EXHIBIT 10.39
XINHUA FINANCE LIMITED
(Purchaser)
AND
▇▇ ▇▇▇▇ CHIEN
(Vendor)
AND
▇▇ ▇▇▇▇
(Warrantor)
AND
▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL LIMITED
(Company)
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SHARE PURCHASE AGREEMENT
IN RESPECT OF SHARES IN THE CAPITAL OF
▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL LIMITED
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December 21, 2005
Hong Kong
TABLE OF CONTENTS
Item Description Page
---- ----------- ----
1. DEFINITIONS...............................................
1.1 Definitions...............................................
1.2 Interpretation............................................
1.3 Recitals, Schedules.......................................
1.4 Joint Obligations.........................................
2. SALE AND PURCHASE OF SALE SHARES..........................
2.1 Sale......................................................
2.2 Purchase Price............................................
2.3 Release...................................................
2.4 The Company's Release Obligations.........................
2.5 The Vendor's Release Obligations..........................
2.6 The Purchaser Release Obligations.........................
2.7 Deferral of the Release...................................
2.8 Closing...................................................
2.9 Further Covenants.........................................
2.10 Covenants of the Company and the Purchaser Post-Closing...
2.11 Board of Directors........................................
2.12 Covenants of the Vendor and the Warrantor Post-Closing....
3. COVENANTS PRIOR TO CLOSING................................
3.1 Covenants.................................................
3.2 Access to Information.....................................
3.3 Rescission................................................
4. REPRESENTATIONS, WARRANTIES AND COVENANTS IN RESPECT OF
THE GROUP.................................................
4.1 The Offshore Companies....................................
4.2 The PRC Companies.........................................
4.3 General...................................................
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE VENDOR...
5.1 Power and Authority.......................................
5.2 Sale Shares...............................................
5.3 Encumbrances..............................................
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
WARRANTOR.................................................
6.1 Power and Authority.......................................
6.2 Sale Shares...............................................
6.3 Encumbrances..............................................
6.4 Acknowledgement...........................................
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER.................................................
7.1 Organisation and Qualification............................
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7.2 Authorisation.............................................
7.3 Power and Authority.......................................
8. LIMITATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS...
8.1 Survival of Representation and Warranties.................
8.2 Investigation or Knowlegdge...............................
8.3 Limitations on Liability..................................
9. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT RELEASE......
9.1 Representations and Warranties............................
9.2 Due Diligence.............................................
9.3 Performance...............................................
9.4 No Material Adverse Change................................
9.5 Deliverables..............................................
9.6 Board Approval............................................
10. INDEMNITY.................................................
10.1 Indemnity.................................................
10.2 Costs.....................................................
10.3 Survival of Indemnification...............................
10.4 Third Party Claims........................................
10.5 Settlement of Claims......................................
10.6 Certain Tax Matters.......................................
10.7 Limitation................................................
10.8 Indemnification by Purchaser..............................
11. NON-COMPETE COVENANT......................................
11.1 Non Competition...........................................
11.2 Nonsolicitation of Clients................................
11.3 Separate Obligations......................................
11.4 Reasonableness............................................
11.5 Equitable Relief..........................................
11.6 Default...................................................
12. TERMINATION...............................................
12.1 Termination...............................................
12.2 Effect of Termination.....................................
13. MISCELLANEOUS.............................................
13.1 Survival of Warranties....................................
13.2 Successors and Assigns....................................
13.3 Governing Law and Jurisdiction............................
13.4 Arbitration...............................................
13.5 Counterparts..............................................
13.6 Titles and Subtitles......................................
13.7 Notices...................................................
13.8 Expenses..................................................
13.9 Severability..............................................
13.10 Entire Agreement..........................................
EXECUTION PAGE...........................................................
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SCHEDULE A CORPORATION DETAILS OF THE COMPANY..........................
SCHEDULE B SCHEDULE OF THE GROUP.......................................
SCHEDULE C LIST OF INTERNAL CONTROL AGREEMENTS.........................
SCHEDULE D CORPORATE DETAILS OF THE GROUP IMMEDIATELY FOLLOWING THE
RELEASE AND AT CLOSING......................................
SCHEDULE E MATERIAL CONTRACTS..........................................
SCHEDULE F LEASES......................................................
SCHEDULE G FORM OF MANAGEMENT CONTRACTS................................
SCHEDULE H LIST OF BANK ACCOUNTS AND DETAILS...........................
SCHEDULE I LIST OF KEY MANAGEMENT TEAM.................................
SCHEDULE J COMPANY'S DELIVERABLES......................................
SCHEDULE K REORGANIZATION DELIVERABLES.................................
SCHEDULE L LIST OF PERSONS TO ENTER INTO DEED OF NON-COMPETITION
UNDERTAKING AND RELEASE.....................................
SCHEDULE M FORM OF DEED OF NON-COMPETITION UNDERTAKING AND RELEASE.....
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THIS SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made on the 21s day of
December 2005.
BETWEEN
(1) XINHUA FINANCE LIMITED, a company incorporated under the laws of the Cayman
Islands and listed on the Mothers Board of the Tokyo Stock Exchange
(Symbol: 9399) (the "PURCHASER");
(2) ▇▇ ▇▇▇▇ CHIEN, holder of Taiwan passport no. ▇▇▇▇▇▇▇▇▇ residing at 102, ▇▇.
▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, PRC (the "VENDOR");
(3) ▇▇ ▇▇▇▇, a citizen of the PRC and holder of PRC identity card number
110101196205293025 residing at ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇. ▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
One, Fangcheng Garden, Fengtai District, Beijing, PRC (the "WARRANTOR");
and
(4) ▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL LIMITED, a company incorporated under the laws of
the British Virgin Islands with registration number 679686 and a registered
address at P.O. Box 957, Offshore Incorporations Centre, Road Town,
Tortola, British Virgin Islands (the "COMPANY").
WHEREAS
A. The Vendor is the holder of legal title to the Sale Shares representing
100% of the issued and outstanding share capital of the Company.
B. The Vendor holds the Sale Shares solely for and on behalf of the Warrantor.
C. The Purchaser desires to purchase from the Vendor and the Warrantor and the
Vendor and the Warrantor desire to sell to the Purchaser all of the legal
and beneficial interests in and to the Sale Shares on the terms and
conditions set out in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants set
forth herein, the Purchaser, the Vendor, the Warrantor and the Company agree as
follows:
1. DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"ACTIVE" means Active Advertising Agency Limited, a company incorporated
under the laws of Hong Kong, the details of which are set out in Schedule
D;
"AFFILIATES" of a specified Person means any other Person that, directly or
indirectly, through one or more intermediaries, Controls, is Controlled by,
or is under common Control with, such specified Person or, in the case of a
natural Person, such Person's spouse, parents and descendants (whether by
blood or adoption and including stepchildren);
"AGREED FORM" means, in relation to any document, the form of that document
which has been agreed upon by each of the parties hereto or their legal
advisors before Release;
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"ANCILLARY AGREEMENTS" means this Agreement, the Internal Control
Agreements and all other agreements contemplated herein;
"BEIJING JINLONG" means Beijing Jinlong Runxin Advertising Co., Ltd., a
company established under the laws of the PRC, the details of which are set
out in Schedule D;
"BEIJING LONGMEI" means Beijing Longmei Television and Broadcast
Advertising, a company established under the laws of the PRC, the details
of which are set out in Schedule D;
"BEIJING SHANGTUO" means Beijing Shangtuo Zhiyang Advertising Co., Ltd., a
company established under the laws of the PRC;
"BOARD" means the board of Directors of the Company;
"BUSINESS DAY" means any Monday, Tuesday, Wednesday, Thursday and Friday on
which banks in Hong Kong or the PRC are not required or permitted by laws
to be closed;
"CLAIMANT" shall have the meaning provided in Clause 13.4;
"CLOSING" shall have the meaning provided in Clause 2.8;
"CLOSING DATE" shall have the meaning provided in Clause 2.8;
"COMPANY SHARES" means ordinary shares each with a par value of US$1.00 in
the capital of the Company;
"CONSENTS" means any consent, approval, order, or authorization of or
registration, declaration, or filing with or exemption by or from a
Governmental Entity;
"CONTROL", "CONTROLS", "CONTROLLED" (or any correlative term) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management of a Person, whether through the ownership of
voting securities, by contract, credit arrangement or proxy, as trustee,
executor, agent or otherwise. For the purpose of this definition, a Person
shall be deemed to Control another Person if such first Person, directly or
indirectly, owns or holds more than 50% of the voting equity interests in
such other Person;
"DIRECTORS" means the members from time to time of the Board;
"DISCLOSURE LETTER" means a letter described as such to be prepared by the
Vendor and delivered to the Purchaser simultaneously with the execution of
this Agreement;
"DISPUTE NOTICE" shall have the meaning provided in Clause 13.4;
"ENCUMBRANCES" means and includes any interest or equity of any person
(including, without prejudice to the generality of the foregoing, any right
to acquire, option or right of pre-emption) or any mortgage, charge,
pledge, claims, agreements, equities, lien or assignment and other third
party rights of any nature whatsoever and together with all rights of any
nature whatsoever now or hereafter attaching or accruing to the property
including, where the property is shares or equity interests in a company,
all rights to any dividends or other distribution declared paid or made in
respect of them, or any other
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encumbrance, priority or security interest or arrangement of whatsoever
nature over or in the relevant property;
"ESCROW AGENT" means ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ of 35th Floor, Two International
Finance Centre, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇;
"ESCROW AGREEMENT" means the escrow agreement entered into among the
Vendor, the Warrantor, the Purchaser and the Escrow Agent;
"ESCROWED PAYMENT" shall have the meaning provided in Clause 2.2(a);
"FINAL DETERMINATION" shall have the meaning provided in Clause 11.6;
"GOVERNMENTAL ENTITY" means any court, administrative agency or commission
or other governmental authority or instrumentality, whether domestic or
foreign;
"GROUP" means, collectively, the Offshore Companies and the PRC Companies;
"HONG KONG" means the Hong Kong Special Administrative Region of the PRC;
"HONG KONG GAAP" means generally acceptable accounting principles in Hong
Kong;
"HUOLI" means Active Advertising (Guangzhou) Co., Ltd., a company
established under the laws of the PRC, the details of which are set out in
Schedule D;
"IFRS" means the International Financial Reporting Standards promulgated by
the International Accounting Standards Board from time to time;
"INDEMNIFIED PARTY" shall have the meaning provided in Clause 10.4;
"INDEMNIFYING PARTY" shall have the meaning provided in Clause 10.4;
"INITIAL PAYMENT" shall have the meaning provided in Clause 2.2(a);
"INTELLECTUAL PROPERTY" means, collectively, the Owned Intellectual
Property and the Licensed Intellectual Property;
"INTERIM AGREEMENT" means the agreement dated 24 November 2005 entered into
among the Purchaser, the Vendor and the Warrantor;
"INTERNAL CONTROL AGREEMENTS" means the contracts, agreements and documents
set out in Schedule C;
"KEY WARRANTIES" means the representations and warranties contained in
Clauses 4.1(a), (b), (c), (d), (e), (s) and (u) and Clauses 4.2(a), (b),
(c), (d), (e), (s) and (u);
"LICENSED INTELLECTUAL PROPERTY" means any and all license rights granted
to the Group in any third party intellectual property or other proprietary
or personal rights, including any and all of the following that are
licensed to any member of the Group anywhere in the world: trademarks,
trade names, service marks and trade dress, and all goodwill associated
with trademarks, trade names, corporate names, business names, brand names,
service marks and trade dress; patents; concepts; prototypes; drawings;
designs; logos; trade dress;
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distinguishing guises; certification marks; official marks; mask works;
utility models; domain names and other identifiers for internet protocol
addresses and networks, fictional characters, and other indicators of
source or business identifiers, and all goodwill associated therewith;
copyrights and copyrightable works; databases; graphics; schematics;
marketing, sales and user data and strategies and customer lists;
technology; trade secrets, including confidential know-how, inventions,
invention disclosures, inventor's notes, improvements, discoveries,
formulae, specifications and processes; computer software programs of any
kind (in both source and object code form); application programming
interfaces; protocols; and any renewal, extension, reissue, continuation or
division rights, applications and/or registrations for any of the
foregoing;
"MANAGEMENT" means the key management team of each member of the Group
listed in Schedule I;
"MANAGEMENT CONTRACTS" means the four-year management employment contracts
substantially in the form set out in Schedule G to be entered into by each
member of Management;
"MARKET VALUE" shall mean, with respect to XFL Shares, the average of the
closing price of XFL Shares on the Mothers Board of the Tokyo Stock
Exchange for the fifteen (15) trading days up to and including the third
trading day prior to the applicable Subsequent Payment date (adjusted to
give effect to any stock splits, dividends or other recapitalizations
occurring during such fifteen-day period), calculated using the closing
Dollar/Japanese yen exchange rate as reported by Bloomberg for the day
immediately preceding the applicable Subsequent Payment date;
"MATERIAL ADVERSE CHANGE" means any event, circumstance or occurrences
which might reasonably be expected to have a material adverse effect on the
business, operations or financial condition of the Group taken as a whole;
"MATERIAL OFFSHORE CONTRACTS" shall have the meaning provided in Clause
4.1(l);
"MATERIAL PRC CONTRACTS" shall have the meaning provided in Clause 4.2(l);
"MEMORANDUM AND ARTICLES" means the memorandum and articles of association
of the Company as may be amended from time to time;
"NON-COMPETE PERIOD" shall have the meaning provided in Clause 11.1;
"OFFSHORE BALANCE SHEET" shall have the meaning provided in Clause 4.1(s);
"OFFSHORE CHARTER DOCUMENTS" shall have the meaning provided in Clause
4.1(b);
"OFFSHORE FINANCIAL STATEMENTS" shall have the meaning provided in Clause
4.1(s);
"OFFSHORE COMPANIES" means, collectively, the Company, Upper Will and
Active;
"OFFSHORE LEASE" or "OFFSHORE LEASES" shall have the meanings provided in
Clause 4.1(v);
"OFFSHORE RETURNS" shall have the meaning provided in Clause 4.1(u);
"OFFSHORE RETURN PERIODS" shall have the meaning provided in Clause 4.1(u);
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"OWNED INTELLECTUAL PROPERTY" means any and all of the following that are
owned (including joint ownership) or held by the Group anywhere in the
world: trademarks, trade names, service marks and trade dress, and all
goodwill associated with trademarks, trade names, corporate names, business
names, brand names, service marks and trade dress; patents; concepts;
prototypes; drawings; designs; logos; trade dress; distinguishing guises;
certification marks; official marks; mask works; utility models; domain
names and other identifiers for internet protocol addresses and networks,
fictional characters, and other indicators of source or business
identifiers, and all goodwill associated therewith; copyrights and
copyrightable works; databases; graphics; schematics; marketing, sales and
user data and strategies and customer lists; technology; trade secrets,
including confidential know-how, inventions, invention disclosures,
inventor's notes, improvements, discoveries, formulae, specifications and
processes; computer software programs of any kind (in both source and
object code form); application programming interfaces; protocols; and any
renewal, extension, reissue, continuation or division rights, applications
and/or registrations for any of the foregoing;
"PAYMENT DEFAULT" shall have the meaning provided in Clause 11.6;
"PERMITTED RESTRUCTURING" means any merger, consolidation, sale, transfer
or disposal or any form of restructuring relating solely to the corporate
structure or business or operations of the Group which is not prohibited
under Clause 2.10(f);
"PERSON" or "PERSONS" means any natural person, corporation, company,
association, partnership, organization, business, firm, joint venture,
trust, unincorporated organization or any other entity or organization, and
shall include any governmental authority;
"PRC" means the People's Republic of China;
"PRC BALANCE SHEET" shall have the meaning provided in Clause 4.2(s);
"PRC CHARTER DOCUMENTS" shall have the meaning provided in Clause 4.2(b);
"PRC COMPANIES" means, collectively, Huoli, ▇▇▇▇▇, Shangtuo Zhiyang,
Beijing Longmei, Beijing Jinlong and Yuanxin;
"PRC FINANCIAL STATEMENTS" shall have the meaning provided in Clause
4.2(s);
"PRC LEASE" or "PRC LEASES" shall have the meanings provided in Clause
4.2(v);
"PRC RETURNS" shall have the meaning provided in Clause 4.2(u);
"PRC RETURN PERIODS" shall have the meaning provided in Clause 4.2(u);
"PRE-RELEASE TAX PERIOD" shall have the meaning provided in Clause 10.6;
"PURCHASE PRICE" shall have the meaning provided in Clause 2.2;
"PURCHASER NOMINEES" means, collectively, ▇▇▇▇ ▇▇▇▇ Hong, a PRC national
and holder of PRC identity card number 110101197401091548 and ▇▇▇▇ An, a
PRC national and holder of PRC identity card number 510402721105001;
"RELEASE" shall have the meaning provided in Clause 2.3;
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"RELEASE DATE" shall have the meaning provided in Clause 2.3;
"RELEASE DELIVERABLE AGREEMENTS" shall have the meaning provided in Clause
2.5(h);
"REORGANIZATION DELIVERABLES" shall have the meaning provided in Clause
2.5(j);
"RESPONDENT" shall have the meaning provided in Clause 13.4;
"RMB" means renminbi, the lawful currency of the PRC;
"SALE SHARES" means the one thousand (1,000) Company Shares to be sold by
the Vendor and procured to be sold by the Warrantor and purchased by the
Purchaser under this Agreement;
"SHANGTUO ZHIYANG" means Shangtuo Zhiyang International Advertising
(Beijing) Co., Ltd., a company established under the laws of the PRC, the
details of which are set out in Schedule D;
"STRADDLE PERIOD" shall have the meaning as provided in Clause 10.6;
"SUBSEQUENT AMOUNTS" means, collectively, the 2005 Amount, the 2006 Amount
and the 2007 Amount and "SUBSEQUENT AMOUNT" means any one of them;
"SUBSEQUENT PAYMENT DATES" means, collectively, the 2005 Payment Date, the
2006 Payment Date and the 2007 Payment Date and "SUBSEQUENT PAYMENT DATE"
means any one of them;
"SUBSEQUENT PAYMENTS" shall have the meaning provided in Clause 2.2(b);
"SUBSIDIARY" means a corporation, partnership, limited liability company,
or other entity of which such corporation or entity directly or indirectly
owns or controls voting securities or other interests that are sufficient
to elect a majority of the board of directors or other managers of such
corporation, partnership, limited liability company or other entity;
"▇▇▇▇▇" means Beijing ▇▇▇▇▇ Advertising Co., Ltd., a company incorporated
under the laws of PRC, the details of which are set out in Schedule D;
"TAX SETTLEMENT OPTION" shall have the meaning set out in Clause 10.6;
"TRINITY HONG KONG" means Trinity Advertising Agency Limited, a company
incorporated under the laws of Hong Kong,;
"TRINITY SHENZHEN" means Shenzhen Trinity Advertising Co., Ltd., a company
incorporated under the laws of the PRC;
"SHENZHEN ACTIVE TRINITY" means Shenzhen Active Trinity Advertising Co.,
Ltd., a company incorporated under the laws of the PRC, the details of
which are set out in Schedule D;
"UPPER WILL" means Upper Will Enterprises Limited, a company incorporated
under the laws of the British Virgin Islands, the details of which are set
out in Schedule D;
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"US GAAP" means generally accepted accounting principles promulgated by the
American Institute of Certified Public Accountants from time to time;
"US$" and "US DOLLARS" means the lawful currency of the United States of
America;
"XFL SHARES" means the shares in the capital of the Purchaser of a par
value of HK$20 per share;
"YUANXIN" means Shanghai Yuanxin Advertising Co., Ltd., a company
established under the laws of the PRC, the details of which are set out in
Schedule D;
"2005 AMOUNT" shall have the meaning provided in Clause 2.2 (b)(i);
"2005 WORKING CAPITAL PAYMENT AMOUNT" means an amount equal to the sum of
(a) current assets less (b) current liabilities, and less (c) the three
month working capital requirements as determined by a firm of international
accountants appointed by the Purchaser (such determination to be final and
binding except in the case of manifest error) and in each case, for Active,
Trinity and Trinity Shenzhen based on Hong Kong GAAP and ▇▇▇▇▇, Huoli,
Beijing Longmei, Beijing Jinlong and Yuanxin based on PRC local tax
statutory reporting standards, as determined by a firm of international
accountants selected by the Purchaser;
"2006 FINANCIALS" and "2007 FINANCIALS" mean the Company's audited
consolidated financial statements of the Company (to include the PRC
Companies and if the Permitted Restructuring occurs, the "Group" shall
include such other companies to which assets or businesses of the Group or
any part thereof are transferred or sold pursuant to the Permitted
Restructuring or any new or existing companies or entities which are
created or formed for holding members of the Group or which result or
originate from the merger, combination, amalgamation, consolidation or
restructuring of members of the Group or their operations or businesses
pursuant to the Permitted Restructuring) attributable to the business of
the Group for the financial years ended 2006 and 2007, in each case
prepared in accordance with IFRS or US GAAP by a firm of international
accountants selected by the Purchaser;
"2005 NET PROFIT" means the aggregate of (i) 2005 net profit of Active,
Trinity and Trinity Shenzhen based on Hong Kong GAAP and (ii) 2005 net
profit of ▇▇▇▇▇, Huoli, Beijing Longmei, Beijing Jinlong and Yuanxin based
on PRC local tax statutory reporting standards as determined by a firm of
international accountants selected by the Purchaser;
"2006 NET PROFIT" and "2007 NET PROFIT" mean the Company's consolidated (to
include the PRC Companies) profit after taxation attributable to the
business of the Group being carried on as a going concern in the ordinary
course set out respectively in the 2006 Financials and 2007 Financials
prepared in accordance with IFRS or US GAAP (at the sole discretion of the
Purchaser) in each case excluding extraordinary items and professional fees
incurred for preparation of the financial statements;
The Net Profit (including the "2005 NET PROFIT", "2006 NET PROFIT" and
"2007 NET PROFIT") shall not take into account any expenses or provision
made or gain recognised relating to amortization, written-off, impairment
loss or adjustment of goodwill which arises from acquisitions or disposal
of companies or business by the Group in the preparation of the Accounts.
