-----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, AnoMgDMxcqQjPfEwePbE9KiqHBJVVN4I6hMP7w3ep99grCz3t6wwPGuBU2IMzWY7 EnMuKw/G2TJJPp+HFu2rNQ== 0001010549-04-000442.txt : 20040708 0001010549-04-000442.hdr.sgml : 20040708 20040708170123 ACCESSION NUMBER: 0001010549-04-000442 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040623 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040708 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOULDER ACQUISITIONS INC CENTRAL INDEX KEY: 0000721693 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 840820212 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12536 FILM NUMBER: 04906580 BUSINESS ADDRESS: STREET 1: 211 W WALL CITY: MIDLAND STATE: TX ZIP: 79701 BUSINESS PHONE: 8003514515 MAIL ADDRESS: STREET 1: 211 W WALL CITY: MIDLAND STATE: TX ZIP: 79701 FORMER COMPANY: FORMER CONFORMED NAME: BOULDER BREWING CO DATE OF NAME CHANGE: 19920703 8-K 1 boulder8k062304.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 23, 2004 BOULDER ACQUISITIONS, INC. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEVADA 0-12536 90-0093373 - ------------------------------- ------------------------ ------------------- (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation or organization) Identification No.) - -------------------------------------------------------------------------------- 429 Guangdong Road Shanghai People's Republic of China 200001 - ---------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (86-21) 6336-8686 - -------------------------------------------------------------------------------- ================================================================================ TABLE OF CONTENTS ITEM 1. CHANGES IN CONTROL OF REGISTRANT......................................1 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS..................................3 THE SHARE EXCHANGE...............................................3 DESCRIPTION OF BOULDER ACQUISITIONS' PREDECESSOR BUSINESS........3 DESCRIPTION OF CURRENT BUSINESS..................................4 General..........................................................4 Overview.................................................4 Our Business Strategy....................................5 Our Value-Added Information Services.............................5 Financial Services.......................................5 Other Services...........................................6 Content Relationships....................................6 Marketing Relationships..................................7 Operator Channels........................................7 Non-Operator Channels....................................8 Customer Research........................................8 Customer Services........................................8 Competitive Landscape....................................9 Distribution.....................................................9 Our Distribution Operation...............................9 Competition.............................................10 Employees.......................................................10 Facilities......................................................10 Legal Proceedings...............................................11 Wireless Technology Standards in China..........................11 Government Regulation...........................................12 Regulation of Telecommunication Services................12 Other Laws and Their Application........................13 Intellectual Property and Proprietary Rights............14 cautionary statements...........................................15 Risks Related to Our Business...................................15 Risks Related to Our Wireless Value-Added Information Services Business....................................15 Risks Related to the Wireless Value-Added Services Industry.............................................21 Risks Related to Doing Business in China................23 Risks Related to the Mobile Phone Distribution Industry.............................................25 Risks Related to our Common Stock.......................26 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...............27 DIRECTORS AND EXECUTIVE OFFICERS................................29 Board Composition and Committees........................30 Director Compensation...................................30 Indebtedness of Directors and Executive Officers........31 Family Relationships....................................31 Legal Proceedings.......................................31 EXECUTIVE COMPENSATION..........................................31 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS............32 ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE............................33 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS....................................34 i ITEM 1. CHANGES IN CONTROL OF REGISTRANT On June 23, 2004, Boulder Acquisitions, Inc. ("Boulder Acquisitions") completed a stock exchange transaction with the shareholders of Sifang Holdings Co., Ltd., an exempted company incorporated in the Cayman Islands with limited liability ("Sifang Holdings"). The exchange was consummated under Nevada and Cayman Islands law and pursuant to the terms of the Securities Exchange Agreement dated effective as of June 23, 2004 (the "Exchange Agreement"). A copy of the Exchange Agreement is filed as an exhibit to this Current Report on Form 8-K. Prior to consummating the exchange, Boulder Acquisitions effected a forward split of its common stock on the basis of 1.31722 shares for each one share issued and outstanding. Immediately prior to the exchange there were 1,585,705 shares of common stock of Boulder Acquisitions issued and outstanding (on a post-forward split basis). Pursuant to the Exchange Agreement, Boulder Acquisitions issued 13,782,636 shares of its common stock, par value $0.001 per share (on a post-forward split basis), to the shareholders of Sifang Holdings, representing approximately 89.7% of Boulder Acquisition's post-exchange issued and outstanding common stock, in exchange for 100% of the outstanding capital stock of Sifang Holdings. After giving effect to the exchange, Boulder Acquisitions had 15,368,341 shares of its common stock outstanding. Pursuant to the exchange, Sifang Holdings became a wholly-owned subsidiary of Boulder Acquisitions. The shares of Boulder Acquisitions common stock issued to stockholders of Sifang Holdings 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 requirements. Certificates representing these shares contain a legend stating the same. Boulder Acquisitions intends to carry on the business of Sifang Holdings' wholly-owned subsidiary, Shanghai TCH Data Technology Co., Ltd. ("TCH"). Boulder Acquisitions has relocated its executive offices to those of TCH at 429 Guangdong Road, Shanghai, People's Republic of China 200001 and its telephone number is (86-21) 6336-8686. The exchange was approved in accordance with the laws of the State of Nevada and the Cayman Islands. Pursuant to the Exchange Agreement, at the closing of the exchange, the membership of the board of directors of Boulder Acquisitions was increased from one to two directors, and Tai Caihua was appointed to serve in the newly created directorship. Also under the terms of the Exchange Agreement, all existing officers resigned as officers of Boulder Acquisitions effective immediately following the closing of the transaction and Mr. Tai, Fu Sixing, Lu Qin and Huang Tianqi were elected as President, Chief Executive Officer, Chief Financial Officer and Chief Technical Officer of Boulder Acquisitions, respectively. On June 24, 2004, the membership of the board of directors of Boulder Acquisitions was increased from two to ten, and Song Jing, Shi Ying, Mao Ming, Mr. Fu, Mr. Huang, Huang Wei, Jing Weiping and Yu Ruijie were appointed to serve in the newly created directorships. Also on June 24, 2004, Timothy P. Halter resigned as a director of Boulder Acquisitions and Zhang Xiaodong was appointed to fill the vacancy on the board of directors caused by Mr. Halter's resignation. For accounting purposes, the exchange is being treated as a reverse acquisition, because the shareholders of Sifang Holdings own a majority of the issued and outstanding shares of common stock of Boulder Acquisitions immediately following the exchange. Except as described in the previous paragraph and in this Current Report 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 Boulder Acquisitions, and to the knowledge of Boulder Acquisitions, no other arrangements exist that might result in a change of control of Boulder Acquisitions. Further, due to the issuance of the 13,782,636 shares of Boulder Acquisitions common stock, a change in control of Boulder Acquisitions occurred on June 23, 2004, the date of the consummation of the exchange. 1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of June 30, 2004, certain information with respect to the beneficial ownership of common stock of Boulder Acquisitions by (i) each director and officer of Boulder Acquisitions, (ii) each person known to Boulder Acquisitions to be the beneficial owner of five percent or more of the outstanding shares of common stock of Boulder Acquisitions, and (iii) all directors and officers of Boulder Acquisitions 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. Amount and Nature of Beneficial Ownership(1) ----------------------------------------- Number Percent of Name of Beneficial Owner of Shares(2) Voting Stock(3) - ------------------------ ---------- ------------- Tai Caihua(4) 11,301,764 66.4% Shi Ying(5) 11,301,764 66.4% Halter Financial Group, Inc.(6) 1,271,304 7.5% Chinamerica Fund, LP 877,193 5.2% Huang Tianqi 413,480 2.4% Jing Weiping 413,480 2.4% Mao Ming 275,652 1.6% Song Jing 275,652 1.6% Fu Sixing 275,652 1.6% Yu Ruijie 275,652 1.6% Zhang Xiaodong 275,652 1.6% Huang Wei 275,652 1.6% Directors and executive officers as a group (10 persons) 13,782,636 81.0%
- ---------------------- * Less than 1% (1) On June 30, 2004, there were 17,018,692 shares of common stock of Boulder Acquisitions outstanding. Each person named below has sole investment and voting power with respect to all shares of our common stock shown as beneficially owned by the person, except as otherwise indicated below. (2) Under applicable rules promulgated by the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a person is deemed 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 (x) the exercise of any option or warrant or (y) the conversion of another security. (3) In determining the percent of common stock of Boulder Acquisitions owned by a person (a) the numerator is the number of shares of common stock of Boulder Acquisitions 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 17,018,692 shares of common stock of Boulder Acquisitions outstanding on June 30, 2004 and (ii) any shares of common stock of Boulder Acquisitions 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 include shares which may be issued upon the exercise of any other options or warrants or the conversion of any other convertible securities. (4) Includes 1,791,743 shares held by Mr. Tai's wife, Shi Ying. Mr. Tai disclaims beneficial ownership of those shares. 2 (5) Includes 9,510,021 shares held by Ms. Shi's husband, Tai Caihua. Ms. Shi disclaims beneficial ownership of those shares. (6) Includes 131,722 shares held by Timothy P. Halter, the president and sole shareholder of Halter Financial Group, Inc. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS Set forth below is certain information concerning (i) the principal terms of the share exchange and (ii) the business of the combined company. THE SHARE EXCHANGE The Share Exchange. On June 23, 2004, Boulder Acquisitions, Sifang Holdings and the shareholders of Sifang Holdings consummated the transactions contemplated by the Exchange Agreement. The Exchange Agreement specified that Boulder Acquisitions would acquire all 50,000 shares of the issued and outstanding stock of Sifang Holdings in exchange for the issuance of an aggregate of 13,782,636 shares of common stock of Boulder Acquisitions (on a post-split basis). On the exchange closing date, Boulder Acquisitions issued an aggregate of 13,782,636 shares of common stock to the shareholders of Sifang Holdings, representing approximately 89.7% of the issued and outstanding Boulder Acquisitions common stock following the exchange. All of Boulder Acquisitions' business operations are now conducted through Sifang Holdings' wholly-owned subsidiary, TCH. Forward Stock Split. Prior to the exchange, Boulder Acquisitions' board of directors approved and effected a forward stock split of Boulder Acquisitions common stock on the basis of 1.31772 shares for each share of common stock outstanding. After giving effect to the forward stock split and immediately prior to the exchange, 1,585,705 shares of Boulder Acquisitions common stock were outstanding. Election of Board of Directors. Pursuant to the Exchange Agreement, at the closing of the exchange, the membership of the board of directors of Boulder Acquisitions was increased from one to two directors, and Tai Caihua was appointed to serve in the newly created directorship. Also, under the terms of the Exchange Agreement, all existing officers resigned as officers of Boulder Acquisitions effective immediately following the closing of the transaction and Mr. Tai, Fu Sixing, Lu Qin and Huang Tianqi were elected as President, Chief Executive Officer, Chief Financial Officer and Chief Technical Officer of Boulder Acquisitions, respectively. DESCRIPTION OF BOULDER ACQUISITIONS' PREDECESSOR BUSINESS Boulder Brewing Company ("Boulder Brewing") was incorporated in Colorado on May 8, 1980 and operated as a microbrewery of various beers. In 1984, Boulder Brewing began constructing a brewery which was substantially completed in October 1984 and opened in June 1985. The construction of this facility along with the movement of equipment and personnel interrupted product sales and hampered cash flow. Boulder Brewing was unable to become profitable within any segment of its core business, became illiquid and was forced to divest itself of all of its assets. Boulder Brewing became dormant without any operations or assets in the second quarter of 1990. In September 2001, Boulder Brewing changed its state of incorporation from Colorado to Nevada by means of a merger with and into Boulder Acquisitions, which was formed on September 6, 2001 solely for the purpose of effecting the reincorporation. The articles of incorporation and bylaws of the Nevada corporation became the articles of incorporation and bylaws of the surviving corporation. From the date of reincorporation through the consummation of the exchange, Boulder Acquisitions had no material operations or assets. 3 DESCRIPTION OF CURRENT BUSINESS Except as otherwise indicated by the context, references in this Current Report to "we," "us," "our," or the "company" are to the combined business of Boulder Acquisitions and its wholly-owned direct subsidiary, Sifang Holdings, and Sifang Holdings' wholly-owned subsidiary, TCH. General Our current operations were originally a business division of Shanghai Sifang Information Technology Co., Ltd. ("Sifang Information"), which was originally formed as a Chinese limited liability company in August 1998. In May 2004, Sifang Information's business divisions focusing on value-added information services and distribution of mobile phones were spun off to a newly established Chinese company, TCH. Pursuant to a series of transactions, TCH became a wholly-owned subsidiary of our wholly-owned subsidiary, Sifang Holdings. We conduct our business in China solely through Sifang Holdings and TCH. Overview Value-Added Information Services. We render value-added information services in China by purchasing content from third-party providers and reformatting that content. Our value-added information services enable wireless receiver (mobile phone and pager) users in China to access financial information and various entertainment-related services. We contract with our affiliated wireless service providers to transmit the reformatted content to customers of China's various network operators. The primary focus of our value-added information services is on providing wireless receiver users in China with access to financial information. We derive the vast majority of our value-added information services revenues from our financial information business. Our financial information software, Sifang Gutong, allows our customers to access stock and currency exchange information and execute stock trades. We are one of the largest stock information and trading value-added information service providers in China. We began providing our entertainment-related services, including icons, screen savers, multiplayer games, Western horoscopes, jokes, and sports and entertainment news during the latter part of 2003. These services are ancillary to our financial information services and they represent only a small portion of our value-added information services revenue at the present time. Leveraging our experience and understanding of the wireless value-added services market in China, we have consistently purchased and reformatted content, applications and technologies which are popular in the Chinese wireless market. To further enhance and differentiate our services, we have entered into, and will continue to actively pursue, collaborative relationships with third parties to customize, market and provide access to their content through various wireless technology platforms to Chinese consumers. In addition, all of our services are promoted by our sales force and supported by our customer service team, each of which is strategically based in Shanghai. In order to meet ownership requirements under Chinese law which restrict us, as a foreign company, from operating in certain industries such as value-added telecommunication and Internet services, we have entered into information service and cooperation agreements with two of our affiliates that are incorporated in the People's Republic of China: Sifang Information and Shanghai Tianci Industrial Group Co., Ltd. ("Tianci"). The original shareholder structure of Sifang Holdings was identical to the current shareholder structure of Sifang Information, and each of Sifang Information and Tianci are owned approximately 69%, through direct and indirect ownership, by Tai Caihua, our president and the chairman of our board of directors. We hold no ownership interest in Sifang Information or Tianci. Sifang Information and Tianci contract with China Mobile Communications Corporation ("China Mobile") and China United Telecommunications Corporation ("China Unicom"), respectively, to provide wireless value-added information services to wireless receiver customers in China via China Mobile and China Unicom, respectively. Sifang Information transmits those services to customers of China Mobile and China Unicom on behalf of itself and Tianci pursuant to a signed agreement between Sifang Information and Tianci. 4 Distribution. We primarily distribute nine different SAMSUNG Electronics Co., Ltd. ("Samsung") mobile phone models in the Shanghai, China region. Six of the Samsung models we distribute are compatible with the CDMA network and three of the Samsung models we distribute are compatible with the GSM network. We plan to pre-install the end-user portion of our Sifang Gutong software in all of the Samsung mobile phones we distribute, and market our stock information, stock trading, and currency exchange services by placing brochures touting those services in the packaging of those Samsung mobile phones before we distribute the phones to retailers. We believe this process will increase name recognition of our financial information and stock trading services with wireless receiver users. There are three main first-tier wholesalers of Samsung phones in China: Shanghai Taili Communication Equipment Co., Ltd., Shenzhen Tianyin Communication Development Co., Ltd., and Guangzhou Yingtai Data Power Technology Co., Ltd. These wholesalers contract, through local branches, with sub-wholesalers to distribute each model in a defined area. We have contracts with Shanghai branch offices of the three main first-tier wholesalers on whom we rely, making us a sub-wholesaler distributor of nine Samsung mobile phone models in the Shanghai region. We sell approximately 52% of our mobile phones to three retailers. Our Business Strategy Our objective is to maintain and strengthen our position both as a provider of wireless value-added information services and as a distributor of mobile phones in the Shanghai region. In order to achieve our objective, we plan to, among other things, increase the number of subscribers to our value-added information services by increasing the number of mobile phones we distribute and pre-installing those phones with the end-user portion of our Sifang Gutong software. Other key strategies for achieving our objective are to: o Continue to expand and diversify our portfolio of consumer wireless information services, including new SMS, 2.5G and other next generation services such as those compatible with 3G, o Increase investment in sales, marketing and branding, both in conjunction with network operators and through independent activities, in order to promote customer awareness of our value-added information service provider in China, o Continue to strengthen existing relationships with China Mobile and China Unicom by increasing our sales presence at the national and local levels and through joint marketing and promotion activities, o Expand our marketing channels by continuing to develop integrated marketing campaigns with traditional media outlets, o Continue to be a sub-wholesaler of Samsung mobile phones and increase the number of models of mobile phones that we distribute, and o Work on establishing relationships with new mobile phone manufacturers and wholesalers in order to diversify our distribution business. Our Value-Added Information Services Financial Services Our primary focus with regard to value-added information services is the provision of financial information services utilizing our Sifang Gutong software. This software, developed by Shanghai Chengao Industrial Co. Ltd. ("Chengao"), utilizes the JAVA and BREW platforms. JAVA and BREW utilize the more advanced 2.5G technology standard, which enables high-capacity wireless data transmissions. As a result, services offered over these platforms are more sophisticated and offer users higher quality graphics and richer content and interactivity, commanding a premium price over our other services. Our Sifang Gutong software enables our mobile phone and pager customers to access quotes and retrieve customized investment-related information, as well as access our currency exchange information. Sifang Gutong provides our mobile phone and pager customers with the ability to receive streaming real-time quotes, including stocks, most active issues, largest gainers and losers, and mutual funds for securities trading on the Shenzhen and Shanghai stock exchanges. Our Sifang Gutong software available to mobile phone users includes a stock trading function that enables our mobile 5 phone customers to directly place orders to buy and sell securities listed on the two aforementioned stock exchanges. Our trading window corresponds with the hours that securities markets are open from 9:30 a.m. to 11:30 a.m., and from 1:00 p.m. to 3:00 p.m., Beijing Time. We receive a continuous direct feed of detailed quote data, market information and news. Our customers can create customized lists of stocks for quick access to current trading information. Through our relationships with financial information companies such as Shanghai Stock Information Company, we also provide access to breaking news, charts, market commentary and analysis. The value-added financial information we offer can only be accessed by a customer on whose mobile phone or pager the end-user portion of our Sifang Gutong software has been installed. We plan to pre-install the end-user portion of our Sifang Gutong software in all of the Samsung mobile phones that we distribute. With regard to mobile phones and pagers not distributed by us, we will provide installation of our Sifang Gutong software free of charge upon request. Pursuant to the request of a Beijing retailer, we entered into an agreement with Chengao and Sifang Information whereby Chengao installs the end-user portion of our Sifang Gutong software into mobile phones owned by the retailer. The retailer sells these phones at a premium price to consumers. In return for the premium price, the consumers receive our value-added information services for six months free of charge. The retailer passes the premium back to Chengao, who retains a small installation fee and then passes the remainder on to us. This relationship helps us market our value-added information services and enables us to establish relationships with new customers. Other Services We also provide icons and screen savers, multiplayer action games, Western horoscopes, jokes and event-driven or entertainment news updates. These services represent only a small portion of our value-added information services revenues at the present time. However, we believe that providing wireless receiver users in China access to entertainment-related services increases our ability to retain our financial information subscribers and expand our subscriber base, and we expect the entertainment-related services portion of our value-added information services business will grow over time. o Horoscopes. With this service, users can obtain daily Western horoscopes via their mobile phones or pagers. o Games. We offer interactive SMS, JAVA and WAP-based games that can be played on the screens of mobile phones. These games are designed to be easy to play on the dial pad of a mobile phone and to maximize the graphics available on mobile phone screens. Our current game offerings include our popular titles Ant Kingdom and English Island. Ant Kingdom, designed for the WAP platform, is a role-playing game set in the kingdom of Ant. Players begin play as a soldier, and as they gain experience in the game, gradually build their character to higher levels such as captain, officer and eventually, king. The goal of the game is to be the king. In English Island, a JAVA-based educational game, players are given English words and must spell them correctly. Every time a player spells a word correctly, the player's score increases. The faster a player can spell words correctly, the higher the score he can achieve. o Jokes. We send users of this service a variety of jokes on demand or via automatic daily messages. o News. We automatically send periodic SMS messages on recent event-driven news, sports (especially soccer), or entertainment events to subscribers of this service. Mobile phone users can also download desired information on demand. We obtain our news content from government affiliated media companies, such as XinhuaNet and other local media. Content Relationships Our content collaborators authorize the inclusion of their content in one or more of our value-added information services for a fixed fee which we pay directly to the provider. Our agreements with our content collaborators usually have a one-year term, and are non-exclusive. Currently, our key content collaborators are: 6 o Shanghai Stock Information Company. o Xinhua News Agency (Shanghai). o Shanghai Wanguo Stock Information Company. o Shanghai Yibang Stock Information Company. o Shanghai Shiji Stock Information Company. o Korea Techall Co., Ltd. (which provides game content). o Shanghai Shenfa Software Co., Ltd. (which provides game content). Marketing Relationships Sifang Information and Tianci, our affiliated value-added mobile phone service providers, have marketing relationships with China Mobile and China Unicom. We sell and market our services principally through China Mobile and China Unicom. We also sell and market through Sifang Information's Web site, www.sifang.net, and promotional events, direct marketing, media advertising and other activities. We are also focused on expanding our marketing channels by developing integrated marketing campaigns with traditional media outlets and multinational corporations. For example, we have been involved in several marketing campaigns with Motorola whereby our wireless value-added services are promoted in their in-store and media advertising in China, and Motorola is in turn promoted through our services. We sell all of our paging value-added information services through our affiliated value-added paging service provider, Sifang Information. We contract directly with end users to settle all payments from pager users. We market our paging value-added information services through traditional media outlets, including newspapers and magazines, and directly to end-users. Operator Channels General. All of our paging value-added information services are provided through the paging network owned by Sifang Information. We contract directly with the pager users to collect all fees generated from our value-added information services. We have an information service and cooperation agreement with Sifang Information that provides us exclusive access to their paging network for ten years. This agreement is automatically renewable for additional one year terms unless we decide to terminate. All of our mobile phone value-added information services are provided to mobile phone users by Sifang Information through the networks of China Mobile and China Unicom. Previously, mobile phone users paid for our services by purchasing pre-paid services cards. Now, our services are billed to mobile phone customers in one of two ways: (1) certain of our customers pay for our services in advance when they purchase our services and a mobile phone together in a premium package (through our relationship with Chengao and Sifang Information), and (2) our other customers (who do not purchase our services as part of any such premium package) are billed by the mobile operators, who collect the fees for our services, including both our data access and short message services, from their mobile phone subscribers. The mobile operators then pass those fees (net of fees charged by the mobile operator) to our affiliated value-added service providers, Sifang Information and Tianci, who in turn pass those fees to us in return for a small fee pursuant to the terms of information service and cooperation agreements between us and each of them. Our management team utilizes its extensive experience in China to develop close ties with the key personnel of the mobile operators at the central and provincial levels. As of June 30, 2004, we had approximately 25 sales professionals strategically located in provinces and municipalities concentrated in the eastern and southern regions of China to work closely with the mobile operators at the local level, where pricing and important marketing and operational decisions are made. Our sales network enables us to work closely with operators to facilitate the approval required for new service offerings and for related pricing and to enjoy enhanced marketing and promotional support. We are also able to gain insight into developments in the local markets and the competitive landscape, as well as new market opportunities. Our sales professionals are well-incentivized; most of their compensation is tied to usage of our services in the applicable region. 