EXHIBIT 10.64
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SHARE PURCHASE AGREEMENT
among
▇▇▇▇.▇▇▇
MEMESTAR LIMITED
and
THE SHAREHOLDERS OF MEMESTAR LIMITED
Dated as of January 3, 2003
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms............................................2
SECTION 1.02. Additional Defined Terms.........................................8
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Interests...............................9
SECTION 2.02. Purchase Price; Deferred Consideration...........................9
SECTION 2.03. Closing..........................................................9
SECTION 2.04. Closing Deliveries..............................................10
SECTION 2.05. Payment of Deferred Consideration...............................10
SECTION 2.06. Adjustment to the Deferred Consideration........................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS
SECTION 3.01. Organization ...................................................12
SECTION 3.02. Subsidiaries....................................................12
SECTION 3.03. Related Entities................................................13
SECTION 3.04. Authority; No Conflict; Required Filings and Consents...........14
SECTION 3.05. Capitalization..................................................15
SECTION 3.06. Corporate Books and Records.....................................16
SECTION 3.07. Financial Statements............................................16
SECTION 3.08. Absence of Certain Changes or Events............................17
SECTION 3.09. Litigation......................................................17
SECTION 3.10. Compliance with Laws............................................17
SECTION 3.11. Material Contracts..............................................18
SECTION 3.12. Intellectual Property...........................................19
SECTION 3.13. Assets..........................................................20
SECTION 3.14. Employee Benefit Matters........................................21
SECTION 3.15. Labor Matters...................................................21
SECTION 3.16. Certain Interests...............................................22
SECTION 3.17. Taxes...........................................................22
SECTION 3.18. Insurance.......................................................23
SECTION 3.19. Real Property...................................................23
SECTION 3.20. Full Disclosure.................................................23
SECTION 3.21. Permits; Compliance.............................................24
SECTION 3.22. Brokers.........................................................24
SECTION 3.23. Exclusivity of Representations..................................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
SECTION 4.01. Shareholder Authority; No Conflict; Required Filings and
Consents........................................................24
SECTION 4.02. Securities Act..................................................25
SECTION 4.03. Ownership of Company Shares.....................................25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 5.01. Organization and Authority......................................26
SECTION 5.02. No Conflict.....................................................26
SECTION 5.03. Consents and Approvals..........................................27
SECTION 5.04. Absence of Litigation...........................................27
SECTION 5.05. Financial Ability...............................................27
SECTION 5.06. Capitalization..................................................27
SECTION 5.07. SEC Filings; Financial Statements...............................28
SECTION 5.08. Investment Purpose..............................................28
SECTION 5.09. Purchaser Shares................................................28
SECTION 5.10. Brokers.........................................................28
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Conduct of Business Prior to the Closing........................28
SECTION 6.02. Access to Information...........................................30
SECTION 6.03. Investigation...................................................31
SECTION 6.04. Confidentiality.................................................31
SECTION 6.05. Regulatory and Other Authorizations; Notices and Consents.......32
SECTION 6.06. Notice of Developments..........................................32
SECTION 6.07. No Solicitation or Negotiation..................................33
SECTION 6.08. Use of Intellectual Property....................................33
SECTION 6.09. Non-Competition.................................................33
SECTION 6.10. Release of Indemnity Obligations................................34
SECTION 6.11. Employee Matters................................................34
SECTION 6.12. Certain Benefits................................................35
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SECTION 6.13. Name Change.....................................................35
SECTION 6.14. Related Entities................................................35
SECTION 6.15. Further Action..................................................36
SECTION 6.16. Post-Closing Performance Undertaking............................36
SECTION 6.17. Related Tax.....................................................37
SECTION 6.18. Resale Restricitons for the Purchser Ordinary Shares............37
SECTION 6.19. Waiver of Right of First Refusal................................37
SECTION 6.20. Repayment of Convertible Loan...................................37
ARTICLE VII
CONDITIONS TO THE TRANSACTIONS
SECTION 7.01. Conditions to Obligations of the Company and the Shareholders...37
SECTION 7.02. Conditions to Obligations of the Purchaser......................38
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties......................39
SECTION 8.02. Indemnification by the Shareholders.............................40
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination.....................................................41
SECTION 9.02. Effect of Termination...........................................42
SECTION 9.03. Amendment.......................................................42
SECTION 9.04. Waiver..........................................................42
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses.......................................................42
SECTION 10.02. Notices........................................................43
SECTION 10.03. Third-Party Beneficiaries......................................44
SECTION 10.04. Public Announcements...........................................44
SECTION 10.05. Severability...................................................44
SECTION 10.06. Assignment; Binding Effect.....................................44
SECTION 10.07. Incorporation of Disclosure Schedule; Exhibits.................45
SECTION 10.08. Governing Law..................................................45
SECTION 10.09 Event of Force Majeure.........................................45
SECTION 10.10. Headings.......................................................45
SECTION 10.11. Counterparts...................................................45
SECTION 10.12. Entire Agreement...............................................45
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SECTION 10.13. Waiver of Jury Trial...........................................46
EXHIBITS
Exhibit A The Shareholders
Exhibit B-1 Beijing Star-Village Equity Transfer Agreement
Exhibit B-2 GMMT Equity Transfer Agreement
Exhibit C Allocation of Purchase Price
Exhibit D Company Employees who have executed Employment Agreements
Exhibit E Form of Legal Opinion of the Company's Legal Counsel
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SHARE PURCHASE AGREEMENT, dated as of January 3, 2003 (this
"Agreement"), among ▇▇▇▇.▇▇▇, a Cayman Islands corporation (the "Purchaser"),
MEMESTAR LIMITED, a British Virgin Islands limited liability corporation (the
"COMPANY"), and the SHAREHOLDERS of the Company identified on the signature
pages of this Agreement (the "Shareholders").
W I T N E S S E T H:
WHEREAS, each Shareholder owns such number of ordinary shares, par
value HK$0.01 per share (the "COMPANY ORDINARY SHARES"), of the Company and such
number of Series A convertible preferred shares, par value HK$0.01 per share
(the "COMPANY PREFERRED SHARES" and, together with the Company Ordinary Shares,
the "COMPANY SHARES"), of the Company as is set forth opposite such
Shareholders' name on EXHIBIT A hereto, which represents all of the outstanding
share capital of the Company (the "SHARES");
WHEREAS, the Company, directly and through its various subsidiaries
and contractual arrangements with Beijing ▇▇▇▇-▇▇▇▇▇▇▇.▇▇▇ Cultural Development
Company, a People's Republic of China limited liability corporation ("BEIJING
STAR-VILLAGE"), and Guangzhou Media Message Technologies, Inc., a People's
Republic of China limited liability corporation ("GMMT" and, together with
Beijing Star-Village, the "RELATED ENTITIES"), is engaged in the business of
providing mobile data value-added services in the PRC (the "BUSINESS");
WHEREAS, as a condition and inducement to the Purchaser entering
into this Agreement and incurring the obligations set forth herein, concurrently
with the execution and delivery of this Agreement, the shareholders of Guangdong
Sina Internet Information Services Company Limited, a People's Republic of China
limited liability corporation ("GUANGDONG SINA") are entering into equity
transfer agreements with each of the shareholders of the Related Entities; and
WHEREAS, each Shareholder wishes to sell to the Purchaser, and the
Purchaser wishes to purchase from such Shareholder, all of the outstanding share
capital of the Company owned by such Shareholder, all upon the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, in consideration of the promises and the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound hereby, the parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ACQUISITION DOCUMENTS" means this Agreement, the Ancillary
Agreements, and any certificate, Financial Statements, report or other
document delivered pursuant to this Agreement or the transactions
contemplated by this Agreement.
"ACTION" means any claim, action, suit, litigation, arbitration,
inquiry, proceeding or investigation by or pending before any Governmental
Authority.
"AFFILIATE" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such
specified Person.
"ANCILLARY AGREEMENTS" means the Employment Agreements and the
Equity Transfer Agreements.
"ASSETS" means the assets and properties of the Company, the Company
Subsidiaries and the Related Entities.
"AVERAGE CLOSING PRICE" means the average of the per share closing
prices on The Nasdaq Stock Market of the Purchaser Ordinary Shares during
the 60 consecutive trading days ending on and including the date that is
30 trading days after the date of the Letter of Intent; PROVIDED, HOWEVER,
that in the event of the public disclosure by the Purchaser of the
transactions contemplated by the Letter of Intent prior to the date that
is 30 trading days after the date of the Letter of Intent, the Average
Closing Price shall mean the average of the per share closing prices on
The Nasdaq Stock Market of the Purchaser Ordinary Shares during such
number of consecutive trading days during the period commencing 30 trading
days prior to the date of the Letter of Intent and ending on and including
the day prior to the date of such public disclosure.
"BEIJING STAR-VILLAGE EQUITY TRANSFER AGREEMENT" means the agreement
among Beijing Star-Village, ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇, Li Rubao, ▇▇ ▇▇▇▇▇▇▇ and the shareholders of Guangdong Sina,
pursuant to which 100% of the equity interest of Beijing Star-Village will
be transferred to the shareholders of Guangdong Sina. The Beijing
Star-Village Equity Transfer Agreement will be substantially in the form
of EXHIBIT B-1.
"BUSINESS DAY" means any day on which banks are not required or
authorized to close in the City of San Francisco, California or Hong Kong.
"CLAIMS" means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations, proceedings, consent orders or
consent agreements.
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"COMPANY ACCOUNTANTS" means Deloitte & Touche.
"COMPANY DISCLOSURE SCHEDULE" means the disclosure schedule
delivered by the Company to the Purchaser concurrently with the execution
of this Agreement and which provides an exception to or otherwise
qualifies (in each case in reasonable detail and with specific Section
references as is necessary to reasonably determine the effect of such
exception or qualification) the representations and warranties of the
Company and the Shareholders specifically contained in Article III hereof.
"COMPUTER RECORDS" means the computer records of the Company
reflecting the operating statistics of the Company on a given day
(including the number of Paying Users).
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly or as trustee,
personal representative or executor, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee, personal representative or
executor, by contract, credit arrangement or otherwise.
"CONVERTIBLE LOAN" means the convertible loan under the Convertible
Promissory Note issued by the Company to DragonTech Ventures Limited,
dated July 26, 2002, as amended, the principal amount of which is
US$1,000,000.
"COPYRIGHTS" means copyrights in works of authorship of any type,
including Software and mask works, registrations and applications for
registration thereof throughout the world, all rights therein provided by
international treaties and conventions, all moral and common law rights
thereto, and all other rights associated therewith.
"ENCUMBRANCE" means any security interest, pledge, hypothecation,
mortgage, lien (including, without limitation, environmental and tax
liens), violation, charge, lease, license, encumbrance, servient easement,
adverse claim, reversion, reverter, preferential arrangement, restrictive
covenant, condition or restriction of any kind, including, without
limitation, any restriction on the use, voting, transfer, receipt of
income or other exercise of any attributes of ownership.
"EQUITY TRANSFER AGREEMENTS" means the Beijing Star-Village Equity
Transfer Agreement and the GMMT Equity Transfer Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FOREIGN CORRUPT PRACTICES ACT" means the Foreign Corrupt Practices
Act, 15 U.S.C Sections 78dd-1 et seq., as amended.
"GMMT EQUITY TRANSFER AGREEMENT" means the agreement among GMMT, the
shareholders of GMMT and the shareholders of Guangdong Sina, pursuant to
which 100% of the equity interest of GMMT will be transferred to the
shareholders of
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Guangdong Sina. The GMMT Equity Transfer Agreement will be substantially
in the form of EXHIBIT B-2.
"GOVERNMENTAL AUTHORITY" means any PRC or non-PRC national,
supranational, state, provincial, local or similar government,
governmental, regulatory or administrative authority, agency or commission
or any court, tribunal, or judicial or arbitral body.
"GOVERNMENTAL ORDER" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Authority.
"INDEBTEDNESS" means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed
money, (b) all obligations of such Person for the deferred purchase price
of property or services, (c) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of
such property), (e) all obligations of such Person as lessee under leases
that have been or should be, in accordance with US GAAP, or PRC GAAP, as
the case may be, recorded as capital leases, (f) all obligations,
contingent or otherwise, of such Person under acceptance, letter of credit
or similar facilities, (g) all obligations of such Person to purchase,
redeem, retire, defease or otherwise acquire for value any share capital
of such Person or any warrants, rights or options to acquire such share
capital, valued, in the case of redeemable preferred stock, at the greater
of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends, (h) all Indebtedness of others referred to in clauses
(a) through (g) above guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness,
(ii) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Indebtedness or to assure the holder of
such Indebtedness against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a creditor against
loss, and (i) all Indebtedness referred to in clauses (a) through (g)
above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Encumbrance
on property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness.
"INTELLECTUAL PROPERTY" means all rights in any and all of the
foregoing throughout the world: (a) Patents, (b) Trademarks, (c) Trade
Secrets, (d) Copyrights, and (e) Software.
"LAW" means any PRC or non-PRC national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule,
code, order, requirement or rule of law (including, without limitation,
common law), other than any non-public or
4
"internal" (NEIBU) policy, rule, order, guidance or administrative
practice of, or applied by, any Governmental Authority in the PRC.
"LEASED REAL PROPERTY" means the real property leased by the
Company, the Company Subsidiaries and the Related Entities, together with,
to the extent leased by the Company, the Company Subsidiaries and the
Related Entities, all buildings, facilities, fixtures, systems, equipment
and items of personal property of the Company, any Company Subsidiary or
any Related Entity attached or appurtenant thereto and all easements and
licenses rights relating to the foregoing.
"LETTER OF INTENT" means the Letter of Intent, dated December 8,
2002, between the Purchaser and the Company.
"LIABILITIES" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising
under any Law (including, without limitation, any Tax Law), Action or
Governmental Order and those arising under any contract, license
agreement, arrangement, commitment or undertaking and in the case of the
Company, including its obligations under the Convertible Loan.
"LICENSED INTELLECTUAL PROPERTY" means Intellectual Property
licensed from any third party to, or licensed to any third party by, the
Company, the Company Subsidiaries or the Related Entities pursuant to the
Licenses and used or intended to be used in connection with the business
of the Company, the Company Subsidiaries or any Related Entity.
"LICENSES" means (a) licenses of Intellectual Property by the
Company, the Company Subsidiaries or the Related Entities to third
parties, (b) licenses of Intellectual Property by third parties to the
Company, the Company Subsidiaries or the Related Entities, (c) agreements
between the Company, any Company Subsidiary or any Related Entity and
third parties relating to the development or use of Intellectual Property,
the development or transmission of data, or the use, modification,
framing, linking, advertisement, or other practices with respect to
Internet web sites.