The Net Profit shall not take into account any expenses (whether
professional or
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otherwise) which may be incurred by the Group in connection with a
restructuring of the business or operations of the Group;
"2005 PAYMENT DATE" shall the meaning provided in Clause 2.2 (b)(i);
"2006 AMOUNT" shall have the meaning provided in Clause 2.2 (b)(ii);
"2006 PAYMENT DATE" shall the meaning provided in Clause 2.2 (b)(ii);
"2007 AMOUNT" shall have the meaning provided in Clause 2.2 (b)(iii); and
"2007 PAYMENT DATE" shall the meaning provided in Clause 2.2 (b)(iii).
1.2 Interpretation. In this Agreement:
(a) the headings are inserted for convenience only and shall not affect
the construction of this Agreement;
(b) references to statutory provisions shall be construed as references to
those provisions as amended or re-enacted or as their application is
modified by other statutory provisions (whether before or after the
date hereof) from time to time and shall include any provisions of
which they are re-enactments (whether with or without modification);
(c) all times and dates in this Agreement shall be Hong Kong times and
dates except where otherwise stated;
(d) unless the context requires otherwise, words incorporating the
singular shall include the plural and vice versa and words importing
one gender shall include every gender; and
(e) references herein to Clauses, Recitals and Schedules are to clauses
and recitals of and schedules to this Agreement.
1.3 Recitals, Schedules. All Recitals and Schedules form part of this Agreement
and shall have the same force and effect as if expressly set out in the
body of this Agreement and any reference to this Agreement shall include
the Recitals and Schedules.
1.4 Joint Obligations. Warranties, covenants, indemnities or other obligations
expressed in this Agreement to be given by more than one party shall be
deemed to be given by such parties on a joint and several basis unless
otherwise expressly provided for.
2. SALE AND PURCHASE OF SALE SHARES
2.1 Sale. Subject to the terms and conditions set out in this Agreement, the
Vendor and the Warrantor agree to sell to the Purchaser and the Purchaser
(relying on the representations, warranties, agreements, covenants,
undertakings and indemnities hereinafter referred to) agrees to purchase
from the Vendor and the Warrantors, the Sale Shares for the Purchase Price
free and clear of all Encumbrances including all rights to any dividends or
other distribution declared paid or made in respect of them after the
Release Date.
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2.2 Purchase Price. The purchase price (the "PURCHASE PRICE") for the Sale
Shares shall comprise of the Initial Payment and the Subsequent Payments,
determined and payable in the manner, at the times and in the amounts set
forth in this Clause 2.2:
(a) an initial payment (the "INITIAL PAYMENT") of twenty-nine million US
dollars (US$29,000,000), which shall be payable as follows:
(i) twenty million US dollars (US$20,000,000) (the "ESCROWED
PAYMENT") by wire transfer from the Escrow Agent at Release to a
bank account designated jointly by the Vendor and the Warrantor;
and
(ii) nine million US dollars (US$9,000,000) by wire transfer at
Release to a bank account jointly designated by the Vendor and
the Warrantor; and
(b) subsequent payments (the "SUBSEQUENT PAYMENTS") consisting of the 2005
Amount, the 2006 Amount and the 2007 Amount which shall be determined
and paid as follows:
(i) an amount (the "2005 AMOUNT") equal to the product of ((A) 2005
Net Profit and (B) 12)) minus US$20,000,000 which shall be paid
by the Purchaser no later than twenty (20) Business Days after
the date of determination of the 2005 Net Profit (the date such
payment is required being the "2005 PAYMENT DATE");
(ii) an amount (the "2006 AMOUNT") equal to the product of ((A) 2006
Net Profit, (B) 12 and (C) 0.7)), minus the sum of ((D)
US$20,000,000 and (E) the ▇▇▇▇ ▇▇▇▇▇▇) which shall be paid by the
Purchaser no later than twenty (20) Business Days after the date
of issuance of the 2006 Financials (the date such payment is
required being the "2006 PAYMENT DATE");
(iii) an amount (the "2007 AMOUNT") equal to the product of ((A) 2007
Net Profit, (B)12 and (C) 0.3)) which shall be paid by the
Purchaser no later than twenty (20) Business Days after the date
of issuance of the 2007 Financials (the date such payment is
required being the "2007 PAYMENT DATE".
(c) On each of 2005 Payment Date, 2006 Payment Date and 2007 Payment Date,
the Purchaser shall pay to the Vendor or any other person jointly
designated by the Vendor and the Warrantor the 2005 Amount, the 2006
Amount and 2007 Amount, respectively.
(d) The Purchaser shall pay each Subsequent Amount in a combination of (A)
money in US dollars in an amount equal to 50% of such sum, and (B)
delivery of XFL Shares, rounded up to the nearest whole share, with an
aggregate Market Value equal to 50% of such sum; provided, however,
that:
(i) the Purchaser may, in its sole discretion, deliver to the Vendor
or any other person jointly designated by the Vendor and the
Warrantor money in US dollars in lieu of all or a portion of the
portion of the Subsequent Amount otherwise deliverable to the
Vendor in XFL Shares;
(ii) if any XFL Shares payable to the Vendor as a portion of any
Subsequent Amount are not actively traded on the Tokyo Stock
Exchange or a
-9-
comparable public trading market, then the Purchaser shall, not
less than ten (10) Business Days prior to the applicable
Subsequent Payment Date, so notify the Vendor, and the Vendor
may, by notice to be delivered to the Purchaser not less than
three (3) Business Days prior to the relevant Subsequent Payment
Date, elect to receive money in US dollars in lieu of such XFL
Shares; and
(iii) any portion of the Subsequent Amount payable by Purchaser to the
Vendor in money's worth pursuant to this Clause 2.2(d) shall be
transferred by the Purchaser to the Vendor by wire transfer of
immediately available funds pursuant to wire transfer
instructions delivered to the Purchaser by the Vendor pursuant to
Clause 2.2(e) herein no later than three (3) Business Days in
advance of the applicable Subsequent Payment Date and any portion
of the Subsequent Amount that is payable with XFL Shares by
issuing to the Vendor or any other person jointly designated by
the Vendor and the Warrantor the relevant number of XFL Shares
free from all Encumbrances on the applicable Subsequent Payment
Date.
(e) Notwithstanding any other provision contained herein, at least three
(3) Business Days in advance of any Subsequent Payment Date, the
Vendor shall, in writing, advise the Purchaser of the manner in which
the Purchaser shall deliver such Subsequent Payment. Specifically, the
Vendor shall advise the Purchaser of the persons and necessary account
information where such payments shall be made and if applicable, to
whom such XFL Shares should be issued and all information reasonably
requested by the Purchaser and/or any applicable Governmental Entity
in connection with the issuance of such XFL Shares. If the Purchaser
has failed to issue the relevant XFL Shares to the Vendor or any other
person jointly designated by the Vendor and the Warrantor in
accordance with Clause 2.2(d)(iii) on a relevant Subsequent Payment
Date then the Vendor may, by notice to be delivered to the Purchaser,
elect to receive money in US dollars in lieu of such XFL Shares except
where:
(i) there is a dispute as to the amount of any Subsequent Payment;
(ii) all relevant information for the issuance of the XFL Shares has
not been provided to the Purchaser in accordance with Clause
2.2(e);
(iii) the Vendor or any other person jointly designated by the Vendor
and the Warrantor has refused to accept the relevant XFL Shares
in any way or for any reason.
(f) The Purchaser shall appoint an international auditng firm to determine
the 2005 Net Income and the 2005 Working Capital Payment Amount. The
Vendor shall have the right to disclose the audit results to the key
management of ▇▇▇▇▇ and Active as in Schedule I.
(g) The Purchaser shall, on the 2005 Payment Date, pay to the person the
Vendor and the Warrantor jointly designate an amount in US dollars
equivalent to the 2005 Working Capital Payment Amount.
(h) The Purchaser and the Vendor shall bear the costs incurred in
determining the 2005 Working Capital Payment Amount in equal shares.
-10-
(i) Annual audits shall be performed to determine 2006 Financials and 2007
Financials with an international audit firm specified by the
Purchaser. The audits will cover the Group on a consolidated basis and
the Vendor shall have the right to disclose the audit results to the
key management of ▇▇▇▇▇ and Active as in Schedule I.
2.3 Release. As promptly as practicable following the satisfaction or, if
permissible, waiver of the conditions set forth in Clause 9, the release of
certain documents relating to the Group and the Initial Payment (the
"RELEASE") shall take place at the offices of the Escrow Agent, or at such
other time and place as the Purchaser, the Vendor and the Company all agree
in writing. The date and time of the Release are herein referred to as the
"RELEASE DATE". The Purchaser shall not be obliged to authorize the release
of the Escrowed Payment or complete the purchase of the Sale Shares unless
all the conditions set forth in Clause 9 are fulfilled or waived by the
Purchaser. If all of the conditions set for in Clause 9 are not fulfilled
or waived by the Purchaser on or before 20 December 2005 the Purchaser
shall not be obliged to authorize the release of the Escrowed Payment or
complete the Purchase of the Sale Shares. Without prejudice to any other
remedies available to the Purchaser, the Purchaser may defer the Release
until all conditions set forth in Clause 9 are fulfilled or waived.
2.4 The Company's Release Obligations. As conditions to the Release the Company
shall deliver to the Purchaser:
(a) all such documents and records for the Company as set out in Schedule
J hereto;
(b) authorization given by the Company to the Company's agent in the
British Virgin Islands responsible for keeping the originals of its
corporate records to receive and accept instructions from the
Purchaser and its agents and acknowledged by such British Virgin
Islands agent, all in form and substance satisfactory to the
Purchaser; and
(c) a certificate issued by an officer of the Company confirming that the
Company is not aware of any matter or thing which is in breach of or
inconsistent with any of the representations, warranties and
undertakings herein contained.
2.5 The Vendor's Release Obligations. As conditions to the Release the Vendor:
(a) shall deliver to the Purchaser an undated instrument of transfer for
the Sale Shares by the registered holders thereof in favour of the
Purchaser or such other person as the Purchaser may designate together
with (i) the share certificates representing the Sale Shares; (ii) a
certified copy of the articles of association of the Company; and
(iii) certified copy of the directors' resolution approving the
transfer of the Sale Shares;
(b) shall deliver to the Purchaser a form of deed of non-competition
undertakings and release in the form set out in Schedule M for the
persons set out in Schedule L and all powers of attorney or other
authorities under which the transfers of the Sale Shares have been
executed (if any);
(c) if applicable, shall deliver to the Purchaser undated resignations of
those resigning Directors of the Company executed by such resigning
Directors of the Company;
-11-
(d) shall deliver to the Purchaser such waivers or consents as the
Purchaser may require enabling the Purchaser to be registered as the
holders of the Sale Shares;
(e) shall deliver to the Purchaser such other documents as may be required
to give to the Purchaser good title to the Sale Shares and to enable
the Purchaser to become the registered holders thereof;
(f) shall deliver to the Purchaser written confirmation that the Vendor is
not aware of any matter or thing which is in breach of or inconsistent
with any of the representations, warranties and undertakings herein
contained;
(g) shall deliver to the Purchaser the following agreements (the "RELEASE
DELIVERABLE AGREEMENTS"):
(i) the Management Contracts duly executed and delivered by the
parties to them; and
(ii) all Internal Control Agreements duly executed by the parties to
them;
(h) shall cause the equity transfer forms, relevant corporate approvals,
and all other documents necessary for the Purchaser's Nominee to be
registered as the only shareholder(s) of ▇▇▇▇▇ to be filed with the
relevant approval authorities in the PRC;
(i) shall deliver to the Purchaser all documents set out in Schedule K
(the "REORGANIZATION DELIVERABLES") and.
(j) shall execute and file with the relevant Administration of Industry
and Commerce all documents required to effect (k) above.
2.6 The Purchaser Release Obligations. Upon Release, the Purchaser shall
deliver or cause to be delivered to the Vendor or such other party as the
Vendor and the Warrantor jointly direct in accordance with this Agreement:
(a) the instruction to the Escrow Agent to release the Escrowed Payment;
and
(b) the remainder of the Initial Payment (less the Escrowed Payment).
2.7 Deferral of the Release. Subject to Clause 12.1(c), the Purchaser shall not
be obliged to complete the Release unless all conditions for Release are
fulfilled or waived in accordance with this Agreement. Without prejudice to
any other remedies available to the Purchaser, if any provision of Clause
2.4 or Clause 2.5 has not been complied with by the Company or by the
Vendor on the Release Date, the Purchaser may:
(a) proceed with the Release so far as practicable (without prejudice to
its rights hereunder); or
(b) rescind its obligations to purchase the Sale Shares under this
Agreement without prejudice to any other remedy and without incurring
any liability to the Company, the Vendor or the Warrantor whereupon
the Escrow Agent shall repay the Escrowed Payment and any interest
accrued thereon to the Purchaser.
-12-
2.8 Closing. The Purchaser may register the transfer of the Sale Shares at such
time as it may determine to effect the purchase and sale of the Sales
Shares (the "CLOSING") which shall take place at the offices of the Escrow
Agent and at such time (the "CLOSING DATE") as the Purchaser may determine
by notice to the Vendor, the Warrantor and the Company which shall not be
later than 15 January 2006 in any event except with the agreement of the
Parties. The Vendor and the Warrantor shall take all steps necessary to or
procure:
(a) the transfer of the Sale Shares to the Purchaser;
(b) the formation of Shenzhen Active Trinity (except for actions to be
taken by persons under the Control of the Purchaser);
(c) the equity interests referred to in each of the Reorganization
Deliverables are transferred.
2.9 Further Covenants. The Vendor and the Warrantor hereby irrevocably
undertake to the Purchaser to procure at their own expense the due
execution and delivery of all necessary documents and to do such further
acts as may be necessary to proceed to Closing and complete the
transactions contemplated in this Agreement.
2.10 Covenants of the Company and the Purchaser Post-Closing. The Purchaser and
Company covenant that until 31 December 2007 unless otherwise agreed by the
Warrantor in writing:
(a) The Purchaser and the Company shall ensure that the calculation of the
2005 Net Profits and 2005 Working Capital Payment Amount will be
determined on or before April 30, 2006 and the 2006 Financials and
2007 Financials will be issued on or before March 31, 2007 and March
31, 2008, respectively.
(b) No member of the Group shall declare or pay any dividend or otherwise
make any distribution.
(c) The Purchaser and the Company shall allow the Vendor or such other
persons designated by the Vendor such access to the accounting and
business records and documents of any member of the Group for the
purpose of the preparation and auditing of the financial statements of
the respective members as may be necessary from time to time, or for
the conducting of any special audits that may be necessary pursuant to
any of the Internal Control Agreements or this Agreement. The
Purchaser shall bear the costs of such preparation and auditing of the
financial statements and the conducting of such special audits.
