve longer operating time than many competing batteries currently available. We have focused on manufacturing a family of replacement lithium batteries for mobile phones. We also supply rechargeable lithium ion and lithium polymer batteries for use in various other portable electronic applications, including high-power handset telephones, laptop computers, digital cameras and video camcorders, MP3's, electric bicycles and general industrial applications. We manufacture three types of batteries: steel cell, aluminum cell and cylindrical cell. We deliver our products to packing plants operated by third parties where the bare cells are packed in accordance with specifications established by certain manufacturers of mobile phones and other electronic products. We operate sales and service branches in six principal coastal cities and Beijing in the PRC. The majority of our income is generated from the sale of steel cells. However, we believe there is growth potential for aluminum and cylindrical cells because of their wide applications. Our current growth strategy includes entering into the original equipment manufacture, or OEM, battery market for top mobile phone brands, portable electronic appliances and electric bicycles worldwide. We are also developing a program for producing lithium polymer battery cells as well as high power lithium ion battery cells, which will allow us inroads into additional battery markets such as those for electric bicycles, power tools and hybrid electric vehicles. Our Business Strategy We seek to maintain and strengthen our position as a provider of lithium ion batteries and related services while increasing the breadth of our product line and improving the quality of our products. In order to achieve our objective, we plan to pursue the key strategies described below. o Continuing to be a cost leader in an increasingly competitive market. We believe we can ensure competitive pricing by integrating a labor intensive production process with high-tech, proprietary manufacturing equipment. We believe our experience in designing and updating key manufacturing equipment and operating such equipment at a low cost gives us a cost advantage over our competitors. 2 o Taking advantage of our ready production capacity and allowing for increased production capacity. We believe our production capacity makes us more reliable, flexible and responsive in terms of fulfilling our customers' requirements than other providers. As such, existing and potential competitors may find it more difficult to compete with our production capabilities. The completion of our new manufacturing facility, projected mid 2005, should only enhance our production capacity. o Enhanced R & D activities. Upon completion of our new facility, we will have the space to enhance our existing R & D capabilities through the addition of state of the art equipment and experienced personnel. o Developing our OEM business. We believe that by entering the original equipment manufacture, or OEM, market for lithium and other types of battery cells, we will be able to significantly increase revenues. As such, we have been preparing for Motorola's QSR certification which will give us the right to serve as an OEM provider for Motorola's products. We believe that obtaining Motorola's QSR Certification will position us to provide lithium batteries to other multinational corporations whose products require such batteries. We believe that our entry into the OEM market for lithium ion batteries is important to our continued growth because the market for replacement batteries is becoming saturated. o Expanding our product lines to capture new market opportunities. We are seeking to produce lithium polymer and high power lithium ion battery cells that can be used in electric bicycles, power tools and hybrid electric vehicles. By entering these markets, we believe we can achieve future revenue growth and improved profit margins. Principal Products and Services Lithium Ion Battery We produce rechargeable lithium ion batteries. Rechargeable lithium ion batteries are used primarily for mobile telephones, camcorders, MP3 players, digital cameras, electric bicycles and general industrial applications. We began producing steel case lithium ion batteries in 2002. Our product mix now consists of 69% steel case battery cells, 30% aluminum battery cells, and 1% cylindrical battery cells, which all come in a broad variety of battery types. Services We have built a sales and service network covering six principal coastal cities and Beijing in the PRC. Our service capabilities include a 24-hour customer response. Our other services include providing battery testing and test reporting; providing training courses regarding quality control and battery usage; gathering customer opinions on our products and services; evaluating customer requirements and fulfilling appropriate requests. BAK has two strategic policies for sales and service: o BAK has built a sales and service network to cover six principal coastal cities in China, and also has a branch in Beijing. o Our service capabilities include 24-hour customer response. 3 Features Performance standards. We believe our products meet or exceed international standards. Our lithium ion batteries have high capacity, low internal resistance, and a safety guarantee. Certificates or approvals we have received include: EU's CE attestation; UL authentication; International Organization for Standardization 9001: 2000, a quality management system certification, and International Organization for Standardization 14001: 1996, an environmental management system certification; and certificates from the major cell phone manufacturers of China, including China Saibao (the CEPREI certification body); Amoi Electronics Co., Ltd.; China Datang (Group) Corporation; Konka Group Co., Ltd.; Tianyu Communication Technology (Kunshan) Co., Ltd.; and Shenzhen Telsda Mobile Communication Industry Development Co., Ltd. Longer usage time and higher discharge rates. We believe our battery has a higher discharge voltage so that it can provide a longer talking time for mobile phone users. Our products have a higher discharge capacity than other battery products. Therefore, with the same capacity, our battery can therefore provide a longer talking time. The higher discharge capacity is especially useful for mobile phones with color screens, which have a high demand on the battery's continuous discharge voltage. Performance at lower temperatures. Our lithium ion batteries perform well from -20 Celsius to +60 Celsius. At a temperature as low as -20 Celsius the batteries release 95% of the battery energy at 0.2C rate; and over 90% of the battery energy can be discharged at 1.0C. This feature allows improved cell phone battery duration, particularly in northern areas of the PRC. Suppliers The main components of lithium ion batteries are the cathode, anode, separator, and electrolyte. We have built a complete supply chain, putting together a group of material and equipment suppliers, primarily Chinese, except for ENTEK (a separator supplier in the US), from whom we buy on a purchase order basis. Cathode material is primarily LiCoO2; LiMnO4 and LiCo1-xNixO2 are also used as cathode materials. Anode material mainly consists of carbon materials such as graphite, sourced primarily in China. The separator material is imported from Japan and the US. There are sufficient supplies of electrolytes in China, and we believe the quality to be very good. The table below describes the key sources of our key materials. As of September 30, 2004, our key material suppliers and key equipment suppliers were as follows: Key Material Suppliers Key Material Suppliers - ------ ------------------ ------------------------------------------------------ Item Materials Main suppliers - ------ ------------------ ------------------------------------------------------ 1 Case and caps Roofer Group Company, Yijinli technology company Shenzhen Tongli Precision Stamping Products Co., Ltd., - ------ ------------------ ------------------------------------------------------ 2 Cathode materials CITIC Guoan - ------ ------------------ ------------------------------------------------------ 3 Anode materials Shanghai Shan Shan, Changsha graphite - ------ ------------------ ------------------------------------------------------ 4 Aluminum foil Aluminum Corporation of America, Shanghai - ------ ------------------ ------------------------------------------------------ 5 Copper foil Huizhou United Copper Foil - ------ ------------------ ------------------------------------------------------ 6 Electrolyte Zhangjiagang Guotai-Huarong New Chemical Materials Co., Ltd - ------ ------------------ ------------------------------------------------------ 7 Separator Ube Industries, ENTEK, CELGARD - ------ ------------------ ------------------------------------------------------ Key Equipment Suppliers - ------ -------------------------------- ---------------------------------------- Item Instruments Suppliers - ------ -------------------------------- ---------------------------------------- 1 Coating machine Beijing 706 Factory - ------ -------------------------------- ---------------------------------------- 2 Mixer Guangzhou Hongyun Machine - ------ -------------------------------- ---------------------------------------- 3 Press machine SevenStar Huachuang - ------ -------------------------------- ---------------------------------------- 4 - ------ -------------------------------- ---------------------------------------- 4 Ultrasonic spot welding machine Zhenjiang Tianhua Machinery and Electrical Co., Ltd. - ------ -------------------------------- ---------------------------------------- 5 Laser seam welder Wuhan Chutian Laser Group - ------ -------------------------------- ---------------------------------------- 6 Vacuum oven Jiangshu Wujiang Songling - ------ -------------------------------- ---------------------------------------- 7 Electrolyte filling machine BAK (internally developed) - ------ -------------------------------- ---------------------------------------- 8 Aging equipment Guangzhou Qingtian Industrial Co., Ltd. - ------ -------------------------------- ---------------------------------------- 9 Testing and sorting equipment Guangzhou Qingtian Industrial Co., Ltd. - ------ -------------------------------- ---------------------------------------- Sales and Marketing Marketing Strategies. We have two key marketing strategies. Our first strategy is to be a leader in the worldwide replacement battery market. We believe we can secure and enhance our market share because of the quality of our products and our ability to maintain high production volume with low production cost. Our second marketing strategy is to enter the OEM market. To enter into this market we will be required to gain approvals from key international manufacturers, including Motorola, Inc. and NingBo Bird Co., Ltd, each of which are currently reviewing our products. Approval from Motorola represents the first step to entering the international OEM market. Our Current Market. We have developed a sales and service network based in six principal coastal cities and Beijing in the PRC. Our products have also been exported to the United States, Canada, South Africa, Japan, Singapore, Taiwan, and Hong Kong. From 2001 to 2003, our annual sales have grown from $3 million to approximately $64 million for the year ended September 30, 2004. As of September 30, 2004, approximately 68% of sales were domestic, while 32% were made internationally. Competition We face competition in the production of lithium ion batteries not only within China but also from other parts of the world, particularly Japan and Korea. Sony Corp. first commercialized lithium ion batteries in 1992. However, Japan's market share of lithium ion battery production has decreased since 2000. We believe we are currently the seventh largest lithium ion battery manufacturer in the world, with a monthly output capacity of 15 million pieces and current monthly production of 11.8 million pieces. We also believe we are the second largest manufacturer in the Chinese market. We believe the following are the leading global manufacturers of lithium ion batteries: o Japan - Sanyo Electric Co., Sony Corp., Matsushita Electric Industrial Co., Ltd. (Panasonic), GS Group, NEC Corporation and Hitachi Ltd.; o Korea - LG Chemical Ltd. and Samsung Electronics Co., Ltd.; and o China - BYD Co. Ltd., Shenzhen BAK Battery Co., Ltd., Tianjin Lishen Battery Joint-Stock Co., Ltd., Henan Huanyu Group and Harbin Coslight Technology International Group Co., Ltd. We compete with these companies by striving to provide a higher quality product at a lower cost. We believe that by doing business in China we enjoy competitive advantages over similar companies doing business in Japan and Korea, including abundant labor resources, low cost raw materials and better access to China's extensive mobile phone market. Customers Our ten largest clients, based on orders, account for 51% of our sales, predominantly in China. Our 30 largest clients, based on orders, account for 85% of our sales, predominantly in China. At present, the bulk of our sales are in the replacement cell phone battery market. Over the past three years, we have developed relationships with key customers, including Konka Group Co., Ltd., SCUD (Fujian) Electronics Co., Ltd., Desay Power Tech. Co., Ltd. and Shenzhen Ya Litong Electronic Co., Ltd. 5 Research and Development We operate a state of the art research and development center performing proprietary research that has resulted in two issued patents in the PRC and 40 in the application process. We also outsource certain of our research and development matters to ChangChun Applied Chemistry Research Institute of the China Scientific Institute, Tstinghua University, JiLin University, the Electrochemistry Department of XiaMen University and Shenzhen University. In our in-house facility we employ over 100 staff members, led by three government recognized specialists. Upon the approval of the National Ministry of Personnel in October 2002, a Postdoctoral Workstation was established. The establishment of the Workstation serves as recognition by the PRC government of the strong capabilities of our in-house research team. The research and development center focuses research on projects relating to liquid lithium ion batteries, high power lithium ion batteries, solid lithium polymer ion batteries, and cylindrical and rectangular lithium ion batteries. During fiscal 2004 and 2003, we expended $328,779 and $116,789, respectively, on our research and development efforts. We anticipate devoting approximately $4.6 million on research and development activities in 2005. Employees The following table summarizes the functional distribution of our employees as of September 30, 2003 and 2004: Department 2003 2004 Officers 9 10 Comprehensive Management 64 197 Human Resources 8 19 Marketing 51 67 PMS Department 14 21 Technical Department 10 46 Research & Development 58 107 Purchasing 8 29 Financial Department 8 18 PMC Department 19 45 After Sales Department 9 33 Quality Control 85 242 Engineering 27 99 Manufacturing 2637 5428 --------------------------------------------------------------- TOTALS 3007 6362 None of our personnel are represented under collective bargaining agreements. We consider our relations with our employees to be good. Facilities We currently lease 5,500 m2 in the aggregate for office space and manufacturing facilities. We lease 3,000 m2 for office space and manufacturing operations pursuant to a lease which runs from June 1, 2003 to June 10, 2008. Our rent due under that lease is $2,468 a month. We also lease 2,500 m2 for office space and manufacturing facilities pursuant to a lease with a term beginning December 16, 2004 and ending December 16, 2006. We owe lease payments of $2,329 a month during the term of this second lease. 6 In addition, we have begun construction of manufacturing facilities, warehousing and packaging facilities, dormitory space and administrative offices at the BAK Industrial Park. We anticipate the completion of construction of these facilities by June 2005. At present, we have no payment obligations related to these facilities, however, upon completion of construction, we will have monthly payments due in satisfaction of our permanent construction financing. Upon completion of the construction of the BAK Industrial Park, we will cease to lease the 5,500 m2 that we currently lease for office space and manufacturing facilities. We will face no material penalties when we cancel these leases. Legal Proceedings We are not a party to any legal proceedings, nor are we aware of any contemplated proceedings. Intellectual Property and Proprietary Rights We rely primarily on a combination of copyright laws and contractual restrictions to establish and protect our intellectual property rights. We currently have two issued patents in the PRC and 40 are in the application process. We require our management and key technical personnel to enter into agreements requiring them to keep confidential all information relating to our customers, methods, business and trade secrets during and after their employment with us. We have very strict control over the core technologies for which we can not apply for patents. Every employee who is related to these proprietary technologies must sign "special technology non-disclosure agreement". We have also established an internal department to protect property rights. In this department, there are professionals including attorneys, engineers, information managers and archives managers responsible for the application and protection of proprietary rights. We have also developed a series of rules regarding "property right non-disclosure", "property right archives management", "information collection and analysis" and "innovation encouragement". While we actively take steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of our intellectual property. This is particularly the case in China where the laws may not protect our proprietary rights as fully as in the United States. Infringement or misappropriation of our intellectual property could materially harm our business. BAK Battery has registered the following Internet and WAP domain name WWW.BAK.COM.CN (the English version of our website can be found at WWW.BAK.COM.CN.EN). CAUTIONARY STATEMENTS You should carefully consider the following risks and the other information set forth elsewhere in this Current Repor, including our financial statements and related notes.. If any of these risks occur, our business, financial condition and results of operations could be adversely affected. As a result, the trading price of our common stock could decline, perhaps significantly. Risks Related to Our Business The rechargeable battery business is highly competitive. We are subject to competition from manufacturers of traditional rechargeable batteries, such as nickel-cadmium batteries, from manufacturers of rechargeable batteries of more recent technologies, such as nickel-metal hydride and liquid electrolyte, as well as from companies engaged in the development of batteries incorporating new technologies. Other manufacturers of lithium ion batteries currently include Sanyo Electric Co., Sony Corp., Matsushita Electric Industrial Co., Ltd. (Panasonic), GS Group, NEC Corporation, Hitachi Ltd., LG Chemical Ltd., Samsung Electronics Co., Ltd., BYD Co. Ltd., Tianjin Lishen Battery Joint-Stock Co., Ltd., Henan Huanyu Group and Harbin Coslight Technology International Group Co., Ltd. 7 Many companies with substantially greater resources are developing a variety of battery technologies, such as lithium polymer and fuel cell batteries, which are expected to compete with our existing product lines technology. Other companies undertaking research and development activities of solid-polymer batteries have already developed prototypes and are constructing commercial scale production facilities. If these companies successfully market their batteries before the introduction of our products, there could be a material adverse effect on our business, financial condition and results of operations. We depend on continued demand for our products. A substantial portion of our business depends on the continued demand for those products that use lithium ion batteries, which in turn cause demand for our products. Therefore, our success depends significantly upon the success of those products in the marketplace. We are subject to many risks beyond our control that influence the success or failure of such products. Because of the specialized, technical nature of the business, we are highly dependent on certain members of management, marketing, engineering and technical staff. The loss of these services or these members could have a material adverse effect on our business, financial condition and results of operations. In addition to developing the manufacturing capacity to produce high volumes of advanced rechargeable batteries, we must attract, recruit and retain a sizeable workforce of technically competent employees. Our ability to pursue effectively our business strategy will depend upon, among other factors, the successful recruitment and retention of additional highly skilled and experienced managerial, marketing, engineering and technical personnel. We cannot assure that we will be able to retain this type of personnel. Rapid growth of our battery business could significantly strain management, operations and technical resources. If we are successful in obtaining rapid market growth of our batteries, we will be required to deliver large volumes of quality products to customers on a timely basis at a reasonable cost to those customers. Such demand can also create working capital issues for us, as we need increased liquidity to fund purchases of raw materials and supplies. We cannot assure, however, that business will rapidly grow or that our efforts to expand manufacturing and quality control activities will be successful or that we will be able to satisfy commercial scale production requirements on a timely and cost-effective basis. We will also be required to continue to improve our operations, management and financial systems and controls. The failure to manage growth effectively could have an adverse effect on our business, financial condition and results of operations. Lithium ion batteries pose certain safety risks that could affect our business. Due to the high energy density inherent in lithium batteries, our batteries can pose certain safety risks, including the risk of fire. Although we incorporate safety procedures in research, development and manufacturing processes that are designed to minimize safety risks, we cannot assure that accidents will not occur. Any accident, whether at the manufacturing facilities or from the use of the products, may result in significant production delays or claims for damages resulting from injuries. Due to the fact that we have no product liablity insurance, these types of losses could have a material adverse effect on our business, financial condition and results of operations. National, state and local laws impose various environmental controls on the manufacture, storage, use and disposal of lithium batteries and/or of certain chemicals used in the manufacture of lithium batteries. Although we believe that our operations are in substantial compliance with current environmental regulations and that, except as noted below, there are no environmental conditions that will require material expenditures for clean-up at 8 the present or former facilities or at facilities to which we send waste for disposal, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities. There can be no assurance that additional or modified regulations relating to the manufacture, transportation, storage, use and disposal of materials used to manufacture our batteries or restricting disposal of batteries will not be imposed or how these regulations will affect us or our customers. We depend on certain suppliers, and any disruption with those suppliers could have an adverse affect on our business. Certain materials used in products are available only from a limited number of suppliers. Additionally, we may elect to develop relationships with a single or limited number of suppliers for materials that are otherwise generally available. We have volume purchase agreements with our major suppliers. Although we believe that alternative suppliers are available to supply materials that could replace materials currently used and that, if necessary, we would be able to redesign our products to make use of such alternatives, any interruption in the supply from any supplier could delay product shipments and adversely effect our relationships with our customers. We cannot control the cost of our raw materials, which may adversely impact our profit margin and financial position. Our principal raw materials are liquid electrolyte and lithium cobalt oxide. The prices for these raw materials are subject to market forces largely beyond our control, including energy costs, organic chemical feedstocks, market demand, and freight costs. The prices for these raw materials have varied significantly, including a significant increase in the year ended September 30, 2004, and may vary significantly in the future. We may not be able to adjust our product prices, especially in the short term, to recover the costs of increases in these raw materials. Our future profitability may be adversely affected to the extent we are unable to pass on higher raw material and energy costs to our customers. If we experience customer concentration, we may be exposed to all of the risks faced by our remaining material customers. Our largest customer accounts for 13.62% of our revenues for the nine months ended September 30, 2004. Unless we maintain multiple customer relationships, it is likely that we will experience periods during which we will be highly dependent on a limited number of customers. Dependence on a few customers could make it difficult to negotiate attractive prices for our products and could expose us to the risk of substantial losses if a single dominant customer stops conducting business with us. Moreover, to the extent that we are dependent on any single customer, we are subject to the risks faced by that customer to the extent that such risks impede the customer's ability to stay in business and make timely payments to us. Our business is highly dependent upon proprietary technologies. Our success depends on the knowledge, ability, experience and technological expertise of our employees and on the legal protection of patents and other proprietary rights. We claim proprietary rights in various unpatented technologies, know-how, trade secrets and trademarks relating to products and manufacturing processes. We cannot guarantee the degree of protection these various claims may or will afford, or that competitors will not independently develop or patent technologies that are substantially equivalent or superior to our technology. We protect our proprietary rights in our products and operations through contractual obligations, including nondisclosure agreements. There can be no assurance as to the degree of protection these contractual measures may or will afford. We have had patents issued and have patent applications pending in China. We cannot assure (i) that patents will be issued from any pending applications, or that the claims allowed under any patents will be sufficiently broad to protect our technology, (ii) that any patents issued to us will not be challenged, invalidated or circumvented, or (iii) as to the degree or adequacy 9 of protection any patents or patent applications may or will afford. If we are found to be infringing third party patents, there can be no assurance that we will be able to obtain licenses with respect to such patents on acceptable terms, if at all. The failure to obtain necessary licenses could delay product shipment or the introduction of new products, and costly attempts to design around such patents could foreclose the development, manufacture or sale of products. We depend on factories to manufacture our products, which may be insufficiently insured against damage or loss. We have no direct business operation, other than our ownership of our subsidiaries located in China, and our results of operations and financial condition are currently solely dependent on our subsidiaries' factories in China. We do not currently maintain insurance to protect against damage and loss to our manufacturing facility, machinery and other leasehold improvements. Therefore, any material damage to, or the loss of, any of our factories due to fire, severe weather, flooding or other cause, and such damage or loss would have a material adverse effect on our financial condition, business and prospects. We face risks related to product warranty claims. We typically offer warranties ranging from six to eight months against any defects due to product malfunction. We provide for a reserve for this potential warranty expense, which is based on an analysis of historical warranty issues. There is no assurance that future warranty claims will be consistent with past history, and in the event we experience a significant increase in warranty claims, there is no assurance that the reserves are sufficient. This could have a material adverse effect on our business, financial condition and results of operations. Our holding company structure creates restrictions on the payment of dividends. We have no direct business operations, other than our ownership of our subsidiaries. While we have no current intention of paying dividends, should we decide in the future to do so, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries and other holdings and investments. