____________________________________________________________________________
| Characters in the Chinese language have been removed from this document. |
| The original document, in PDF format, has been filed separately. |
----------------------------------------------------------------------------
Exhibit 2.12
Dated the 9th day of December 2003
(▇▇▇▇ ▇▇▇▇)
(▇▇▇▇ ▇▇▇▇▇)
(▇▇▇▇ ▇▇▇▇)
(▇▇▇▇▇ ▇▇▇▇)
and
HARTCOURT CAPITAL, INC.
------------------------------------------------------------------------------
AGREEMENT FOR SALE AND PURCHASE OF
CERTAIN INTEREST IN THE REGISTRED CAPITAL OF
Beijing Challenger Wanzhong Info Tech Co., LTD
------------------------------------------------------------------------------
Solicitors
10th Floor, ▇▇▇▇▇▇▇▇▇ House
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Tel: (▇▇▇) ▇▇▇▇ ▇▇▇▇ Fax: (▇▇▇) ▇▇▇▇ ▇▇▇▇
Website: ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Our ref: 47831-00002/KAL/VTSO
1
THIS AGREEMENT is dated the 9th of December, 2003.
BETWEEN:
(1) ▇▇▇▇ ▇▇▇▇, ID No. 120104196404056832, Address: ▇▇.▇, ▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
(2) ▇▇▇▇ ▇▇▇▇▇, ID No. 110102571102005, Address: ▇▇. ▇▇▇, ▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇,
▇▇▇▇ ▇, ▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
(3) ▇▇▇▇ ▇▇▇▇, ID No. 110108197208152243, Address: ▇▇. ▇▇▇, ▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇
▇▇, ▇▇. ▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
(4) ▇▇▇▇▇ ▇▇▇▇, ID No. 110108630329607, Address: ▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇. ▇▇,
▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
(▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇) are hereinafter
collectively referred to as the "Vendors" and each individually referred
to as the "Vendor"); and
(5) HARTCOURT CAPITAL, INC., a company incorporated in the British Virgin
Islands with its registered office situate at Akara Bldg., ▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Islands and its
principal office situate at Suite 1310, China VentureTech Plaza, ▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "Purchaser").
WHEREAS:
(A) Beijing Challenger Wanzhong Info Tech Co., LTD (the "Company") is a
domestic joint venture company with limited liability incorporated in the
PRC and has as at the date hereof a registered capital of RMB 10,000,000.
Brief particulars of the Company are set out in Schedule 1. As at the date
of this Agreement, the Vendors are respectively the beneficial owners of
certain interests in the registered capital of the Company as set out in
column 2 of Schedule 2.
(B) As at the date of this Agreement, the Purchaser is a wholly owned
subsidiary of The Hartcourt Companies, Inc. (the "Holding Company"), the
shares of which are currently listed on the Over-the-Counter Bulletin
Board ("OTCBB") of the United States (OTCBB Symbol: HRCT).
(C) The Vendors have agreed to sell and the Purchaser has agreed to purchase
certain interests in the registered capital of the Company as set out in
column 3 of Schedule 2, the aggregate of which represents 51% of the
registered capital of the Company (the "Sale Interests") in accordance
with the terms and conditions of this Agreement.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. INTERPRETATION
1.1 In this Agreement (including the Recitals and Schedules), unless the
2
context otherwise requires, the following words and expressions shall
have the following meanings ascribed to each of them below:
"Agreement" this agreement for the sale and purchase of
the Sale Interest, as amended or
supplemented from time to time;
"Board" the board of directors of the Company from
time to time;
"Business Day" From Monday to Friday except Hong Kong's
public holidays;
"Company" has the meaning ascribed thereto in Recital
(A);
"Companies Ordinance" the Companies Ordinance (Chapter 32 of the
Laws of Hong Kong);
"Completion Date" the date falling on the 5th Business Day
after the conditions set out in Clause 3.1
have been fulfilled or waived by the
Purchaser;
"Completion" completion of the sale and purchase of the
Sale Interests in accordance with the terms
and conditions of this Agreement;
"Consideration" the total consideration payable by the
Purchaser pursuant to Clause 4.1 hereof;
"Consideration Shares" 5,797,980ordinary shares with par value of
US$0.001 each in the capital of the Holding
Company to be allotted and issued in the
name of the Vendors or their nominees
pursuant to Clause 4.1;
"Directors" directors of the Company from time to time
and "Director" shall be construed as any one
of them;
"Encumbrance" any mortgage, charge, pledge, lien
(otherwise than arising by statute or
operation of law), equities, hypothecation
or other encumbrance, priority or security
interest, deferred purchase, title
retention, leasing, sale-and-repurchase or
sale-and-leaseback arrangement whatsoever
over or in any property, assets or rights of
whatsoever nature and includes any agreement
for any of the same;
3
"Group" the Company and its subsidiaries and "member
of the Group" shall be construed as any one
of them;
"Guaranteed Profit" RMB10,770,000;
"Guaranteed Turnover" RMB600,000,000;
"HK$" Hong Kong dollars;
"Holding Company" The Hartcourt Companies, Inc., a company
incorporated under the laws of the State of
Utah, United States and the registered and
beneficial owner of the entire issued share
capital of the Purchaser;
"Hong Kong" the Hong Kong Special Administrative Region
of the PRC;
"Listing Rules" the Rules Governing the Listing of
Securities on the Stock Exchange;
"Long Stop Date" March 31, 2004;
"Net Profit" in relation to the year ending on the date
on which the Restricted Trading Period ends,
the consolidated profits (less losses) of
the Group as shown by the Special Audited
Accounts :
(a) after deducting all expenses of working
and management including, without
limitation, director's remuneration
(whether by way of fees, salary or
commission) and depreciation;
(b) without taking into account profits or
losses of a capital nature arising on
disposal of fixed assets, investments,
plant or any other assets of the Group;
and
(c) after making such other adjustments as
the auditors of the Company consider
appropriate;
"PRC" the People's Republic of China, which for
the purpose of this Agreement, excludes Hong
Kong and Macau;
"Purchaser's Nominees" persons to be nominated by the Purchaser to
acquire the Sale Interests in accordance
with the terms and conditions of this
Agreement;
4
"Relevant Proportion" the respective portion of Sale Interests
owned by each of the Vendors expressed as a
percentage of the entire interest in the
registered capital of the Company as set out
in column 3 of the Schedule 2;
"RMB" Renminbi, the lawfully currency of PRC;
"Restricted Trading Period"
a period of twelve (12) months from the date
on which the Consideration Shares being
allotted and issued to the Vendors or their
nominees;
"Sale Interests" 51% of the entire interest in the registered
capital of the Company to be sold by the
Vendors to the Purchaser's Nominees;
"Special Audited Accounts"
the audited consolidated profit and loss
accounts of the Group for the year ended on
the date on which the Restricted Trading
Period ends;
"Tax Indemnity" the deed of indemnity to be given by each of
the Vendors in favor of the Purchaser and
the Group in such form and substance as may
be satisfactory and acceptable to the
Purchaser;
"Taxation" all forms of taxation whenever created or
imposed and whether in the PRC or elsewhere
and without limiting the generality of the
foregoing, includes all forms of profits
tax, interest tax, salaries tax, property
tax, estate duty, stamp duty, sales tax, any
provisional tax, customs and import duty and
any amount equal to any deprivation of any
relief, allowance, set off, deduction in
computing profits or rights to repayment of
taxation granted by or pursuant to any
legislation concerning or otherwise relating
to taxation and also includes in addition
and without prejudice to the foregoing, all
fines, penalties, costs, charges, expenses
and interests relating thereto;
"US" the United States of America;
"US$" United States Dollars, being the lawful
currency of the United States of America;
5
"Vendors' Solicitors" ▇▇. ▇▇▇▇ ▇▇▇▇▇
Beijing University Tonghe Law Firm
Beijing University Campus
Tel: ▇▇▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇)▇▇▇▇▇▇▇▇
"Warranties" the representations and warranties set out
in Schedule 3.
----------
"Sihai Lanxiang" Beijing Sihai Lanxiang Tech Development Co.,
Ltd.( ), a domestic joint venture company
established in and under the laws of the PRC
and whose entire registered capital as at
the date hereof is 10,000,000 RMB and
registered in the name of (i) ▇▇▇▇ ▇▇▇▇ as
to 50% of the entire equity interest in
Sihai Lanxiang; and (ii) ▇▇▇▇ ▇▇ as to 35%
of the entire equity interest in Sihai
Lanxiang; (iii) Sun Lei as to 15% of the
entire equity interest in Sihai Lanxiang.
"Challenger Ruihua" Beijing Challenger Ruihua Electronic Tech
Co., Ltd (), a domestic joint venture
company established in and under the laws of
the PRC and whose entire registered capital
as at the date hereof is 15,000,000 RMB and
registered in the name of (i) ▇▇▇▇▇ ▇▇▇▇ as
to 20% of the entire equity interest in
Challenger Ruihua; and (ii) ▇▇▇ ▇▇▇▇▇▇▇ as
to 50% of the entire equity interest in
Challenger Ruihua; and (iii) ▇▇▇▇ ▇▇▇ as to
30% of the entire equity interest in
Challenger Ruihua.
"Shanghai Helian" Shanghai Helian Electronic Tech Co., Ltd (),
a domestic joint venture company established
in and under the laws of the PRC and whose
entire registered capital as at the date
hereof is 5,000,000 and registered in the
name of (i) ▇▇▇▇ ▇▇▇▇ as to 60% of the
entire equity interest in Shanghai Helian;
and (ii)Meng Song as to 40% of the entire
equity interest in Shanghai Helian.
1.2 The headings of this Agreement are inserted for convenience only and
shall be ignored in construing this Agreement. Unless the context
otherwise requires, references in this Agreement to the singular shall
be deemed to include references to the plural and vice versa;
references to one gender shall include all genders and references to
any person shall include an individual, firm, body corporate or
unincorporated.
6
1.3 References in this Agreement to clauses, schedules and exhibits are
references to clauses, schedules and exhibits of this Agreement and
references to sub-clauses and paragraphs are unless otherwise stated,
references to sub-clauses and paragraphs of the clause, sub-clause or,
as appropriate, the schedule or the exhibit in which the reference
appears.
1.4 Reference to a "subsidiary" or "holding company" shall be construed in
accordance with section 2 of the Companies Ordinance.
1.5 Reference to any Ordinance, regulation or other statutory provision or
rules in this Agreement includes reference to such Ordinance,
regulation, provision or rule as modified, consolidated or re-enacted
from time to time.