"MANAGEMENT SHAREHOLDERS" means ▇▇▇▇ ▇▇, ▇▇ ▇▇, ▇▇▇ ▇▇▇▇, Li ▇▇ ▇▇▇
and ▇▇▇▇ ▇▇▇.
"MATERIAL ADVERSE EFFECT" means any event, circumstance, change in
or effect on the Company or the Company Subsidiaries or the Related
Entities or the Purchaser or its subsidiaries, as the context dictates,
that, individually or in the aggregate has had or is reasonably expected
to have a material adverse effect on the business, results of operations
or the financial condition of the Company or the Company Subsidiaries or
the Related Entities or the Purchaser and its subsidiaries, as the context
dictates, taken as a whole; PROVIDED, HOWEVER, that any material adverse
effect arising out of or resulting from (a) an event or series of events
or circumstances affecting the economy of the PRC generally, (b) a change
or changes in the fee rate of the mobile communications operators in China
for mobile data value-added services as a result of a change in the
regulations,
5
rules or policies of the Ministry of Information Industry of the PRC or
any affiliate of China Mobile Communications Corporation, unless, on the
hypothetical assumption that such change or changes had been effective as
of December 1, 2002, such change or changes would have resulted in a
decrease of more than 35% in the monthly revenue in December, 2002 of the
Company, (c) the entering into of this Agreement or the consummation of
the transactions contemplated hereby or the announcement thereof shall be
excluded in determining whether a Material Adverse Effect has occurred.
"OWNED INTELLECTUAL PROPERTY" means Intellectual Property owned by
the Company, any Company Subsidiary or any Related Entity and used or
intended to be used in connection with the business of the Company, the
Company Subsidiaries or any Related Entity.
"PAID SERVICE" means any of Yi Dong Fei ▇▇▇▇▇ ▇▇▇ Nu [(CHINESE
CHARACTERS)], Yi Dong ▇▇▇▇ ▇▇ ▇▇ [(CHINESE CHARACTERS)], Yi Dong You ▇▇
▇▇▇▇▇ [(CHINESE CHARACTERS)] and Yi Dong San ▇▇▇ ▇▇▇ [(CHINESE
CHARACTERS)] being offered by the Company, the Company Subsidiaries
and/or the Related Entities.
"PATENTS" means patents, patent applications and statutory invention
registrations, including reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations thereof, and all
rights therein provided by international treaties and conventions.
"PAYING USER" means any user that (i) has subscribed for any of the
Paid Services and (ii) is obligated to pay the service fee for such Paid
Services when due as of the date of determination as to whether a user is
a Paying User. For the purposes of this definition, a user who is
obligated to pay the services fee for the Paid Services when due, but whom
a telecommunications carrier has failed to ▇▇▇▇ or from whom such carrier
has failed to collect for any reason, should still be considered to be a
Paying User.
"PERMITTED ENCUMBRANCES" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced and as to which none of the Company, any Company
Subsidiary or any Related Entity is otherwise subject to civil or criminal
liability due to its existence: (a) liens for Taxes, assessments and
governmental charges or levies not yet due and payable; (b) Encumbrances
imposed by Law, such as materialmen's, mechanics', carriers', workmen's
and repairmen's liens and other similar liens arising in the ordinary
course of business securing obligations that (i) are not overdue for a
period of more than 30 days and (ii) are not in excess of RMB250,000 (or
its equivalent in any other currency) in the case of a single property or
RMB1,000,000 (or its equivalent in any other currency) in the aggregate at
any time; (c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations; and (d) minor survey exceptions, reciprocal easement
agreements and other customary encumbrances on title to real property that
(i) were not incurred in connection with any Indebtedness, (ii) do not
render title to the property encumbered thereby
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unmarketable and (iii) do not, individually or in the aggregate,
materially adversely affect the value of or the use of such property for
its current and anticipated purposes.
"PERSON" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, group, trust,
association or other organization or entity or a government or a political
subdivision, agency or instrumentality of a government.
"PRC" means the People's Republic of China.
"PRC GAAP" means PRC Accounting Standards for Business Enterprises
in effect from time to time applied consistently throughout the periods
involved.
"PURCHASER ACCOUNTANTS" means PricewaterhouseCoopers LLP.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHAREHOLDERS AGREEMENT" means the Second Amended and Restated
Shareholder's Agreement, dated August 13, 2002, among DragonTech Ventures
Limited, ▇▇▇▇-▇▇▇▇▇▇▇.▇▇▇ Corporation, ▇▇▇▇ ▇▇, each of the Persons listed
on SCHEDULE 1 thereto, and the Company.
"SOFTWARE" means computer software, programs and databases in any
form, including source code, object code, operating systems and
specifications, data, databases, database management code, utilities,
graphical user interfaces, menus, images, icons, forms, methods of
processing, software engines, platforms, and data formats, all versions,
updates, corrections, enhancements, replacements and modifications
thereof, and all related documentation, developer notes, comments and
annotations.
"SUBSIDIARY" of any Person has the meaning set forth in Rule 405
promulgated under the Securities Act.
"TAX" or "TAXES" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales,
use, share capital, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer,
value added, or gains taxes; license, registration and documentation fees;
and customs duties, tariffs, and similar charges.
"TAX RETURN" shall mean any return, declaration, report, claim for
refund, form, or information or return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendments
thereof.
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"TRADE SECRETS" means trade secrets, know-how and other confidential
or proprietary technical, business and other information, including
research and development information, technology, drawings,
specifications, designs, plans, proposals, technical data, financial,
marketing and business data, business and marketing plans, pricing and
cost information, customer information, and all rights in any jurisdiction
to limit the use or disclosure thereof.
"TRADEMARKS" means trademarks, service marks, trade dress, logos,
trade names, corporate names, URL addresses, domain names, symbols,
slogans and other indicia of source or origin, including the goodwill of
the business symbolized thereby or associated therewith, common law rights
thereto, registrations and applications for registration thereof
throughout the world, all rights therein provided by international
treaties and conventions, and all other rights associated therewith.
"US GAAP" means the accounting principles generally accepted in the
United States of America, applied consistently throughout the periods
involved by either the Company or Purchaser, as the case may be.
"WFOE" means ▇▇▇▇-▇▇▇▇▇▇▇.▇▇▇ (Beijing) Internet Technology Limited.
SECTION 1.02. ADDITIONAL DEFINED TERMS. The following terms have the
meanings set forth in the Sections set forth below:
DEFINITION LOCATION
Aggregate Purchase Price Section 2.02
Agreement Preamble
Beijing Star-Village Recitals
Business Recitals
Cash Consideration Section 2.02
Closing Section 2.03
Closing Date Section 2.03
Company Preamble
Company Marks Section 6.08
Company Ordinary Shares Recitals
Company Permits Section 3.21
Company Preferred Shares Recitals
Company Shares Recitals
Company Subsidiaries Section 3.02(a)
Corporate Transaction Section 6.11(a)
Deferred Cash Consideration Section 2.02
Deferred Consideration Section 2.02
Deferred Share Consideration Section 2.02
Employment Agreements Section 7.02(f)
Financial Statements Section 3.07(a)
for cause Section 2.05(a)
Force Majeure Section 10.09
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GMMT Recitals
Gross Revenues Section 6.16(a)
Guangdong Sina Recitals
Loss Section 8.02(a)
Material Contracts Section 3.11(a)
Operating Benchmark Section 6.16(a)
Payment Date Section 2.05(a)
Projections Section 6.02(b)
Purchaser Preamble
Purchaser Indemnified Party Section 8.02(a)
Purchaser Ordinary Shares Section 2.02
Purchaser SEC Reports Section 5.07(a)
Related Entities Recitals
Restricted Period Section 6.09(a)
Shareholders Preamble
Shares Recitals
Share Consideration Section 2.02
Shortfall Section 2.06
Supplemental Data Section 6.02(b)
Third Party Claims Section 8.02(b)
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE OF THE INTERESTS. Upon the terms and
subject to the conditions of this Agreement, at the Closing, each Shareholder
shall sell, assign, transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to the Purchaser, and the Purchaser shall
purchase, all of the Company Ordinary Shares and Company Preferred Shares owned
by such Shareholder set forth opposite such Shareholder's name on EXHIBIT A.
SECTION 2.02. PURCHASE PRICE; DEFERRED CONSIDERATION. Subject to
adjustment pursuant to Section 2.06 below, the aggregate purchase price to be
paid for the Shares and the covenants contained in Section 6.09 shall be
US$20,777,675 (the "AGGREGATE PURCHASE PRICE"), of which (i) US$10,277,675 less
the US dollar equivalent of RMB1,000,000 determined using the basic inter-bank
exchange rate published by the People's Bank of China on the business day
immediately preceding the Closing Date (the "CASH Consideration") shall be paid
pursuant to Section 2.04(c), (ii) the number of ordinary shares, par value
$0.133 per share (the "PURCHASER ORDINARY Shares"), of the Purchaser (the "SHARE
CONSIDERATION" ) equal to the quotient obtained by dividing $2,625,000 by the
Average Closing Price shall be paid pursuant to Section 2.04(d), and (iii) (A)
US$5,250,000 (the "DEFERRED CASH CONSIDERATION") and (B) the number of Purchaser
Ordinary Shares (the "DEFERRED SHARE CONSIDERATION" and, together with the
Deferred Cash Consideration, the "DEFERRED CONSIDERATION") equal to the quotient
obtained by dividing $2,625,000 by the Average Closing Price shall be paid
pursuant to Section 2.05.
9
SECTION 2.03. CLOSING. As promptly as practicable following the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII hereof (or such other date as may be agreed by each of the parties hereto),
the closing of the transactions contemplated by this Agreement (the "CLOSING")
shall take place at the offices of Shearman & Sterling, 2318 China World Tower
Two, 1 Jianguomenwai Dajie, Beijing, China (or such other place as the parties
may agree). The date and time of the Closing are herein referred to as the
"CLOSING DATE".
SECTION 2.04. CLOSING DELIVERIES. At the Closing:
(a) the Purchaser, the Company and the Shareholders shall deliver to
each other, unless delivered prior to the Closing, the certificates and
other documents required to be delivered hereunder prior to or on the
Closing Date;
(b) the Shareholders shall deliver to the Purchaser certificates
evidencing the Shares, duly endorsed in blank, or accompanied by powers
duly executed in blank, in form satisfactory to the Purchaser and with all
required stock transfer tax stamps affixed;
(c) the Purchaser shall deliver to each Shareholder the portion of
the Cash Consideration set forth opposite such Shareholder's name on
EXHIBIT C in cash in U.S. dollars by check or wire transfer in immediately
available funds to an account designated in writing by such Shareholder;
and
(d) the Purchaser shall deliver a share certificate to each
Management Shareholder representing the portion of the Share Consideration
set forth opposite such Management Shareholder's name on EXHIBIT C.
SECTION 2.05. PAYMENT OF DEFERRED CONSIDERATION. (a) Subject to
adjustment pursuant to Section 2.06 below, the Purchaser shall pay to each
Management Shareholder 25% of the Deferred Cash Consideration set forth opposite
such Management Shareholder's name on EXHIBIT C, on each of the following dates
(each a "PAYMENT DATE"):
(A) 135 calendar days after the Closing Date;
(B) 270 calendar days after the Closing Date;
(C) 405 calendar days after the Closing Date; and
(D) 540 calendar days after the Closing Date;
PROVIDED, HOWEVER, that if the employment of any of ▇▇ ▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇
and ▇▇ ▇▇▇▇▇ is terminated voluntarily by such employee or is terminated for
cause by the Purchaser or its designated affiliate prior to any Payment Date,
then such employee shall not receive the Deferred Cash Consideration which would
otherwise be payable on such Payment Date and any subsequent Payment Date. For
the purposes of this Section 2.05, "FOR CAUSE" shall mean the occurrence of any
of the following, subject only to any statutory requirement of any applicable
law: (i) the sustained dereliction by the Management Shareholder with respect to
his duties as an executive for a period of three consecutive months after
receipt of written notice by the Company and a reasonable opportunity for the
Management Shareholder to correct the same
10
within a reasonable period specified by the Company; or (ii) the criminal
conviction of the Management Shareholder in connection with any theft, fraud or
other criminal offense by the Management Shareholder.
(b) The Deferred Cash Consideration shall be paid in cash in U.S.
dollars by check or wire transfer in immediately available funds to an account
designated in writing by each Management Shareholder.
(c) On the first anniversary of the Closing Date, the Purchaser
shall deliver a share certificate to each Management Shareholder representing
the portion of the Deferred Share Consideration set forth opposite such
Management Shareholder's name on EXHIBIT C; PROVIDED, HOWEVER, that if the
employment of any of ▇▇ ▇▇, Cai Feng, ▇▇▇▇ ▇▇▇ and ▇▇ ▇▇▇▇▇ is terminated
voluntarily by such employee or is terminated for cause by the Purchaser or its
designated affiliate prior to the first anniversary of the Closing Date, then
such employee shall not receive any of the Deferred Share Consideration;
PROVIDED FURTHER, HOWEVER, that if the employment of ▇▇▇▇ ▇▇ is terminated for
any reason, he shall nonetheless be entitled to receive the portion of the
Deferred Share Consideration set forth opposite his name on EXHIBIT C on the
first anniversary of the Closing Date.
(d) If, during the period (i) between the date hereof and the
Closing Date or (ii) between the Closing Date and the date of payment of the
Deferred Share Consideration pursuant to Section 2.05(c) above, any change in
the share capital of the Purchaser shall occur by reasons of reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereof with a record date during such period or
any similar event, the Deferred Share Consideration shall be appropriately
adjusted.
(e) No certificates or scrip representing fractional Purchaser
Ordinary Shares shall be issued in connection with the payment of the Deferred
Share Consideration, and such fractional share interests will not entitle the
owner thereof to vote or to any other rights of a shareholder of the Purchaser.
Each holder of a fractional share interest shall be paid an amount in cash
(without interest) equal to the product obtained by multiplying (i) such
fractional share interest to which such holder (after taking into account all
fractional share interests then held by such holder) would otherwise be entitled
by (ii) the Average Closing Price.
(f) The Purchaser Ordinary Shares to be issued pursuant to this
Agreement have not been, and will not be, registered under the Securities Act,
and will be issued in a transaction that is exempt from the registration
requirements of the Securities Act. Such Purchaser Ordinary Shares will be
"restricted securities" under the U.S. federal securities laws and cannot be
offered or resold except pursuant to registration under the Securities Act or an
available exemption from registration. All certificates representing such
Purchaser Ordinary Shares shall bear, in addition to any other legends required
under applicable securities laws, the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and may not be transferred except pursuant to registration under the
Securities Act or pursuant to an available exemption from
registration."