7 Coordinated Marketing Campaigns Our affiliated wireless service providers cooperate in marketing campaigns with China Mobile and China Unicom. These network operators distribute literature marketing us and our affiliates. Non-Operator Channels We also focus on non-mobile operator sales and marketing activities, such as: o promoting Sifang Information's Web site, www.sifang.net, to potential users as a fun, easy-to-access place to request our wireless content and applications, o engaging in direct marketing to mobile phone users by, for example, including advertising inserts in users' bills from Shanghai Mobile and Shanghai Unicom, o engaging in direct marketing to stock market investors by, for example, including advertising inserts in investors' bills from brokerage companies such as GF Securities Co., Ltd., Guotai Junan Securities Co., Ltd., Everbright Securities Co., Ltd. and Guoxin Securities Co., Ltd., o utilizing our database of users to create targeted marketing campaigns, o advertising in traditional media outlets such as newspapers and magazines, and o we plan to pre-install the Samsung mobile phones we distribute with the end-user portion of our Sifang Gutong software, and place brochures touting our stock information, stock trading and currency exchange services in the packaging of those phones, before distributing them to retailers. Customer Research Our sales, marketing and product development activities are supported by our five-member customer research department. This department focuses our sales efforts in the following three distinct phases: Customer Acquisition Our customer research department analyzes the success rates of various national and local marketing campaigns in which we are involved, including by user segment and cost per user, in order to determine which campaigns are the most effective. Using phone surveys, focus groups and analyses of usage patterns, the department also considers demographic and other market factors to identify product mixes and product categories which are suitable for the current market environment. Customer Conversion To enhance our ability to convert one-time or occasional customers into regular users of our services, our customer research department analyzes customer and product churn rates across the market, average revenue per user data and other information. In this way, it can identify different customer segments and develop targeted marketing campaigns for those segments, including cross-selling and up-selling marketing campaigns. Customer Retention Our customer research department evaluates ways to maximize user interest in our services through, for example, providing feedback to our product developers to improve product features based on customer information and bundling older services with newly launched services. It also creates various reward programs designed to enhance customer loyalty. Customer Services We pride ourselves in providing high quality customer service. Our dedicated customer service center based in Shanghai provides our users real-time support and is staffed by 20 full-time professionals. The center currently operates everyday from 7:00 a.m. to 10:00 p.m. We strive to achieve the fastest response times and highest customer satisfaction levels in the industry. 8 Competitive Landscape There are currently three broad categories of wireless service providers in China: o Portal service providers, which have established expertise in Internet content and have subsequently branched into mobile space. The portals serve as content aggregators offering a variety of wireless value-added services. These national portal operators include Sohu, NetEase, SINA, and Tom.com. o Dedicated service providers, whose businesses focus on offering a variety of wireless content directly to mobile users. These providers include Linktone, Newpalm and Mtone Wireless. o Niche service providers, which focus on a particular market segment or application that often builds on a pre-existing sector competency. These providers include Tencent, Enorbus, and Solute. We belong in this category because of our focus on financial information services. We may also face competition from international wireless service providers. As the mobile operators are becoming more selective in choosing their service providers to promote high quality content, ensure high levels of customer service and limit the number of providers with which they have to deal, scale is becoming more important, and we believe the industry will likely experience consolidation with the leading nationwide providers gaining more market share at the expense of smaller local providers. Nationwide providers may also acquire some of their smaller competitors to gain access to local relationships with the mobile operators in China or new product expertise. Distribution Our Distribution Operation We distribute various mobile phone brands in the Shanghai, China region. We distribute mobile phones manufactured primarily by Samsung, and to a lesser extent, by Motorola, Inc. ("Motorola"). We began distributing Motorola mobile phones in early 2002 and Samsung mobile phones in November 2002. We began discontinuing our Motorola mobile phone distribution business on June 30, 2004. We will remain a distributor, for the Shanghai region, of nine different mobile phone models manufactured by Samsung, and plan to increase our sales of Samsung mobile phones. Six of the Samsung models we distribute are compatible with the CDMA network and three of the Samsung models we distribute are compatible with the GSM network. We plan to pre-install the end-user portion of our Sifang Gutong software in all of the Samsung mobile phones we distribute, and market our stock information, stock trading, and currency exchange services by placing brochures touting those services in the packaging of those Samsung mobile phones before we distribute the phones to retailers. We believe this process will increase name recognition of our financial information and stock trading services with wireless receiver users. There are three main first-tier wholesalers of Samsung phones in China: Shanghai Taili Communication Equipment Co., Ltd., Shenzhen Tianyin Communication Development Co., Ltd., and Guangzhou Yingtai Data Power Technology Co., Ltd. These wholesalers contract, through local branches, with sub-wholesalers to distribute each model in a defined area. We have contracts with Shanghai branch offices of the three main first-tier wholesalers on whom we rely, making us a sub-wholesaler distributor of nine Samsung mobile phone models in the Shanghai region. We sell approximately 52% of our mobile phones to three retailers. We have rebate programs with Shanghai Taili Communication Equipment Co., Ltd. and Shenzhen Tianyin Communication Development Co., Ltd. whereby we are credited a certain portion of the sales price we paid to the first-tier wholesaler if we are able to fulfill certain sales volume prescribed by that first-tier wholesaler. As a result, we are entitled to receive certain rebates and credits for the inventory held and sold by us within a specified period of time as set by the first-tier wholesaler offering the rebate program. 9 Competition We estimate that we compete with between ten and 20 other sub-wholesalers for the rights to distribute Samsung phones in the Shanghai region. The three main competitive factors the wholesalers consider in granting a sub-wholesaler the rights to distribute a particular model include: Available Cash Flow. Sub-wholesalers must be able to pay for the mobile phones they desire to purchase from first-tier wholesalers. First-tier wholesalers will be hesitant to grant rights to distribute a particular model to a sub-wholesaler if that sub-wholesaler does not have sufficient capital to make large purchases. We believe that having adequate cash flow gives us a competitive advantage. Relationships with Retailers. The wholesalers look to the types of relationships sub-wholesalers have with large retailers when deciding which sub-wholesaler to utilize. We have strong relationships with three large retailers in Shanghai and sell approximately 52% of our mobile phones to these three retailers. Relationships with Wholesalers. We have relationships with the three major wholesalers of Samsung phones in China and have been sub-wholesalers for those three wholesalers for more than a year. Employees The following table summarizes the functional distribution of our employees as of June 30, 2003 and 2004: -------------------------------- -------------------------------------- June 30, -------------------------------- -------------------------------------- Department 2003 2004 -------------------------------- ------------------ ------------------- Business Development 5 5 -------------------------------- ------------------ ------------------- Customer Research 5 5 -------------------------------- ------------------ ------------------- Customer Service 20 20 -------------------------------- ------------------ ------------------- Finance 3 3 -------------------------------- ------------------ ------------------- Human Resources 2 2 -------------------------------- ------------------ ------------------- Investor Relations 2 2 -------------------------------- ------------------ ------------------- Legal and Administrative 2 2 -------------------------------- ------------------ ------------------- Sales and Marketing 25 25 -------------------------------- ------------------ ------------------- Product Development 20 20 -------------------------------- ------------------ ------------------- Technical Support 10 10 -------------------------------- ------------------ ------------------- -------------------------------- ------------------ ------------------- Total 94 94 -------------------------------- ------------------ ------------------- None of our personnel are represented under collective bargaining agreements. We consider our relations with our employees to be good. Facilities We currently occupy two office spaces in the Shanghai region. We lease the first, located at 429 Guangdong Road, Shanghai, People's Republic of China 200001, for approximately $41,000 a year, pursuant to an operating lease that expires in December 2006. This office space contains our corporate headquarters, and is approximately 250 square meters. We own the second, located at 689 Laoshandong Road, Shanghai, People's Republic of China 200120, which houses our technical team and servers, and is approximately 800 square meters. We believe we will be able to obtain adequate facilities, principally through the leasing of appropriate properties, to accommodate our future expansion plans. 10 Legal Proceedings No legal proceedings have been or are currently being undertaken for or against the company, nor are we aware of any contemplated proceedings. Wireless Technology Standards in China Several different wireless technology standards have been developed which operate at different frequencies with both analog and digital radio signals. First generation wireless telephone systems employ analog technology, while newer systems employ digital technology. Digital wireless technology, commonly referred to as second generation technology, or 2G, multiplies the number of users that can be served by the same band of spectrum using analog technology. The wireless technologies most relevant in China currently include: o Global System for Mobile Communications, or GSM -- initially developed in order to facilitate unification and integration of telecommunications within the European Union has become widespread throughout most Asian countries. GSM technology breaks audio signals into sequential pieces of data of a defined length, places each piece into an information conduit at specific intervals and then reconstructs the pieces at the end of the conduit. A key component of the GSM system is the SIM card. Data stored on the card identifies the subscriber to the mobile network as well as the service authorized for that subscriber. Since the identity of the subscriber is held on the card, any mobile phone can be used in conjunction with the SIM card. o Code Division Multiple Access, or CDMA -- a digital technology standard which has been used in commercial operation by several operators in certain countries such as the United States and Korea. Unlike GSM, CDMA technology is a continuous transmission technology which uses a coding system to mix discrete audio signals together during transmission and then separates those signals at the end of transmission. Prior to the commercial rollout of third generation, or 3G, networks, 2.5G technology standards have been developed for both the GSM and CDMA technologies to offer higher data transmission speeds, enabling the use of more data intensive products. Current 2.5G wireless technologies include: o General Packet-Switched Radio Service, or GPRS -- offers faster data transmission with speeds ranging from 56 kilobits per second, or Kbps, to 114 Kbps via a GSM network. GPRS supports a wide range of bandwidths and is particularly suited for sending and receiving small bursts of data, such as e-mail and Web browsing, as well as large volumes of data. GPRS also makes it possible for users to make telephone calls and transmit data simultaneously. o CDMA 1x RTT -- an advanced CDMA-based technology which allows transmission of data at speeds of up to 144 Kbps, compared to a maximum of 64 Kbps for second generation CDMA networks. 3G represents several technology standards developed by The International Telecommunications Union. Third generation technology has been developed for both the GSM standard and CDMA standard. Wireless value-added services can be offered through all of these technology standards and most commonly include: o Short Messaging Services, or SMS -- a service that enables a user to send and receive text messages comprised of words or numbers or an alphanumeric combination. SMS was created when it was incorporated into the GSM standard. o Wireless Application Protocol, or WAP -- a software protocol standard that defines a standardized means of transmitting Internet-based content and data to handheld devices such as mobile phones and pagers with secure access to e-mail and text-based Web pages. WAP supports most wireless networks including GSM and CDMA. o Multimedia Messaging Services, or MMS -- a method of transmitting graphics, video clips, sound files and short text messages over wireless networks using the WAP protocol. MMS, however, is not the same as e-mail in that MMS is based on the concept of multimedia messaging. An MMS message is coded so that the images, sounds and text are displayed in a predetermined order as one singular message. Furthermore, MMS does not support attachments as e-mail does. 11 o JAVA -- a general programming environment that creates applications for the Internet or any other distributed networks. JAVA applications are intended to be independent of the hardware platform. Government Regulation The following is a summary of the principal governmental laws and regulations that are or may be applicable to wireless service providers like us in China. The scope and enforcement of many of the laws and regulations described below are uncertain. We cannot predict the effect of further developments in the Chinese legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement of laws, particularly with regard to wireless value-added services, which is an emerging industry in China. Regulation of Telecommunication Services The telecommunications industry, including certain wireless value-added services, is highly-regulated in China. Regulations issued or implemented by the State Council, the Ministry of Information Industries, and other relevant government authorities cover many aspects of telecommunications network operation, including entry into the telecommunications industry, the scope of permissible business activities, interconnection and transmission line arrangements, tariff policy and foreign investment. The principal regulations governing the telecommunications services business in China include: o Telecommunications Regulations (2000), or the Telecom Regulations. The Telecom Regulations categorize all telecommunications businesses in China as either infrastructure telecommunications businesses or value-added telecommunications businesses. The latter category includes SMS and other wireless value-added services. Under the Telecom Regulations, certain services are classified as being of a value-added nature and require the commercial operator of such services to obtain an operating license, including telecommunication information services, online data processing and translation processing, call centers and Internet access. The Telecom Regulations also set forth extensive guidelines with respect to different aspects of telecommunications operations in China. o Regulations for the Administration of Foreign-Invested Telecommunications Enterprises (2002), or the FI Telecom Regulations. The FI Telecom Regulations set forth detailed requirements with respect to capitalization, investor qualifications and application procedures in connection with the establishment of a foreign-invested telecom enterprise. Under the FI Telecom Regulations, a foreign entity is prohibited from owning more than 50% of the total equity in any value-added telecommunications business in China, subject to certain geographic limitations. o Administrative Measures for Telecommunications Business Operating License (2001), or the Telecom License Measures. Under the Telecom License Measures, an approved value-added telecommunications service provider must conduct its business in accordance with the specifications recorded on its Telecom Business Operating License. In addition to regulations promulgated at the national level by the Chinese government, the Shanghai municipal government has issued provisional regulations requiring SMS service providers to obtain licenses from or register with the local Ministry of Information Industries branch office before providing SMS service within the city. At this time, it is unclear whether national regulations will be promulgated regulating SMS services. Our affiliates, Sifang Information and Tianci, each have a value-added telecommunication services license issued by the Shanghai Municipal Telecommunications Administration Bureau, which is the local office of the Ministry of Information Industries. They are each also in the process of applying for an inter-provincial value-added telecommunication license with the Ministry of Information Industries. 12 Other Laws and Their Application Regulation of Internet Content Services. As a wireless value-added information services provider, we do not engage in the Internet portal business which typically involves the provision of extensive Internet content services, including Chinese language Web navigational and search capabilities, content channels, web-based communications and community services and a platform for e-commerce, such as auction houses. Sifang Information registered with the Shanghai Telecommunication Administration Bureau in January 2001 to provide commercial services at the WWW.SIFANG.NET Web site. As a commercial ICP provider, Sifang Information is prohibited from posting or displaying any content that: o opposes the fundamental principles determined in China's Constitution; o compromises state security, divulges state secrets, subverts state power or damages national unity; o harms the dignity or interests of the state; o incites ethnic hatred or racial discrimination or damages inter-ethnic unity; o sabotages China's religious policy or propagates heretical teachings or feudal superstitions; o disseminates rumors, disturbs social order or disrupts social stability; o propagates obscenity, pornography, gambling, violence, murder or fear or incites the commission of crimes; o insults or slanders a third party or infringes upon the lawful rights and interests of a third party; or o includes other content prohibited by laws or administrative regulations. Failure to comply with these prohibitions may result in the closing of Sifang Information's Web site. Regulation of News Dissemination through SMS Services. Pursuant to a circular issued by the Shanghai Communications Administration, distribution of news content through wireless applications like SMS must be approved by relevant government agencies. Both Sifang Information and Tianci have all necessary approvals. Regulation of Advertisements. The State Administration of Industry and Commerce, or the SAIC, is the government agency responsible for regulating advertising activities in China. The SAIC has not promulgated regulations specifically aimed at wireless advertising through a media other than the Internet, such as through SMS services. One provisional regulation issued by Shanghai municipal government prohibits service providers from sending SMS advertisements without the client's consent. As part of our non-mobile operator marketing activities, we have developed integrated marketing campaigns with traditional media outlets such as magazines and newspapers and multinational corporations through certain cross-selling efforts with companies, including Motorola and Samsung. If the SAIC were to treat our integrated marketing campaigns or other activities as being advertising activities, we would need to apply to the local SAIC for an advertising license to conduct wireless advertising business (through SMSs, for example). We can give no assurance that such application would be approved by the SAIC. Failure to obtain such approval could result in penalties including being banned from engaging in online advertising activities, confiscation of illegal earnings and fines. Foreign Exchange Controls. The principal regulations governing foreign exchange in China are the Foreign Exchange Control Regulations (1996) and the Administration of Settlement, Sale and Payment of Foreign Exchange Regulations (1996), or the Foreign Exchange Regulations. Under the Foreign Exchange Regulations, Renminbi is freely convertible into foreign currency for current account items, including the distribution of dividends. Conversion of Renminbi for capital account items, such as direct investment, loans and security investment, however, is still subject to the approval of the State Administration of Foreign Exchange, or SAFE. Under the Foreign Exchange Regulations, foreign-invested enterprises are required to open and maintain separate foreign exchange accounts for capital 13 account items (but not for other items). In addition, foreign-invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from SAFE. 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 require our employees 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. Our employees are required to acknowledge and recognize that all inventions, trade secrets, works of authorship, developments and other processes, whether or not patentable or copyrightable, made by them during their employment are our property. They also sign agreements to substantiate our sole and exclusive right to those works and to transfer any ownership that they may claim in those works to us. 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. Sifang Information has registered the following Internet and WAP domain name www.sifang.net. Shanghai Sifang Communication Company ("Sifang Communication") has registered one trademark with China's Trademark Office. That trademark is its logo, a square (the English translation of "Sifang" is "square"). China's trademark law utilizes a "first-to-file" system for obtaining trademark rights. As a result, the first applicant to file an application for registration of a mark will preempt all other applicants. Prior use of unregistered marks, except "well known" marks, is generally not a basis for legal action in China. We may not be able to successfully defend or claim any legal rights in any trademarks for which we apply in the future. Pursuant to a license agreement between our affiliate, Sifang Communication, and us, we have the right to use its registered trademark, its square logo, whenever necessary. We also acquired all of Sifang Information's interest in the Sifang Gutong software pursuant to the terms of the spin-off of Sifang Information's business divisions focusing on value-added information services and distribution of mobile phones. We have the right to use the word "Sifang" and to market ourselves through www.sifang.net with regard to both of the spun-off divisions. Many parties are actively developing and seeking patent protection for wireless services-related technologies. We expect these parties to continue to take steps to protect these technologies, including seeking patent protection. There may be patents issued or pending that are held by others and that cover significant parts of our technology, business methods or services. Disputes over rights to these technologies are likely to arise in the future. We cannot be certain that our products do not or will not infringe valid patents, copyrights or other intellectual property rights held by third parties. We may be subject to legal proceedings and claims from time to time relating to the intellectual property of others. 14 CAUTIONARY STATEMENTS You should carefully consider the following risks and the other information set forth elsewhere in this Current Report. 