2. SALE AND PURCHASE OF THE SALE INTERESTS
2.1 Subject to the terms and conditions of this Agreement, each of the
Vendors, as beneficial owners of the respective portion of Sale
Interests as set out in Schedule 2, shall sell and the Purchaser shall,
relying on the warranties and indemnities herein contained, purchase or
procure its nominee to purchase the Sale Interests, with full title
guarantee with effect from the date of this Agreement free from all
Encumbrances together with all rights now or hereafter attaching
thereto including but not limited to all dividends paid, declared
and/or made in respect thereof on or after the date of this Agreement.
2.2 The parties acknowledge and agree that the Vendors will enter into a
share transfer agreement with the Purchaser's Nominees as referred to
in Clause 3.1(b), pursuant to which the Purchaser's Nominees will be
registered as the beneficiary owner of the Sale Interests in accordance
with the instructions of the Purchaser. That share transfer agreement
is the appendix to this agreement.
2.3 The Purchaser and/or the Purchaser's Nominees shall not be obliged to
purchase any portion of the Sale Interests unless the purchase of all
the Sale Interests is completed simultaneously.
3. CONDITIONS
3.1 Completion is conditional upon:
(a) the Purchaser having completed its due diligence (including
without limitation, legal, financial and commercial aspects) in
respect of the Group referred to in Clause 3.3 below and the
results of which are, in the absolute opinion of the Purchaser,
satisfactory and acceptable to the Purchaser in all respects;
(b) the due execution of a share transfer agreement by the Vendors
and the Purchaser's Nominees;
7
(c) if so required, passing of necessary resolutions by directors of
the Purchaser at a board meeting approving (i) this Agreement and
the transactions contemplated herein and (ii) the allotment and
issue of the Consideration Shares to the Vendors credited as
fully paid;
(d) all necessary consents permits and approval (whether
governmental, regulatory or otherwise) as may be required under
US securities laws or other relevant laws, regulations and rules
in US in respect of this Agreement, the allotment and issue of
the Consideration Shares and the transactions contemplated
hereunder having been obtained by the Purchaser;
(e) all necessary consents permits and approval (whether
governmental, regulatory or otherwise) as may be required in
respect of the sale and purchase of the Sale Interests and/or the
change of control of the Company having been obtained from the
relevant PRC governmental authorities, including but not limited
to the new business license for the Company;
(f) the Purchaser having obtained a legal opinion issued by a lawyer
(acceptable to the Purchaser) qualified to practice PRC laws
(which form and contents are satisfactory and acceptable to the
Purchaser at its absolute discretion) in respect of:
(i) the legality and validity of this Agreement and the
transactions contemplated herein;
(ii) the completion of all necessary procedures and obtaining of
all necessary approvals regarding the sale and purchase of
the Sale Interests;
(iii) the appointment of Director(s) nominated by the Purchaser
become effective;
(iv) no change in the permitted scope business of the Company
after the transfer of the Sale Interests;
(v) all other matters reasonably requested by the Purchaser;
(g) the Purchaser having obtained a legal opinion issued by a US
legal counsel (which form and contents are satisfactory and
acceptable to the Purchaser at its absolute discretion) in
respect of:
(i) the legality and validity of this Agreement, allotment and
issue of the Consideration Shares and the transactions
contemplated herein;
(ii) the completion of all necessary procedures and obtaining of
all necessary approvals regarding the acquisition of the
Sale Interests; and
(iii) all other matters reasonably requested by the Purchaser;
(h) the Vendors having obtained a consent letter duly signed by all
shareholders and person who has any direct or indirect interest
in the registered capital of the Company waiving their respective
rights of pre-emption or any other rights they may have in
respect of the Sale Interests;
(i) the due execution of a share transfer and pledge agreement by the
Purchaser's Nominees and the Purchaser;
(j) the Warranties and undertakings under this Agreement are true and
accurate and are not misleading in any material aspects at
Completion as if repeated at Completion and at all time between
the date of this Agreement and the Completion.
3.2 The Vendors shall jointly and severally procure the fulfillment of the
condition precedents mentioned in Clauses 3.1(e) above and shall keep
the Purchaser fully informed of all their actions and efforts in
connection with their obtaining the necessary consents, permits and
approvals from the relevant regulatory authorities, including without
limitation, providing the Purchaser immediately with all of their
correspondence with these relevant regulatory authorities.
3.3 In relation to Clause 3.1(a), the Vendors shall give and shall procure
that the Purchaser and/or any persons authorized by it in writing will
be given such access to the premises and all books, documents, title
deeds, records, returns, approvals, correspondence and accounts of the
Company and all members of the Group and all such information relating
to the Group as may be reasonably requested by or on behalf of the
Purchaser to undertake and conduct a full due diligence (including but
without limitation, in all legal, financial and commercial aspects)
against the Group and be permitted to take copies of any such books,
documents, title deeds, records and accounts and that the directors and
employees of all members of the Group shall be instructed to give
promptly all such information and explanations to any such persons as
aforesaid as may be requested by it or them. For the avoidance of
doubt, such due diligence shall not limit or otherwise qualify in any
way the obligations and liabilities of the Vendors under Clause 10.
3.4 The Purchaser may at any time by notice in writing to the Vendors waive
any of the conditions set out in Clause 3.1 . If (a) any of the
conditions set out in Clause 3.1 has not been satisfied (or as the case
may be, waived by the Purchaser) on or before 5:00 p.m. on the Long
Stop Date or such later date as the Purchaser may agree; or (b) the
Purchaser is not satisfied with the results of the due diligence
conducted according to Clause 3.3 and informs the Vendors in writing at
any time, this Agreement shall cease and determine and the parties to
this Agreement shall not have any obligations and liabilities.
4. CONSIDERATION
4.1 The Consideration for the sale and purchase of the Sale Interests (i.e.
51% of the entire equity interest in the registered capital of the
Company on a fully diluted basis from time to time) shall be the sum of
RMB33,700,000 which shall be satisfied by the Purchaser in the
following manner:
i. RMB28,700,000, being payment and consideration for 41% of
the entire equity interest in the registered capital of the
Company (on a fully diluted basis including after issue and
allotment of shares in the Company to the Purchaser
pursuant to sub-clause (ii) below), shall be satisfied by
the Purchaser procuring the Holding Company to allot, issue
and credit the Consideration Shares to the Vendors in the
Relevant Proportions as fully paid at an issue price of
US$0.60 per Consideration Share upon Completion;
ii. RMB5,000,000, representing the remaining balance of the
Consideration and being payment and consideration for 10%
of the entire equity interest in the registered capital of
the Company (on a fully diluted basis including after
transfer shares in the Company to the Purchaser pursuant to
sub-clause (i) above), shall be satisfied by the Purchaser
procuring the payment of RMB5,000,000 to Sihai Lanxiang
upon Completion. The Vendors shall be jointly and severally
responsible to do and execute or procure to be done and
executed all necessary acts, deeds, documents and things
within their power to ensure that Sihai Lanxiang is
converted from a domestic PRC company to a sino-foreign
join venture company under the laws of the PRC (with the
Purchaser's cooperation).
The Purchaser shall not be obliged to complete the purchase of any
of the Sale Interests unless the purchase of all the Sale Interests
is completed simultaneously.
For the purpose of above clause:
Consideration Shares shall be defined as an aggregate of 5,797,980 new
shares of US$ 0.60 per share in the capital of the Holding Company to
be allotted and issued, credited as fully paid, to the Vendors in
accordance with the terms and conditions of this Agreement;
US$1.00 is equal to RMB8.25 (1USD=(cent)D8.25)
4.2 The Vendors shall notify the Purchaser in writing at least two (2)
Business Days before the Completion Date of the name(s) and other
particulars of the registered holder(s) of the Consideration Shares and
the board lot denomination of the share certificate(s) in respect of
the Consideration Shares to be issued to them or their nominee(s) and
all necessary information and details as is reasonably required to
enable the share registrars of the Holding Company to issue the
definitive share certificates for such Consideration Shares upon
Completion.
4.3 The Vendors understand that the Consideration Shares will not be
registered under the U.S. Securities Act. The Vendors also understand
that the Consideration Shares are being allotted and issued pursuant to
an exemption from registration contained in the U.S. Securities Act
based in part upon the Vendors' representations contained in this
Agreement. The Vendors hereby represent and warrant as follow:
(a) Vendors bear economic risk: the Vendors have substantial
experience in evaluating and investing in private placement
transactions of securities in companies similar to the Purchaser
so that it is capable of evaluating the merits and risks of its
investments in the Purchaser and have the capacity to protect its
own interests. The Vendors are able to bear the economic risk of
this investment;
(b) Acquisition for own account: the Vendors are acquiring the
Consideration Shares for their respective own account for
investment only, and not with a view towards their distribution;
(c) Vendors can protect their interest: the Vendors represent that by
reason of their management, business or financial experience, the
Vendors have the capacity to protect their own interests in
connection with the transactions contemplated in this Agreement.
Further, the Vendors are aware of no publication of any
advertisement in connection with the transactions contemplated in
this Agreement;
(d) Company information: the Vendors have had an opportunity to
discuss the Purchaser's business, management and financial
affairs with directors, officers and management of the Purchaser
and have had the opportunity to review the Purchaser's operations
and facilities. The Vendors have also had the opportunity to ask
questions of and receive answers from the Purchaser and its
management regarding the terms and conditions of this investment;
Purchaser will provide balance sheet and income statement to
Vendors.
(e) Rule 144: The Vendors have been advised or are aware of the
provisions of Rule 144 promulgated under the U.S. Securities Act,
which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions;
(f) Legends: The Vendors understand and agree that the Purchaser will
cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s)
evidencing ownership of the Consideration Shares, together with
any other legends that may be required by state or federal
securities laws, or by the Articles of Association and Bye laws
of the Company, or by any other agreement between the Vendors and
the Purchaser or between the Vendors and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
(g) Refusal to Transfer: The Purchaser will not be required to (i)
transfer on its books any Consideration Shares that have been
sold or otherwise transferred in violation of any of the
provisions of this Agreement; or (ii) treat as owner of such
Consideration Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such
Consideration Shares have been so transferred.
4.4 The Purchaser agrees that upon expiry of the Restricted Trading Period,
and upon expiry of the Repurchase Options under Clause 8, and upon
presentation of the Consideration Shares to Purchaser, Purchaser will
commerce within 7 business days all necessary formalities and
registration procedures as may be required under the U.S. Securities
Act and the applicable State securities law to enable the Consideration
Shares becoming freely transferable and resalable.