11
Such legend shall be removed at such time as the Purchaser Ordinary Shares
represented by such certificate have been registered under the Securities Act or
otherwise as appropriate. In order to prevent any transfer from taking place in
violation of this Agreement or applicable law, the Purchaser may, in its
reasonable discretion, cause a stop transfer order to be placed with its
transfer agent(s) with respect to the Purchaser Ordinary Shares.
SECTION 2.06. ADJUSTMENT TO THE DEFERRED CONSIDERATION. In the event
that the Operating Benchmark is determined pursuant to Section 6.16 to be less
than 2,000,000 (such shortfall, being the "SHORTFALL"), (a) the total amount of
the Deferred Cash Consideration (in the case of the Management Shareholders)
shall be reduced by an amount equivalent to the product of (i) the total amount
of the Deferred Cash Consideration and (ii) the percentage of 2,000,000
constituted by the Shortfall; and (b) DragonTech Ventures Limited shall pay to
the Purchaser an amount equivalent to the product of (i) the total amount of the
Cash Consideration paid by the Purchaser to DragonTech Ventures Limited under
Section 2.04 and (ii) the percentage of 2,000,000 constituted by the Shortfall
in cash in US dollars to an account designated in writing by the Purchaser;
PROVIDED, HOWEVER, that the total amount to be reduced or returned under clause
(a) and (b) above shall not exceed 10% of the Aggregate Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS
As an inducement to Purchaser to enter into this Agreement, the
Company and each Shareholder, jointly and severally, hereby represents and
warrants to the Purchaser as follows:
SECTION 3.01. ORGANIZATION. The Company is an international business
company duly incorporated and validly existing under the laws of the British
Virgin Islands and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. The Company has heretofore made available to the Purchaser a complete
and correct copy of the Memorandum and Articles of Association of the Company.
Such Memorandum and Articles of Association are in full force and effect. The
Company is not in violation of any of the provisions of its Memorandum and
Articles of Association.
SECTION 3.02. SUBSIDIARIES. (a) Section 3.02 of the Company
Disclosure Schedule sets forth a correct and complete list of all the
subsidiaries of the Company (the "COMPANY SUBSIDIARIES") and the Related
Entities, listing for each Company Subsidiary and each Related Entity its name,
the type of entity, the jurisdiction and date of its incorporation or
organization, its authorized share capital, partnership capital or equivalent,
the number and type of its issued and outstanding shares of share capital,
partnership interests or similar ownership interests and the current ownership
of such shares, partnership interests or similar ownership interests.
12
(b) Other than the Company Subsidiaries and the Related Entities,
there are no other corporations, partnerships, joint ventures, associations or
other entities in which the Company, any Company Subsidiary or any Related
Entity owns, of record or beneficially, any direct or indirect equity or other
interest or any right (contingent or otherwise) to acquire the same. Other than
the Company Subsidiaries and the Related Entities, none of the Company, any
Company Subsidiary or any Related Entity is a member of (nor is any part of the
Business conducted through) any partnership nor is the Company, any Company
Subsidiary or any Related Entity a participant in any joint venture or similar
arrangement.
(c) Each Company Subsidiary: (i) is duly organized and validly
existing under the laws of its jurisdiction of incorporation and (ii) has all
necessary power and authority to own, operate or lease the properties and assets
owned, operated or leased by such Company Subsidiary and to carry on its
business as it has been and is currently conducted by such Company Subsidiary.
(d) All actions taken by each Company Subsidiary have been duly
authorized and no Company Subsidiary has taken any action that in any respect
conflicts with, constitutes a default under or results in a violation of any
provision of its certificate of incorporation or by-laws (or similar
organizational documents). True and complete copies of the certificate of
incorporation and by-laws (or similar organizational documents), in each case as
in effect on the date hereof, of each Company Subsidiary have been delivered by
the Company to the Purchaser.
SECTION 3.03. RELATED ENTITIES. (a) Each Related Entity is a limited
liability company duly incorporated and validly existing under the laws of the
PRC and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Each
Related Entity has all necessary corporate power and authority to execute and
deliver the Equity Transfer Agreement to which it is a party, to perform its
obligations thereunder and to consummate the transactions contemplated thereby.
(b) The registered capital of Beijing Star-Village is RMB100,000,
which has been fully paid up. The registered capital of GMMT is RMB2,500,000,
which has been fully paid up. Section 3.03(b) of the Company Disclosure Schedule
sets forth the names of all of the shareholders of each Related Entity and the
equity interest of each Related Entity owned by each such shareholder. Except as
set forth in Section 3.03(b) of the Company Disclosure Schedule, the equity
interests in the Related Entities are not subject to or issued in violation of
any purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any applicable Law, the articles
of association or any contract to which any Related Entity is a party or is
otherwise bound. There are no bonds, indentures, notes or other indebtedness of
any Related Entity having the right to vote (or to convert into, or exchangeable
for, securities having the right to vote) on any matters on which holders of its
equity interests may vote. Except as set forth in Section 3.03(b) of the Company
Disclosure Schedule, there are no voting trusts, shareholder agreements, proxies
or other arrangements or understandings in effect with respect to the voting or
transfer of any of the equity interests to which any Related Entity is a party
or is otherwise bound.
(c) Except as set forth in Section 3.03(c) of the Company Disclosure
Schedule, there are no permits or licenses required in connection with the
operation of the business as
13
currently conducted by each of the Related Entities which have not been obtained
or renewed by such entity. Except as set forth in Section 3.03(c) of the Company
Disclosure Schedule, the Company has no reason to believe any of such permits or
licenses will be revoked or otherwise terminated or not renewed. The Related
Entities are in compliance with the terms of all their respective permits and
licenses.
(d) Except for the consents, approvals, authorizations and other
actions set forth in Section 3.04(c) of the Company Disclosure Schedule, the
execution and delivery by each Related Entity of the Equity Transfer Agreement
to which it is a party does not, and the performance of by such Related Entity
of the Equity Transfer Agreement to which it is a party will not, (i) conflict
with or violate the organizational documents of such Related Entity, (ii)
assuming that all consents, approvals, authorizations, filings and other actions
or obligations set forth in Section 3.04(c) of the Company Disclosure Schedule
have been obtained or made, as the case may be, conflict with or violate any Law
applicable to such Related Entity or by which any property or asset of such
Related Entity is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any property or asset of the Related Entity pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation.
SECTION 3.04. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The Company has all necessary corporate power and authority to execute and
deliver this Agreement and each of the Ancillary Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by the
Company of this Agreement and the Ancillary Agreements to which it is a party
and the consummation by the Company of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action and no
other proceedings on the part of the Company are necessary to authorize this
Agreement and the Ancillary Agreements or to consummate the transactions
contemplated hereby and thereby. This Agreement and the Ancillary Agreements to
which the Company is a party have been duly and validly executed and delivered
by the Company and, assuming the due authorization, execution and delivery by
the other parties hereto and thereto, constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.
(b) The execution and delivery of this Agreement and the Ancillary
Agreements by the Company do not, and the performance of this Agreement and the
Ancillary Agreements by the Company will not, (i) violate, conflict with or
result in the breach of any provision of the Memorandum and Articles of
Association (or similar organizational documents) of the Company, any Company
Subsidiary or any Related Entity, (ii) conflict with or violate (or cause an
event which could have a Material Adverse Effect as a result of) any Law or
Governmental Order applicable to the Company, any Company Subsidiary or any
Related Entity or any of the Company's, the Company Subsidiaries' and the
Related Entities' respective assets, properties or businesses including, without
limitation, the Business, or (iii) conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of
14
any Encumbrance on any of the Shares or Assets pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Company, any Company
Subsidiary or any Related Entity is a party or by which any of the Shares or any
of the Assets is bound or affected, except, in the case of clauses (ii) and
(iii) above, for conflicts, violations, breaches, defaults, rights of
termination, amendment, acceleration or cancellation, or Encumbrances as would
not, individually or in the aggregate, have a Material Adverse Effect.
(c) Except as set forth in Section 3.04(c) of the Company Disclosure
Schedule, the execution, delivery and performance of this Agreement and the
Ancillary Agreements by the Company and the Related Entities do not and will not
require any consent, approval, authorization or other order of, action by,
filing with or notification to, any Governmental Authority.
SECTION 3.05. CAPITALIZATION. (a) The authorized share capital of
the Company consists of (i) 80,000,000 Company Ordinary Shares and (ii)
20,000,000 Company Preferred Shares. As of the date hereof, (x) 60,920,211
Company Ordinary Shares and 15,230,053 Company Preferred Shares, are issued and
outstanding, all of which are validly issued, fully paid and nonassessable and,
to the knowledge of the Company and the Shareholders after due inquiry, are
owned of record and beneficially by the Shareholders, free and clear of any
Encumbrances (other than Encumbrances created by (i) this Agreement in favor of
the Purchaser or (ii) the Shareholders Agreement), in the amounts set forth on
EXHIBIT A, and (y) no shares of share capital of the Company are held in the
treasury of the Company. There are no other shares of share capital or
securities convertible into or exercisable for shares of share capital of the
Company issued and outstanding. Except for the Convertible Loan and except as
set forth in Section 3.05 of the Company Disclosure Schedule, there are no
options, warrants, notes, convertible securities or other rights issued or
granted by the Company, or any agreements, arrangements or commitments to which
the Company is a party of any character relating to the issued or unissued share
capital of the Company or obligating the Company to issue or sell any shares of
share capital, options, warrants or convertible securities of, or other equity
interests in, the Company. All Company Ordinary Shares subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of share capital of the Company. Except as set forth in
Section 3.05 of the Company Disclosure Schedule, there are no material
outstanding contractual obligations of the Company to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in,
any Person.
(b) The stock register of the Company accurately records: (i) the
name and address of each Person owning Company Shares and (ii) the certificate
number of each certificate evidencing shares of share capital issued by the
Company, the number of shares evidenced by each such certificate, the date of
issuance thereof and, in the case of cancellation, the date of cancellation.
(c) The registered capital of each Company Subsidiary established in
the PRC has been paid in full by the Company. All the outstanding shares of
share capital of, or other
15
interests in, each Company Subsidiary are validly issued, fully paid,
nonassessable and, except with respect to wholly owned Company Subsidiaries,
free of preemptive rights and are owned by the Company, whether directly or
indirectly, free and clear of all Encumbrances. There are no options, warrants,
convertible securities or other rights, agreements, arrangements or commitments
of any character relating to the share capital of, or other interests in, any
Company Subsidiary or obligating the Company or any Company Subsidiary to issue
or sell any shares of share capital of, or any other interest in, any Company
Subsidiary. There are no voting trusts, shareholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer of
any shares of share capital of or any other interests in any Company Subsidiary.
(d) The stock register of each Company Subsidiary (or, in the case
of the WFOE, its articles of association) accurately records: (i) the name and
address of each Person owning shares of share capital of such Company Subsidiary
and (ii) the certificate number of each certificate evidencing shares of share
capital issued by such Subsidiary, the number of shares evidenced by each such
certificate, the date of issuance thereof and, in the case of cancellation, the
date of cancellation.
SECTION 3.06. CORPORATE BOOKS AND RECORDS. The minute books of the
Company, the Company Subsidiaries and the Related Entities contain accurate
records of all meetings and accurately reflect all other actions taken by the
shareholders, Boards of Directors and all committees of the Boards of Directors
of the Company, the Company Subsidiaries and the Related Entities. Complete and
accurate copies of all such minute books and of the stock register or the
equivalent thereof of the Company, each Company Subsidiary and the Related
Entities have been provided, or will be provided by the Closing, by the Company
to the Purchaser.
SECTION 3.07. FINANCIAL STATEMENTS. (a) Complete and unaltered
copies of (i) the unaudited combined balance sheet of the Company for the fiscal
year ended as of December 31, 2001, and the related unaudited combined
statements of income, retained earnings, stockholders' equity and changes in
financial position of the Company, together with all related notes and schedules
thereto, for the fiscal year ended as of December 31, 2001, and (ii) the
unaudited balance sheet of the Company as of November 30, 2002, and the related
unaudited combined statements of income, retained earnings, stockholders' equity
and changes in financial position of the Company, together with all related
notes and schedules thereto for the eleven months ended as of November 30, 2002
(collectively, the "FINANCIAL STATEMENTS"), have been delivered by the Company
to the Purchaser. The Financial Statements (i) were prepared in accordance with
the books of account and other financial records of the Company and the Company
Subsidiaries and the Related Entities, (ii) present fairly the combined
financial condition and results of operations of the Company and the Company
Subsidiaries and the Related Entities as at the dates thereof or for the
respective periods covered thereby, (iii) have been prepared in accordance with
PRC GAAP applied on a basis consistent with the past practices of the Company,
the Company Subsidiaries and the Related Entities (except as may be indicated in
the notes thereto and except that the Financial Statements do not contain
footnotes and are subject to normal and recurring period-end adjustments, which
adjustments would not have a Material Adverse Effect) and (iv) include all
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair presentation of the consolidated financial
16
condition of the Company, the Company Subsidiaries and the Related Entities and
the results of the operations of the Company, the Company Subsidiaries and the
Related Entities as of the dates thereof or for the periods covered thereby.
There are no Liabilities of the Company, any Company Subsidiary or any Related
Entity, other than Liabilities reflected or reserved against on the unaudited
combined balance sheets of the Company for the period ended as of November 30,
2002. For the purposes of this Agreement, "combined" shall have the same meaning
as "consolidated" and shall apply as if the Company, the Company Subsidiaries
and the Related Entities were a single company.
(b) The books of account and other financial records of the Company,
the Company Subsidiaries and the Related Entities: (i) reflect all items of
income and expense and all assets and Liabilities required to be reflected
therein in accordance with PRC GAAP applied on a basis consistent with the past
practices of the Company, the Company Subsidiaries and the Related Entities,
respectively, (ii) are in all material respects complete and correct, and do not
contain or reflect any material inaccuracies or discrepancies and (iii) have
been maintained in accordance with good business and accounting practices.
(c) Complete and accurate copies of all Computer Records at the end
of each calendar month for the first eleven months of 2002 have been provided by
the Company to the Purchaser. The Computer Records: (i) are in all material
respects complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies and (ii) have been maintained in accordance with
good business and accounting practices.
(d) Section 3.07(d) of the Disclosure Schedule sets forth each and
every account maintained by each of the Company, the Company Subsidiaries and
the Related Entities at a bank or other financial institution, including the
name of such bank or financial institution, account number and the amount of
balance on such account.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since November
30, 2002, the Business has been conducted only in the ordinary course and in a
manner consistent with past practice.