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions. If future dividends are paid in Renminbi, fluctuations in the exchange rate for the conversion of Renminbi into U.S. dollars may adversely affect the amount received by U.S. stockholders upon conversion of the dividend payment into U.S. dollars. Our short term debt obligations may affect our liquidity and capital resources. As of September 30, 2004 we had approximately U.S. $50 million in short term loans and notes payable maturing at or prior to September 30, 2005. If we fail to obtain extensions of the maturity dates of these obligations, our overall liquidity and capital resources will be adversely affected as a result of our efforts to satisfy these obligations. We have not obtained the certificate of land use right for our BAK Industrial Park. We have not obtained the certificate of land use right for the property and facilities located at BAK Industrial Park, No. 1 BAK Street, Kuichong Town, Longgang District, Shenzhen, People's Republic of China. We are negotiating with the government regarding this matter. We have paid approximately U.S. $278,000 for construction and area preparation costs. We have, however, been granted permission to, and have commenced construction of, our new production facility. Although we anticipate receiving the certificate of land use right, our business will be materially adversely affected if our application for a certificate of land use right is not approved, because we could be obligated to vacate the premises and relocate to new facilities. 10 Risks Related to Doing Business in China Our operations are located in China and may be adversely affected by changes in the political and economic policies of the Chinese government. Our business operations may be adversely affected by the political environment in the PRC. The PRC has operated as a socialist state since 1949 and is controlled by the Communist Party of China. In recent years, however, the government has introduced reforms aimed at creating a "socialist market economy" and policies have been implemented to allow business enterprises greater autonomy in their operations. Changes in the political leadership of the PRC may have a significant effect on laws and policies related to the current economic reforms program, other policies affecting business and the general political, economic and social environment in the PRC, including the introduction of measures to control inflation, changes in the rate or method of taxation, the imposition of additional restrictions on currency conversion and remittances abroad, and foreign investment. These effects could substantially impair our business, profits or prospects in China. Moreover, economic reforms and growth in the PRC have been more successful in certain provinces than in others, and the continuation or increases of such disparities could affect the political or social stability of the PRC. Although we believe that the economic reform and the macroeconomic measures adopted by the Chinese government have had a positive effect on the economic development of China, we cannot predict the future direction of these economic reforms or the effects these measures may have on our business, financial position or results of operations. In addition, the Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD. These differences include: o economic structure; o level of government involvement in the economy; o level of development; o level of capital reinvestment; o control of foreign exchange; o methods of allocating resources; and o balance of payments position. As a result of these differences, our business may not develop in the same way or at the same rate as might be expected if the Chinese economy were similar to those of the OECD member countries. The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. The PRC only recently has permitted provincial and local economic autonomy and private economic activities. The government of the PRC has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in the PRC or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures. Any such developments could have a material adverse effect on our business, operations, financial condition and prospects. In addition, while we do not believe it is a likely event, the Chinese government may decide not to grant a renewal of BAK Battery's renewable operating tenure upon its expiration on August 3, 2011. While we believe that renewing the operating tenure is a simple administrative matter, a failure to renew BAK Battery's renewable operating tenure could have a material adverse effect on our business, operations, financial condition and prospects. 11 The favorable tax treatment in Shenzhen is projected to end in the near future, which, when effective, will adversely impact our profit margin and results of operations. The current tax rate in Shenzhen is 15% of profits. However, Shenzhen is an economic development zone. As such, the tax rate for foreign invested enterprises like us is adjusted to promote development. Under the current tax scheme, foreign invested enterprises do not owe any tax during the first two years following the time at which they become profitable. For the next following three years, foreign invested enterprises owe 50% of the current tax rate, or 7.5%. Thereafter, foreign invested enterprises owe the full tax rate, unless they qualify and apply for other reduced tax programs. Under this format, we currently pay 7.5%. We will likely begin to pay the 15% mandated maximum on January 1, 2007. Once this increase becomes effective, our profit margin and financial position will experience a concordant negative adjustment. A downturn in the Chinese economy may slow down our growth and profitability. The growth of the Chinese economy has been uneven across geographic regions and economic sectors. There can be no assurance that growth of the Chinese economy will be steady or that any downturn will not have a negative effect on our business. Our profitability will decrease if expenditures for lithium ion batteries decrease due to a downturn in the Chinese economy. Future inflation in China may inhibit economic activity in China and adversely affect our operations. In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation which have led to the adoption by the PRC government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. While inflation has moderated since 1995, high inflation may in the future cause the PRC government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby adversely affect our business operations and prospects in the PRC. Any recurrence of severe acute respiratory syndrome, or SARS, or another widespread public health problem, could adversely affect our business and results of operations. A renewed outbreak of SARS or another widespread public health problem in China, where all of our revenue is derived, and in Shanghai, where our operations are headquartered, could have a negative effect on our operations. Our operations may be impacted by a number of health-related factors, including the following: o quarantines or closures of some of our offices which would severely disrupt our operations, o the sickness or death of our key officers and employees, and o a general slowdown in the Chinese economy. Any of the foregoing events or other unforeseen consequences of public health problems could adversely affect our business and results of operations. Restrictions on currency exchange may limit our ability to receive and use our revenues effectively. Because almost all of our future revenues may be in the form of Renminbi, any future restrictions on currency exchanges may limit our ability to use revenue generated in Renminbi to fund any future business activities outside China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the Renminbi for current account transactions, significant restrictions still remain, including primarily the restriction that 12 foreign-invested enterprises may only buy, sell or remit foreign currencies, after providing valid commercial documents, at those banks authorized to conduct foreign exchange business. In addition, conversion of Renminbi for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the Renminbi, especially with respect to foreign exchange transactions. The value of our securities will be affected by the foreign exchange rate between U.S. dollars and Renminbi. The value of our common stock will be affected by the foreign exchange rate between U.S. dollars and Renminbi. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operational needs and should the Renminbi appreciate against the U.S. dollar at that time, our financial position and the price of our common stock may be adversely affected. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of declaring dividends on our common stock or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of our earnings from our subsidiaries in China would be reduced. Until 1994, the Renminbi experienced a gradual but significant devaluation against most major currencies, including U.S. dollars, and there was a significant devaluation of the Renminbi on January 1, 1994 in connection with the replacement of the dual exchange rate system with a unified managed floating rate foreign exchange system. Since 1994, the value of the Renminbi relative to the U.S. Dollar has remained stable and has appreciated slightly against the U.S. dollar. Countries, including the U.S., have argued that the Renminbi is artificially undervalued due to China's current monetary policies and have pressured China to allow the Renminbi to float freely in world markets. If any devaluation of the Renminbi were to occur in the future, our returns on our operations in China, which are expected to be in the form of Renminbi, will be negatively affected upon conversion to U.S. dollars. Although we attempt to have most future payments, mainly repayments of loans and capital contributions, denominated in U.S. dollars, if any increase in the value of the Renminbi were to occur in the future, our products sales in China and in other countries may be negatively affected. We may be unable to enforce our rights due to policies regarding the regulation of foreign investments in China. The PRC's legal system is a civil law system based on written statutes in which decided legal cases have little value as precedents, unlike the common law system prevalent in the United States. The PRC does not have a well-developed, consolidated body of laws governing foreign investment enterprises. As a result, the administration of laws and regulations by government agencies may be subject to considerable discretion and variation, and may be subject to influence by external forces unrelated to the legal merits of a particular matter. China's regulations and policies with respect to foreign investments are evolving. Definitive regulations and policies with respect to such matters as the permissible percentage of foreign investment and permissible rates of equity returns have not yet been published. Statements regarding these evolving policies have been conflicting and any such policies, as administered, are likely to be subject to broad interpretation and discretion and to be modified, perhaps on a case-by-case basis. The uncertainties regarding such regulations and policies present risks which may affect our ability to achieve our business objectives. We cannot assure you that we will be able to enforce any legal rights we may have under our contracts or otherwise. Our failure to enforce our legal rights may have a material adverse impact on our operations and financial position, as well as our ability to compete with other companies in our industry. 13 It may be difficult for stockholders to enforce any judgment obtained in the United States against us, which may limit the remedies otherwise available to our stockholders. Substantially all of our assets are located outside the United States. Almost all of our current operations are conducted in China. Moreover, all of our directors and officers are nationals or residents of China. All or a substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for shareholders to effect service of process within the United States upon these persons. In addition, there is uncertainty as to whether the courts of China would recognize or enforce judgments of United States courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities law of the United States or any state thereof, or be competent to hear original actions brought in China against us or such persons predicated upon the securities laws of the United States or any state thereof. Risks Related to our Common Stock The market price for our common stock may be volatile. The market price for our common stock is likely to be highly volatile and subject to wide fluctuations in response to factors including the following: o actual or anticipated fluctuations in our quarterly operating results, o announcements of new services by us or our competitors, o changes in financial estimates by securities analysts, o conditions in the lithium ion battery market, o changes in the economic performance or market valuations of other companies involved in lithium ion battery production, o announcements by our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments, o additions or departures of key personnel, o potential litigation, or o conditions in the mobile telephone market. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. Stockholders could experience substantial dilution. We may issue additional shares of our capital stock to raise additional cash for working capital. If we issue additional shares of our capital stock, our stockholders will experience dilution in their respective percentage ownership in us. We have no present intention to pay dividends. Neither during the preceding two fiscal years nor during the nine month period ended September 30, 2004 did we pay dividends or make other cash distributions on our common stock, and we do not expect to declare or pay any dividends in the foreseeable future. Should we decide in the future to do so, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries and other holdings and investments. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions. We intend to retain any future earnings for working capital and to finance current operations and expansion of our business. 14 A large portion of our common stock is controlled by a small number of stockholders. A large portion of our common stock is held by a small number of stockholders. As a result, these stockholders are able to influence the outcome of stockholder votes on various matters, including the election of directors and extraordinary corporate transactions including business combinations. In addition, the occurrence of sales of a large number of shares of our common stock, or the perception that these sales could occur, may affect our stock price and could impair our ability to obtain capital through an offering of equity securities. Furthermore, the current ratios of ownership of our common stock reduce the public float and liquidity of our common stock which can in turn affect the market price of our common stock. There is currently a limited trading market for our common stock. Our common stock is traded in the over-the-counter market through the Over-the-Counter Electronic Bulletin Board. There is currently an active trading market for our common stock; however, there can be no assurance that an active trading market will be maintained. We cannot assure you that our common stock will ever be included for trading on any stock exchange or through any other quotation system (including, without limitation, the NASDAQ Stock Market). We are likely to remain subject to "penny stock" regulations. As long as the trading price of our common stock is below $5.00 per share, the open-market trading of our common stock will be subject to the "penny stock" rules. The "penny stock" rules impose additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchaser's written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability of broker-dealers to sell the common stock and may affect a stockholder's ability to resell the common stock. Stockholders should be aware that, according to Securities and Exchange Commission Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. We are responsible for the indemnification of our officers and directors. Our Bylaws provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and 15 other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of us. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Current Report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined in the "Cautionary Statements" section beginning on page 7 in this Current Report. These factors may cause our actual results to differ materially from any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Current Report to conform such statements to actual results or to changes in our expectations. DIRECTORS AND EXECUTIVE OFFICERS The following table provides information about our executive officers and directors and their respective ages and positions as of January 20, 2005. The directors listed below will serve until the next annual meeting of the Medina stockholders: NAME AGE POSITION HELD ---- --- ------------- Xiangqian Li 36 Director, Chairman of the Board, President and Chief Executive Officer Yongbin Han 35 Chief Financial Officer and Secretary Huanyu Mao 53 Chief Technical Officer Xiangqian Li has served as our Director, Chairman of the Board, President and Chief Executive Officer since January 20, 2005. Mr. Li has been Chairman of Board of Directors and General Manager of BAK Battery since April 2001 and has also served as BAK Battery's general manager since December 2003. Previously, Mr. Li served as (i) Chairman of the Board of Directors and General Manager of Shenzhen BAK Li-ion Battery Co., Ltd. from December 2000 until March 2001; (ii) as Chairman of the Board of Directors and General Manager of Jilin Province Huaruan Technology Company Limited by Stocks ("Huaruan") from March 2001 until June 2001; and (iii) as Chairman of the Board of Directors of Huaruan from June 2001 until June 2003. Prior to 2001 Mr. Li was self employed. Mr. Li graduated from Lanzhou Railway Institute and holds a Bachelors degree in gas engineering. He is pursuing a Doctorate of quantity economics from Jilin University. Yongbin Han has served as our Chief Financial Officer and Secretary since January 20, 2005. Mr. Han is a Chinese certified public accountant and certified tax agent. Mr. Han has been Deputy General Manager of BAK Battery since April 2003. In that capacity he oversees the finance and accounting department. Previously, Mr. Han served as (i) Deputy General Manager of Huaruan from January 2002 until April 2003 and (ii) Department Manager of Zhonghongxin Jianyuan Accounting Firm from July 1995 until July 2001. Mr. Han graduated from Changchun Tax Institute with a Bachelors degree in accounting. 16 Huanyu Mao has served as our Chief Technical Officer since January 20, 2005. Dr. Mao has been Chief Scientist of BAK Battery since September 2004. From 1997 until September 2004 Dr. Mao served as Chief Engineer of Tianjin Lishen Company. Dr. Mao graduated from Memorial University of Newfoundland, Canada and received a Doctorate degree in electrochemistry in conducting polymers. Board Composition and Committees The board of directors is currently composed of one member, Xiangqian Li. All Board action requires the approval of a majority of the directors in attendance at a meeting at which a quorum is present. We intend to expand our board to include "independent" directors. We currently do not have standing audit, nominating or compensation committees. We intend, however, to establish an audit committee and a compensation committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. The compensation committee will be primarily responsible for reviewing and approving our salary and benefits policies (including stock options), including compensation of executive officers. Director Compensation At present we do not pay our directors a fee for attending scheduled and special meetings of our board of directors. We intend to reimburse each director for reasonable travel expenses related to such director's attendance at board of directors and committee meetings. As noted above, we intend to expand our board to include "independent" directors. It is anticipated that the appointment of independent members of our board will require us to pay fees comparable to those paid by other public companies in our peer group. Indebtedness of Directors and Executive Officers None of our directors or officers or their respective associates or affiliates is indebted to us. Involvement in Certain Legal Proceedings In the normal course of business, various claims are made against us. At this time, in the opinion of management, there are no pending claims the outcome of which are expected to result in a material adverse effect on our consolidated financial position or results of operations. Family Relationships There are no family relationships among our directors or officers. Executive Compensation The following Summary Compensation Table sets forth all cash compensation paid to our chief executive officer for services rendered in all capacities to us during the noted periods. No executive officers received a total annual salary and bonus compensation in excess of $100,000.
Summary Compensation Table Name and Principal Restricted Securities Underlying Stock Underlying All Other Positions Year Salary Bonus Awards Options Compensation ---------- ---- ------ ----- ---------- ---------- ------------ Xiangqian Li 2004 -0- -0- NA NA NA 2003 -0- -0- NA NA NA 2002 -0- -0- NA NA NA
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of January 20, 2005, certain information with respect to the beneficial ownership of our common stock by (i) each director and officer of Medina, (ii) each person known to Medina to be the beneficial owner of five percent or more of the outstanding shares of common stock of Medina, and (iii) all directors and officers of Medina as a group. Unless otherwise indicated, the person or entity listed in the table is the beneficial owner of, and has sole voting and investment power with respect to, the shares indicated. Certain principal stockholders are selling stockholders in this offering. Amount and Nature of Beneficial Ownership (1) --------------------------------------------- Number Percent of Name of Beneficial Owner of Shares (2) Voting Stock (3) - ------------------------ ------------- ---------------- Xiangqian Li 21,233,437 (4) 51.8% Huanyu Mao 249,805 * Yongbin Han 312,256 * Directors and executive officers as a group (3 persons) 21,795,498 53.2%
- ------------------------- *Denotes less than 1% of the outstanding shares of common stock. (1) On January 20, 2005, there were 40,978,533 shares of common stock outstanding and no issued and outstanding preferred stock. Each person named above has the sole investment and voting power with respect to all shares of common stock shown as beneficially owned by the person, except as otherwise indicated below. (2) Under applicable SEC rules, a person is deemed to be the "beneficial owner" of a security with regard to which the person directly or indirectly, has or shares (a) the voting power, which includes the power to vote or direct the voting of the security, or (b) the investment power, which includes the power to dispose, or direct the disposition, of the security, in each case irrespective of the person's economic interest in the security. Under these SEC rules, a person is deemed to beneficially own securities which the person has the right to acquire within 60 days through the exercise of any option or warrant or through the conversion of another security. (3) In determining the percent of voting stock owned by a person on January 20, 2005, (a) the numerator is the number of shares of common stock beneficially owned by the person, including shares the beneficial ownership of which may be acquired within 60 days upon the exercise of options or warrants or conversion of convertible securities, and (b) the denominator is the total of (i) the 40,978,533 shares in the aggregate of common stock outstanding on January 20, 2005, and (ii) any shares of common stock which the person has the right to acquire within 60 days upon the exercise of options or warrants or conversion of convertible securities. Neither the numerator nor the denominator includes shares which may be issued upon the exercise of any other options or warrants or the conversion of any other convertible securities. (4) Mr. Li is a party to an Escrow Agreement pursuant to which he has agreed to place 2,179,550 shares of his common stock into escrow for the benefit of the selling stockholders in the event we fail to satisfy certain "performance thresholds", as defined in the Escrow Agreement, which Escrow Agreement is filed with this Current Report statement as a material exhibit. Mr. Li is also a party to a Lock-up Agreement pursuant to which he has agreed, except for distributions of his shares of common stock required under the Escrow Agreement, not to transfer his common stock for a period commencing January 20, 2005 and ending twelve months after the listing of our common stock on a national stock exchange or national quotation medium. The Lock-up Agreement is filed with this Current Report as a material exhibit. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS We have several outstanding short term bank notes payable to the Agricultural Bank of China, Shenzhen branch, the Shenzhen Development Bank and the China Minsheng Bank, Shenzhen branch, respectively, the proceeds of which were used primarily to fund the operations of our manufacturing facility located 18 at the BAK Industrial Park. At September 30, 2004, we had aggregate amounts due and payable under these debt facilities of $45,661,000. The debt facilities bear interest at rates ranging from 4.536% to 5.841% and have maturity dates ranging from five to twelve months. This indebtedness is guaranteed by both Xiangqian Li, our President and Chief Executive Officer, and Julin Provincial Huaruan Technology Company Limited by Shares, or Huaruan, a PRC company. Mr. Li is the controlling shareholder and an executive officer of Huaruan. Except as disclosed above, we have no other business relationships with Huaruan. Neither Mr. Li nor Huaruan received or is entitled to receive any consideration for the above referenced guarantees. On October 18, 2003, we acquired intangible assets, including a patent and other patent rights, from Huaruan, an entity controlled by Xiangqian Li, our President and Chief Executive Officer. The total consideration paid to Huaruan was $3.86 million. The consideration paid to Huaruan was recorded at fair market value, as determined by an independent appraisal firm. On September 30, 2004, BAK Battery entered into a Financial Consulting Agreement with HFG International, Ltd., a PRC representative office, pursuant to which HFG International agreed to provide BAK Battery with consulting help in implementing an organizational structure that would facilitate accessing the capital markets of the United States. In consideration for these services, HFG International was paid a fee of $400,000 in conjunction with the consummation of BAK Battery's private placement. Timothy P. Halter, our former Chief Executive Officer, is the principal shareholder and an executive officer of HFG International. SECTION 3--SECURITIES AND TRADING MARKETS Item 3.02. Unregistered Sales of Equity Securities. Set forth below is information regarding recent issuances and sales of our securities without registration. No such sales involved the use of an underwriter, no advertising or public solicitation were involved, the securities bear a restrictive legend and no commissions were paid in connection with the sale of any securities. On January 20, 2005 we completed a stock exchange transaction with the stockholders of BAK International, Ltd., a Hong Kong company ("BAK International"). The exchange was consummated under Nevada law pursuant to the terms of a Securities Exchange Agreement dated effective as of January 20, 2005 by and among Medina, BAK International and the stockholders of BAK International. Pursuant to the Securities Exchange Agreement, we issued 39,826,075 shares of our common stock, par value $0.001 per share, to the stockholders of BAK International, representing approximately 97.2% of our post-exchange issued and outstanding common stock, in exchange for 100% of the outstanding capital stock of BAK International. We presently carry on the business of Shenzhen BAK Battery Co., Ltd., a Chinese corporation and BAK International's wholly-owned subsidiary, or BAK Battery. The foregoing shares were issued in private transactions or private placements intending to meet the requirements of one or more exemptions from registration. In addition to any noted exemption below, we relied upon Regulation S, Regulation D and Section 4(2) of the Securities Act of 1933, as amended (the "Act"). The investors were not solicited through any form of general solicitation or advertising, the transactions being non-public offerings, and the sales were conducted in private transactions where the investor identified an investment intent as to the transaction without a view to an immediate resale of the securities; the shares were "restricted securities" in that they were both legended with reference to Rule 144 as such and the investors identified they were sophisticated as to the investment decision and in most cases we reasonably believed the investors were "accredited investors" as such term is defined under Regulation D based upon statements and information supplied to us in writing and verbally in connection with the transactions. We never utilized an underwriter for an offering of our securities and no sales commissions were paid to any third party in connection with the above-referenced sales. 