5. COMPLETION
5.1 Completion shall take place at the PRC office of the Vendors situated
at third floor, Kaiyuan Building, ▇▇.▇▇ ▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ on the Completion Date at 2p.m. (or at such other place and
time as the parties may agree) when all the acts and requirements set
out in this Clause 5 shall be complied with.
5.2 On Completion, each of the Vendors shall jointly and/or severally (as
the case may be) deliver or procure the delivery to the Purchaser of
all the following:
(a) copies, certified as true and complete by a director/ legal
representative of the Company and its relevant subsidiaries, of
resolutions of the shareholders /board of directors meeting
approving the matters as stipulated in Clauses 5.3, 5.4(c) and
5.4(d);
(b) in respect of every member of the Group:
(i) all constitutional documents, statutory records and minute
books (which shall be written up to date as at Completion);
(ii) all common seals and all rubber stamps, cheque books,
cheque stubs and bank statements, receipt books, all
current insurance policies (if any), books and accounts and
title deeds and evidence of ownerships to all assets and
all current contracts and all other accounting records;
(iii) copies of all tax returns and assessments (receipted where
the due dates for payment fell on or before the Completion
Date); and
(iv) all other papers, correspondence and documents relating to
the Group which are in the possession of or under the
control of any of the Vendor;
provided that, if the Purchaser so agrees, delivery of all
documents and records as referred to in this Clause 5.2(b)
shall be deemed to have been effected where they are
situated in premises and shall continue to be in the sole
occupation of the relevant member of the Group following
Completion or otherwise in the custody of persons who shall
remain officers and/or employees of such member of the
Group following Completion;
(c) the Tax Indemnity duly executed by each of the Vendors.
5.3 On Completion, the Vendors shall procure a meeting of the shareholders
of the Company at which such matters shall be dealt with and resolved
upon as the Purchaser shall require for the purposes of giving effect
to the provisions of this Agreement including:
(a) approving the sale and purchase of the Sale Interests;
(b) appointing nominee(s) of the Purchaser to be Director(s) and of
the Company;
(c) amending the memorandum and articles of association of the
Company as may be required by the Purchaser to effect the
transactions contemplated hereunder; and
(d) procure the resignation of such existing Director(s) of the
Company as the Purchaser shall specify and that each person shall
confirm under seal that they have no claim against the Company
for compensation for loss of office or any other claim.
5.4 On Completion, each of the Vendors shall jointly procure that:
(a) all registration procedures as may be required under the PRC law
in respect of the transfer of the Sale Interests by the Vendors
to the Purchaser's Nominees shall be completed within reasonable
time;
(b) a new articles of association of the Company shall be signed by
the Purchaser's Nominees and filed with the relevant local
Administration of Industry and Commerce which shall state that
the Purchaser's Nominees hold 51% interest in the registered
capital of the Company;
(c) a board meeting of each subsidiary of the Company shall be held
at which such matters shall be dealt with and resolved upon as
the Purchaser shall require for the purposes of giving effect to
the provisions of this Agreement, including appointing such
persons as the board of directors may determine to be new
director(s); and
(d) such existing directors, supervisor(s) and the secretary of each
subsidiary of the Company as the Purchaser shall specify shall
resign as directors, supervisor(s) and the secretary of such
relevant subsidiary of the Company and that each such person
shall confirm under seal that they have no claim against the
relevant subsidiary for compensation for loss of office or any
other claim whatsoever.
5.5 Against performance of the obligations by the Vendors under Clauses
5.2, 5.3 and 5.4 above, the Purchaser shall: -------
----------------
(a) procure the allotment and issue to each of the Vendors (or their
respective nominees) the Consideration Shares in the Relevant
Proportion and immediately thereafter to register each of the
Vendors (or their respective nominees) as a member of the
Purchaser;
(b) cause to be delivered to each of the Vendors certified copy of
instructions to the share registrar of the Holding Company for
the issue of definitive share certificates of title in respect of
the Consideration Shares in the Relevant Proportion in the
respective names of the Vendors or their respective nominee(s);
and
(c) deliver to each of the Vendors a certified copy of the directors'
resolutions of the Purchaser approving:
(i) the acquisition of the Sale Interests and the terms and
conditions of this Agreement; and
(ii) the issue and allotment of the Consideration Shares.
5.6 If the Vendors shall fail to do anything required to be done by them
under Clauses 5.2, 5.3 and 5.4, without prejudice to any other right or
------------------------
remedy available to the Purchaser, the Purchaser may:
(a) defer Completion to a day not later than 14 days after the date
fixed for Completion (and so that the provisions of this
paragraph (a) shall apply to Completion as so deferred); or
(b) proceed to Completion so far as practicable but without prejudice
to the Purchaser's rights to the extent that the Vendors shall
not have complied with their obligations hereunder; or
(c) rescind this Agreement without liability on its part.
5.7 If the Purchaser shall fail to do anything required to be done by them
under Clauses 5.5, without prejudice to any other right or remedy
available to the Vendors, the Vendors may:
(d) defer Completion to a day not later than 14 days after the date
fixed for Completion (and so that the provisions of this
paragraph (a) shall apply to Completion as so deferred); or
(e) proceed to Completion so far as practicable but without prejudice
to the Vendors' rights to the extent that the Purchaser shall not
have complied with their obligations hereunder; or
(f) rescind this Agreement without liability on its part.
5.8 Clauses 6 to Clause 17 shall survive the Completion.
--------- ---------
6. MANAGEMENT OF THE COMPANY
6.1 Upon Completion, the business and operations of the Group shall be
managed by the Board.
6.2 The Chairman of the Board and the legal representative of the Company
shall be nominated and appointed by the Board. The Chairman of the
Board and the legal representative of the Company shall initially be
▇▇▇▇ ▇▇▇▇.
6.3 The Board shall comprise of 5 Directors. The Purchaser's Nominees shall
be entitled to nominate and appoint 3 Directors at any time by written
notice addressed to the Company according to the new articles of
association of the Company under Clause 5.3.
6.4 The quorum for meetings of the Board shall be 3, of whom 2 shall be
Directors nominated by the Purchaser's Nominees.
6.5 Unless otherwise unanimously agreed by all Directors, meetings of the
Board shall be held at least once in each quarter.
6.6 At least 7 days' written notice of each meeting of the Board shall be
given to each Director and alternate director specifying the date, time
and place of the meeting and the business to be transacted thereat with
all documents and papers to be distributed in such meeting attached,
provided that if Directors and their nominated alternates who would
constitute a quorum at any meeting agree to a shorter period of notice,
then such meeting shall be deemed to be properly called.
6.7 The financial controller and/or the chief financial officer of the
Company shall be nominated and appointed by the Board.
6.8 According to PRC corporate law, the Vendors shall sell or otherwise
dispose of any of their remaining interests in the Company.
6.9 So far as the Vendors remain as shareholders of the Company, each of
the Vendors undertakes that he/she/it shall procure and take all
actions to ensure that all obligations under Clauses 6 be duly
executed, done and/or performed.
7. DISPOSAL OF CONSIDERATION SHARES
Each of the Vendors agrees and acknowledges that the Consideration
Shares are subject to the United States Securities and Exchange
Commission ("SEC") Rule 144 and in particular, hereby jointly and
severally undertakes to and covenants with the Purchaser and the
Holding Company that it will not, during the Restricted Trading Period,
dispose of (including without limitation by the creation of any option,
charge or other Encumbrance or rights over or in respect of) any of the
Consideration Shares or any interests therein owned by it/him/her or in
which it/he/she is, directly or indirectly, interested immediately
after Completion or dispose of (including without limitation by the
creation of any option, charge or other encumbrance or rights over or
in respect of) any shares in any company controlled by it/he/she which
is the beneficial owner of the Consideration Shares.
8. REPURCHASE OPTION
8.1 If, according to the Special Audited Accounts, the Company either:
(a) fails to attain a Net Profit exceeding the Guaranteed Net Profit
or fails to achieve the Guaranteed Turnover during the Restricted
Trading Period; or
(b) making loss in any single quarter in the Restricted Trading
Period,
then the Purchaser may at its sole and absolute discretion, within
three (3) months from the issue of the Special Audited Accounts, by
notice in writing to the Vendors ("the Purchaser's Repurchase Notice")
request the Vendors to either, (i) repurchase the Sale Interests and
the Vendors shall transfer to the Purchaser or its nominee all of the
Consideration which have been paid pursuant to Clause 4.1 and Clause
8.3 free from Encumbrances in consideration of all beneficial and
equitable interest in the registered capital of the Company then held
by the Purchaser and/or the Purchaser's Nominees being transferred to
the Vendors, or (ii) transfer or procure to be transferred to the
Purchaser such percentage number of additional equity interests in the
entire capital of the Company (i.e. additional percentage equity
interest in addition to the Sale Interests) ("Additional Sale
Interests") calculated as follows :
A (%)= ( ((28,700,000 / 6.5) / Net Profit) x 100 ) - (41)
whereby
A is the percentage additional number of equity interest in the entire
capital of the Company to be transferred to the Purchaser in addition
to the Sales Interest; and
In the event that the Purchaser exercises its rights to obtain
Additional Sale Interests as set out above, (a) no additional
consideration for the same shall be paid or be payable by the Purchaser
to any of the Vendors and for the purpose of this Agreement, the
consideration for the Additional Sale Interests shall be deemed to have
been included and paid for under Clause 4.1(i) above; and (b) the
Vendors shall transfer and assign to the Purchaser the Additional Sale
Interests pro-rata and according to their Relevant Proportion.
8.2 If, upon expiry of the Restricted Trading Period, the return accrued or
derived from the Consideration Shares is less than 41% of the Company's
Net Profit, then all of the Vendors may (but not individually) at their
collective and absolute discretion, within three (3) months from the
issue of the Special Audited Accounts, by notice in writing to the
Purchaser ("the Vendors' Repurchase Notice"), request the Purchaser to
either, (i) repurchase the Consideration Shares and transfer to the
Vendors all beneficial and equitable interest in the registered capital
of the Company then held by the Purchaser and/or the Purchaser's
Nominees in consideration of all of the Consideration which have been
paid pursuant to Clause 4.1 and Clause 8.3 free from Encumbrances being
transferred to the Purchase, or (ii) issue and allot to the Vendors
such total number of additional shares of and in the Holding Company
("Additional Hartcourt Shares") calculated as follows:
X = ((41% x Net Profit) - (Number of Consideration Shares x (average
closing price per Consideration Share for the last thirty (30) trading
days, including the date on which the Restricted Trading Period ends) -
RMB28,700,000))) / (average closing price per Consideration Share for
the last thirty (30) trading days, including the date on which the
Restricted Trading Period ends )
whereby
X is the aggregate total number of shares in the Holding Company to be
issued and allotted to the Vendors.