SECTION 3.09. LITIGATION. (a) There are no Actions by or against the
Company, any Company Subsidiary or any Related Entity, pending before any
Governmental Authority (nor, to the best knowledge of the Company after due
inquiry, are there any such Governmental Orders threatened to be imposed by any
Governmental Authority). None of the matters disclosed in Section 3.10 of the
Company Disclosure Schedule has, has had or could reasonably be expected to have
a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the Transactions contemplated by this Agreement or thereby.
(b) None of the Company, any Company Subsidiary or any Related
Entity is subject to any Governmental Order (nor, to the knowledge of the
Company and the Shareholders after due inquiry, are there any such Governmental
Orders threatened to be imposed by any Governmental Authority) which has or has
had a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the transactions contemplated by this Agreement or thereby.
17
SECTION 3.10. COMPLIANCE WITH LAWS. (a) Except as set forth in
Section 3.10 of the Company Disclosure Schedule, the Company, the Company
Subsidiaries and the Related Entities have each conducted and continue to
conduct the Business in accordance with all Laws and Governmental Orders
applicable to the Company, any Company Subsidiary or any Related Entity, and
none of the Company, any Company Subsidiary or any Related Entity is in
violation of any such Law or Governmental Order. To the best knowledge of the
Company and the Shareholders, none of the Company, any Company Subsidiary or any
Related Entity is in violation of any non-public or "internal" (NEIBU) policy,
rule, order, guidance or administrative practice of, or applied by, any
Governmental Authority in the PRC.
(b) To the knowledge of the Company and the Shareholders after due
inquiry, none of the Company, any Company Subsidiary or any Related Entity or
any officer, directors, employee, agent or representative of the Company, the
Company Subsidiaries or any Related Entity has taken any action which (i) is or
could be deemed to be a violation of the Foreign Corrupt Practices Act in
respect of the Business; and (ii) is not customary or permitted in the PRC.
SECTION 3.11. MATERIAL CONTRACTS. (a) Section 3.11 of the Company
Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral agreements) of the Company, the Company
Subsidiaries and the Related Entities (the "MATERIAL CONTRACTS"):
(i) each contract, agreement, invoice, purchase order and other
arrangement for the furnishing of services to the Company, any Company
Subsidiary or any Related Entity, or otherwise related to the Business,
under the terms of which the Company, any Company Subsidiary or any
Related Entity: (A) is likely to pay or otherwise give consideration of
more than US$50,000 in the aggregate during the calendar year ended
December 31, 2002, (B) is likely to pay or otherwise give consideration of
more than US$100,000 in the aggregate over the remaining term of such
contract or (C) except in the case of employment agreements with employees
of the Company, the Company Subsidiaries or the Related Entities (other
than the senior management of the Company, the Company Subsidiaries or the
Related Entities), cannot cancel without penalty or further payment and
without more than 30 days' notice;
(ii) each contract, agreement, invoice, sales order and other
arrangement, for the furnishing of services by the Company, any Subsidiary
or any Related Entity which: (A) is likely to involve consideration of
more than US$50,000 in the aggregate during the calendar year ended
December 31, 2002, (B) is likely to involve consideration of more than
US$100,000 in the aggregate over the remaining term of the contract or (C)
cannot be cancelled by the Company, such Company Subsidiary or such
Related Entity without penalty or further payment and without more than 30
days' notice;
(iii) each contract, agreement, lease and sublease concerning the
use, occupancy, management or operation of any real property;
(iv) all franchise, agency, sales promotion, market research,
marketing, consulting and advertising contracts and agreements;
18
(v) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) which are not
cancelable without penalty or further payment and without more than 30
days' notice;
(vi) all contracts and agreements relating to Indebtedness of the
Company, any Company Subsidiary or any Related Entity;
(vii) all contracts and agreements with any Governmental Authority;
(viii) all contracts and agreements that limit or purport to limit
the ability of the Company, any Company Subsidiary or any Related Entity
to compete in any line of business or with any Person or in any geographic
area or during any period of time; (ix) all contracts and agreements
providing for benefits under any plan;
(x) all agreements included in the Licenses;
(xi) all agreements providing for exclusive cooperation or exclusive
business relationship or similar arrangement;
(xii) all contracts and agreements between or among the Company, any
Company Subsidiary or any Related Entity, on one hand, and a Shareholder
or any affiliate (including any immediate relative of an individual
shareholder) of a Shareholder (other than the Company, any Company
Subsidiary or any Related Entity), on the other hand; and
(xiii) all other contracts and agreements, whether or not made in
the ordinary course of business, which are material to the Company, any
Company Subsidiary and the Related Entities, taken as a whole, or the
conduct of the Business, or the absence of which would have a Material
Adverse Effect.
(b) Except as disclosed in Section 3.11 of the Company Disclosure
Schedule, each Material Contract: (i) is valid and binding on the parties
thereto and is in full force and effect, and (ii) upon consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements, except
to the extent that any consents set forth in Section 3.04(c) of the Company
Disclosure Schedule are not obtained, shall continue in full force and effect
without penalty or other adverse consequence. None of the Company, any Company
Subsidiary or any Related Entity is in breach of, or default under, any Material
Contract.
(c) Except as disclosed in Section 3.11 of the Company Disclosure
Schedule, to the best knowledge of the Company after due inquiry, no other party
to any Material Contract is in breach thereof or default thereunder and none of
the Company, any Company Subsidiary or any Related Entity has received any
notice of termination, cancellation, breach or default under any Material
Contract.
SECTION 3.12. INTELLECTUAL PROPERTY. (a) Except as would not have a
Material Adverse Effect, Section 3.12(a) of the Company Disclosure Schedule sets
forth a true and complete list of all (i) Owned Intellectual Property and (ii)
Licensed Intellectual Property.
19
The Owned Intellectual Property and the Licensed Intellectual Property include
all of the Intellectual Property material to the operation of the Business as
currently conducted and there are no other items of Intellectual Property
material to the operation of the Business as currently conducted.
(b) Except as otherwise disclosed in Section 3.12(b) of the Company
Disclosure Schedule, to the knowledge of the Company and the Shareholders after
due inquiry, the conduct of the Business as currently conducted does not
infringe upon, conflict with, dilute, misappropriate or otherwise violate the
Intellectual Property rights of any third party, and no claim has been asserted
to, or is pending or threatened against, the Company, the Company Subsidiaries
or the Related Entities alleging that the operation of the Business infringes
upon, may infringe, misappropriates, conflicts with, dilutes or otherwise
violates the Intellectual Property rights of any third party.
(c) To the knowledge of the Company and the Shareholders after due
inquiry, with respect to each item of the Owned Intellectual Property, the
Company, a Company Subsidiary or a Related Entity is the exclusive owner of the
entire, unencumbered right, title and interest in and to such Intellectual
Property and is entitled to use such Intellectual Property in the continued
operation of the Business.
(d) With respect to each item of Licensed Intellectual Property, the
Company, a Company Subsidiary or a Related Entity has the right to use such
Licensed Intellectual Property in the continued operation of the Business
subject only to the terms of the license agreement governing such Licensed
Intellectual Property.
(e) To the knowledge of the Company and the Shareholders after due
inquiry, the Owned Intellectual Property is valid and enforceable, and has not
been adjudged invalid or unenforceable in whole or in part and no Person is
engaging in any activity or using any Intellectual Property that infringes upon,
conflicts with, dilutes, misappropriates or otherwise violates the Owned
Intellectual Property or the Licensed Intellectual Property.
(f) To the knowledge of the Company and the Shareholders after due
inquiry, each license of the Licensed Intellectual Property is valid and
enforceable, is binding on all parties to such license, and is in full force and
effect and no party to any license of the Licensed Intellectual Property is in
breach thereof or default thereunder. The consummation of the transactions
contemplated hereby will not result in the termination or impairment of any
License.
(g) Except as disclosed in Section 3.12(g) of the Company Disclosure
Schedule, none of the Company, the Company Subsidiaries and the Related entities
has experienced any shutdown, disruption, system failure, problems of a material
nature or other similar events with respect to the Software used in the
operation of the Business that have disrupted its operation or have had or are
reasonably expected to have a Material Adverse Effect on the Business.
SECTION 3.13. ASSETS. (a) Except as disclosed in Section 3.12(b) of
the Company Disclosure Schedule or as reflected in the balance sheet (including
any related notes thereto) dated November 30, 2002 or with respect to inventory
or other assets that are not material to the Company disposed of since November
30, 2002 in the ordinary course of
20
business, either the Company, a Company Subsidiary or a Related Entity, as the
case may be, owns, leases or has the legal right to use all the properties and
assets, including, without limitation, the Owned Intellectual Property, the
Licensed Intellectual Property, the Licenses, the real property and tangible
personal property, used or intended to be used in the conduct of the Business or
otherwise owned, leased or used by the Company, any Company Subsidiary or any
Related Entity, and, with respect to contract rights, is a party to and enjoys
the right to the benefits of all contracts, agreements and other arrangements
used or intended to be used by the Company, any Company Subsidiary or any
Related Entity in or relating to the conduct of the Business, all of which
properties, assets and rights constitute the Assets. Either the Company, a
Company Subsidiary or a Related Entity, as the case may be, has good and
marketable title to, or, in the case of leased or subleased Assets, valid and
subsisting leasehold interests in, all the Assets, free and clear of all
Encumbrances, except (i) as disclosed in Section 3.12(b) of the Company
Disclosure Schedule, (ii) Permitted Encumbrances and (iii) Encumbrances created
in favor of the Purchaser.
(b) Except as disclosed in Section 3.12(b) of the Company Disclosure
Schedule, the Assets constitute all the properties, assets and rights forming a
part of, used, held or intended to be used in, and all such properties, assets
and rights as are necessary in the conduct of, the Business. At all times since
November 30, 2002, the Company has caused the Assets to be maintained in
accordance with good business practice, and all the Assets are in good operating
condition and repair and are suitable for the purposes for which they are used
and intended.
SECTION 3.14. EMPLOYEE BENEFIT MATTERS. Except as disclosed in
Section 3.14 of the Company Disclosure Schedule, the Company, each Company
Subsidiary and each Related Entity has complied with all applicable Laws
relating to employment benefits, including, without limitation, pension, medical
insurance, work-related injury insurance, birth and nursery insurance and
unemployment insurance. All contributions or payments required to be made by the
Company, any Company Subsidiary or any Related Entity with respect to employee
benefits have been made on or before their due dates. Except as disclosed in
Section 3.14 of the Company Disclosure Schedule, all such contributions and
payments required to be made by any employees of the Company, any Company
Subsidiary or any Related Entity with respect to the employee benefits have been
fully deducted and paid to the relevant Governmental Authorities on or before
their due dates, and no such deductions have been challenged or disallowed by
any Governmental Authority or any employee of the Company, any Company
Subsidiary or any Related Entity.
SECTION 3.15. LABOR MATTERS. Except as set forth in Section 3.14 of
the Company Disclosure Schedule, (a) none of the Company, any Company Subsidiary
or any Related Entity is a party to any collective bargaining agreement or other
labor union contract applicable to Persons employed by the Company, any Company
Subsidiary or any Related Entity, and currently there are no organizational
campaigns, petitions or other unionization activities seeking recognition of a
collective bargaining unit which could affect the Company, any Company
Subsidiary or any Related Entity; (b) there are no strikes, slowdown or work
stoppages pending or, to the knowledge of the Company and the Shareholders after
due inquiry, threatened between the Company, any Company Subsidiary or any
Related Entity and any of their respective employees, and none of the Company,
any Company Subsidiary or any Related Entity has experienced any such strike,
slowdown, or work stoppage within the past three years;
21
(c) there are no unfair labor practice claims pending against the Company, any
Company Subsidiary or any Related Entity before any Governmental Authority or
any current union representation questions involving employees of the Company,
any Company Subsidiary or any Related Entity which could have a Material Adverse
Effect; (d) the Company, each Company Subsidiary and each Related Entity are
currently in compliance with all applicable Laws relating to the employment of
labor; and (e) there is no claim with respect to payment of wages, salary or
overtime pay that has been asserted or is now pending or threatened before any
Governmental Authority with respect to any Persons currently or formerly
employed by the Company, any Company Subsidiary or any Related Entity.
SECTION 3.16. CERTAIN INTERESTS. (a) Except as disclosed in Section
3.16(a) of the Company Disclosure Schedule, no shareholder, officer or director
of the Company, any Company Subsidiary or any Related Entity and no relative or
spouse (or relative of such spouse) who resides with, or is a dependent of, any
such shareholder, officer or director:
(i) has any direct or indirect financial interest in any supplier or
customer of the Company, any Company Subsidiary, any Related Entity or the
Business; PROVIDED, HOWEVER, that the ownership of securities representing
no more than five percent of the outstanding voting power of any supplier
or customer, and which are also listed on any national securities
exchange, shall not be deemed to be a "financial interest" so long as the
Person owning such securities has no other connection or relationship with
such supplier or customer;
(ii) owns, directly or indirectly, in whole or in part, or has any
other interest in any tangible or intangible property which the Company,
any Company Subsidiary or any Related Entity uses or has used in the
conduct of the Business or otherwise; or
(iii) has outstanding any Indebtedness to the Company, any Company
Subsidiary or any Related Entity.
(b) Except as disclosed in Section 3.02(b) of the Company Disclosure
Schedule, and except with respect to expense reimbursements due in the ordinary
course of business, none of the Company, any Company Subsidiary or any Related
Entity has any Liability or any other obligation of any nature whatsoever to any
officer, director or shareholder of the Company, any Company Subsidiary or any
Related Entity or to any relative or spouse (or relative of such spouse) who
resides with, or is a dependent of, any such officer, director or shareholder.
SECTION 3.17. TAXES. The Company, the Company Subsidiaries and the
Related Entities have timely filed, or will timely file, all Tax Returns
required to be filed by them with respect to Taxes for any period ending on or
before the Closing Date, and such Tax Returns are or will be, as the case may
be, accurate, complete and correct in all material respects. All Taxes shown as
due and owing on such Tax Returns have been paid or will be paid by the Closing
Date except to the extent such Taxes are being contested in good faith and have
been adequately reserved for. Neither the Company nor any of its Subsidiaries
has waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to any Tax assessment or deficiency. Neither the
Company nor any of its Subsidiaries is a party to any
22
income tax allocation or sharing agreement. There are no pending or, to the
knowledge of the Company and the Shareholders after due inquiry, threatened
actions or proceedings for the assessment or collection of Taxes against the
Company, any Company Subsidiary or any Related Entity.