(d) The Purchaser and any member of the Group shall not terminate or
procure not terminate the employment of the Management under the
respective Management Contracts to be terminated for any reason other
than his death or in one or more of the following circumstances
material breach of the Management Contract which breach is
attributable to acts of the relevant key management committed during
the term of the Management Contract;
(e) The Purchaser and the Company shall not remove any director nominated
by the Vendors or the Warrantor from the board of directors of the
Company and ▇▇▇▇▇ for any reason other than his death or in one or
more of the following circumstances material breach of the his
employment contract with the Group which breach is attributable to
acts of the relevant director committed after Release;
-13-
(f) The Purchaser shall not cause (i) any member of the Group to enter
into a merger or consolidation with or into any other entity or
entities or the merger of any other entity or entities into any member
of the Group except for mergers and consolidations between members of
the Group where such merger or consolidation does not involve
combination in which the operations of the Company are combined with
the operations of any other business or entities outside of the Group
or as a result of which the Company ceases to maintain separate
financial books for the business carried on by the Group, or (ii) the
sale or other transfer or disposition of all or substantially all of
the assets of any member of the Group to anyone other than another
member of the Group or an Affiliate of the Purchaser with no assets,
liabilities, business or operations who shall then be a member of the
Group and which shall not cause a Material Adverse Change.
(g) The Purchaser and the Company shall not take any steps to wind up or
liquidate any member of the Group.
(h) The Purchaser and the Company shall not cause any member of the Group
to acquire any business unless such acquisition is made on an arm's
length terms at fair value and is made through the acquisition of a
company (having independent legal existence) which holds the business
provided that such acquisition does not cause an Material Adverse
Change.
(i) The Purchaser and the Company shall not sell or dispose of, nor create
any Encumbrance over, any of their direct or indirect interests in
each member of the Group so that their shareholding falls below 51% in
any member of the Group, nor enter into any agreement to do any of the
foregoing.
(j) The Vendor will have control and responsibility for the strategic and
operational management of the business of the Company and each member
of the Group (including control over operating expenses, employment
matters and pricing) consistent with good business practices and terms
of this Agreement and the respective Management Agreements and in each
case subject to reasonable oversight of the Purchaser and the board of
directors of the Company and ▇▇▇▇▇.
2.11 Board of Directors: From Release until 31 December 2007 the board of
directors of Upper Will and Active shall consist of five (5) directors. At
Release the Purchaser shall have the right to appoint three (3) directors
and the Vendor shall have the right to appoint two (2) directors to the
board of directors of each of Upper Will and Active. The Vendors will
ensure the chairman of the board of directors of Upper Will and Active
shall be nominated by the Purchaser at Release.
From 2 January 2006 until 31 December 2007 the board of directors of the
Company, ▇▇▇▇▇ and Huoli shall consist of five (5) directors. On 2 January
2006 the Purchaser shall have the right to appoint three (3) directors and
the Vendor shall have the right to appoint two (2) directors to the board
of directors of each of Company, ▇▇▇▇▇ and Huoli. The Vendors will ensure
the chairman of the board of directors of the Company, ▇▇▇▇▇ and Huoli
shall be nominated by the Purchaser on 2 January 2006.
The Vendor and the Warrantor shall do all things necessary to effect the
appointments to the board of directors of the relevant member of the Group
in accordance with this Clause 2.11.
-14-
2.12 Covenants of the Vendor and the Warrantor Post-Closing. The Vendor and the
Warrantor shall procure that:
(a) Trinity Hong Kong, Trinity Shenzhen and Beijing Shangtuo, shall after
Closing cease to carry out any further business without the written
consent of the Purchaser save and except:
(i) the Vendor and the Warrantor shall cause Trinity Hong Kong to
take all steps necessary to obtain all necessary certificates and
approvals under CEPA (as defined in 4.1(y)) to establish a wholly
foreign owned enterprise that will enjoy the benefits under the
status of a Hong Kong service supplier of advertising services
under CEPA in such location as may be agreed to by the Purchaser;
and
(ii) the completion of the existing contracts without further renewal
or extension; and
(b) the articles of association of Yuanxin are amended so that matters
requiring shareholders' approval shall only require majority approval
of the shareholders rather than unanimous.
3. COVENANTS PRIOR TO CLOSING
3.1 Covenants. From the date of this Agreement until the Closing, except for
the transactions described herein or otherwise with the prior written
consent of the Purchaser:
(a) the Warrantor and the Vendor warrant and undertake that they will
cause each member of the Group at all times prior to Closing to:
(i) conduct its business in the ordinary course and consistent with
past practices;
(ii) maintain in full force and effect their existence;
(iii) promptly and timely prepare and file any reports and tax returns
and pay all taxes and assessments, government fees and charges,
if any, required to maintain its existence and conduct its
business in the ordinary course and consistent with past
practices;
(iv) comply with all applicable laws;
(v) keep records in which true and correct entries will be made of
all transactions entered into;
(vi) duly observe all material requirements of governmental
authorities unless contested in good faith by appropriate
proceedings with the consent of the Purchaser;
(vii) promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon its income, profits,
property or business of unless contested in good faith by
appropriate proceedings with the consent of the Purchaser so long
as such amount exceeds RMB50,000;
-15-
(viii) at all times comply with the provisions of all contracts,
agreements and leases to which it is a party, unless contested in
good faith by appropriate proceedings with the consent of the
Purchaser; and
(ix) unless otherwise directed by the Purchaser, to use best
endeavours to procure that its employees at the date of this
Agreement remain and continue as employees after the Release;
(b) the Warrantor and the Vendor warrant and undertake to cause each
member of the Group not to:
(i) modify its charter documents;
(ii) cause or permit its liquidation or dissolution;
(iii) institute, or permit to be instituted against it, any
proceeding, which remains undismissed for a period of 15 days
after the filing thereof, seeking to adjudicate it as bankrupt or
insolvent, or seeking liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of it
under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of any
order or relief or the appointment of receiver, trustee or other
similar official for them or for any substantial part of its
property;
(iv) make a general assignment for the benefit of its creditors;
(v) declare or pay any dividend or make any distribution to its
shareholders;
(vi) issue, redeem, sell or dispose of, or create any obligation to
issue, redeem, sell or dispose of, any shares of its capital
stock or equity interest;
(vii) effect any stock split, reclassification or combination;
(viii) modify agreements and other obligations with respect to its
long-term indebtedness including, but not limited to its loan
agreements, indentures, mortgages, debentures, notes and security
agreements;
(ix) incur, assume, guarantee or otherwise become obligated or liable
for any indebtedness (other than in the ordinary course of
business to finance operations) or encumber any of its assets or
enter into any transaction or contract, or make any commitment
relating to its assets or business (other than in the ordinary
course of business and in a manner consistent with past
practices) but in all circumstances subject to an aggregate
limitation of US$10,000;
(x) become a party to any merger or consolidation or any other
business combination with any corporation or other entity, except
as contemplated by this Agreement;
(xi) make any acquisition of all or substantially all of the stock or
assets of any other person or entity;
-16-
(xii) take or omit to take any action which could be reasonably
anticipated to have a materially adverse effect upon its
financial condition or assets;
(xiii) grant any director, officer, legal representative, employee or
consultant any increase in compensation in any form (other than
pursuant to existing employment agreements) or any severance or
termination pay, or enter into or vary the terms of any
employment agreement with such person except as provided in the
Management Contracts;
(xiv) adopt, amend in any material respect or terminate, any employee
benefit program of general applicability; or
(xv) make any advance or loan to any person or entity.
3.2 Access to Information. Until the Closing, the Warrantor and the Vendor
shall procure that the Purchaser, its agents and representatives are given
reasonable access to such documents relating to the Group as the Purchaser
shall request.
3.3 Rescission. The Purchaser shall be entitled to rescind its obligations to
purchase the Sale Shares under this Agreement by notice in writing to the
Warrantor and the Vendor if prior to the Release it appears that any of the
Key Warranties set out in this Agreement are not or were not true and
accurate in all respects or if any act or event occurs which, had it
occurred on or before the date of this Agreement, would have constituted a
breach of any of the Key Warranties or if there is any material
non-fulfilment of any of the Key Warranties which (being capable of remedy)
is not remedied prior to the Release. Upon such rescission and if the
Escrowed Payment had been released to the Vendor or such other party as the
Vendor may direct, the Vendor shall forthwith pay to the Purchaser the full
amount of the Escrowed Payment.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS IN RESPECT OF THE GROUP
Save as set out in the Disclosure Letter, the Warrantor and the Vendor
jointly and severally represent and warrant to the Purchaser that the
following statements are true and correct as of the date of this Agreement:
4.1 The Offshore Companies. In respect of each member of the Offshore
Companies:
(a) Organization, Standing, and Power. It is a company duly organized,
validly existing, and in good standing under its laws of
incorporation, has all requisite corporate power and authority to
carry on its businesses, and is duly qualified and in good standing to
do business in each jurisdiction in which it conducts business.
(b) Corporate Records. It has made available to the Purchaser complete and
correct copies of all the corporate documents, including but not
limited to, its memorandum and articles of association, registers and
other organizational documents ("OFFSHORE CHARTER DOCUMENTS"), in each
case, as amended to the date hereof. It has delivered to the Purchaser
complete and correct copies of its minute books and corporate records,
all of which contain correct and complete records of all proceedings
and actions taken at all meetings of, or effected by written consent
of,
-17-
its shareholders and its board of directors and all original issuances
and subsequent transfers, repurchases, and cancellations of its
shares.
(c) Capital Structure.
(i) Set out in Schedule D is its issued share capital immediately
following the Release and which will exist at the time of Closing
(ii) There are no options, warrants, calls, conversion rights,
commitments, agreements, contracts, restrictions, or rights of
any character to which it is a party or by which it may be bound
obligating it to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares, or obligating it to grant,
extend or enter into any such option, warrant, call, conversion
right, commitment, agreement, contract, understanding,
restriction, arrangement or right. It does not have outstanding
bonds, debentures, notes or other indebtedness other than normal
trade indebtedness incurred in the ordinary course of business.
(d) Subsidiaries. It does not presently own or control, directly or
indirectly, any interest in any other company, association, or other
business entity, and is not a participant in any joint venture,
partnership, or similar arrangement, except as set out in Schedule B.
Its particulars as set out in Schedule D are true and accurate in all
respects and the percentage of share capital or equity interest shown
therein as owned or controlled by it is legally and beneficially owned
and free and clear of all Encumbrances, save as contained in the
Internal Control Agreements. Save as expressly provided in the
Ancillary Agreements, there is no agreement or arrangement in force
which calls for the present or future issue or sale of, or grant to
any person the right (whether conditional or otherwise) to call for
the issue, sale or transfer of any of its share or loan capital
(including any of its option, notes, warrants or other securities or
rights convertible or ultimately convertible into shares or equity
interests).
(e) Authority. The execution, delivery, and performance of this Agreement
and all Ancillary Agreements to be entered into by it have been duly
authorized by all necessary action of its board. Certified copies of
the resolutions adopted by its board approving this Agreement, the
Ancillary Agreements and transactions contemplated hereby and thereby
have been provided to the Purchaser.
(f) Execution. It has duly and validly executed and delivered this
Agreement and the Ancillary Agreements naming it as a party, and this
Agreement and such Ancillary Agreements constitute valid, binding, and
enforceable obligations of it in accordance with their terms, except
to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in equity.
(g) Compliance with Laws and Other Instruments. It holds and, at all
times, has held all licenses, permits, and authorizations from all
Governmental Entities necessary for the lawful conduct of its business
pursuant to all applicable statutes, laws, ordinances, rules, and
regulations of all such authorities having jurisdiction over it or any
part of its operations. There are no violations or claimed violations
of any
-18-
such license, permit, or authorization, or any such statute, law,
ordinance, rule or regulation. It has conducted its activities in
compliance with all applicable laws and there has been no material
breach of any laws applicable to it.
(h) Corporate Governance. Neither the execution and delivery of this
Agreement and the Ancillary Agreements naming it as a party nor the
performance by it of its obligations under this Agreement and such
Ancillary Agreements will (i) conflict with or result in any breach of
its Offshore Charter Documents; (ii) require any Consent, (iii)
conflict with, result in a breach or default of, or give rise to any
right of termination, cancellation or acceleration or result in the
creation of any Encumbrance, or restriction upon any of the properties
or assets of it or its shares under, any law, statute, rule,
regulation, judgment, decree, order, government permit, license or
order or any mortgage, indenture, note, license, trust, agreement or
other agreement, instrument or obligation to which it is a party.
(i) Absence of Certain Changes and Events. Since the signing of this
Agreement, there has not been:
(i) Any transaction involving more than RMB50,000 entered into by it
other than in the ordinary course of business;
(ii) Any declaration, payment, or setting aside of any dividend or
other distribution to or for any of the holders of any equity;
(iii) Any termination, modification, or rescission of or waiver by it
of rights under any contract having or reasonably likely to have
a Material Adverse Change on its business;
(iv) Any discharge or satisfaction by it of any Encumbrance, or any
payment of any obligation or liability (absolute or contingent)
other than liabilities incurred in the ordinary course of
business;
(v) Any mortgage, pledge, imposition of any security interest, claim,
Encumbrance, or other restriction created on any of the assets,
tangible or intangible, of it having or reasonably likely to have
a Material Adverse Change on its business;
(vi) Any settlement amount of any claim, dispute, suit, proceeding or
investigation regarding it; or
(vii) Any event or condition resulting in a Material Adverse Change on
its business.
(j) Litigation and Other Proceedings. It is not nor is any of its
officers, directors, or employees a party to any pending or,
threatened action, suit, labour dispute (including any union
representation proceeding), proceeding, investigation, or
discrimination claim in or by any court or governmental board,
commission, agency, department, or officer, or any arbitrator, arising
from its actions or omissions or, in the case of an individual, from
acts in his or her capacity as its officer, director, employee, agent
or contractor, which individually or in the aggregate would have a
Material Adverse Change on its business. It is not a named party to
any order, writ, judgment, decree, or injunction.
-19-
(k) No Defaults. It is not, nor has it received written notice that it
would be with the passage of time, in default or violation of any
term, condition, or provision of (i) its Offshore Charter Documents;
(ii) any judgment, decree, or order to which it is a named party; or
(iii) any loan or credit agreement, note, bond, mortgage, indenture,
contract, agreement, lease, license, or other instrument to which it
is a party or by which it or any of its properties or assets is bound,
except for defaults and violations which have been cured or,
individually or in the aggregate, would not have a Material Adverse
Change on its business.
(l) Major Contracts. Except for the agreements set out in Schedule E (the
"MATERIAL OFFSHORE CONTRACTS") it is not a party to or bound by:
(i) Any employment contract or arrangement providing for annual
salary in excess of US$12,000 with any officer or employee or
with any consultant or director providing for annual compensation
in excess of US$12,000;
(ii) Any plan or contract or arrangement, written or oral, providing
for bonuses, pensions, deferred compensation, retirement
payments, profit-sharing, severance, acceleration of vesting of
benefits, payments upon change of control events, or the like;
(iii) Any joint venture contract or arrangement or any other agreement
that has involved or is expected to involve a sharing of profits;
(iv) Any licensing or distribution agreement, volume purchase
agreement, corporate end user sales or service agreement,
reproduction or replication agreement or production agreement in
which the amount involved exceeds annually, US$50,000 or pursuant
to which any it has granted or received manufacturing rights,
most favoured nation pricing provisions, or exclusive marketing,
reproduction, publishing or distribution rights related to any
product, group of products or territory;
(v) Any lease for real or personal property in which the amount of
payments which it is required to make on an annual basis exceeds
US$10,000;
(vi) Any agreement, franchise, or indenture where the amount of
consideration payable thereunder is greater than US$50,000 in any
year during the term of such agreement, franchise or indenture
and which has not been terminated or performed in its entirety
and not renewed which may be, by its terms, terminated, impaired,
or adversely affected by reason of the execution of this
Agreement and the Ancillary Agreements, the Release, the Closing
or the consummation of the transactions contemplated;
(vii) Any license, permit, or authorization which has not been
terminated or performed in its entirety and not renewed which may
be, by its terms, terminated, impaired, or adversely affected by
reason of the execution of this Agreement and the Ancillary
Agreements, the Release, the Closing or the consummation of the
transactions contemplated;
(viii) Except for trade indebtedness incurred in the ordinary course
of business, any instrument evidencing or related in any way to
indebtedness incurred in
-20-
the acquisition of companies or other entities or indebtedness
for borrowed money by way of direct loan, sale of debt
securities, purchase money obligation, conditional sale,
guarantee, or otherwise which individually is in the amount of
US$20,000 or more; or
(ix) Any contract containing covenants purporting to limit its freedom
to compete in any line of business in any geographic area.
All Material Offshore Contracts are valid and in full force and effect
and it has not nor has any other party thereto breached any material
provisions of, or entered into default in any material respect under
the terms thereof other than such beaches or defaults that have been
cured or would not, individually or in the aggregate, have a Material
Adverse Change on its business. It has made available to the Purchaser
a copy of each of the Material Offshore Contracts specified in
Schedule E together with all amendments, material written waivers or
other material written changes thereto.
All outstanding Material Offshore Contracts relating to Trinity Hong
Kong are listed in Schedule E and Trinity Hong Kong has not entered
into any other contracts which are outstanding as at the date of this
Agreement.
(m) Assets. The assets owned, possessed or used by it comprise all the
assets required to enable it to carry on its business fully and
effectively in the ordinary course. It has legal and beneficial
ownership of all assets owned, possessed or used by it free and clear
of all Encumbrances. No other Person owns any property and asset which
are being used by it except for the property leased by it pursuant to
the Material Offshore Contracts.
(n) Technology and Intellectual Property Rights.
(i) Except for the corporate names of each of the members of the
Offshore Companies, it has no registered Intellectual Property in
any part of the world.
(ii) It owns or has the right to use all Intellectual Property used or
held for use in the conduct of its business without any conflict
with the rights of others. All products and technology that have
been or currently are published and/or offered by it or are under
development by it, and all products and/or technology underlying
any and all services that have been or currently are offered by
it or are under development by it is either: (1) owned by it, (2)
in the public domain, or (3) rightfully used by the it pursuant
to a valid written license or other agreement.
(iii) It is not, as a result of the execution or delivery of this
Agreement and/or the Ancillary Agreements, nor the performance of
its obligations under them of under the Internal Control
Agreements will cause it to be in violation of any license,
sublicense or other agreement relating to the Intellectual
Property or of any non-disclosure agreement to which it is a
party or otherwise bound.
(iv) It is not obligated to provide any financial consideration or
other consideration to any third party, nor is any third party
otherwise entitled to
-21-
any financial consideration or other consideration, with respect
to any exercise of rights by it or its successors in the
Intellectual Property.