In the event that the Vendors exercise their rights to obtain
Additional Hartcourt Shares as set out above, (a) such Additional
Hartcourt Shares shall be credited and deemed fully paid by the
Vendors; and (b) the Purchaser shall issue and allot the Additional
Hartcourt Shares to the Vendors pro rata and in accordance to their
Relevant Proportion.
8.3 The Vendors shall, within 7 days from the date of the Purchaser's
Repurchase Notice or the Vendors' Repurchase Notice (as the case may
be), deliver to or cause to be delivered to the Purchaser the following
in respect of the relevant Consideration Shares:
(a) duly executed transfer instruments and contract notes in favor of
the Purchaser or its nominees together with the relevant share
certificates; and
(b) such other documents as may be reasonably required to give good
title to the Consideration Shares free from Encumbrances to
enable the Purchaser or its nominees (or as it may nominate) to
become the registered holder thereof,
against which the Purchaser shall transfer and assign or procure the
transfer and assign to the Vendors of all equitable and beneficial
interest and all shareholding in the Company then held by it and/or the
Purchaser's Nominees.
8.4 For the purposes of this Clause 8, return accrued or derived from the
Consideration Shares shall be calculated by reference to: the multiple
of the average closing price of the Consideration Shares for the last
thirty (30) trading days including the date on which the Restricted
Trading Period ends and the number of the Consideration Shares, then
less RMB28,700,000.
8.5 The Special Audited Accounts shall be issued by the accounting firms in
P.R.C. which are jointly entrusted by the Vendors and the Purchaser.
9. WARRANTIES
9.1 Each of the Vendors hereby jointly and severally represents and
warrants to the Purchaser that the Warranties are true and accurate in
all respects as at the date of this Agreement and will continue to be
so up to and including Completion and agree to use their best
endeavours (including taking such remedial action as may be necessary)
to ensure that the Warranties have remained and will remain true and
accurate in all respects from date of signing of this Agreement up to
the time of Completion and acknowledges that the Purchaser, in entering
into this Agreement, is relying on, inter alia, such Warranties. For
the avoidance of doubt, the liabilities and obligations of each of the
Vendors under the Warranties shall in no circumstances be lessened,
modified, relieved or otherwise reduced due to any actual or
constructive knowledge of the Purchaser of any facts or events relating
to the business, operations or otherwise of the Group, whether such
knowledge is gained in the course of the due diligence conducted under
Clause 3.3 or otherwise.
9.2 Each of the Vendors agrees that the Purchaser shall treat each of the
Warranties as a condition of this Agreement. In addition, each of the
Warranties is without prejudice to any other Warranty and, except where
expressly otherwise stated, no provision in any Warranty shall govern
or limit the extent or application of any other provision in any
Warranty.
9.3 Each of the Vendors agrees to fully indemnify and keep the Purchaser
and its assignee fully indemnified on demand from and against all
losses, liabilities, damages, costs and expenses (including legal
expenses) which the Purchaser and its assignee may incur or sustain
from or in consequence of any of the Warranties not being correct or
fully complied with. This indemnity shall be without prejudice to any
other rights and remedies of the Purchaser and its assignee in relation
to any such breach of Warranties and all such rights and remedies are
hereby reserved.
9.4 The Warranties shall survive Completion and the rights and remedies of
the Purchaser in respect of any breach of the Warranties shall not be
affected by Completion or by any investigation made by or on behalf of
the Purchaser into the affairs of the Group or by the Purchaser
rescinding, or failing to rescind this Agreement, or failing to
exercise or delaying the exercise of any right or remedy, or by any
other event or matter whatsoever, except a specific and duly authorised
written waiver or release and no single or partial exercise of any
right or remedy shall preclude any further or other exercise.
9.5 The Purchaser shall be entitled to take action both before and after
Completion in respect of any breach or non-fulfillment of any of the
Warranties and Completion shall not in any way constitute a waiver of
any right of the Purchaser.
9.6 Each of the Vendors undertakes in relation to any Warranty which refers
to the knowledge, information or belief of each of the Vendors that it
has made full enquiry into the subject matter of that Warranty and that
they do not have actual or constructive knowledge, information or
belief that the subject matter of that Warranty may not be correct,
complete or accurate.
9.7 If at any time before Completion the Vendors or any of them come to
know of any fact or event which:
(a) is in any way inconsistent with any of the undertakings given by
the Vendors, and/or
(b) suggests that any fact warranted may not be as warranted or may
be misleading; and/or
(c) might affect the willingness of a prudent purchaser for value of
the Sale Interests to complete its purchase or the amount of the
consideration which such purchaser would be prepared to pay for
the Sale Interests;
the Vendors shall give immediate written notice thereof to the
Purchaser in which event the Purchaser may within 14 days of receiving
such notice rescind this Agreement by written notice to each of the
Vendors.
9.8 If at any time before Completion, the Purchaser finds that any of the
Warranties is incorrect or has not been or is (in the reasonable
opinion of the Purchaser) incapable of being rectified the Purchaser
may rescind this Agreement by written notice to each of the Vendors.
9.9 The Purchaser's rights under the above clauses are in addition to and
without prejudice to all other rights and remedies available to it and
its exercise of or its failure to exercise its rights under any of the
above clauses shall not constitute a waiver of or prejudice any of its
other rights under this Agreement.
10. VENDORS' UNDERTAKINGS
10.1 Each of the Vendors jointly and severally undertakes that the Vendors
will not directly or indirectly either alone or jointly with or as
manager or agent of any person and whether or not for gain, carry on,
engage or in any way be interested in any business that is similar to
and/or in competition with the business of the Company and/or any of
its subsidiaries for a period of three (3) years commencing from the
date on which the Restricted Trading Period ends.
10.2 The Vendors covenant and undertake that prior to Completion and without
the prior written consent of the Purchaser, the Vendors shall procure
that the Company and each member of the Group shall not:
a. incur any expenditure on capital account or enter into any option
in respect of any part of its assets;
b. dispose of or agree to dispose of or grant any option in respect
of any part of its assets;
c. borrow any money or make any payments out of or drawings on its
bank account(s) other than routine payments;
d. enter into any unusual or abnormal contract or commitment;
e. make any loan;
f. enter into any leasing, hire, purchase or other agreement or
arrangements for payment on deferred terms;
g. declare, make or pay any dividend or other distribution or do or
suffer anything which may render its financial position less
favourable than as at the date of this Agreement;
▇. ▇▇▇▇▇ or issue or agree to grant or issue any mortgages, charges,
debentures or other securities or give or agree to give any
guarantees or indemnities;
i. make any change in the terms and conditions of employment or
pension benefits of any of its directors or employees or employ
or terminate (other than for good cause) the employment of any
person;
j. create, issue or grant any option in respect of any class of
share or loan capital or agree so to do;
k. in any other way depart from the ordinary course of its
respective day-to-day business either as regards the nature scope
or manner of conducting the same;
l. voluntarily contravene or fail to comply with any material
obligation, statutory or otherwise; and
m. do anything whereby its financial position will be rendered less
favourable than at the date hereof.
10.3 Each of the Vendors agrees to fully indemnify and keep each member of
the Group and/or the Purchaser and its assignee fully indemnified on
demand from and against all losses, liabilities, damages, costs and
expenses (including legal expenses) which any member of the Group
and/or the Purchaser and its assignee may incur or sustain from or in
consequence of any liabilities of the Group, i.e. the diminution of the
value (including without limitation, the net assets value or expected
profits) of the Group, arising from any act or omission or otherwise
incurred on or before the Completion Date.
11. ACCESS TO INFORMATION
Each of the Vendors shall assist the Purchaser, its agents,
representatives and professional advisers in obtaining promptly on
request full access to all such facilities and information regarding
the business, assets, liabilities, contracts and affairs of the Group
and other evidence of ownership of the assets owned by the Group as the
Purchaser may require.
12. FURTHER ASSURANCE
Each of the Vendors shall execute, do and perform or procure to be
executed, done and performed by other necessary persons all such
further acts, agreements, assignments, assurances, deeds and documents
as the Purchaser may require effectively to vest the registered and
beneficial ownership of the Sale Interests in the Purchaser free from
all Encumbrances and with all rights now and hereafter attaching
thereto.
13. CONFIDENTIALITY AND ANNOUNCEMENTS
13.1 Each of the parties undertakes to the others that it will not, at any
time after the date of this Agreement, divulge or communicate to any
person other than to its professional advisers, or when required by law
or any rule of any relevant stock exchange body or regulatory
authorities, or to its respective officers or employees whose province
is to know the same any confidential information concerning the
business, accounts, finance or contractual arrangements or other
dealings, transactions or affairs of any of the others which may be
within or may come to its knowledge and it shall use its best
endeavours to prevent the publication or disclosure of any such
confidential information concerning such matters.
13.2 No public announcement or communication of any kind shall be made in
respect of the subject matter of this Agreement unless specifically
agreed between the parties or unless an announcement is required
pursuant to the applicable laws and the regulations or the requirements
of any relevant stock exchange or any other regulatory body or
authority. Any announcement by any party required to be made pursuant
to any relevant laws or regulation or the requirements of the relevant
stock exchange or any other regulatory body or authority shall be
issued only after such prior consultation with the other party as is
reasonably practicable in the circumstances.
14. GENERAL
14.1 This Agreement constitutes the entire agreement between the parties
hereto with respect to the matters dealt with herein and supersedes all
previous agreements, arrangements, statements, understandings or
transactions between the parties hereto in relation to the matters
hereof and the parties acknowledge that no claim shall arise in respect
of any agreement so superseded.
14.2 Any variation to this Agreement shall be binding only if recorded in a
document signed by all the parties hereto.
14.3 Time shall be of the essence of this Agreement but no failure by any
party to exercise, and no delay on its part in exercising any right
hereunder will operate as a waiver thereof, nor shall any single or
partial exercise of any right under this Agreement (including a
settlement with the Vendor) preclude any other or further exercise of
it or the exercise of any right or prejudice or affect any right
against any person under the same liability whether joint, several or
otherwise. The rights and remedies provided in this Agreement are
cumulative and not exclusive of any rights or remedies provided by law.
14.4 The obligations, liabilities (including without limitation, breach of
Warranties) and undertakings of the Vendors shall be joint and several.