SECTION 3.18. INSURANCE. All material assets, properties and risks
of the Company, each Company Subsidiary and each Related Entity are, and for the
past two years have been, covered by valid and, except for insurance policies
that have expired under their terms in the ordinary course, currently effective
insurance policies or binders of insurance (including, without limitation,
general liability insurance, property insurance and workers' compensation
insurance) issued in favor of the Company, a Company Subsidiary or a Related
Entity, as the case may be, in each case with responsible insurance companies,
in such types and amounts and covering such risks as are consistent with
customary practices and standards of companies in the PRC engaged in businesses
and operations similar to those of the Company, such Company Subsidiary or such
Related Entity, as the case may be.
SECTION 3.19 REAL PROPERTY. (a) None of the Company, any Company
Subsidiary or any Related Entity owns any real property.
(b) Section 3.19(b) of the Company Disclosure Schedule sets forth a
true and complete list of all leases and subleases relating to the Leased Real
Property and any and all ancillary documents pertaining thereto. With respect to
each of such leases and subleases, none of the Company, any Company Subsidiary
or any Related Entity has exercised or given any notice of exercise, nor has any
lessor or landlord exercised or received any notice of exercise by a lessor or
landlord of, any option, right of first offer or right of first refusal
contained in any such lease or sublease, including, without limitation, any such
option or right pertaining to purchase, expansion, renewal, extension or
relocation.
(c) Each lease agreement in respect of the Leased Real Property has
been duly registered with the relevant PRC Governmental Authority, the
transactions contemplated by this Agreement and the Ancillary Agreements will
not require the re-registration thereof and, to the knowledge of the Company and
the Shareholders after due inquiry, there are no facts that would prevent the
Leased Real Property form being occupied by the Company, any Company Subsidiary
or any Related Entity, as the case may be, after the Closing in the same manner
as occupied by the Company, any such Subsidiary or any such Related Entity
immediately prior to the Closing.
(d) The rental set forth in each lease or sublease of the Leased
Real Property is the actual rental being paid, and there are no separate
agreements or understandings with respect to the same.
SECTION 3.20 FULL DISCLOSURE. (a) The Company is not aware of any
facts pertaining to the Company, any Company Subsidiary, any Related Entity or
the Business which could materially adversely affect the Company, any Company
Subsidiary, any Related Entity or the Business or which are likely in the future
to materially adversely affect the Company, any Company Subsidiary, any Related
Entity or the Business and which have not been disclosed in
23
this Agreement or the Company Disclosure Schedule, or otherwise disclosed to the
Purchaser by the Company in writing.
(b) No representation or warranty of the Company or the Shareholders
in this Agreement, nor any statement or certificate furnished or to be furnished
to the Purchaser pursuant to this Agreement or the Ancillary Agreements, or in
connection with the transactions contemplated by this Agreement or the Ancillary
Agreements, contains or will contain any untrue statement of material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
SECTION 3.21. PERMITS; COMPLIANCE. The Company, the Company
Subsidiary or the Related Entity is in possession of all franchises, licenses,
permits, certificates, approvals and orders of any Governmental Authority
necessary for the Company, such Company Subsidiary or such Related Entity to
own, lease and operate its properties or to carry on the Business as it is now
being conducted in the jurisdictions in which it is now being conducted (the
"COMPANY PERMITS"), and no suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company and the Shareholders
after due inquiry, threatened.
SECTION 3.22 BROKERS. Except as disclosed in Section 3.22 of the
Disclosure Schedule, no broker, finder or investment banker nor any affiliate of
the Company is entitled to any brokerage, finder's, consulting or other fee or
commission in connection with the transactions contemplated by this Agreement or
the Ancillary Agreements based upon arrangements made by or on behalf of the
Company or the Shareholders.
SECTION 3.23 EXCLUSIVITY OF REPRESENTATIONS. The representations and
warranties made by the Company and the Shareholders in this Agreement are in
lieu of and are exclusive of all other representations and warranties, including
without limitation any implied warranties. The Company and each Shareholder
hereby disclaim any such other express or implied representations or warranties,
notwithstanding the delivery or disclosure to the Purchaser or its officers,
directors, employees, agents or representatives of any documentations or other
information (including any Projections or Supplemental Data).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
As an inducement to the Purchaser to enter into this Agreement, the
Shareholders, severally but not jointly, hereby represents and warrants to the
Purchaser as follows:
SECTION 4.01. SHAREHOLDER AUTHORITY; NO CONFLICT; REQUIRED FILINGS
AND CONSENTS. (a) The Shareholder has full legal capacity and authority to
execute and deliver this Agreement and to perform such Shareholder's obligations
hereunder and to consummate the transactions contemplated hereby. With respect
to a Shareholder that is a corporation, the execution and delivery of this
Agreement and the consummation by such Shareholder of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action and no other proceedings on the part of such Shareholder is necessary to
authorize this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been
24
duly executed and delivered by such Shareholder, and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes a
legal, valid and binding obligation of such Shareholder, enforceable against
such Shareholder in accordance with its terms.
(b) The execution and delivery of this Agreement by such Shareholder
does not, and the performance of this Agreement by such Shareholder will not,
(i) with respect to a Shareholder that is a corporation, violate, conflict with
or result in the breach of any provision of the organizational documents of such
Shareholder, (ii) conflict with or violate any Law or Governmental Order
applicable to such Shareholder or any of such Shareholder's assets, properties
or businesses including, without limitation, the Business, or (iii) conflict
with, result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the Shares pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which such Shareholder
is a party or by which any of the Shares is bound or affected.
SECTION 4.02. SECURITIES ACT. (a) The Shareholder is acquiring the
Purchaser Ordinary Shares to be issued to such Shareholder for such
Shareholder's own account and not with a view to, or for sale in connection
with, any distribution thereof in violation of the Securities Act. The
Shareholder acknowledges that the Purchaser Ordinary Shares being received by
such Shareholder have not been registered and that such Purchaser Ordinary
Shares may not be transferred or sold unless they are registered under the
Securities Act or an exemption from such registration is available.
(b) The Shareholder understands and acknowledges that all
certificates representing the Purchaser Ordinary Shares so issued in the
Transaction shall bear, in addition to any other legends required under
applicable securities laws, the following legend:
"The shares represented by this certificate have not been registered
under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be transferred except pursuant to registration
under the Securities Act or pursuant to an available exemption from
registration."
SECTION 4.03. OWNERSHIP OF COMPANY SHARES. The Shareholder is the
legal and beneficial owner of the Company Ordinary Shares or Company Preferred
Shares set forth opposite such Shareholder's name on EXHIBIT B, free and clear
of any Encumbrance (other than Encumbrances caused by this Agreement). Upon
consummation of the transactions contemplated hereby and the registration of the
Shares in the name of the Purchaser in the stock register of the Company, the
Purchaser, assuming the Purchaser shall have purchased the Shares for value in
good faith and without notice of any adverse claim, will own the Shares free and
clear of all Encumbrances. Except for this Agreement, there are no voting
trusts, stockholder agreements, proxies or other agreements or understandings in
effect with respect to the voting or transfer of such shares.
25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to the Company and the Shareholders to enter into
this Agreement, except as set forth in the Purchaser SEC Reports, the Purchaser
hereby represents and warrants to the Company and the Shareholders as follows:
SECTION 5.01. ORGANIZATION AND AUTHORITY. (a) The Purchaser is
an exempt company with limited liability duly incorporated, validly existing and
in good standing under the laws of the Cayman Islands and has all necessary
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by the Purchaser of this Agreement and the Ancillary Agreements to
which it is a party and the consummation by the Purchaser of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary action and no other proceedings on the part of the Purchaser are
necessary to authorize this Agreement and the Ancillary Agreements or to
consummate the transactions contemplated hereby and thereby. This Agreement and
the Ancillary Agreements to which the Purchaser is a party have been duly and
validly executed and delivered by the Purchaser and, assuming the due
authorization, execution and delivery by the other parties thereto, constitute
legal, valid and binding obligations of the Purchaser, enforceable against the
Purchaser in accordance with their terms.
(b) The execution and delivery of this Agreement and the Ancillary
Agreements by the Purchaser do not, and the performance of this Agreement and
the Ancillary Agreements by the Purchaser will not, (i) violate, conflict with
or result in the breach of any provision of the Memorandum and Articles of
Association of the Purchaser, (ii) conflict with or violate (or cause an event
which could have a material adverse effect on the Purchaser as a result of) any
Law or Governmental Order applicable to the Purchaser or any of the Purchaser's
respective assets, properties or businesses, or (iii) conflict with, result in
any breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which the Purchaser is a party, which would
adversely affect the ability of the Purchaser to carry out its obligations
under, and to consummate the transactions contemplated by, this Agreement or by
the Ancillary Agreements, except, in the case of clauses (ii) and (iii) above,
for conflicts, violations, breaches, defaults, rights of termination, amendment,
acceleration or cancellation, or Encumbrances as would not, individually or in
the aggregate, have a material adverse effect on the Purchaser.
(c) The execution, delivery and performance of this Agreement and
the Ancillary Agreements by the Company do not and will not require any consent,
approval, authorization or other order of, action by, filing with or
notification to, any Governmental Authority.
SECTION 5.02. NO CONFLICT. Assuming all consents, approvals,
authorizations and other actions described in Section 5.03 have been obtained
and except as may result from
26
any facts or circumstances relating solely to the Company, the execution,
delivery and performance of this Agreement by the Purchaser do not and will not
(a) violate or conflict with the Memorandum and Articles of Association (or
other similar applicable documents) of the Purchaser, (b) conflict with or
violate any Law or Governmental Order applicable to the Purchaser or (c) result
in any breach of, or constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, or give to any
Person any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of any Encumbrance on any of the material assets or
properties of the Purchaser pursuant to, any material contract, license or other
instrument relating to such assets or properties to which the Purchaser or any
of its Subsidiaries is a party or by which any of such assets or properties is
bound or affected, except as would not, individually or in the aggregate,
materially impair the ability of the Purchaser to consummate the transactions
contemplated by this Agreement or by the Ancillary Agreements.
SECTION 5.03. CONSENTS AND APPROVALS. The execution and delivery of
this Agreement and each Ancillary Agreement by the Purchaser do not, and the
performance of this Agreement and each Ancillary Agreement by the Purchaser will
not, require any consent, approval, authorization or other action by, or filing
with or notification to, any Governmental Authority, except (a) where failure to
obtain such consent, approval, authorization or action, or to make such filing
or notification, would not prevent the Purchaser from performing any of its
material obligations under this Agreement and the Ancillary Agreements, (b) as
may be necessary as a result of any facts or circumstances relating solely to
the Company, and (c) a filing on Form 8-K by the Purchaser pursuant to the
requirements of the Exchange Act and filings pursuant to the relevant
requirements of Nasdaq as a result of and in connection with the execution of
this Agreement.
SECTION 5.04. ABSENCE OF LITIGATION. No Action is pending or, to the
knowledge of the Purchaser, threatened, before any Governmental Authority which
seeks to delay or prevent the consummation of the transactions contemplated
hereby or which would materially impair the ability of the Purchaser to
consummate the transactions contemplated hereby.
SECTION 5.05. FINANCIAL ABILITY. The Purchaser has cash available or
has existing borrowing facilities or unconditional, binding firm commitments
that together are sufficient to enable it to consummate the transactions
contemplated by this Agreement.
SECTION 5.06. CAPITALIZATION. The authorized share capital of the
Purchaser consists of 75,000,000 Purchaser Ordinary Shares and 3,750,000
undesignated Preferred Shares. As of October 31, 2002, 45,927,452 Purchaser
Ordinary Shares were issued and outstanding, all of which are validly issued,
fully paid and nonassessable. All Purchaser Ordinary Shares subject to issuance
as aforesaid or issuable pursuant to this Agreement, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There are
no outstanding contractual obligations of the Purchaser to repurchase, redeem or
otherwise acquire any Purchaser Ordinary Shares.
27
SECTION 5.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Purchaser
has filed all forms, reports and documents required to be filed by it with the
SEC from September 27, 2002 through the date of this Agreement (collectively,
the "PURCHASER SEC REPORTS"). As of the respective dates they were filed, (i)
the Purchaser SEC Reports were prepared, and all forms, reports and documents
filed with the SEC after the date of this Agreement and prior to the Closing
Date will be prepared, in all material respects in accordance with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
(ii) none of the Purchaser SEC Reports contained, nor will any forms, reports
and documents filed after the date of this Agreement and prior to the Closing
Date contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Purchaser SEC Reports and in any
form, report or document filed after the date of this Agreement and prior to the
Closing Date was, or will be, as the case may be, prepared in accordance with US
GAAP applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes thereto or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) and each presented or will present fairly,
in all material respects, the consolidated financial condition and results of
operations of Purchaser as at the respective dates thereof and for the
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which did not and would not have a material adverse effect on the
Purchaser).
SECTION 5.08. INVESTMENT PURPOSE. The Purchaser is acquiring the
Shares solely for the purpose of investment and not with a view to, or for offer
or sale in connection with, any distribution thereof.
SECTION 5.09. PURCHASER SHARES. All of the Purchaser Shares issuable
as consideration to the Shareholders shall be, when so issued, duly authorized,
validly issued, fully paid and nonassessable, free and clear of all Encumbrances
and preemptive rights and exempt from registration pursuant to Section 4(2) of
the Securities Act. The Purchaser's reliance on such exemption is predicated on
the Shareholders' representations set forth in Article IV hereof.
SECTION 5.10. BROKERS. No broker, finder or investment banker nor
any affiliate of the Purchaser is entitled to any brokerage, finder's,
consulting or other fee or commission in connection with the transactions
contemplated by this Agreement or the Ancillary Agreements based upon
arrangements made by or on behalf of the Purchaser.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING. (a) The
Company and the Shareholders covenant and agree that, except as described in
Section 6.01(b) of the Company Disclosure Schedule, between the date hereof and
the time of the Closing, neither the Company nor any Company Subsidiary shall
conduct its business other than in the ordinary
28
course and consistent with the Company's and such Company Subsidiary's prior
practice. Without limiting the generality of the foregoing, except as described
in Section 6.01(b) of the Company Disclosure Schedule, the Company shall, and
shall cause each Company Subsidiary to (i) continue their advertising and
promotional activities, and pricing and purchasing policies, in accordance with
past practice; (ii) use their best efforts to (A) preserve intact their business
organizations and the business organization of the Business, (B) keep available
to the Purchaser the services of the employees of the Company and each Company
Subsidiary, (C) continue in full force and effect without material modification
all existing policies or binders of insurance currently maintained in respect of
the Company, each Company Subsidiary and the Business, (D) preserve their
current relationships with their customers, suppliers and other Persons with
whom they have had significant business relationships and (E) maintain and
protect its interest in each item of Owned Intellectual Property and Licensed
Intellectual Property; and (iii) not engage in any practice, take any action,
fail to take any action or enter into any transaction which could cause any
representation or warranty of the Company and the Shareholders to be untrue or
result in a breach of any covenant made by the Company and the Shareholders in
this Agreement.