(v) Its use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any Owned
Intellectual Property by it or its licensees does not infringe,
misappropriate or violate any copyright, patent, trade secret,
trademark, service ▇▇▇▇, trade name, firm name, logo, trade
dress, database right, other intellectual property right, right
of privacy, right of publicity or right in personal or other data
of any person. Further, the use, reproduction, modification,
distribution, licensing, sublicensing, sale, or any other
exercise of rights in any Licensed Intellectual Property or any
other authorized exercise of rights in or to Licensed
Intellectual Property by it or its licensees does not infringe,
misappropriate or violate any copyright, patent, trade secret,
trademark, service ▇▇▇▇, trade name, firm name, logo, trade
dress, moral right, database right, other intellectual property
right, right of privacy, right of publicity or right in personal
or other data of any person. Further, the distribution,
licensing, sublicensing, sale, or other provision of products and
services by it or its resellers or licensees does not infringe,
misappropriate or violate any copyright, patent, trade secret,
trademark, service ▇▇▇▇, trade name, firm name, logo, trade
dress, moral right, database right, other intellectual property
right, right of privacy, right of publicity or right of any
person.
(vi) No action, suit or proceeding, pending or otherwise, (i)
challenging the validity, enforceability, or ownership by it of
any of Owned Intellectual Property or (ii) to the effect that the
use, reproduction, modification, manufacturing, distribution,
licensing, sublicensing, sale or any other exercise of rights in
any Owned Intellectual Property by it or its licensees infringes,
misappropriates or violates any intellectual property or other
proprietary or personal right of any person is pending or is
threatened by any person. Further, no claim to the effect that
the distribution, licensing, sublicensing, sale or other
provision of products and services by it or its resellers or
licensees infringes misappropriates or violates any intellectual
property or other proprietary or personal right of any person is
pending or, to the knowledge of the Company and the Vendor, is
threatened by any person. There is no unauthorized use,
infringement or misappropriation of any of Owned Intellectual
Property by any third party, employee or former employee.
(vii) No other party has any security interest in any Intellectual
Property.
(viii) It has secured from all parties who have created any portion
of, or otherwise have any rights in or to, Owned Intellectual
Property, other than employees of itself whose work product was
created by them entirely within the scope of their employment by
it and constitutes work made for hire owned by it, valid written
assignments or licenses of any such work or other rights to it
that are enforceable by it and has made available true and
complete copies of such assignments or licenses to the Purchaser.
(ix) It owns all right, title and interest in and to all data it
collects from or discloses about users of its products and
services. Its practices regarding the collection and use of
consumer personal information are in accordance in
-22-
all respects with applicable laws and regulations of all
jurisdictions in which it operates.
(x) No officer, director, stockholder or employee of it, nor any
spouse, or relative thereof, owns directly or indirectly, in
whole or in part, any Intellectual Property.
(o) Employees. It has no written or oral contract of employment or other
employment agreement with any of its employees (including any
contracts relating to the temporary use or loaning of employees) that
are not terminable at will by it without payment of severance or
termination payments or benefits. It is not a party to any pending or
threatened labour dispute concerning its business or employment
practices or the subject of any organizing drive, labour grievance or
petition to certify a labour union. It has complied with all
applicable laws, treaties, ordinances, rules, and regulations and
requirements relating to the employment of labour in all material
respects. There are no claims pending or threatened to be brought
against it in any court or administrative agency by any of its former
or current employees.
(p) Certain Agreements. Neither the execution and delivery of this
Agreement and the Ancillary Agreements nor the performance of its
obligations contained in them will: (i) result in any payment by it
(including severance, unemployment compensation, parachute payment,
bonus or otherwise) becoming due to any director, employee, or
independent contractor of it under any employee benefit plan,
agreement, or otherwise, (ii) increase any benefits otherwise payable
under any employee benefit plan or agreement, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
(q) Guarantees and Suretyships. It does not have any powers of attorney
outstanding and it does not have any obligations or liabilities
(absolute or contingent) as guarantor, surety, cosigner, endorser,
co-maker, or otherwise respecting the obligations or liabilities of
any person, corporation, partnership, joint venture, association,
organization, or other entity other than as an endorser of negotiable
instruments in the ordinary course of business.
(r) Absence of Questionable Payments. It has not nor has any of its
respective Affiliates, directors, officers, agents, employees or other
persons acting on their behalf, used any corporate or other funds for
unlawful contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to government
officials or others or established or maintained any unlawful or
unrecorded funds. It has not nor has any of its respective Affiliates,
directors, officers, agents, employees or other persons acting on its
behalf, accepted or received any unlawful contributions, payments,
gifts, or expenditures.
(s) Financial Statements. There has been delivered to the Purchaser (a)
audited balance sheets as of 31 December 2004 and the related audited
income statements for the year ending 2004, and (b) an unaudited
balance sheet as at 31 October 2005 (the "OFFSHORE BALANCE SHEET") and
the related income statements for the ten months then ended
(collectively, the "OFFSHORE FINANCIAL STATEMENTS"). The Offshore
Financial Statements: (i) have been prepared from its books and
records; (ii) present fairly in all material respects its financial
position as of and for the periods indicated; and (iii) have been
prepared in accordance with Hong Kong GAAP consistently applied. There
are no liabilities in excess of US$5,000 in the aggregate,
-23-
claims or obligations of any nature, whether absolute, contingent,
anticipated or otherwise, whether due or to become due, that are not
shown in the Offshore Financial Statements.
(t) Accounts Receivable. All of the accounts receivable shown on the
Balance Sheet have and all of its receivables as of the Escrow Release
Date will have arisen out of bona fide transactions in its ordinary
course of business and have been collected or are good and collectible
in the aggregate recorded amounts thereof (less the allowance for
doubtful accounts also appearing in such Balance Sheet and net of
returns and payment discounts allowable by its policies) and can
reasonably be anticipated to be paid in full without outside
collection efforts within ninety (90) days of the due date.
(u) Taxes.
(i) It has timely filed (or caused to be filed) all tax returns
("OFFSHORE RETURNS") required to be filed by it. All taxes
required to be paid (whether or not shown on any Return) in
respect of the periods covered by such Returns ("OFFSHORE RETURN
PERIODS") have been paid or fully accrued on the Offshore Balance
Sheet. It has not requested or been granted any extension of time
to file any Offshore Return. The Company and the Vendor have made
available to the Purchaser true and correct copies of all
Offshore Returns, and all material correspondence with any taxing
authority.
(ii) No deficiencies or adjustments for any of its tax has been
claimed, proposed or assessed or threatened in writing and not
paid. There is currently no claim outstanding by an authority in
a jurisdiction where it does not file Offshore Returns that it is
or may be subject to taxation by that jurisdiction. It is not
subject to any pending or threatened tax audit or examination. It
has not entered into any agreements, waivers or other
arrangements in respect of the statute of limitations in respect
of its taxes or Offshore Returns.
(iii) For the purposes of this Agreement, the terms "tax" and "taxes"
shall include all taxes, assessments, duties, tariffs,
registration fees, and other governmental charges in the nature
of taxes including, all income, franchise, property, production,
sales, use, payroll, license, windfall profits, value added,
severance, withholding, excise, gross receipts and other taxes,
as well as any interest, additions or penalties relating thereto
and any interest in respect of such additions or penalties.
(iv) There are no liens for taxes upon its assets except for taxes
that are not yet payable. It has withheld all taxes required to
be withheld in respect of wages, salaries and other payments to
all employees, officers and directors and any taxes required to
be withheld from any other person and has timely paid all such
amounts withheld to the proper taxing authority.
(v) Leases in Effect; Real Estate. All real property leases and subleases
to which it is a party and any amendments or modifications thereof are
listed in Schedule F (each an "OFFSHORE LEASE" and, collectively, the
"OFFSHORE LEASES"). It has a valid leasehold interest under such
Offshore Leases. There are no existing defaults, and it has not
received or given any written notice of default or claimed default
with respect to any Offshore Lease and there is no event that with
notice or lapse of time,
-24-
or both, would constitute a default thereunder. All real property
occupied by it is subject to a written lease. It holds no interest in
real property other than the Offshore Leases.
(w) Material Relations. None of the parties to any of the Material
Offshore Contracts have terminated or in any way expressed to it an
intent to reduce or terminate the amount of business with it in the
future.
(x) Insurance and Banking Facilities. Schedule H contains a complete and
correct list of the names and locations of all banks in which it has
accounts or safe deposit boxes, the designation of each such account
and safe deposit box, and the names of all persons authorized to draw
on or have access to each such account and safe deposit box. All
premiums and other payments due from it with respect to any contracts
of insurance or indemnity have been paid, and there are no act, or
failures to act that has or might cause any such contract to be
cancelled or terminated. All known claims for insurance or indemnity
have been presented.
(y) CEPA. Active has obtained all necessary certificates and approvals
under CEPA to establish a wholly foreign owned enterprise that will
enjoy the benefits under the status of a Hong Kong service supplier of
advertising service and the HKSS Certificate, necessary for (i)
establishing its status of a Hong Kong service supplier of advertising
services under the CEPA and (ii) enjoying all the benefits thereunder
which apply to a service supplier of advertising services.
For the interpretation of this Clause 4.1(y) only,
"ADVERTISING SERVICES" has the meaning ascribed to it under Table 1 of
Annex 4 of the CEPA
"CEPA" means the Mainland and Hong Kong Closer Economic Partnership
Arrangement
"HKSS CERTIFICATE" means the certificate issued to a natural or
juridical person by the Trade and Industry Department of Hong Kong
confirming the fulfillment by such person of the criteria as required
under Annex 5 of the CEPA for being a Hong Kong service supplier
"SERVICE SUPPLIER" has the meaning ascribed to it under Annex 5 of the
CEPA
4.2 The PRC Companies. In respect of each of the PRC Companies:
(a) Organization, Standing, and Power. It is a company duly organized,
validly existing, and has not been deliniquent in any required filings
with all relevant Governmental Entities under the laws of the PRC, has
all requisite corporate power and authority to carry on its
businesses, and is duly qualified and in good standing to do business
in each jurisdiction in which it conducts business.
(b) Corporate Records. It has made available to the Purchaser complete and
correct copies of all the documents including but not limited to, its
business license, articles of association, tax registration
certificates, registers and/or other organizational documents ("PRC
CHARTER DOCUMENTS"), in each case, as amended to the date
-25-
hereof. It has delivered to the Purchaser complete and correct copies
of its minute books and corporate records, all of which contain
correct and complete records of all proceedings and actions taken at
all meetings of, or effected by written consent of, its shareholders
and its board of directors, and all original issuances and subsequent
transfers, repurchases, and cancellations of its shares.
(c) Capital Structure.
(i) Set out in Schedule D is its issued share capital immediately
following the Release and at Closing.
(ii) There are no options, warrants, calls, conversion rights,
commitments, agreements, contracts, restrictions, or rights of
any character to which it is a party or by which it may be bound
obligating it to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares, or obligating it to grant,
extend or enter into any such option, warrant, call, conversion
right, commitment, agreement, contract, understanding,
restriction, arrangement or right. It does not have outstanding
bonds, debentures, notes or other indebtedness.
(d) Subsidiaries. It does not presently own or control, directly or
indirectly, any interest in any other company, association, or other
business entity, and is not a participant in any joint venture,
partnership, or similar arrangement, except as set out in Schedule B.
Its particulars as set out in Schedule D are true and accurate in all
respects and the percentage of share capital or equity interest shown
therein as owned or controlled by it is legally and beneficially owned
and free and clear of all Encumbrances, save as contained in the
Internal Control Agreements. Save as expressly provided in the
Ancillary Agreements, there is no agreement or arrangement in force
which calls for the present or future issue or sale of, or grant to
any person the right (whether conditional or otherwise) to call for
the issue, sale or transfer of any of its share or loan capital
(including any of its option, notes, warrants or other securities or
rights convertible or ultimately convertible into shares or equity
interests).
(e) Authority. The execution, delivery, and performance of this Agreement
and all Ancillary Agreements to be entered into by it have been duly
authorized by all necessary action of its board and the shareholders
meeting (where applicable). Certified copies of the resolutions
adopted by its board approving this Agreement, the Ancillary
Agreements and transactions contemplated hereby and thereby have been
provided to the Purchaser.
(f) Execution. It has duly and validly executed and delivered this
Agreement and the Ancillary Agreements naming it as a party, and this
Agreement and such Ancillary Agreements constitute valid, binding, and
enforceable obligations of it in accordance with their terms, except
to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in equity.
(g) Compliance with Laws and Other Instruments. It holds and, at all
times, has held all licenses, permits, and authorizations from all
Governmental Entities necessary
-26-
for the lawful conduct of its business pursuant to all applicable PRC
statutes, laws, ordinances, rules, and regulations of all such
authorities having jurisdiction over it or any part of its operations.
There are no violations or claimed violations of any such license,
permit, or authorization, or any such statute, law, ordinance, rule or
regulation. It has conducted its activities in compliance with all
applicable laws and there has been no material breach of any laws
applicable to it.
(h) Corporate Governance. Neither the execution and delivery of this
Agreement and the Ancillary Agreements naming it as a party nor the
performance by it of its obligations under this Agreement and such
Ancillary Agreements will (i) conflict with or result in any breach of
its PRC Charter Documents; (ii) require any Consents,,(iii) conflict
with, result in a breach or default of, or give rise to any right of
termination, cancellation or acceleration or result in the creation of
any lien, charge, encumbrance, or restriction upon any of the
properties or assets of it or its shares under, any law, statute,
rule, regulation, judgment, decree, order, government permit, license
or order or any mortgage, indenture, note, license, trust, agreement
or other agreement, instrument or obligation to which it is a party.
(i) Absence of Certain Changes and Events. Since the signing of this
Agreement, there has not been:
(i) Any transaction involving more than RMB50,000 entered into by it
other than in the ordinary course of business;
(ii) Any declaration, payment, or setting aside of any dividend or
other distribution to or for any of the holders of any equity;
(iii) Any termination, modification, or rescission of or waiver by it
of rights under any contract having or reasonably likely to have
a Material Adverse Change on its business;
(iv) Any discharge or satisfaction by it of any Encumbrance, or any
payment of any obligation or liability (absolute or contingent)
other than liabilities incurred in the ordinary course of
business;
(v) Any mortgage, pledge, imposition of any security interest, claim,
Encumbrance, or other restriction created on any of the assets,
tangible or intangible, of it having or reasonably likely to have
a Material Adverse Change on its business;
(vi) Any settlement amount of any claim, dispute, suit, proceeding or
investigation regarding it; or
(vii) Any event or condition resulting in a Material Adverse Change on
its business.
(j) Litigation and Other Proceedings. It is not nor is any of its
officers, directors, or employees a party to any pending or,
threatened action, suit, labour dispute (including any union
representation proceeding), proceeding, investigation, or
discrimination claim in or by any court or governmental board,
commission, agency, department, or officer, or any arbitrator, arising
from its actions or omissions or, in the case of an individual, from
acts in his or her capacity as its officer, director,
-27-
employee, agent or contractor, which individually or in the aggregate
would have a Material Adverse Change on its business. It is not a
named party to any order, writ, judgment, decree, or injunction.
(k) No Defaults. It is not, nor has it received written notice that it
would be with the passage of time, in default or violation of any
term, condition, or provision of (i) its PRC Charter Documents; (ii)
any judgment, decree, or order to which it is a named party; or (iii)
any loan or credit agreement, note, bond, mortgage, indenture,
contract, agreement, lease, license, or other instrument to which it
is a party or by which it or any of its properties or assets is bound,
except for defaults and violations which have been cured or,
individually or in the aggregate, would not have a Material Adverse
Change on its business.
(l) Major Contracts. Except for the agreements set out in Schedule E (the
"MATERIAL PRC CONTRACTS") it is not a party to or bound by:
(i) Any employment contract or arrangement providing for annual
salary in excess of US$12,000 with any officer or employee or
with any consultant or director providing for annual compensation
in excess of US$12,000;
(ii) Any plan or contract or arrangement, written or oral, providing
for bonuses, pensions, deferred compensation, retirement
payments, profit-sharing, severance, acceleration of vesting of
benefits, payments upon change of control events, or the like;
(iii) Any joint venture contract or arrangement or any other agreement
that has involved or is expected to involve a sharing of profits;
(iv) Any licensing or distribution agreement, volume purchase
agreement, corporate end user sales or service agreement,
reproduction or replication agreement or production agreement in
which the amount involved exceeds annually, US$50,000 or pursuant
to which any it has granted or received manufacturing rights,
most favoured nation pricing provisions, or exclusive marketing,
reproduction, publishing or distribution rights related to any
product, group of products or territory;
(v) Any lease for real or personal property in which the amount of
payments which a it is required to make on an annual basis
exceeds US$10,000;
(vi) Any agreement, franchise, or indenture where the amount of
consideration payable thereunder is greater than US$50,000 in any
year during the term of such agreement, franchise or indenture
and which has not been terminated or performed in its entirety
and not renewed which may be, by its terms, terminated, impaired,
or adversely affected by reason of the execution of this
Agreement and the Ancillary Agreements, the Release, the Closing
or the consummation of the transactions contemplated;
(vii) Any license, permit, or authorization which has not been
terminated or performed in its entirety and not renewed which may
be, by its terms, terminated, impaired, or adversely affected by
reason of the execution of this Agreement and the Ancillary
Agreements, the Release, the Closing or the consummation of the
transactions contemplated;
-28-
(viii) Except for trade indebtedness incurred in the ordinary course
of business, any instrument evidencing or related in any way to
indebtedness incurred in the acquisition of companies or other
entities or indebtedness for borrowed money by way of direct
loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, or otherwise which individually is
in the amount of US$20,000 or more; or
(ix) Any contract containing covenants purporting to limit its freedom
to compete in any line of business in any geographic area.
All Material PRC Contracts are valid and in full force and effect and
it has not nor has any other party thereto breached any material
provisions of, or entered into default in any material respect under
the terms thereof other than such beaches or defaults that have been
cured or would not, individually or in the aggregate, have a Material
Adverse Change on its business. It has made available to the Purchaser
a copy of each of the Material PRCContracts specified in Schedule E
together with all amendments, material written waivers or other
material written changes thereto.
All outstanding Material Offshore Contracts relating to Trinity
Shenzhen and Beijing Shangtuo are listed in Schedule E and none of
Trinity Shenzhen and Beijing Shangtuo have entered into any other
contracts which are outstanding as at the date of this Agreement.
(m) Assets. The assets owned, possessed or used by it comprise all the
assets required to enable it to carry on its business fully and
effectively in the ordinary course. It has legal and beneficial
ownership of all assets owned, possessed or used by it free and clear
of all Encumbrances. No other Person owns any property and assets
which are being used by it except for the property leased by it
pursuant to the Material PRC Contracts.
(n) Technology and Intellectual Property Rights.
(i) Except for the corporate names of each of the members of the
Onshore Group, it has no registered Intellectual Property in any
part of the world.
(ii) It owns or has the right to use all Intellectual Property used or
held for use in the conduct of its business without any conflict
with the rights of others. All products and technology that have
been or currently are published and/or offered by it or are under
development by it, and all products and/or technology underlying
any and all services that have been or currently are offered by
it or are under development by it is either: (1) owned by it, (2)
in the public domain, or (3) rightfully used by the it pursuant
to a valid written license or other agreement.