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 WIRELESS VALUE-ADDED INFORMATION SERVICES BUSINESS WE DEPEND UPON CONTRACTUAL ARRANGEMENTS WITH OUR AFFILIATED VALUE-ADDED MOBILE PHONE SERVICE PROVIDERS, SHANGHAI SIFANG INFORMATION TECHNOLOGY CO., LTD., OR SIFANG INFORMATION, AND SHANGHAI TIANCI INDUSTRIAL GROUP CO., LTD., OR TIANCI, FOR THE SUCCESS OF OUR BUSINESS. THESE ARRANGEMENTS MAY NOT BE AS EFFECTIVE IN PROVIDING OPERATIONAL CONTROL AS DIRECT OWNERSHIP OF THESE BUSINESSES AND MAY BE DIFFICULT TO ENFORCE. Because we conduct our business only in China, and because we are restricted by the Chinese government from owning telecommunications or Internet operations in China, we depend on our affiliated value-added mobile phone service providers, Sifang Information and Tianci, in which we have no direct ownership interest, but with which we have entered into information service and cooperation agreements, to provide those services to mobile phone users in China through contractual agreements with the mobile operators, China Mobile and China Unicom. These arrangements may not be as effective in providing control over our value-added information services to mobile phone users in China as would be direct ownership of these businesses. For example, Sifang Information or Tianci could fail to take actions required to operate our business, such as entering into service contracts with China Mobile and China Unicom. Moreover, a portion of the fees for our services are paid by the mobile operators directly to Sifang Information and Tianci, which are then obligated to transfer all of those fees to us, in return for a small fee. If Sifang Information or Tianci fail to perform their obligations under these agreements, we may have to rely on legal remedies under Chinese law, which we cannot assure you would be effective or sufficient. In the opinion of our Chinese counsel, Grandall Legal Group (Shanghai), Sifang Information and Tianci each possess such licenses, permits, certificates, authorities and approvals, issued by appropriate governmental agencies or bodies in the People's Republic of China, as are necessary to conduct its business as presently conducted as well as to perform their obligations under any contracts between them and China Mobile and China Unicom, respectively. In addition, to the best knowledge of Grandall Legal Group (Shanghai), TCH is not in breach of or in default under any laws of the People's Republic of China or any approval, consent, waiver, authorization, exemption, permission, endorsement or license granted by any People's Republic of China governmental agencies. There are, however, substantial uncertainties regarding the interpretation and application of current and future Chinese laws and regulations, as discussed below. WE DEPEND ON ONE SOFTWARE DEVELOPER FOR A SIGNIFICANT PORTION OF OUR SOFTWARE DEVELOPMENT, AS WELL AS FOR IMPORTANT MARKETING RELATIONSHIPS. We rely on Chengao to develop a significant portion of our software, including our Sifang Gutong software. We also rely on Chengao to provide us with an important marketing relationship regarding Sifang Gutong. If we were to lose our relationship with Chengao we may have a difficult time finding a suitable replacement in the short term. Our corporate structure could be deemed to be in violation of current or future Chinese laws and regulations which could adversely affect our ability to operate our business effectively or at all. In connection with China's entry into the World Trade Organization, or WTO, foreign investment in value-added telecommunications and Internet services in China was liberalized to allow for 30.0% foreign ownership in value-added telecommunication and Internet services in 2002, 49.0% in 2003 and 50.0% thereafter. In order to meet these ownership requirements, we have entered into information service and cooperation agreements with two of our Chinese affiliate companies: Sifang Information and Tianci. We do not have any direct ownership 15 interest in Sifang Information or Tianci. The original shareholder structure of Sifang Holdings was identical to the current shareholder structure of Sifang Information, and each of Sifang Information and Tianci are beneficially owned 69% by Tai Caihua, our president and the chairman of our board of directors. It is possible that the relevant Chinese authorities could, at any time, assert that any portion or all of TCH's, Sifang Information's, or Tianci's existing or future ownership structure and businesses violate existing or future Chinese laws, regulations or policies. It is also possible that the new laws or regulations governing the telecommunication or Internet sectors in China that have been adopted or may be adopted in the future will prohibit or restrict foreign investment in, or other aspects of, TCH's, Sifang Information's or Tianci's current or proposed businesses and operations. In addition, these new laws and regulations may be retroactively applied. In any such case, we could be required to restructure our operations which could adversely affect our ability to operate our business effectively or at all. WE DEPEND ON CHINA MOBILE AND CHINA UNICOM FOR DELIVERY OF OUR VALUE-ADDED INFORMATION SERVICES TO MOBILE PHONE USERS IN CHINA, AND THE TERMINATION OR ALTERATION OF SIFANG INFORMATION'S AND TIANCI'S VARIOUS CONTRACTS WITH EITHER OF THEM OR THEIR PROVINCIAL OR LOCAL AFFILIATES COULD MATERIALLY AND ADVERSELY IMPACT OUR BUSINESS. Our affiliated value-added mobile phone service providers, Sifang Information and Tianci, contract with the two mobile phone operators in China, China Mobile and China Unicom, to offer our wireless value-added information services to mobile phone users through those two mobile phone operators, which service nearly all of China's approximately 282.2 million mobile phone subscribers. Given their dominant market position, our affiliated value-added mobile phone service providers' negotiating leverage with these operators is limited. If our affiliated value-added mobile phone service providers' various contracts with either operator are terminated or adversely altered, it may be impossible for our affiliated value-added mobile phone service providers to find appropriate replacement operators with the requisite licenses and permits, infrastructure and customer base to offer our services, and our business would be significantly impaired. Our value-added information services are provided to mobile phone users in China pursuant to contracts our affiliates have with China Mobile and China Unicom and their provincial or local affiliates. Each of these contracts is non-exclusive, and has a limited term (generally one year). Our affiliates usually renew these contracts or enter into new ones when the prior contracts expire, but on occasion the renewal or new contract can be delayed by periods of one month or more. The terms of these contracts vary, but the operators are generally entitled to terminate them in advance for a variety of reasons or, in some cases, for no reason in their discretion. For example, several of our affiliates' contracts with the mobile operators can generally be terminated if: o our affiliate fails to achieve performance standards which are established by the applicable operator from time to time, o our affiliate breaches its obligations under the contracts, which include, in many cases, the obligation not to deliver content that violates the operator's policies and applicable law, o the operator receives high levels of customer complaints about our affiliate's services, or o the operator sends written notice to our affiliate that it wishes to terminate the contract at the end of the applicable notice period. Our affiliates may also be compelled to alter their arrangements with these mobile operators in ways which adversely affect our business. China Mobile and China Unicom have unilaterally changed their policies as applied to third-party service providers in the past, and may do so again in the future. We may not be able to adequately respond to negative developments in the contractual relationships between our affiliates and China Mobile or China Unicom in the future because we do not have a contractual relationship with China Mobile or China Unicom. OUR BUSINESS COULD BE ADVERSELY AFFECTED IF CHINA MOBILE OR CHINA UNICOM OR BOTH BEGIN PROVIDING THEIR OWN WIRELESS VALUE-ADDED SERVICES. Our wireless value-added information services business may be adversely affected if China Mobile or China Unicom or both decide to begin providing their own wireless value-added services to mobile phone users. In that case, we would face enhanced competition, and our services could be fully or partially denied access to their networks. 16 WE DEPEND IN PART ON CHINA MOBILE AND CHINA UNICOM TO MAINTAIN ACCURATE RECORDS AND THEIR WILLINGNESS TO PAY OUR AFFILIATED VALUE-ADDED WIRELESS SERVICE PROVIDERS. We depend in part on China Mobile and China Unicom to maintain accurate records of the fees paid by users and their willingness to pay our affiliated value-added wireless service providers. Specifically, the mobile operators provide our affiliates with monthly statements that do not provide itemized information regarding which of our services are being paid for. As a result, monthly statements that our affiliates receive and provide to us from the mobile operators cannot be reconciled to our internal records. In addition, we have only limited means to independently verify the information provided to us by our affiliates in this regard because we do not have access to the mobile operators' internal records. Our business and results of operation could be adversely affected if these mobile phone companies miscalculate the revenue generated from our services and our affiliates' portion of that revenue, or refuse to pay our affiliates altogether. OUR REVENUES AND COST OF SERVICES ARE AFFECTED BY BILLING AND TRANSMISSION FAILURES WHICH ARE OFTEN BEYOND OUR CONTROL. Our affiliates do not collect fees for our services owed to them by China Mobile and China Unicom in a number of circumstances, including if: o the delivery of our service to a customer is prevented because his or her phone is turned off for an extended period of time, the customer's prepaid phone card has run out of value or the customer has ceased to be a customer of the applicable operator, o China Mobile or China Unicom experiences technical problems with its network which prevent the delivery of our services to the customer, o we experience technical problems with our technology platform that prevents delivery of our services, o our affiliates experience technical problems with their technology platform which prevents delivery of our services, or o the customer refuses to pay for our service due to quality or other problems. These situations are known in the industry as billing and transmission failures, and we do not recognize any revenue for services which are characterized as billing and transmission failures. The failure rate can vary among the operators, and by province, and also has fluctuated significantly in the past. If actual billing and transmission failures exceed our estimates, our revenues could be materially adversely affected. BECAUSE CHINA MOBILE AND CHINA UNICOM DO NOT SUPPLY OUR AFFILIATED VALUE-ADDED MOBILE PHONE SERVICE PROVIDERS WITH REVENUE AND TRANSMISSION INFORMATION ON A SERVICE-BY-SERVICE BASIS, WE CAN ONLY ESTIMATE OUR ACTUAL GROSS REVENUE AND OUR COST OF SERVICES BY SERVICE TYPE, AND AS A RESULT, WHICH OF OUR SERVICES ARE OR MAY BE PROFITABLE, ALL OF WHICH MAKE IT DIFFICULT TO ANALYZE THE FACTORS AFFECTING OUR FINANCIAL PERFORMANCE. China Mobile's and China Unicom's monthly statements to value-added service providers regarding the services provided through their networks currently do not contain revenue and billing and transmission failure information on a service-by-service basis. Although we maintain our own records reporting the services provided, we can only estimate our actual gross revenue and cost of services by service type in this business because we are unable to confirm which services were transmitted but resulted in billing and transmission failures. As a result, we are not able to definitively calculate and monitor service-by-service revenue, margins and other financial information, such as average revenue per user by service and total revenue per user by service, and also cannot definitively determine which of our services are or may be profitable. CHINA MOBILE AND CHINA UNICOM MAY IMPOSE HIGHER SERVICE OR NETWORK FEES ON OUR AFFILIATED VALUE-ADDED SERVICE PROVIDERS IF WE ARE UNABLE TO SATISFY CUSTOMER USAGE AND OTHER PERFORMANCE CRITERIA. Fees for our wireless value-added information services are charged on a monthly subscription or per use basis. Based on our contractual arrangements and those of our wireless value-added service providers, we rely on China Mobile and China Unicom to bill and collect fees for our services from mobile phone users. 17 China Mobile and China Unicom generally charge our affiliated value-added service providers service fees of 15% and 30% of the revenues generated by their services, respectively. To the extent that the number of messages sent by our affiliates over China Mobile's network exceeds the number of messages their customers send to them, our affiliates must pay per message network fees, which decrease in several provinces as the volume of customer usage of our services increases. The number of messages sent by our affiliates will exceed those sent by their users, for example, if a user sends us a single message to order a game but our affiliates in turn must send that user several messages to confirm his or her order and deliver the game itself. Our affiliates' service fees for China Unicom could also rise if our affiliates fail to meet certain customer usage, revenue and other performance criteria. We cannot be certain that our affiliates will be able to continue to satisfy these criteria in the future or that the mobile operators will keep the criteria at their current levels. Any increase in China Mobile's or China Unicom's network fees and service charges could reduce our gross margins. CHINA MOBILE AND CHINA UNICOM MAY TERMINATE THEIR RELATIONSHIPS WITH OUR AFFILIATES IF OUR AFFILIATES FAIL TO ACHIEVE MINIMUM CUSTOMER USAGE, REVENUE AND OTHER CRITERIA. Our business could be adversely affected if our affiliated value-added mobile phone service providers fail to achieve minimum customer usage, revenue and other criteria imposed or revised by China Mobile and China Unicom at their discretion from time to time. China Mobile and China Unicom, through their national and local offices, have historically preferred to work only with a small group of the best performing wireless value-added service providers, based upon the uniqueness of the service offered by each provider, total number of users, usage and revenue generated in the applicable province or municipality, the rate of customer complaints, and marketing expenditures in the applicable province or municipality. THE SERVICES OUR AFFILIATED VALUE-ADDED MOBILE PHONE SERVICE PROVIDERS OFFER AND THE PRICES THEY CHARGE ARE SUBJECT TO APPROVAL BY CHINA MOBILE AND CHINA UNICOM, AND IF REQUESTED APPROVALS ARE NOT GRANTED IN A TIMELY MANNER, OUR BUSINESS COULD BE ADVERSELY AFFECTED. Our affiliated value-added mobile phone service providers must obtain approval from China Mobile and China Unicom with respect to each service that they propose to offer to their customers and the pricing for such service. In addition, any changes in the pricing of our affiliates' existing services must be approved in advance by these operators. There can be no assurance that such approvals will be granted in a timely manner or at all. Moreover, under some of our affiliates' contracts with the operators, prices cannot be changed more than once every six months and prices must be within fixed parameters, depending on the service. Any failure of our affiliates to obtain, or any delay in, obtaining such approvals could place us at a competitive disadvantage in the market and adversely affect our business. WE OPERATE IN A RAPIDLY EVOLVING INDUSTRY, WHICH MAKES IT DIFFICULT FOR INVESTORS TO EVALUATE OUR BUSINESS. We began commercially offering wireless value-added information services to mobile phone and pager users in China in January 2002, and since that time, the technologies and services used in the wireless value-added information services industry in China have developed rapidly. As a result of this rapid and continual change in the industry, you should consider the prospects of our value-added information service business in light of the risks and difficulties frequently encountered by businesses in an early stage of development. These risks include our ability to: o attract and retain users for our wireless value-added information services, o expand the content and services that we offer and, in particular, develop and aggregate innovative new content and service offerings, o respond effectively to rapidly evolving competitive and market dynamics and address the effects of mergers and acquisitions among our competitors, o build relationships with strategic partners, and o increase awareness of our brand and user loyalty. Due to these factors, there can be no certainty that we will maintain or increase our current share of the highly competitive wireless value-added information services market in which we operate. 18 THE SUCCESS OF SOME OF OUR WIRELESS VALUE-ADDED INFORMATION SERVICES IS SIGNIFICANTLY DEPENDENT ON OUR ABILITY TO OBTAIN AND REFORMAT DESIRABLE CONTENT AND TECHNOLOGY FROM THIRD PARTIES. We obtain much of our content, including financial information, games, logos, music, news and other information, from third parties. Furthermore, we expect that we will develop and purchase technology in connection with our development of next generation services such as MMS, JAVA and BREW. As the market for wireless value-added information services develops, content and technology providers may attempt to increase their profits from distribution arrangements by demanding greater fees or a share of revenues, which would adversely affect our financial performance. Many of our arrangements with content and technology providers are non-exclusive, have a term of one year and are subject to renewal. If our competitors are able to obtain such content in a similar or superior manner or to license the same technologies, it could adversely affect the popularity of our services and our negotiating leverage with third-party providers. If we fail to establish and maintain economically attractive relationships with content and technology providers and to thereafter successfully reformat their products, we may not be able to attract and retain users or maintain or improve our financial performance. WE DEPEND ON OUR SIFANG GUTONG SOFTWARE CONTINUING TO BE COMPATIBLE WITH NEW MOBILE PHONE MODELS. There can be no assurance that our Sifang Gutong software will be compatible with new mobile phones developed by manufacturers such as Samsung. If the software is no longer compatible, we will be forced to engage Chengao or an alternative software developer to develop software that is compatible with the new mobile phones or we will have to develop the software ourselves. If we are unable to either engage a software developer or develop software in house that is compatible with the new mobile phones, we will lose a significant portion of our value-added information services revenue, including all of the pre-charged subscription fee revenues we receive pursuant to the information service and cooperation agreement among us, Chengao, and Sifang Information. WE FACE INTENSE COMPETITION. The Chinese market for wireless value-added services is intensely competitive. We believe there are more than 800 service providers (including the three groups discussed below) as of June 30, 2004, and is changing rapidly. We compete indirectly with the following three groups of wireless value-added service providers in China: o portal service providers, which have established expertise in Internet content and have subsequently branched into mobile space. The portals serve as content aggregators offering a variety of wireless value-added services, o dedicated service providers, whose businesses focus on offering a variety of wireless content directly to mobile users, and o niche service providers, which focus primarily on a particular market segment or application that often builds on a pre-existing sector competency. We have faced indirect competition from all three groups since our entry into this market. Moreover, there are low barriers to entry for new competitors in the wireless value-added services market. As a result, our existing or potential competitors may in the future achieve greater market acceptance and gain additional market share, which in turn could reduce our revenues. MOST OF OUR VALUE-ADDED INFORMATION SERVICES REVENUES ARE DERIVED FROM THE SHANGHAI MUNICIPAL AREA AND SURROUNDING PROVINCES, AND THE TERMINATION OR ALTERATION OF OUR AFFILIATES' CONTRACTS WITH THE MOBILE OPERATORS, OR A GENERAL ECONOMIC DOWNTURN IN THOSE AREAS COULD HAVE A PARTICULARLY ADVERSE EFFECT ON OUR BUSINESS. Per capita income levels and mobile phone penetration rates (i.e., the number of mobile subscribers divided by the population of China) in China are generally higher in the coastal and southern provinces, and most of our revenues derive from those areas, including the municipality of Shanghai and the provinces of Beijing and Jiangsu. 19 WE DEPEND ON KEY PERSONNEL FOR THE SUCCESS OF OUR BUSINESS. OUR BUSINESS MAY BE SEVERELY DISRUPTED IF WE LOSE THE SERVICES OF OUR KEY EXECUTIVES AND EMPLOYEES OR FAIL TO ADD NEW SENIOR AND MIDDLE MANAGERS TO OUR MANAGEMENT. Our future success is heavily dependent upon the continued service of our key executives, particularly Tai Caihua, our president and chairman of our board of directors, Fu Sixing, our chief executive officer, Lu Qin, our chief financial officer, and Huang Tianqi, our chief technology officer. Our future success is also dependent upon our ability to attract and retain qualified senior and middle managers to our management team. If one or more of our current or future key executives and employees are unable or unwilling to continue in their present positions, we may not be able to easily replace them, and our business may be severely disrupted. In addition, if any of these key executives or employees joins a competitor or forms a competing company, we could lose customers and suppliers and incur additional expenses to recruit and train personnel. Each of our executive officers has entered into an employment agreement and a confidentiality, non-competition and non-solicitation agreement with us. We do not maintain key-man life insurance for any of our key executives. Management will spend approximately 30% of its time managing Sifang Information. We also rely on a number of key technology staff for the operation of our company. Given the competitive nature of our industry, the risk of key technology staff leaving our company is high and could disrupt our operations. RAPID GROWTH AND A RAPIDLY CHANGING OPERATING ENVIRONMENT STRAIN OUR LIMITED RESOURCES. As our user base increases, we will need to increase our investment in our technology infrastructure, facilities and other areas of operations, in particular our product development, customer service and sales and marketing departments, which are important to our future success. If we are unable to manage our growth and expansion effectively, the quality of our services and our customer support could deteriorate and our business may suffer. Our future success will depend on, among other things, our ability to: o develop and quickly introduce new services, adapt our existing services and maintain and improve the quality of all of our services, particularly as new mobile technologies such as 3G are introduced, o expand the percentage of our revenues which are recurring and are derived from monthly subscription based services, o continue to enter into and maintain relationships with desirable content providers, o continue training, motivating and retaining our existing employees and attract and integrate new employees, including our senior management, most of whom have been with our company for less than one year, o develop and improve our operational, financial, accounting and other internal systems and controls, and o maintain adequate controls and procedures to ensure that our periodic public disclosure under applicable laws, including U.S. securities laws, is complete and accurate. ANY FAILURES OF THE MOBILE TELECOMMUNICATIONS NETWORK, THE INTERNET OR OUR TECHNOLOGY PLATFORM MAY REDUCE USE OF OUR SERVICES. Both the continual accessibility of China Mobile's and China Unicom's mobile networks and the performance and reliability of China's Internet infrastructure are critical to our ability to attract and retain users. Moreover, our business depends on our ability to maintain the satisfactory performance, reliability and availability of our technology platform. The servers which constitute the principal system hardware for our operations are located in one location in Shanghai. Any server interruptions, break-downs or system failures, including failures caused by sustained power shutdowns, floods or fire causing loss or corruption of data or malfunctions of software or hardware equipment, or other events outside our control that could result in a sustained shutdown of all or a material portion of the mobile networks, the Internet or our technology platform, could adversely impact our ability to provide our services to users and decrease our revenues. 20 COMPUTER VIRUSES AND HACKING MAY CAUSE DELAYS OR INTERRUPTIONS ON OUR SYSTEMS AND MAY REDUCE USE OF OUR SERVICES AND HARM OUR REPUTATION. Computer viruses and hacking may cause delays or other service interruptions on our systems. "Hacking" involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment. In addition, the inadvertent transmission of computer viruses could expose us to a material risk of loss or litigation and possible liability. We may be required to expend significant capital and other resources to protect our systems against the threat of such computer viruses and hacking and to rectify any damage to our systems. Moreover, if a computer virus or hacking which affects our systems is highly publicized, our reputation could be materially damaged and usage of our services may decrease. WE MAY BE HELD LIABLE FOR INFORMATION DISPLAYED ON OR RETRIEVED FROM OUR SERVICE OFFERINGS. We may face liability for defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the materials that we provide in our wireless value-added information services. For example, SMS news updates provided by us could possibly be deemed to contain state secrets in violation of applicable Chinese law. In addition, third parties could assert claims against us for losses incurred in reliance on information distributed by us. We may incur significant costs in investigating and defending these claims, even if they do not result in liability. WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, AND WE MAY BE EXPOSED TO INFRINGEMENT CLAIMS BY THIRD PARTIES. We rely on contractual restrictions on disclosure to protect our intellectual property rights. Monitoring unauthorized use of our information services is difficult and costly, and we cannot be certain that the steps we take will effectively prevent misappropriation of our technology and content. Our management may determine in the future to make application for copyright, trademark or trade secret protection if management determines that such protection would be beneficial and cost-effective. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources. In addition, third parties may initiate litigation against us for alleged infringement of their proprietary rights. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or content or license the infringed or similar technology or content on a timely basis, our business could suffer. Moreover, even if we are able to license the infringed or similar technology or content, license fees that we pay to licensors could be substantial or uneconomical. WE HAVE LIMITED BUSINESS INSURANCE COVERAGE. The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources. RISKS RELATED TO THE WIRELESS VALUE-ADDED SERVICES INDUSTRY OUR ABILITY TO GENERATE REVENUES COULD SUFFER IF THE CHINESE MARKET FOR WIRELESS VALUE-ADDED SERVICES DOES NOT DEVELOP AS ANTICIPATED. The wireless value-added services market in China has evolved rapidly over the last four years, with the introduction of new services, development of consumer preferences, market entry by new competitors and adaptation of strategies by existing competitors. We expect each of these trends to continue, and we must continue to adapt our strategy to successfully compete in our market. 21 In particular, we currently offer a wide range of wireless value-added information services for mobile phones using 2.5G technologies. There can be no assurance, however, that these 2.5G technologies and any services compatible with them will be accepted by consumers or promoted by the mobile operators. Moreover, there are numerous other technologies in varying stages of development, such as third generation mobile technologies, which could radically alter or eliminate the market for SMS or 2.5G services. Accordingly, it is extremely difficult to accurately predict consumer acceptance and demand for various existing and potential new offerings and services, and the future size, composition and growth of this market. Furthermore, given the limited history and rapidly evolving nature of our market, we cannot predict the price that wireless subscribers will be willing to pay for our services or the services of our affiliated value-added service providers or whether subscribers will have concerns about security, reliability, cost and quality of service associated with wireless services. If acceptance of our wireless value-added information services is different than anticipated, our ability to maintain or increase our revenue and profits could be materially and adversely affected. THE POPULARITY OF OUR SERVICES WHICH OPERATE WITH NEXT GENERATION TECHNOLOGY STANDARDS ARE NECESSARILY DEPENDENT ON THE MARKET PENETRATION OF MOBILE PHONES THAT ARE COMPATIBLE WITH THOSE STANDARDS, WHICH IS BEYOND OUR CONTROL. Mobile phone users can access our MMS, WAP, JAVA, BREW and other services which operate with next generation technology standards only if they purchase mobile phones that are compatible with those standards. In particular, mobile phones that are 2.5G-compatible have historically been significantly more expensive in China than mobile phones using older technology such as GSM. Although the prices of 2.5G-compatible mobile phones have been dropping rapidly in recent quarters, we cannot be certain whether this trend will continue or the extent to which existing users will be willing to upgrade their mobile phones to obtain the latest technology. The pricing, marketing and other factors which affect the sales of more sophisticated mobile phones are all outside of our control, and weak sales of mobile phones for which we have developed services could adversely affect our business. THE TELECOMMUNICATION LAWS AND REGULATIONS IN CHINA ARE EVOLVING AND SUBJECT TO INTERPRETATION AND WILL LIKELY CHANGE IN THE NEAR FUTURE. IF WE ARE FOUND TO BE IN VIOLATION OF CURRENT OR FUTURE CHINESE LAWS OR REGULATIONS, WE COULD BE SUBJECT TO SEVERE PENALTIES. Although wireless value-added services are subject to general regulations regarding telecommunication services, we believe that currently there are no Chinese laws at the national level explicitly governing wireless value-added services, such as our services related to SMS, MMS, WAP, JAVA, and BREW, and no Chinese government authority has been specifically designated to regulate these services. Many providers of wireless value-added services have obtained various value-added telecommunication services licenses, such as the licenses possessed by our Chinese affiliates, Sifang Information and Tianci. These value-added telecommunication licenses were issued by the local Shanghai Municipal Telecommunications Administration Bureau, and they may not be sufficient to offer wireless value-added services on a national basis. Sifang Information and Tianci are in the process of applying with the Ministry of Information Industries for an inter-provincial value-added telecommunication license in accordance with the Ministry's general regulations regarding telecommunication services. However, we cannot predict whether either will be granted that license. Moreover, we cannot be certain that any local or national value-added telecommunication license requirements will not conflict with one another or that any given license will be deemed sufficient by the relevant governmental authorities for the provision of this category of service. It is also possible that new national legislation might be adopted to regulate such services. If we or our affiliates are found to be in violation of any existing or future Chinese laws or regulations regarding wireless value-added services or Internet access which is discussed in the following risk factor, the relevant Chinese authorities have the power to, among other things: o levy fines; o confiscate our income or the income of our affiliated value-added service providers; o revoke our business license or the business licenses of our affiliated value-added service providers; 22 o shut down our servers or the servers of our affiliated value-added service providers and/or block any Web sites that we or our affiliated value-added service providers may operate; o require us to discontinue any portion or all of our wireless value-added information services business; or o require our affiliated value-added service providers to discontinue any portion or all of their wireless value-added services business. THE CHINESE GOVERNMENT, CHINA MOBILE OR CHINA UNICOM MAY PREVENT US FROM DISTRIBUTING, AND WE MAY BE SUBJECT TO LIABILITY FOR, CONTENT THAT ANY OF THEM BELIEVE IS INAPPROPRIATE. China has enacted regulations governing telecommunication service providers, Internet access and the distribution of news and other information. In the past, the Chinese government has stopped the distribution of information over the Internet that it believes violates Chinese law, including content that is obscene, incites violence, endangers national security, is contrary to the national interest or is defamatory. In addition, our affiliated value-added service providers may not publish certain news items, such as news relating to national security, without permission from the Chinese government. Furthermore, the Ministry of Public Security has the authority to cause any local Internet service provider to block any Web site maintained outside China at its sole discretion. China Mobile and China Unicom also have their own policies regarding the distribution of inappropriate content by wireless value-added service providers and have recently punished certain providers for distributing content deemed by them to be obscene. Such punishments have included censoring of content, delaying payments of fees by the mobile operators to the offending service provider, forfeiture of fees owed by the mobile operators to the offending service provider and suspension of the service on the mobile operators' networks. Accordingly, even if our affiliated wireless value-added service providers comply with Chinese governmental regulations relating to licensing and foreign investment prohibitions, if the Chinese government, China Mobile or China Unicom were to take any action to limit or prohibit the distribution of information or to limit or regulate any current or future content or services available to users, our revenues could be reduced and our reputation harmed. The Chinese government is expected to grant licenses to offer wireless services in China to China Telecom, China Netcom and possibly other parties with which our affiliated wireless value-added service providers have not yet developed close relationships. If those parties receive licenses and are successful in the market but our affiliates are unable to develop cooperative relationships with them, our business could be adversely affected. It is also possible that China Telecom, China Netcom and any other parties receiving wireless licenses may decide to offer wireless value-added services created by them, rather than by third-party service providers such as our affiliated wireless value-added service providers. In that case, our business could be adversely affected. RISKS RELATED TO DOING BUSINESS IN CHINA 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 wireless value-added services decrease due to a downturn in the Chinese economy. More specifically, increased penetration of wireless value-added services in the less economically developed central and western provinces of China will depend on those provinces achieving certain income levels so that mobile phones and related services become affordable to a significant portion of the population. 23 GOVERNMENT REGULATION OF THE TELECOMMUNICATIONS AND INTERNET INDUSTRIES MAY BECOME MORE COMPLEX. Government regulation of the telecommunications and Internet industries is highly complex. New regulations could increase our costs of doing business and prevent us from efficiently delivering our services. These regulations may stop or slow down the expansion of our user base and limit the access to our services. THE UNCERTAIN LEGAL ENVIRONMENT IN CHINA COULD LIMIT THE LEGAL PROTECTIONS AVAILABLE TO YOU. The Chinese legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. In the late 1970s, the Chinese government began to promulgate a comprehensive system of laws and regulations governing economic matters. The overall effect of legislation enacted over the past 20 years has significantly enhanced the protections afforded to foreign invested enterprises in China. However, these laws, regulations and legal requirements are relatively recent and are evolving rapidly, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to foreign investors, such as the right of foreign invested enterprises to hold licenses and permits such as requisite business licenses. 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. CHANGES IN CHINA'S POLITICAL AND ECONOMIC POLICIES COULD HARM OUR BUSINESS. The economy of China has historically been a planned economy subject to governmental plans and quotas and has, in certain aspects, been transitioning to a more market-oriented economy. 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. 24 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 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 ordinary shares 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. RISKS RELATED TO THE MOBILE PHONE DISTRIBUTION INDUSTRY WE ARE DEPENDENT ON THREE MAIN FIRST-TIER WHOLESALERS TO SUPPLY ALL OF OUR MOBILE PHONES. Our performance depends on whether we can continue to secure contracts with the three wholesalers of Samsung mobile phones on whom we rely. We have no long-term purchase contracts or other contracts that provide continued supply, pricing or access to new models and any of the first-tier wholesalers on whom we rely could discontinue selling to us at any time. We may not be able to acquire new Samsung models in the future and we may not be able to acquire the models that we need in sufficient quantities or on terms that are acceptable to us in the future. As a result, our revenues may decrease. OUR PERFORMANCE IS DEPENDENT ON THE POPULARITY OF SAMSUNG'S MOBILE PHONE MODELS. We primarily distribute mobile phones manufactured by Samsung and thus are dependant on Samsung's ability to create and deliver high quality mobile phone models in a cost effective and timely manner. Samsung is a leading manufacturer of mobile phones based on both the CDMA network and the GSM network in China. There can be no assurance that Samsung will continue to create high quality mobile phone models that are popular with consumers. As a result, our revenues may decrease. In addition, our success depends on our ability to anticipate and respond to changing mobile phone model trends and consumer demands in a timely manner. The models we distribute must appeal to a broad range of consumers whose preferences cannot always be predicted with certainty and may change between sales seasons. If we misjudge which mobile phone models will be popular or the market for the models we distribute, our sales may decline or we may be required to sell our models at lower prices. CASH FLOW. It is important that we have sufficient cash flow to purchase enough mobile phones from the first-tier wholesalers on whom we rely. If our cash flow decreases significantly, we will not be able to purchase a sufficient quantity of inventory to meet our customers' demands, which would have a negative impact on our sales, and may cause the first-tier wholesalers on whom we rely to look to other sub-wholesalers to distribute mobile phones. This development would have a negative impact on our revenues. 25 CUSTOMERS. One of the factors the first-tier wholesalers on whom we rely considers when determining who they will use as a sub-wholesaler is the sub-wholesaler's relationship with retailers. Currently approximately 52% of our mobile phone sales are made to three retailers. We have no long-term sales contracts or other contracts that provide continued selling or pricing and any of the retailers we supply could discontinue buying from us at any time. If we lose our relationships with our three largest retailers, we will have a difficult time finding new large retailers to purchase our Samsung mobile phones and may lose our contracts with the first-tier wholesalers on whom we rely. This would have a negative impact on our business. WE FACE CERTAIN RISKS RELATING TO CUSTOMER SERVICE. Any material disruption or slowdown in our order processing systems resulting from labor disputes, mechanical problems, human error or accidents, fire, natural disasters, or comparable events could cause delays in our ability to receive and distribute orders and may cause orders to be lost or to be shipped or delivered late. As a result, customers may cancel orders or refuse to receive goods on account of late shipments, which would result in a reduction net sales and could mean increased administrative and shipping costs. WE FACE RISKS ASSOCIATED WITH DISTRIBUTION. We conduct all of our distribution operations from one facility in Shanghai, China. Any disruption in the operations at the distribution center could have a negative impact on our business. COMPETITION. Despite the fact that we distribute nine Samsung mobile phone models in the Shanghai, China region, we face competition from distributors of different models of mobile phones manufactured by Samsung in the Shanghai region and from distributors of phones manufactured by companies other than Samsung that distribute in the Shanghai region. Competition is based on a variety of factors including maintenance of product quality, competitive pricing, delivery efficiency, customer service and satisfaction levels and the ability to anticipate technological changes and changes in customer preferences. No assurances can be given that any of the first-tier wholesalers on whom we rely or Samsung will not acquire, startup, or expand their own distribution systems to sell directly to our customers. 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 wireless value-added services market, o changes in the economic performance or market valuations of other companies involved in wireless value-added information services or distribution of mobile phones, 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 phone market. 26 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 the company. We have no present intention to pay dividends. We have never paid dividends or made other cash distributions on our common stock, and do not expect to declare or pay any dividends in the foreseeable future. We intend to retain future earnings, if any, for working capital and to finance current operations and expansion of our business. 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. WE MAY BE SUBJECT TO "PENNY STOCK" REGULATIONS. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and our sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that becomes subject to those penny stock rules. Whenever any of our securities become subject to the penny stock rules, holders of those securities may have difficulty in selling those securities. 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 "Risk Factors" section above. These factors may cause our actual results to differ materially from any forward-looking statement. 27 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. 28 DIRECTORS AND EXECUTIVE OFFICERS The following table provides information about our executive officers and directors and their respective ages and positions as of June 30, 2004. The directors listed below will serve until the next annual meeting of the Boulder Acquisitions stockholders: NAME AGE POSITIONS HELD AND TENURE Tai Caihua 47 Director, President, Chairman of the Board Shi Ying 44 Director Huang Tianqi 32 Director, Chief Technology Officer Jing Weiping 40 Director Mao Ming 42 Director Song Jing 28 Director Fu Sixing 43 Director, Chief Executive Officer Yu Ruijie 41 Director Zhang Xiaodong 36 Director Huang Wei 41 Director Lu Qin 35 Chief Financial Officer Tai Caihua has served as President, Chairman of our Board of Directors and a member of our Board of Directors since June 23, 2004. Mr. Tai has been (i) the President and sole Director of our wholly owned subsidiary, Sifang Holdings, since February 2004; (ii) Chairman of the Board of Directors of Sifang Holdings wholly owned subsidiary, TCH, since its inception in May 2004; (iii) Director and General Manager of Tianci, one of our affiliates, since January 1994 and (iv) a Director of Sifang Information, one of our affiliates, since December 2001. Mr. Tai holds a Masters of Business Administration from the Macau University of Science and Technology. Shi Ying has served as a member of our Board of Directors since June 24, 2004. Ms. Shi has been the Head of Operations and a member of the Board of Directors of TCH since its inception in May 2004. For the past eight years she headed the Operations Department of Sifang Information. Ms. Shi graduated from the Shanghai Sports college with a Bachelors degree. Huang Tianqi has served as our Chief Technology Officer since June 23, 2004 and a member of our Board of Directors since June 24, 2004. Mr. Huang has served as Chief Technology Officer of Sifang Holdings and Vice-General Manager, Chief Technology Officer and a Director of TCH since their inception in February 2004 and May 2004, respectively. Mr. Huang also serves as the Vice-General Manager and a member of the Board of Directors of Sifang Information. Before becoming Vice-General Manager, Mr. Huang was the Chief Technology Officer at Sifang Information for seven years. Mr. Huang graduated from Nanjing University of Posts and Telecommunications with a Bachelors Degree and from Shanghai Jiao Tong University with a Masters of Science Degree. Jing Weiping has served as a member of our Board of Directors since June 24, 2004. Mr. Jing has served as a member of the Board of Directors of TCH since its inception in May 2004 and as a Director of Sifang Information since 2001. Mr. Jing served as the Manager of Technology Assurance Department for Sifang Information for the past nine years. Mr. Jing received his Bachelors Degree from Dong Hua University. Mao Ming serves as a member of the Board of Directors. He was elected to the Board of Directors June 24, 2004. He has been (i) the General Manager and a member of the Board of Directors of TCH since its inception in May 2004; and (ii) the General Manager and a Director of Sifang Information since January 1998. Mr. Mao graduated from China PLA Measurement College with a Bachelors Degree and from the Macau University of Science and Technology with a Masters of Business Administration. Song Jing has served as a member of our Board of Directors since June 24, 2004. Mr. Song has served as Vice-General Manager and a member of the Board of Directors of TCH since its inception in May 2004 and as General Manager of 29 Shanghai Shan Tian Telecommunication Co., Ltd., an affiliate of ours, since November 2003. Previously, Mr. Song served as Director and General Manager of Shanghai Zhong Si Hua Hao Co., Ltd. for one year and Assistant General Manager of both Shanghai Hua Si Trading Co., Ltd. and Shanghai Qi Shi Trading Co., Ltd for five years. Fu Sixing has served as our Chief Executive Officer since June 23, 2004 and a member of our Board of Directors since June 24, 2004. Mr. Fu has served as Executive Manager of Sifang Holdings and as Head of Research and Development and a Director of TCH since their inception in February 2004 and May 2004, respectively. For the past seven years, Mr. Fu was (i) the Assistant to General Manager of Tianci; (ii) a Director and the General Manager of Shanghai Sifang Health Technology Co., Ltd. and Directorate Secretary of Sifang Information. Mr. Fu received a Bachelors of Science in Physics from Nanjing University, a Masters of Social Science in Economics from Huadong Normal University and a Doctorate of Business Administration from the University of Southern California. Yu Ruijie has served as a member of our Board of Directors since June 24, 2004. Mr. Yu has served (i) as Head of the Systems Department and a Director of TCH since its inception in May 2004 and (ii) as Head of the Systems Department of Sifang Information since January 1994. Mr. Yu received a Bachelors Degree in Computer Science from Shanghai University of Engineering Science. Zhang Xiaodong has served as a member of our Board of Directors since June 24, 2004. Mr. Zhang has served as the Head of the Projection Department of TCH since its inception in May 2004. Mr. Zhang also serves as a Director and Head of the Projection Department of Sifang Information. For the past nine years, Mr. Zhang served as head of the Wireless Engineering Department at Sifang Information. Mr. Zhang graduated from Shanghai Jiao Tong University with a Bachelors Degree and received a Masters Degree from the Macao University of Science and Technology. Huang Wei has served as a member of our Board of Directors since June 24, 2004. Ms. Huang has served as (i) the Vice-General Manager of TCH since its inception in May 2004 and (ii) Vice-General Manager and a Director of Sifang Information since 1993. Ms. Huang graduated from Nanjing University of Air Force and Politics with a Bachelors Degree in Logistics. Lu Qin has served as our Chief Financial Officer since June 23, 2004. Ms. Lu has served as the (i) Head of the Accounting Department of TCH and Sifang Information since May 2004 and April 1998, respectively and (ii) Financial Controller of Sifang Holdings since February 2004. Ms. Lu graduated from Shanghai Television University with a Bachelors Degree in Financial Accounting and is a Certified Public Accountant. Board Composition and Committees The board of directors is currently composed of ten members, including Tai Caihua, Song Jin, Shi Ying, Mao Ming, Fu Sixing, Huang Tianqi, Huang Wei, Jing Weiping, Yu Ruijie and Zhang Xiaodong. All Board action shall require the approval of a majority of the directors in attendance at a meeting at which a quorum is present. 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 We do not pay our directors a fee for attending scheduled and special meetings of our board of directors. We do reimburse each director for reasonable travel expenses related to such director's attendance at board of directors and committee meetings. 30
Indebtedness of Directors and Executive Officers None of our directors or officers or their respective associates or affiliates is indebted to us. Family Relationships Except as set forth herein, there are no family relationships among our directors or officers. Mr. Tai Caihua, President and a member of our Board of Directors is married to Ms. Shi Ying, a member of our Board of Directors and Ms. Ying is also a sibling of Huang Wei, a member of our Board of Directors. Legal Proceedings As of the date of this Current Report, there is no material proceeding to which any director, officer, affiliate or stockholder of the Company is a party adverse to the Company. EXECUTIVE COMPENSATION The following table sets forth certain information concerning the compensation paid by the company for services rendered in all capacities to the company from January 1, 2003 through the fiscal year ended December 31, 2003, of all officers and directors of the company. Name and Principal Underlying Positions at 12/31/03 Salary Bonus Other Compensation Options - -------------------------------- ------ ----- ------------------ ------- Tai Caihua President/Chairman of the Board $2,416 $0 $0 --