(b) Except as described in Section 6.01(b) of the Company Disclosure
Schedule, the Company and the Shareholders covenant and agree that, between the
date hereof and the time of the Closing, without the prior written consent of
the Purchaser, neither the Company nor any Company Subsidiary will:
(i) permit or allow any of the Assets to be subjected to any
Encumbrance, other than Permitted Encumbrances and Encumbrances that will
be released at or prior to the Closing;
(ii) amend, terminate, cancel or compromise any material claims of,
or waive any other rights of substantial value to, the Company, any
Company Subsidiary or any Related Entity;
(iii) sell, transfer, lease, sublease, license or otherwise dispose
of any properties or assets, real, personal or mixed, with a value in
excess of US$25,000 individually or US$100,000 in the aggregate unless
approved by the Purchaser (including, without limitation, leasehold
interests and intangible property);
(iv) issue or sell any share capital, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of
the Company, any Company Subsidiary or any Related Entity;
(v) redeem any of the share capital or declare, make or pay any
dividends or distributions (whether in cash, securities or other property)
to the holders of share capital of the Company, any Company Subsidiary or
any Related Entity or otherwise, other than dividends, distributions and
redemptions declared, made or paid by any Company Subsidiary or any
Related Entity solely to the Company;
(vi) merge with, enter into a consolidation with or acquire an
interest of 5% or more in any Person or acquire a substantial portion of
the assets or business of any Person
29
or any division or line of business thereof, or otherwise acquire any
material assets other than in the ordinary course of business consistent
with past practice;
(vii) make any capital expenditure or commitment for any capital
expenditure in excess of US$25,000 individually or US$100,000 in the
aggregate unless approved by the Purchaser;
(viii) incur any Indebtedness in excess of US$25,000 individually or
US$100,000 in the aggregate unless approved by the Purchaser;
(ix) fail to pay any creditor any amount owed to such creditor when
due;
(x) (i) grant any increase, or announce any increase, in the wages,
salaries, compensation, bonuses, incentives, pension or other benefits
payable by the Company, any Company Subsidiary or any Related Entity to
any of its employees, including, without limitation, any increase or
change pursuant to any plan, or (ii) establish or increase or promise to
increase any benefits under any plan, in either case, except as required
by Law or any collective bargaining agreement and involving ordinary
increases consistent with the past practices of the Company, any Company
Subsidiary or any Related Entity or involving amounts not in excess of
US$10,000 per month in the aggregate;
(xi) enter into any agreement, arrangement or transaction with any
of its directors, officers, employees or shareholders (or with any
relative, beneficiary, spouse or Affiliate of such Persons);
(xii) allow any Permit that was issued or relates to the Company,
any Company Subsidiary or any Related Entity or otherwise relates to the
Business to lapse or terminate or failed to renew any insurance policy or
Permit that is scheduled to terminate or expire within 45 calendar days of
the Closing Date;
(xiii) amend, modify or consent to the termination of any Material
Contract or the Company's, any Company Subsidiary's or any Related
Entity's rights thereunder;
(xiv) amend or restate the Memorandum and Articles of Association
(or other organizational documents) of the Company, any Company Subsidiary
or any Related Entity unless approved by the Purchaser;
(xv) change any content of Computer Records; or
(xvi) agree, whether in writing or otherwise, to take any of the
actions specified in this Section 6.01 or grant any options to purchase,
rights of first refusal, rights of first offer or any other similar rights
or commitments with respect to any of the actions specified in this
Section 6.01, except as expressly contemplated by this Agreement and the
Ancillary Agreements.
SECTION 6.02. ACCESS TO INFORMATION. (a) From the date hereof until
the Closing, upon reasonable notice, the Company shall cause its officers,
directors, employees,
30
agents, representatives, accountants and counsel and shall cause the Company
Subsidiaries and each of the Company Subsidiaries' officers, directors,
employees, agents, representatives, accountants and counsel to afford the
officers, employees, agents, accountants, counsel, financing sources and
representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, plants, other facilities, books and records
of the Company and each Company Subsidiary and to those officers, directors,
employees, agents, accountants and counsel of the Company and of each Company
Subsidiary who have any knowledge relating to the Company, any Company
Subsidiary or the Business; PROVIDED, HOWEVER, that such investigation shall not
unreasonably interfere with the businesses or operations of the Company,
including the Business.
(b) By January 6, 2003, the Company shall, and the Shareholders
shall cause the Company to, provide complete copies of (i) projections of the
combined revenues, earnings before depreciation, interest and taxes, operating
margins, net income and capital expenditures of the Company, the Company
Subsidiaries and the Related Entities for each of the fiscal years ended as of
December 31, 2002, 2003 and 2004 prepared by senior management of the Company
(the "PROJECTIONS") and (ii) the assumptions and supplemental data used in
preparing the Projections (collectively, the "SUPPLEMENTAL Data") to the
Purchaser. The Projections and the Supplemental Data will reflect the best
estimates currently available and best judgment of the Company's senior
management as to the expected future financial performance of the Company, the
Company Subsidiaries and the Related Entities.
SECTION 6.03. INVESTIGATION. The Purchaser acknowledges and agrees
that, subject to the Company's performance of its obligations pursuant to
Section 6.02 herein, it (i) has made its own inquiry and investigation into,
and, based thereon, has formed an independent judgment concerning, the Company,
its Subsidiaries and the Related Entities, and (ii) has been furnished with or
given adequate access to such information about the Company, its Subsidiaries
and the Related Entities as it has requested.
SECTION 6.04. CONFIDENTIALITY. The Company and the Shareholders
agrees to, and shall cause their respective agents, representatives, affiliates,
employees, officers and directors to: (a) treat and hold as confidential (and
not disclose or provide access to any Person to) all information relating to
trade secrets, processes, patent and trademark applications, product
development, price, customer and supplier lists, pricing and marketing plans,
policies and strategies, details of client and consultant contracts, operations
methods, product development techniques, business acquisition plans, new
personnel acquisition plans and all other confidential or proprietary
information with respect to the Business, the Company and each Company
Subsidiary, (b) in the event that the Company, any Shareholder or any such
agent, representative, affiliate, employee, officer or director becomes legally
compelled to disclose any such information, provide the Purchaser with prompt
written notice of such requirement so that the Purchaser, the Company or any
Company Subsidiary may seek a protective order or other remedy or waive
compliance with this Section 6.04, (c) in the event that such protective order
or other remedy is not obtained, or the Purchaser waives compliance with this
Section 6.04, furnish only that portion of such confidential information which
is legally required to be provided and exercise its best efforts to obtain
assurances that confidential treatment will be accorded such information, and
(d) promptly furnish (prior to, at, or as soon as practicable following, the
Closing) to the Company or the Purchaser any and all copies (in whatever form or
medium) of
31
all such confidential information then in the possession of the Shareholder or
any of its agents, representatives, affiliates, employees, officers and
directors and destroy any and all additional copies then in the possession of
the Shareholder or any of its agents, representatives, affiliates, employees,
officers and directors of such information and of any analyses, compilations,
studies or other documents prepared, in whole or in part, on the basis thereof;
PROVIDED, HOWEVER, that this sentence shall not apply to any information that,
at the time of disclosure, is available publicly and was not disclosed in breach
of this Agreement by the Company (prior to the Closing), or the Shareholders or
any of their agents, representatives, affiliates, employees, officers or
directors; and PROVIDED FURTHER that, with respect to Intellectual Property,
specific information shall not be deemed to be within the foregoing exception
merely because it is embraced in general disclosures in the public domain. In
addition, with respect to Intellectual Property, any combination of features
shall not be deemed to be within the foregoing exception merely because the
individual features are in the public domain unless the combination itself and
its principle of operation are in the public domain. The Company and the
Shareholders agree and acknowledge that remedies at law for any breach of its
obligations under this Section 6.04 are inadequate and that in addition thereto
the Purchaser shall be entitled to seek equitable relief, including injunction
and specific performance, in the event of any such breach.
SECTION 6.05. REGULATORY AND OTHER AUTHORIZATIONS; NOTICES AND
CONSENTS. (a) The Company and the Shareholders shall use their best efforts to
obtain (or the Company Subsidiaries to obtain) all authorizations, consents,
orders and approvals of all Governmental Authorities and officials that may be
or become necessary for their execution and delivery of, and the performance of
their obligations pursuant to, this Agreement and the Ancillary Agreements and
will cooperate fully with the Purchaser in promptly seeking to obtain all such
authorizations, consents, orders and approvals.
(b) The Company and the Shareholders shall, or shall cause the
Company Subsidiaries to, give promptly such notices to third parties and use its
or their best efforts to obtain such third party consents and estoppel
certificates as the Purchaser may in its sole discretion deem necessary or
desirable in connection with the transactions contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable efforts to
assist the Company in giving such notices and obtaining such consents and
estoppel certificates; PROVIDED, HOWEVER, that the Purchaser shall have no
obligation to give any guarantee or other consideration of any nature in
connection with any such notice, consent or estoppel certificate or to consent
to any change in the terms of any agreement or arrangement which the Purchaser
in its sole discretion may deem adverse to the interests of the Purchaser, the
Company, any Company Subsidiary or the Business.
(d) Neither the Company nor any Shareholders knows of any reason why
all the consents, approvals and authorizations necessary for the consummation of
the transactions contemplated by this Agreement will not be received.
SECTION 6.06. NOTICE OF DEVELOPMENTS. Prior to the Closing, the
Company and the Shareholders shall promptly notify the Purchaser in writing of
(a) all events, circumstances, facts and occurrences arising subsequent to the
date of this Agreement which could result in any
32
breach of a representation or warranty or covenant of the Company or a
Shareholder in this Agreement, or which could have the effect of making any
representation or warranty of the Company or a Shareholder in this Agreement
untrue or incorrect in any respect, and (b) all other material developments
affecting the assets, Liabilities, business, financial condition, operations,
results of operations, customer or supplier relations, employee relations,
projections or prospects of the Company, any Company Subsidiary or the Business.
SECTION 6.07. NO SOLICITATION OR NEGOTIATION. (a) The Company agrees
that between the date of this Agreement and the earlier of (a) the Closing and
(b) the termination of this Agreement, none of the Company, the Company
Subsidiaries, the Shareholders or any of their respective affiliates, officers,
directors, representatives or agents will (i) solicit or accept any other
proposals or offers from any Person (A) relating to any acquisition or purchase
of all or any portion of the share capital of the Company, any Company
Subsidiary or any Related Entity or the Assets (other than Inventory to be sold
in the ordinary course of business consistent with past practice), (B) to enter
into any merger, consolidation or other business combination with the Company,
any Company Subsidiary, any Related Entity or the Business or (C) to enter into
a recapitalization, reorganization or any other extraordinary business
transaction involving or otherwise relating to the Company, any Company
Subsidiary or any Related Entity or (ii) participate in any negotiations and
other communications regarding, or furnish to any other Person any information
with respect to, any of the foregoing.
(b) In the event that the Closing shall not have occurred for any
reason, the Purchaser shall undertake not to employ or solicit for employment,
directly or indirectly, the employees of the Company for a period of 12 months
from the date this Agreement is executed.
SECTION 6.08. USE OF INTELLECTUAL PROPERTY. The Shareholders
acknowledge that from and after the Closing, the name "[(CHINESE CHARACTERS)]"
and all similar or related names, marks and logos (all of such names, marks and
logos being the "COMPANY MARKS") shall be owned by the Company or a Company
Subsidiary, that none of the Shareholders or any of their affiliates shall have
any rights in the Company Marks and that none of the Shareholders or any of
their affiliates will contest the ownership or validity of any rights of the
Purchaser, the Company or any Company Subsidiary in or to the Company Marks.
SECTION 6.09. NON-COMPETITION. (a) For a period of one (1) year
following the expiration of the Employment Agreement signed by such Management
Shareholder (or one (1) year following the termination of such Employment
Agreement in the case of the termination of the Employment Agreement prior to
the expiration of its term) (the "RESTRICTED PERIOD"), such Management
Shareholder shall not engage, directly or indirectly, in any business that
supplies services to customers located in the PRC of the kind supplied by the
Business, the Company, any Company Subsidiary or any Related Entity as of the
Closing Date or, without the prior written consent of the Purchaser, directly or
indirectly, own an interest in, manage, lend money or render financial or other
assistance to, as an officer, employee, partner, stockholder, consultant or
otherwise, any Person that competes with the Business, the Company, any Company
Subsidiary or any Related Entity in supplying services of the kind supplied by
the Business, the Company, any Company Subsidiary or any Related Entity as of
the Closing Date; PROVIDED, HOWEVER, that, for the purposes of this Section
6.09, ownership of securities having no more than three percent
33
of the outstanding voting power of any competitor which are listed on any
national securities exchange shall not be deemed to be in violation of this
Section 6.09 as long as the Person owning such securities has no other
connection or relationship with such competitor.
(b) As a separate and independent covenant, each Management
Shareholder agrees with the Purchaser that, for the applicable Restricted
Period, such Management Shareholder shall not in any way, directly or
indirectly, for the purpose of conducting or engaging in any business that
supplies services to customers located in the PRC of the kind supplied by the
Business, the Company, any Company Subsidiary or any Related Entity as of the
Closing Date, call upon, solicit, advise or otherwise do business with any
customers of the Business, the Company, any Company Subsidiary or any Related
Entity with whom the Business, the Company, any Company Subsidiary or any
Related Entity had any dealings prior to the Closing Date or take away or
interfere any custom, trade, business or patronage of the Business, the Company,
any Company Subsidiary or any Related Entity.
(c) The Restricted Period applicable to a Management Shareholder
shall be extended by the length of any period during which such Management
Shareholder is in breach of the terms of this Section 6.09.
(d) Each Management Shareholder severally acknowledges that the
covenants of such Management Shareholder set forth in this Section 6.09 are an
essential element of this Agreement and that, but for the agreement of such
Shareholder to comply with these covenants, the Purchaser would not have entered
into this Agreement. Subject to Section 9.02 below, each Management Shareholder
acknowledges that this Section 6.09 constitutes an independent covenant and
shall not be affected by performance or nonperformance of any other provision of
this Agreement by the Purchaser.
SECTION 6.10. RELEASE OF INDEMNITY OBLIGATIONS. The Shareholders
covenant and agree, on or prior to the Closing, to execute and deliver to the
Company, for the benefit of the Company and each Company Subsidiary, a general
release and discharge, in form and substance satisfactory to the Purchaser,
releasing and discharging the Company and Company Subsidiary from any and all
obligations to indemnify the Shareholders or otherwise hold it harmless pursuant
to any agreement or other arrangement entered into prior to the Closing.