14.5 This Agreement shall be binding upon and ensure for the benefit of the
successors of the parties but shall not be assignable.
14.6 All provisions of this Agreement, in so far as the same shall not have
been performed at Completion, shall remain in full force and effect
notwithstanding Completion.
14.7 If any provision of this Agreement shall be held to be illegal or
unenforceable, the enforceability of the remainder of this Agreement
shall not be affected.
14.8 Time shall be of the essence as regards any date or period mentioned in
this Agreement and any date or period substituted for the same by
agreement of the parties hereto or otherwise.
15. NOTICES
15.1 Any notice, claim, demand, legal process, document or other
communication to be given under this Agreement (collectively
"communication" in this Clause 15) shall be in writing in the English
language and may be served or given personally or sent to the address
or facsimile numbers (if any) stated after the relevant party's name in
Schedule 4 or to such other address as may have been last notified in
writing by such party to the party serving the communication
specifically referring to this Agreement. All communications shall be
served by the following means and the addressee of a communication
shall be deemed to have received the same within the time stated
adjacent to the relevant means of dispatch:
Means of dispatch Time of deemed receipt
Local mail or courier 24 hours
Facsimile on receipt of a satisfactory report of
transmission printed out by the sending
machine
Air courier/Speedpost 3 days
Airmail 5 days
Provided that in the case of delivery by hand or by fax which occurs
after 6:00 p.m. on a Business Day or a day which is not a Business Day,
service thereof shall be deemed to occur at 9:30 a.m. on the next
following Business Day.
15.2 A communication served in accordance with Clause 15.1 shall be deemed
sufficiently served and in proving service and/or receipt of a
communication it shall be sufficient to prove that such communication
was left at the addressee's address or that the envelope containing
such communication was properly addressed and posted or dispatched to
the addressee's address or that the communication was properly
transmitted by facsimile to the addressee.
15.3 Nothing in this Clause 15 shall preclude the service of communication
---------
or the proof of such service by any mode permitted by Hong Kong law.
16. COSTS AND STAMP DUTY
16.1 Each party shall bear its own costs and expenses (including legal fees)
incurred in connection with the preparation, negotiation, execution and
performance of this Agreement and all documents incidental or relating
to Completion.
16.2 All stamp duty (if any) payable in connection with the sale and
purchase of the Sale Interests shall be borne by the Vendors and the
Purchaser in equal shares.
17. GOVERNING LAW AND JURISDICTION
17.1 This Agreement shall be governed by and construed in accordance with
the laws of Hong Kong.
17.2 Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach termination or invalidity thereof, shall be
settled by arbitration in accordance with the UNCITRAL Arbitration
Rules as at present in force and as may be amended by the rest of this
clause. The appointing authority shall be Hong Kong International
Arbitration Centre.
17.3 The place of arbitration shall be in Hong Kong and at Hong Kong
International Arbitration Centre (HKIAC). There shall be only [one]
arbitrator. Any such arbitration shall be administered by HKIAC in
accordance with HKIAC Procedures for Arbitration in force at the date
of this Agreement including such additions to the UNCITRAL Arbitration
Rules as are therein contained.
17.4 The language to be used in the arbitral proceedings shall be English.
17.5 Each of the Vendors hereby irrevocably appoints ▇▇.▇▇▇▇ ▇▇▇▇ of Room
1603, 16/F, Kinox Center, ▇▇. ▇ ▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇ (TEL: (▇▇▇) ▇▇▇▇▇▇▇▇ FAX: (▇▇▇) ▇▇▇▇▇▇▇▇) and Purchaser hereby
irrevocably appoints ▇▇▇▇▇ ▇▇▇ of 35th Floor, Two International Finance
Centre, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ (TEL: (▇▇▇) ▇▇▇▇▇▇▇▇, FAX:
(▇▇▇)▇▇▇▇▇▇▇▇) as its process agent to receive on its behalf service of
any writ, summons, order, judgment or other notice of legal process in
Hong Kong. Such service shall be deemed completed on delivery to such
process agent (whether or not it is forwarded to and received by both
parties). If for any reason such process agent ceases to be able to act
as process agent, or no longer has an address in Hong Kong, any party
irrevocably agrees to appoint a substitute process agent with an
address in Hong Kong and to deliver to the other party a copy of the
new process agent's acceptance of that appointment within 30 days.
Nothing herein contained shall affect the right to serve process in any
other manner permitted by law.
18. LEGAL REPRESENTATION
Each party confirms and acknowledges to the other that he/she/it has
sought separate legal representation and is fully aware of the
provisions of this Agreement and the transactions contemplated herein
before entering into this Agreement.
19. COUNTERPARTS
This Agreement may be executed in one or more counter parts each of
which shall be binding on each party by whom or on whose behalf it is
so executed, but which together shall substitute a single instrument.
For the avoidance of doubt, this Agreement shall not be binding on any
party hereto unless and until it shall have been executed by or on
behalf of all persons expressed to be a party hereto.
20. Further Undertaking
20.1 Each of the Vendors hereby jointly and severally undertake to procure
the following :
(a) the Company is restructured such that the entire equity interests
of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Challenger Ruihua, and Shanghai Helian
respectively are beneficially owned (whether directly and/or
indirectly) by the Company, including attending to all necessary
matters to complete restructuring, within 2 months of the signing
date of the Agreement.
(b) The Company, following completion of the restructuring, shall
meet the following requirements:
I. its entire registered capital shall be no less than
RMB30,000,000;
II. the Purchaser shall at all times remain as the beneficial
owner of the 51% equity interest in the entire registered
capital of and in the Company;
III. the Company shall be as the actual beneficial owner of the
100% equity interest in the entire registered capital of
and in Sihai Lanxiang, Challenger Ruihua, Shanghai Helian
("100% Interest") and have full rights ,benefits ,
interests and control in the 100% Interest;
IV. the representatives of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Challenger Ruihua,
Shanghai Helian are respectively ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
Song at the signing date of the Agreement and the said ▇▇▇
▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ Song as the registered owner of the
10% equity interest in the entire registered capital of and
in Sihai Lanxiang, Challenger Ruihua, Shanghai Helian
respectively ("10 % Interest") shall at all times (unless
otherwise agreed in writing by the Company and the
Purchaser) hold on trust such 10% Interest on behalf of the
Company such that the Company shall have the full rights,
benefits, interests and control in the 10% Interest and as
beneficial owner;
▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ Song shall duly execute and
deliver the Pledge Agreement , the Power of Attorney, the
Statement for Waiving the Priority Rights, the
Shareholders' Undertaking and such other documents and
deeds as maybe reasonably requested by the Company (in
respect of the 10% Interest and such that the Company may
at all times exercise control and have absolute benefit in
the 10% Interest) to and in favor of the Company;
VI. the Company shall be the registered owner of the 90% equity
interest in the entire registered capital of and in Sihai
Lanxiang, Challenger Ruihua, Shanghai Helian.
20.2 Each of the Vendors hereby jointly and severally undertake to procure
that the Company will acquire Beijing Xingrun Jiayuan Tech Co., ("
Jiayuan Tech"). The relevant agreements will be executed by the
Vendors, the Purchaser and Jiayuan Tech.
SCHEDULE 1
----------
Particulars of the Company
--------------------------
Beijing Challenger Wanzhong Info Tech Co., LTD
1. Date of incorporation : June 07, 1999
2. Place of incorporation : Beijing ,PRC
3. Registration No. : 1101071138267 (1-1)
4. Registered capital : RMB 10,000,000
5. Registered Address : ▇▇. ▇▇▇▇, ▇▇▇▇▇
hotel, Hi-Tech
Garden, Shi ▇▇▇▇ ▇▇▇▇
District ▇▇▇ ▇▇▇▇▇ ,
▇▇▇▇▇▇▇
▇. Nature : domestic joint
venture group with
limited liability
6. Legal Representative : ▇▇▇▇ ▇▇▇▇
7. Directors : ▇▇▇▇ ▇▇▇▇
8. Financial year end : 31 December
9. Auditors : Beijing
Tianzhenghua
accountants firm
10. Scope of Business : Selling electronic
computer and exterior
instrument, making
new products,
developing
information
technology,
technology transfer
and consultant and
training and service
etc
SCHEDULE 2
----------
The Vendors
Beijing Challenger Wanzhong Info Tech Co., LTD
Name Amount of registered capital Percentage of Sale
of Sale Interests paid up by Interests to the entire
each of the Vendors(RMB) issued share capital of the
Company
Song Ming 255Io 25.5%
▇▇▇▇ ▇▇▇▇▇ 102Io 10.2%
▇▇▇▇ ▇▇▇▇ 102Io 10.2%
▇▇▇▇▇ ▇▇▇▇ 51Io 5.1%
-----------------------------------------------------------
Total 510Io 51%
SCHEDULE 3
Warranties
1. INTERPRETATION
(A) In this schedule where the context admits:
"Accounts" means the consolidated balance sheet of the Group made up as
at the Balance Sheet Date and the consolidated profit and loss accounts
of the Company and its subsidiaries for the year ended on the Balance
Sheet Date, true copies of which are attached hereto marked "Appendix";
"Balance Sheet Date" means November 31, 2003;
Connected Persons" shall have the meaning ascribed thereto in the Listing Rules;
"Intellectual Property" means patents, trademarks, service marks, trade
names, registered designs, designs, copyrights and other forms of
intellectual or industrial property (in each case in any part of the
world and whether or not registered or registrable and for the full
period thereof and all extensions and renewals thereof and applications
for registration of or otherwise in connection with the foregoing),
know-how, inventions, formulae, confidential or secret processes and
information, computer programs and software, and any other protected
rights and assets, and any licences and permissions in connection
therewith;
(B) All references in this Schedule 3 to the Company, other than those in
paragraphs 3(B), 4(A) and 4(C) shall be read and construed as a
reference to the Company and each of its subsidiaries.
2. INFORMATION
(A) Disclosures
The facts and information set out in the recitals and, the Schedules
and all documents attached are true and all information which has been
provided in writing to the Purchaser or its representatives or advisers
by the Vendors or by any Director, officer or other official of the
Company by its professional advisers or other agents was when given and
is now true and accurate in all material respects. There is no fact or
matter which has not been disclosed which renders any such information
untrue, inaccurate or misleading or the disclosure of which might
reasonably affect the willingness of a willing purchaser to purchase
the Sale Interests in accordance with the provisions of this Agreement.
(B) Assessment of prospects
The information disclosed to the Purchaser or its representatives or
professional advisers, by the Vendors and the directors, officers or
other officials of the Company regarding its current status or
prospects comprises all information which is material for the
reasonable assessment of the financial and trading prospects of the
Company or the Group as a whole.