31 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS On June 1, 2004, we entered into two information service and cooperation agreements with Sifang Information, and one information service and cooperation agreement with Tianci. Pursuant to those agreements, Sifang Information and Tianci transmit all of our value-added information services to customers of China's various wireless receiver networks. The agreements have ten-year terms and we pay each of Sifang Information and Tianci a fee based on the costs the two companies incur for the transmission of our reformatted content. During the normal course of our business, we incurred debt from related parties and loaned money to related parties, including Sifang Information, for financing purposes. In 2002, we borrowed funds from Sifang Information to start our mobile phone distribution business. At December 31, 2002, the outstanding balance of the loan was $604,062, and interest expense incurred on the borrowed amount was $36,245. During 2003, we paid off all outstanding balances and loaned certain amounts to Sifang Information, which amounts were repaid by Sifang Information before year end. We continued to borrow funds from and lend funds to Sifang Information, however, as of December 31, 2003, all such amounts had been repaid. Interest expense incurred on amounts borrowed from Sifang Information for the year ended December 31, 2003 was $12,082. We advanced $966,522 to Sifang Information for financing purposes on March 28, 2004. At March 31, 2004, the outstanding principal amount due from Sifang Information was $966,522 and interest income on that amount was immaterial because the amount was advanced at the end of March 2004. Sifang Information repaid us the entire amount advanced, plus interest, on June 29, 2004. We purchased a building located at 689 Laoshandong Road, Shanghai, People's Republic of China 200120, from our related party, Shanghai Fude Industry Co., for a price of $910,925. This building now houses our technical team and our servers. On February 23, 2004, we sold 1,500,000 pre-reverse and forward split shares (987,915 net shares) of restricted common stock for gross proceeds of $300,000, pursuant to a subscription agreement, to Halter Financial Group, Inc., an entity owned by Timothy P. Halter, a former member of the Board of Directors and the Company's former Chief Executive Officer. Additionally, in consideration for agreeing to serve as an officer and director of the Company, Timothy P. Halter was granted a warrant to purchase up to 200,000 pre-reverse and forward split shares (131,722 net shares) of restricted common stock of the Company. The warrant was exercised on June 14, 2004, and we received gross proceeds of $40,000 upon exercise. On February 23, 2004, we agreed to pay Little and Company Investment Securities, an entity owned by Glenn A. Little, our former controlling shareholder, officer and director, $30,000 in consulting fees related to the transaction discussed in the previous paragraph and in consideration for maintaining the corporate entity. To formalize this obligation, we issued a $30,000 non-interest bearing promissory note maturing on February 23, 2005. Concurrent with the transaction discussed in the previous paragraph, we and Little and Company Investment Securities executed an Exchange Agreement whereby we issued 150,000 pre-reverse and forward split shares (98,792 net shares) of unregistered, restricted common stock in satisfaction of the outstanding promissory note. On June 23, 2004, we entered into a Stock Purchase Agreement with Halter Financial Group, Inc. pursuant to which we sold 166,667 shares of common stock of the Company in exchange for $190,000. Timothy P. Halter is the sole shareholder and President of Halter Financial Group, Inc. Pursuant to the Stock Purchase Agreement, we granted to Halter Financial Group, Inc. an option to require the Company to purchase up to 166,667 shares of common stock of the Company at a price of $1.14 per share, such option being exercisable at any time after the date that is six months after the Company files a registration statement on Form SB-2 with the SEC, registering the shares purchased by Halter Financial Group, Inc., up to and including the earlier of the date that such registration statement is declared effective by the SEC or Halter Financial Group, Inc.'s shares are eligible for resale under Rule 144 under the Securities Act of 1933. 32 ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE On June 23, 2004, the Company entered into a Stock Purchase Agreement with an existing stockholder pursuant to which the Company sold 166,667 post-reverse and forward split shares of common stock of the company in exchange for $190,000. Pursuant to the Stock Purchase Agreement, the company granted to the existing stockholder an option to require the Company to purchase up to 166,667 post-reverse and forward split shares of common stock of the company at a price of $1.14 per share, such option being exercisable at any time after the date that is six months after the company files a registration statement on Form SB-2 with the SEC, registering the shares purchased by the existing stockholder, up to and including the earlier of the date that such registration statement is declared effective by the SEC or the existing stockholder's shares are eligible for resale under Rule 144 under the Securities Act of 1933. On June 28, 2004, the Company entered into three Stock Purchase Agreements pursuant to which the company sold an aggregate of 1,315,789 post-reverse and forward split shares of common stock of the company in exchange for an aggregate amount of $1,500,000. All three Stock Purchase Agreements had put options similar to the one described above, whereby the investors have the option to require the Company to purchase an aggregate amount of 1,315,789 post-reverse and forward split shares of common stock of the company at a price of $1.14 per share. In connection with the execution of the Stock Purchase Agreements, the Company and the investors entered into an Escrow Agreement. According to the Escrow Agreement, the $1,500,000 will not be released to the Company until a registration statement, registering all 1,315,789 post-reverse and forward split shares of common stock of the company purchased by the investors, has been declared effective by the SEC. 33 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS a. Financial Statements of the Business Acquired. Our audited financial statements required by this Item 7(a) are not yet available. We expect that our audited financial statements will be completed and filed by amendment to this Current Report within the permitted time period. b. Pro Forma Financial Information (Unaudited). Our pro forma financial statements required by this Item 7(b) are not yet available. We expect that our pro forma financial statements will be completed and filed by amendment to this Current Report within the permitted time period. c. Exhibits. Except as otherwise noted, the following exhibits have been filed as a part of this Current Report: Exhibit Number Description of Exhibit ------- ---------------------- 3.1* Second Amended and Restated Bylaws of Boulder Acquisitions, Inc. 10.1* Securities Exchange Agreement by and among Boulder Acquisitions, Inc., Sifang Holdings Co., Ltd. and the shareholders of Sifang Holdings Co., Ltd. dated effective as of June 23, 2004. 10.2** Information Service and Cooperation Agreement by and among Shanghai Sifang Information Technology Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.3** Information Service and Cooperation Agreement by and among Shanghai Sifang Information Technology Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.4** Information Service and Cooperation Agreement by and among Shanghai Sifang Information Technology Co. Ltd., Shanghai Chengao Industrial Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.5** Information Service and Cooperation Agreement by and among Shanghai Tianci Industrial (Group), Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.6** Business and Related Assets Transfer Agreement between Shanghai Sifang Information Technology Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.7* Stock Purchase Agreement by and between Halter Financial Group, Inc. and Boulder Acquisitions, Inc. dated as of June 23, 2004. 10.8* Stock Purchase Agreement by and between Chinamerica Fund, LP and Boulder Acquisitions, Inc. dated as of June 28, 2004. 10.9* Stock Purchase Agreement by and between Chinamerica Acquisition, LLC and Boulder Acquisitions, Inc. dated as of June 28, 2004. 10.10* Stock Purchase Agreement by and between Gary Evans and Boulder Acquisitions, Inc. dated as of June 28, 2004. *Filed herewith. **To be filed by amendment. 34 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Boulder Acquisitions has duly caused this report to be signed on its behalf by the undersigned hereunto authorized. BOULDER ACQUISITIONS, INC. By: /s/ Tai Caihua ------------------------ Tai Caihua, President DATED: July 8, 2004 35 INDEX TO EXHIBITS Exhibit Number Description of Exhibit ------- ---------------------- 3.1* Second Amended and Restated Bylaws of Boulder Acquisitions, Inc. 10.1* Securities Exchange Agreement by and among Boulder Acquisitions, Inc., Sifang Holdings Co., Ltd. and the shareholders of Sifang Holdings Co., Ltd. dated effective as of June 23, 2004. 10.2** Information Service and Cooperation Agreement by and among Shanghai Sifang Information Technology Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.3** Information Service and Cooperation Agreement by and among Shanghai Sifang Information Technology Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.4** Information Service and Cooperation Agreement by and among Shanghai Sifang Information Technology Co. Ltd., Shanghai Chengao Industrial Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.5** Information Service and Cooperation Agreement by and among Shanghai Tianci Industrial (Group), Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.6** Business and Related Assets Transfer Agreement between Shanghai Sifang Information Technology Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. 10.7* Stock Purchase Agreement by and between Halter Financial Group, Inc. and Boulder Acquisitions, Inc. dated as of June 23, 2004. 10.8* Stock Purchase Agreement by and between Chinamerica Fund, LP and Boulder Acquisitions, Inc. dated as of June 28, 2004. 10.9* Stock Purchase Agreement by and between Chinamerica Acquisition, LLC and Boulder Acquisitions, Inc. dated as of June 28, 2004. 10.10* Stock Purchase Agreement by and between Gary Evans and Boulder Acquisitions, Inc. dated as of June 28, 2004. *Filed herewith. **To be filed by amendment. EX-3.1 2 boulder8kex31062304.txt SECOND AMENDED AND RESTATED BYLAWS EXHIBIT 3.1 SECOND AMENDED AND RESTATED BYLAWS OF BOULDER ACQUISITIONS, 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 SECOND AMENDED AND RESTATED BYLAWS OF BOULDER ACQUISITIONS, INC. ARTICLE I OFFICES Section 1.1 Registered Office. The registered office and registered agent of Boulder Acquisitions, 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 created proxy bearing a later date is filed with or transmitted to the Secretary 2 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 number of Directors of the Corporation will be such number as determined by the Board of Directors. The number of Directors authorized will be increased or decreased as the Board of Directors may from time to time designate. No decrease in the number of Directors will have the effect of shortening the term of any incumbent Director. 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 4 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 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 June 9, 2004. EX-10.1 3 boulder8kex101062304.txt SECURITIES EXCHANGE AGREEMENT EXHIBIT 10.1 ================================================================================ SECURITIES EXCHANGE AGREEMENT dated effective as of June 23, 2004 by and among BOULDER ACQUISITIONS, INC., SIFANG HOLDINGS CO., LTD., and THE SHAREHOLDERS OF SIFANG HOLDINGS CO., 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 Article V. REPRESENTATIONS AND WARRANTIES of Public Company....................5 5.1 Organization, Standing and Power..............................5 5.2 Capital Structure.............................................6 5.3 Authority: Noncontravention...................................6 5.4 Subsidiaries..................................................7 5.5 Intellectual Property.........................................7 5.6 Absence of Certain Changes or Events; No Undisclosed Material Liabilities..........................................7 5.7 Books and Records.............................................8 5.8 Employees.....................................................8 5.9 Employee Benefit Plans........................................8 5.10 Compliance with Applicable Laws...............................8 5.11 Insurance.....................................................8 5.12 Litigation, etc...............................................8 5.13 Contracts.....................................................9 5.14 Real Property.................................................9 5.15 Quotation.....................................................9 5.16 Filings.......................................................9 5.17 Environmental Matters.........................................9 5.18 Anti-takeover Plan: State Takeover Statutes..................10 5.19 Solicitation.................................................10 5.20 Disclosure...................................................10 Article VI. INdemnification...................................................10 6.1 Indemnification of Holding Co and Shareholders...............10 i 6.2 Indemnification of Public Company............................11 Article VII. CONDITIONS PRECEDENT.............................................11 7.1 Conditions to Each Party's Obligation to Effect the Exchange.11 7.2 Conditions to Obligations of Holding Co and the Shareholders.12 7.3 Conditions to Obligations of Public Company..................12 7.4 Frustration of Closing Conditions............................13 Article VIII. GENERAL PROVISIONS..............................................13 8.1 Survival of Representations and Warranties...................13 8.2 Fees and Expenses............................................13 8.3 Definitions..................................................13 8.4 Usage........................................................14 8.5 Notices......................................................15 8.6 Counterparts.................................................15 8.7 Entire Agreement; Third-Party Beneficiaries..................15 8.8 Governing Law................................................15 8.9 Assignment...................................................15 8.10 Enforcement..................................................16 8.11 Severability.................................................16 ii SECURITIES EXCHANGE AGREEMENT THIS SECURITIES EXCHANGE AGREEMENT (the "Agreement"), dated effective as of June 23, 2004 (the "Effective Date"), is entered into by and among SIFANG HOLDINGS CO., LTD., an exempted company incorporated in the Cayman Islands with limited liability ("Holding Co"), and Boulder Acquisitions, Inc., a Nevada corporation (the "Public Company"), and the individuals whose names appear on the signature page hereof, each being a shareholder of Holding Co (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 50,000 outstanding shares of the common stock, par value $1.00, 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 13,782,636 shares of common stock, par value $0.001, of Public Company (the "Exchange"); and WHEREAS, the Boards of Directors of Public Company and Holding Co have determined that it is desirable to effect 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, per 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 at the Closing, 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 13,782,636 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 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 Boulder Acquisition, Inc.'s 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. Holding Co is an exempted company with limited liability duly organized, validly existing and in good standing under the laws of the Cayman Islands, 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, 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 4 (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 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, 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 Shanghai TCH Data Technology Co., Ltd., a company organized under the laws of the Peoples Republic of China ("New China Co"), have been audited for the periods indicated in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). 4.4 Capital Structure. As of the Effective Date, 50,000 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. 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 5 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. At the Closing, there will be 15,368,341 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 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. No 6 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 March 31, 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 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, cancellation of any material debts or claims or waiver of any material rights by Public Company; or (xiii) any agreements by Public Company to (a) do any of the things described in the preceding clauses (i) through (xii) 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. 7 (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. 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 8 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, and its pending agreement with Insight Communications, Inc., 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 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 9 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 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 one year 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. 10 (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. (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 one year 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, 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). 11 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 Tai Caihua as a member of the Board of Directors, and (b) all existing officers shall resign as officers of Public Company. (d) Available Funds. At the Closing, Public Company will have $500,000 in U.S. dollars on deposit in its operations bank account. (e) Opinion of Counsel. Holding Co shall have received an opinion of Public Company's counsel that is satisfactory to Holding Co in both form and content. 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. 12 (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. (c) Financial Advisory Agreement. All obligations of the Financial Advisory Agreement by and between HFG International, Limited and Shanghai Sifang Information Technology Co., Ltd. dated January 8, 2004, including the payment of $270,000 owed thereunder, shall have been satisfied in full. (d) Opinion of Counsel. Public Company shall have received an opinion of Holding Co's counsel that is satisfactory to Public Company in both form and content. 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 one year. 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; 13 (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. (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 14 (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): (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 689 Laoshandong Road Shanghai 200120 People's Republic of China Telephone: (86-21) 6336-8686 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 15 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. 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. BOULDER ACQUISITIONS, INC. By: /s/ Timothy P. Halter --------------------------------------------------- Timothy P. Halter, Chief Executive Officer, President, Chief Operating Officer, Chairman of the Board, Secretary and Treasurer SIFANG HOLDINGS CO., LTD. By: /s/ Tai Caihua --------------------------------------------------- Tai Caihua, President SHAREHOLDERS By: /s/ Tai Caihua --------------------------------------------------- TAI CAIHUA By: /s/ Tai Caihua * --------------------------------------------------- SHI YING 16 By: /s/ Tai Caihua * --------------------------------------------------- MAO MING By: /s/ Tai Caihua * --------------------------------------------------- SONG JING By: /s/ Tai Caihua * --------------------------------------------------- FU SIXING By: /s/ Tai Caihua * --------------------------------------------------- YU RUIJIE By: /s/ Tai Caihua * --------------------------------------------------- JING WEIPING By: /s/ Tai Caihua * --------------------------------------------------- ZHANG XIADONG By: /s/ Tai Caihua * --------------------------------------------------- HUANG WEI By: /s/ Tai Caihua * --------------------------------------------------- HUANG TIANQI *By Power of Attorney granted to Tai Caihua 17 EX-10.7 4 boulder8kex107062304.txt STOCK PURCHASE AGREEMENT DATED JUNE 23, 2004 EXHIBIT 10.7 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 23rd day of June, 2004, by and between Halter Financial Group, Inc. ("Purchaser") and Boulder Acquisitions, Inc., a Nevada Corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Company desires to sell to Purchaser and Purchaser desires to purchase from the Company a total of 166,667 newly issued, restricted shares (the "Shares") of the common capital stock of the Company, par value $0.001 per share, upon the terms, provisions, and conditions and for the consideration hereinafter set forth; NOW, THEREFORE, for and in consideration of the premises and mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby represent, warrant, covenant, and agree as follows: Section 1. Issuance and Sale of Shares. Based upon the representations, warranties, and covenants and subject to the terms, provisions, and conditions contained in this Agreement, the Company agrees to sell and deliver the Shares to Purchaser, free and clear of all liens, pledges, encumbrances, security interests, and adverse claims, and Purchaser agrees to purchase the Shares from the Company for the consideration hereinafter set forth. Section 2. Purchase Price. The total purchase price to be paid to the Company by Purchaser for the Shares is $1.14 per Share (the "Purchase Price"). Section 3. The Closing. Upon execution of this Agreement, the Company shall deliver to Purchaser a certificate(s) evidencing the Shares issued in the name of Purchaser, and immediately upon delivery thereof, Purchaser shall deliver to the Company the Purchase Price. Section 4. Representations and Warranties of Purchaser. Purchaser acknowledges and understands that the Shares are being acquired for investment in a transaction that is considered to be exempt from registration. In connection with the transactions contemplated hereby, Purchaser hereby represents and warrants to the Company that: a) Purchaser is acquiring the Shares solely for investment purposes and not with a view to, or for resale in connection with, any distribution thereof or with any present intention 1 of distributing or selling any of the Shares, except as allowed by the Securities Act of 1933, as amended, or any rules or regulations promulgated thereunder (collectively, the "Act"). b) Purchaser will hold the Shares subject to all of the applicable provisions of the Act, and Purchaser will not at any time make any sale, transfer, or other disposition of the Shares in contravention of said Act. c) Purchaser acknowledges that it must bear the economic risk of its investment in the Shares for an indefinite period of time since the Shares have not been registered under the Act and therefore cannot be sold unless the Shares are subsequently registered or an exemption from registration is available. d) The sale of the Shares to Purchaser is being made without any public solicitation or advertisements. Section 5. Representations and Warranties of the Company. In connection with the transactions contemplated hereby, the Company hereby represents and warrants to Purchaser as follows, with each such representation and warranty pertaining to the Company and its direct and indirect subsidiaries where applicable: 5.1. Organization, Standing and Power. The Company is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has the requisite corporate power and authority to carry on its business as now being conducted. The 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 Company Material Adverse Effect. For purposes of this Agreement, the term "Company Material Adverse Effect" means any material adverse effect with respect to the Company, taken as a whole, or any change or effect that adversely, or is reasonably expected to adversely, affect the ability of the Company to maintain its current business operations or to consummate the transactions contemplated by this Agreement in any material respect. 5.2. Validity of Transaction. This Agreement and, as applicable, each other agreement contemplated hereby are valid and legally binding obligations of the Company, enforceable in accordance with their respective terms against the Company, except as limited by bankruptcy, insolvency and similar laws affecting creditors generally, and by general principles of equity. At the time that the Shares are sold, assigned, transferred and conveyed to Purchaser pursuant to this Agreement, the Shares will be duly authorized, validly issued, fully paid and nonassessable. The execution, delivery and performance of this Agreement have been duly authorized by the Company and will not violate any applicable federal or state law, any order of any court or government agency or the articles or certificate of incorporation of the Company. The execution, delivery and performance of this 2 Agreement and each other agreement contemplated hereby will not result in any breach of or default under, or result in the creation of any encumbrance upon any of the assets of the Company pursuant to the terms of any agreement by which the Company or any of its respective assets may be bound. No consent, approval or authorization of, or registration or filing with any governmental authority or other regulatory agency, is required for the validity of the execution and delivery by the Company of this Agreement or any documents related thereto. 5.3. Capital Structure. The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.001 per share (the "Company Common Stock"). On the Closing Date hereof, there will be 15,702,903 shares of Company Common Stock issued and outstanding. No shares of Company Common Stock will be held by the Company in its treasury. All outstanding shares of capital stock of the 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 the 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 the Company may vote are issued or outstanding. There are no outstanding stock appreciation rights or similar derivative securities or rights of the Company. 5.4. Authority: Noncontravention. The Company has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes the valid and binding agreement of Purchaser, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies and to 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 consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not, (a) conflict with any of the provisions of the charter documents or bylaws of the Company, (b) 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 3 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, franchise, license or similar instrument or undertaking to which the Company is a party or by which the Company or any of the assets of either entity are bound, result in the creation or imposition of a material Lien or other restriction or encumbrance on any material asset of the Company, which, singly or in the aggregate, would have a Company Material Adverse Effect, or (c) subject to the governmental filings and other matters referred to in the following sentence, violate any domestic or foreign law, rule or regulation or any order, writ, judgment, injunction, decree, determination or award currently in effect except for such violations, which, singly or in the aggregate, would only have an immaterial effect. Except as otherwise required by applicable state or federal securities laws, no consent, approval or authorization of, or declaration or filing with, or notice to, any domestic or foreign governmental agency or regulatory authority (a "Governmental Entity") or any third party which has not been received or made, is required by or with respect to the Company in connection with the execution and delivery of this Agreement by the Company or the consummation by the 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 Company Material Adverse Effect. "Lien" 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. 5.5. Restrictions Upon Registration. The Company agrees that for the twelve month period following the execution date of this Agreement it shall not file a registration statement, of any type, with the Commission for the purpose of registering shares of the Company's common stock held by those persons who received such shares pursuant to that certain Securities Exchange Agreement, dated effective as of June 23, 2004, entered into by and among Sifang Holdings Co., Ltd., a corporation organized under the laws of the Cayman Islands ("Holding Co"), the Company and the shareholders of Holding Co. 5.6. Absence of Certain Changes or Events; No Undisclosed Material Liabilities. Except as otherwise set forth in the Company's periodic reports as filed with the U.S. Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, the Company has no Liabilities. "Liability" means, as to any person, all debts, liabilities and obligations, direct, indirect, absolute or contingent of such person, whether accrued, vested or otherwise, whether known or unknown and whether or not actually reflected, or required in accordance with GAAP to be reflected, in such person's balance sheet. 5.7. Compliance with Applicable Laws. The Company has and after giving effect to the transactions contemplated hereby will have in effect all federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights ("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 the 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 Company Material Adverse Effect. To the Company's knowledge, the Company is in compliance with, and has no liability or obligation under, all applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Entity, including any liability or obligation to undertake any remedial action under hazardous substances laws, except for instances of non-compliance, liabilities or obligations, which individually or in the aggregate would only have an immaterial effect. 4 5.8. Litigation, etc. As of the date hereof, (a) there is no suit, claim, action or proceeding (at law or in equity) pending or, to the knowledge of the Company, threatened against the Company (including, without limitation, any product liability claims) before any court or governmental or regulatory authority or body, and (b) the 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 Company Material Adverse Effect or (ii) involves an allegation of criminal misconduct or a violation of the Racketeer and Influenced Corrupt Practices Act, as amended. As of the date hereof, there are no suits, actions, claims or proceedings pending or, to the Company's knowledge, threatened, seeking to prevent, hinder, modify or challenge the transactions contemplated by this Agreement. 