19 SECTION 4--CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT Item 4.01. Changes in Registrant's Certifying Accountant. On January 20, 2005, the Company dismissed George Stewart, C.P.A. as its independent registered public accounting firm as part of the change of control transaction reported under Item 5.01 of this Current Report. The Company's Board of Directors approved the dismissal of George Stewart, C.P.A. on January 20, 2005. As a result of the change in control, BAK International became the accounting survivor for reporting purposes. No accountant's report on the financial statements for the fiscal years ended December 31, 2003 and 2002, respectively, contained an adverse opinion or a disclaimer of opinion or was qualified or modified as to uncertainty, audit scope or accounting principles, except a going concern opinion expressing substantial doubt about the ability of the Company to continue as a going concern. No additional disclosure regarding this uncertainty is provided as such uncertainty does pertain to BAK International, the accounting survivor following the recapitalization referenced in Item 1.01 of this Current Report. During the Company's two most recent fiscal years (ended December 31, 2004 and 2003) and from January 1, 2005 to the date of this Report, there were no disagreements with the Company's independent registered accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. There were no reportable events, as described in Item 304(a)(1)(iv)(B) of Regulation S-B, during the Company's two most recent fiscal years (ended December 31, 2004 and 2003) and from January 1, 2005 to the date of this Report. Effective January 20, 2005, the Company appointed Schwartz Levitsky Feldman L.L.P., as its independent registered public accounting firm. SECTION 5--CORPORATE GOVERNANCE AND MANAGEMENT Item 5.01. Changes in Control of Registrant. See Item 1.01 above. For accounting purposes, the exchange is being treated as a reverse acquisition, because the stockholders of BAK International own a majority of the issued and outstanding shares of common stock of the Company immediately following the exchange. Due to the issuance of the 39,826,075 shares of the Company's common stock, a change in control of the Company occurred on January 20, 2005, the date of the consummation of the exchange. Except as described in the Item 1.01 and in this Current Report in Item 5.02 under the caption "Certain Relationships and Related Party Transactions," no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of the board of directors of the Company, and to the knowledge of the Company, no other arrangements exist that might result in a change of control of the Company. Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers. Pursuant to the Exchange Agreement, at the closing of the Exchange, the membership of the board of directors of the Company was increased from one (1) to two (2) directors, and Xiangqian Li was appointed to serve as a member of the Company's board of directors; thereafter, Mr. Halter resigned as a director of the Company. Also under the terms of the Exchange Agreement, all existing officers resigned as officers of the Company effective immediately following the closing of the Exchange transaction, and Xiangqian Li was elected as Chairman of the Board, President and Chief Executive Officer, Yongbin Han was elected as Chief Financial Officer and Secretary and Huanyu Mao was elected as Chief Technological Officer. See also "Directors and Executive Officers" and "Certain Relationships and Related Party Transactions" under Item 2.01 above. 20 Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. The Board of Directors of the Company adopted Amended and Restated Bylaws (the "New Bylaws") effective January 20, 2005. The material changes in the New Bylaws are as follows: (1) The Company's registered office was fixed in Article I of the previous bylaws (the "Old Bylaws"), but Section 1.1 of the New Bylaws provides that the registered office will be such office as set forth from time to time in the Company's Articles of Incorporation or an amendment thereto. (2) According to Section 2 of Article II of the Old Bylaws, the annual meeting of the shareholders was to be held on the 1st of July, but Section 2.2 of the New Bylaws provides that the annual meeting shall be held on a date determined by the Board of Directors. (3) Section 2.4 of the New Bylaws provides that special meetings of the shareholders may be called by the President or Secretary at the request in writing of the holders of not less than thirty percent (30%) of all the shares issued, outstanding and entitled to vote. Section 3 of Article II of the Old Bylaws required the request of not less than ten percent (10%) of the voting power of the Company. (4) According to Section 2.6 of the New Bylaws, quorum at a meeting of shareholders consists of the holders of thirty-three percent (33%) of the shares entitled to vote rather than a majority of the shares entitled to vote, as provided in Section 7 of Article II of the Old Bylaws. (5) A proxy to be used at a meeting of the shareholders must bear a date not more than six (6) months prior to such meeting, as provided in Section 2.8 of the New Bylaws, rather than eleven (11) months, as provided in Section 9 of Article II of the Old Bylaws. (6) The New Bylaws do not list express powers of the Company's management, unlike Section 1 of Article III of the Old Bylaws. Instead, according to Section 3.1 of the New Bylaws, the Board of Directors generally may exercise all such powers of the Company and do all such lawful acts and things that are not required to be done by the shareholders. (7) Section 3.5 of the New Bylaws provides that all vacancies in the Board of Directors are to be filled by the Board of Directors. Section 4 of Article III of the Old Bylaws, however, provided that the shareholders could elect a director to fill a vacancy not filled by the Board of Directors. (8) Section 3.11 of the New Bylaws provides that no contract or transaction between the Company and one or more of its directors or officers is void if certain criteria is met. The Old Bylaws did not contain a similar provision. (9) Section 5.6 of the New Bylaws provides that the Board of Directors may authorize executive employment contracts. The Old Bylaws did not contain a similar provision. (10) The New Bylaws include descriptions for the powers and duties of assistant secretaries (Section 5.11) and assistant treasurers (Section 5.13), which the Old Bylaws did not include. (11) Section 5.14 of the New Bylaws provides that the Company may secure a bond to protect it from loss in the event of defalcation by any of its officers. The Old Bylaws did not contain a similar provision. 21 (12) Section 6.2 of the New Bylaws provides what steps may be taken to replace lost certificates. The Old Bylaws did not contain a similar provision. (13) Section 6.3 of the New Bylaws provides the process for transferring shares of stock. The Old Bylaws did not contain a similar provision. (14) Section 7.1 of the New Bylaws provides that dividends of the Company's shares may be declared by the Board of Directors. The Old Bylaws did not contain a similar provision. (15) Section 7.2 of the New Bylaws provides that the Board of Directors may create a reserve out of the surplus of the Company in order to provide for contingencies. The Old Bylaws did not contain a similar provision. (16) Section 7.3 of the New Bylaws provides that meetings of directors, shareholders or committee members may take place by means of conference telephone or similar equipment. The Old Bylaws did not contain a similar provision. (17) Section 7.5 of the New Bylaws provides that the fiscal year of the Company will be fixed by resolution of the Board of Directors. The Old Bylaws did not contain a similar provision. (18) Section 7.8 of the New Bylaws provides that the Company may purchase and maintain insurance on behalf of the Company and any person whom it has the power to indemnify. The Old Bylaws did not contain a similar provision. (19) Section 7.10 of the New Bylaws provides that the Company's bylaws may be amended by the Board of Directors. Section 1 of Article VI of the Old Bylaws allowed for the shareholders to amend the bylaws. (20) Section 7 of Article IV of the Old Bylaws provided that the President is ex-officio a member of all of the standing committees. The New Bylaws do not contain a similar provision. (21) Section 4 of Article V of the Old Bylaws provided that the Board of Directors shall send an annual report to the shareholders no later than 120 days after the close of the fiscal year. The New Bylaws do not contain a similar provision. (22) Section 7 of Article V of the Old Bylaws provided that the president or any vice president and the secretary or assistant secretary are authorized to vote on behalf of the Company any shares of another corporation held by the Company. The New Bylaws do not contain a similar provision. The Board of Directors approved on January 20, 2005 a change in the Company's fiscal year end from December 31 to September 30. This change is being effectuated in connection with the exchange transaction described in Item 1.01 above. The report covering the transition period will be filed on a Form 10-K for the year ended September 30, 2004. Section 9--Financial Statements and Exhibits Item 9.01. Financial Statements and Exhibits Exhibits. The following Exhibits have been filed as a part of this Current Report: Exhibit Number Description - ------ ----------- 3.1* Articles of Incorporation of the Registrant. 3.2* Articles of Amendment. 22 3.3+ Amended and Restated Bylaws. 3.4* Bylaws 10.1+ Securities and Exchange Agreement by and among BAK International, Ltd., Medina Coffee, Inc. and the stockholders of BAK International, Ltd. dated as of January 20, 2005. 10.2+ Escrow Agreement by and among Medina Coffee, Inc., the selling stockholders, Xiangqian Li, and Securities Transfer Corporation dated as of January 20, 2005. 10.3+ Lock-up Agreement by and between Medina Coffee, Inc. and Xiangqian Li dated as of January 20, 2005. 10.4+ Form of Subscription Agreement. 10.5+ Summary of Sales Agreement by and between Shenzhen BAK Battery Co., Ltd. and Zhongshan Mingji Battery Co., Ltd. dated as of October 25, 2003. 10.6+ Summary of Purchase Agreement by and between Shenzhen BAK Battery Co., Ltd. and Luhua Technology (Shenzhen) Co., Ltd. dated as of April 14, 2004. 10.7+ Summary of Purchase Agreement by and between Shenzhen BAK Battery Co., Ltd. and Beijing CITIC Guoan Mengguli Electricity Supply Ltd. Co. dated as of September 30, 2004. 10.8+ Summary of Revolvable Credit Facilities Agreement by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Branch, Agricultural Bank of China dated as of June 27, 2003. 10.9+ Summary of Guaranty Contract of Maximum Amount by and between Longgang Division, Shenzhen Branch, Agricultural Bank of China and Jilin Provincial Huaruan Technology Company Limited by Shares dated as of June 27, 2003. 10.10+ Summary of Comprehensive Credit Facilities Agreement of Maximum Amount by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Branch, Agricultural Bank of China dated as of April 5, 2004. 10.11+ Summary of Guaranty Contract of Maximum Amount by and among Longgang Division, Shenzhen Branch, Agricultural Bank of China, Development and Construction (Group) Company Limited by Shares of Changchun Economic & Technology Development District, Jilin Provincial Huaruan Technology Company Limited by Shares and Xiangqian Li dated as of April 5, 2004. 10.12+ Summary of Comprehensive Credit Facilities Agreement by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Development Bank dated as of April 1, 2004. 10.13+ Summary of Guaranty Contract of Maximum Amount by and among Longgang Division, Shenzhen Development Bank, Development and Construction (Group) Company Limited by Shares of Changchun Economic & Technology Development District, Jilin Provincial Huaruan Technology Company Limited by Shares, Xiangqian Li, Yanlong Zou, Fenghua Li, Jimin Li, Jiajun Huang, Baicheng Zhou, Jinghui Wang, Yongbin Han, Shuquan Zhang, Xinrong Yang, Yunfei Li and Weiqiang Zhang dated as of April 1, 2004. 10.14+ Summary of Comprehensive Credit Facilities Agreement by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Branch, China Minsheng Bank dated as of January 14, 2004. 23 10.15+ Summary of Guaranty Contract of Maximum Amount by and among Longgang Division, Shenzhen Branch, China Minsheng Bank, Jilin Provincial Huaruan Technology Company Limited by Shares and Xiangqian Li dated as of November 15, 2003. 10.16+ Summary of Loan Agreement by and between Shenzhen BAK Battery Co., Ltd. and Shenzhen Branch, Industrial Bank dated as of March 11, 2004. 10.17+ Summary of Guaranty Agreement by and between Shenzhen Branch, Industrial Bank and Shenzhen High-Tech Investment Service Co. dated as of March 10, 2004. 10.18+ Summary of Related Transaction Agreement by and between Shenzhen BAK Battery Co., Ltd. and Jilin Provincial Huaruan Technology Company Limited by Shares dated as of October 18, 2003. 10.19+ Summary of Loan Agreement by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Development Bank dated as of April 1, 2004. 16.1+ Letter on Change in Certifying Accountant. 99.1+ Press Release. - ---------------------- * Previously filed as an exhibit to Registration Statement on Form SB-1 (#333-41124) filed with the Commission on July 10, 2000. + Filed herewith. 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Medina Coffee has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Medina Coffee, Inc. /s/ Xiangqian Li --------------------------- Xiangqian Li, President and Chief Executive Officer DATED: January 20, 2005 25 EXHIBIT INDEX Exhibit Number Description - ------ ----------- 3.1* Articles of Incorporation of the Registrant. 3.2* Articles of Amendment. 3.3+ Amended and Restated Bylaws. 3.4* Bylaws 10.1+ Securities and Exchange Agreement by and among BAK International, Ltd., Medina Coffee, Inc. and the stockholders of BAK International, Ltd. dated as of January 20, 2005. 10.2+ Escrow Agreement by and among Medina Coffee, Inc., the selling stockholders, Xiangqian Li, and Securities Transfer Corporation dated as of January 20, 2005. 10.3+ Lock-up Agreement by and between Medina Coffee, Inc. and Xiangqian Li dated as of January 20, 2005. 10.4+ Form of Subscription Agreement. 10.5+ Summary of Sales Agreement by and between Shenzhen BAK Battery Co., Ltd. and Zhongshan Mingji Battery Co., Ltd. dated as of October 25, 2003. 10.6+ Summary of Purchase Agreement by and between Shenzhen BAK Battery Co., Ltd. and Luhua Technology (Shenzhen) Co., Ltd. dated as of April 14, 2004. 10.7+ Summary of Purchase Agreement by and between Shenzhen BAK Battery Co., Ltd. and Beijing CITIC Guoan Mengguli Electricity Supply Ltd. Co. dated as of September 30, 2004. 10.8+ Summary of Revolvable Credit Facilities Agreement by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Branch, Agricultural Bank of China dated as of June 27, 2003. 10.9+ Summary of Guaranty Contract of Maximum Amount by and between Longgang Division, Shenzhen Branch, Agricultural Bank of China and Jilin Provincial Huaruan Technology Company Limited by Shares dated as of June 27, 2003. 10.10+ Summary of Comprehensive Credit Facilities Agreement of Maximum Amount by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Branch, Agricultural Bank of China dated as of April 5, 2004. 10.11+ Summary of Guaranty Contract of Maximum Amount by and among Longgang Division, Shenzhen Branch, Agricultural Bank of China, Development and Construction (Group) Company Limited by Shares of Changchun Economic & Technology Development District, Jilin Provincial Huaruan Technology Company Limited by Shares and Xiangqian Li dated as of April 5, 2004. 10.12+ Summary of Comprehensive Credit Facilities Agreement by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Development Bank dated as of April 1, 2004. 10.13+ Summary of Guaranty Contract of Maximum Amount by and among Longgang Division, Shenzhen Development Bank, Development and Construction (Group) Company Limited by Shares of Changchun Economic & Technology Development District, Jilin Provincial Huaruan Technology Company Limited by Shares, Xiangqian Li, Yanlong Zou, Fenghua Li, Jimin Li, Jiajun Huang, Baicheng Zhou, Jinghui Wang, Yongbin Han, Shuquan Zhang, Xinrong Yang, Yunfei Li and Weiqiang Zhang dated as of April 1, 2004. 10.14+ Summary of Comprehensive Credit Facilities Agreement by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Branch, China Minsheng Bank dated as of January 14, 2004. 10.15+ Summary of Guaranty Contract of Maximum Amount by and among Longgang Division, Shenzhen Branch, China Minsheng Bank, Jilin Provincial Huaruan Technology Company Limited by Shares and Xiangqian Li dated as of November 15, 2003. 10.16+ Summary of Loan Agreement by and between Shenzhen BAK Battery Co., Ltd. and Shenzhen Branch, Industrial Bank dated as of March 11, 2004. 10.17+ Summary of Guaranty Agreement by and between Shenzhen Branch, Industrial Bank and Shenzhen High-Tech Investment Service Co. dated as of March 10, 2004. 10.18+ Summary of Related Transaction Agreement by and between Shenzhen BAK Battery Co., Ltd. and Jilin Provincial Huaruan Technology Company Limited by Shares dated as of October 18, 2003. 10.19+ Summary of Loan Agreement by and between Shenzhen BAK Battery Co., Ltd. and Longgang Division, Shenzhen Development Bank dated as of April 1, 2004. 16.1+ Letter on Change in Certifying Accountant. 99.1+ Press Release. - ---------------------- * Previously filed as an exhibit to Registration Statement on Form SB-1 (#333-41124) filed with the Commission on July 10, 2000. + Filed herewith. EX-3.3 2 medina8kex33011805.txt AMENDED AND RESTATED BYLAWS EXHIBIT 3.3 AMENDED AND RESTATED BYLAWS OF MEDINA COFFEE, INC. TABLE OF CONTENTS ARTICLE I......................................................................1 OFFICES.....................................................................1 Section 1.1 Registered Office.........................................1 Section 1.2 Other Offices.............................................1 ARTICLE II.....................................................................1 SHAREHOLDERS................................................................1 Section 2.1 Place of Meetings.........................................1 Section 2.2 Annual Meeting............................................1 Section 2.3 List of Shareholders......................................1 Section 2.4 Special Meetings..........................................1 Section 2.5 Notice....................................................2 Section 2.6 Quorum....................................................2 Section 2.7 Voting....................................................2 Section 2.8 Method of Voting..........................................2 Section 2.9 Record Date; Closing Transfer Books.......................3 Section 2.10 Action by Consent.........................................3 ARTICLE III....................................................................3 BOARD OF DIRECTORS..........................................................3 Section 3.1 Management................................................3 Section 3.2 Qualification; Election; Term.............................3 Section 3.3 Number....................................................3 Section 3.4 Removal...................................................4 Section 3.5 Vacancies.................................................4 Section 3.6 Place of Meetings.........................................4 Section 3.7 Annual Meeting............................................4 Section 3.8 Regular Meetings..........................................4 Section 3.9 Special Meetings..........................................4 Section 3.10 Quorum....................................................4 Section 3.11 Interested Directors......................................4 Section 3.12 Committees................................................5 Section 3.13 Action by Consent.........................................5 Section 3.14 Compensation of Directors.................................5 ARTICLE IV.....................................................................5 NOTICE......................................................................5 Section 4.1 Form of Notice............................................5 Section 4.2 Waiver....................................................5 ARTICLE V......................................................................6 OFFICERS AND AGENTS.........................................................6 Section 5.1 In General................................................6 Section 5.2 Election..................................................6 Section 5.3 Other Officers and Agents.................................6 i Section 5.4 Compensation..............................................6 Section 5.5 Term of Office and Removal................................6 Section 5.6 Employment and Other Contracts............................6 Section 5.7 Chairman of the Board of Directors........................6 Section 5.8 President.................................................6 Section 5.9 Vice Presidents...........................................7 Section 5.10 Secretary.................................................7 Section 5.11 Assistant Secretaries.....................................7 Section 5.12 Treasurer.................................................7 Section 5.13 Assistant Treasurers......................................7 Section 5.14 Bonding...................................................7 ARTICLE VI.....................................................................8 CERTIFICATES REPRESENTING SHARES............................................8 Section 6.1 Form of Certificates......................................8 Section 6.2 Lost Certificates.........................................8 Section 6.3 Transfer of Shares........................................8 Section 6.4 Registered Shareholders...................................8 ARTICLE VII....................................................................9 GENERAL PROVISIONS..........................................................9 Section 7.1 Dividends.................................................9 Section 7.2 Reserves..................................................9 Section 7.3 Telephone and Similar Meetings............................9 Section 7.4 Books and Records.........................................9 Section 7.5 Fiscal Year...............................................9 Section 7.6 Seal......................................................9 Section 7.7 Indemnification..........................................10 Section 7.8 Insurance................................................10 Section 7.9 Resignation..............................................10 Section 7.10 Amendment of Bylaws......................................10 Section 7.11 Invalid Provisions.......................................10 Section 7.12 Relation to Articles of Incorporation....................10 ii AMENDED AND RESTATED BYLAWS OF MEDINA COFFEE, INC. ARTICLE I OFFICES Section 1.1 Registered Office. The registered office and registered agent of Medina Coffee, Inc. (the "Corporation") will be as from time to time set forth in the Corporation's Articles of Incorporation or in any certificate filed with the Secretary of State of the State of Nevada to amend such information. Section 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Nevada, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II SHAREHOLDERS Section 2.1 Place of Meetings. All meetings of the shareholders for the election of Directors will be held at such place, within or without the State of Nevada or the United States of America, as may be fixed from time to time by the Board of Directors. Meetings of shareholders for any other purpose may be held at such time and place, within or without the State of Nevada or the United States of America, as may be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2.2 Annual Meeting. An annual meeting of the shareholders will be held at such time as may be determined by the Board of Directors, at which meeting the shareholders will elect a Board of Directors and transact such other business as may properly be brought before the meeting. Section 2.3 List of Shareholders. At least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of voting shares registered in the name of each, will be prepared by the officer or agent having charge of the stock transfer books. Such list will be kept on file at the registered office of the Corporation for a period of ten (10) days prior to such meeting and will be subject to inspection by any shareholder at any time during usual business hours. Such list will be produced and kept open at the time and place of the meeting during the whole time thereof, and will be subject to the inspection of any shareholder who may be present. Section 2.4 Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by law, the Articles of Incorporation or these Bylaws, may be called by the President or the Board of Directors, or will be called by the President or Secretary at the request in 1 writing of the holders of not less than thirty percent (30%) of all the shares issued, outstanding and entitled to vote. Such request will state the purpose or purposes of the proposed meeting. Business transacted at all special meetings will be confined to the purposes stated in the notice of the meeting unless all shareholders entitled to vote are present and consent. Section 2.5 Notice. Written or printed notice stating the place, day and hour of any meeting of the shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, will be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each shareholder of record entitled to vote at the meeting. If mailed, such notice will be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. Section 2.6 Quorum. With respect to any matter, the presence in person or by proxy of the holders of thirty-three percent (33%) of the shares entitled to vote on that matter will be necessary and sufficient to constitute a quorum for the transaction of business except as otherwise provided by law, the Articles of Incorporation or these Bylaws. If, however, such quorum is not present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, will have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each shareholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally notified. Section 2.7 Voting. When a quorum is present at any meeting of the Corporation's shareholders, the vote of the holders of a majority of the shares entitled to vote that are actually voted on any question brought before the meeting will be sufficient to decide such question; provided that if the question is one upon which, by express provision of law, the Articles of Incorporation or these Bylaws, a different vote is required, such express provision shall govern and control the decision of such question. Section 2.8 Method of Voting. Each outstanding share of the Corporation's capital stock, regardless of class or series, will be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class or series are limited or denied by the Articles of Incorporation, as amended from time to time. At any meeting of the shareholders, every shareholder having the right to vote will be entitled to vote in person or by proxy executed in writing by such shareholder and bearing a date not more than six (6) months prior to such meeting, unless it is coupled with an interest, or unless such instrument provides for a longer period, which may not exceed 7 years from the date of its creation. A telegram, telex, cablegram or similar transmission by the shareholder, or a photographic, photostatic, facsimile or similar reproduction of a writing executed by the shareholder, shall be treated as an execution in writing for purposes of the preceding sentence. Subject to these restrictions every properly created proxy is not revoked and shall continue in full force and effect until another instrument or transmission revoking it or a properly 2 created proxy bearing a later date is filed with or transmitted to the Secretary of the Corporation. Such proxy will be filed with the Secretary of the Corporation prior to or at the time of the meeting. Voting for Directors will be in accordance with Article III of these Bylaws. Voting on any question or in any election may be by voice vote or show of hands unless the presiding officer orders or any shareholder demands that voting be by written ballot. Section 2.9 Record Date; Closing Transfer Books. The Board of Directors may fix in advance a record date for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such record date to be not less than ten (10) nor more than sixty (60) days prior to such meeting, or the Board of Directors may close the stock transfer books for such purpose for a period of not less than ten (10) nor more than sixty (60) days prior to such meeting. In the absence of any action by the Board of Directors, the date upon which the notice of the meeting is mailed will be the record date. Section 2.10 Action by Consent. Except as prohibited by law, any action required or permitted by law, the Articles of Incorporation or these Bylaws to be taken at a meeting of the shareholders of the Corporation may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and will be delivered to the Corporation by delivery to its registered office in Nevada, its principal place of business or an officer or agent of the Corporation having custody of the minute book. ARTICLE III BOARD OF DIRECTORS Section 3.1 Management. The business and affairs of the Corporation will be managed by or under the direction of the Board of Directors, who may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Articles of Incorporation or these Bylaws directed or required to be exercised or done by the shareholders. Section 3.2 Qualification; Election; Term. Each Director must be a natural person at least 18 years of age. None of the Directors need be a shareholder of the Corporation or a resident of the State of Nevada. The Directors will be elected by plurality vote at the annual meeting of the shareholders, except as hereinafter provided, and each Director elected will hold office until whichever of the following occurs first: his successor is elected and qualified, his resignation, his removal from office by the shareholders or his death. Section 3.3 Number. The authorized number of Directors of the Corporation shall be not less than one (1) nor more than eight (8). Section 3.4 Removal. Any Director may be removed either for or without cause at any special meeting of shareholders by the affirmative vote of the shareholders representing not less than two-thirds of the voting power of the issued and outstanding stock entitled to voting power; provided, that notice of intention to act upon such matter has been given in the notice calling such meeting. 