(iii) It is not, as a result of the execution or delivery of this
Agreement and/or the Ancillary Agreements, nor the performance of
its obligations under them of under the Internal Control
Agreements will cause it to be in violation of any license,
sublicense or other agreement relating to the Intellectual
Property or of any non-disclosure agreement to which it is a
party or otherwise bound.
-29-
(iv) It is not obligated to provide any financial consideration or
other consideration to any third party, nor is any third party
otherwise entitled to any financial consideration or other
consideration, with respect to any exercise of rights by it or
its successors in the Intellectual Property.
(v) Its use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any Owned
Intellectual Property by it or its licensees does not infringe,
misappropriate or violate any copyright, patent, trade secret,
trademark, service ▇▇▇▇, trade name, firm name, logo, trade
dress, database right, other intellectual property right, right
of privacy, right of publicity or right in personal or other data
of any person. Further, the use, reproduction, modification,
distribution, licensing, sublicensing, sale, or any other
exercise of rights in any Licensed Intellectual Property or any
other authorized exercise of rights in or to Licensed
Intellectual Property by it or its licensees does not infringe,
misappropriate or violate any copyright, patent, trade secret,
trademark, service ▇▇▇▇, trade name, firm name, logo, trade
dress, moral right, database right, other intellectual property
right, right of privacy, right of publicity or right in personal
or other data of any person. Further, the distribution,
licensing, sublicensing, sale, or other provision of products and
services by it or its resellers or licensees does not infringe,
misappropriate or violate any copyright, patent, trade secret,
trademark, service ▇▇▇▇, trade name, firm name, logo, trade
dress, moral right, database right, other intellectual property
right, right of privacy, right of publicity or right of any
person.
(vi) No action, suit or proceeding, pending or otherwise, (i)
challenging the validity, enforceability, or ownership by it of
any of Owned Intellectual Property or (ii) to the effect that the
use, reproduction, modification, manufacturing, distribution,
licensing, sublicensing, sale or any other exercise of rights in
any Owned Intellectual Property by it or its licensees infringes,
misappropriates or violates any intellectual property or other
proprietary or personal right of any person is pending or is
threatened by any person. Further, no claim to the effect that
the distribution, licensing, sublicensing, sale or other
provision of products and services by it or its resellers or
licensees infringes, misappropriates or violates any intellectual
property or other proprietary or personal right of any person is
pending or, to the knowledge of the Company and the Vendor, is
threatened by any person. There is no unauthorized use,
infringement or misappropriation of any of Owned Intellectual
Property by any third party, employee or former employee.
(vii) No other party has any security interest in any Intellectual
Property.
(viii) It has secured from all parties who have created any portion
of, or otherwise have any rights in or to, Owned Intellectual
Property, other than employees of itself whose work product was
created by them entirely within the scope of their employment by
it and constitutes work made for hire owned by it, valid written
assignments or licenses of any such work or other rights to it
that are enforceable by it and has made available true and
complete copies of such assignments or licenses to the Purchaser.
-30-
(ix) It owns all right, title and interest in and to all data it
collects from or discloses about users of its products and
services. Its practices regarding the collection and use of
consumer personal information are in accordance in all respects
with applicable laws and regulations of all jurisdictions in
which it operates.
(x) No officer, director, stockholder or employee of it, nor any
spouse, or relative thereof, owns directly or indirectly, in
whole or in part, any Intellectual Property.
(o) Employees. It has no written or oral contract of employment or other
employment agreement with any of its employees (including any
contracts relating to the temporary use or loaning of employees) that
are not terminable at will by it without payment of severance or
termination payments or benefits. It is not a party to any pending or
threatened labour dispute concerning its business or employment
practices or the subject of any organizing drive, labour grievance or
petition to certify a labour union. It has complied with all
applicable laws, treaties, ordinances, rules, and regulations and
requirements relating to the employment of labour in any material
respect. There are no claims pending or threatened to be brought
against it in any court or administrative agency by any of its former
or current employees.
(p) Certain Agreements. Neither the execution and delivery of this
Agreement and the Ancillary Agreements nor the performance of its
obligations contained in them will: (i) result in any payment by it
(including severance, unemployment compensation, parachute payment,
bonus or otherwise) becoming due to any director, employee, or
independent contractor of it under any employee benefit plan,
agreement, or otherwise, (ii) increase any benefits otherwise payable
under any employee benefit plan or agreement, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
(q) Guarantees and Suretyships. It does not have any powers of attorney
outstanding and it does not have any obligations or liabilities
(absolute or contingent) as guarantor, surety, cosigner, endorser,
co-maker, or otherwise respecting the obligations or liabilities of
any person, corporation, partnership, joint venture, association,
organization, or other entity other than as an endorser of negotiable
instruments in the ordinary course of business.
(r) Absence of Questionable Payments. It has not nor has any of its
respective Affiliates, directors, officers, agents, employees or other
persons acting on their behalf, used any corporate or other funds for
unlawful contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to government
officials or others or established or maintained any unlawful or
unrecorded funds. It has not nor has any of its respective Affiliates,
directors, officers, agents, employees or other persons acting on its
behalf, accepted or received any unlawful contributions, payments,
gifts, or expenditures.
(s) Financial Statements. There has been delivered to the Purchaser (a)
statutory tax reporting documents as of 31 October 2005, and (b) an
unaudited balance sheet as at 31 October 2005 (including the notes
thereto, the "PRC BALANCE SHEET") and the related income statements
for the ten months then ended (collectively, the "PRC FINANCIAL
STATEMENTS"). The PRC Financial Statements: (i) have been prepared
from its books and records; (ii) present fairly in all material
respects its financial
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position as of and for the periods indicated; and (iii) have been
prepared in accordance with PRC local tax statutory requirements
consistently applied. There are no liabilities in excess of US$5,000
in the aggregate, claims or obligations of any nature, whether
absolute, contingent, anticipated or otherwise, whether due or to
become due, that are not shown in the PRC Financial Statements.
(t) Accounts Receivable. All of the accounts receivable shown on the PRC
Balance Sheet have and all of its receivables as of the Escrow Release
Date will have arisen out of bona fide transactions in its ordinary
course of business and have been collected or are good and collectible
in the aggregate recorded amounts thereof (less the allowance for
doubtful accounts also appearing in such PRC Balance Sheet and net of
returns and payment discounts allowable by its policies) and can
reasonably be anticipated to be paid in full without outside
collection efforts within ninety (90) days of the due date.
(u) Taxes.
(i) It has timely filed (or caused to be filed) all tax returns ("PRC
RETURNS") required to be filed by it. All taxes required to be
paid (whether or not shown on any Return) in respect of the
periods covered by such Returns ("PRC RETURN PERIODS") have been
paid or fully accrued on the PRC Balance Sheet. It has not
requested or been granted any extension of time to file any PRC
Return. The Company and the Vendor have made available to the
Purchaser true and correct copies of all PRC Returns, and all
material correspondence with any taxing authority.
(ii) No deficiencies or adjustments for any of its tax has been
claimed, proposed or assessed or threatened in writing and not
paid. There is currently no claim outstanding by an authority in
a jurisdiction where it does not file PRC Returns that it is or
may be subject to taxation by that jurisdiction. It is not
subject to any pending or threatened tax audit or examination. It
has not entered into any agreements, waivers or other
arrangements in respect of the statute of limitations in respect
of its taxes or PRC Returns.
(iii) For the purposes of this Agreement, the terms "tax" and "taxes"
shall include all taxes, assessments, duties, tariffs,
registration fees, and other governmental charges in the nature
of taxes including, all income, franchise, property, production,
sales, use, payroll, license, windfall profits, value added,
severance, withholding, excise, gross receipts and other taxes,
as well as any interest, additions or penalties relating thereto
and any interest in respect of such additions or penalties.
(iv) There are no liens for taxes upon its assets except for taxes
that are not yet payable. It has withheld all taxes required to
be withheld in respect of wages, salaries and other payments to
all employees, officers and directors and any taxes required to
be withheld from any other person and has timely paid all such
amounts withheld to the proper taxing authority.
(v) Leases in Effect; Real Estate. All real property leases and subleases
to which it is a party and any amendments or modifications thereof are
listed in Schedule F (each a "PRC LEASE" and, collectively, the "PRC
LEASES"). It has a valid leasehold interest under such PRC Leases.
There are no existing defaults, and it has not
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received or given any written notice of default or claimed default
with respect to any PRC Lease and there is no event that with notice
or lapse of time, or both, would constitute a default thereunder. All
real property occupied by it is subject to a written lease. It holds
no interest in real property other than the PRC Leases.
(w) Material Relations. None of the parties to any of the Material
PRCContracts have terminated or in any way expressed to it an intent
to reduce or terminate the amount of business with it in the future.
(x) Insurance and Banking Facilities. Schedule H contains a complete and
correct list of the names and locations of all banks in which it has
accounts or safe deposit boxes, the designation of each such account
and safe deposit box, and the names of all persons authorized to draw
on or have access to each such account and safe deposit box. All
premiums and other payments due from it with respect to any contracts
of insurance or indemnity have been paid, and there are no act, or
failures to act that has or might cause any such contract to be
cancelled or terminated. All known claims for insurance or indemnity
have been presented.
4.3 General
(a) The Internal Control Agreements. (i) Each of the Internal Control
Agreements that has been duly executed by the parties thereto, is in
full force and effect and constitutes valid and legally binding
obligation of the parties thereto, enforceable in accordance with its
terms, except (1) as limited by applicable bankruptcy, insolvency,
reorganisation, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (2) as limited
by laws relating to the availability of specific performance,
injunctive relief, or other equitable principles and (3) the due
execution and delivery by the parties thereto under the control of the
Purchaser. (ii) The execution, delivery and performance of each of the
Internal Control Agreements by the parties thereto do not and will not
conflict with or violate any law, regulation or governmental order in
the PRC. (iii) The execution, delivery and performance of each of the
Internal Control Agreements by the parties thereto do not and will not
require any consent, approval, authorization or other order of, action
by, filing with or notification to, any governmental authority in Hong
Kong or in the PRC or in the British Virgin Islands, if any such
consent, approval, authorization, order, action, filing or
notification is required, they have been obtained or made or will be
obtained or made prior to the Release.
(b) The Release Deliverable Agreements. On or before the Release, each of
the Release Deliverable Agreements will have been duly executed by the
parties thereto except for those persons under the control of the
Purchaser being ▇▇▇▇ ▇▇▇▇ Hong and ▇▇▇▇ An and, as at the Release (in
relation to the Management Contracts) or prior to Closing (in relation
to the Internal Control Documents), will be in full force and effect
and will constitute valid and legally binding obligations of the
parties thereto, enforceable in accordance with their terms.
(c) Full Disclosure. (i) The Vendor and the Warrantor are not aware of any
facts which could materially adversely affect themselves or any member
of the Group or which are likely in the future to materially adversely
affect any of them and which have not been disclosed to the Purchaser
by or on behalf of the Company in connection with or pursuant to this
Agreement. (ii) No representation or warranty in this Agreement, nor
any statement or certificate furnished or to be furnished to the
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Purchaser pursuant to or in connection with this Agreement contains or
will contain any untrue statement of material fact, or omits or will
omit to state a material fact necessary to make the statements
contained herein or therein misleading.
(d) Reliance. The foregoing representations and warranties are made by the
Company and the Vendor with the knowledge and expectation that the
Purchaser is placing reliance thereon.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE VENDOR
The Vendor hereby represent, warrant and covenant to the Purchaser that
each of the following statements is true:
5.1 Power and Authority. He has full power and capacity to make the covenants
and representations referred to herein and to sell the legal title in and
to the Sale Shares and to execute, deliver and perform this Agreement.
5.2 Sale Shares. He is the registered owner of the Sale Shares holding them in
trust for the benefit of the Warrantor.
5.3 Encumbrances. Subject only to the trust in favour of the Warrantor, the
Sale Shares are free and clear of all Encumbrances.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE WARRANTOR
The Warrantor hereby represent, warrant and covenants to the Purchaser that
each of the following statements is true:
6.1 Power and Authority. She has full power and capacity to make the covenants
and representations referred to herein and to sell the beneficial interests
in and to the Sale Shares and to execute, deliver and perform this
Agreement.
6.2 Sale Shares. She is the sole beneficial owner of the Sale Shares. She has
duly authorized the Vendor to sell the Sale Shares contemplated herein and
has provided the Vendor with full power and authority to do so.
6.3 Encumbrances. The beneficial interests in and to the Sale Shares are free
and clear of all Encumbrances.
6.4 Acknowledgement. She has no rights, title, beneficial or other interests
whatsoever in, to or over the any equity or interest in any member of the
Group other than the Sale Shares immediately after Release and the Sale
Shares immediately after Closing.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
The Purchaser hereby represents, warrants and covenants to the Vendor that
each of the following statements is true:
7.1 Organisation and Qualification. It is a person or a legal entity duly
organised and validly existing under the laws of its jurisdiction of
incorporation.
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7.2 Authorisation. It has taken all corporate or other action required to
authorise, and has duly authorised, the execution, delivery and performance
of this Agreement and upon due execution and delivery the same will
constitute its legal, valid and binding obligations enforceable in
accordance with its terms.
7.3 Power and Authority. It has full power and authority to make the covenants
and representations referred to herein and to subscribe for the
Subscription Shares and to purchase the Sale Shares and to execute, deliver
and perform this Agreement.
8. LIMITATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Survival of Representation and Warranties. Survival of all representations
and warranties of the Parties contained in this Agreement shall survive the
Closing and remain in full force and effect for a period of 12 months
following the 2007 Payment Date, except that:
(a) the Key Warranties shall survive until the date falling 2 years from
the 2007 Payment Date save for Key Warranties contained in Clauses 4.1
(c) and (u) and Clauses 4.2(c) and (u) which shall be dealt with under
Clause 8.1(b);
(b) the Key Warranties contained in Clauses 4.1 (c) and (u) and Clauses
4.2(c) and (u) shall survive until the expiration of the statute of
limitations applicable to the relevant underlying matter; and
(c) if a claim or notice is given with respect to any representation or
warranty prior to the applicable expiration date, such representation
or warranty shall remain in full force and effect until the later of
(i) the expiry of the periods set out in this Clause 8.1 and (ii) the
expiry of the period of six months starting on the date of
notification of the claim, unless proceedings in respect of the claim
shall previously have been issued and served on the Vendor and/or the
Warrantor.
8.2 Investigation or Knowlegdge. The right to indemnification or other remedy
resulting from, based on or arising from a Party's representations,
warranties, covenants or obligations will not be affected by any
investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Release Date or Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any
such representation, warranty, covenant or obligation.
8.3 Limitations on Liability. The liability of the Vendor and the Warrantor
altogether in respect of any breach of the Warranties under Clause 4,
Clause 5, Clause 6 and the Indemnity under Clause 10 shall be limited as
follows:-
(a) no liability shall attach to the Vendor or the Warrantor unless and
until the aggregate amount of the liabilities of the Vendor and the
Warrantor altogether shall exceed the sum of US$50,000 but if the
liabilities exceed that sum the Vendor and/or the Warrantor shall be
liable for only the the excess; and
(b) no claims may be made in respect of any matters which have been fairly
disclosed, qualified or withheld in the Disclosure Letter, the
Offshore Financial Statements, the PRC Financial Statements or this
Agreement.
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9. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT RELEASE
The obligations of the Purchaser under this Agreement at the Release are
subject to the satisfaction or waiver on or before the Release Date of each
of the following:
9.1 Representations and Warranties. The Key Warranties shall be true on and as
of the Release Date with the same effect as though such representations and
warranties had been made on and as of the Release Date.
9.2 Due Diligence. The Purchaser has completed its due diligence review of the
Group and is satisfied with the results thereof;
9.3 Performance. Each member of the Group shall have performed and complied
with all agreements, obligations and conditions contained in this
Agreement, the Ancillary Agreements and the Internal Control Agreements
that are required to be performed or complied with by it on or before
Release.
9.4 No Material Adverse Change. There having not occurred any Material Adverse
Change in the Group's business, financial condition, assets or operations
since the date of signing of this Agreement,
9.5 Deliverables. All matters pertaining under Clauses 2.4 and 2.5 are
completed.
9.6 Board Approval. The Purchaser's board of directors shall have authorized
and approved the execution and delivery of the Agreement and the Ancillary
Agreements.
10. INDEMNITY
10.1 Indemnity. The Vendor and the Warrantor, jointly and severally, shall
indemnify and shall keep indemnified and save harmless the Purchaser from
and against:
(a) any and all losses, claims, damages (including interest, penalties,
fines and monetary sanctions), liabilities and costs reasonably
incurred or suffered by the Purchaser by reason of, resulting from, in
connection with, or arising in any manner whatsoever out of the breach
of any warranty, representation or covenant or the inaccuracy of any
representation made by any of them or by the Company contained or
referred to in this Agreement or in any agreement, instrument or
document delivered by or on behalf of the Company, the Vendor or the
Warrantor including, but not limited to, any diminution in the value
of the assets of and any payment made or required to be made by the
Purchaser or any Subsidiary and any costs and expenses incurred as a
result of such breach] provided that the indemnity contained in this
Clause 10 shall be without prejudice to any other rights and remedies
available to the Purchaser;
(b) the nonfulfillment or breach of any covenant, undertaking, agreement
or other obligation of the Company, the Vendor, the Warrantor or any
party to any of the Ancillary Agreements (except those by the
Purchaser or the Purchaser's Nominees) under any of this Agreement or
the Ancillary Agreements; and
(c) any claim by any shareholder or interest holder or former shareholder
or former interest holder of ▇▇▇▇▇, Beijing Shangtuo, Shangtuo
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
-▇▇-
▇▇▇▇▇▇▇ Jinlong or Yuanxin in connection with the transfer of any
interest that they may have in any of the foregoing companies whether
made against the Vendor, the Warrantor, the Purchaser or any other
party.
10.2 Costs. For the purposes of this Clause 10, "costs" includes lawyers' (on a
solicitor and his own client's basis) and accountants' fees and expenses,
court costs and all other out-of-pocket expenses.
10.3 Survival of Indemnification. The representations and warranties of the
Vendor and the Warrantor and the rights of the Purchaser to indemnification
under this Agreement with respect thereto shall survive Closing in
accordance with Clause 9.1.