5.9. Disclosure. The representations and warranties and statements of fact made by the 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. Section 6. Survival of Representations and Warranties. All representations, warranties, covenants, and agreements contained herein shall not be discharged or dissolved upon, but shall survive the closing and shall be unaffected by any investigation made by any party at any time. Section 7. Registration Rights. 7.1. Registration by the Company. (a) Mandatory Registration. As promptly as practicable (but in no event later than 30 days) after the date of this Agreement, the Company shall file a registration statement (the "Registration Statement") with the Commission under the Act covering the Shares. (b) Registration Statement Form. Registrations under this Section 7.1 shall be on such appropriate registration form of the Commission as shall be reasonably selected by the Company. (c) Effective Registration Statement. A registration required pursuant to this Section 7.1 shall not be deemed to have been effected (i) unless the Registration Statement has become effective and remained effective in compliance with the provisions of the Act with respect to the disposition of all of the Shares covered by such Registration Statement until such time as all of the Shares have been disposed of in accordance with the intended methods of disposition by the Purchaser set forth in such Registration Statement (unless the failure to so dispose of such Shares shall be caused solely by reason of a failure on the part of the Purchaser). 5 7.2. Priority Registrations. Subject to the limitations set forth below, the Registration Statement may include, in addition to the Shares, other securities of the Company which are proposed to be sold for the account of the Company or any other stockholders thereof. 7.3. Registration Procedures. The Company will, as expeditiously as possible: a) prepare and file with the Commission the requisite Registration Statement to effect such registration and thereafter use its reasonable best efforts to cause such Registration Statement to become effective; b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Act with respect to the disposition of all the Shares covered by such Registration Statement until the earlier of the time as all of such Shares have been disposed of in accordance with the intended methods of disposition by the Purchaser set forth in such Registration Statement or the date that the Shares are eligible for resale pursuant to the provisions of Rule 144 under the Act; c) furnish such number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such Registration Statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Act, in conformity with the requirements of the Act, and such other documents, as the Purchaser may reasonably request; 6 d) use its reasonable best efforts (i) to register or qualify the Shares under such other securities or blue sky laws of such States of the United States of America where an exemption is not available and as Purchaser shall reasonably request, (ii) to keep such registration or qualification in effect for so long as such Registration Statement remains in effect, and (iii) to take any other action which may be reasonably necessary or advisable to enable the Purchaser to consummate the disposition in such jurisdictions of the securities to be sold by the Purchaser, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (d) be obligated to be so qualified or to consent to general service of process in any such jurisdiction; e) use its reasonable best efforts to cause all Shares covered by such Registration Statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the Purchaser to enable the Purchaser to consummate the disposition of such Shares; f) notify the Purchaser at any time when a prospectus relating thereto is required to be delivered under the Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and at the request of the Purchaser promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; g) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and, if required, make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder, and promptly furnish to Purchaser a copy of any amendment or supplement to such Registration Statement or prospectus; h) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all the Shares covered by such Registration Statement from and after a date not later than the effective date of such registration; and i) use its reasonable best efforts to list the Shares on any national securities exchange on which the shares of the same class covered by such Registration Statement are then listed and, if no such shares are so listed, on any national securities exchange on which the common stock is then listed. Purchaser agrees by acquisition of the Shares that, upon receipt of any notice from the Company of the happening of any event of the kind described in subdivision (f) of this Section 7.3, such holder will forthwith discontinue such disposition of the Shares pursuant to the Registration Statement until Purchaser's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (f) of this Section 7.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to the Shares current at the time of receipt of such notice. 7.4. Indemnification. (a) Indemnification by the Company. The Company will, and hereby does, indemnify and hold harmless, in the case of the Registration Statement filed pursuant to Section 7.1, the Purchaser and its respective directors, officers, partners, agents and affiliates, against any losses, claims, damages or liabilities, joint or several, to which Purchaser or any such director, officer, partner, agent, affiliate or 7 controlling person may become subject under the Act or otherwise, including, without limitation, the fees and expenses of legal counsel, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company will reimburse Purchaser and each such director, officer, partner, agent, affiliate and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Purchaser, specifically stating that it is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Purchaser or any such director, officer, partner, agent, affiliate or controlling person and shall survive the transfer of such securities by the Purchaser. (b) Indemnification by the Purchaser. As a condition to including the Shares in the Registration Statement, the Company shall have received an undertaking satisfactory to it from the Purchaser, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 7.4(a)) each other seller, if any, the Company, and each director of the Company and each officer of the Company, with respect to any statement or alleged statement in or omission or alleged omission from such Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by the Purchaser specifically stating that it is for use in the preparation of such Registration Statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided, --------- however, that the liability of such indemnifying party under this Section 7.4(b) shall be limited to the amount of proceeds received by such indemnifying party giving rise to such liability. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by the Purchaser. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 7.4 (a) or (b), such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the 8 commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 7.4, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that any indemnified party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both the Company and an indemnified party is, or is reasonably likely to become, a party, such indemnified party shall have the right to employ separate counsel at the Company's expense and to control its own defense of such action or proceeding if (a) there are or may be legal defenses available to such indemnified party or to other indemnified parties that are different from or additional to those available to the Company or (b) any actual conflict exists between the Company and such indemnified party that would make such separate representation advisable; provided, however, that the Company may limit the fees and expenses that it pays in any one legal action or group of related legal actions to those fees and expenses of one firm of attorneys (together with appropriate local counsel), which firm of attorneys (together with appropriate legal counsel) shall be designated in writing by a majority of the indemnified parties who are a party to, or are reasonably likely to become parties to, such legal action or group of related legal actions. No indemnifying party shall be liable for any settlement of any action or proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No indemnifying party shall, without the consent of the indemnified party, which consent shall not be unreasonably withheld or delayed, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation or which requires action other than the payment of money by the indemnifying party. (d) Contribution. If the indemnification provided for in this Section 7.4 shall for any reason be held by a court to be unavailable to an indemnified party under Section 7.4(a) or (b) hereof in respect of any loss, claim, damage or liability, or any action in respect thereof, then, in lieu of the amount paid or payable under Section 7.4(a) or (b), the indemnified party and the indemnifying party under Section 7.4(a) or (b) shall contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating the same), (i) in such proportion as is appropriate to reflect the relative fault of the Company and the Purchaser which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, as well as any other relevant equitable considerations or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Purchaser from the offering of the securities 9 covered by such Registration Statement, provided, that for purposes of this clause (ii), the relative benefits received by the Purchaser shall be deemed not to exceed the amount of proceeds received by the Purchaser. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchaser's obligation to contribute as provided in this Section 7.4(d) is several in proportion to the relative value of its respective Shares covered by such Registration Statement and not joint. In addition, no person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or claim effected without such person's consent, which consent shall not be unreasonably withheld. (e) Other Indemnification. Indemnification and contribution similar to that specified in the preceding subdivisions of this Section 7.4 (with appropriate modifications) shall be given by the Company and the Purchaser with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Act. (f) Indemnification Payments. The indemnification and contribution required by this Section 7.4 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. Section 8. Put Option. (a) Subject to the provisions of subparagraphs (b) and (c) or this Section 8, the Company hereby grants to Purchaser an option to require the Company to purchase up to 166,667 Shares at a price of $1.14 per share (the "Put Option"). (b) The Put Option may be exercised at any time after the date that is six months after the Company files the Registration Statement registering the Shares up to and including the earlier of the date that such Registration Statement is declared effective by the Commission or the Shares are eligible for resale under Rule 144 under the Act (the "Expiration Date"). (c) The Put Option may be exercised by written notice given by the Purchaser to the Company exercising the Put Option. If the Put Option is not exercised by the Expiration Date, then the Put Option will terminate, and be null, void and of no further effect immediately following the Expiration Date. Section 9. Entirety and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements and understandings, whether oral or written, between the parties hereto relating to such subject matter. No modification, alteration, amendment, or supplement to this Agreement shall be valid or effective unless the same is in writing and signed by all parties hereto. Section 10. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their successors and permitted assigns, heirs, and personal representatives. Section 11. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada. IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of the date first written above. PURCHASER: HALTER FINANCIAL GROUP, INC. By: /s/ Timothy P. Halter --------------------------------- Name: Timothy P. Halter Title: President COMPANY: BOULDER ACQUISITIONS, INC. By: /s/ Tai Caihua --------------------------------- Tai Caihua 10 EX-10.8 5 boulder8kex108062304.txt STOCK PURCHASE AGREEMENT DATED JUNE 28, 2004 EXHIBIT 10.8 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 28th day of June, 2004, by and between Chinamerica Fund, LP ("Purchaser") and Boulder Acquisitions, Inc., a Nevada Corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Company desires to sell to Purchaser and Purchaser desires to purchase from the Company a total of 877,193 newly issued, restricted shares (the "Shares") of the common capital stock of the Company, par value $0.001 per share, upon the terms, provisions, and conditions and for the consideration hereinafter set forth; NOW, THEREFORE, for and in consideration of the premises and mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby represent, warrant, covenant, and agree as follows: Section 1. Issuance and Sale of Shares. Based upon the representations, warranties, and covenants and subject to the terms, provisions, and conditions contained in this Agreement, the Company agrees to sell and deliver the Shares to Purchaser, free and clear of all liens, pledges, encumbrances, security interests, and adverse claims, and Purchaser agrees to purchase the Shares from the Company for the consideration hereinafter set forth. Section 2. Purchase Price. The total purchase price to be paid to the Company by Purchaser for the Shares is $1.14 per Share (the "Purchase Price"). Section 3. The Closing. Upon execution of this Agreement, the Company shall deliver to Purchaser a certificate(s) evidencing the Shares issued in the name of Purchaser, and immediately upon delivery thereof, Purchaser shall deliver to Securities Transfer Corporation (the "Escrow Agent") the Purchase Price. The release of the Purchase Price to the Company shall be effected in accordance with the terms of this Agreement and that certain Escrow Agreement (the "Escrow Agreement") to be entered into by and among the Escrow Agent, the parties hereto and such other parties referenced therein. Section 4. Representations and Warranties of Purchaser. Purchaser acknowledges and understands that the Shares are being acquired for investment in a transaction that is considered to be exempt from registration. In connection with the transactions contemplated hereby, Purchaser hereby represents and warrants to the Company that: 1 a) Purchaser is acquiring the Shares solely for investment purposes and not with a view to, or for resale in connection with, any distribution thereof or with any present intention of distributing or selling any of the Shares, except as allowed by the Securities Act of 1933, as amended, or any rules or regulations promulgated thereunder (collectively, the "Act"). b) Purchaser will hold the Shares subject to all of the applicable provisions of the Act, and Purchaser will not at any time make any sale, transfer, or other disposition of the Shares in contravention of said Act. c) Purchaser acknowledges that it must bear the economic risk of its investment in the Shares for an indefinite period of time since the Shares have not been registered under the Act and therefore cannot be sold unless the Shares are subsequently registered or an exemption from registration is available. d) The sale of the Shares to Purchaser is being made without any public solicitation or advertisements. Section 5. Representations and Warranties of the Company. In connection with the transactions contemplated hereby, the Company hereby represents and warrants to Purchaser as follows, with each such representation and warranty pertaining to the Company and its direct and indirect subsidiaries where applicable: 5.1. Organization, Standing and Power. The Company is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has the requisite corporate power and authority to carry on its business as now being conducted. The 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 Company Material Adverse Effect. For purposes of this Agreement, the term "Company Material Adverse Effect" means any material adverse effect with respect to the Company, taken as a whole, or any change or effect that adversely, or is reasonably expected to adversely, affect the ability of the Company to maintain its current business operations or to consummate the transactions contemplated by this Agreement in any material respect. 5.2. Validity of Transaction. This Agreement and, as applicable, each other agreement contemplated hereby are valid and legally binding obligations of the Company, enforceable in accordance with their respective terms against the Company, except as limited by bankruptcy, insolvency and similar laws affecting creditors generally, and by general principles of equity. At the time that the Shares are sold, assigned, transferred and conveyed to Purchaser pursuant to this Agreement, the Shares 2 will be duly authorized, validly issued, fully paid and nonassessable. The execution, delivery and performance of this Agreement have been duly authorized by the Company and will not violate any applicable federal or state law, any order of any court or government agency or the articles or certificate of incorporation of the Company. The execution, delivery and performance of this Agreement and each other agreement contemplated hereby will not result in any breach of or default under, or result in the creation of any encumbrance upon any of the assets of the Company pursuant to the terms of any agreement by which the Company or any of its respective assets may be bound. No consent, approval or authorization of, or registration or filing with any governmental authority or other regulatory agency, is required for the validity of the execution and delivery by the Company of this Agreement or any documents related thereto. 5.3. Capital Structure. The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.001 per share (the "Company Common Stock"). On the Closing Date hereof, the capitalization of the Company will be as set forth on Schedule 5.3 hereto. No shares of Company Common Stock will be held by the Company in its treasury. All outstanding shares of capital stock of the 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 the 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 the Company may vote are issued or outstanding. Except for this Agreement and as set forth in Schedule 5.3 to this Agreement, the Company does not have, or at or after Closing will not have, any outstanding option, warrant, call, subscription or other right, agreement or commitment which either (a) obligates the Company to issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any shares of the capital stock of the Company, or (b) restricts the voting, disposition or transfer of shares of capital stock of the Company. There are no outstanding stock appreciation rights or similar derivative securities or rights of the Company. 5.4. Authority: Noncontravention. The Company has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes the valid and binding agreement of Purchaser, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies and to 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 consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not, (a) conflict with any of the provisions of the charter documents or bylaws of the Company, (b) 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 3 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, franchise, license or similar instrument or undertaking to which the Company is a party or by which the Company or any of the assets of either entity are bound, result in the creation or imposition of a material Lien or other restriction or encumbrance on any material asset of the Company, which, singly or in the aggregate, would have a Company Material Adverse Effect, or (c) subject to the governmental filings and other matters referred to in the following sentence, violate any domestic or foreign law, rule or regulation or any order, writ, judgment, injunction, decree, determination or award currently in effect except for such violations, which, singly or in the aggregate, would only have an immaterial effect. Except as otherwise required by applicable state or federal securities laws, no consent, approval or authorization of, or declaration or filing with, or notice to, any domestic or foreign governmental agency or regulatory authority (a "Governmental Entity") or any third party which has not been received or made, is required by or with respect to the Company in connection with the execution and delivery of this Agreement by the Company or the consummation by the 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 Company Material Adverse Effect. "Lien" 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. 5.5. Restrictions Upon Registration. The Company agrees that for the twelve month period following the execution date of this Agreement it shall not file a registration statement, of any type, with the Commission for the purpose of registering shares of the Company's common stock held by those persons who received such shares pursuant to that certain Securities Exchange Agreement, dated effective as of June 23, 2004, entered into by and among Sifang Holdings Co., Ltd., a corporation organized under the laws of the Cayman Islands ("Holding Co"), the Company and the shareholders of Holding Co. 5.6. Absence of Certain Changes or Events; No Undisclosed Material Liabilities. Except as otherwise set forth in the Company's periodic reports as filed with the U.S. Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, the Company has no Liabilities. "Liability" means, as to any person, all debts, liabilities and obligations, direct, indirect, absolute or contingent of such person, whether accrued, vested or otherwise, whether known or unknown and whether or not actually reflected, or required in accordance with GAAP to be reflected, in such person's balance sheet. 5.7. Compliance with Applicable Laws. The Company has and after giving effect to the transactions contemplated hereby will have in effect all federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights ("Permits") necessary for it to own, lease 4 or operate its properties and assets and to carry on its business as now conducted, and to the knowledge of the 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 Company Material Adverse Effect. To the Company's knowledge, the Company is in compliance with, and has no liability or obligation under, all applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Entity, including any liability or obligation to undertake any remedial action under hazardous substances laws, except for instances of non-compliance, liabilities or obligations, which individually or in the aggregate would only have an immaterial effect. 5.8. Litigation, etc. As of the date hereof, (a) there is no suit, claim, action or proceeding (at law or in equity) pending or, to the knowledge of the Company, threatened against the Company (including, without limitation, any product liability claims) before any court or governmental or regulatory authority or body, and (b) the 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 Company Material Adverse Effect or (ii) involves an allegation of criminal misconduct or a violation of the Racketeer and Influenced Corrupt Practices Act, as amended. As of the date hereof, there are no suits, actions, claims or proceedings pending or, to the Company's knowledge, threatened, seeking to prevent, hinder, modify or challenge the transactions contemplated by this Agreement. 5.9. Disclosure. The representations and warranties and statements of fact made by the 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. Section 6. Survival of Representations and Warranties. All representations, warranties, covenants, and agreements contained herein shall not be discharged or dissolved upon, but shall survive the closing and shall be unaffected by any investigation made by any party at any time. Section 7. Registration Rights. 7.1. Registration by the Company. (a) Mandatory Registration. As promptly as practicable (but in no event later than 30 days) after the date of this Agreement, the Company shall file a registration statement (the "Registration Statement") with the Commission under the Act covering the Shares. (b) Registration Statement Form. Registrations under this Section 7.1 shall be on such appropriate registration form of the Commission as shall be reasonably selected by the Company. 5 (c) Effective Registration Statement. A registration required pursuant to this Section 7.1 shall not be deemed to have been effected (i) unless the Registration Statement has become effective and remained effective in compliance with the provisions of the Act with respect to the disposition of all of the Shares covered by such Registration Statement until such time as all of the Shares have been disposed of in accordance with the intended methods of disposition by the Purchaser set forth in such Registration Statement (unless the failure to so dispose of such Shares shall be caused solely by reason of a failure on the part of the Purchaser). 7.2. Priority Registrations. Subject to the limitations set forth below, the Registration Statement may include, in addition to the Shares, other securities of the Company which are proposed to be sold for the account of the Company or any other stockholders thereof. 7.3. Registration Procedures. The Company will, as expeditiously as possible: a) prepare and file with the Commission the requisite Registration Statement to effect such registration and thereafter use its reasonable best efforts to cause such Registration Statement to become effective; b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Act with respect to the disposition of all the Shares covered by such Registration Statement until the earlier of the time as all of such Shares have been disposed of in accordance with the intended methods of disposition by the Purchaser set forth in such Registration Statement or the date that the Shares are eligible for resale pursuant to the provisions of Rule 144 under the Act; c) furnish such number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such Registration Statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Act, in conformity with the requirements of the Act, and such other documents, as the Purchaser may reasonably request; d) use its reasonable best efforts (i) to register or qualify the Shares under such other securities or blue sky laws of such States of the United States of America where an exemption is not available and as Purchaser shall reasonably request, (ii) to keep such registration or qualification in effect for so long as such Registration Statement remains in effect, and (iii) to take any other action which may be reasonably necessary or advisable to enable the Purchaser to consummate the disposition in such jurisdictions of the securities to be sold by the Purchaser, except that the Company shall not for 6 any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (d) be obligated to be so qualified or to consent to general service of process in any such jurisdiction; e) use its reasonable best efforts to cause all Shares covered by such Registration Statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the Purchaser to enable the Purchaser to consummate the disposition of such Shares; f) notify the Purchaser at any time when a prospectus relating thereto is required to be delivered under the Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and at the request of the Purchaser promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; g) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and, if required, make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder, and promptly furnish to Purchaser a copy of any amendment or supplement to such Registration Statement or prospectus; h) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all the Shares covered by such Registration Statement from and after a date not later than the effective date of such registration; and i) use its reasonable best efforts to list the Shares on any national securities exchange on which the shares of the same class covered by such Registration Statement are then listed and, if no such shares are so listed, on any national securities exchange on which the common stock is then listed. Purchaser agrees by acquisition of the Shares that, upon receipt of any notice from the Company of the happening of any event of the kind described in subdivision (f) of this Section 7.3, such holder will forthwith discontinue such disposition of the Shares pursuant to the Registration Statement until Purchaser's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (f) of this Section 7.3 and, if so directed by the 7 Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to the Shares current at the time of receipt of such notice. 