3. COMPLIANCE AND ABILITY TO SELL
(A) Constitution of each member of the Group
The copy of the memorandum and articles of association of the Company
which have been provided to the Purchaser are true and complete in all
respects and have embodied in them or annexed to them a copy of every
such resolution and agreement required by law to be annexed thereto and
the Company has at all times carried on its business and affairs in all
respects in accordance with its respective memorandum and articles of
association and all such resolutions and agreements.
(B) Statutory compliance
The Company is a domestic joint venture company with limited liability
duly established and validly existing under the laws of the PRC and has
the corporate powers and authorises to carry on the business presently
carried on by it and to own and hold the assets used therewith.
Each member of the Group are duly established and validly existing
under the laws of the place of its incorporation and has the corporate
powers and authorises to carry on the business presently carried on by
it and to own and hold the assets used therewith.
Each member of the Group has complied with the provisions of all
applicable laws, regulations (and all orders notices and directions
made thereunder) and all applicable codes or practices. All returns,
particulars, resolutions and other documents required to be filed with
or delivered to the registrar of companies or to any other authority
whatsoever by the relevant member of the Group have been correctly and
properly prepared and so filed or delivered.
(C) Power to sell
Each of the Vendors has full power to enter into and perform this
Agreement and this Agreement will constitute binding obligations on
each such party, enforceable in accordance with their terms.
4. CAPITAL STRUCTURE
(A) Capital of the Company
The Sale Interests together constitute 51% of the registered capital of
the Company as at the date of this Agreement and are fully paid up.
There is no Encumbrance or other form of agreement (including
conversion rights and rights of pre-emption) on, over or affecting the
Sale Interests and there is no agreement or commitment to give or
create any of the foregoing, and no claim has been made by any person
to be entitled to any of the foregoing, and no person has the right
(whether exercisable now or in the future and whether contingent or
not) to call for any portion of the capital of the Company under any of
the foregoing.
(B) Ownership
All the Sale Interests are solely legally and beneficially owned by and
registered in the names of the Vendors in the proportions set out in
column 3 of Schedule 2 and are free from any Encumbrance and there are
no arrangements in force or claimed entitling or allegedly entitling
any person to any Encumbrance.
(C) Connected business
Save as disclosed, the Company:
(i) does not have any subsidiary and there is no company,
partnership or unincorporated business or association in which
the Company owns or controls (whether directly or indirectly
through another company) any interests therein;
(ii) has not been and has not agreed to become a subsidiary of any
other company or under the control of any group of companies
or consortium;
(iii) has not at any time been and has not agreed to become a member
of any partnership, joint venture, consortium or other
unincorporated business or association; and
(iv) has no branch, place of business, permanent establishment or
substantial assets outside the PRC.
5. ACCOUNTS
(A) General
The Accounts:
(i) were prepared in accordance with the requirements of all
relevant laws, statutes, with good accounting principles and
practices generally accepted at the date hereof in the PRC for
companies carrying on a similar business to that of the Group,
comply with all relevant statements of standard accounting
practice and accounting guidelines issued by the relevant
authorities, are prepared on a basis consistent with preceding
accounting periods of the Group and with the books of account
of the Group and are true and accurate in all material
respects;
(ii) disclose a true and fair view of the assets and liabilities of
the Group at the Balance Sheet Date and of its profits for the
financial year ended on such date;
(iii) contain full provision or reserve for bad and doubtful debts,
burdensome contracts or other obligations, obsolescent or slow
moving stocks and for depreciation on fixed assets, which
provision or reserve was when made and is now adequate;
(iv) contain a note of all capital commitments (if any) of the
Company and its subsidiaries at the Balance Sheet Date, which
note was when made and is now adequate, fair and not
misleading; and
(v) contain full provision or reserves (as appropriate) for all
Taxation.
(B) Liabilities
At the Balance Sheet Date, the Group had no liabilities known, actual
or contingent (including contingent liabilities to customers and
contingent liabilities for Taxation) which were not disclosed, noted or
provided for in the Accounts.
(C) Stock valuation
The stock-in-trade shown in the Accounts has been valued at the lower
of cost and net realisable value and includes no redundant, obsolete or
unsaleable items and no items which are the subject of any dispute
(other than minor disputes in the ordinary course of business) with a
supplier or customer. The basis of valuation of the stock-in-trade has
remained in all material respects consistent with that adopted for the
purpose of the Group's consolidated accounts at the beginning and end
of each of the accounting periods of the Group since its incorporation.
(D) Plant and machinery etc.
All the fixed and loose plant and machinery, equipment, furniture,
fittings and vehicles used by the Group at the Balance Sheet Date are
reflected in the Accounts, were at the Balance Sheet Date and (except
for such items as have been disposed of or realised by the Group in the
ordinary course of business) remain in the absolute beneficial
ownership of the Group and are free from any Encumbrance, hire or hire
purchase agreement or leasing agreement or agreement for payment on
deferred terms and (apart from depreciation in the ordinary course of
business) their value is not less than at the Balance Sheet Date and
none has been acquired for any consideration in excess of its net
realisable value at the date of such acquisition or otherwise than by
way of a bargain at arm's length.
(E) Profits
The profits of the Group for the two years ended on the Balance Sheet
Date as shown by the Accounts and by the audited accounts of the Group
for previous periods delivered to the Purchaser and the trend of
profits shown by them have not (except as disclosed in them) been
affected to a material extent by inconsistencies of accounting
practices, by the inclusion of non-recurring items of income or
expenditure, by transactions entered into otherwise than on normal
commercial terms or by any other factors rendering such profits for all
or any of such periods exceptionally high or low.
(F) Depreciation
Depreciation of the fixed assets of the Group has been made at a rate
sufficient to write down the value of such assets to nil not later than
the end of their useful working lives and no fixed asset has attributed
to it a value exceeding the current market value thereof at the Balance
Sheet Date.
(G) Books of account
All accounts, books, ledgers, financial and other necessary records of
whatsoever kind of the Group (including all invoices and other records
required for tax):
(i) have been fully, properly and accurately maintained, are in
the possession of the relevant company and contain true and
accurate records of all matters including those required to be
entered in them by applicable laws and no notice or allegation
that any of the same is incorrect or should be rectified has
been received;
(ii) do not contain or reflect any material inaccuracies or
discrepancies;
(iii) give and reflect a true and fair view of the matters which
ought to appear in them and in particular of the financial,
contractual and trading position of the relevant company and
of its plant and machinery, fixed and current assets and
liabilities (actual and contingent), debtors and creditors and
stock-in trade; and
(iv) contain accurate information in accordance with generally
accepted accounting principles in the PRC relating to all
transactions to which any member of the Group has been a party
and the Accounts do not overstate the value of any asset or
understate any liability of the Group at the Balance Sheet
Date.
6. POST BALANCE SHEET DATE EVENTS
Since the Balance Sheet Date, each member of the Group:
(A) Business
has carried on its business in the ordinary and usual course and
without entering into any transaction, assuming any liability or making
any payment not provided for in the Accounts which is not in the
ordinary course of business and without any interruption or alteration
in the nature, scope or manner of its business and nothing has been
done which would be likely to prejudice the interests of the Purchaser
as a prospective purchaser of the Sale Interests;
(B) Financial position and prospects
has not experienced any deterioration in its financial or trading
position or prospects or turnover or suffered any diminution of its
assets by the wrongful act of any person and the value of its net
assets is not less than the value of its net assets as at the Balance
Sheet Date as shown by the Accounts and each member of the Group has
not had its business, profitability or prospects adversely affected by
the loss of any important customer or source of supply or by any
abnormal factor not affecting similar businesses to a like extent and
there are no facts which are likely to give rise to any such effects;
(C) Assets and liabilities
has not acquired or disposed of or agreed to acquire or dispose of any
assets or assumed or incurred or agreed to assume or incur any
liabilities (actual or contingent) otherwise than in the ordinary
course of business;
(D) Distributions and loan repayments
has not declared, made or paid any dividend, bonus or other
distribution of capital or income (whether a qualifying distribution or
otherwise) and (excluding fluctuations in overdrawn current accounts
with bankers) no loan or loan capital of any member of the Group has
been repaid in whole or in part or has become due or is liable to be
declared due by reason of either service of a notice or lapse of time
or otherwise howsoever;
(E) Liability to tax
has not carried out or entered into any transaction and no other event
has occurred in consequence of which (whether alone or together with
any one or more transactions or events occurring before, on or after
the date of this Agreement) any liability of the Group to Taxation has
arisen or will arise (or would have arisen or would or might arise but
for the availability of any relief, allowance, deduction or credit)
other than profits tax on the actual income (not chargeable gains or
deemed income) of the relevant member of the Group arising from
transactions entered into in the ordinary course of business;
(F) Employees
has not made any change to the remuneration, terms of employment,
emoluments or pension benefits of any present or former director,
officer or employee of the Group who on the Balance Sheet Date was
entitled to remuneration in excess of US$10,000 (or its equivalent in
any other currency) per annum and has not appointed or employed any
additional director, officer or employee entitled as aforesaid;
(G) Debts
has not waived or released any debts in whole or in part and has not
written off debts in an amount exceeding US$10,000 (or its equivalent
in any other currency) in the aggregate;
(H) Contracts
tal expenditure in an amount exceeding in the aggregate US$10,000 (or its
equivalent in any other currency);
(I) Resolutions
has not passed any resolution whether in general meeting or otherwise;
(J) Third party rights
has not become aware that any event has occurred which would entitle
any third party to terminate any contract or any benefit enjoyed by it
or call in any money before the normal due date therefor;
(K) Stock-in-trade
has
(L) Creditors
has paid its creditors within the times agreed with such creditors and
does not have any debts outstanding which are overdue for payment by
more than four weeks;
(M) Borrowings
has not borrowed or raised any money or taken any financial facility
(except such short term borrowings from bankers as are within the
amount of any overdraft facility which was available to the relevant
member of the Group at the Balance Sheet Date) or since the Balance
Sheet Date renegotiated or received any notice from any banker that
such banker wishes to renegotiate any overdraft facility available to
the Group at the Balance Sheet Date;
7. TRANSACTIONS WITH VENDORS, DIRECTORS AND CONNECTED PERSONS
(A) Loans and debts
There is not outstanding:
(i) any indebtedness or other liability (actual or contingent)
owing by the Company to any of the Vendors or any director or
supervisor of the Company or any of its Connected Persons or
owing to the Company by any of the Vendors or any director or
supervisor of the Company or any of its respective Connected
Persons; or
(ii) any guarantee or security for any such indebtedness or
liability as aforesaid.