SECTION 6.11. EMPLOYEE MATTERS. (a) At the Closing of this
Agreement, an Employment Agreement with a term of two (2) years shall be entered
into between the Purchaser or its designated affiliate and each of ▇▇ ▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇ and ▇▇ ▇▇▇▇▇, and an Employment Agreement with a term of one-year
shall be entered into between the Purchaser or its designated affiliate and ▇▇▇▇
▇▇. If the employment is terminated by the Purchaser or its designated affiliate
without cause before the Employment Agreement expires, a severance package equal
to the lesser of (i) 6 month salary of such dismissed party and (ii) the salary
the dismissed party would otherwise have received during such period subsequent
to such termination shall be paid to that party.
Notwithstanding Section 2.05 hereof, immediately prior to the
consummation of a Corporate Transaction, payment of all of the Deferred
Consideration pursuant to Section 2.05 hereof shall be accelerated and shall be
paid to such Management Shareholder upon demand. A
34
"CORPORATE Transaction" shall mean any of the following transactions: (i) a
consolidation in which the Purchaser is not the surviving entity, except for a
transaction the principal purpose of which is to change the place in which the
Purchaser is incorporated; (ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Purchaser; (iii) approval by the
Purchaser's shareholders of any plan or proposal for the complete liquidation or
dissolution of the Purchaser; or (iv) acquisition by any Person or group of
Persons (other than the Purchaser or by a Purchaser-sponsored employee benefit
plan) of beneficial ownership of securities representing more than fifty percent
(50%) of the total combined voting right of the Purchaser's outstanding
securities.
(b) By January 6, 2003, the Company and the Shareholders shall
deliver to the Purchaser an employee list, which sets forth the name, position
and location of each employee of the Company, the Company Subsidiaries and the
Related Entities and the total amount of its annual compensation (including the
salary and other benefits).
SECTION 6.12. CERTAIN BENEFITS. (a) Until the first anniversary
of the Closing Date, the Purchaser shall provide or cause to be provided the
benefits (including health benefits, severance policies and general employment
policies and procedures) which are comparable in the aggregate to benefits that
are available to employees of the Company, its Subsidiaries and the Related
Entity as of the date hereof; PROVIDED, HOWEVER, nothing herein shall be deemed
to prevent the Purchaser from making any changes required by Law.
(b) To the extent permitted by Law, each employee of the Company,
its Subsidiaries or any Related Entity shall be given credit for all service
with the Company, its Subsidiaries or any Related Entity (or service credited by
the Company, its Subsidiaries or any Related Entity) under all employee benefit
plans, programs, policies and arrangements maintained by the Purchaser in which
they participate or in which they become participants for purposes of
eligibility (as determined by the Purchaser according to its relevant plan,
program, policy or arrangement), vesting and benefit accrual including, without
limitation, for purposes of determining (i) short-term and long-term disability
benefits, (ii) severance benefits, (iii) vacation benefits and (iv) benefits
under any retirement plan; PROVIDED, HOWEVER, that no service credit for benefit
accrual purposes shall be provided that would result in duplicative accrual of
benefits for the same periods of service.
SECTION 6.13. NAME CHANGE. Immediately after the Closing, the
parties hereto shall take all necessary action and make all necessary filings to
change the name of the Company to "SINA Communications" or "SINA Wireless" (or
such other name as may be agreed by the Purchaser and the Company).
SECTION 6.14. RELATED ENTITIES. (a) The Company and the Shareholders
shall cause the holders of the equity interests in the Related Entities to
transfer their equity interests in the Related Entities as directed by the Board
of Directors of the Purchaser.
(b) From and after the date of this Agreement, the Company and the
Shareholders shall, and shall cause the Related Entities and the holders of
equity interests in the Related Entities to (i) preserve intact the business and
assets of the Related Entities and (ii) not take any action, or fail to take any
action, that would have the effect of making any of the representations
35
and warranties in Article III relating to the Related Entities untrue or
incorrect in any material respect.
SECTION 6.15. FURTHER ACTION. Each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all appropriate action, do
or cause to be done all things necessary, proper or advisable under applicable
Law, and to execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement or the Ancillary
Agreements and consummate and make effective the transactions contemplated by
this Agreement or the Ancillary Agreements.
SECTION 6.16. POST-CLOSING PERFORMANCE UNDERTAKING. (a) Each of the
Company and the Shareholders agrees and undertakes to the Purchaser that during
the six (6) month period ending May 31, 2003, the lower of (A) the daily average
number of the total Paying Users for such six (6) months period, and (B) the
daily average number of the total Paying Users for the two (2) months ending May
31, 2003 (the "OPERATING BENCHMARK") shall not be less than 2,000,000, PROVIDED
that:
(i) the determination of the total number of the Paying Users shall
be based on the Computer Records, which have been audited and confirmed by
the Purchaser, PROVIDED that the Computer Records shall be audited and
confirmed by an independent third party jointly selected by the Purchaser
and the Shareholders if the Purchaser and the Shareholders can not reach
an agreement on the Computer Records to be used for the purposes of
determination of the total number of the Paying Users;
(ii) during such six (6) month period ending May 31, 2003, the
average monthly sales and marketing expenditures (excluding salaries and
fringe benefits payable to the sales staff of the Company) in connection
with the Paid Services shall not be lower than 25% of the average monthly
Gross Revenues generated from the Paid Services (for the purposes of this
clause, "GROSS REVENUES" shall mean the gross revenues of the Company, the
Company Subsidiaries and the Related Entities which have been confirmed by
the relevant subsidiaries of China Mobile Communications Corporation as
evidenced by the monthly billing statements of such subsidiaries);
(iii) during such six (6) months period ending May 31, 2003, unless
with the consent of the Shareholders, the Purchaser shall not take any
action to change, or cause its affiliate to change, the sales and
marketing strategies, policies, practices and networks of the Company, the
Company Subsidiaries and the Related Entities as of the Closing Date, or
relocate (or terminate employment of) any sales and marketing, product
development, technology or customer service staff of the Company, the
Company Subsidiaries or the Related Entities as of the Closing Date; and
(iv) the obligation of the Company and the Shareholders to satisfy
the Operating Benchmark requirements under this Section 6.16 shall be
subject to the limitations of any Event of Force Majeure.
(b) Each of the Shareholders agrees and undertakes to the Purchaser
that in the event that the Operating Benchmark is determined to be lower than
2,000,000 as of May 31,
36
2002, the Deferred Cash Consideration (and in the case of DragonTech, the Cash
Consideration) shall be adjusted and reduced in accordance with Section 2.06
hereof.
SECTION 6.17. RELATED TAX. Each of the Shareholders covenants and
agrees to pay any tax and duties assessed on the part of such Shareholder in
connection with, or as a result of the sale of the Shares pursuant to this
Agreement required by any Governmental Authority.
SECTION 6.18. RESALE RESTRICTIONS FOR THE PURCHASER ORDINARY SHARES.
Each of the Management Shareholders covenants and agrees not to resell,
transfer, or otherwise dispose any of the Purchaser Ordinary Shares except in
compliance with Rule 144 under the Securities Act.
SECTION 6.19. WAIVER OF RIGHT OF FIRST REFUSAL. Each of the
Shareholders, by its execution and delivery hereof, irrevocably waives any right
of first refusal, co-sale right or other similar right it enjoys with respect to
the Company Shares, including without limitation, such right of first refusal,
co-sale right or other similar right as is set forth in the Shareholders
Agreement.
SECTION 6.20. REPAYMENT OF THE CONVERTIBLE LOAN. The Company
covenants and agrees, and each of the Shareholders agrees to cause the Company
promptly following the date hereof but in any event prior to the Closing, to
repay all of the outstanding principal amount, and pay all interest accrued
thereon, under the Convertible Loan and to discharge any and all the Company's
obligations thereunder prior to the Closing.
ARTICLE VII
CONDITIONS TO THE TRANSACTIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS. The obligations of the Company and the Shareholders to consummate
the transactions contemplated by this Agreement shall be subject to the
fulfillment or written waiver, at or prior to the Closing, of each of the
following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of the Purchaser contained in this Agreement shall have
been true and correct when made and shall be true and correct in all
material respects as of the Closing, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct as of that date,
in each case, with the same force and effect as if made as of the Closing
Date, other than such representations and warranties as are made as of
another date, the covenants and agreements contained in this Agreement to
be complied with by the Purchaser on or before the Closing Date shall have
been complied with in all material respects, and the Company shall have
received a certificate from the Purchaser to such effect signed by a duly
authorized officer thereof;
(b) NO PROCEEDING OR LITIGATION. No Action shall have been commenced
by or before any Governmental Authority against either the Company or the
Purchaser, seeking
37
to restrain or materially and adversely alter the transactions
contemplated by this Agreement which, in the reasonable, good faith
determination of the Company, is likely to render it impossible or
unlawful to consummate such transactions; PROVIDED, HOWEVER, that the
provisions of this Section 7.01(b) shall not apply if the Company has
directly or indirectly solicited or encouraged any such Action; and
(c) ANCILLARY AGREEMENTS. The Purchaser shall have executed and
delivered to the Company each of the Ancillary Agreements to which it is a
party.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or written waiver, at or prior to
the Closing, of each of the following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of the Company or a Shareholder contained in this Agreement
(i) that are not qualified by "materiality" or "Material Adverse Effect"
shall have been true and correct in all material respects when made and
shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if made as of the Closing Date and (ii)
that are qualified by "materiality" or "Material Adverse Effect" shall
have been true and correct when made and shall be true and correct as of
the Closing Date, except to the extent such representations and warranties
are as of another date, in which case, such representations and warranties
shall be true and correct as of that date, in each case, with the same
force and effect as if made as of the Closing Date, other than such
representations and warranties as are made as of another date, the
covenants and agreements contained in this Agreement to be complied with
by the Company or the Shareholders on or before the Closing Date shall
have been complied with, and the Purchaser shall have received a
certificate of the Company signed by a duly authorized officer thereof and
of the Shareholders to such effect;
(b) NO PROCEEDING OR LITIGATION. No Action shall have been commenced
or threatened by or before any Governmental Authority against either the
Company or the Purchaser, seeking to restrain or materially and adversely
alter the transactions contemplated by this Agreement which, in the
reasonable, good faith determination of the Purchaser, is likely to render
it impossible or unlawful to consummate such transactions or which could
have a Material Adverse Effect or otherwise render inadvisable, in the
sole discretion of the Purchaser, the consummation of the transactions
contemplated by this Agreement;
(c) LEGAL OPINION. The Purchaser shall have received from Junhe Law
Offices, the PRC counsel to the Company, a legal opinion, addressed to the
Purchase and dated the Closing Date, substantially in the form of EXHIBIT
E;
(d) CONSENTS AND APPROVALS. The Purchaser and the Company shall have
received, each in form and substance satisfactory to the Purchaser, all
authorizations, consents, orders and approvals of all Governmental
Authorities and officials which the Purchaser in its sole discretion deems
necessary or desirable for the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements;
38
(e) RELATED ENTITIES. The transactions contemplated by the GMMT
Equity Transfer Agreement shall have been consummated;
(f) EMPLOYMENT AGREEMENTS. Each of the employees of the Company
listed on EXHIBIT D shall have entered into employment agreements
(collectively, the "EMPLOYMENT AGREEMENTS") with the Company, each in form
and substance satisfactory to the Purchaser;
(g) NO MATERIAL ADVERSE EFFECT. No event or events shall have
occurred, or be reasonably likely to occur, which, individually or in the
aggregate, have, or could have, a Material Adverse Effect;
(h) RESIGNATION OF DIRECTORS. The Purchaser shall have received the
resignations, effect as of the Closing Date, of all of the directors and
officers of the Company, each Company Subsidiary and each Related Entity,
except for such Persons as shall have been designated in writing prior to
the Closing by the Purchaser to the Company;
(i) LIQUIDATION OF COMPANY SUBSIDIARY. The Purchaser shall have
received documents from the Company evidencing (i) the disposal of the
Company's shares of Star Vi Online Games Limited and (ii) the release of
the Company from any liabilities relating to the Company's ownership
interest in Star Vi Online Games Limited prior to such disposal;
(j) ANCILLARY AGREEMENTS. Each of the Company and the Shareholders
shall have executed and delivered to the Purchaser each of the Ancillary
Agreements to which it is a party; and
(k) CONFIRMATION OF THE REPAYMENT OF THE CONVERTIBLE LOAN. The
Purchaser shall have received a release from DragonTech Ventures Limited
(i) which confirms the receipt from the Company of the repayment of all of
the outstanding principal amount and the payment of all interest accrued
thereon under the Convertible Loan pursuant to Section 6.20 hereof and
(ii) pursuant to which DragonTech Ventures Limited agrees to release the
Company from any liabilities the Company has, has had or may have under
the Convertible Loan.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company or a Shareholder contained in this
Agreement and the Ancillary Agreements shall survive the Closing until the first
anniversary of the Closing Date; PROVIDED, HOWEVER, that (i) the representations
and warranties made pursuant to Sections 3.01, 3.02, 3.03, 3.04, 3.05, 3.15,
3.21 survive the Closing until the second anniversary of the Closing Date; (ii)
the representations and warranties made pursuant to Sections 4.03 shall survive
indefinitely; and (iii) the representations and warranties dealing with Tax
matters shall terminate at the close of the business at the 120th day following
the expiration of the applicable
39
statutory of limitations with respect to the Tax liabilities in question.
Neither the period of survival nor the liability of the Company and the
Shareholders with respect to the Company's and the Shareholder's representations
and warranties shall be reduced by any investigation made at any time by or on
behalf of the Purchaser. If written notice of a claim has been given prior to
the expiration of the applicable representations and warranties by the Purchaser
to the Company, then the relevant representations and warranties shall survive
as to such claim, until such claim has been finally resolved.
SECTION 8.02. INDEMNIFICATION BY THE SHAREHOLDERS. (a) The Purchaser
and its affiliates, officers, directors, employees, agents, successors and
assigns (each a "PURCHASER INDEMNIFIED PARTY") shall be indemnified and held
harmless by the Shareholders, jointly and severally, for and against any and all
Liabilities, losses, damages, claims, costs and expenses actually suffered or
incurred by them (including, without limitation, any Action brought or otherwise
initiated by any of them) (hereinafter a "LOSS"), arising out of or resulting
from:
(i) the breach of any representation or warranty made by the Company
or a Shareholder or a Transferor under any of the Equity Transfer
Agreements contained in the Acquisition Documents (it being understood
that such representations and warranties shall be interpreted without
giving effect to any limitations or qualifications as to "materiality"
(including the word "material") or "Material Adverse Effect" set forth
therein); or
(ii) the breach of any covenant or agreement by the Company or a
Shareholder or a Transferor under any of the Equity Transfer Agreements
contained in the Acquisition Documents;
PROVIDED, that the sum of all Losses subject to this Section 8.02 shall exceed
US$700,000 before Purchaser shall be entitled to recover any Loss, and then to
the extent such Loss exceeds US$700,000; PROVIDED, FURTHER, that the total
liability of the Shareholders for indemnification hereunder shall not exceed 25%
of the Aggregate Purchase Price; and PROVIDED, FURTHER, HOWEVER, that the
limitation on total liability of the Shareholders for indemnification set forth
in this Section 8.02 shall not apply in respect of any Loss arising out of or
resulting from fraud committed by any of the Shareholders, the Company, the
Company Subsidiaries or the Related Entities prior to the Closing. To the extent
that the Shareholders' undertakings set forth in this Section 8.02 may be
unenforceable, the Shareholders shall contribute the maximum amount that it is
permitted to contribute under applicable Law to the payment and satisfaction of
all Losses incurred by the Purchaser Indemnified Parties.