3 Section 3.5 Vacancies. All vacancies in the Board of Directors, including those caused by an increase in the number of Directors, may be filled by a majority of the remaining Directors, though less than a quorum, unless provided for in the Articles of Incorporation. A Director elected to fill a vacancy will be elected for the unexpired term of his predecessor in office. Section 3.6 Place of Meetings. Meetings of the Board of Directors, regular or special, may be held at such place within or without the State of Nevada or the United States of America as may be fixed from time to time by the Board of Directors. Section 3.7 Annual Meeting. The first meeting of each newly elected Board of Directors will be held without further notice immediately following the annual meeting of shareholders and at the same place, unless by unanimous consent, the Directors then elected and serving shall change such time or place. Section 3.8 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place as is from time to time determined by resolution of the Board of Directors. Section 3.9 Special Meetings. Special meetings of the Board of Directors may be called by the President on oral or written notice to each Director, given either personally, by telephone, by telegram or by mail; special meetings will be called by the President or the Secretary in like manner and on like notice on the written request of at least two (2) Directors. Except as may be otherwise expressly provided by law, the Articles of Incorporation or these Bylaws, neither the business to be transacted at, nor the purpose of, any special meeting need be specified in a notice or waiver of notice. Section 3.10 Quorum. At all meetings of the Board of Directors the presence of a majority of the number of Directors then in office will be necessary and sufficient to constitute a quorum for the transaction of business, and the affirmative vote of at least a majority of the Directors present at any meeting at which there is a quorum will be the act of the Board of Directors, except as may be otherwise specifically provided by law, the Articles of Incorporation or these Bylaws. If a quorum is not present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum is present. Section 3.11 Interested Directors. No contract or transaction between the Corporation and one or more of its Directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of the Corporation's Directors or officers are Directors or officers or have a financial interest, will be void or voidable solely for this reason, solely because the Director or officer is present at or participates in the meeting of the Board of Directors or committee thereof that authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (i) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum, (ii) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the 4 shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the shareholders. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction. Section 3.12 Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate committees, each committee to consist of one (1) or more Directors of the Corporation, which committees will have such power and authority and will perform such functions as may be provided in such resolution. Such committee or committees will have such name or names as may be designated by the Board of Directors and will keep regular minutes of their proceedings and report the same to the Board of Directors when required. Section 3.13 Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee of the Board of Directors may be taken without such a meeting if a consent or consents in writing, setting forth the action so taken, is signed by all the members of the Board of Directors or such committee, as the case may be. Section 3.14 Compensation of Directors. Directors will receive such compensation for their services and reimbursement for their expenses as the Board of Directors, by resolution, may establish; provided that nothing herein contained will be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV NOTICE Section 4.1 Form of Notice. Whenever by law, the Articles of Incorporation or these Bylaws, notice is to be given to any Director or shareholder, and no provision is made as to how such notice is to be given, such notice may be given: (i) in writing, by mail, postage prepaid, addressed to such Director or shareholder at such address as appears on the books of the Corporation or (ii) in any other method permitted by law. Any notice required or permitted to be given by mail will be deemed to be given at the time the same is deposited in the United States mail. Section 4.2 Waiver. Whenever any notice is required to be given to any shareholder or Director of the Corporation as required by law, the Articles of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated in such notice, will be equivalent to the giving of such notice. Attendance of a shareholder or Director at a meeting will constitute a waiver of notice of such meeting, except where such shareholder or Director attends for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. 5 ARTICLE V OFFICERS AND AGENTS Section 5.1 In General. The officers of the Corporation will be elected by the Board of Directors and will be a President, Secretary and Treasurer. The Board of Directors may also elect a Chairman of the Board, Vice Chairman of the Board, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers. Any two (2) or more offices may be held by the same person. Section 5.2 Election. The Board of Directors, at its first meeting after each annual meeting of shareholders, will elect the officers, none of whom need be a member of the Board of Directors. Section 5.3 Other Officers and Agents. The Board of Directors may also elect and appoint such other officers and agents as it deems necessary, who will be elected and appointed for such terms and will exercise such powers and perform such duties as may be determined from time to time by the Board of Directors. Section 5.4 Compensation. The compensation of all officers and agents of the Corporation will be fixed by the Board of Directors or any committee of the Board of Directors, if so authorized by the Board of Directors. Section 5.5 Term of Office and Removal. Each officer of the Corporation will hold office until his death, his resignation or removal from office, or the election and qualification of his successor, whichever occurs first. Any officer or agent elected or appointed by the Board of Directors may be removed at any time, for or without cause, by the affirmative vote of a majority of the entire Board of Directors, but such removal will not prejudice the contract rights, if any, of the person so removed. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. Section 5.6 Employment and Other Contracts. The Board of Directors may authorize any officer or officers or agent or agents to enter into any contract or execute and deliver any instrument in the name or on behalf of the Corporation, and such authority may be general or confined to specific instances. The Board of Directors may, when it believes the interest of the Corporation will best be served thereby, authorize executive employment contracts that contain such terms and conditions as the Board of Directors deems appropriate. Nothing herein will limit the authority of the Board of Directors to authorize employment contracts for shorter terms. Section 5.7 Chairman of the Board of Directors. If the Board of Directors has elected a Chairman of the Board, he will preside at all meetings of the shareholders and the Board of Directors. Except where by law the signature of the President is required, the Chairman will have the same power as the President to sign all certificates, contracts and other instruments of the Corporation. During the absence or disability of the President, the Chairman will exercise the powers and perform the duties of the President. Section 5.8 President. The President will be the Chief Executive Officer of the Corporation, unless another person is elected to serve in such capacity, and, subject to the control of the Board of Directors, will supervise 6 and control all of the business and affairs of the Corporation. He will, in the absence of the Chairman of the Board, preside at all meetings of the shareholders and the Board of Directors. The President will have all powers and perform all duties incident to the office of President and will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe. Section 5.9 Vice Presidents. Each Vice President will have the usual and customary powers and perform the usual and customary duties incident to the office of Vice President, and will have such other powers and perform such other duties as the Board of Directors or any committee thereof may from time to time prescribe or as the President may from time to time delegate to him. In the absence or disability of the President and the Chairman of the Board, a Vice President designated by the Board of Directors, or in the absence of such designation the Vice Presidents in the order of their seniority in office, will exercise the powers and perform the duties of the President. Section 5.10 Secretary. The Secretary will attend all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. The Secretary will perform like duties for the Board of Directors and committees thereof when required. The Secretary will give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors. The Secretary will keep in safe custody the seal of the Corporation. The Secretary will be under the supervision of the President. The Secretary will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the President may from time to time delegate to him. Section 5.11 Assistant Secretaries. The Assistant Secretaries in the order of their seniority in office, unless otherwise determined by the Board of Directors, will, in the absence or disability of the Secretary, exercise the powers and perform the duties of the Secretary. They will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the President may from time to time delegate to them. Section 5.12 Treasurer. The Treasurer will have responsibility for the receipt and disbursement of all corporate funds and securities, will keep full and accurate accounts of such receipts and disbursements, and will deposit or cause to be deposited all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer will render to the Directors whenever they may require it an account of the operating results and financial condition of the Corporation, and will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the President may from time to time delegate to him. Section 5.13 Assistant Treasurers. The Assistant Treasurers in the order of their seniority in office, unless otherwise determined by the Board of Directors, will, in the absence or disability of the Treasurer, exercise the powers and perform the duties of the Treasurer. They will have such other powers and perform such other duties as the Board of Directors may from time to time prescribe or as the President may from time to time delegate to them. Section 5.14 Bonding. The Corporation may secure a bond to protect the Corporation from loss in the event of defalcation by any of the officers, which bond may be in such form and amount and with such surety as the Board of Directors may deem appropriate. 7 ARTICLE VI CERTIFICATES REPRESENTING SHARES Section 6.1 Form of Certificates. Certificates, in such form as may be determined by the Board of Directors, representing shares to which shareholders are entitled, will be delivered to each shareholder. Such certificates will be consecutively numbered and entered in the stock book of the Corporation as they are issued. Each certificate will state on the face thereof the holder's name, the number, class of shares, and the par value of such shares or a statement that such shares are without par value. They will be signed by the President or a Vice President and the Secretary or an Assistant Secretary, and may be sealed with the seal of the Corporation or a facsimile thereof. If any certificate is countersigned by a transfer agent, or an assistant transfer agent or registered by a registrar, either of which is other than the Corporation or an employee of the Corporation, the signatures of the Corporation's officers may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on such certificate or certificates, ceases to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the Corporation or its agents, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. Section 6.2 Lost Certificates. The Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it may require and/or to give the Corporation a bond, in such form, in such sum, and with such surety or sureties as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. When a certificate has been lost, apparently destroyed or wrongfully taken, and the holder of record fails to notify the Corporation within a reasonable time after such holder has notice of it, and the Corporation registers a transfer of the shares represented by the certificate before receiving such notification, the holder of record is precluded from making any claim against the Corporation for the transfer of a new certificate. Section 6.3 Transfer of Shares. Shares of stock will be transferable only on the books of the Corporation by the holder thereof in person or by such holder's duly authorized attorney. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it will be the duty of the Corporation or the transfer agent of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 6.4 Registered Shareholders. The Corporation will be entitled to treat the holder of record of any share or shares of stock as the holder in 8 fact thereof and, accordingly, will not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it has express or other notice thereof, except as otherwise provided by law. ARTICLE VII GENERAL PROVISIONS Section 7.1 Dividends. Dividends upon the outstanding shares of the Corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting. Dividends may be declared and paid in cash, in property, or in shares of the Corporation, subject to the provisions of Chapter 78 of the Nevada Revised Statutes and the Articles of Incorporation. The Board of Directors may fix in advance a record date for the purpose of determining shareholders entitled to receive payment of any dividend, such record date to be not more than sixty (60) days prior to the payment date of such dividend, or the Board of Directors may close the stock transfer books for such purpose for a period of not more than sixty (60) days prior to the payment date of such dividend. In the absence of any action by the Board of Directors, the date upon which the Board of Directors adopts the resolution declaring such dividend will be the record date. Section 7.2 Reserves. There may be created by resolution of the Board of Directors out of the surplus of the Corporation such reserve or reserves as the Directors from time to time, in their discretion, deem proper to provide for contingencies, or to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the Directors may deem beneficial to the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. Surplus of the Corporation to the extent so reserved will not be available for the payment of dividends or other distributions by the Corporation. Section 7.3 Telephone and Similar Meetings. Shareholders, Directors and committee members may participate in and hold meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Participation in such a meeting will constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting had not been lawfully called or convened. Section 7.4 Books and Records. The Corporation will keep correct and complete books and records of account and minutes of the proceedings of its shareholders and Board of Directors, and will keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of the shares held by each. Section 7.5 Fiscal Year. The fiscal year of the Corporation will be fixed by resolution of the Board of Directors. Section 7.6 Seal. The Corporation may have a seal, and such seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Any officer of the Corporation will have authority to affix the seal to any document requiring it. 9 Section 7.7 Indemnification. The Corporation will indemnify its Directors to the fullest extent permitted by the Chapter 78 of the Nevada Revised Statutes and may, if and to the extent authorized by the Board of Directors, so indemnify its officers and any other person whom it has the power to indemnify against liability, reasonable expense or other matter whatsoever. Section 7.8 Insurance. The Corporation may at the discretion of the Board of Directors purchase and maintain insurance on behalf of the Corporation and any person whom it has the power to indemnify pursuant to law, the Articles of Incorporation, these Bylaws or otherwise. Section 7.9 Resignation. Any Director, officer or agent may resign by giving written notice to the President or the Secretary. Such resignation will take effect at the time specified therein or immediately if no time is specified therein. Unless otherwise specified therein, the acceptance of such resignation will not be necessary to make it effective. Section 7.10 Amendment of Bylaws. These Bylaws may be altered, amended or repealed at any meeting of the Board of Directors at which a quorum is present, by the affirmative vote of a majority of the Directors present at such meeting. Section 7.11 Invalid Provisions. If any part of these Bylaws is held invalid or inoperative for any reason, the remaining parts, so far as possible and reasonable, will be valid and operative. Section 7.12 Relation to Articles of Incorporation. These Bylaws are subject to, and governed by, the Articles of Incorporation. Adopted January 20, 2005. EX-10.1 3 medina8kex101011805.txt SECURITIES AND EXCHANGE AGREEMENT EXHIBIT 10.1 SECURITIES EXCHANGE AGREEMENT dated effective as of January 20, 2005 by and among MEDINA COFFEE, INC. BAK INTERNATIONAL, LTD. and THE SHAREHOLDERS OF BAK INTERNATIONAL, LTD. TABLE OF CONTENTS ARTICLE I. ISSUANCE AND EXCHANGE OF SHARES.....................................1 1.1 Issuance and Exchange...............................................1 1.2 Exchange Ratio......................................................1 ARTICLE II. CLOSING 2 2.1 Closing.............................................................2 2.2 Deliveries by Public Company........................................2 2.3 Deliveries by Shareholders and Holding Co...........................2 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS....................2 3.1 Ownership of Stock..................................................2 3.2 Authority to Execute and Perform Agreement; No Breach...............3 3.3 Securities Matters..................................................3 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF HOLDING CO.......................4 4.1 Organization, Standing and Corporate Power..........................4 4.2 Authority; Noncontravention.........................................4 4.3 Financial Statements................................................5 4.4 Capital Structure...................................................5 4.5 Subsidiaries........................................................5 4.6 Intellectual Property...............................................5 4.7 Absence of Certain Changes or Events; No Undisclosed Material Liabilities.........................................................5 4.8 Books and Records...................................................6 4.9 Employees...........................................................6 4.10 Employee Benefit Plans..............................................6 4.11 Compliance with Applicable Laws.....................................6 4.12 Insurance...........................................................7 4.13 Litigation, etc.....................................................7 4.14 Contracts...........................................................7 4.15 Real Property.......................................................7 4.16 Environmental Matters...............................................7 4.17 Solicitation........................................................7 4.18 Disclosure..........................................................7 ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PUBLIC COMPANY....................8 5.1 Organization, Standing and Power....................................8 5.2 Capital Structure...................................................8 5.3 Authority: Noncontravention.........................................8 5.4 Subsidiaries........................................................9 5.5 Intellectual Property...............................................9 5.6 Absence of Certain Changes or Events; No Undisclosed Material Liabilities.........................................................9 5.7 Books and Records..................................................10 5.8 Employees..........................................................10 5.9 Employee Benefit Plans.............................................10 i 5.10 Compliance with Applicable Laws....................................10 5.11 Insurance..........................................................11 5.12 Litigation, etc....................................................11 5.13 Contracts..........................................................11 5.14 Real Property......................................................11 5.15 Quotation..........................................................11 5.16 Filings............................................................11 5.17 Environmental Matters..............................................11 5.18 Anti-takeover Plan: State Takeover Statutes........................12 5.19 Solicitation.......................................................12 5.20 Disclosure.........................................................12 ARTICLE VI. INDEMNIFICATION...................................................12 6.1 Indemnification of Holding Co and Shareholders.....................12 6.2 Indemnification of Public Company..................................13 ARTICLE VII. CONDITIONS PRECEDENT.............................................13 7.1 Conditions to Each Party's Obligation to Effect the Exchange.......13 7.2 Conditions to Obligations of Holding Co and the Shareholders.......14 7.3 Conditions to Obligations of Public Company........................14 7.4 Frustration of Closing Conditions..................................15 ARTICLE VIII. GENERAL PROVISIONS..............................................15 8.1 Survival of Representations and Warranties.........................15 8.2 Fees and Expenses..................................................15 8.3 Definitions........................................................15 8.4 Usage..............................................................16 8.5 Notices............................................................16 8.6 Counterparts.......................................................17 8.7 Entire Agreement; Third-Party Beneficiaries........................17 8.8 Governing Law......................................................17 8.9 Assignment.........................................................17 8.10 Enforcement........................................................17 8.11 Severability.......................................................18 ii SECURITIES EXCHANGE AGREEMENT THIS SECURITIES EXCHANGE AGREEMENT (the "Agreement"), dated as of January 20, 2005 (the "Effective Date"), is entered into by and among BAK INTERNATIONAL, LTD., a company incorporated in Hong Kong with limited liability ("Holding Co"), and MEDINA COFFEE, INC., a Nevada corporation (the "Public Company"), and the individuals whose names appear on the signature page hereof, each being either a shareholder of Holding Co or an entity holding shares in trust (each a "Trust Company") for the benefit of certain shareholders of Holding Co (collectively, the "Shareholders"). Certain capitalized terms used in this Agreement are defined in Section 8.3 hereof. W I T N E S S E T H: WHEREAS, as of the Effective Date, there are 39,826,075 outstanding shares of the common stock of Holding Co (the "Holding Co Stock"), of which all of the shares of Holding Co Stock are beneficially owned and/or controlled by the Shareholders. WHEREAS, Public Company proposes to acquire all of the outstanding shares of Holding Co in exchange for the issuance of an aggregate of 39,826,075 shares of common stock, par value $0.001, of Public Company (the "Exchange"); WHEREAS, the Exchange shall constitute a reorganization within the meaning of Section 368(a) (1)(B) of the Internal Revenue Code of 1986, as amended, and/or any other "tax free" exemptions thereunder that may be available for the Exchange; and WHEREAS, the Boards of Directors of Public Company and Holding Co have determined that it is desirable to effect such a plan of reorganization. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants, agreements, representations and warranties contained herein, the parties hereto agree as follows: ARTICLE I. ISSUANCE AND EXCHANGE OF SHARES 1.1 Issuance and Exchange. At the Closing (as defined in Section 2.1 below), to be held in accordance with the provisions of Article II below and subject to the terms and agreements set forth herein, Public Company shall authorize Public Company's transfer agent to issue to the Shareholders the number of duly authorized and newly issued shares of common stock, par value $0.001, of Public Company (the "Public Company Stock") set forth in Section 1.2 below for the outstanding shares of Holding Co Stock. In consideration for the shares of Public Company Stock to be exchanged, the Shareholders shall have delivered to counsel for Public Company, prior to Closing, certificates evidencing their shares of Holding Co, together with duly executed stock powers to effectuate the transfer. Counsel for Public Company shall release the Holding Co shares, over which he has custody, to Public Company in accordance with the written instruction of Public Company, assuming satisfaction by the Shareholders and Holding Co of all applicable conditions set forth in this Agreement. 1.2 Exchange Ratio. (a) At the Closing, Public Company shall exchange an aggregate of 39,826,075 shares of Public Company Stock for all issued and outstanding shares of Holding Co Stock as full consideration for the Holding Co Stock. A chart setting forth the capitalization of Public Company immediately prior to and immediately following the Closing (as defined in Section 2.1) is set forth on Exhibit 1.2(a) hereto. 1 (b) No fractional shares of Public Company Stock will be issued to any Shareholder entitled to receive said shares. Accordingly, Shareholders who would otherwise be entitled to receive fractional shares of Public Company Stock will, upon surrender of their certificate representing the fractional shares of Holding Co Stock, receive a full share if the fractional share exceeds fifty percent (50%) and if the fractional share is less than fifty percent (50%) the fractional share shall be cancelled. ARTICLE II. CLOSING 2.1 Closing. The consummation of the Exchange by Public Company, Holding Co and the Shareholders (the "Closing") shall occur on the Effective Date at the offices of Holding Co, subject to the satisfaction or waiver of all of the conditions to Closing, or at such other place as the parties may agree upon. 2.2 Deliveries by Public Company. Public Company shall deliver, or cause to be delivered, to the Shareholders: (a) As soon as practicable after the Closing, certificates for the shares of Public Company Stock being exchanged for their respective accounts, in form and substance reasonably satisfactory to the Shareholders and their counsel, it being understood that the certificates will be prepared by Public Company's transfer agent and delivered to Jackson Walker, L.L.P. for the benefit of the Shareholders; (b) At the Closing, the items specified in Article VII below; and (c) At the Closing, all of the books and records of Public Company. 2.3 Deliveries by Shareholders and Holding Co. At the Closing, the Shareholders and Holding Co, as applicable, shall deliver to Public Company the items specified in Article VII below. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS Each Shareholder, including those Shareholders whose shares in Holding Co are being held by a Trust Company, hereby represents and warrants to Public Company as follows (it being acknowledged that Public Company is entering into this Agreement in material reliance upon each of the following representations and warranties, and that the truth and accuracy of each, as evidenced by their signature set forth on the signature page, constitutes a condition precedent to the obligations of Public Company hereunder): 3.1 Ownership of Stock. Each Shareholder is the lawful owner of his Holding Co Stock to be transferred to Public Company free and clear of all preemptive or similar rights, Liens, and the delivery to Public Company of the Holding Co Stock pursuant to the provisions of this Agreement will transfer to Public Company valid title thereto, free and clear of all Liens. To the Knowledge of each Shareholder, the Holding Co Stock to be exchanged herein has been duly authorized and validly issued and is fully paid and nonassessable. 