10.4 Third Party Claims. A party entitled to indemnification hereunder (an
"INDEMNIFIED PARTY") shall notify promptly the indemnifying party (the
"INDEMNIFYING PARTY") in writing of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Agreement; provided, however, that the failure of any
Indemnified Party to provide such notice shall not relieve the Indemnifying
Party of its obligations under this Agreement. In case any claim, action or
proceeding is brought against an Indemnified Party and the Indemnified
Party notifies the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein and to assume
the defense thereof, to the extent that it chooses, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the
Indemnifying Party to such Indemnified Party that it so chooses, the
Indemnifying Party shall not be liable to such Indemnified Party for any
legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that (i) if the Indemnifying Party fails
to take reasonable steps necessary to defend diligently the action or
proceeding within twenty (20) calendar days after receiving notice from
such Indemnified Party that the Indemnified Party believes it has failed to
do so; or (ii) if such Indemnified Party who is a defendant in any claim or
proceeding which is also brought against the Indemnifying Party reasonably
shall have concluded that there may be one or more legal defenses available
to such Indemnified Party which are not available to the Indemnifying
Party; or (iii) if representation of both parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct,
then, in any such case, the Indemnified Party shall have the right to
assume or continue its own defense as set forth above (but with no more
than one firm of counsel for all Indemnified Parties in each jurisdiction),
and the Indemnifying Party shall be liable for any expenses therefor.
10.5 Settlement of Claims.
(i) No Indemnifying Party shall, without the written consent of the
Indemnified Party, effect the settlement or compromise of, or consent
to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification may be
sought hereunder (whether or not the Indemnified Party is an actual or
potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the
Indemnified Party from all liability arising out of such action or
claim, (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act, by or on behalf of any
Indemnified Party and (iii) does not include any injunctive or other
non-monetary relief; and
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(ii) the Indemnified Party may, in its sole discretion, offset against any
payment (including, where relevant, Subsequent Payments) any and all
losses, claims, damages (including lost profits, consequential
damages, interest, penalties, fines and monetary sanctions),
liabilities and costs incurred or suffered by the Indemnifying Party
and for which the Indemnifying Party is entitled to be indemnified in
this Agreement.
10.6 Certain Tax Matters. The Vendor and the Warrantor shall jointly and
severally indemnify the Purchaser and hold it harmless from and against any
loss, claim, liability, expense, or other damage attributable to (i) any
and all taxes (or the non-payment thereof) of any member of the Group or
Trinity or any subsidiary of Trinity for all taxable periods ending on or
before the Release Date and the portion through the end of the Release Date
for any taxable period that includes (but does not end on) the Release Date
("Pre-Release Tax Period"), (ii) all taxes of any member of an affiliated,
consolidated, combined or unitary group of which any member of the Group
(or any predecessor of any of the foregoing) is or was a member on or prior
to the Release Date, and (iii) any and all taxes of any person (other than
any member of the Group) imposed on any member of the Group as a transferee
or successor, by contract or pursuant to any law, rule, or regulation,
which taxes relate to an event or transaction occurring before the Release.
Payment in full of any amount due from the Vendor and/or Warrantor under
this Clause 10.6 shall be made to the Purchaser in immediately available
funds at least two business days before the date payment of the taxes to
which such payment relates is due, or, if no tax is payable, within fifteen
days after written demand is made for such payment. Notwithstanding the
foregoing, (i) the Purchaser seeking indemnification hereunder shall
provide the Vendor and the Warrantor with reasonably prompt written notice
of any proposed tax adjustment that may give rise to the Vendor and
Warrantor's indemnification obligation hereunder, shall cooperate with the
Vendor and Warrantor and, provided that the Vendor and/or Warrantor
acknowledge in writing their liability pursuant to this Clause 10.6 for
indemnification with respect to the tax adjustment at issue, permit the
Vendor and/or the Warrantor to participate, at their own expense, in the
audit or other proceeding. Notwithstanding the preceding sentence, in the
event that Vendor and/or Warrantor want to accept a proposed settlement of
a tax claim for which they have an indemnity obligation pursuant to this
Clause 10.6 (the "TAX SETTLEMENT OPTION") and the Purchaser determines that
it prefers to pursue the tax claim further, the Purchaser may pursue the
tax claim without the participation of Vendor or the Warrantor PROVIDED
THAT in such case the maximum amount of liability of theVendor and the
Warrantor under such tax claim shall not exceed the amount for which they
would have been liable if the Tax Settlement Option were accepted.
In the case of any taxable period that includes (but does not end on) the
Release Date (a "STRADDLE PERIOD"), the amount of any taxes based on or
measured by income or receipts of the Group or any member thereof for the
Pre-Release Tax Period shall be determined based on an interim closing of
the books as of the close of business on the Release Date (and for such
purposes the taxable period of any partnership or other pass-through entity
in which any member of the Group holds a beneficial interest shall be
deemed to terminate at such time), and the amount of other taxes of the
Group for a Straddle Period which relate to the Pre-Release Tax Period
shall be deemed to be the amount of such tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in
the taxable period ending on the Release Date and the denominator of which
is the number of days in such Straddle Period.
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10.7 Limitation. For the avoidance of doubt, the liability of the Vendor and the
Warrantor in respect of the Indemnity Claim by the Purchaser under this
Clause 10 shall be limited or qualified to the extent as set out in Clause
8.
10.8 Indemnification by Purchaser. Subject to the limitations set forth in
Clause 8.1, the Purchaser shall indemnify and defend the Vendor against and
hold the Vendor harmless from any and all losses that the Vendor may incur
due to:
(a) any inaccuracy or breach of any of the representations and warranties
of the Purchaser contained in Clause 7; or
(b) the nonfulfillment or breach of any covenant, undertaking, agreement
or other obligation of the Purchaser contained in this Agreement or
any Ancillary Agreement.
11. NON-COMPETE COVENANT
11.1 Non Competition. Each of the Vendor and the Warrantor undertakes and
covenants to the Purchaser that from the date of the Release and for a
period of four years after the Closing (the "Non-Compete Period"), neither
it nor any of its Affiliates will and it shall procure that no Person who
is set out under Schedule L will:
(a) either on its own account or through any of its Affiliates, or in
conjunction with or on behalf of any other Person, will on or be
engaged, concerned or interested directly or indirectly whether as
shareholder, director, employee, partner, agent or otherwise carry on
any business in direct competition with the businesses (of the same
business of the Group as at the date of this Agreement) of any member
of the Group in Hong Kong or the PRC; and
(b) either on its own account or through any of its Affiliates or in
conjunction with or on behalf of any other Person, employ, solicit or
entice away or attempt to employ, solicit or entice away from any
member of the Group any person for the purpose of carrying on any
business in direct competition with the business (of the same business
of the Group as at the date of this Agreement) of any member of the
Group in Hong Kong or the PRC who is or shall have been at the date of
or within twelve (12) months prior to such cessation a director,
officer, legal representative, manager or employee of any such member
of the Group whether or not such person would commit a breach of
contract by reason of leaving such employment.
11.2 Nonsolicitation of Clients. During the Non-Compete Period, neither of the
Vendor nor the Warrantor shall other than in connection with his or her
employment with and for the benefit of the Group, directly or indirectly,
either individually or as a principal, partner, member, manager, agent,
employee, employer, consultant, independent contractor, stockholder, joint
venturer or investor, or as a director or officer of any corporation,
limited liability company, partnership or other entity, or in any other
manner or capacity whatsoever,
(a) solicit or divert or attempt to solicit or divert from the Group any
business with any Client;
(b) solicit or divert or attempt to solicit or divert from the Group any
business with any person or entity who was being solicited as a Client
by the Group;
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(c) induce or cause, or attempt to induce or cause, any salesperson,
supplier, vendor, representative, independent contractor, broker,
agent or other person transacting business with any member of the
Group to terminate or modify such relationship or association or to
represent, distribute or sell services or products in competition with
services or products of the Group; or
(d) otherwise provide any services or products to any Client that are or
have been provided by any member of the Group.
For purposes of this Agreement, a "Client" shall mean an individual or
entity to whom any member of the Group has provided analysis, services or
products in Hong Kong or the PRC in respect of the businesses of the Group
as at the date of this Agreement within two years prior to the commencement
of and during the Non-Compete Period.
11.3 Separate Obligations. Each and every obligation under Clauses 11.1 and 11.2
shall be treated as a separate obligation and shall be severally
enforceable as such and in the event of any obligation or obligations being
or becoming unenforceable in whole or in part such part or parts as are
unenforceable shall be deleted from Clauses 11.1 or 11.2 and any such
deletion shall not affect the enforceability of all such parts of Clauses
11.1 and 11.2 as remain not so deleted.
11.4 Reasonableness. While the restrictions contained in Clauses 11.1 and 11.2
are considered by the parties to be reasonable in all the circumstances, it
is recognised that restrictions of the nature in question may fail for
technical reasons unforeseen and accordingly it is hereby agreed and
declared that if any of such restrictions shall be adjudged to be void as
going beyond what is reasonable in all the circumstances for the protection
of the interests of the Group or the Purchaser but would be valid if part
of the wording thereof were deleted or the periods thereof reduced or the
range of activities or area dealt with thereby reduced in scope the said
restriction shall apply with such modifications as may be necessary to make
it valid and effective.
11.5 Equitable Relief. The Parties agree that Purchaser's rights under this
Clause 11 are special and unique, and that any violation thereof by either
the Vendor or the Warrantor would not be adequately compensated by money
damages, and the Vendor and the Warrantor hereby grants to the Purchaser
the right to specifically enforce (including injunctive relief or analogous
procedings) the terms of this Clause 11. In any proceeding, in equity or
law, each of the Vendor and the Warrantor specifically waives any defense
that there is an adequate remedy at law for any violations of the terms of
this Clause 11.
11.6 Default. If there occurs a Payment Default the undertakings set out in this
Clause 11 shall cease to be applicable to and binding against the Vendor
and the Warrantor and each party to the deeds of non-competition
undertaking and release set out in Schedule M. For purposes of this
Agreement, a "Payment Default" means a failure by the Purchaser to pay any
part of the Purchase Price within thirty (30) days of the Final
Determination of any dispute concerning the payment or non-payment of any
part of the Purchase Price. If the Purchaser and the Vendor and Warrantor
do not reach an agreement with respect to the payment of any part of the
Purchase Price, or the determination of any of the 2005 Amount, the 2006
Amount or the 2007 Amount, then the matter shall be referred to an arbitral
tribunal for final determination pursuant to Clause 13.4; provided, that
upon resolution of such matter by the arbitral tribunal, the Party that was
unsuccessful in the arbitration with respect to such matter shall be solely
responsible for all reasonable fees, costs and expenses
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relating to the arbitration. Any amount of the Purchase Price required to
be paid as determined pursuant to such final arbitral determination (the
"Final Determination"), shall for all purposes be considered final,
accepted and approved by the Purchaser and the Vendor and the Warrantor.
12. TERMINATION
12.1 Termination. This Agreement may be terminated at any time prior to Release:
(a) by the Purchaser if, between the date hereof and the Release: (i)
there is a Material Adverse Change, (ii) any Key Warranties contained
in this Agreement shall not have been true and correct when made or at
the Release or any time in between, (iii) the Vendor or the Warrantor
shall not have complied in all material respects with the covenants or
agreements contained in this Agreement to be complied with by it, or
(iv) any company or any Person who is a party to any of the Ancillary
Agreements or Management Contracts makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or
against such company or Person seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its
debts under any law related to bankruptcy, insolvency or
reorganization;
(b) by the Vendor but such termination shall be effective if, between the
date hereof and the Release: (i) any representations and warranties of
the Purchaser contained in this Agreement shall not have been true and
correct when made, (ii) the Purchaser shall not have complied in all
material respects with the covenants or agreements contained in this
Agreement to be complied with by it or (iii) the Purchaser makes a
general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against the Purchaser in question seeking to
adjudicate the Purchaser in question bankrupt or insolvent, or seeking
liquidation, winding up or reorganization, arrangement, adjustment,
protection, relief or composition of its debts under any law related
to bankruptcy, insolvency or reorganization;
(c) the Purchaser or the Vendor if the Release shall not have occurred by
December 31, 2005; provided, however, that the right to terminate this
Agreement under this Clause 12.1(c) shall not be available to any
Party whose failure to fulfil any obligation under this Agreement
shall have been the cause of, or shall have resulted in, the failure
of the Release to occur on or prior to such date; or
(d) by the mutual written consent of the Purchaser and the Vendor.
12.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in Clause
12.1 other than as provided in Clause 12.1(b), this Agreement shall
forthwith become void provided that nothing herein shall relieve any
party hereto from liability for any breach of this Agreement. In the
event of termination of this Agreement as provided in Clause 12.1(b),
this Agreement shall forthwith become void and there shall be no
liability on the part of the Company provided that neither the Company
nor the Purchaser shall be relieved from liability for any breach of
this Agreement.
-41-
(b) In the event of termination of this Agreement, the Escrow Agent shall
forthwith repay the Escrowed Payment with any interest accrued thereon
to the Purchaser or as the Purchaser may direct.
For the avoidance of doubt, it is the intention of the Parties that no
Party shall be entitled to terminate this Agreement after Release, unless
with the consent of all the Parties.
13. MISCELLANEOUS
13.1 Survival of Warranties. The representations, warranties and covenants
contained in or made pursuant to this Agreement shall survive the execution
and delivery of this Agreement and the Release and shall in no way be
affected by any investigation of the subject matter thereof made by or on
behalf of the Purchaser.
13.2 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including
transferees of any Company Shares sold hereunder transferred in accordance
with the terms of the Shareholders Agreement). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
13.3 Governing Law and Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of Hong Kong. The parties hereto
irrevocably agree to submit to the non-exclusive jurisdiction of the courts
of Hong Kong in all matters arising in connection with this Agreement.
13.4 Arbitration. Any dispute, controversy or claim arising out of or relating
to this Agreement, or the breach, termination or invalidity thereof, shall
be settled by binding arbitration in accordance with the UNCITRAL
Arbitration Rules as present in force in the manner set forth in this
Clause 13.4.
(a) The procedures of this Clause 13.4 may be initiated by a written
notice (a "DISPUTE NOTICE") given by one party (a "CLAIMANT") to the
other, but not before thirty (30) days have passed during which the
parties have been unable to reach a resolution. The Dispute Notice
shall be accompanied by (i) a statement of the Claimant describing the
dispute in reasonable detail and (ii) documentation, if any,
supporting the Claimant's position on the dispute. Within twenty (20)
days after the other party's (the "RESPONDENT") receipt of the Dispute
Notice and accompanying materials, the dispute shall be resolved by
binding arbitration in Hong Kong under the UNCITRAL Arbitration Rules.
All arbitration procedures pursuant to this paragraph (a) shall be
confidential and treated as compromise and settlement negotiations and
shall not be admissible in any arbitration or other proceeding.
(b) The Parties shall agree on a single arbitrator to resolve the dispute.
If the Parties fail to agree on the designation of an arbitrator
within a twenty (20)-day period the Hong Kong International
Arbitration Centre shall be requested to designate the single
arbitrator. If the arbitrator becomes disabled, resigns or is
otherwise unable to discharge the arbitrator's duties, the
arbitrator's successor shall be appointed in the same manner as the
arbitrator was appointed.
-42-
(c) Any award arising out of arbitration (i) shall be binding and
conclusive upon the Parties; (ii) shall be limited to a holding for or
against a party, and affording such monetary remedy as is deemed
equitable, just and within the scope of this Agreement; (iii) may not
include special, indirect, incidental, consequential, special,
punitive or exemplary damages or diminution in value; (iv) may in
appropriate circumstances include injunctive relief; and (v) may be
entered in a court.
(d) Arbitration shall not be deemed a waiver of any right of termination
under this Agreement, and the arbitrator is not empowered to act or
make any award other than based solely on the rights and obligations
of the Parties prior to termination in accordance with this Agreement.
(e) The arbitrator may not limit, expand or otherwise modify the terms of
this Agreement.
(f) Each party shall bear its own expenses incurred in any arbitration or
litigation, but any expenses related to the compensation and the costs
of the arbitrator shall be borne equally by the Parties to the
dispute.
(g) If any action or proceeding is commenced to construe or enforce this
Agreement or the rights and duties of the Parties hereunder, then the
Party prevailing in that action, and any appeal thereof, shall be
entitled to recover its attorney's fees and costs in that action or
proceeding, as well as all costs and fees of any appeal or action to
enforce any judgment entered in connection therewith.
13.5 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.6 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
13.7 Notices. Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or upon postal
service delivery, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such
party on the signature page hereof or by facsimile at the facsimile number
set out on the signature page hereof, or at such other address or facsimile
number as such party may designate by two (2) days' advance written notice
to the other parties.
13.8 Expenses. Each of the parties hereto shall be responsible for its own costs
and expenses incurred in the preparation, negotiation and execution of this
Agreement. Each member of the Group shall pay and shall be responsible for
all transfer, documentary, sales, use, stamp, registration and other such
taxes and fees (including penalties and interest but not including any
income taxes) incurred by each such company in connection with this
Agreement and the Ancillary Agreements.
13.9 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if
such provision was so excluded and shall be enforceable in accordance with
its terms.
-43-
13.10 Entire Agreement. This Agreement, the Ancillary Agreements and the
Management Contracts supersedes all other agreements including the Interim
Agreement and constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
- EXECUTION PAGE FOLLOWS -
-44-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE COMPANY
For and on behalf of ▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL LIMITED
Per:
/s/ ▇▇ ▇▇▇▇ Chien
-------------------------------------
Authorized Signatory
Address of the Company:
▇.▇.▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone:
--------------------------
Facsimile:
--------------------------
-45-
THE PURCHASER
For and on behalf of XINHUA FINANCE LIMITED
Per:
/s/ ▇▇▇▇▇ ▇▇▇▇
-------------------------------------
Authorized Signatory
Address of the Purchaser:
▇▇▇▇ ▇▇▇▇-▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇.: General Counsel
Telephone: (▇▇▇) ▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇▇ ▇▇▇▇
-46-
THE VENDOR
/s/ ▇▇ ▇▇▇▇ Chien
-------------------------------------
Name: ▇▇ ▇▇▇▇ CHIEN
Address of the Vendor:
102, ▇▇. ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, PRC
Telephone:
--------------------------
Facsimile:
--------------------------
-47-
THE WARRANTOR
/s/ ▇▇ ▇▇▇▇
-------------------------------------
Name: ▇▇ ▇▇▇▇
Address of the Warrantor:
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇. ▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ One
Fangcheng Garden, Fengtai District
Beijing, the People's Republic of China
Telephone:
--------------------------
Facsimile:
--------------------------
-48-
SCHEDULE A
CORPORATE DETAILS OF THE COMPANY
▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL LIMITED
Date and place of Incorporation British Virgin Islands
Registered Address ▇.▇.▇▇▇ 957, Offshore Incorporations Centre,
Road Town, Tortola, British Virgin Islands
Authorized share capital US$50,000 divided into 50,000 shares of
US$1.00 each
Issued share capital 1,000 shares of US$1.00 each
Shareholder Shareholder Name No. of Ordinary Shares
---------------- ----------------------
▇▇ ▇▇▇▇ Chien 1,000
-----
TOTAL: 1,000
=====
Director ▇▇ ▇▇▇▇ Chien
-49-
SCHEDULE B
SCHEDULE OF THE GROUP
At Release, the Group shall be comprised of the following, all free and clear of
all Encumbrances.