(b) A Purchaser Indemnified Party shall give the Shareholders notice
of any matter which a Purchaser Indemnified Party has reasonably determined has
given or could give rise to a right of indemnification under this Agreement,
within 60 days of such determination, stating the amount of the Loss, if known,
and method of computation thereof, and containing a reference to the provisions
of this Agreement in respect of which such right of indemnification is claimed
or arises. The obligations and Liabilities of the Shareholders under this
Article VIII with respect to Losses arising from claims of any third party which
are subject to the indemnification provided for in this Article VIII ("THIRD
PARTY CLAIMS") shall be governed by and be contingent upon the following
additional terms and conditions: if a Purchaser Indemnified
40
Party shall receive notice of any Third Party Claim, the Purchaser Indemnified
Party shall give the Shareholders notice of such Third Party Claim within 30
days of the receipt by the Purchaser Indemnified Party of such notice; PROVIDED,
HOWEVER, that the failure to provide such notice shall not release the
Shareholders from any of their obligations under this Article VIII except to the
extent that the Shareholders are materially prejudiced by such failure and shall
not relieve the Shareholders from any other obligation or Liability that it may
have to any Purchaser Indemnified Party otherwise than under this Article VIII.
If the Shareholders acknowledge in writing its obligation to indemnify the
Purchaser Indemnified Party hereunder against any Losses that may result from
such Third Party Claim, then the Shareholders shall be entitled to assume and
control the defense of such Third Party Claim at their expense and through
counsel of its choice if it gives notice of its intention to do so to the
Purchaser Indemnified Party within five days of the receipt of such notice from
the Purchaser Indemnified Party; PROVIDED, HOWEVER, that if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Purchaser Indemnified Party in its sole and
absolute discretion for the same counsel to represent both the Purchaser
Indemnified Party and the Shareholders, then the Purchaser Indemnified Party
shall be entitled to retain its own counsel in each jurisdiction for which the
Purchaser Indemnified Party determines counsel is required, at the expense of
the Shareholders. In the event that the Shareholders exercise the right to
undertake any such defense against any such Third Party Claim as provided above,
the Purchaser Indemnified Party shall cooperate with the Shareholders in such
defense and make available to the Shareholders, at the Shareholders' expense,
all witnesses, pertinent records, materials and information in the Purchaser
Indemnified Party's possession or under the Purchaser Indemnified Party's
control relating thereto as is reasonably required by the Shareholders.
Similarly, in the event the Purchaser Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Shareholders shall cooperate with the Purchaser Indemnified Party in such
defense and make available to the Purchaser Indemnified Party, at the
Shareholders' expense, all such witnesses, records, materials and information in
the Shareholders' possession or under the Shareholders' control relating thereto
as is reasonably required by the Purchaser Indemnified Party. No such Third
Party Claim may be settled by the Shareholders without the prior written consent
of the Purchaser Indemnified Party.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) by the Purchaser if, between the date hereof and the Closing:
(i) an event or condition occurs that has resulted in a Material Adverse
Effect, (ii) any representations and warranties of the Company or a
Shareholder contained in this Agreement (1) that are not qualified by
"materiality" or "Material Adverse Effect" shall not have been true and
correct in all material respects when made or (2) that are qualified by
"materiality" or "Material Adverse Effect" shall not have been true and
correct when made, (iii) the Company and the Shareholders shall not have
complied in all material respects with the covenants or agreements
contained in this Agreement to be complied with by it or (iv) the
41
Company or any Company Subsidiary makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against
the Company or any Company Subsidiary seeking to adjudicate any of them a
bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition
of its debts under any Law relating to bankruptcy, insolvency or
reorganization;
(b) by either the Purchaser or the Company in the event that any
Governmental Authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable; or
(c) by the mutual written consent of the Company, the Purchaser and
the Shareholders.
SECTION 9.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement as provided in Section 9.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except (a) as set forth in Sections 6.03 and 10.01 and (b) that nothing herein
shall relieve either party from liability for any breach of this Agreement.
SECTION 9.03. AMENDMENT. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
Company, the Purchaser and the Shareholders or (b) by a waiver in accordance
with Section 9.04.
SECTION 9.04. WAIVER. Any party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties of the
other parties contained herein or in any document delivered by the other parties
pursuant hereto or (c) waive compliance with any of the agreements of the other
parties or conditions to such parties' obligations contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby. Any waiver of any term or condition
shall not be construed as a waiver of any subsequent breach or a subsequent
waiver of the same term or condition, or a waiver of any other term or condition
of this Agreement. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any of such rights. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. EXPENSES. Except as otherwise expressly provided in
this Agreement, all costs and expenses, including, without limitation, all fees
and disbursements of counsel, accountants, financial advisors, experts and
consultants incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party
42
incurring such costs and expenses, whether or not the Closing shall have
occurred. Without limiting the generality of the foregoing, the Shareholders
shall pay all fees and disbursements of counsel, accountants, financial
advisors, experts and consultants incurred by the Company and the Shareholders
in connection with this Agreement and the transactions contemplated by this
Agreement, whether or not the Closing shall have occurred.
SECTION 10.02. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by overnight courier service, by telecopy or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.02):
(a) if to the Purchaser:
▇▇▇▇.▇▇▇
Soho New Town, 16F
Building C
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇-▇▇) ▇▇▇▇-▇▇▇▇
Telecopy: (▇▇-▇▇) ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
with a copy to:
Shearman & Sterling
▇▇▇▇ ▇▇▇▇▇ World ▇▇▇▇▇ ▇▇▇
▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇-▇▇) ▇▇▇▇-▇▇▇▇
Telecopy: (▇▇-▇▇) ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇, Esq.
(b) if to the Company:
MeMeStar Limited
9C, ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇-▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇
43
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Entertainment Building, 21st Floor
▇▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, Esq.
(c) if to the Shareholders:
▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇-▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Entertainment Building, 21st Floor
▇▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, Esq.
SECTION 10.03. THIRD-PARTY BENEFICIARIES. Except for the provisions
of Article VIII relating to indemnified parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person, including, without limitation, any union or any employee
or former employee of the Company, any legal or equitable right, benefit or
remedy of any nature whatsoever, including, without limitation, any rights of
employment for any specified period, under or by reason of this Agreement.
SECTION 10.04. PUBLIC ANNOUNCEMENTS. No party to this Agreement
shall make, or cause to be made, any press release or public announcement in
respect of this Agreement or the transactions contemplated by this Agreement or
otherwise communicate with any news media without prior notification to the
other party. Purchaser and the Company will cooperate with each other in the
development and distribution of all press releases and other public
announcements with respect to the transactions contemplated hereby, and will
furnish the other with drafts of any such releases and announcements as far in
advance as practicable.
SECTION 10.05. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect for so long as the economic
or legal substance of the transactions contemplated by this
44
Agreement is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement be consummated as originally
contemplated to the fullest extent possible.
SECTION 10.06. ASSIGNMENT; BINDING EFFECT. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties; PROVIDED, THAT, the Purchaser may
assign any of its rights, interests or obligations to any other affiliate of the
Purchaser. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
SECTION 10.07. INCORPORATION OF DISCLOSURE SCHEDULE; EXHIBITS. The
Company Disclosure Schedule and all Exhibits attached hereto and referred to
herein are hereby incorporated herein by reference and made a part of this
Agreement for all purposes as if fully set forth herein.
SECTION 10.08. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of California applicable
to contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined exclusively in any California state or federal court sitting in the
County of San Mateo, California.
SECTION 10.09. EVENT OF FORCE MAJEURE. (a) "FORCE MAJEURE" shall
mean any act or event which is reasonably unforeseeable or unavoidable and which
is beyond the control of the affected party, including, but not limited to,
earthquake, storm, typhoon, fire, flood, outbreak of hostilities, declaration of
national emergency, war, insurrection or similar military actions, and any
change in policies of any affiliate of China Mobile Communications Corporation
which has rendered the determination as to whether a user is a Paying User
infeasible for the purposes of accounting for the number of Paying Users;
(b) If a party has been prevented from performing its obligations
provided in this Agreement because of an event of Force Majeure, it shall notify
another party in writing promptly after the occurrence of the event of Force
Majeure. If an event of Force Majeure occurs, no party shall be responsible for
any damage, increased costs, or losses which another party may sustain by reason
of the failure or delay in performance. The party claiming Force Majeure shall
take appropriate means to minimize or remove the effects of Force Majeure and,
within the shortest possible time, attempt to resume performance of the
obligation affected by Force Majeure. Prior to the Closing of this Agreement, if
the affected party is unable to perform all or part of its obligations under
this Agreement for six (6) months after the date of the notice of the occurrence
of Force Majeure, any party shall have the right to terminate this Agreement.
SECTION 10.10. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
45
SECTION 10.11. COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.12. ENTIRE AGREEMENT. This Agreement (including the
Exhibits and the Disclosure Schedule) and the Ancillary Agreements constitute
the entire agreement among the parties with respect to the subject matter hereof
and thereof and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof.
SECTION 10.13. WAIVER OF JURY TRIAL. Each of the parties hereto
hereby waives to the fullest extent permitted by applicable law any right it may
have to a trial by jury with respect to any litigation directly or indirectly
arising out of, under or in connection with this Agreement or the transactions
contemplated by this Agreement. Each of the parties hereto (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce that foregoing waiver and (b) acknowledges that it and the other
party hereto have been induced to enter into this Agreement and the transactions
contemplated by this Agreement, as applicable, by, among other things, the
mutual waivers and certifications in this Section 10.13.
[END OF PAGE]
46
IN WITNESS WHEREOF, each of the Purchaser, the Company and the
Shareholders has duly executed, or has caused to be duly executed by their
respective officers thereunto duly authorized, this Agreement as of the date
first written above.
▇▇▇▇.▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇
Title: CEO
MEMESTAR LIMITED
By: /s/ ▇▇▇▇ ▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇
Title: Chairman
SHAREHOLDERS:
DRAGONTECH VENTURES LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Authorized Signatory
▇▇▇▇-▇▇▇▇▇▇▇.▇▇▇ CORPORATION
By: /s/ ▇▇▇▇ ▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇
Title: Chairman
WIN LIGHT LIMITED
By: /s/ ▇▇ ▇▇
------------------------------------
Name: ▇▇ ▇▇
Title: Sole Director
RICHES KEY LIMITED
By: /s/ Li Yi Wen
------------------------------------
Name: Li Yi Wen
Title: Sole Director
PROFIT STAND INVESTMENTS LIMITED
By: /s/ Cai Feng
------------------------------------
Name: Cai Feng
Title: Sole Director
EASY UP LIMITED
By: /s/ ▇▇▇▇ ▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇
Title: Sole Director
/s/ ▇▇▇▇ ▇▇
----------------------------------------
▇▇▇▇ ▇▇
DRAGONTECH VENTURES MANAGEMENT LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Authorized Signatory
EXHIBIT A
SHAREHOLDERS
AS OF THE DATE OF THIS AGREEMENT:
NUMBER OF NUMBER OF
COMPANY ORDINARY COMPANY PREFERRED
NAME SHARES OWNED SHARES OWNED
---- ---------------- -----------------
DragonTech Ventures Limited 0 15,230,053
▇▇▇▇-▇▇▇▇▇▇▇.▇▇▇ Corporation 10,519,014 0
Win Light Limited 19,202,812 0
Riches Key Limited 8,670,469 0
Profit Stand Investments 8,458,771 0
Limited
Easy Up Limited 7,835,101 0
▇▇▇▇ ▇▇ 6,234,044 0
IMMEDIATELY PRIOR TO THE CLOSING DATE:
NUMBER OF NUMBER OF
COMPANY ORDINARY COMPANY PREFERRED
NAME SHARES OWNED SHARES OWNED
---- ---------------- -----------------
DragonTech Ventures Limited 0 15,230,053
▇▇▇▇-▇▇▇▇▇▇▇.▇▇▇ Corporation 10,519,014 0
Win Light Limited 19,202,812 0
Riches Key Limited 8,670,469 0
Profit Stand Investments 8,458,771 0
Limited
Easy Up Limited 7,835,101 0
▇▇▇▇ ▇▇ 6,234,044 0
DragonTech Ventures 1,523,005 0
Management Limited
EXHIBIT B-1
BEIJING STAR-VILLAGE EQUITY TRANSFER AGREEMENT
EXHIBIT B-2
GMMT EQUITY TRANSFER AGREEMENT
EXHIBIT C
ALLOCATION OF PURCHASE PRICE
POTION OF SHARE
PORTION OF CONSIDERATION AND
PORTION OF DEFERRED DEFERRED
NAME CASH CONSIDERATION CASH CONSIDERATION SHARE CONSIDERATION
---- ------------------ ------------------ -------------------
DragonTech Ventures Limited US$4,008,638 US$0 US$0
DragonTech Ventures US$407,405 US$0 US$0
Management Limited
▇▇▇▇-▇▇▇▇▇▇▇.▇▇▇ Corporation US$1,907,336 US$0 US$906,511
Win Light Limited US$1,198,106 US$2,282,573 US$1,654,866
Riches Key Limited US$540,970 US$1,030,629 US$747,206
Profit Stand Investments US$527,761 US$1,005,465 US$728,962
Limited
Easy Up Limited US$488,849 US$931,332 US$675,216
▇▇▇▇ ▇▇ US$1,077,837 US$0 US$537,239
TOTAL US$10,156,902 US$5,250,000 US$5,250,000
EXHIBIT D
COMPANY EMPLOYEES WHO HAVE
EXECUTED EMPLOYMENT AGREEMENTS
▇▇▇▇ ▇▇
Wu ▇▇
▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇
▇▇ ▇▇ ▇▇▇
EXHIBIT E
FORM OF LEGAL OPINION OF
THE COMPANY'S COUNSEL