2 3.2 Authority to Execute and Perform Agreement; No Breach. Each Shareholder has the full legal right and power and all authority and approval required to enter into, execute and deliver this Agreement, and to sell, assign, transfer and convey the Holding Co Stock and to perform fully his respective obligations hereunder. This Agreement has been duly executed and delivered by each Shareholder and, assuming due execution and delivery by, and enforceability against Public Company, constitutes the valid and binding obligation of each Shareholder enforceable in accordance with its terms, subject to the qualifications that enforcement of the rights and remedies created hereby is subject to (a) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors, and (b) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). No approval or consent of, or filing with, any Governmental Entity, and no approval or consent of, or filing, with any other Person is required to be obtained by the Shareholders or in connection with the execution and delivery by the Shareholders of this Agreement and consummation and performance by them of the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each Shareholder and the consummation of the transactions contemplated hereby in accordance with the terms and conditions hereof by each Shareholder will not: (a) violate, conflict with or result in the breach of any of the terms of, or constitute (or with notice or lapse of time or both would constitute) a default under, any contract, lease, agreement or other instrument or obligation to which a Shareholder is a party or by or to which any of the properties and assets of any of the Shareholders may be bound or subject; (b) violate any order, judgment, injunction, award or decree of any court, arbitrator, governmental or regulatory body, by which a Shareholder or the securities, assets, properties or business of any of them is bound; or (c) violate any statute, law or regulation to which any Shareholder is subject. 3.3 Securities Matters. The Shareholders hereby represent, warrant and covenant to the Public Company, as follows: (a) The Shareholders have been advised that the Public Company Stock has not been registered under the Securities Act, or any state securities act in reliance on exemptions therefrom. (b) The Public Company Stock is being acquired solely for each Shareholder's own account, for investment and are not being acquired with a view to or for the resale, distribution, subdivision or fractionalization thereof. The Shareholders have no present plans to enter into any such contract, undertaking, agreement or arrangement and the Shareholders further understand that the Public Company Stock may only be resold pursuant to a registration statement under the Securities Act, or pursuant to some other available exemption. (c) The Shareholders agree that the certificate or certificates representing the Public Company Stock will be inscribed with substantially the following legend: "The securities represented by this certificate have not been registered under the Securities Act of 1933. The securities have been acquired for investment and may not be sold, transferred or assigned in the absence of an effective registration statement for these securities under the Securities Act of 1933 or an opinion of counsel that registration is not required under said Act." 3 (d) The Shareholders acknowledge that an investment in Public Company is subject to a high degree of risk and that, even though Public Company's common stock is quoted on the NASD Over-the-Counter Bulletin Board, there exists no established trading market for the Public Company Stock. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF HOLDING CO Holding Co hereby represents and warrants to Public Company as follows (it being acknowledged that Public Company is entering into this Agreement in material reliance upon each of the following representations and warranties, and that the truth and accuracy of each, as evidenced by the execution of this Agreement by a duly authorized officer of Holding Co, constitutes a condition precedent to the obligations of the Public Company hereunder): 4.1 Organization, Standing and Corporate Power. Each of Holding Co and Shenzhen BAK Battery Co., Ltd., Holding Co's wholly-owned subsidiary ("BAK"), is a company with limited liability duly organized, validly existing and in good standing under the laws of Hong Kong and the People's Republic of China, respectively, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business substantially as now conducted, except where the failure to do so would not have, individually or in the aggregate, a Holding Co Material Adverse Effect. For purposes of this Agreement, the term "Holding Co Material Adverse Effect" means any Material Adverse Effect with respect to Holding Co and BAK, taken as a whole, or any change of effect that adversely, or is reasonably expected to adversely, affect the ability of Holding Co to consummate the transactions contemplated by this Agreement in any material respect or materially impair or delay Holding Co's ability to perform its obligations hereunder. 4.2 Authority; Noncontravention. Holding Co has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution, delivery and performance by Holding Co of this Agreement and the consummation of the transactions contemplated hereby by Holding Co have been duly authorized by all necessary corporate action on the part of Holding Co. This Agreement has been duly executed and delivered by Holding Co and, assuming this Agreement constitutes the valid and binding agreement of Public Company, constitutes a valid and binding obligation of Holding Co, enforceable against Holding Co in accordance with its terms, subject to (a) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors, and (b) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law). The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement, will not (x) conflict with any provisions of the charter or other organizational or governing documents of Holding Co, (y) subject to the governmental filings and other matters referred to in the following sentence, conflict with, result in a breach of or default (with or without notice or lapse of time, or both) under, or give rise to a right of first refusal, termination, cancellation or acceleration of any obligation (including to pay any sum of money) or loss of a material benefit under, or require the consent of any Person under, any indenture, or other material agreement, Permit, concession, ground lease or similar instrument or undertaking to which Holding Co is a party or by which Holding Co or any of its assets are bound or affected, result in the creation or imposition of a Lien against any material asset of Holding Co, which singly or in the aggregate would have a Holding Co Material Adverse Effect, or (z) subject to the governmental filings and other matters referred to in the following sentence, contravene any law, rule or regulation, or any order, writ, judgment, injunction, decree, determination or award binding on or applicable to Holding Co or BAK and currently in effect, which, in the case of clauses (y) and (z) above, singly or in the aggregate, would have a Holding Co Material Adverse Effect. No consent, approval or authorization of, or declaration or filing with, 4 or notice to, any Governmental Entity or any third party which has not been received or made is required by or with respect to Holding Co in connection with the execution and delivery of this Agreement by Holding Co or the consummation by Holding Co of the transactions contemplated hereby, except for consents, approvals, authorizations, declarations, filings and notices that, if not obtained or made, will not, individually or in the aggregate, result in a Holding Co Material Adverse Effect. 4.3 Financial Statements. The financial statements of Holding Co and BAK have been audited by the chartered accounting firm of Schwartz Levitsky Feldman LLP/SRL for the periods indicated in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). 4.4 Capital Structure. As of the Effective Date, 39,826,075 shares of Holding Co Stock were issued and outstanding and no shares of Holding Co Stock were held by Holding Co in its treasury. All outstanding shares of capital stock of Holding Co will have been duly authorized and validly issued, and will be fully paid and nonassessable and not subject to preemptive or similar rights. No bonds, debentures, notes or other indebtedness of Holding Co having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which the Shareholders may vote are issued or outstanding. Except for this Agreement, Holding Co does not have and, at or after Closing will not have, any outstanding option, warrant, call, subscription or other right, agreement or commitment which either (a) obligates Holding Co to issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any shares of the capital stock of Holding Co, or (b) restricts the voting, disposition or transfer of shares of capital stock of Holding Co. There are no outstanding stock appreciation rights or similar derivative securities or rights of Holding Co. 4.5 Subsidiaries. Other than as provided on Schedule 4.5, neither Holding Co nor BAK owns, directly or indirectly, any of the capital stock of any other corporation or any equity, profit sharing, participation or other interest in any corporation, partnership, joint venture or other entity. 4.6 Intellectual Property. Schedule 4.6 lists the trademarks, trade names, service marks, patents, copyrights used by Holding Co and BAK and any applications with respect thereto. Neither Holding Co nor BAK has any Knowledge of any claim that, or inquiry as to whether, any product, activity or operation of Holding Co or BAK infringes upon or involves, or has resulted in the infringement of, any trademarks, trade names, service marks, patents, copyrights or other proprietary rights of any other Person, corporation or other entity; and no proceedings have been instituted, are pending or are threatened with respect thereto. 4.7 Absence of Certain Changes or Events; No Undisclosed Material Liabilities. (a) Each of Holding Co and BAK has conducted its business only in the ordinary course, and, except as set forth on Schedule 4.7, there has not been (i) any change, destruction, damage, loss or event which has had or could reasonably be expected to have, individually or in the aggregate a Holding Co Material Adverse Effect; (ii) any declaration, setting aside or payment of any dividend or other distribution in respect of shares of Holding Co or BAK's capital stock, or any repurchase, redemption or other acquisition by Holding Co or BAK of any shares of their respective capital stock or equity interests, as applicable; (iii) any increase in the rate or terms of compensation payable or to become payable by Holding Co or BAK to its directors, officers or key employees; (iv) any entry into, or increase in the rate or terms of, any bonus, insurance, severance, pension or other employee or retiree benefit plan, payment or arrangement made to, for or with any such directors, officers or employees; (v) any entry into any agreement, commitment or transaction by Holding Co or 5 BAK, or waiver, termination, amendment or modification to any agreement, commitment or transaction, which is material to Holding Co or BAK taken as a whole; (vi) any material labor dispute involving the employees of Holding Co or BAK; (vii) any change by Holding Co or BAK in accounting methods, principles or practices except as required or permitted by GAAP; (viii) any write-off or write-down of, or any determination to write-off or write-down, any asset of Holding Co or BAK or any portion thereof; (ix) any split, combination or reclassification of any of Holding Co or BAK's capital stock or issuance or authorization relating to the issuance of any other securities in respect of, in lieu of or in substitution for shares of Holding Co or BAK's capital stock; (x) any amendment of any material term of any outstanding security of Holding Co or BAK; (xi) any loans, advances or capital contributions to or investments in, any other Person in existence on the Effective Date made by Holding Co or BAK; (xii) any sale or transfer by Holding Co or BAK of any of the assets of Holding Co or BAK, as applicable; (xiii) cancellation of any material debts or claims or waiver of any material rights by Holding Co or BAK; or (xiv) any agreements by Holding Co or BAK to (a) do any of the things described in the preceding clauses (i) through (xiii) other than as expressly contemplated or provided for herein or (b) take, whether in writing or otherwise, any action which, if taken prior to the Effective Date, would have made any representation or warranty of Holding Co in this Agreement untrue or incorrect in any material respect. (b) BAK has no liabilities, except as set forth in its financial statements for the period ended September 30, 2004 or otherwise incurred in the ordinary course of business. 4.8 Books and Records. The books of account and other financial Records of Holding Co and BAK, all of which have been made available to Public Company, are complete and correct and represent actual, bona fide transactions and have been maintained in accordance with sound business practices. 4.9 Employees. Neither Holding Co nor BAK has any labor disputes with its respective employees. Except as otherwise set forth on Schedule 4.9, there are no loans or other obligations payable or owing by Holding Co or BAK to any stockholder, officer, director or employee of Holding Co or BAK, as applicable, nor are there any loans or debts payable or owing by any of such persons to Holding Co or BAK or any guarantees by Holding Co or BAK of any loan or obligation of any nature to which any such Person is a party. 4.10 Employee Benefit Plans. All employee benefit plans provided by BAK to its employees are operated under and in accordance with applicable laws of the People's Republic of China. 4.11 Compliance with Applicable Laws. Each of Holding Co and BAK has and after giving effect to the transactions contemplated hereby will have in effect all Permits necessary for it to own, lease or operate its properties and assets and to carry on its business as now conducted, and to the Knowledge of Holding Co there has occurred no default under any such Permit, except for the lack of Permits and for defaults under Permits which individually or in the aggregate would not have a Holding Co Material Adverse Effect. To Holding Co's Knowledge, each of Holding Co and BAK is in compliance with, and has no liability or obligation under, any applicable statute, law, ordinance, rule, order or regulation of any Governmental Entity, including any liability or obligation to undertake any remedial action under Hazardous Substances Laws (as hereinafter defined), except for instances of non-compliance, liabilities or obligations, which individually or in the aggregate would not have a Holding Co Material Adverse Effect. 6 4.12 Insurance. Except as disclosed on Schedule 4.12, each of Holding Co and BAK has no insurance policies in effect. 4.13 Litigation, etc. Except as set forth on Schedule 4.13 and as of the Effective Date, (a) there is no suit, claim, action or proceeding (at law or in equity) pending or, to the Knowledge of Holding Co, threatened against Holding Co or BAK (including, without limitation, any product liability claims) before any court or governmental or regulatory authority or body, and (b) neither Holding Co nor BAK is subject to any outstanding order, writ, judgment, injunction, order, decree or arbitration order that, in any such case described in clauses (a) and (b), (i) could reasonably be expected to have, individually or in the aggregate, a Holding Co Material Adverse Effect or (ii) involves an allegation of criminal misconduct or a violation of the Racketeer and Influenced Corrupt Practices Act. As of the Closing, there are no suits, actions, claims or proceedings pending or, to Holding Co's Knowledge, threatened, seeking to prevent, hinder, modify or challenge the transactions contemplated by this Agreement. 4.14 Contracts. Schedule 4.14 lists all material contracts, leases, arrangements or commitments (whether oral or written) of either Holding Co or BAK relating to: (a) the employment of any Person; (b) collective bargaining with, or any representation of any employees by, any labor union or association; (c) the acquisition of services, supplies, equipment or other personal property; (d) the purchase or sale of real property; (e) distribution, agency or construction; (f) lease of real or personal property as lessor or lessee or sublessor or sublessee; (g) lending or advancing of funds; (h) borrowing of funds or receipt of credit; (i) incurring any obligation or liability; or (j) the sale of personal property. 4.15 Real Property. Except as provided on Schedule 4.15, neither Holding Co nor BAK owns or leases any real property. 4.16 Environmental Matters. The operations of each of Holding Co and BAK comply with all applicable local and national environmental laws. 4.17 Solicitation. None of Holding Co, BAK, or the officers, directors, Affiliates or agents of Holding Co or BAK, or any other Person acting on behalf of Holding Co or BAK has solicited, directly or indirectly, any Person to enter into a merger or similar business combination transaction with Holding Co or BAK by any form of general solicitation, including, without limitation, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. 4.18 Disclosure. The representations and warranties and statements of fact made by Holding Co in this Agreement are, as applicable, accurate, correct and complete and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained herein not false or misleading. 7 ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PUBLIC COMPANY Public Company hereby represents and warrants to Holding Co and the Shareholders as follows (it being acknowledged that Holding Co and the Shareholders are entering into this Agreement in material reliance upon each of the following representations and warranties, and that the truth and accuracy of each, as evidenced by the execution of this Agreement by a duly authorized officer of Public Company, constitutes a condition precedent to the obligations of Holding Co and the Shareholders hereunder): 5.1 Organization, Standing and Power. Public Company is duly organized, validly existing and in good standing under the laws of Nevada and has the requisite corporate power and authority to carry on its business as now being conducted. Public Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed (individually or in the aggregate) would not have a Public Company Material Adverse Effect. For purposes of this Agreement, the term "Public Company Material Adverse Effect" means any Material Adverse Effect with respect to Public Company, taken as a whole, or any change or effect that adversely, or is reasonably expected to adversely, affect the ability of Public Company to consummate the transactions contemplated by this Agreement in any material respect or materially impairs or delays Public Company's ability to perform its obligations hereunder. Public Company has made available to Holding Co complete and correct copies of its charter documents and bylaws. 5.2 Capital Structure. As of the Effective Date, the authorized capital stock of Public Company consists of 100,000,000 shares of Public Company Stock. Immediately following the Closing, there will be 40,978,533 shares of common stock of Public Company issued and outstanding. No shares of common stock of Public Company will be held by Public Company in its treasury. All outstanding shares of capital stock of Public Company will have been duly authorized and validly issued, and will be fully paid and nonassessable and not subject to preemptive or similar rights. No bonds, debentures, notes or other indebtedness of Public Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which the stockholders of Public Company may vote are issued or outstanding. Except for this Agreement, Public Company does not have, and at or after Closing will not have, any outstanding option, warrant, call, subscription or other right, agreement or commitment which either (a) obligates Public Company to issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any shares of the capital stock of Public Company, or (b) restricts the voting, disposition or transfer of shares of capital stock of Public Company. There are no outstanding stock appreciation rights or similar derivative securities or rights of Public Company. 5.3 Authority: Noncontravention. Public Company has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement by Public Company and the consummation by Public Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Public Company. This Agreement has been duly executed and delivered by Public Company and, assuming this Agreement constitutes the valid and binding agreement of Holding Co and the Shareholders, constitutes a valid and binding obligation of Public Company, enforceable against Public Company in accordance with its terms, subject to (a) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors, and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). The execution and delivery of this Agreement do not, and the 8 consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof, will not, (x) conflict with any of the provisions of the charter documents or bylaws of Public Company, (y) subject to the governmental filings and other matters referred to in the following sentence, conflict with, result in a breach of or default (with or without notice or lapse of time, or both) under, or give rise to a right of first refusal, termination, cancellation or acceleration of any obligation (including to pay any sum of money) or loss of a benefit under, or require the consent of any Person under, any indenture or other agreement, Permit, concession, ground lease or similar instrument or undertaking to which Public Company is a party or by which Public Company or any of its assets are bound or affected, result in the creation or imposition of a Lien against any material asset of Public Company, which, singly or in the aggregate, would have a Public Company Material Adverse Effect, or (z) subject to the governmental filings and other matters referred to in the following sentence, contravene any law, rule or regulation, or any order, writ, judgment, injunction, decree, determination or award binding on Public Company currently in effect, which in the case of clauses (y) and (z) above, singly or in the aggregate, would have a Public Company Material Adverse Effect. Except as required by applicable federal securities law, no consent, approval or authorization of, or declaration or filing with, or notice to, any Governmental Entity or any third party which has not been received or made is required by or with respect to Public Company in connection with the execution and delivery of this Agreement by Public Company or the consummation by Public Company of the transactions contemplated hereby, except for consents, approvals, authorizations, declarations, filings and notices that, if not obtained or made, will not, individually or in the aggregate, result in a Public Company Material Adverse Effect. 5.4 Subsidiaries. Public Company does not own, directly or indirectly, any of the capital stock of any other corporation or any equity, profit sharing, participation or other interest in any corporation, partnership, joint venture or other entity. 5.5 Intellectual Property. Public Company does not own or use any trademarks, trade names, service marks, patents, copyrights or any applications with respect thereto. Public Company has no Knowledge of any claim that, or inquiry as to whether, any product, activity or operation of Public Company infringes upon or involves, or has resulted in the infringement of, any trademarks, trade names, service marks, patents, copyrights or other proprietary rights of any other Person, corporation or other entity; and no proceedings have been instituted, are pending or are threatened with respect thereto. 5.6 Absence of Certain Changes or Events; No Undisclosed Material Liabilities. (a) The Shareholders have been provided with the audited financial statements of Public Company as of December 31, 2003 and unaudited balance sheet of Public Company dated September 30, 2004 (collectively, the "Financial Statements"). Except as otherwise disclosed in its filings or public record with the Securities and Exchange Commission, Public Company has conducted its business only in the ordinary course, and there has not been (i) any change, destruction, damage, loss or event which has had or could reasonably be expected to have, individually or in the aggregate a Public Company Material Adverse Effect; (ii) any declaration, setting aside or payment of any dividend or other distribution in respect of shares of Public Company's capital stock, or any repurchase, redemption or other acquisition by Public Company of any shares of their respective capital stock or equity interests, as applicable; (iii) any increase in the rate or terms of compensation payable or to become payable by Public Company to its directors, officers or key employees; (iv) any entry into, or increase in the rate or terms of, any bonus, insurance, severance, pension or other employee or retiree benefit plan, payment or arrangement made to, for or with any such directors, officers or employees; (v) any entry into any agreement, commitment or transaction by Public Company, or waiver, termination, amendment or modification to any agreement, commitment or transaction, which is material to Public Company taken as a whole; (vi) any material labor dispute 9 involving the employees of Public Company; (vii) any change by Public Company in accounting methods, principles or practices except as required or permitted by GAAP; (viii) any write-off or write-down of, or any determination to write-off or write-down, any asset of Public Company or any portion thereof; (ix) any split, combination or reclassification of any of Public Company's capital stock or issuance or authorization relating to the issuance of any other securities in respect of, in lieu of or in substitution for shares of Public Company's capital stock; (x) any amendment of any material term of any outstanding security of Public Company; (xi) any loans, advances or capital contributions to or investments in, any other Person in existence on the Effective Date made by Public Company; (xii) any sale or transfer by Public Company of any of the assets of Public Company; (xiii) cancellation of any material debts or claims or waiver of any material rights by Public Company; or (xiv) any agreements by Public Company to (a) do any of the things described in the preceding clauses (i) through (xiii) other than as expressly contemplated or provided for herein or (b) take, whether in writing or otherwise, any action which, if taken prior to the Effective Date, would have made any representation or warranty of Public Company in this Agreement untrue or incorrect in any material respect. (b) Public Company has no Liabilities, except as set forth in the Financial Statements or otherwise incurred in the ordinary course of business. 5.7 Books and Records. The books of account and other financial Records of Public Company, all of which have been made available to Holding Co, are complete and correct and represent actual, bona fide transactions and have been maintained in accordance with sound business practices and the requirements of Section 13(b)(2) of the Exchange Act. 5.8 Employees. Except with regard to Timothy P. Halter, Public Company's sole officer and director, Public Company (a) has no employees, (b) does not owe any compensation of any kind, deferred or otherwise, to any current or previous employees, (c) has no written or oral employment agreements with any officer or director of Public Company or (d) is not a party to or bound by any collective bargaining agreement. There are no loans or other obligations payable or owing by Public Company to any stockholder, officer, director or employee of Public Company, nor are there any loans or debts payable or owing by any of such persons to Public Company or any guarantees by Public Company of any loan or obligation of any nature to which any such Person is a party. 5.9 Employee Benefit Plans. Public Company has no (a) non-qualified deferred or incentive compensation or retirement plans or arrangements, (b) qualified retirement plans or arrangements, (c) other employee compensation, severance or termination pay or welfare benefit plans, programs or arrangements or (d) any related trusts, insurance contracts or other funding arrangements maintained, established or contributed to by Public Company. 5.10 Compliance with Applicable Laws. Public Company has and after giving effect to the transactions contemplated hereby will have in effect all Permits necessary for it to own, lease or operate its properties and assets and to carry on its business as now conducted, and to the Knowledge of Public Company there has occurred no default under any such Permit, except for the lack of Permits and for defaults under Permits which individually or in the aggregate would not have a Public Company Material Adverse Effect. To Public Company's Knowledge, Public Company is in compliance with, and has no liability or obligation under, any applicable statute, law, ordinance, rule, order or regulation of any Governmental Entity, including any liability or obligation to undertake any remedial action under Hazardous Substances Laws (as hereinafter defined), except for instances of non-compliance, liabilities or obligations, which individually or in the aggregate would not have a Public Company Material Adverse Effect. 10 5.11 Insurance. Public Company has no insurance policies in effect. 5.12 Litigation, etc. As of the Effective Date, (a) there is no suit, claim, action or proceeding (at law or in equity) pending or, to the Knowledge of Public Company, threatened against Public Company (including, without limitation, any product liability claims) before any court or governmental or regulatory authority or body, and (b) Public Company is not subject to any outstanding order, writ, judgment, injunction, order, decree or arbitration order that, in any such case described in clauses (a) and (b), (i) could reasonably be expected to have, individually or in the aggregate, a Public Company Material Adverse Effect or (ii) involves an allegation of criminal misconduct or a violation of the Racketeer and Influenced Corrupt Practices Act. As of the Closing, there are no suits, actions, claims or proceedings pending or, to Public Company's Knowledge, threatened, seeking to prevent, hinder, modify or challenge the transactions contemplated by this Agreement. 