(B) Contracts and arrangements
(i) There is not now outstanding, any agreement, arrangement or
understanding (whether legally enforceable or not) to which
the Company is a party or has an interest and in which any of
the Vendors, or any director or supervisor of the Company or
any of its Connected Persons is interested whether directly or
indirectly.
(ii) The Company is not a party to nor has its profits or financial
position during the last 3 years been affected by any
agreement or arrangement which is not entirely of an arm's
length nature.
(C) Competitive interests
None of the Vendors nor any director or supervisor of the Company nor
any of its Connected Persons intends to acquire, either individually or
collectively, or with any other person or persons, has any estate,
right or interest, directly or indirectly, in any business other than
that now carried on by the Group which is or is likely to be or become
competitive with the business of any member of the Group.
(D) Intellectual Property
None of the Vendors nor any director or supervisor of the Company nor
any of its Connected Persons either individually, collectively or with
any other person or persons are interested in any way whatsoever in any
Intellectual Property used and/or not wholly owned by the Group.
(E) Benefits
None of the Vendors nor any director or supervisor of the Company nor
any of its Connected Persons, is entitled to or has claimed entitlement
to any remuneration, compensation or other benefit from the Group.
8. FINANCE
(A) Borrowings
(i) The amount borrowed by the Company from its bankers does not exceed
the overdraft facility agreed with such banker.
(ii) The total amount borrowed by the Company from any source does
not exceed any limitation on its borrowing contained in its
articles of association or in any debenture or loan stock
trust deed or instrument or any other document executed by it.
(iii) No member of the Group has any outstanding loan capital or
loan stock.
(iv) Particulars of all money borrowed by each member of the Group
have been disclosed.
(B) Debts owed to each member of the Group
(i) No member of the Group owns the benefit of any debt (whether
present or future) other than debts which have accrued to it
in the ordinary course of business.
(ii) All debts owed to the Company are collectable in the ordinary
course of business and each such debt will realise in full its
face value within three months of its due date for payment.
(iii) The debts owing to the Company shown in the Accounts (subject
to any provision for bad and doubtful debts made in the
Accounts) were paid in full on their due dates or, if any such
debts are not yet due, each such debt is not now regarded by
the Company or by the Vendors as irrecoverable in whole or in
part.
(C) Bank accounts
Particulars of the balances on all bank accounts of the Company as at a
date not more than seven days before the date of this Agreement have
been disclosed and the Company has no other bank accounts; since the
date of such particulars there have been no payments out of any such
bank accounts except for routine payments and the aggregate balance on
all such bank accounts is not substantially different from the
aggregate balance shown in such particulars.
(D) Working capital requirements
Having regard to the existing banking and other facilities, the Company
has sufficient working capital for the purpose of continuing to carry
on its business in its present form and at its present level of
turnover for the foreseeable future and for the purposes of executing,
carrying out and fulfilling in accordance with their terms all orders,
projects and contractual obligations which have been placed with or
undertaken by the Company.
(E) Financial facilities
In relation to any Encumbrance to which any asset of the Group is
subject and in relation to debentures, acceptance lines, overdrafts,
loans or other financial facilities outstanding or available to the
Group:
(i) the Vendors have disclosed full details of them and true and
correct copies of all documents relating to them; and
(ii) none of the Vendors nor any member of the Group has done
anything whereby the continuance of any such encumbrance or
facility in full force and effect might be affected or
prejudiced.
(F) Options, guarantees etc.
The Company is not responsible for the indebtedness of any other
person, and in particular but without prejudice to the generality of
the foregoing is not a party to any option or pre-emption right or a
party to any guarantee or suretyship or any other obligation (whatever
called) to pay, purchase or provide funds (whether by the advance of
money, the purchase of or subscription for shares or other securities
or the purchase of assets or services or otherwise) for the payment of,
or as an indemnity against the consequence of default in the payment
of, any indebtedness of any other person.
9. TAXATION
(A) General
(i) Notices and returns
All notices, returns and computations of the Company for the
purposes of Taxation have been made punctually on a proper
basis and are correct and none of them is, or is likely to be,
the subject of any dispute with any fiscal authority.
(ii) Payment of tax due
All Taxation that the Company is liable to pay prior to
Completion has been or will be so paid prior to Completion.
(iii) Penalties or interest on tax
No member of the Group has paid or become liable to pay any
penalty, fine or interest charged by virtue of the provisions
of any Taxation statute, law, rule or regulation.
(iv) Compliance with tax collection obligations
(a) All tax deductible and payable under any Taxation
statute, law, rule or regulation has, so far as is
required to be deducted, been deducted from all
payments made or treated as made by the Company and
all amounts due to be paid to all relevant Taxation
authorities prior to the date of this Agreement have
been so paid.
(b) All payments by the Company to any person which ought
to have been made under deduction of tax have been so
made and the relevant company (if required by law to
do so) has accounted to the relevant fiscal authority
for the tax so deducted.
(c) Proper records have been maintained in respect of all
such deductions and payments and all applicable
regulations have been complied with.
(v) No back duty investigation
The Company has not in the last 3 years been the subject of a
discovery, audit or investigation by any Taxation authority
and there are no facts which are likely to cause a discovery,
audit or investigation to be made.
(vi) Tax provision
Full provision or reserve has been made in the Accounts for
all Taxation assessed or liable to be assessed on the Company
or for which it is accountable in respect of income, profits
or gains earned, accrued or received on or before the Balance
Sheet Date, including distributions made down to such date or
provided for in the Accounts, and proper provision has been
made in the Accounts for deferred taxation in accordance with
internationally accepted accounting standards.
(vii) Anti-avoidance provisions
The Company has not entered into or been a party to any scheme
or arrangement of which the main purpose, or one of the main
purposes, was the avoidance of or the reduction in liability
to taxation.
(viii) Calculation of tax liability
The Company has sufficient records to permit accurate
calculation of the tax liability or relief which would arise
upon a disposal or realisation on completion of each asset
owned by the Company at the Balance Sheet Date or acquired by
the Company before Completion.
(ix) Sales at under-value or over-value
The Company has not been a party to any sale or other disposal
of an asset either at an under-value or an over-value.
10. THE PROPERTIES
No member of the Group has owned any real properties.
11. OTHER ASSETS
(A) Assets and charges
(i) All assets of the Company which are included in the Accounts
or have otherwise been represented as being the property of
the Company or which were at the Balance Sheet Date used or
held for the purposes of its business were at the Balance
Sheet Date in the absolute beneficial ownership of the Company
and (except for assets disposed of or realised by the Company
in the ordinary course of business) the Company is the
absolute beneficial owner of and has good, marketable title to
all such assets and all such assets are in the possession and
control of the Company and are sited within the PRC.
(ii) All assets which have been acquired by the Company since the
Balance Sheet Date are (except as aforesaid) now in the
absolute beneficial ownership of the Company and in the
possession and control of the Company and none is the subject
of any Encumbrance (excepting only liens arising in the normal
course of trading) nor has the Company created or agreed to
create any encumbrance or entered into any factoring
arrangement, hire-purchase, conditional sale or credit sale
agreement which has not been disclosed and in respect of any
such encumbrance, arrangement or agreement so disclosed there
has been no default by the Company in the performance or
observance of any of the provisions thereof.
(B) Condition of assets
The plant and machinery (including fixed plant and machinery) and all
vehicles and office and other equipment and assets shown in the
Accounts or acquired since the Balance Sheet Date or otherwise used in
connection with the business of the Company which have not been
disposed of in the ordinary course of business:
(i) do not contravene any requirement or restriction having the
force of law;
(ii) performs in accordance with its manufacturers specifications
and are in good repair and condition and are regularly
maintained, fully serviceable and in good working order;
(iii) are each capable of doing the work for which they were
designed and/or purchased and will each be so capable (subject
to fair wear and tear) during the period of time over which
the value of such assets will be written down to nil in the
accounts of the Company;
(iv) are not surplus to the Company's requirements; and
(v) are not dangerous, inefficient, out-of-date, unsuitable or in
need of renewal or replacement and the vehicles owned by the
Company are road-worthy and duly licensed for the purposes for
which they are used.
(vi) Maintenance contracts are in full force and effect in respect
of the computer and all other assets owned or used by the
Company which it is normal or prudent to have maintained by
outside or specialist contractors.
(C) Condition of stock-in-trade
The Company's stock-in-trade is of merchantable quality and not
obsolete, defective or out of fashion and is capable of being sold by
the Company in the ordinary course of business in accordance with its
current price list without rebate or allowance to retail purchasers.
(D) Insurance
(i) All the assets of the Company which are of an insurable nature
have at all material times been and are at the date hereof
fully insured to their full replacement value against fire and
other risks normally insured against by companies carrying on
similar businesses or owning property of a similar nature to
those of the Company and the Company has at all material times
been and is at the date of this Agreement adequately covered
against all legal liability and risks normally insured against
by such companies (including liability to employees or third
parties for personal injury or loss or damage to property,
product liability and loss of profit).
(ii) Particulars of all policies of insurance of the Company now in
force have been disclosed and such particulars are true and
correct and all premiums due on such policies have been duly
paid and all such policies are valid and in force and (so far
as the Company and the Vendors are aware) there are no
circumstances which might lead to any liability under such
insurance being avoided by the insurers or the premiums being
increased and there is no claim outstanding under such policy
nor are the Company and the Vendors aware of any circumstances
likely to give rise to a claim or cause an application for
renewal of such policy to be refused.
(iii) No insurance company has refused to insure the assets or risks
of the Company or has imposed conditions (by way of increased
premiums or otherwise) for such insurance.
(E) Retention of title
The Company has not acquired or agreed to acquire any material asset on
terms that title to such asset does not pass to the Company until full
payment is made.
(F) Equipment leases etc
Rentals payable by the Company under any leasing, hire-purchase or
other similar agreement to which it is a party have not been and are
not likely to be increased and all such rentals are fully deductible by
the Company for tax purposes.
12. OPERATION
(A) Licences, permits, consents and authorities
The Company has all necessary licences (including statutory licences),
permits, consents and authorities (public and private) for the proper
and effective carrying on of its business and in the manner in which
such business is now carried on and all such licences, permits,
consents and authorities are valid and subsisting and none of the
Vendors knows of any reason why any of them should be suspended,
cancelled or revoked whether in connection with the acquisition of the
Sale Interests by the Purchaser or otherwise and so far as the Vendors
are aware there are no factors that might in any way prejudice the
continuance or renewal of any of those licences, permits, consents or
authorities and the Company is not restricted by contract from carrying
on any activity in any part of the world.