Company owns the following companies:
(1) all the shares in Upper Will which, in turn, holds the entire issued share
capital in Active and which, in turn, holds 100% interests in Huoli;
(2) indirect control (through Purchser's Nominees) 100% interest in ▇▇▇▇▇
which, in turn, holds the following:
(i) 80% interest in Beijing Longmei;
(ii) 80% interest in Beijing Jinlong;
(iii) 80% interest in Yuanxin;
(iv) 80% interest in Shangtuo Zhiyang.
-50-
SCHEDULE C
LIST OF INTERNAL CONTROL AGREEMENTS
A. FOR ▇▇▇▇▇
1. FOR ▇▇ ▇▇▇▇
a) Equity pledge agreement among ▇▇ ▇▇▇▇, Huoli and ▇▇▇▇▇;
b) Exclusive conditional equity purchase agreement between ▇▇ ▇▇▇▇ and
Huoli;
c) Subrogation agreement among ▇▇ ▇▇▇▇, Huoli and ▇▇▇▇▇; and
2. FOR MO HAI HONG
a) Equity pledge agreement among Mo Hai Hong, Huoli and ▇▇▇▇▇;
b) Exclusive conditional equity purchase agreement between Mo Hai Hong
and Huoli;
c) Subrogation agreement among Mo Hai Hong, Huoli and ▇▇▇▇▇
▇. FOR SHENZHEN ACTIVE TRINITY
1. FOR ▇▇▇▇ ▇▇▇▇ HONG
a) Secured promissory note to be issued by ▇▇▇▇ ▇▇▇▇ Hong in favour of
Huoli;
b) Equity pledge agreement among ▇▇▇▇ ▇▇▇▇ Hong, Huoli and Shenzhen
Active Trinity;
c) Exclusive conditional equity purchase agreement between ▇▇▇▇ ▇▇▇▇ Hong
and Huoli;
d) Subrogation agreement among ▇▇▇▇ ▇▇▇▇ Hong, Huoli and Shenzhen Active
Trinity;
e) Declaration by spouse of ▇▇▇▇ ▇▇▇▇ Hong;
f) Directors' resolution of Shenzhen Active Trinity approving the
internal arrangements;
g) Waiver of right of first refusal of equity interest in Shenzhen Active
Trinity;
h) Letter of resignation signed in blank by directors of Shenzhen Active
Trinity;
i) Shareholders' resolution of Shenzhen Active Trinity signed in blank
approving resignation of directors of Shenzhen Active Trinity;
j) Letter of resignation signed in blank by legal representative of
Shenzhen Active Trinity; and
k) Shareholders' resolution of Shenzhen Active Trinity signed in blank
approving resignation of legal representative of Shenzhen Active
Trinity; and
2. FOR ▇▇▇▇ AN
a) Secured promissory note to be issued by ▇▇▇▇ ▇▇▇▇ Hong in favour of
Huoli;
b) Equity pledge agreement among ▇▇▇▇ ▇▇▇▇ Hong, Huoli and Shenzhen
Active Trinity;
c) Exclusive conditional equity purchase agreement between ▇▇▇▇ ▇▇▇▇ Hong
and Huoli;
d) Subrogation agreement among ▇▇▇▇ ▇▇▇▇ Hong, Huoli and Shenzhen Active
Trinity;
e) Declaration by spouse of ▇▇▇▇ ▇▇▇▇ Hong;
f) Directors' resolution of Shenzhen Active Trinity approving the
internal arrangements;
g) Waiver of right of first refusal of equity interest in Shenzhen Active
Trinity;
h) Letter of resignation signed in blank by directors of Shenzhen Active
Trinity;
i) Shareholders' resolution of Shenzhen Active Trinity signed in blank
approving resignation of directors of Shenzhen Active Trinity;
j) Letter of resignation signed in blank by legal representative of
Shenzhen Active Trinity; and
k) Shareholders' resolution of Shenzhen Active Trinity signed in blank
approving resignation of legal representative of Shenzhen Active
Trinity.
-51-
SCHEDULE D
CORPORATE DETAILS OF THE GROUP IMMEDIATELY FOLLOWING THE
RELEASE AND AT CLOSING
THE COMPANY
Date and place of Incorporation British Virgin Islands
Registered Address ▇.▇.▇▇▇ 957, Offshore Incorporations Centre,
Road Town, Tortola, British Virgin Islands
Authorized share capital US$50,000 divided into 50,000 shares of
US$1.00 each
Issued share capital 1,000 shares of US$1,000 each
Shareholder Shareholder Name No. of Ordinary Shares
---------------- ----------------------
Xinhua Finance Limited 1,000
-----
TOTAL: 1,000
=====
Director ▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇*
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇*
Chi Sum ▇▇▇▇▇▇ ▇▇▇▇▇*
* To be nominated on 2 January 2006
UPPER WILL
Date and place of Incorporation 10 November 2005, British Virgin Islands
Registered Address ▇.▇.▇▇▇ 957, Offshore Incorporations Centre,
Road Town, Tortola, British Virgin Islands
Authorized share capital US$50,000 divided into 50,000 shares of
US$1.00 each
Issued share capital US$2.00 divided into 2 shares of US$1.00 each
Shareholder Shareholder Name No. of Ordinary Shares
---------------- ----------------------
▇▇▇▇ ▇▇▇▇▇ International Limited 2
-52-
TOTAL: 2
Directors Lit ▇▇▇▇ ▇▇▇▇▇
Li ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇*
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇*
Chi Sum ▇▇▇▇▇▇ ▇▇▇▇▇*
* To be nominated on 2 January 2006
ACTIVE
Date of Incorporation 17 February 1997
Place of Incorporation Hong Kong
Certificate of Incorporation No. 595557
Business Registration No. 20667773-000-02-05-7
Authorized Capital HK$10,000.00 divided into 10,000 ordinary shares of
HK$1.00 each
Address of Registered Office 21/F., On Hong ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇.
Location of Statutory Records 21/F., On Hong ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇.
Location of Common Seal 21/F., On Hong ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇.
Shareholding Structure Registered No of shares
Shareholder Beneficial Owner held
----------- ---------------- ------------
Upper Will 2
Names of Directors Lit ▇▇▇▇ ▇▇▇▇▇
Li ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇*
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇*
Chi Sum ▇▇▇▇▇▇ ▇▇▇▇▇*
* To be nominated on 2 January 2006
Name of Company Secretary Lit ▇▇▇▇ ▇▇▇▇▇
Name of Auditors ▇▇▇▇▇ ▇▇▇▇▇ & Company, Certified Public Accountants
Subsidiaries and Shareholdings Holding 100% of the total equity interest in Huoli
-53-
CORPORATE DETAILS OF THE PRC COMPANIES
HUOLI
Registered capital US$300,000
Shareholder and its shareholding Active 100%
Scope of operation Design, production, agency, distribution of
advertisements. Illegal operations are
prohibited. Licenses are obtained where
necessary.
Subsidiaries and Shareholdings NIL
Directors ▇▇▇▇ ▇▇▇▇ Hong
An Li Zhang
Zhang ▇▇▇ ▇▇▇
Lit ▇▇▇▇ ▇▇▇▇▇
Li ▇▇▇▇
▇▇▇▇▇
Registered capital ▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ and its shareholding ▇▇▇▇ ▇▇▇▇ Hong holds 50% equity ▇▇▇▇ An holds
50% equity
Scope of operation Design, production, agency, distribution of
advertisements, adversting consulting etc.
Subsidiaries and Shareholdings Holder of 80% of the total equity interest in
each of Shangtuo Zhiyang, Beijing Longmei,
Beijing Jinlong and Yuanxin
Directors ▇▇▇▇ ▇▇▇▇ Hong
An Li Zhang
Zhang ▇▇▇ ▇▇▇
Lit ▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇
BEIJING JINLONG
Registered capital RMB 500 thousand
Shareholder and its shareholding ▇▇▇▇▇ holds 80% equity
▇▇▇▇ ▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ holds 10%
respectively
Scope of operation Design, production, agency, distribution of
advertisements, adversting consulting etc.
Subsidiaries and Shareholdings NIL
Director ▇▇▇ ▇▇▇▇▇▇▇
-54-
BEIJING LONGMEI
Registered capital RMB 500 thousand
Shareholder and its shareholding ▇▇▇▇▇ holds 80% equity
▇▇▇▇ ▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ holds 10%
respectively
Scope of operation Design, production and distribution of
advertisements
Subsidiaries and Shareholdings NIL
Director ▇▇▇ ▇▇▇▇▇▇▇
YUANXIN
Registered capital RMB 2 million
Shareholder and its shareholding ▇▇▇▇▇ holds 80% equity
Mo Haihong holds 20% equity
Scope of operation Subcontracts of advertising design,
production, agency, distribution of
advertisements, information consulting etc.
Licenses are obtained where necessary.
Subsidiaries and Shareholdings NIL
Director ▇▇▇ ▇▇▇▇▇▇▇
SHANGTUO ZHIYANG
Registered capital RMB 1 million
Shareholder and its shareholding ▇▇▇▇▇ holds 80% equity
▇▇▇▇ ▇▇▇▇▇▇ holds 20% equity
Subsidiaries and Shareholdings NIL
Directors Zhang ▇▇▇ ▇▇▇
An Li Zhang
▇▇▇▇ ▇▇▇▇▇▇
SHENZHEN ACTIVE TRINITY
Registered capital [To be Finalized]
Shareholder and its shareholding Zhang ▇▇▇ ▇▇▇ holds 50% equity
▇▇▇▇ An holds 50% equity
Scope of operation [To be Finalized]
Subsidiaries and Shareholdings NIL
-55-
SCHEDULE E
MATERIAL CONTRACTS
[List of onshore and offshore material contracts, which include agreements such
as volume discount agreements, distribution agreements, service provision
agreements and exclusive agency agreements.]
-56-
SCHEDULE F
LEASES
[List of leases under each subsidiary.]
-57-
SCHEDULE G
[Form of management contracts between Active Advertising Agency Co., Ltd. And
its executives.]
-58-
SCHEDULE H
LIST OF BANK ACCOUNTS AND DETAILS
[List of bank accounts under the PRC companies.]
-59-
SCHEDULE I
LIST OF KEY MANAGEMENT TEAM
[Names of key officers of the PRC companies.]
-60-
SCHEDULE J
COMPANY'S DELIVERABLES
THE COMPANY (TO BE DELIVERED TO ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ AT 35TH FLOOR, TWO
INTERNATIONAL FINANCE CENTRE, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇)
1. Certificate of Incorporation of the Company (2.4(a) + 2.5(j));
2. Memorandum and Articles of Association of the Company (2.4(a) +
2.5(j));
3. Certified copy of the articles of association of the Company
(2.5(a)(ii));
4. Statutory records of the Company which comprise (2.4(a) + 2.5(j)):
a) Register of directors;
b) Register of members;
c) Register of transfers;
d) Register of secretary;
e) Register of charges;
f) Minutes of all directors' meeting and directors' resolution;
g) Minutes of all shareholders' meeting and shareholders'
resolution;
5. Share certificate book of the Company (2.4(a) + 2.5(j));
6. Company chop and company seal (2.4(a) + 2.5(j));
7. Documents relating to the transfer of the Sale Shares:
a) Undated instrument of transfer executed by Lu for the transfer of
the Sale Shares by the Vendor in favour of the Purchaser
(2.5(a));
b) Certified copy of the directors' resolution approving the
transfer of the Sale Shares (2.5(a)(iii));
8. Documents relating to the resignation and appointment of directors and
chairman:
a) Directors' meeting approving the appointment of ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇ ▇▇▇▇ as additional directors and
▇▇▇▇▇ ▇▇▇▇ as chairman nominated by the Purchaser (2.11 &
2.5(j));
b) Consent to act as director for each of:
i. ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇. ▇▇▇▇▇ ▇▇▇▇
iii. ▇▇▇▇▇▇ ▇▇▇▇▇
iv. ▇▇ ▇▇▇▇
9. Authorization given by the Company to the Company's agent in the
British Virgin Islands responsible for keeping the originals of its
corporate records to receive and accept instructions from the
Purchaser and its agents and acknowledged by such British Virgin
Islands agent, all in form and substance satisfactory to the Purchaser
(2.4(b));
-61-
10. Certificate issued by an officer of the Company confirming that the
Company is not aware of any matter or thing which is in breach of or
inconsistent with any of the representations, warranties and
undertakings contained in the Share Purchase Agreement (2.4(c));
11. Written confirmation by the Vendor that the Vendor is not aware of any
matter or thing which is in breach of or inconsistent with any of the
representations, warranties and undertakings contained in the
Agreement (2.5(f)).
-62-
SCHEDULE K
REORGANIZATION DELIVERABLES
THE ORIGINALS OF EACH OF THE FOLLOWING UNLESS OTHERWISE INDICATED:
A. BEIJING ▇▇▇▇▇ ADVERTISING CO., LTD. (TO BE DELIVERED AT OFFICE OF LLINKS,
BEIJING)
1. Original and duplicate of Business License
2. Original and duplicate of PRC Institution Code
3. Company's Chop
4. Financial Chop
5. Contract Chop (If any, and written confirmation in case there is no
such chop)
6. Original and duplicate of tax registration certificate for state and
local tax
7. Management contracts
8. Non-competition agreement
9. Deliverables regarding the equity transfer from ▇▇, ▇▇▇▇ and Mo,
Haihong to the nominees of XFL Such documents shall include all
documents submitted to the SAIC, including but not limited to the
following)
(1) Minute of shareholders meeting on the equity transfer and amended
AOA reflecting, new shareholders and new legal representative
(2) Declaration of the other shareholders on the waiver of preemptive
rights
(3) Equity Transfer Agreement
(4) Signed internal control documents (As listed under paragraph 11)
(5) Application of change
(6) New capital verification certification (with company chop)
(7) New shareholders' register (with company chop)
9. AIC's reply indicating acceptance of application for equity transfer
10. ▇▇ ▇▇▇▇ and Mo Hai Hong executed a written agreement undertaking to
sign a written confirmation on receipt of purchase money after release
by Xinhua.
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B. BEIJING LONGMEI TELEVISION AND BROADCAST ADVERTISING CO., LTD. (TO BE
DELIVERED AT OFFICE OF LLINKS, BEIJING)
11. Original and duplicate of Business License
12. Original and duplicate of PRC Institution Code
13. Company's Chop
14. Financial Chop
15. Contract chop (If any, and written confirmation in case there is no
such chop)
16. Original and duplicate of tax registration certificate (state and
local tax)
17. New articles of association
18. Management contracts
19. Deliverables regarding the equity transfer of Beijing ▇▇▇▇▇ acquiring
80% equity interests, including but not limited to:
(1) Application for change
(2) Minute of shareholders meeting approving the equity transfer and
amendment to AOA
(3) Letter of resignation signed in blank by the two existing
directors;
(4) Declaration of the other shareholders on the waiver of preemptive
rights
(5) Equity Transfer Agreement
(6) The revised Article of Association after the equity transfer
(7) The Investment Certificates issued by the Company to the
shareholders after the equity transfer
(8) The list of shareholders after the equity transfer
(9) Confirmation that transferee has received all equity transfer
consideration
C BEIJING JINLONG RUNXIN ADVERTISING CO., LTD. (TO BE DELIVERED AT OFFICE OF
LLINKS, BEIJING)
1. Original and duplicate of Business License
2. Original and duplicate of PRC Institution Code
3. Company's Chop
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4. Financial chop
5. If any, and written confirmation in case there is no such chop
6. Tax registration (state and local)
7. New articles of association
8. Management contract
9. Non-compete agreement
10. Deliverables regarding the equity transfer of Beijing ▇▇▇▇▇ acquiring
80% equity interests
(1) Certified copy of Application of change
(2) Minute of shareholders meeting on the equity transfer
(3) Letter of resignation by existing director;
(4) Declaration of the other shareholders on the waiver of preemptive
rights
(5) Equity Transfer Agreement
(6) The revised Article of Association after the equity transfer
(7) The Investment Certificates issued by the Company to the
shareholders after the equity transfer
(8) The list of shareholders after the equity transfer
(9) Confirmation from the transferee of receipt of all consideration
for equity transfer
(10) ▇▇▇▇▇ already holds 80% equity of the Company and other commerce
and industry registration certifying the completion of
restructuring
D SHANGHAI YUANXIN ADVERTISING CO., LTD. (TO BE DELIVERED AT OFFICE OF
LLINKS, SHANGHAI)
1. Original and duplicate of Business License
2. Original and duplicate of PRC Institution Code
3. Company's Chop
4. Financial chop
5. Contract chop (If any, and written confirmation in case there is no
such chop)
6. Tax registration (original and copy, including state and local)
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7. New articles of association
8. Management contract
9. Non-compete agreement
10. Deliverables regarding the equity transfer of Beijing ▇▇▇▇▇ acquiring
80% equity interests
(1) Minute of shareholders meeting on the equity transfer
(2) Declaration of the other shareholders on the waiver of preemptive
rights
(3) Equity Transfer Agreement
(4) The revised Article of Association after the equity transfer
(5) The Investment Certificates issued by the Company to the
shareholders after the equity transfer
(6) The list of shareholders after the equity transfer
(7) Transferor has already received a written confirmation on receipt
of all purchase price.
11. Shareholders resolution and all other necessary documents to amend the
AoA such that shareholders' approval will be passed by a simple
majority.
E SHANGTUO ZHIYANG INTERNATIONAL ADVERTISING CO., LTD. (TO BE DELIVERED AT
OFFICE OF LLINKS, BEIJING)
1. Original and duplicate of Business License
2. Original and duplicate of PRC Institution Code (If any, written
confirmation is required if such certificate not obtained)
3. Company's Chop
4. Financial Chop
5. Article of Association
6. Contract chop (If any, and written confirmation in case there is no
such chop)
7. The Company signs a written deed undertaking to transfer the financial
privilege to Xinhua's designated personnel upon receipt of such
privilege.
8. Tax registration (orginal and copy, including state and local) (If
any, written confirmation is required if such certificate not
obtained)
9. Capital inspection and related bank statements upon the Company's
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incorporation
Capital Verification Report on the set up of the company or other
similar documents
10. The lease contract on the registered office
11. The list of shareholders of the company
12. The Investment Certificates issued by the Company to the shareholders
13. The Employment Agreement between the company and the new employees
14. Management Contract
15. Non-compete agreement
F ACTIVE ADVERTISING CO., LTD. (GUANGZHOU)(TO BE DELIVERED AT OFFICE OF
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ AT 35TH FLOOR, TWO INTERNATIONAL FINANCE CENTRE, ▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇)
1. Original and duplicate of Business License
2. Original and duplicate of PRC Institution Code
3. Company's Chop
4. Certificate of approval for foreign invested enterprise
5. Approval for the establishment of the company
6. Capital verification report
7. New articles of association
8. Foreign exchange registration certificate
9. Original and duplicate tax registration certificate (state and local
tax)
10. Financial registration certificate
11. Social insurance registration certificate
12. Account opening permit
13. Financial chop
14. Contract chop (If any, and written confirmation in case there is no
such chop)
15. Management contract
(References to clauses herein are references to clauses of the Agreement.)