5.13 Contracts. Except for its contract with Securities Transfer Corporation, a Texas corporation ("STC"), pursuant to which STC acts as the Public Company's stock transfer agent, Public Company has no material contracts, leases, arrangements or commitments (whether oral or written) and is not a party to or bound by or affected by any contract, lease, arrangement or commitment (whether oral or written) relating to: (a) the employment of any Person; (b) collective bargaining with, or any representation of any employees by, any labor union or association; (c) the acquisition of services, supplies, equipment or other personal property; (d) the purchase or sale of real property; (e) distribution, agency or construction; (f) lease of real or personal property as lessor or lessee or sublessor or sublessee; (g) lending or advancing of funds; (h) borrowing of funds or receipt of credit; (i) incurring any obligation or liability; or (j) the sale of personal property. 5.14 Real Property. Public Company does not own or lease any real property. 5.15 Quotation. As of the Effective Date, the Public Company Stock will remain eligible for quotation on the NASD Over-the-Counter Bulletin-Board. 5.16 Filings. Prior to the Effective Date, Public Company has filed all reports required to be filed by it under the Securities Exchange Act. 5.17 Environmental Matters. Public Company has not received any written notice from any Governmental Entity that there exists any violation of any Hazardous Substances Law (as hereinafter defined). Public Company has no Knowledge (a) of any Hazardous Substances (as hereinafter defined) present on, under or about any Public Company asset, and to Public Company's Knowledge no discharge, spillage, uncontrolled loss, seepage or filtration of Hazardous Substances has occurred on, under or about any Public Company asset, (b) that any Public Company assets violates, or has at any time violated, any Hazardous Substance Laws, and (c) that there is a condition on any asset for which Public Company has an obligation to undertake any remedial action pursuant to Hazardous Substance 11 Laws. For purposes hereof, "Hazardous Substances" means, without limitation (i) those substances included within definitions of any one or more of the terms "Hazardous Substance," and "Hazardous Waste," "Toxic Substance" and "Hazardous Material" in the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. ss. 90,601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq., the Occupational Safety and Health Act, 29 U.S.C. ss. 651, et seq., (insofar as it relates to employee health and safety in relation to exposure to Hazardous Substances) and any other local, state, federal or foreign laws or regulations related to the protection of public health or the environment (collectively, "Hazardous Substances Laws"); (ii) such other substances, materials or wastes as are or become regulated under, or as are classified as hazardous or toxic under Hazardous Substance Laws; and (iii) any materials, wastes or substances that can be defined as (v) petroleum products or wastes; (w) asbestos; (x) polychlorinated biphenyl; (y) flammable or explosive; or (z) radioactive. 5.18 Anti-takeover Plan: State Takeover Statutes. Public Company does not have in effect any plan, scheme, device or arrangement, commonly or colloquially known as a "poison pill" or "anti-takeover" plan or any similar plan, scheme, device or arrangement. The Board of Directors of Public Company has approved this Agreement. No other state takeover statute or similar statute or regulation applies or purports to apply to the Exchange, this Agreement or any of the transactions contemplated by this Agreement. 5.19 Solicitation. None of Public Company, its officers, directors, Affiliates or agents, or any other Person acting on its behalf has solicited, directly or indirectly, any Person to enter into a merger or similar business combination transaction with Public Company by any form of general solicitation, including, without limitation, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. 5.20 Disclosure. The representations and warranties and statements of fact made by Public Company in this Agreement are, as applicable, accurate, correct and complete and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained herein not false or misleading. ARTICLE VI. INDEMNIFICATION 6.1 Indemnification of Holding Co and Shareholders. (a) Public Company shall, from and after the Closing, indemnify, defend and hold harmless the Shareholders, Holding Co, and Holding Co's officers, directors, Affiliates or agents, and any other Person acting on its behalf (the "Holding Co Indemnified Parties") against all losses, claims, damages, costs, expenses (including reasonable attorneys' fees and expenses), liabilities or judgments or amounts that are paid in settlement with the approval of the indemnifying party (the "Holding Co Indemnified Liabilities") based on, or arising out of, or pertaining to this Agreement or the transactions contemplated hereby, in each case, to the fullest extent permitted under the laws of the State of Nevada. (b) The Holding Co Indemnified Parties shall have the right to conduct the defense of any action giving rise to a claim for indemnity under this Agreement with counsel of their own choosing. Holding Co, the Shareholders and 12 Public Company agree that all rights to indemnification, including provisions relating to advances of expenses incurred in defense of any action or suit, existing in favor of the Holding Co Indemnified Parties with respect to matters occurring through the Closing, shall survive the Exchange and shall continue in full force and effect for a period of not less than two years from the Closing; provided, however, that all rights to indemnification in respect of any Holding Co Indemnified Liabilities asserted or made within such period shall continue until the disposition of such Holding Co Indemnified Liabilities. (c) The provisions of this Section 6.1 are intended to be for the benefit of, and shall be enforceable by, each Holding Co Indemnified Party, his or her heirs and his or her personal representatives and shall be binding upon all successors and assigns of Public Company and Holding Co. 6.2 Indemnification of Public Company. (a) Holding Co shall, from and after the Closing, indemnify, defend and hold harmless Public Company and Public Company's officers, directors, Affiliates or agents, and any other Person acting on its behalf (the "Public Company Indemnified Parties") against all losses, claims, damages, costs, expenses (including reasonable attorneys' fees and expenses), liabilities or judgments or amounts that are paid in settlement with the approval of the indemnifying party (the "Public Company Indemnified Liabilities") based on, or arising out of, or pertaining to this Agreement or the transactions contemplated hereby, in each case, to the fullest extent permitted under the laws of the State of Nevada and Hong Kong. (b) The Public Company Indemnified Parties shall have the right to conduct the defense of any action giving rise to a claim for indemnity under this Agreement with counsel of their own choosing. Holding Co, the Shareholders and Public Company agree that all rights to indemnification, including provisions relating to advances of expenses incurred in defense of any action or suit, existing in favor of the Public Company Indemnified Parties with respect to matters occurring through the Closing, shall survive the Exchange and shall continue in full force and effect for a period of not less than two years from the Closing; provided, however, that all rights to indemnification in respect of any Public Company Indemnified Liabilities asserted or made within such period shall continue until the disposition of such Public Company Indemnified Liabilities. (c) The provisions of this Section 6.2 are intended to be for the benefit of, and shall be enforceable by, each Public Company Indemnified Party, his or her heirs and his or her personal representatives and shall be binding upon all successors and assigns of Public Company and Holding Co. ARTICLE VII. CONDITIONS PRECEDENT 7.1 Conditions to Each Party's Obligation to Effect the Exchange. The respective obligation of each party to effect the Exchange is subject to the satisfaction or written waiver of the following conditions: (a) No Injunctions or Restraints. No statute, rule, regulation, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Exchange shall be in effect; provided, however, that the party invoking this condition shall use its best efforts to have any such temporary restraining order, injunction, order, restraint or prohibition vacated. (b) Governmental and Regulatory Consents. All material filings required to be made prior to the Closing with, and all material consents, approvals, permits and authorizations required to be obtained prior to the Closing from, 13 Governmental Entities, in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Holding Co and Public Company will have been made or obtained (as the case may be). 7.2 Conditions to Obligations of Holding Co and the Shareholders. The obligations of Holding Co and the Shareholders to effect the Exchange are further subject to the satisfaction or written waiver on or prior to the Closing of the following conditions: (a) Representations and Warranties. The representations and warranties of Public Company set forth in Article V that are qualified as to materiality or Material Adverse Effect shall be true and correct and the representations and warranties of Public Company set forth in Article V that are not so qualified shall be true and correct in all material respects, in each case as of the Closing, except to the extent such representations and warranties speak as of an earlier date. In addition, all such representations and warranties shall be true and correct as of the Closing, except to the extent such representation or warranty speaks of an earlier date (without regard to any qualifications for materiality or Material Adverse Effect) except to the extent that any such failure to be true and correct (other than any such failure the effect of which is immaterial) individually and in the aggregate with all such other failures would not have a Material Adverse Effect, and Holding Co and the Shareholders shall have received a certificate signed on behalf of Public Company by the chief executive officer of Public Company to the effect set forth in this paragraph. (b) Performance of Obligations of Public Company. Public Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing. (c) Board Representation. At the Closing and pursuant to a written consent to action of the Board of Directors of Public Company, the Board of Directors (a) shall appoint Xiangqian Li as a member of the Board of Directors, and (b) all existing officers shall resign as officers of Public Company. (d) Current Report and Registration Statement. Simultaneously with the Closing, Public Company shall file with the Securities and Exchange Commission (i) a Current Report on Form 8-K to report the transaction contemplated hereunder and (ii) a registration statement to register those shares issued to those stockholders of Holding Co who participated in Holding Co's private offering of securities deemed consummated on the Effective Date. 7.3 Conditions to Obligations of Public Company. The obligation of Public Company to effect the Exchange is further subject to the satisfaction or written waiver on or prior to Closing of the following conditions: (a) Representations and Warranties. The representations and warranties of Holding Co set forth in Article IV and the Shareholders set forth in Article III that are qualified as to materiality or Material Adverse Effect shall be true and correct and the representations and warranties of Holding Co set forth in Article IV and the Shareholders set forth in Article III that are not so qualified shall be true and correct in all material respects, in each case as of the Closing. In addition, all such representations and warranties shall be true and correct as of the Closing, except to the extent such representation or warranty speaks of an earlier date (without regard to any qualifications for materiality or Material Adverse Effect) except to the extent that any such failure to be true and correct (other than any such failure the effect of which is immaterial) individually and in the aggregate with all such other failures would not have a Material Adverse Effect, and Public Company shall have received a certificate signed on behalf of Holding Co by the president of Holding Co to the effect set forth in this paragraph. 14 (b) Performance of Obligations of Holding Co and the Shareholders. Holding Co and the Shareholders shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing. 7.4 Frustration of Closing Conditions. None of Public Company, the Shareholders or Holding Co may rely on the failure of any condition set forth in Sections 7.1, 7.2 or 7.3, as the case may be, to be satisfied if such failure was caused by such party's failure to use reasonable efforts to commence or complete the Exchange and the other transactions contemplated by this Agreement. ARTICLE VIII. GENERAL PROVISIONS 8.1 Survival of Representations and Warranties. Except as otherwise contemplated herein, the representations and warranties in this Agreement and in any instrument delivered pursuant to this Agreement shall survive the Closing for a period of two years. 8.2 Fees and Expenses. Each party hereto shall pay its own expenses incident to preparing for, entering into and carrying out this Agreement and the consummation of the transactions contemplated hereby. 8.3 Definitions. For purposes of this Agreement, and except as otherwise defined in this Agreement: (a) "Affiliate" of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person; (b) "Governmental Entity" means any domestic or foreign governmental agency or regulatory authority; (c) "Knowledge" means actual knowledge. In order for an individual to have Knowledge of a fact or matter, the individual must be actually aware of that fact or matter. A Person (other than an individual) will be deemed to have Knowledge of a particular fact or matter if any individual who is serving, or who has at any time served, as a director, officer, partner, executor or trustee of that Person (or in any similar capacity) has, or at any time had, Knowledge of that fact or matter. (d) "Liens" means, collectively, all material pledges, claims, liens, charges, mortgages, conditional sale or title retention agreements, hypothecations, collateral assignments, security interests, easements and other encumbrances of any kind or nature whatsoever; (e) "Material Adverse Effect" with respect to any Person means an event that has had or would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of such Person and its subsidiaries taken as a whole; (f) "Permits" means federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits an rights; and (g) "Person" means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity. 15 (h) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. (i) "Securities Act" means the Securities Act of 1933, as amended. (j) "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. 8.4 Usage. In this Agreement, unless a clear contrary intention appears: (a) the singular number includes the plural number and vice versa; (b) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (c) reference to any gender includes each other gender or, in the case of an entity, the neuter; (d) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof, and shall be deemed to refer as well to all addenda, exhibits and schedules; (e) reference to a Section or Schedule, such reference shall be to a Section of, or a Schedule to, this Agreement unless otherwise indicated (f) reference to any law means such law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any law means that provision of such law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (g) the table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (h) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision thereof; (i) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; (j) "or" is used in the inclusive sense of "and/or;" and (k) with respect to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding." 8.5 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): 16 (a) if to Public Company prior to the Closing to: Timothy P. Halter 12890 Hilltop Road Argyle, Texas 76226 Telephone: (972) 233-0300 (b) if to Holding Co and to Public Company after the Closing to BAK Industrial Park No. 1 BAK Street, Kuichang Town Longgang District, Shenzhen, China Telephone: 8.6 Counterparts. This Agreement may be executed in two or more counterparts. 8.7 Entire Agreement; Third-Party Beneficiaries. This Agreement constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. This Agreement is not intended to confer upon any Person other than the parties hereto and the third party beneficiaries referred to in the following sentence, any rights or remedies. The parties hereto expressly intend the provisions of Sections 6.1 and 6.2 to confer a benefit upon and be enforceable by, as third party beneficiaries of this Agreement, the third Persons referred to in, or intended to be benefited by, such provisions. 8.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. 8.9 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, and any such assignment that is not consented to shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. 8.10 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Nevada, this being in addition to any other remedy to which they are entitled at law or in equity. 17 8.11 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. IN WITNESS WHEREOF, Public Company, Holding Co and the Shareholders have executed this Agreement to be effective as of the Effective Date. MEDINA COFFEE, INC. By: /s/ Timothy P. Halter ------------------------------------------ Timothy P. Halter, Chief Executive Officer BAK INTERNATIONAL, LTD. By: /s/ Xiangqian Li ------------------------------------------ Xiangqian Li, President 18 SKY TARGET INTERNATIONAL, LIMITED By: /s/ ----------------------------- Its: ---------------------------- KENWELL INTERNATIONAL LIMITED By: /s/ ----------------------------- Its: ---------------------------- 19 SHAREHOLDERS By: /s/ --------------------------- 20 EX-10.2 4 medina8kex102011805.txt ESCROW AGREEMENT EXHIBIT 10.2 ESCROW AGREEMENT This Escrow Agreement (the "Agreement"), dated effective as of the last date set forth opposite the respective signatories hereto, is entered into by and among Medina Coffee, Inc., a Nevada corporation (the "Company"), each of the parties listed below who were subscribers to the private offering of securities of BAK International, Ltd. ("BAK"), the Company's wholly-owned subsidiary, (collectively, the "Subscribers"), Xiangqian Li, in his individual capacity ("Li"), and Securities Transfer Corporation (hereinafter referred to as "Escrow Agent"). WHEREAS, each of the Subscribers has entered into a Subscription Agreement (the "Subscription Agreement") evidencing their participation in BAK's private offering (the "Offering") of securities. As an inducement to the Subscribers to participate in the Offering and as set forth in the Subscription Agreement, Li agreed to place the "Escrow Shares" (as hereinafter defined) into escrow for the benefit of the Subscribers in the event the Company failed to satisfy the "Performance Thresholds" (as hereinafter defined). As a result of their participation in the Offering, the Subscribers also participated in that certain stock exchange transaction (the "Exchange") with the Company pursuant to which they and all other holders of BAK capital stock, including Li, received shares of common stock of the Company in exchange for all of their holding in BAK. As a result of the Exchange, the Escrow Shares shall be shares of the common capital stock of the Company currently held by Li; WHEREAS, pursuant to the requirements of the Subscription Agreement, the Company, Li and the Subscribers have agreed to establish an escrow on the terms and conditions set forth in this Agreement; WHEREAS, the Escrow Agent has agreed to act as escrow agent pursuant to the terms and conditions of this Agreement; and WHEREAS, all capitalized terms used but not defined herein shall have the meanings assigned them in the Subscription Agreement; NOW, THEREFORE, in consideration of the mutual promises of the parties and the terms and conditions hereof, the parties hereby agree as follows: 1. Appointment of Escrow Agent. The Subscribers, Li and the Company hereby appoint Securities Transfer Corporation as Escrow Agent to act in accordance with the terms and conditions set forth in this Agreement, and Escrow Agent hereby accepts such appointment and agrees to act in accordance with such terms and conditions. 2. Establishment of Escrow. Upon the execution of this Agreement, Li shall deliver to the Escrow Agent a stock certificate evidencing 2,179,550 shares (the `Escrow Shares") of the Company's common capital stock along with a stock power executed in blank. 3. Representations of Li. Li hereby represents and warrants to the Subscribers as follows: (i) The Escrow Shares are validly issued, fully paid and nonassessable shares of the Company, and free and clear of all pledges, liens and encumbrances. (ii) Performance of this Agreement and compliance with the provisions hereof will not violate any provision of any applicable law and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon, any of the properties or assets of Li pursuant to the terms of any indenture, mortgage, deed of trust or other agreement or instrument binding upon Li, other than such breaches, defaults or liens which would not have a material adverse effect taken as a whole. 4. Disbursement of Escrow Shares. BAK advised the Subscribers that the Company, on a consolidated basis, would attain the following financial performance thresholds (the "Performance Thresholds"): $12 million of Net Income ("NI") for the fiscal year ending September 30, 2005 (the "2005 Threshold") and $27 million NI for the fiscal year ending September 30, 2006 (the "2006 Threshold"), respectively. In the event that the 2005 Threshold is not achieved based on the Company's audited financial statements for the period as filed with the U.S. Securities and Exchange Commission ("SEC"), the Subscriber's attorney-in-fact, Halter Financial Group, Inc. ("HFG"), shall provide written instruction to the Escrow Agent instructing the Escrow Agent to issue and deliver certificates evidencing, in the aggregate, 50% of the Escrow Shares to the Subscribers, on a pro rata basis, within ten (10) business days of the date the audit report for the period is filed with the SEC. The Escrow Agent need only rely on the letter of instruction from HFG in this regard. If the 2005 Threshold is achieved, Li shall provide written instruction to the Escrow Agent, which letter of instruction shall be acknowledged in writing by HFG, for the release of 50% of the Escrow Shares to Li. In the event that the 2006 Threshold is not achieved based on the Company's audited financial statements for the period as filed with the SEC, HFG shall provide written instruction to the Escrow Agent instructing the Escrow Agent to issue and deliver certificates evidencing, in the aggregate, the remaining 50% of the Escrow Shares to the Subscribers, on a pro rata basis, within ten (10) business days of the date the audit report for the period is filed with the SEC. The Escrow Agent need only rely on the letter of instruction from HFG in this regard. If the 2006 Threshold is achieved, Li shall provide written instruction to the Escrow Agent, which letter of instruction shall be acknowledged in writing by HFG, for the release of the remaining 50% of the Escrow Shares to Li. 5. Duration. This Agreement shall terminate on the sooner of the distribution of all the Escrow Shares or the 10th business day following the filing of the Company's audited financial statements for fiscal 2006 with the SEC. 6. Interpleader. Should any controversy arise among the parties hereto with respect to this Agreement or with respect to the right to receive the Escrow Shares, Escrow Agent shall have the right to consult counsel and/or to institute an appropriate interpleader action to determine the rights of the parties. Escrow Agent is also hereby authorized to institute an appropriate interpleader action upon receipt of a written letter of direction executed by the parties so directing Escrow Agent. If Escrow Agent is directed to institute an appropriate interpleader action, it shall institute such action not prior to thirty (30) days after receipt of such letter of direction and not later than sixty (60) days after such date. Any interpleader action instituted in accordance with this Section 6 shall be filed in any court of competent jurisdiction in Dallas County, Texas, and the Escrow Shares in dispute shall be deposited with the court and in such event Escrow Agent shall be relieved of and discharged from any and all obligations and liabilities under and pursuant to this Agreement with respect to the Escrow Shares. 7. Exculpation and Indemnification of Escrow Agent. (a) Escrow Agent is not a party to, and is not bound by or charged with notice of any agreement out of which this escrow may arise. Escrow Agent acts under this Agreement as a depositary only and is not responsible or liable in any manner whatsoever for the sufficiency, correctness, genuineness or validity of the subject matter of the escrow, or any part thereof, or for the form or execution of any notice given by any other party hereunder, or for the identity or authority of any person executing any such notice. Escrow Agent will have no duties or responsibilities other than those expressly set forth herein. Escrow Agent will be under no liability to anyone by reason of any failure on the part of any party hereto (other than Escrow Agent) or any maker, endorser or other signatory of any document to perform such person's or entity's obligations hereunder or under any such document. Except for this Agreement and instructions to Escrow Agent pursuant to the terms of this Agreement, Escrow Agent will not be obligated to recognize any agreement between or among any or all of the persons or entities referred to herein, notwithstanding its knowledge thereof. (b) Escrow Agent will not be liable for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in good faith and in the exercise of its own best judgment, and may rely conclusively on, and will be protected in acting upon, any order, notice, demand, certificate, or opinion or advice of counsel (including counsel chosen by Escrow Agent), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which is reasonably believed by Escrow Agent to be genuine and to be signed or presented by the proper person or persons. The duties and responsibilities of the Escrow Agent hereunder shall be determined solely by the express provisions of this Agreement and no other or further duties or responsibilities shall be implied, including, but not limited to, any obligation under or imposed by any laws of the State of Texas upon fiduciaries. (c) Escrow Agent will be indemnified and held harmless, jointly and severally, by the Company, Li and the Subscribers from and against any expenses, including reasonable attorneys' fees and disbursements, damages or losses suffered by Escrow Agent in connection with any claim or demand, which, in any way, directly or indirectly, arises out of or relates to this Agreement or the services of Escrow Agent hereunder; except, that if Escrow Agent is guilty of willful misconduct, fraud or gross negligence under this Agreement, then Escrow Agent will bear all losses, damages and expenses arising as a result of such willful misconduct, fraud or gross negligence. Promptly after the receipt by Escrow Agent of notice of any such demand or claim or the commencement of any action, suit or proceeding relating to such demand or claim, Escrow Agent will notify the other parties hereto in writing. For the purposes hereof, the terms "expense" and "loss" will include all amounts paid or payable to satisfy any such claim or demand, or in settlement of any such claim, demand, action, suit or proceeding settled with the express written consent of the parties hereto, and all costs and expenses, including, but not limited to, reasonable attorneys' fees and disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit or proceeding. The provisions of this Section 7 shall survive the termination of this Agreement. 8. Compensation of Escrow Agent. The Company will pay Escrow Agent an amount equal to Escrow Agent's standard fee schedule rate for all services rendered by Escrow Agent hereunder. 9. Resignation of Escrow Agent. At any time, upon ten (10) days' written notice to the Company, Escrow Agent may resign and be discharged from its duties as Escrow Agent hereunder. As soon as practicable after its resignation, Escrow Agent will promptly turn over to a successor escrow agent appointed by the Company the Escrow Shares held hereunder upon presentation of a document appointing the new escrow agent and evidencing its acceptance thereof. If, by the end of the 10-day period following the giving of notice of resignation by Escrow Agent, the Company shall have failed to appoint a successor escrow agent, Escrow Agent may interplead the Escrow Shares into the registry of any court having jurisdiction. 