(B) Litigation and arbitration
The Company is not engaged in (nor are any of its director in relation
to the affairs of the Company engaged in) any legal proceedings
(including litigation, administrative, arbitration and prosecution) and
no such proceedings are pending or threatened, nor are there any facts
likely to give rise to such proceedings known or which would on
reasonable enquiry be known to the Company or its directors.
(C) Delegation of powers
There are in force no powers of attorney given by the Company nor any
other authority (express, implied or ostensible) given by the Company
to any person to enter into any contract or commitment or do anything
on its behalf other than any authority of employees to enter into
routine trading contracts in the normal course of their duties.
(D) Confidentiality
No disclosure has been made of any of the confidential information,
including financial or trade secrets, of any member of the Group save
in the ordinary course of business and the Company has taken adequate
steps to preserve the confidential nature of all such information.
(E) Business names
The Company does not use on its letterhead, books or vehicles or
otherwise carry on its business under any name other than its corporate
name.
(F) Records of the Group
(i) All the accounting records, statutory and other books and
records (including the register of members), and other deeds
documents records, data and information of the Company and its
pension and benefit schemes (if any) are, and have since its
incorporation been, kept up to date, properly, accurately and
consistently completed and are a complete and accurate record
of all acts and transactions of the Company and of all matters
required by law or best business practice to be recorded or
registered therein; the Company has not received any
application or request for rectification of any such registers
are in the possession of the Company.
(ii) The Company has no records, systems, controls, data or
information recorded, stored, maintained, operated or
otherwise wholly or partly dependent on or held by any means
(including any electronic, mechanical or photographic process
whether computerised or not) which (including all means of
access thereto and therefrom) are not under its exclusive
ownership and direct control.
(G) Winding up, insolvency and receivership
(i) No order has been made or petition presented or resolution
passed for the winding up of the Company and no distress,
execution or other process has been levied on any of its
assets.
(ii) The Company is not insolvent nor unable to pay its debts as
they fall due.
(iii) No administrative or other receiver has been appointed by any
person of the business or assets of the Company or any part
thereof, nor has any order been made or petition presented for
the appointment of an administrator in respect thereof.
(iv) There has been no delay by the Company in the payment of any material
obligation due for payment.
(H) Guarantees, warranties and sureties
(i) The Company has not given any guarantee or warranty or made
any representation in respect of articles or trading stock
sold or contracted to be sold or service provided or
contracted to be provided by it save for any warranty or
guarantee implied by law and (save as aforesaid) has not
accepted any liability or obligation to service, maintain,
repair, take back or otherwise do or not do anything in
respect of any articles, stock or service that would apply
after any such article or stock has been delivered by it or
service performed by it, as the case may be.
(ii) No person other than the Company has given any guarantee of or
security for any overdraft, loan or loan facility granted to
the Company.
13. CONTRACTS
(A) Onerous contracts
There are no long term contracts (i.e. contracts not terminable by the
Company without penalty on six months' notice or less) or onerous or
unusual or abnormal contracts (i.e. contracts for capital commitments
or contracts differing from those necessitated by the ordinary course
of business) binding upon the Company, nor is the Company a party to
any contract which contains any onerous or other provision material for
disclosure to an intending purchaser of the Sale Interests and no
expenses or liabilities of a material amount have been incurred before
the date of this Agreement by the Company otherwise than for the
purpose of the Company's business.
(B) Material contracts
Copies of all material contracts to which the Company is a party have
been disclosed or will be disclosed to the Purchaser during the due
diligence to be conducted by the Purchaser pursuant to Clause 3.3 of
the Agreement and, save as those disclosed, the Company is not a party
to or subject to any agreement, transaction, obligation, commitment,
understanding, arrangement or liability which:
(i) is incapable of complete performance in accordance with its
terms within six months after the date on which it was entered
into or undertaken;
(ii) is known by any of the Vendors to be likely to be unprofitable
or result in a loss to the Company on completion of
performance;
(iii) cannot readily be fulfilled or performed by the relevant
member of the Group on time and without undue or unusual
expenditure of money and effort;
(iv) involves or is likely to involve obligations, restrictions,
expenditure or receipts of an unusual, onerous or exceptional
nature and not in the ordinary course of business;
(v) requires an
currency);
(vi) is a contract for services (other than contracts for the
supply of electricity or normal office services);
(viii) requires any member of the Company to pay any commission,
finder's fee, royalty or the like; or
(ix) is in any way otherwise than in the ordinary and proper course
of the Company's business.
(C) Performance of contracts
(i) The terms of all contracts of the Company have been complied
with by the Company and by the other parties to the contracts
in all respects and there are no circumstances likely to give
rise to a default by the Company or by the other parties under
any such contract.
(ii) All the contracts of the Company except those between the
Company and its employees are assignable by the Company
without the consent of any other party.
(iii) There are no outstanding claims, separately or in the
aggregate of material amounts, against the Company on the part
of customers or other parties in respect of defects in quality
or delays in delivery or completion of contracts or
deficiencies of design or performance or otherwise relating to
liability for goods or services sold or supplied by the
Company and no such claims are threatened or anticipated and
there is no matter or fact in existence in relation to goods
or services currently sold or supplied by the Company which
might give rise to the same.
(iv) The Company has no knowledge of the invalidity of or grounds
for rescission, avoidance or repudiation of any agreement or
other transaction to which it is a party and has received no
notice of any intention to terminate, repudiate or disclaim
any such agreement or other transaction.
(D) Restrictive contracts
There are no agreements in force restricting the freedom of the Company
to provide and take goods and services by such means and from and to
such persons as it may from time to time think fit.
(E) Agency and distributorship agreements
Save as disclosed, the Company is not a party to any subsisting agency
or distributorship agreement.
14. EMPLOYEES
(A) There is no current contract of service between the Company and any of
its directors, officers or employees which is not terminable by the
Company without compensation by three months notice or less given at
any time or payment of salary for such period in lieu of notice.
(B) Save as regards any scheme which the Company is or may become obliged
to join or subscribe under any applicable law or regulations, there is
no scheme or fund in respect of retirement, pension, health insurance,
housing, bonus, incentive, share option or other benefits to directors,
officers, staff, employees or any other party to which the Company is a
party or in respect of which there is any obligations or liabilities,
present or future, actual or contingent.
(C) The Company is not subject to or involved in any industrial dispute or
action whether official or unofficial.
15. INTELLECTUAL PROPERTY
(A) Ownership and rights
(i) General
Full particulars of all Intellectual Property owned or
otherwise exploited or used by the Company in any part of the
world will be disclosed to the Purchaser during the due
diligence to be conducted by the Purchaser. All Intellectual
Property exploited or used by the Company is in the absolute
beneficial ownership of the Company or any member of the Group
is a 1icensee of the same and the Company does not own, use,
exploit or have any other interest in any Intellectual
Property which has not been disclosed. In particular but
without prejudice to the generality of the foregoing, none of
the Intellectual Property disclosed is jointly owned by the
Company and a third party.
(ii) Enforcement
All applications for any Intellectual Property owned, used or
otherwise exploited by the Company are being diligently
prosecuted; patents, registered trademarks and registered
designs and other similar registered or recorded Intellectual
Property rights owned, used or otherwise exploited by the
Company have been maintained; nothing has been done to
diminish or otherwise affect the reputation of unregistered
trademarks, trade names, brand names or get up owned, used or
otherwise exploited by the Company; no copying or reproduction
of the copyright material owned, used or otherwise exploited
by the Company has been permitted (expressly or by
implication); the technical information and other knowhow
owned, used or otherwise exploited by the Company has been
kept confidential; and (where applicable) all application,
registration and renewal fees necessary to procure, register,
record or maintain the Intellectual Property have been paid.
(iii) Intellectual Property Agreements
All agreements in relation to any Intellectual Property used
or owned by the Company have been disclosed and are valid and
binding; none has been the subject of any breach or default by
any party thereto or of any event which with notice or lapse
of time or both would constitute a default; nor are there any
disputes, claims or proceedings arising out of or relating to
such agreements. No member of the Group has authorised or
otherwise permitted, expressly or by implication, any use
whatsoever of the Intellectual Property owned, used or
otherwise exploited by the Group save insofar as any such
authority is contained in the appropriate agreements. The
Company does not use or otherwise exploit any Intellectual
Property belonging to a third party save insofar as it is
licensed to do so in the appropriate agreements. All such
agreements have been duly recorded or registered with the
proper authorities whenever a requirement to do so exists.
16. CONSEQUENCE OF THE PURCHASE OF THE SALE INTERESTS
The purchase of the Sale Interests by the Purchaser or compliance with
the terms of this Agreement and any change in the current management of
the Company:
(i) will not cause the Company to lose the benefit of any right or
privilege it presently enjoys or cause any person who normally
does business with the Company not to continue to do so on the
same basis as previously;
(ii) will not relieve any person of any obligation to the Company
(whether contractual or otherwise) or enable any person to
determine any such obligation or any right or benefit enjoyed
by the Company or to exercise any right whether under an
agreement with or otherwise in respect of the Company;
(iii) will not conflict with or result in the breach of or
constitute a default under any of the terms, conditions or
provisions of any agreement or instrument to which the Company
is now a party or any loan to or mortgage created by the
Company or of its memorandum or articles of association;
(iv) will not result in any present or future indebtedness of the
Company becoming due and payable or capable of being declared
due and payable prior to its stated maturity;
(v) will not cause any director, supervisor or senior employee of
the Company to leave employment;
(vi) will not conflict with, violate or result in a breach of any
law, regulation, order, decree or writ applicable to the
Company; and
so far as the Company and the Vendors are aware the attitude or actions
of clients, customers and suppliers with regard to the Company will not
be prejudicially affected thereby.
SCHEDULE 4
Addresses and facsimile numbers
for communication
IN WITNESS whereof this Agreement has been duly executed by all parties hereto
the day and year first above written.
SIGNED by )
▇▇▇▇ ▇▇▇▇ )
in the presence of: )
SIGNED by )
▇▇▇▇ ▇▇▇▇▇ )
in the presence of: )
SIGNED by )
▇▇▇▇ ▇▇▇▇ )
in the presence of: )
SIGNED by )
▇▇▇▇▇ ▇▇▇▇ )
in the presence of: )
SIGNED by )
for and on behalf of )
HARTCOURT CAPITAL, INC. )
in the presence of: )