7.4. Indemnification. (a) Indemnification by the Company. The Company will, and hereby does, indemnify and hold harmless, in the case of the Registration Statement filed pursuant to Section 7.1, the Purchaser and its respective directors, officers, partners, agents and affiliates, against any losses, claims, damages or liabilities, joint or several, to which Purchaser or any such director, officer, partner, agent, affiliate or controlling person may become subject under the Act or otherwise, including, without limitation, the fees and expenses of legal counsel, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company will reimburse Purchaser and each such director, officer, partner, agent, affiliate and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Purchaser, specifically stating that it is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Purchaser or any such director, officer, partner, agent, affiliate or controlling person and shall survive the transfer of such securities by the Purchaser. (b) Indemnification by the Purchaser. As a condition to including the Shares in the Registration Statement, the Company shall have received an undertaking satisfactory to it from the Purchaser, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 7.4(a)) each other seller, if any, the Company, and each director of the Company and each officer of the Company, with respect to any statement or alleged statement in or omission or alleged omission from such Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by the Purchaser specifically stating that it is for use in the preparation of such Registration Statement, preliminary prospectus, final prospectus, 8 the liability of such indemnifying party under this Section 7.4(b) shall be limited to the amount of proceeds received by such indemnifying party giving rise to such liability. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by the Purchaser. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 7.4 (a) or (b), such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 7.4, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that any indemnified party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both the Company and an indemnified party is, or is reasonably likely to become, a party, such indemnified party shall have the right to employ separate counsel at the Company's expense and to control its own defense of such action or proceeding if (a) there are or may be legal defenses available to such indemnified party or to other indemnified parties that are different from or additional to those available to the Company or (b) any actual conflict exists between the Company and such indemnified party that would make such separate representation advisable; provided, however, that the Company may limit the fees and expenses that it pays in any one legal action or group of related legal actions to those fees and expenses of one firm of attorneys (together with appropriate local counsel), which firm of attorneys (together with appropriate legal counsel) shall be designated in writing by a majority of the indemnified parties who are a party to, or are reasonably likely to become parties to, such legal action or group of related legal actions. No indemnifying party shall be liable for any settlement of any action or proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No indemnifying party shall, without the consent of the indemnified party, which consent shall not be unreasonably withheld or delayed, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation or which requires action other than the payment of money by the indemnifying party. (d) Contribution. If the indemnification provided for in this Section 7.4 shall for any reason be held by a court to be unavailable to an indemnified party under Section 7.4(a) or (b) hereof in respect of any loss, claim, damage or liability, or any action in respect thereof, then, in lieu of the amount paid or payable under Section 7.4(a) or (b), the indemnified party and the indemnifying party under Section 7.4(a) or (b) shall contribute to the aggregate losses, claims, damages 9 and liabilities (including legal or other expenses reasonably incurred in connection with investigating the same), (i) in such proportion as is appropriate to reflect the relative fault of the Company and the Purchaser which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, as well as any other relevant equitable considerations or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Purchaser from the offering of the securities covered by such Registration Statement, provided, that for purposes of this clause (ii), the relative benefits received by the Purchaser shall be deemed not to exceed the amount of proceeds received by the Purchaser. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchaser's obligation to contribute as provided in this Section 7.4(d) is several in proportion to the relative value of its respective Shares covered by such Registration Statement and not joint. In addition, no person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or claim effected without such person's consent, which consent shall not be unreasonably withheld. (e) Other Indemnification. Indemnification and contribution similar to that specified in the preceding subdivisions of this Section 7.4 (with appropriate modifications) shall be given by the Company and the Purchaser with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Act. (f) Indemnification Payments. The indemnification and contribution required by this Section 7.4 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. Section 8. Put Option. (a) Subject to the provisions of subparagraphs (b) and (c) or this Section 8, the Company hereby grants to Purchaser an option to require the Company to purchase up to 877,193 Shares at a price of $1.14 per share (the "Put Option"). (b) The Put Option may be exercised at any time after the date that is six months after the Company files the Registration Statement registering the Shares up to and including the earlier of the date that such Registration Statement is declared effective by the Commission or the Shares are eligible for resale under Rule 144 under the Act (the "Expiration Date"). 10 (c) The Put Option may be exercised by written notice given by the Purchaser to the Company and the Escrow Agent exercising the Put Option. If the Put Option is not exercised by the Expiration Date, then the Put Option will terminate, and be null, void and of no further effect immediately following the Expiration Date. Section 9. Entirety and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements and understandings, whether oral or written, between the parties hereto relating to such subject matter. No modification, alteration, amendment, or supplement to this Agreement shall be valid or effective unless the same is in writing and signed by all parties hereto. Section 10. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their successors and permitted assigns, heirs, and personal representatives. Section 11. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada. IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of the date first written above. PURCHASER: CHINAMERICA FUND, LP By: /s/ B. Johnson --------------------------------- Name: B. Johnson Title: General Partner COMPANY: BOULDER ACQUISITIONS, INC. By: /s/ Tai Caihua --------------------------------- Tai Caihua 11 EX-10.9 6 boulder8kex109062304.txt STOCK PURCHASE AGREEMENT DATED JUNE 28, 2004 EXHIBIT 10.9 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 28th day of June, 2004, by and between Chinamerica Acquisition, LLC ("Purchaser") and Boulder Acquisitions, Inc., a Nevada Corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Company desires to sell to Purchaser and Purchaser desires to purchase from the Company a total of 263,157 newly issued, restricted shares (the "Shares") of the common capital stock of the Company, par value $0.001 per share, upon the terms, provisions, and conditions and for the consideration hereinafter set forth; NOW, THEREFORE, for and in consideration of the premises and mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby represent, warrant, covenant, and agree as follows: Section 1. Issuance and Sale of Shares. Based upon the representations, warranties, and covenants and subject to the terms, provisions, and conditions contained in this Agreement, the Company agrees to sell and deliver the Shares to Purchaser, free and clear of all liens, pledges, encumbrances, security interests, and adverse claims, and Purchaser agrees to purchase the Shares from the Company for the consideration hereinafter set forth. Section 2. Purchase Price. The total purchase price to be paid to the Company by Purchaser for the Shares is $1.14 per Share (the "Purchase Price"). Section 3. The Closing. Upon execution of this Agreement, the Company shall deliver to Purchaser a certificate(s) evidencing the Shares issued in the name of Purchaser, and immediately upon delivery thereof, Purchaser shall deliver to Securities Transfer Corporation (the "Escrow Agent") the Purchase Price. The release of the Purchase Price to the Company shall be effected in accordance with the terms of this Agreement and that certain Escrow Agreement (the "Escrow Agreement") to be entered into by and among the Escrow Agent, the parties hereto and such other parties referenced therein. Section 4. Representations and Warranties of Purchaser. Purchaser acknowledges and understands that the Shares are being acquired for investment in a transaction that is considered to be exempt from registration. In connection with the transactions contemplated hereby, Purchaser hereby represents and warrants to the Company that: 1 a) Purchaser is acquiring the Shares solely for investment purposes and not with a view to, or for resale in connection with, any distribution thereof or with any present intention of distributing or selling any of the Shares, except as allowed by the Securities Act of 1933, as amended, or any rules or regulations promulgated thereunder (collectively, the "Act"). b) Purchaser will hold the Shares subject to all of the applicable provisions of the Act, and Purchaser will not at any time make any sale, transfer, or other disposition of the Shares in contravention of said Act. c) Purchaser acknowledges that it must bear the economic risk of its investment in the Shares for an indefinite period of time since the Shares have not been registered under the Act and therefore cannot be sold unless the Shares are subsequently registered or an exemption from registration is available. d) The sale of the Shares to Purchaser is being made without any public solicitation or advertisements. Section 5. Representations and Warranties of the Company. In connection with the transactions contemplated hereby, the Company hereby represents and warrants to Purchaser as follows, with each such representation and warranty pertaining to the Company and its direct and indirect subsidiaries where applicable: 5.1. Organization, Standing and Power. The Company is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has the requisite corporate power and authority to carry on its business as now being conducted. The 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 Company Material Adverse Effect. For purposes of this Agreement, the term "Company Material Adverse Effect" means any material adverse effect with respect to the Company, taken as a whole, or any change or effect that adversely, or is reasonably expected to adversely, affect the ability of the Company to maintain its current business operations or to consummate the transactions contemplated by this Agreement in any material respect. 5.2. Validity of Transaction. This Agreement and, as applicable, each other agreement contemplated hereby are valid and legally binding obligations of the Company, enforceable in accordance with their respective terms against the Company, except as limited by bankruptcy, insolvency and similar laws affecting creditors generally, and by general principles of equity. At the time that the Shares are sold, assigned, transferred and conveyed to Purchaser pursuant to this Agreement, the Shares will be duly authorized, validly issued, fully paid and nonassessable. The 2 execution, delivery and performance of this Agreement have been duly authorized by the Company and will not violate any applicable federal or state law, any order of any court or government agency or the articles or certificate of incorporation of the Company. The execution, delivery and performance of this Agreement and each other agreement contemplated hereby will not result in any breach of or default under, or result in the creation of any encumbrance upon any of the assets of the Company pursuant to the terms of any agreement by which the Company or any of its respective assets may be bound. No consent, approval or authorization of, or registration or filing with any governmental authority or other regulatory agency, is required for the validity of the execution and delivery by the Company of this Agreement or any documents related thereto. 5.3. Capital Structure. The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.001 per share (the "Company Common Stock"). On the Closing Date hereof, the capitalization of the Company will be as set forth on Schedule 5.3 hereto. No shares of Company Common Stock will be held by the Company in its treasury. All outstanding shares of capital stock of the 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 the 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 the Company may vote are issued or outstanding. Except for this Agreement and as set forth in Schedule 5.3 to this Agreement, the Company does not have, or at or after Closing will not have, any outstanding option, warrant, call, subscription or other right, agreement or commitment which either (a) obligates the Company to issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any shares of the capital stock of the Company, or (b) restricts the voting, disposition or transfer of shares of capital stock of the Company. There are no outstanding stock appreciation rights or similar derivative securities or rights of the Company. 5.4. Authority: Noncontravention. The Company has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes the valid and binding agreement of Purchaser, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies and to 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 consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not, (a) conflict with any of the provisions of the charter documents or bylaws of the Company, (b) 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 3 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, franchise, license or similar instrument or undertaking to which the Company is a party or by which the Company or any of the assets of either entity are bound, result in the creation or imposition of a material Lien or other restriction or encumbrance on any material asset of the Company, which, singly or in the aggregate, would have a Company Material Adverse Effect, or (c) subject to the governmental filings and other matters referred to in the following sentence, violate any domestic or foreign law, rule or regulation or any order, writ, judgment, injunction, decree, determination or award currently in effect except for such violations, which, singly or in the aggregate, would only have an immaterial effect. Except as otherwise required by applicable state or federal securities laws, no consent, approval or authorization of, or declaration or filing with, or notice to, any domestic or foreign governmental agency or regulatory authority (a "Governmental Entity") or any third party which has not been received or made, is required by or with respect to the Company in connection with the execution and delivery of this Agreement by the Company or the consummation by the 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 Company Material Adverse Effect. "Lien" 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. 5.5. Restrictions Upon Registration. The Company agrees that for the twelve month period following the execution date of this Agreement it shall not file a registration statement, of any type, with the Commission for the purpose of registering shares of the Company's common stock held by those persons who received such shares pursuant to that certain Securities Exchange Agreement, dated effective as of June 23, 2004, entered into by and among Sifang Holdings Co., Ltd., a corporation organized under the laws of the Cayman Islands ("Holding Co"), the Company and the shareholders of Holding Co. 5.6. Absence of Certain Changes or Events; No Undisclosed Material Liabilities. Except as otherwise set forth in the Company's periodic reports as filed with the U.S. Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, the Company has no Liabilities. "Liability" means, as to any person, all debts, liabilities and obligations, direct, indirect, absolute or contingent of such person, whether accrued, vested or otherwise, whether known or unknown and whether or not actually reflected, or required in accordance with GAAP to be reflected, in such person's balance sheet. 5.7. Compliance with Applicable Laws. The Company has and after giving effect to the transactions contemplated hereby will have in effect all federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights ("Permits") necessary for it to own, lease 4 or operate its properties and assets and to carry on its business as now conducted, and to the knowledge of the 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 Company Material Adverse Effect. To the Company's knowledge, the Company is in compliance with, and has no liability or obligation under, all applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Entity, including any liability or obligation to undertake any remedial action under hazardous substances laws, except for instances of non-compliance, liabilities or obligations, which individually or in the aggregate would only have an immaterial effect. 5.8. Litigation, etc. As of the date hereof, (a) there is no suit, claim, action or proceeding (at law or in equity) pending or, to the knowledge of the Company, threatened against the Company (including, without limitation, any product liability claims) before any court or governmental or regulatory authority or body, and (b) the 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 Company Material Adverse Effect or (ii) involves an allegation of criminal misconduct or a violation of the Racketeer and Influenced Corrupt Practices Act, as amended. As of the date hereof, there are no suits, actions, claims or proceedings pending or, to the Company's knowledge, threatened, seeking to prevent, hinder, modify or challenge the transactions contemplated by this Agreement. 5.9. Disclosure. The representations and warranties and statements of fact made by the 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. Section 6. Survival of Representations and Warranties. All representations, warranties, covenants, and agreements contained herein shall not be discharged or dissolved upon, but shall survive the closing and shall be unaffected by any investigation made by any party at any time. Section 7. Registration Rights. 7.1. Registration by the Company. (a) Mandatory Registration. As promptly as practicable (but in no event later than 30 days) after the date of this Agreement, the Company shall file a registration statement (the "Registration Statement") with the Commission under the Act covering the Shares. (b) Registration Statement Form. Registrations under this Section 7.1 shall be on such appropriate registration form of the Commission as shall be reasonably selected by the Company. 5 (c) Effective Registration Statement. A registration required pursuant to this Section 7.1 shall not be deemed to have been effected (i) unless the Registration Statement has become effective and remained effective in compliance with the provisions of the Act with respect to the disposition of all of the Shares covered by such Registration Statement until such time as all of the Shares have been disposed of in accordance with the intended methods of disposition by the Purchaser set forth in such Registration Statement (unless the failure to so dispose of such Shares shall be caused solely by reason of a failure on the part of the Purchaser). 7.2. Priority Registrations. Subject to the limitations set forth below, the Registration Statement may include, in addition to the Shares, other securities of the Company which are proposed to be sold for the account of the Company or any other stockholders thereof. 7.3. Registration Procedures. The Company will, as expeditiously as possible: a) prepare and file with the Commission the requisite Registration Statement to effect such registration and thereafter use its reasonable best efforts to cause such Registration Statement to become effective; b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Act with respect to the disposition of all the Shares covered by such Registration Statement until the earlier of the time as all of such Shares have been disposed of in accordance with the intended methods of disposition by the Purchaser set forth in such Registration Statement or the date that the Shares are eligible for resale pursuant to the provisions of Rule 144 under the Act; c) furnish such number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such Registration Statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Act, in conformity with the requirements of the Act, and such other documents, as the Purchaser may reasonably request; d) use its reasonable best efforts (i) to register or qualify the Shares under such other securities or blue sky laws of such States of the United States of America where an exemption is not available and as Purchaser shall reasonably request, (ii) to keep such registration or qualification in effect for so long as such Registration Statement remains in effect, and (iii) to take any other action which may be reasonably necessary or advisable to enable the Purchaser to consummate 6 the disposition in such jurisdictions of the securities to be sold by the Purchaser, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (d) be obligated to be so qualified or to consent to general service of process in any such jurisdiction; e) use its reasonable best efforts to cause all Shares covered by such Registration Statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the Purchaser to enable the Purchaser to consummate the disposition of such Shares; f) notify the Purchaser at any time when a prospectus relating thereto is required to be delivered under the Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and at the request of the Purchaser promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; g) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and, if required, make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder, and promptly furnish to Purchaser a copy of any amendment or supplement to such Registration Statement or prospectus; h) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all the Shares covered by such Registration Statement from and after a date not later than the effective date of such registration; and i) use its reasonable best efforts to list the Shares on any national securities exchange on which the shares of the same class covered by such Registration Statement are then listed and, if no such shares are so listed, on any national securities exchange on which the common stock is then listed. Purchaser agrees by acquisition of the Shares that, upon receipt of any notice from the Company of the happening of any event of the kind described in subdivision (f) of this Section 7.3, such holder will forthwith discontinue such disposition of the Shares pursuant to the Registration Statement until Purchaser's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (f) of this Section 7.3 and, if so directed by the 7 Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to the Shares current at the time of receipt of such notice. 7.4. Indemnification. (a) Indemnification by the Company. The Company will, and hereby does, indemnify and hold harmless, in the case of the Registration Statement filed pursuant to Section 7.1, the Purchaser and its respective directors, officers, partners, agents and affiliates, against any losses, claims, damages or liabilities, joint or several, to which Purchaser or any such director, officer, partner, agent, affiliate or controlling person may become subject under the Act or otherwise, including, without limitation, the fees and expenses of legal counsel, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company will reimburse Purchaser and each such director, officer, partner, agent, affiliate and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Purchaser, specifically stating that it is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Purchaser or any such director, officer, partner, agent, affiliate or controlling person and shall survive the transfer of such securities by the Purchaser. (b) Indemnification by the Purchaser. As a condition to including the Shares in the Registration Statement, the Company shall have received an undertaking satisfactory to it from the Purchaser, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 7.4(a)) each other seller, if any, the Company, and each director of the Company and each officer of the Company, with respect to any statement or alleged statement in or omission or alleged omission from such Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by the Purchaser specifically stating that it is for use in the preparation of such Registration Statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided, however, that 8 the liability of such indemnifying party under this Section 7.4(b) shall be limited to the amount of proceeds received by such indemnifying party giving rise to such liability. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by the Purchaser. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 7.4 (a) or (b), such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 7.4, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that any indemnified party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both the Company and an indemnified party is, or is reasonably likely to become, a party, such indemnified party shall have the right to employ separate counsel at the Company's expense and to control its own defense of such action or proceeding if (a) there are or may be legal defenses available to such indemnified party or to other indemnified parties that are different from or additional to those available to the Company or (b) any actual conflict exists between the Company and such indemnified party that would make such separate representation advisable; provided, however, that the Company may limit the fees and expenses that it pays in any one legal action or group of related legal actions to those fees and expenses of one firm of attorneys (together with appropriate local counsel), which firm of attorneys (together with appropriate legal counsel) shall be designated in writing by a majority of the indemnified parties who are a party to, or are reasonably likely to become parties to, such legal action or group of related legal actions. No indemnifying party shall be liable for any settlement of any action or proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No indemnifying party shall, without the consent of the indemnified party, which consent shall not be unreasonably withheld or delayed, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation or which requires action other than the payment of money by the indemnifying party. (d) Contribution. If the indemnification provided for in this Section 7.4 shall for any reason be held by a court to be unavailable to an indemnified party under Section 7.4(a) or (b) hereof in respect of any loss, claim, damage or liability, or any action in respect thereof, then, in lieu of the amount paid or payable under Section 7.4(a) or (b), the indemnified party and the indemnifying party under Section 7.4(a) or (b) shall contribute to the aggregate losses, claims, damages 9 and liabilities (including legal or other expenses reasonably incurred in connection with investigating the same), (i) in such proportion as is appropriate to reflect the relative fault of the Company and the Purchaser which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, as well as any other relevant equitable considerations or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Purchaser from the offering of the securities covered by such Registration Statement, provided, that for purposes of this clause (ii), the relative benefits received by the Purchaser shall be deemed not to exceed the amount of proceeds received by the Purchaser. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchaser's obligation to contribute as provided in this Section 7.4(d) is several in proportion to the relative value of its respective Shares covered by such Registration Statement and not joint. In addition, no person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or claim effected without such person's consent, which consent shall not be unreasonably withheld. (e) Other Indemnification. Indemnification and contribution similar to that specified in the preceding subdivisions of this Section 7.4 (with appropriate modifications) shall be given by the Company and the Purchaser with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Act. (f) Indemnification Payments. The indemnification and contribution required by this Section 7.4 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. Section 8. Put Option. (a) Subject to the provisions of subparagraphs (b) and (c) or this Section 8, the Company hereby grants to Purchaser an option to require the Company to purchase up to 263,157 Shares at a price of $1.14 per share (the "Put Option"). (b) The Put Option may be exercised at any time after the date that is six months after the Company files the Registration Statement registering the Shares up to and including the earlier of the date that such Registration Statement is declared effective by the Commission or the Shares are eligible for resale under Rule 144 under the Act (the "Expiration Date"). (c) The Put Option may be exercised by written notice given by the Purchaser to the Company and the Escrow Agent exercising the Put Option. If the Put Option is not exercised by the Expiration Date, then the Put Option will terminate, and be null, void and of no further effect immediately following the Expiration Date. 10 Section 9. Entirety and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements and understandings, whether oral or written, between the parties hereto relating to such subject matter. No modification, alteration, amendment, or supplement to this Agreement shall be valid or effective unless the same is in writing and signed by all parties hereto. Section 10. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their successors and permitted assigns, heirs, and personal representatives. Section 11. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada. IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of the date first written above. PURCHASER: CHINAMERICA ACQUISITION, LLC By: /s/ William P. Wells --------------------------------- Name: William P. Wells Title: Manager COMPANY: BOULDER ACQUISITIONS, INC. By: /s/ Tai Caihua --------------------------------- Tai Caihua 11 EX-10.10 7 boulder8kex1010062304.txt STOCK PURCHASE AGREEMENT DATED JUNE 28, 2004 EXHIBIT 10.10 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the 28th day of June, 2004, by and between Gary Evans ("Purchaser") and Boulder Acquisitions, Inc., a Nevada Corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Company desires to sell to Purchaser and Purchaser desires to purchase from the Company a total of 175,439 newly issued, restricted shares (the "Shares") of the common capital stock of the Company, par value $0.001 per share, upon the terms, provisions, and conditions and for the consideration hereinafter set forth; NOW, THEREFORE, for and in consideration of the premises and mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby represent, warrant, covenant, and agree as follows: Section 1. Issuance and Sale of Shares. Based upon the representations, warranties, and covenants and subject to the terms, provisions, and conditions contained in this Agreement, the Company agrees to sell and deliver the Shares to Purchaser, free and clear of all liens, pledges, encumbrances, security interests, and adverse claims, and Purchaser agrees to purchase the Shares from the Company for the consideration hereinafter set forth. Section 2. Purchase Price. The total purchase price to be paid to the Company by Purchaser for the Shares is $1.14 per Share (the "Purchase Price"). Section 3. The Closing. Upon execution of this Agreement, the Company shall deliver to Purchaser a certificate(s) evidencing the Shares issued in the name of Purchaser, and immediately upon delivery thereof, Purchaser shall deliver to Securities Transfer Corporation (the "Escrow Agent") the Purchase Price. The release of the Purchase Price to the Company shall be effected in accordance with the terms of this Agreement and that certain Escrow Agreement (the "Escrow Agreement") to be entered into by and among the Escrow Agent, the parties hereto and such other parties referenced therein. Section 4. Representations and Warranties of Purchaser. Purchaser acknowledges and understands that the Shares are being acquired for investment in a transaction that is considered to be exempt from registration. In connection with the transactions contemplated hereby, Purchaser hereby represents and warrants to the Company that: 1 a) Purchaser is acquiring the Shares solely for investment purposes and not with a view to, or for resale in connection with, any distribution thereof or with any present intention of distributing or selling any of the Shares, except as allowed by the Securities Act of 1933, as amended, or any rules or regulations promulgated thereunder (collectively, the "Act"). b) Purchaser will hold the Shares subject to all of the applicable provisions of the Act, and Purchaser will not at any time make any sale, transfer, or other disposition of the Shares in contravention of said Act. c) Purchaser acknowledges that it must bear the economic risk of its investment in the Shares for an indefinite period of time since the Shares have not been registered under the Act and therefore cannot be sold unless the Shares are subsequently registered or an exemption from registration is available. d) The sale of the Shares to Purchaser is being made without any public solicitation or advertisements. Section 5. Representations and Warranties of the Company. In connection with the transactions contemplated hereby, the Company hereby represents and warrants to Purchaser as follows, with each such representation and warranty pertaining to the Company and its direct and indirect subsidiaries where applicable: 5.1. Organization, Standing and Power. The Company is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has the requisite corporate power and authority to carry on its business as now being conducted. The 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 Company Material Adverse Effect. For purposes of this Agreement, the term "Company Material Adverse Effect" means any material adverse effect with respect to the Company, taken as a whole, or any change or effect that adversely, or is reasonably expected to adversely, affect the ability of the Company to maintain its current business operations or to consummate the transactions contemplated by this Agreement in any material respect. 5.2. Validity of Transaction. This Agreement and, as applicable, each other agreement contemplated hereby are valid and legally binding obligations of the Company, enforceable in accordance with their respective terms against the Company, except as limited by bankruptcy, insolvency and similar laws affecting creditors generally, and by general principles of equity. At the time that the Shares are sold, assigned, transferred and conveyed to Purchaser pursuant to this Agreement, the Shares will be duly authorized, validly issued, fully paid and nonassessable. The execution, delivery and performance of this Agreement have been duly authorized 2 by the Company and will not violate any applicable federal or state law, any order of any court or government agency or the articles or certificate of incorporation of the Company. The execution, delivery and performance of this Agreement and each other agreement contemplated hereby will not result in any breach of or default under, or result in the creation of any encumbrance upon any of the assets of the Company pursuant to the terms of any agreement by which the Company or any of its respective assets may be bound. No consent, approval or authorization of, or registration or filing with any governmental authority or other regulatory agency, is required for the validity of the execution and delivery by the Company of this Agreement or any documents related thereto. 5.3. Capital Structure. The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.001 per share (the "Company Common Stock"). On the Closing Date hereof, the capitalization of the Company shall be as set forth on Schedule 5.3. No shares of Company Common Stock will be held by the Company in its treasury. All outstanding shares of capital stock of the 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 the 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 the Company may vote are issued or outstanding. Except for this Agreement and as set forth in Schedule 5.3 to this Agreement, the Company does not have, or at or after Closing will not have, any outstanding option, warrant, call, subscription or other right, agreement or commitment which either (a) obligates the Company to issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any shares of the capital stock of the Company, or (b) restricts the voting, disposition or transfer of shares of capital stock of the Company. There are no outstanding stock appreciation rights or similar derivative securities or rights of the Company. 5.4. Authority: Noncontravention. The Company has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes the valid and binding agreement of Purchaser, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies and to 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 consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not, (a) conflict with any of the provisions of the charter documents or bylaws of the Company, (b) 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 3 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, franchise, license or similar instrument or undertaking to which the Company is a party or by which the Company or any of the assets of either entity are bound, result in the creation or imposition of a material Lien or other restriction or encumbrance on any material asset of the Company, which, singly or in the aggregate, would have a Company Material Adverse Effect, or (c) subject to the governmental filings and other matters referred to in the following sentence, violate any domestic or foreign law, rule or regulation or any order, writ, judgment, injunction, decree, determination or award currently in effect except for such violations, which, singly or in the aggregate, would only have an immaterial effect. Except as otherwise required by applicable state or federal securities laws, no consent, approval or authorization of, or declaration or filing with, or notice to, any domestic or foreign governmental agency or regulatory authority (a "Governmental Entity") or any third party which has not been received or made, is required by or with respect to the Company in connection with the execution and delivery of this Agreement by the Company or the consummation by the 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 Company Material Adverse Effect. "Lien" 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. 5.5. Restrictions Upon Registration. The Company agrees that for the twelve month period following the execution date of this Agreement it shall not file a registration statement, of any type, with the Commission for the purpose of registering shares of the Company's common stock held by those persons who received such shares pursuant to that certain Securities Exchange Agreement, dated effective as of June 23, 2004, entered into by and among Sifang Holdings Co., Ltd., a corporation organized under the laws of the Cayman Islands ("Holding Co"), the Company and the shareholders of Holding Co. 5.6. Absence of Certain Changes or Events; No Undisclosed Material Liabilities. Except as otherwise set forth in the Company's periodic reports as filed with the U.S. Securities and Exchange Commission pursuant to the requirements of the Securities Exchange Act of 1934, the Company has no Liabilities. "Liability" means, as to any person, all debts, liabilities and obligations, direct, indirect, absolute or contingent of such person, whether accrued, vested or otherwise, whether known or unknown and whether or not actually reflected, or required in accordance with GAAP to be reflected, in such person's balance sheet. 5.7. Compliance with Applicable Laws. The Company has and after giving effect to the transactions contemplated hereby will have in effect all federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights ("Permits") necessary for it to own, lease 4 or operate its properties and assets and to carry on its business as now conducted, and to the knowledge of the 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 Company Material Adverse Effect. To the Company's knowledge, the Company is in compliance with, and has no liability or obligation under, all applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Entity, including any liability or obligation to undertake any remedial action under hazardous substances laws, except for instances of non-compliance, liabilities or obligations, which individually or in the aggregate would only have an immaterial effect. 5.8. Litigation, etc. As of the date hereof, (a) there is no suit, claim, action or proceeding (at law or in equity) pending or, to the knowledge of the Company, threatened against the Company (including, without limitation, any product liability claims) before any court or governmental or regulatory authority or body, and (b) the 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 Company Material Adverse Effect or (ii) involves an allegation of criminal misconduct or a violation of the Racketeer and Influenced Corrupt Practices Act, as amended. As of the date hereof, there are no suits, actions, claims or proceedings pending or, to the Company's knowledge, threatened, seeking to prevent, hinder, modify or challenge the transactions contemplated by this Agreement. 5.9. Disclosure. The representations and warranties and statements of fact made by the 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. Section 6. Survival of Representations and Warranties. All representations, warranties, covenants, and agreements contained herein shall not be discharged or dissolved upon, but shall survive the closing and shall be unaffected by any investigation made by any party at any time. Section 7. Registration Rights. 7.1. Registration by the Company. (a) Mandatory Registration. As promptly as practicable (but in no event later than 30 days) after the date of this Agreement, the Company shall file a registration statement (the "Registration Statement") with the Commission under the Act covering the Shares. (b) Registration Statement Form. Registrations under this Section 7.1 shall be on such appropriate registration form of the Commission as shall be reasonably selected by the Company. 5 (c) Effective Registration Statement. A registration required pursuant to this Section 7.1 shall not be deemed to have been effected (i) unless the Registration Statement has become effective and remained effective in compliance with the provisions of the Act with respect to the disposition of all of the Shares covered by such Registration Statement until such time as all of the Shares have been disposed of in accordance with the intended methods of disposition by the Purchaser set forth in such Registration Statement (unless the failure to so dispose of such Shares shall be caused solely by reason of a failure on the part of the Purchaser). 7.2. Priority Registrations. Subject to the limitations set forth below, the Registration Statement may include, in addition to the Shares, other securities of the Company which are proposed to be sold for the account of the Company or any other stockholders thereof. 7.3. Registration Procedures. The Company will, as expeditiously as possible: a) prepare and file with the Commission the requisite Registration Statement to effect such registration and thereafter use its reasonable best efforts to cause such Registration Statement to become effective; b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Act with respect to the disposition of all the Shares covered by such Registration Statement until the earlier of the time as all of such Shares have been disposed of in accordance with the intended methods of disposition by the Purchaser set forth in such Registration Statement or the date that the Shares are eligible for resale pursuant to the provisions of Rule 144 under the Act; c) furnish such number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such Registration Statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Act, in conformity with the requirements of the Act, and such other documents, as the Purchaser may reasonably request; d) use its reasonable best efforts (i) to register or qualify the Shares under such other securities or blue sky laws of such States of the United States of America where an exemption is not available and as Purchaser shall reasonably request, (ii) to keep such registration or qualification in effect for so long as such Registration Statement remains in effect, and (iii) to take any other action which may be reasonably necessary or advisable to enable the Purchaser to consummate the disposition in such jurisdictions of the securities to be sold by the Purchaser, except that the Company shall not for 6 any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (d) be obligated to be so qualified or to consent to general service of process in any such jurisdiction; e) use its reasonable best efforts to cause all Shares covered by such Registration Statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the Purchaser to enable the Purchaser to consummate the disposition of such Shares; f) notify the Purchaser at any time when a prospectus relating thereto is required to be delivered under the Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and at the request of the Purchaser promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; g) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and, if required, make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder, and promptly furnish to Purchaser a copy of any amendment or supplement to such Registration Statement or prospectus; h) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all the Shares covered by such Registration Statement from and after a date not later than the effective date of such registration; and i) use its reasonable best efforts to list the Shares on any national securities exchange on which the shares of the same class covered by such Registration Statement are then listed and, if no such shares are so listed, on any national securities exchange on which the common stock is then listed. Purchaser agrees by acquisition of the Shares that, upon receipt of any notice from the Company of the happening of any event of the kind described in subdivision (f) of this Section 7.3, such holder will forthwith discontinue such disposition of the Shares pursuant to the Registration Statement until Purchaser's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (f) of this Section 7.3 and, if so directed by the 7 Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to the Shares current at the time of receipt of such notice. 7.4. Indemnification. (a) Indemnification by the Company. The Company will, and hereby does, indemnify and hold harmless, in the case of the Registration Statement filed pursuant to Section 7.1, the Purchaser and its respective directors, officers, partners, agents and affiliates, against any losses, claims, damages or liabilities, joint or several, to which Purchaser or any such director, officer, partner, agent, affiliate or controlling person may become subject under the Act or otherwise, including, without limitation, the fees and expenses of legal counsel, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company will reimburse Purchaser and each such director, officer, partner, agent, affiliate and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Purchaser, specifically stating that it is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Purchaser or any such director, officer, partner, agent, affiliate or controlling person and shall survive the transfer of such securities by the Purchaser. (b) Indemnification by the Purchaser. As a condition to including the Shares in the Registration Statement, the Company shall have received an undertaking satisfactory to it from the Purchaser, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 7.4(a)) each other seller, if any, the Company, and each director of the Company and each officer of the Company, with respect to any statement or alleged statement in or omission or alleged omission from such Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by the Purchaser specifically stating that it is for use in the preparation of such Registration Statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided, however, that 8 the liability of such indemnifying party under this Section 7.4(b) shall be limited to the amount of proceeds received by such indemnifying party giving rise to such liability. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by the Purchaser. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 7.4 (a) or (b), such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 7.4, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that any indemnified party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action or proceeding in which both the Company and an indemnified party is, or is reasonably likely to become, a party, such indemnified party shall have the right to employ separate counsel at the Company's expense and to control its own defense of such action or proceeding if (a) there are or may be legal defenses available to such indemnified party or to other indemnified parties that are different from or additional to those available to the Company or (b) any actual conflict exists between the Company and such indemnified party that would make such separate representation advisable; provided, however, that the Company may limit the fees and expenses that it pays in any one legal action or group of related legal actions to those fees and expenses of one firm of attorneys (together with appropriate local counsel), which firm of attorneys (together with appropriate legal counsel) shall be designated in writing by a majority of the indemnified parties who are a party to, or are reasonably likely to become parties to, such legal action or group of related legal actions. No indemnifying party shall be liable for any settlement of any action or proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No indemnifying party shall, without the consent of the indemnified party, which consent shall not be unreasonably withheld or delayed, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation or which requires action other than the payment of money by the indemnifying party. (d) Contribution. If the indemnification provided for in this Section 7.4 shall for any reason be held by a court to be unavailable to an indemnified party under Section 7.4(a) or (b) hereof in respect of any loss, claim, damage or liability, or any action in respect thereof, then, in lieu of the amount paid or payable under Section 7.4(a) or (b), the indemnified party and the indemnifying party under Section 7.4(a) or (b) shall contribute to the aggregate losses, claims, damages 9 and liabilities (including legal or other expenses reasonably incurred in connection with investigating the same), (i) in such proportion as is appropriate to reflect the relative fault of the Company and the Purchaser which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action or proceeding in respect thereof, as well as any other relevant equitable considerations or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Purchaser from the offering of the securities covered by such Registration Statement, provided, that for purposes of this clause (ii), the relative benefits received by the Purchaser shall be deemed not to exceed the amount of proceeds received by the Purchaser. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchaser's obligation to contribute as provided in this Section 7.4(d) is several in proportion to the relative value of its respective Shares covered by such Registration Statement and not joint. In addition, no person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or claim effected without such person's consent, which consent shall not be unreasonably withheld. (e) Other Indemnification. Indemnification and contribution similar to that specified in the preceding subdivisions of this Section 7.4 (with appropriate modifications) shall be given by the Company and the Purchaser with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Act. (f) Indemnification Payments. The indemnification and contribution required by this Section 7.4 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. Section 8. Put Option. (a) Subject to the provisions of subparagraphs (b) and (c) or this Section 8, the Company hereby grants to Purchaser an option to require the Company to purchase up to 175,439 Shares at a price of $1.14 per share (the "Put Option"). (b) The Put Option may be exercised at any time after the date that is six months after the Company files the Registration Statement registering the Shares up to and including the earlier of the date that such Registration Statement is declared effective by the Commission or the Shares are eligible for resale under Rule 144 under the Act (the "Expiration Date"). (c) The Put Option may be exercised by written notice given by the Purchaser to the Company and the Escrow Agent exercising the Put Option. If the Put Option is not exercised by the Expiration Date, then the Put Option will terminate, and be null, void and of no further effect immediately following the Expiration Date. 10 Section 9. Entirety and Modification. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements and understandings, whether oral or written, between the parties hereto relating to such subject matter. No modification, alteration, amendment, or supplement to this Agreement shall be valid or effective unless the same is in writing and signed by all parties hereto. Section 10. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their successors and permitted assigns, heirs, and personal representatives. Section 11. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada. IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as of the date first written above. PURCHASER: By: /s/ Gary Evans --------------------------------- Gary Evans COMPANY: BOULDER ACQUISITIONS, INC. By: /s/ Tai Caihua --------------------------------- Tai Caihua -----END PRIVACY-ENHANCED MESSAGE-----