10. Records. Escrow Agent shall maintain accurate records of all transactions hereunder. Promptly after the termination of this Agreement or as may reasonably be requested by the parties hereto from time to time before such termination, Escrow Agent shall provide the parties hereto, as the case may be, with a complete copy of such records, certified by Escrow Agent to be a complete and accurate account of all such transactions. The authorized representatives of each of the parties hereto shall have access to such books and records at all reasonable times during normal business hours upon reasonable notice to Escrow Agent. 11. Notice. All notices, communications and instructions required or desired to be given under this Agreement must be in writing and shall be deemed to be duly given if sent by registered or certified mail, return receipt requested, or overnight courier to the following addresses: If to Escrow Agent: Securities Transfer Corporation 2591 Dallas Parkway, Suite 102 Frisco, Texas 75034 Attention: Kevin Halter If to the Company or Li: BAK Industrial Zone Atou Village Kui Chong Town Lunggang District Shenzhen, China 518119 Attention: Li Xiang Qian, President If to the Subscribers: c/o Halter Financial Group, Inc. 12890 Hilltop Road Argyle, Texas 76226 or to such other address and to the attention of such other person as any of the above may have furnished to the other parties in writing and delivered in accordance with the provisions set forth above. 12. Execution in Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13. Assignment and Modification. This Agreement and the rights and obligations hereunder of any of the parties hereto may not be assigned without the prior written consent of the other parties hereto. Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of each of the parties hereto and their respective successors and permitted assigns. No other person will acquire or have any rights under, or by virtue of, this Agreement. No portion of the Escrow Shares shall be subject to interference or control by any creditor of any party hereto, or be subject to being taken or reached by any legal or equitable process in satisfaction of any debt or other liability of any such party hereto prior to the disbursement thereof to such party hereto in accordance with the provisions of this Agreement. This Agreement may be changed or modified only in writing signed by all of the parties hereto. 14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN, EXCEPT THAT THE PORTIONS OF THE TEXAS TRUST CODE, SECTION 111.001, ET SEQ. OF THE TEXAS PROPERTY CODE, CONCERNING FIDUCIARY DUTIES AND LIABILITIES OF TRUSTEES SHALL NOT APPLY TO THIS AGREEMENT. THE PARTIES EXPRESSLY WAIVE SUCH DUTIES AND LIABILITIES, IT BEING THEIR INTENT TO CREATE SOLELY AN AGENCY RELATIONSHIP AND HOLD THE ESCROW AGENT LIABLE ONLY IN THE EVENT OF ITS WILLFUL MISCONDUCT, FRAUD, OR GROSS NEGLIGENCE. ANY LITIGATION CONCERNING THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE EXCLUSIVELY PROSECUTED IN THE COURTS OF DALLAS COUNTY, TEXAS, AND ALL PARTIES CONSENT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THOSE COURTS. 15. Headings. The headings contained in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. 16. Attorneys' Fees. If any action at law or in equity, including an action for declaratory relief, is brought to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees from the other party (unless such other party is the Escrow Agent), which fees may be set by the court in the trial of such action or may be enforced in a separate action brought for that purpose, and which fees shall be in addition to any other relief that may be awarded. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date set forth opposite their respective names. Medina Coffee, Inc. By: /s/ ------------------------------------------- Its: ------------------------------------------ Dated: January 20, 2005 ---------------------------------------- /s/ Xiangqian Li ---------------------------------------------- Xiangqian Li Dated: January 20, 2005 ---------------------------------------- SECURITIES TRANSFER CORPORATION By: /s/ ------------------------------------------- Its: ------------------------------------------ Dated: January 20, 2005 ---------------------------------------- SUBSCRIBERS By: /s/ Timothy P. Halter ------------------------------------------ Timothy P. Halter, President Halter Financial Group, Inc., as attorney- in-fact or each of the Subscribers EX-10.3 5 medina8kex103011805.txt LOCK-UP AGREEMENT EXHIBIT 10.3 LOCK-UP AGREEMENT This LOCK-UP AGREEMENT (this "Agreement"), dated as of January 20, 2005. is entered into by and between Medina Coffee, Inc., a Nevada corporation (the "Company"), and Xiangqian Li, in his individual capacity ("Li"). WHEREAS, on even date the Company's wholly-owned subsidiary, BAK International, Ltd. ("BAK"), completed a private offering ("Offering") of its securities in which investors agreed to participate, subject to Li entering into this Agreement with the Company; and WHEREAS, Li has agreed to enter into this Agreement as a condition to closing of the Offering. NOW THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows: AGREEMENT: 1. Except for distributions required under that certain Escrow Agreement, dated as of even date (the "Escrow Agreement"), a copy of which is attached hereto as Exhibit "A" and incorporated herein by this reference, by and among the Company, each of the subscribers to the Offering "), Li, and Securities Transfer Corporation, for a period of 12 months from the date the Company's common capital stock is listed on a national stock exchange or quotation medium (the "Lock-up Period"), the undersigned will not, without the prior written consent of the Company, directly or indirectly, (i) offer, sell, assign, transfer, pledge, contract to sell (if such sale would or could be consummated within the Lock-Up Period), hypothecate or otherwise dispose of (collectively, "Transfer") any of the 21,233,437 shares (the "Shares") of the Company's common capital stock held by him as of even date, (ii) enter into any swap, hedge or similar agreement or arrangement that transfers in whole or in part, the economic risk of ownership of the Shares or (iii) engage in any short selling of the Shares; provided, however, that nothing in this Agreement shall prevent the undersigned from entering into any legally permissible hedge or collar transaction (or similar transaction) that does not permit or require the Shares to be Transferred into the open market or that would or could result in a change of beneficial ownership of the Shares prior to the expiration of the Lock-Up Period. In addition, the undersigned agrees that, without the prior written consent of the Company, the undersigned will not, during the Lock-up Period, make any demand for or exercise any rights with respect to the registration of any Shares. 2. Notwithstanding the foregoing, the undersigned may (a) transfer any or all of the Shares, as the case may be, by gift, will or intestacy, or (b) pledge or hypothecate such Shares in connection with a bona fide loan transaction; provided, however, that in any such case it shall be a condition to the transfer or pledge that the transferee or pledgee execute an agreement stating that the transferee or pledgee is receiving and holding the Shares subject to the provisions of this Agreement, and there shall be no further transfer of such Shares except in accordance with this Agreement. 3. The undersigned agrees that the Company may, and in the case of clause (ii) that the undersigned will, cause the transfer agent for the Company to note stop transfer instructions with respect to such Shares on the transfer books and records of the transfer agent or the Company, as applicable. 4. The undersigned understands that the parties to Offering will proceed with the Offering in reliance on this Agreement. 5. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. 6. This Agreement may not be changed except in a writing signed by the person(s) against whose interest such change shall operate. This Agreement shall be governed by and construed under the laws of the State of Nevada without regard to principles of conflicts of law. 7. This Agreement shall be deemed to be jointly prepared by the parties hereto, and no ambiguity herein shall be construed for or against either party based upon the identity of the author of this Agreement or any provision hereof. [Balance of the page intentionally left blank.] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first above written. Medina Coffee, Inc., a Nevada corporation By: /s/ ------------------------------ Name: ---------------------------- Title: --------------------------- LI: /s/ Xiangqian Li --------------------------------- Name: Xiangqian Li EX-10.4 6 medina8kex104011805.txt FORM OF SUBSCRIPTION AGREEMENT EXHIBIT 10.4 SUBSCRIPTION AGREEMENT BAK International, Ltd. BAK Industrial Zone Atou Village Kui Chong Town Lunggang District Shenzhen, China 518119 Attention: Li Xiang Qian, President Ladies and Gentlemen: The undersigned subscriber ("Subscriber") hereby tenders this Subscription Agreement (this "Agreement") in accordance with and subject to the terms and conditions set forth herein: 1. Subscription. 1.1 Subscriber hereby subscribes for and agrees to purchase the number of shares (the "Shares") of common stock (the "Common Shares"), of BAK International, Ltd., a Hong Kong corporation (the "Company"), indicated on the signature page attached hereto at the purchase price set forth on such signature page (the "Purchase Price"). Subscriber has made payment by wire transfer of funds in accordance with instructions from the Company in the full amount of the Purchase Price of the Common Shares for which Subscriber is subscribing (the "Payment"). 1.2 This Agreement is part of an offering of Common Shares being conducted by the Company (the "Offering"). Under the terms of the Offering, the Company seeks to raise a minimum of $8 million (USD) (the "Minimum Offering") up to a maximum of $17 million (USD) (the "Maximum Offering") ( proceeds from the Minimum and Maximum Offerings being collectively referred to herein as the "Gross Proceeds Amount") based on an Offering price of $___ per share. The Company agrees that it shall not undertake any other financings (other than acquisitions utilizing capital stock of the Company or the Public company, as hereinafter defined) involving its Equity Common Shares (as defined below) on terms more favorable than those in the Offering until thirty (30) days after the effectiveness of the Registration Statement (as that term is defined below) covering all of the Common Shares, without the prior written approval of the holders of a majority of the Common Shares subscribed for in this Offering. The term "Equity Common Shares" as used herein shall mean all capital stock of the Company or the Public Company (as hereinafter defined), plus all rights, warrants, options, convertible Common Shares or Public Company common shares or indebtedness, exchangeable Common Shares or Public Company common shares or indebtedness, or other rights, exercisable for or convertible into, directly or indirectly, capital stock of the Company or the Public Company. Notwithstanding the above, "Equity Common Shares" shall not include any Common Shares of the Company or common shares of the Public Company issued pursuant to any incentive or stock option plan of the Company or the Public Company approved by the shareholders or the board of directors of the Company or the Public Company. 1.3 Subscriber understands that it will not earn interest on any funds held by the Company prior to the date of closing of the Offering. The funds will be held in escrow pending the closing of the Offering. Attached as Exhibit "A" hereto is the form of Escrow Agreement (the "Escrow Agreement") that will govern the maintenance of funds until the sooner of the closing of the Offering or the expiration thereof. The Closing Date of the Offering is referred to as the "Closing Date." The Closing shall occur on or before December 28, 2004. The Company shall have the right to a one time 45 day extension of the Closing Date. If the Offering is not closed by said date all Gross Offering Proceeds then in escrow shall be returned to the Subscriber. The closing shall occur upon the satisfaction of the following conditions and in the following sequence: (a) confirmation from the Escrow Agent, as identified in the Escrow Agreement, that the proceeds from the Minimum Offering are on deposit; (b) participation by the each of the subscribers to the Offering in that certain exchange transaction (the "Exchange"), whereby each subscriber and all other shareholders of the Company will exchange their Common Shares for the identical number of shares (the "Public Company Shares") of a corporation domiciled in the United States of America which has common equity securities eligible for quotation on the 1 Over-the-Counter Bulletin Board (the "Public Company"); and (c) the Public Company files a registration statement on a suitable form (the "Registration Statement") with the U.S. Securities and Exchange Commission to register the Public Company Shares held by the subscribers to the Offering. Gross Offering Proceeds will not be released to either the Company or the Public Company until such time as each of the forgoing has been completed. Certificates will be issued in the name of each such subscriber, and the name of such subscriber will be registered on the stock transfer books of the Public Company as the record owner of Public Company Shares. The Public Company will promptly thereafter issue to each subscriber a stock certificate for the Public Company Shares to which it is entitled. 1.4 Subscriber hereby agrees to be bound hereby upon (i) execution and delivery to the Company of the signature page to this Agreement and (ii) written acceptance on the Closing Date by the Company of Subscriber's subscription, which shall be confirmed by faxing to the Subscriber the signature page to this Agreement that has been executed by the Company (the "Subscription"). 2. Offering Material. Subscriber represents and warrants that it is in receipt of and that it has carefully read the following items: (a) The Company's business plan , the form of which is attached hereto (the "Business Plan"); (b) The audited financial statement of Shenzhen BAK Battery Co., Ltd., the Company's wholly-owned subsidiary ("BAK") for the fiscal years ended September 30, 2003 and 2004. (c) The Exchange Agreement; (d) The Escrow Agreement; and (e) A draft of the Registration Statement. The documents listed in this Section 2 shall be referred to herein as the "Disclosure Documents." 3. Conditions to Subscriber's Obligations. 3.1 The obligation of Subscriber to close the transaction contemplated by this Agreement (the "Transaction") is subject to the satisfaction on or prior to the Closing Date of the following conditions set forth in Sections 3.2 through 3.5 hereof. 3.2 The Company shall have executed this Agreement. 3.3 The Board of Directors of the Company shall have adopted resolutions consistent with Section 4.1(d) below. 3.4 Subscriber shall have received copies of all documents and information which it may have reasonably requested in connection with the Offering. 3.5 The Exchange shall have been simultaneously consummated. 3.6 The Registration Statement shall have been filed with the SEC. 3.7 The representations and warranties of the Company shall be true and correct on and as of the Closing Date as though made on and as of such date. 3.8 If so requested by Subscriber, the Company shall have delivered to the custodian for the Subscriber duly executed certificate(s), registered in the name of Subscriber's nominee, representing the Public Company Shares. 2 4. Representations and Warranties; Covenants; Survival. 4.1 The Company represents and warrants to Subscriber that, at the date of this Agreement and as of the Closing Date: (a) The Company and each of its subsidiaries are corporations duly organized, validly existing and in good standing under the laws of their jurisdiction of incorporation, with all requisite corporate power and authority to carry on the business in which they are engaged and to own the properties they own, and the Company has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The Company and each of its subsidiaries are duly qualified and licensed to do business and are in good standing in all jurisdictions where the nature of their business makes such qualification necessary, except where the failure to be qualified or licensed would not have a material adverse effect on the business of the Company and its subsidiaries, taken as a whole. (b) Except as otherwise described in the Disclosure Documents, there are no legal actions or administrative proceedings or investigations instituted, or to the best knowledge of the Company threatened, against the Company, that could reasonably be expected to have a material adverse effect on the Company or any subsidiary, any of the Common Shares, or the business of the Company and its subsidiaries, or which concerns the transactions contemplated by this Agreement. (c) The audited financial statements of BAK as of September 30, 2003 and 2004 including the notes contained therein, fairly present the financial position of BAK at the respective dates thereof and the results of its operations for the periods purported to be covered thereby. Such financial statements have been prepared in conformity with generally accepted accounting principles consistently applied with prior periods subject to any comments and notes contained therein. Since September 30, 2004, there has been no material adverse change in the financial condition of the Company or BAK from the financial condition stated in such financial statements. (d) The Company, by appropriate and required corporate action, has, or will have prior to the closing, duly authorized the execution of this Agreement and the issuance and delivery of the Common Shares. The Common Shares are not subject to preemptive or other rights of any stockholders of the Company and when issued in accordance with the terms of this Agreement, the Common Shares will be validly issued, fully paid and nonassessable and free and clear of all pledges, liens and encumbrances. (e) Performance of this Agreement and compliance with the provisions hereof will not violate any provision of any applicable law or of the charter documents of the Company, or of any of its subsidiaries, and, will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon, any of the properties or assets of the Company, or of any of its subsidiaries, pursuant to the terms of any indenture, mortgage, deed of trust or other agreement or instrument binding upon the Company, or any of its subsidiaries, other than such breaches, defaults or liens which would not have a material adverse effect on the Company and its subsidiaries taken as a whole. The Company is not in default under any provision of its organizational documents or under any provision of any agreement or other instrument to which it is a party or by which it is bound or of any law, governmental order, rule or regulation so as to affect adversely in any material manner its business or assets or its condition, financial or otherwise. (f) The Disclosure Documents, taken together, do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein to make the statements contained therein not misleading. (g) This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. (h) No registration, authorization, approval, qualification or consent of any court or governmental authority or agency is necessary in connection with the execution and delivery of this Agreement or the offering, issuance or sale of the Common Shares under this Agreement. 3 (i) The Company is not now, and after the sale of the Common Shares under this Agreement and under all other agreements and the application of the net proceeds from the sale of the Common Shares will not be, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (j) Subject to the accuracy of the Subscriber's representations and warranties in Section 7 of this Agreement, the offer, sale, and issuance of the Common Shares in conformity with the terms of this Agreement constitute transactions made exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the "Securities Act") and from the registration or qualification requirements of the laws of any applicable state. (k) Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Shares to the Subscriber. (l) Li Xiangqian, the Company's and BAK's Chief Executive Officer has agreed that he will not sell, transfer or otherwise dispose of his holdings in either the Company or the Public Company, upon consummation of the Going Public Transaction, except to persons or entities who agree to be bound by the same restrictions, for a period of twelve months following the date the Public Company's securities become eligible for quotation on the NASDAQ Stock Market. (m) Executive management of the Company will escrow 10% of their holdings (the "Make Good Shares") in the Public Company following consummation of the Going Public Transaction, so that in the event the consolidated financial statements of the Public Company do not reflect $12 million of Net Income ("NI") for the fiscal year ending September 30, 2005 and $27 million NI for the fiscal year ending September 30, 2006, respectively (the "Guaranteed NI") the Make Good Shares shall be distributed on a pro rata to the subscribers to the Offering as follows: (i) in the event that the Guaranteed NI for fiscal 2005 is not achieved, 50% of the Make Good Shares will be delivered to participants in the Offering within ten (10) business days of the date the audit report for the period is filed with the SEC; and (b) in the event that the Guaranteed NI for fiscal 2006 is not achieved, the balance of the Make Good Shares will be delivered to participants in the Offering within ten (10) business days of the date the audit report for the period is filed with the SEC. If the Guaranteed NI is achieved for a given fiscal year, holders of the Make Good Shares can immediately take possession of the number of said shares reserved for distribution during said period to participants in the Offering. In the event the Make Good Shares are delivered to participants in the Offering, the holders thereof shall be afforded demand registration rights to have the Make Good Shares registered under the Securities Act. 4.2 The Company shall indemnify and hold harmless the Subscribers from and against all fees, commissions or other payments owing by the Company to any other person or firm acting on behalf of the Company hereunder. 5. Transfer and Registration Rights. 5.1 Subscriber acknowledges that it is acquiring the Common Shares for its own account and for the purpose of investment and not with a view to any distribution or resale thereof within the meaning of the Securities Act and any applicable state or other securities laws ("State Acts"). Subscriber further agrees that, except in connection with the Exchange, it will not sell, assign, transfer or otherwise dispose of any of the Common Shares or the Public Company Shares in violation of the Securities Act or State Acts and acknowledges that, in taking unregistered Common Shares and ultimately Public Company Shares, it must continue to bear economic risk in regard to its investment for an indefinite period of time because of the fact that neither of such securities have been registered under the Securities Act or State Acts and further realizes that such securities cannot be sold unless subsequently registered under the Securities Act and State Acts or an exemption from such registration is available. 5.2 Neither the Common Shares or the Public Company Shares issued pursuant to this Agreement may be transferred except in a transaction which is in compliance with the Securities Act and State Acts. 6. Closing. 4 6.1 The closing of the Offering shall take place at such time and at such place as the Company shall determine, provided that the Closing shall occur no later than December 28, 2004, unless otherwise extended for up to an additional 45 days . If the closing of the sale of Common Shares to Subscriber has not occurred within the time frame provided in the previous sentence, then Subscriber may terminate this Agreement by giving written notice to the Company. 7. Subscriber Representations. Subscriber hereby represents, warrants and acknowledges and agrees with the Company as follows: 7.1 Subscriber has been furnished with and has carefully read the Disclosure Documents as set forth in Section 2 hereto and is familiar with the terms of the Offering. With respect to individual or partnership tax and other economic considerations involved in this investment, Subscriber is not relying on the Company (or any agent or representative of any of the Company). Subscriber has carefully considered and has, to the extent Subscriber believes such discussion necessary, discussed with Subscriber's legal, tax, accounting and financial advisers the suitability of an investment in the Common Shares for Subscriber's particular tax and financial situation. 7.2 Subscriber has had an opportunity to inspect relevant documents relating to the organization and operations of the Company. Subscriber acknowledges that all documents, records and books pertaining to this investment which Subscriber has requested have been made available for inspection by Subscriber and Subscriber's attorney, accountant or other adviser(s). 7.3 Subscriber and/or Subscriber's advisor(s) has/have had a reasonable opportunity to ask questions of and receive answers and to request additional relevant information from a person or persons acting on behalf of the Company concerning the Offering. 7.4 Subscriber is not subscribing for the Common Shares as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar. 7.5 Subscriber is an "accredited investor," within the meaning of Rule 501(a) of Regulation D under the Securities Act ("Regulation D"). Subscriber, by reason of Subscriber's business or financial experience or the business or financial experience of Subscriber's professional advisers who are unaffiliated with and who are not compensated by the Company or any affiliate, directly or indirectly, can be reasonably assumed to have the capacity to protect Subscriber's own interests in connection with the transaction. Subscriber further acknowledges that he has read the written materials provided by the Company. 7.6 Subscriber has adequate means of providing for Subscriber's current financial needs and contingencies, is able to bear the substantial economic risks of an investment in the Common Shares for an indefinite period of time, has no need for liquidity in such investment and, at the present time, could afford a complete loss of such investment. 7.7 Subscriber has such knowledge and experience in financial, tax and business matters so as to enable Subscriber to use the information made available to Subscriber in connection with the Offering to evaluate the merits and risks of an investment in the Common Shares and to make an informed investment decision with respect thereto. 7.8 Subscriber recognizes that investment in the Common Shares involves substantial risks. Subscriber further recognizes that no Federal or state agencies have passed upon this offering of the Common Shares or made any finding or determination as to the fairness of this investment. 7.9 Subscriber acknowledges that each certificate representing the Public Company Shares shall contain a legend substantially in the following form: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY 5 APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL (WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE COMPANY) CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. 7.10 If this Agreement is executed and delivered on behalf of a partnership, corporation, trust or estate: (i) such partnership, corporation, trust or estate has the full legal right and power and all authority and approval required (a) to execute and deliver, or authorize execution and delivery of, this Agreement and all other instruments executed and delivered by or on behalf of such partnership, corporation, trust or estate in connection with the purchase of the Common Shares, (b) to delegate authority pursuant to a power of attorney and (c) to purchase and hold such Common Shares; (ii) the signature of the party signing on behalf of such partnership, corporation, trust or estate is binding upon such partnership, corporation, trust or estate; and (iii) such partnership, corporation or trust has not been formed for the specific purpose of acquiring the Common Shares, unless each beneficial owner of such entity is qualified as an "accredited investor" within the meaning of Regulation D and has submitted information substantiating such individual qualification. 7.11 If Subscriber is a retirement plan or is investing on behalf of a retirement plan, Subscriber acknowledges that investment in the Common Shares poses risks in addition to those associated with other investments, including the inability to use losses generated by an investment in the Common Shares to offset taxable income. 8. Understandings. Subscriber understands, acknowledges and agrees with the Company as follows: 8.1 Subscriber hereby acknowledges and agrees that upon notice of acceptance from the Company pursuant to Section 1.3, the Subscription hereunder is irrevocable by Subscriber, that, except as required by law or as permitted under Section 6.1 above, Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of Subscriber hereunder and that this Subscription Agreement and such other agreements shall survive the death or disability of Subscriber and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns. If Subscriber is more than one person, the obligations of Subscriber hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his or her heirs, executors, administrators, successors, legal representatives and permitted assigns. 8.2 No federal or state agency has made any findings or determination as to the fairness of the terms of this Offering for investment nor any recommendations or endorsement of the Common Shares. 