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G THE COMPANY (TO BE DELIVERED TO ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ AT 35TH FLOOR, TWO
INTERNATIONAL FINANCE CENTRE, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇)
1. Certificate of Incorporation of the Company (2.4(a) + 2.5(j));
2. Memorandum and Articles of Association of the Company (2.4(a) +
2.5(j));
3. Certified copy of the articles of association of the Company
(2.5(a)(ii));
4. Statutory records of the Company which comprise (2.4(a) + 2.5(j)):
a) Register of directors;
b) Register of members;
c) Register of transfers;
d) Register of secretary;
e) Register of charges;
f) Minutes of all directors' meeting and directors' resolution;
g) Minutes of all shareholders' meeting and shareholders'
resolution;
5) Share certificate book of the Company (2.4(a) + 2.5(j));
6) Company chop and company seal (2.4(a) + 2.5(j));
7) Documents relating to the transfer of the Sale Shares:
a) Undated instrument of transfer executed by Lu for the transfer of
the Sale Shares by the Vendor in favour of the Purchaser
(2.5(a));
b) Certified copy of the directors' resolution approving the
transfer of the Sale Shares (2.5(a)(iii));
8. Documents relating to the resignation and appointment of directors and
chairman:
1. Directors' meeting approving the appointment of ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇ ▇▇▇▇ as additional directors and
such person as chairman nominated by the Purchaser (2.11 &
2.5(j));
2. Consent to act as director for each of:
i. ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇. ▇▇▇▇▇ ▇▇▇▇
iii. ▇▇▇▇▇▇ ▇▇▇▇▇
iv. ▇▇ ▇▇▇▇
9. Authorization given by the Company to the Company's agent in the
British Virgin Islands responsible for keeping the originals of its
corporate records to receive and accept instructions from the
Purchaser and its agents and acknowledged by such British Virgin
Islands agent, all in form and substance satisfactory to the Purchaser
(2.4(b));
10. Certificate issued by an officer of the Company confirming that the
Company is not aware of any matter or thing which is in breach of or
inconsistent with any of the
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representations, warranties and undertakings contained in the Share
Purchase Agreement (2.4(c));
11. Written confirmation by the Vendor that the Vendor is not aware of any
matter or thing which is in breach of or inconsistent with any of the
representations, warranties and undertakings contained in the
Agreement (2.5(f)).
H UPPER WILL (TO BE DELIVERED TO ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ AT 35TH FLOOR, TWO
INTERNATIONAL FINANCE CENTRE, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇)
Pursuant to Clause 2.5(j) of the SPA.
1. Certificate of Incorporation of Upper Will (2.5(j));
2. Memorandum and Articles of Association of Upper Will (2.5(j));
3. Statutory records of Upper Will which comprise (2.5(j)):
a) Register of directors;
b) Register of members;
c) Register of transfers;
d) Register of secretary;
e) Register of charges;
f) Minutes of all directors' meeting and directors' resolutions;
g) Minutes of all shareholders' meeting and shareholders'
resolutions;
4. Share certificate book of Upper Will (2.5(j));
5. Company chop and seal of Upper Will (2.5(j));
6. Documents necessary to effect the vesting in Upper Will all the shares
of Active (2.5(j)):
a) Board Resolutions of Upper Will approving the acquisition of
shares in Active
b) Board Resolutions of Active approving the transfer of shares to
Upper Will
c) Instrument of Transfers duly stamped representing the transfer of
one share from each of Lit ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ Wan to Upper
Will
d) Bought and Sold Note duly stamped representing the transfer of
one share from each of Lit ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ Wan to Upper
Will
7. Documents relating to the resignation and appointment of directors
(2.5(j)):
a) Undated resignations of:
▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇;
b) Consent to act as Directors of Upper Will, for:
i. ▇▇▇▇▇ ▇▇▇▇;
ii. ▇▇▇▇ ▇▇▇▇▇▇▇; and
iii. ▇▇▇▇▇▇ ▇▇▇▇▇
iv. ▇▇ ▇▇▇▇
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c) Directors' meeting approving the appointment of ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇ ▇▇▇▇ as additional directors and
such person as chairman nominated by the Purchaser;
8. Authorization given by Upper Will to Upper Will's agent in the British
Virgin Islands responsible for keeping the originals of its corporate
records to receive and accept instructions from the Purchaser and its
agents and acknowledged by such British Virgin Islands agent, all in
form and substance satisfactory to the Purchaser (2.5(j));
I ACTIVE (TO BE DELIVERED TO ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ AT 35TH FLOOR, TWO
INTERNATIONAL FINANCE CENTRE, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇)
1. Certificate of Incorporation of Active (2.5(j));
2. Memorandum and Articles of Association of Active (2.5(j));
3. Certified copy of Business registration certificate (expired or
effective) of Active (2.5(j));
4. Statutory records of Active which comprise (2.5(j)):
a. Register of directors;
b. Register of members;
c. Register of transfers;
d. Register of secretary;
e. Register of charges;
f. Minutes of all directors' meeting and directors' resolutions;
g. Minutes of all shareholders' meeting and shareholders'
resolutions;
5. All corporate documents filed with the Companies Registry of Hong Kong
(2.5(j));
6. Share certificate book of Active (2.5(j));
7. Company chop and company seal of Active (2.5(j));
8. Documents relating to the resignation and appointment of directors and
chairman (2.5(j)):
a) Undated letter of resignation of:
▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇;
b) Consent to act as Directors of Active for;
i. ▇▇▇▇ ▇▇▇▇▇▇▇;
ii. ▇▇▇▇▇ ▇▇▇▇;
iii. ▇▇▇▇▇▇ ▇▇▇▇▇
iv. ▇▇ ▇▇▇▇;
c) Directors' meeting approving the appointment of ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇ ▇▇▇▇ as additional directors and
such person as chairman nominated by the Purchaser;
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9. Documents evidencing transfer of shares to Upper Will (2.5(j)):
a) Share Certificate of Active representing one share issued to
Upper Will;
b) cancelled share certificates issued to Lit ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇ Wan;
10. Signed non-competition undertakings and release in the form set out in
Schedule N for (2.5(b)):
a) ▇▇▇▇ ▇▇▇▇;
b) Lit ▇▇▇▇ ▇▇▇▇▇
c) ▇▇▇▇▇ ▇▇▇▇ Wan;
11. Management Contracts duly executed and delivered by (2.5 (h)(i):
a) ▇▇▇▇▇ ▇▇▇▇ Wan;
b) Lit ▇▇▇▇ ▇▇▇▇▇;
c) ▇▇▇ ▇▇▇ Shan;
12. Employment contracts with the former employees of Trinity:
a) ▇▇▇ ▇▇ Ki;
b) ▇▇▇ ▇▇▇;
c) ▇▇▇▇ ▇▇▇;
d) ▇▇▇▇ ▇▇▇ Man;
e) ▇▇▇ ▇▇▇▇▇ Yan;
f) Chan ▇▇▇ ▇▇▇▇▇; and
g) Chan Wing Wai
13. Certified copy of CEPA documents, consisting of (2.5(j), 2.12 &
4.1(y)):
a) Certificate of Hong Kong Service Supplier issued by the Trade and
Industry Department of Hong Kong;
b) Statement of Lie Yingyang;
c) Employee report dated 3 August 2004;
d) Board resolution approving certificate of applying for CEPA -
certificate of Hong Kong Service Supplier dated 3 August 2004;
e) Tenancy report dated 3 August 2004;
f) Financial and business certificate dated 3 August 2004.
J TRINITY (TO BE DELIVERED TO ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ AT 35TH FLOOR, TWO
INTERNATIONAL FINANCE CENTRE, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
1. Certificate of Incorporation of Trinity (2.5(j));
2. Memorandum and Articles of Association of Trinity (2.5(j));
3. Certified copy of Business registration certificate (expired or
effective) of Trinity (2.5(j));
4. Statutory records of Trinity which comprise (2.5(j)):
a) Register of directors;
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b) Register of members;
c) Register of transfers;
d) Register of secretary;
e) Register of charges;
f) Minutes of all directors' meeting and directors' resolutions;
g) Minutes of all shareholders' meeting and shareholders'
resolutions;
5. All corporate documents filed with the Companies Registry of Hong Kong
(2.5(j));
6. Share certificate book of Trinity (2.5(j));
7. Company chop and company seal of Trinity (2.5(j));
8. Termination notices to the following:
a) ▇▇▇ ▇▇ Ki;
b) ▇▇▇ ▇▇▇;
c) ▇▇▇▇ ▇▇▇;
d) ▇▇▇▇ ▇▇▇ Man;
e) ▇▇▇ ▇▇▇▇▇ Yan;
f) Chan ▇▇▇ ▇▇▇▇▇; and
g) Chan Wing Wai
9. Director's resolution approving the change in company secretary to
King Secretaries Limited;
10. Letter of resignation by existing company secretary of Trinity;
11. Duly signed Form D2A for change of company secretary;
12. Undated share transfer forms signed in blank by Garnerian Worldwide
Ltd. transferring 40 shares to Upper Will;
13. Undated share transfer form signed in blank by Swarkin Holding Limited
transferring 60 shares to Upper Will;
14. Undated directors' resolution of Trinity signed in blank by Garnerian
Worldwide Ltd. and Swarkin Holding Limited approving the transfer of
shares to Upper Will;
15. Share certificate of Trinity issued to Garnerian Worldwide Ltd. for 40
shares;
16. Share certificate of Trinity issued to Swarkin Holding Limited for 60
shares;
17. Share register of Trinity.
K INTERNAL ARRANGEMENT DOCUMENTS (TO BE DELIVERED TO ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ AT
35TH FLOOR, TWO INTERNATIONAL FINANCE CENTRE, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ (2.5(H)(II))
A. FOR ▇▇▇▇▇
1. FOR ▇▇ ▇▇▇▇
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a) Equity pledge agreement among ▇▇ ▇▇▇▇, Huoli and ▇▇▇▇▇;
b) Exclusive conditional equity purchase agreement between ▇▇ ▇▇▇▇ and
Huoli; and
c) Subrogation agreement among ▇▇ ▇▇▇▇, Huoli and ▇▇▇▇▇
2. FOR MO HAIHONG
a) Equity pledge agreement among Mo Hai Hong, Huoli and ▇▇▇▇▇;
b) Exclusive conditional equity purchase agreement between Mo Hai Hong
and Huoli; and
c) Subrogation agreement among Mo Hai Hong, Huoli and ▇▇▇▇▇;
L OTHER
SHENZHEN ACTIVE TRINITY CO., LTD. (TO BE DELIVERED AT OFFICE OF ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇▇ AT 35TH FLOOR, TWO INTERNATIONAL FINANCE CENTRE, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇)
1. The Employment Agreement (signed by the employees without dating, to be
effective on January 1, 2006)
2. Termination notice with former employee and non-compete agreement
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SCHEDULE L
LIST OF PERSONS TO ENTER INTO DEED OF NON-COMPETITION UNDERTAKING AND RELEASE
1. Lit ▇▇▇▇ ▇▇▇▇▇
2. ▇▇▇▇▇ ▇▇▇▇ Wan
3. Chan ▇▇ ▇▇▇▇
4. ▇▇▇▇ ▇▇▇▇▇▇
5. ▇▇▇ ▇▇▇▇▇▇
6. ▇▇▇ ▇▇▇▇▇▇▇
7. ▇▇▇▇ ▇▇▇
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SCHEDULE M
FORM OF DEED OF NON-COMPETITION UNDERTAKING AND RELEASE
DEED OF NON-COMPETITION UNDERTAKING AND RELEASE
THIS DEED is entered into on the ______________ day of December 2005
BY
[Name] of [address] (the "SUBJECT")
IN FAVOUR OF
[Name of Company that person is employed by or transferred interest in], a [type
of incorporation] with a registered address of [address] (the "COMPANY");
XINHUA FINANCE LIMITED, a company incorporated under the laws of the Cayman
Islands (the "Purchaser").
WHEREAS:
1. All or part of Subject's Interest (as defined below) has or will be
beneficially acquired by XFL pursuant to the sale and purchase agreement
entered into between XFL, ▇▇ ▇▇▇▇ Chien, ▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇
International Limited on [insert date] (the "PURCHASE AGREEMENT').
2. It is a condition of the closing of the transactions contemplated by the
Purchase Agreement that the Subject execute and deliver this Agreement.
THIS DEED WITNESSES as follows:
1. Definitions. In this Deed the following words shall have the following
meanings:
"AFFILIATES" of a specified Person means any other Person that, directly or
indirectly, through one or more intermediaries, Controls, is Controlled by,
or is under common Control with, such specified Person or, in the case of a
natural Person, such Person's spouse, parents and descendants (whether by
blood or adoption and including stepchildren);
"CLIENT" means an individual or entity to whom any member of the Group has
provided analysis, services or products in Hong Kong or the PRC in respect
of the businesses fo the Group as at the date of this Deed within two years
prior to the commencement of and during the Non-Compete Period.
"CONTROL", "CONTROLS", "CONTROLLED" (or any correlative term) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management of a Person, whether through the ownership of
voting securities, by contract, credit arrangement or proxy, as trustee,
executor, agent or otherwise. For the purpose of this definition, a Person
shall be deemed to Control another Person if such first Person, directly or
indirectly, owns or holds more than 50% of the voting equity interests in
such other Person;
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"GROUP" means ▇▇▇▇▇, Upper Will Enterprises Limited, Active Advertising
Agency Limited, Beijing Jinlong, Beijing Longmei, Beijing Shangtuo, Huoli,
Shangtuo Zhiyang, Yuanxin.
"PERSON" or "PERSONS" means any natural person, corporation, company,
association, partnership, organization, business, firm, joint venture,
trust, unincorporated organization or any other entity or organization, and
shall include any governmental authority;
"SUBJECT'S INTEREST" means any interest that the Subject holds or has held
in the equity of the Company.
2. Non Competition. The Subject hereby agrees that he shall not (without the
written consent of the Company or XFL) for the period of 4 years from the
date that the Subject transfers the Subject's Interest to a third party
(the "NON-COMPETE PERIOD"), neither it nor any of its Affiliates will:
(a) either on its own account or through any of its Affiliates, or in
conjunction with or on behalf of any other person, will on or be
engaged, concerned or interested directly or indirectly whether as
shareholder, director, employee, partner, agent or otherwise carry on
any business in direct competition with the businesses (of the same
business of the Company as at the date of this Deed) of any member of
the Group in Hong Kong or the PRC; and
(b) either on its own account or through any of its Affiliates or in
conjunction with or on behalf of any other Person, employ, solicit or
entice away or attempt to employ, solicit or entice away from any
member of the Group any person for the purpose of carrying on any
business in direct competition with the business (of the same business
of the Group as at the date of this Deed) of any member of the Group
in Hong Kong or the PRC who is or shall have been at the date of or
within twelve (12) months prior to such cessation a director, officer,
legal representative, manager or employee of any such member of the
Group whether or not such person would commit a breach of contract by
reason of leaving such employment.
3. Nonsolicitation of Clients. During the Non-Compete Period, the Subject
shall not other than in connection with his or her employment with and for
the benefit of the Group, directly or indirectly, either individually or as
a principal, partner, member, manager, agent, employee, employer,
consultant, independent contractor, stockholder, joint venturer or
investor, or as a director or officer of any corporation, limited liability
company, partnership or other entity, or in any other manner or capacity
whatsoever,
(a) solicit or divert or attempt to solicit or divert from the Group any
business with any Client;
(b) solicit or divert or attempt to solicit or divert from the Group any
business with any person or entity who was being solicited as a Client
by the Group;
(c) induce or cause, or attempt to induce or cause, any salesperson,
supplier, vendor, representative, independent contractor, broker,
agent or other person transacting business with any member of the
Group to terminate or modify such relationship or association or to
represent, distribute or sell services or products in competition with
services or products of the Group; or
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(d) otherwise provide any services or products to any Client that are or
have been provided by any member of the Group.
4. Separate Obligations. Each and every obligation under Clauses 2 and 3 shall
be treated as a separate obligation and shall be severally enforceable as
such and in the event of any obligation or obligations being or becoming
unenforceable in whole or in part such part or parts as are unenforceable
shall be deleted from Clauses 2 or 3 and any such deletion shall not affect
the enforceability of all such parts of Clauses 2 and 3 as remain not so
deleted.
5. Reasonableness. While the restrictions contained in Clauses 2 and 3 are
considered by the parties to be reasonable in all the circumstances, it is
recognised that restrictions of the nature in question may fail for
technical reasons unforeseen and accordingly it is hereby agreed and
declared that if any of such restrictions shall be adjudged to be void as
going beyond what is reasonable in all the circumstances for the protection
of the interests of the Group but would be valid if part of the wording
thereof were deleted or the periods thereof reduced or the range of
activities or area dealt with thereby reduced in scope the said restriction
shall apply with such modifications as may be necessary to make it valid
and effective.
6. Equitable Relief. The Parties agree that Company's rights under this Deed
are special and unique, and that any violation thereof by the Subject would
not be adequately compensated by money damages, and the Subject hereby
grants to the any relevant Person the right to specifically enforce
(including injunctive relief or analogous proceedings) the terms of this
Deed. In any proceeding, in equity or law, the Subject specifically waives
any defense that there is an adequate remedy at law for any violations of
the terms of this Deed.
7. Release. The Subject hereby irrevocably, unconditionally and absolutely
releases (i) the Company and the Purchaser, (ii) the transferee of the
Subject's Interest and (iii) any subsequent holder of title of any part of
the Subject's Interest, of any liabilities, past, present or future of any
nature and howsoever arising in connection with the transfer of the
Subject's Interest to any third party.
8. Governing Law and Jurisdiction. This Deed shall be governed by and
construed in accordance with the laws of Hong Kong and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of the Hong Kong
courts.
IN WITNESS WHEREOF this instrument has been executed and delivered as a deed by
the Subject on day and year first above written.
SIGNED, SEALED AND DELIVERED )
by )
in the presence of: )
)
)
)
------------------------------------- )
Signature of Witness )
)
)
------------------------------------- )
Name of Witness )
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SIGNED BY )
for and on behalf of [Company] )
)
)
SIGNED BY )
for and on behalf of Xinhua Finance )
Limited )
)
)
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