8.3 The Offering is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act and the provisions of Rule 506 of Regulation D thereunder, which is in part dependent upon the truth, completeness and accuracy of the statements made by Subscriber herein. 8.4 It is understood that in order not to jeopardize the Offering's exempt status under Section 4(2) of the Securities Act and Regulation D, any transferee may, at a minimum, be required to fulfill the investor suitability requirements thereunder. 8.5 No person or entity acting on behalf, or under the authority, of Subscriber is or will be entitled to any broker's, finder's or similar fee or commission in connection with this Subscription. 8.6 Subscriber acknowledges that the information furnished in this Agreement by the Company to Subscriber or its advisers in connection with the Offering, is confidential and nonpublic and agrees that all such written 6 information which is material and not yet publicly disseminated by the Company shall be kept in confidence by Subscriber and neither used by Subscriber for Subscriber's personal benefit (other than in connection with this Subscription), nor disclosed to any third party, except Subscriber's legal and other advisers who shall be advised of the confidential nature of such information, for any reason; provided, however, that this obligation shall not apply to any such information that (i) is part of the public knowledge or literature and readily accessible at the date hereof, (ii) becomes a part of the public knowledge or literature and readily accessible by publication (except as a result of a breach of this provision) or (iii) is received from third parties (except third parties who disclose such information in violation of any confidentiality agreements or obligations, including, without limitation, any subscription agreement entered into with the Company). The representations, warranties and agreements of Subscriber and the Company contained herein and in any other writing delivered in connection with the Offering shall be true and correct in all material respects on and as of the Closing Date of such Subscription as if made on and as of the date the Company executes this Agreement and shall survive the execution and delivery of this Agreement and the purchase of the Common Shares. 8.7 IN MAKING AN INVESTMENT DECISION, SUBSCRIBER MUST RELY ON ITS OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE COMMON SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 9. Miscellaneous. 9.1 Except as set forth elsewhere herein, any notice or demand to be given or served in connection herewith shall be deemed to be sufficiently given or served for all purposes by being sent as registered or certified mail, return receipt requested, postage prepaid, in the case of the Company, addressed to it at the address set forth below: BAK Industrial Zone Atou Village Kui Chong Town Lunggang District Shenzhen, China 518119 Attention: Li Xiang Qian, President and in the case of Subscriber to the address set forth below: ___________________________________ ___________________________________ ___________________________________ ___________________________________ 9.2 This Agreement shall be enforced, governed and construed in all respects in accordance with the laws of Hong Kong, and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. If any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed to be modified to conform with such statute or rule of law. Any provision hereof that may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof. 9.3 In any action, proceeding or counterclaim brought to enforce any of the provisions of this Agreement or to recover damages, costs and expenses in connection with any breach of the Agreement, the prevailing party, as determined by the finder of fact, shall be entitled to be reimbursed by the opposing party for all of the prevailing party's reasonable outside attorneys' fees, costs and other out-of-pocket expenses incurred in connection with such action, proceeding or counterclaim. 9.4 This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth herein. The 7 Company acknowledges that all material facts upon which it has relied in forming its decision to enter into this Agreement are expressly set forth herein and further acknowledges that the Subscriber has not made any representations, express or implied, which are not set expressly set forth herein. This Agreement supercedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. 9.5 The Company shall indemnify, defend and hold harmless Subscriber and each of its agents, partners, members, officers, directors, representatives, or affiliates (collectively, the "Subscriber Indemnities") against any and all losses, liabilities, claims and expenses, including reasonable attorneys' fees ("Losses"), sustained by Subscriber Indemnities resulting from, arising out of, or connected with any material inaccuracy in, breach of, or nonfulfillment of any representation, warranty, covenant or agreement made by or other obligation of the Company contained in this Agreement (including the Exhibits hereto) or in any document delivered in connection herewith. 9.6 Subscriber shall indemnify, defend and hold harmless the Company and each of its agents, partners, members, officers, directors, representatives, or affiliates (collectively, the "Company Indemnities") against any and all Losses sustained by the Company Indemnities resulting from, arising out of, or connected with any material inaccuracy in, breach of, or non-fulfillment of any representation, warranty, covenant or agreement made by or other obligation of Subscriber contained in this Agreement (including the Exhibits hereto) or in any document delivered in connection herewith. 9.7 The Company shall not issue any public statement or press release, or otherwise disclose in any manner the identity of the Subscriber or that Subscriber has purchased the Common Shares, without the prior written consent of the Subscriber, except as may be required by applicable law; provided, however, that the Company may disclose such information in the Registration Statement filed with the SEC. 10. Signature. The signature page of this Agreement is contained as part of the applicable Subscription Package, entitled "Signature Page." 8 SUBSCRIPTION AGREEMENT GENERAL INSTRUCTIONS ------------------------------------------- General Instructions These Subscription Documents contain all documents necessary to subscribe for Common Shares ("Common Shares"), of BAK International, Ltd., a Hong Kong corporation (the "Company"). You may subscribe for Common Shares by completing the Subscription Agreement in the following manner: 1. On line (a) of the signature page state the number of Common Shares you wish to purchase. 2. On line (b) of the signature page state the total cost of the Common Shares you wish to purchase. To obtain the cost, multiply the number of Common Shares you desire to purchase by the purchase price per Common Share set forth therein. 3. Sign and state your address, telephone number and social security or other taxpayer identification number on the lines provided on the signature page to the Subscription Agreement and deliver the completed Subscription Agreement with payment of the entire purchase price of the Common Shares subscribed for as set forth below. Payment should be made in United States Dollars by wire transfer to: ___________________________________ ___________________________________ ___________________________________ ___________________________________ The Subscription Agreement Signature Page must be completed and signed by each investor. Send all documents to: Securities Transfer Corporation Attention: Kevin Halter 2591 Dallas Parkway, Suite 102 Frisco, Texas 75034 THE COMPLETED SUBSCRIPTION AGREEMENT SHOULD BE RETURNED IN ITS ENTIRETY TO THE ESCROW AGENT DESIGNATED ABOVE. Acceptance of Delivery All questions as to the validity, form, eligibility (including time of receipt) and acceptance of the completed Subscription Agreement will be reasonably determined by the Company. The Company reserves the absolute right to reject any completed Subscription Agreement, in its sole and absolute discretion. The Company also reserves the right to waive any irregularities in, or conditions of, the submission of completed Subscription Agreements. The Company shall be under no duty to give any notification of irregularities in connection with any attempted subscription for Common Shares or incur any liability for failure to give such notification. Until such irregularities have been cured or waived, no subscription for Common Shares shall be deemed to have been made. Any Subscription Agreement that is not properly completed and as to which defects have not been cured or waived will be returned by the Company to the Subscriber as soon as practicable. 9 SUBSCRIPTION AGREEMENT SIGNATURE PAGE The undersigned investor hereby certifies that he or she (i) has received and relied solely upon information provided by the Company, (ii) agrees to all the terms and conditions of this Subscription Agreement, (iii) meets the suitability standards set forth in this Subscription Agreement and (iv) is a resident of the state indicated below. (a) The undersigned subscribes for __________ Common Shares. (b) The total cost of the Common Shares subscribed for, at $____ per Common Share, is $__________ (the "Purchase Price"). If other than Individual check one and indicate _____________________________ capacity of signatory under the signature: [_] Trust [_] Estate _____________________________ [_] Uniform Gifts to Minors Act of State of____ Name of Subscriber (Print) [_] Attorney-in-fact [_] Corporation [_] Other______________________________________ _____________________________ If Joint Ownership, check one: Name of Joint Subscriber (if any) (Print) [_] Joint Tenants with Right of Survivorship [_] Tenants in Common _____________________________ [_] Tenants by Entirety Signature of Subscriber [_] Community Property _____________________________ Signature of Joint Subscriber (if any) _____________________________ Capacity of Signatory (if applicable) _____________________________ Backup Withholding Statement: Social Security or Please check this box only if the investor Taxpayer Identification Number is subject to: [_] backup withholding. _____________________________ Address Foreign Person: Please check this box only if the investor is a: [_] nonresident alien, foreign corporation, _____________________________ foreign partnership, foreign trust or City State Zip Code foreign estate. Telephone ( )____________________ Telecopy No. ______________________ The investor agrees to the terms of this Subscription Agreement and, as required by the Regulations pursuant to the Internal Revenue Code, certifies under penalty of perjury that (1) the Social Security Number or Taxpayer Identification Number and address provided above is correct, (2) the investor is not subject to backup withholding (unless the Backup Withholding Statement box is checked) either because he has not been notified that he is subject to backup withholding as a result of a failure to report all interest or dividends or because the Internal Revenue Service has notified him that he is no longer subject to backup withholding and (3) the investor (unless the Foreign Person box above is checked) is not a nonresident alien, foreign partnership, foreign trust or foreign estate. 10 THE SUBSCRIPTION FOR _____________ COMMON SHARES BAK INTERNATIONAL, LTD. BY THE ABOVE NAMED SUBSCRIBER(S) IS ACCEPTED AS OF ________________, 2004. BAK INTERNATIONAL, LTD. By: __________________________________________ Title:________________________________________ 11 EX-10.5 7 medina8kex105011805.txt SUMMARY OF SALES AGREEMENT EXHIBIT 10.5 Summary of Sales Agreement by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Zhongshan Mingji Battery Co., Ltd. ("Zhongshan") dated as of October 25, 2003. The contract number for this agreement is WI-BAK-2003-05-28. This agreement does not include an exact quantity to be purchased by Zhongshan. The quantity is to be determined at the time of each sale. From September 2003 to September 2004, the sales volume was RMB 58,941,628.09 Yuan. These sales constituted 15% of the total sales of the Company for the period September 2003 to September 2004. The Company is liable for breach of contract in the event that the quality of the battery cell causes the product to malfunction. EX-10.6 8 medina8kex106011805.txt SUMMARY OF PURCHASE AGREEMENT EXHIBIT 10.6 Summary of Purchase Agreement by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Luhua Technology (Shenzhen) Co., Ltd. ("Luhua") dated as of April 14, 2004. The contract number for this agreement is WI-040204-LHKJ/04. This agreement does not include an exact quantity to be purchased by the Company. The quantity is to be determined at the time of each purchase. From September 2003 to September 2004, the purchase volume was RMB 74,046,804.72 Yuan. In the event of breach of contract, the breaching party must pay damages equal to five percent (5%) of the total contract value during the term of the agreement. EX-10.7 9 medina8kex107011805.txt SUMMARY OF PURCHASE AGREEMENT EXHIBIT 10.7 Summary of Purchase Agreement by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Beijing CITIC Guoan Mengguli Electricity Supply Ltd. Co. dated as of September 30, 2004. The contract number for this agreement is MGL040930-67. This agreement does not include an exact quantity to be purchased by the Company. The quantity is to be determined at the time of each purchase. From September 2003 to September 2004, the purchase volume was RMB 77,218,547.00 Yuan. In the event of breach of contract, the breaching party must pay damages equal to two-tenths of one percent (0.2%) of the total contract value during the term of the agreement. EX-10.8 10 medina8kex108011805.txt SUMMARY OF REVOLVABLE CREDIT FACILITIES AGREEMENT EXHIBIT 10.8 Summary of Revolvable Credit Facilities Agreement by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Longgang Division, Shenzhen Branch, Agricultural Bank of China ("Agricultural Bank of China") dated as of June 27, 2003. The contract number for this agreement is (Shenzhen Longgang) Nongyin Xunshou Zi (2003) No. 02370001. The contract term is June 27, 2003 to June 27, 2005, and the amount of credit to be extended by Agricultural Bank of China is RMB 50,000,000 Yuan. Remedies in the event of breach of contract include the adjustment of the credit amount, the suspension of credit, the imposition of punitive interest, an increase of the guaranty deposit and the call back of principal and interest before maturity. The agreement also requires the Company to grant a mortgage of its land use right to Agricultural Bank of China once it is obtained. If the mortgage is not granted to Agricultural Bank of China, the contract will be amended to have a term of one year. EX-10.9 11 medina8kex109011805.txt SUMMARY OF GUARANTY CONTRACT EXHIBIT 10.9 Summary of Guaranty Contract of Maximum Amount by and between Longgang Division, Shenzhen Branch, Agricultural Bank of China and Jilin Provincial Huaruan Technology Company Limited by Shares ("Huaruan Company") dated as of June 27, 2003. Huaruan Company signed a guaranty on June 27, 2003 in relation to the Revolvable Credit Facilities Agreement (the "Agreement") as summarized in Exhibit 10.8. As guarantor, Huaruan Company undertakes to assume joint and several responsibilities for the obligation of Shenzhen BAK Battery Co., Ltd. under the Agreement, subject to the maximum security amount of RMB 50,000,000 Yuan. The guaranty has a term of two (2) years, commencing from the maturity of the obligations of Shenzhen BAK Battery Co., Ltd. under the Agreement. EX-10.10 12 medina8kex1010011805.txt SUMMARY COMPREHENSIVE CREDIT FACILITIES AGREEMENT EXHIBIT 10.10 Summary of Comprehensive Credit Facilities Agreement of Maximum Amount by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Longgang Division, Shenzhen Branch, Agricultural Bank of China ("Agricultural Bank of China") dated as of April 5, 2004. The contract number for this agreement is Shenzhen Longgang Nongyin Shouzi No. 200402370001. The contract term is April 5, 2004 to April 5, 2005, and the amount of credit to be extended by Agricultural Bank of China is RMB 200,000,000 Yuan. Remedies in the event of breach of contract include the adjustment of the credit amount, the suspension of credit, the imposition of punitive interest and overdue interest, an increase of guarantee deposit and the call back of principal and interest before maturity. The agreement also provides that the Company cannot make a distribution to its shareholders before the loan is paid in full. It also provides that the Company must grant a mortgage to the Agricultural Bank of China upon obtaining a certificate of title for Bak Industrial Park. EX-10.11 13 medina8kex1011011805.txt SUMMARY OF GUARANTY CONTRACT EXHIBIT 10.11 Summary of Guaranty Contract of Maximum Amount by and among Longgang Division, Shenzhen Branch, Agricultural Bank of China, Development and Construction (Group) Company Limited by Shares ("Changchun Co") of Changchun Economic & Technology Development District, Jilin Provincial Huaruan Technology Company Limited by Shares ("Huaruan Company") and Xiangqian Li dated as of April 5, 2004. Changchun Co, Huaruan Company and Mr. Li signed a guaranty on April 5, 2004 in relation to the Comprehensive Credit Facilities Agreement (the "Agreement") as summarized in Exhibit 10.10. As guarantor, Changchun Co, Huaruan Company and Mr. Li undertake to assume joint and several responsibilities for the obligation of Shenzhen BAK Battery Co., Ltd. under the Agreement, subject to the maximum security amounts of RMB 100,000,000 Yuan, RMB 100,000,000 Yuan and RMB 200,000,000 Yuan, respectively. The guaranty has a term of two (2) years, commencing from the maturity of the obligations of Shenzhen BAK Battery Co., Ltd. under the Agreement. EX-10.12 14 medina8kex1012011805.txt SUMMARY COMPREHENSIVE CREDIT FACILITIES AGREEMENT EXHIBIT 10.12 Summary of Comprehensive Credit Facilities Agreement by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Longgang Division, Shenzhen Development Bank ("Shenzhen Development Bank") dated as of April 1, 2004. The contract number for this agreement is Shenfa Longgang Daizi NO. 200403055. The contract term is April 1, 2004 to April 1, 2005, and the amount of credit to be extended by Shenzhen Development Bank is RMB 150,000,000 Yuan. The agreement provides that the documents and bills must be based on real and genuine trading; otherwise, the credit is suspended immediately. Furthermore, the Company cannot mortgage its new factory and dormitory buildings to a third party or the loan becomes mature immediately. EX-10.13 15 medina8kex1013011805.txt SUMMARY OF GUARANTY CONTRACT EXHIBIT 10.13 Summary of Guaranty Contract of Maximum Amount by and among Longgang Division, Shenzhen Development Bank, Development and Construction (Group) Company Limited by Shares of Changchun Economic & Technology Development District ("Changchun Co"), Jilin Provincial Huaruan Technology Company Limited by Shares ("Huaruan Company"), Xiangqian Li, Yanlong Zou, Fenghua Li, Jimin Li, Jiajun Huang, Baicheng Zhou, Jinghui Wang, Yongbin Han, Shuquan Zhang, Xinrong Yang, Yunfei Li and Weiqiang Zhang dated as of April 1, 2004. Changchun Co, Huaruan Company and 12 shareholders of Shenzhen BAK Battery Co., Ltd. (Xiangqian Li, Yanlong Zou, Fenghua Li, Jimin Li, Jiajun Huang, Baicheng Zhou, Jinghui Wang, Yongbing Han, Shuquan Zhang, Xinrong Yang, Yunfei Li, Weiqiang Zhang) (collectively, the "Shareholders") signed a guaranty on April 1, 2004 in relation to the Comprehensive Credit Facilities Agreement (the "Agreement") as summarized in Exhibit 10.12. In the guaranty, Changchun Co, Huaruan Company and the Shareholders undertake to assume joint and several liabilities for the obligations of Shenzhen BAK Battery Co., Ltd. under the Agreement, subject to the maximum security amounts of RMB 100,000,000 Yuan, RMB 50,000,000 Yuan and RMB 150,000,000 Yuan for each shareholder respectively. The guaranty has a term of April 1, 2004 to April 1, 2007. EX-10.14 16 medina8kex1014011805.txt SUMMARY COMPREHENSIVE CREDIT FACILITIES AGREEMENT EXHIBIT 10.14 Summary of Comprehensive Credit Facilities Agreement by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Longgang Division, Shenzhen Branch, China Minsheng Bank ("China Minsheng Bank") dated as of January 14, 2004. The contract number for this agreement is Year 2003 Shen Longgang Zong'e Zi NO.010. The contract term is January 14, 2004 to January 14, 2005, and the amount of credit to be extended by China Minsheng Bank is RMB 30,000,000 Yuan. Under the agreement China Minsheng Bank is entitled to adjust or cancel the credit and demand immediate payment of the loan if the Company's business operations deteriorate severely, the Company loses its business reputation, there is a dispute between the Company and third party creditors or there is a major adjustment of the state monetary policy. EX-10.15 17 medina8kex1015011805.txt SUMMARY OF GUARANTY CONTRACT EXHIBIT 10.15 Summary of Guaranty Contract of Maximum Amount by and among Longgang Division, Shenzhen Branch, China Minsheng Bank, Jilin Provincial Huaruan Technology Company Limited by Shares ("Huaruan Company") and Xiangqian Li dated as of November 15, 2003. Huaruan Company and Xiangqian Li signed a guaranty on November 15, 2003 in relation to the Comprehensive Credit Facilities Agreement (the "Agreement") as summarized in Exhibit 10.14. According to the guaranty, each of the guarantors undertakes to assume joint and several liabilities for the obligation of Shenzhen BAK Battery Co., Ltd. under the Agreement, subject to the maximum security amount of RMB 30,000,000 Yuan. The guaranty has a term of two (2) years, commencing from the maturity of each loan agreement under the Agreement. EX-10.16 18 medina8kex1016011805.txt SUMMARY OF LOAN AGREEMENT EXHIBIT 10.16 Summary of Loan Agreement by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Shenzhen Branch, Industrial Bank ("Industrial Bank") dated as of March 11, 2004. The contract number for this agreement is Xingyin Shen Yewu Sanjian Zi 2004 No. 003. The contract term is March 11, 2004 to March 11, 2005, and the amount of credit to be extended by Industrial Bank is RMB 20,000,000 Yuan. In the event of breach of contract, the agreement provides for the correction of such breach of contract within a certain period of time, preventing the Company from drawing on the loan, termination of the agreement, the payment of overdue and compound interest and the payment of litigation fees. EX-10.17 19 medina8kex1017011805.txt SUMMARY OF GUARANTY CONTRACT EXHIBIT 10.17 Summary of Guaranty Agreement by and between Shenzhen Branch, Industrial Bank and Shenzhen High-Tech Investment Service Co. ("Shenzhen High-Tech") dated as of March 10, 2004. Shenzhen High-Tech signed a guaranty on March 10, 2004 in relation to the Loan Agreement as summarized in Exhibit 10.16. According to the guaranty, the guarantor undertakes to assume the liability of Shenzhen BAK Battery Co., Ltd., subject to the maximum security amount of RMB 20,000,000 Yuan. EX-10.18 20 medina8kex1018011805.txt SUMMARY OF RELATED TRANSACTION AGREEMENT EXHIBIT 10.18 Summary of Related Transaction Agreement by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Jilin Provincial Huaruan Technology Company Limited by Shares ("Huaruan Company") dated as of October 18, 2003. The agreement relates to the transfer of one patent and seven patent application rights from Huaruan Company to the Company for consideration in the amount of RMB 32,000,000 Yuan. The first payment is due within 30 days of execution of the agreement. In the event of breach of contract, the breaching party must pay RMB 100,000 Yuan to the non-breaching party. The Company has fully performed on this agreement. EX-10.19 21 medina8kex1019011805.txt SUMMARY OF LOAN AGREEMENT EXHIBIT 10.19 Summary of Loan Agreement by and between Shenzhen BAK Battery Co., Ltd. (the "Company") and Longgang Division, Shenzhen Development Bank ("Shenzhen Development Bank") dated as of April 1, 2004. The contract number for this agreement is Shenfa Longgang Daizi NO. 200403055. The contract term is April 1, 2004 to April 1, 2005, and the amount of credit to be extended by Shenzhen Development Bank is RMB 100,000,000 Yuan. This agreement is conditioned upon the execution of the Comprehensive Credit Facilities Agreement as summarized in Exhibit 10.12. Remedies in the event of breach of contract include the suspension of unused credit, the calling back of the loan principal in whole or part before maturity, the imposition of penalty interest and compound interest and compensation for loss. The agreement provides that the loan shall not be used by the Company for the distribution of profits and that the Company cannot mortgage its new factory and dormitory buildings to a third party. In the event that any of the foregoing should occur, the loan becomes mature immediately. EX-16.1 22 medina8kex161011805.txt LETTER ON CHANGE IN CERTIFYING ACCOUNTANT EXHIBIT 16.1 GEORGE STEWART, CPA 2301 SOUTH JACKSON STREET, SUITE 101-G SEATTLE, WASHINGTON 98144 (206) 328-8554 FAX (206) 328-0383 January 20, 2005 U. S. Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Gentlemen: On January 19, 2005, this Firm received a draft copy of a Form 8-K to be filed by Medina Coffee, Inc. (the "Company") reporting the dismissal of firm as the Company's independent registered public accounting firm in accordance with the requirements of Item 4.01 - Changes in Registrant's Certifying Public Accountant of Form 8-K. We have no disagreements with the statements made in the draft Form 8-K/A, Item 4.01 disclosures provided to us. Our reports on the December 31, 2003 and 2002 financial statements, respectively, did not contain an adverse opinion or a disclaimer of opinion nor was it qualified or modified as to audit scope, accounting principles or uncertainty, except for a going concern opinion expressing substantial doubt about the ability of the Company to continue as a going concern. Very truly yours, /S/ George Stewart, CPA George Stewart, CPA EX-99.1 23 medina8kex991011805.txt PRESS RELEASE EXHIBIT 99.1 FOR IMMEDIATE RELEASE CONTACT: Mr. Xiangqian Li 86 755 89770093 - -------------------------------------------------------------------------------- Medina Coffee, Inc. BAK International, LTD. BAK Industrial Park, No.1 BAK Street Kuichong Town, Longang District Shenzhen, People's Republic of China NEWS RELEASE - -------------------------------------------------------------------------------- BAK INTERNATIONAL, LTD. COMPLETES $17 MILLION PRIVATE FINANCING AND GOING PUBLIC TRANSACTION Shenzhen, China, January 20, 2005 - Medina Coffee, Inc. (OTCBB: MCFF.OB) announced today the closing of a stock exchange transaction with BAK International, LTD., a Hong Kong company ("BAK"). The companies will operate on a consolidated basis, executing upon the current business plan of BAK's wholly-owned subsidiary located in the People's Republic of China ("PRC"). Immediately preceding the consummation of the exchange transaction, BAK closed a private placement of securities whereby it issued an aggregate of 8,600,433 shares of its common stock for gross proceeds of $17million, or $1.98 per share. As a result of the one-for-one share exchange transaction, BAK's stockholders, including participants in BAK's private offering, were issued 39,826,075 shares of Medina's common stock representing in the aggregate 97.2% of Medina's 40,978,533 issued and outstanding shares of common stock immediately following the closing. As a result of the exchange transaction, Mr. Xiangqian Li was appointed to the Board of Directors of Medina, and Mr. Li, as well as other senior management of BAK, were elected as executive officers of Medina upon the resignation of the company's sole executive. Medina's shares are listed on the Over-the-Counter (OTC) Bulletin Board under the symbol, MCFF.OB. BAK, through its wholly-owned PRC subsidiary, manufactures and distributes a wide variety of standard and customized lithium ion rechargeable batteries. BAK supplies rechargeable lithium ion batteries for use in mobile phones and various other portable electronic applications, including high-power handset telephones, laptop computers, digital cameras and video camcorders, MP3's, electric bicycles and general industrial applications. BAK's battery products fall into three categories, steel cell, aluminum cell and cylindrical cell. BAK operates sales and service branches in six principal coastal cities and Beijing in the PRC. For the year ended September 30, 2004, BAK, on a consolidated basis, generated approximately $63.75 million in gross revenues, compared to approximately $20.05 million in gross revenues for the year ended September 30, 2003, representing an increase of approximately 218%. BAK, on a consolidated basis, achieved net income of approximately $6.75 million for the year ended September 30, 2004, compared to net income of approximately $3.58 million for the year ended September 30, 2003. Mr. Xianqian Li, Chief Executive Officer of Medina, stated, "We want to thank our financial advisor, Halter Financial Group, for facilitating our efforts in connection with our private financing and the going public transaction. We believe these transactions will afford us access to the US capital markets in hopes of capitalizing on what we perceive to be tremendous growth opportunities in the battery market place both in China and internationally." He added, "These events are also significant because they will allow us to launch several new products and continue the expansion of our marketing efforts." FORWARD LOOKING STATEMENTS This release contains certain "forward-looking statements" relating to the business of Medina and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, regulatory actions or delays, the ability to obtain or maintain intellectual property protection, market acceptance, third party reimbursement, future capital requirements, competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. Medina is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. -----END PRIVACY-ENHANCED MESSAGE-----