EXHIBIT 10.37
Execution copy
XINHUA FINANCE LIMITED
(Subscriber)
FAN CHO TAK ALEX
(Fan)
AND OTHERS
and
ECONWORLD MEDIA LIMITED
(Company)
----------
SUBSCRIPTION AGREEMENT
IN RESPECT OF 210,000 ORDINARY SHARES IN THE CAPITAL OF
ECONWORLD MEDIA LIMITED
----------
MAY 26, 2005
Hong Kong
TABLE OF CONTENTS
ITEM DESCRIPTION PAGE
---- ----------- ----
1. DEFINITIONS....................................................... 3
2. ISSUE, ALLOTMENT AND SUBSCRIPTION OF NEW SHARES................... 8
3. COVENANTS PRIOR TO CLOSING........................................ 10
4. REPRESENTATIONS, WARRANTIES AND COVENANTS IN RESPECT OF
THE COMPANY....................................................... 12
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBSCRIBER........... 22
6. CONDITIONS OF SUBSCRIBER'S OBLIGATIONS TO PAY CASH
CONSIDERATION..................................................... 23
7. PUT OPTION AND CALL OPTION........................................ 24
8. INDEMNITY......................................................... 27
9. NON-COMPETITION................................................... 28
10. TERMINATION....................................................... 29
11. MISCELLANEOUS..................................................... 30
SCHEDULE 1 PART I........................................................ 38
CORPORATE DETAILS OF THE COMPANY IMMEDIATELY PRIOR TO CLOSING............ 38
SCHEDULE 1 PART II....................................................... 39
CORPORATE DETAILS OF THE COMPANY IMMEDIATELY AFTER CLOSING............... 39
SCHEDULE 2............................................................... 40
CORPORATE DETAILS OF THE HONG KONG SUBSIDIARIES.......................... 40
SCHEDULE 3............................................................... 43
CORPORATE DETAILS OF THE PRC SUBSIDIARIES................................ 43
SCHEDULE 4............................................................... 45
KEY MANAGEMENT........................................................... 45
SCHEDULE 5............................................................... 46
MATERIAL CONTRACTS....................................................... 46
SCHEDULE 6............................................................... 47
SCHEDULE OF EXERCISING PUT OPTION OR CALL OPTION FOR NON-MANAGEMENT
SHAREHOLDERS............................................................. 47
EXHIBIT A: PUT OPTION NOTICE............................................ 48
EXHIBIT B: CALL OPTION NOTICE........................................... 49
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THIS SHARE SUBSCRIPTION AGREEMENT (this "AGREEMENT") is made on the 26th day of
May 2005
BETWEEN
(1) XINHUA FINANCE LIMITED, a company incorporated under the laws of the Cayman
Islands with a registered address at the offices of Codan Trust Company
(Cayman) Limited, Century Yard, Cricket Square, ▇▇▇▇▇▇▇▇ Drive, P.O. Box
2681 GT, ▇▇▇▇▇▇ Town, Grand Cayman, British West Indies (the "SUBSCRIBER")
(2) FAN CHO TAK ALEX, a citizen of Hong Kong with an address of ▇▇▇▇ ▇▇▇▇,
▇/▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇ ▇▇▇▇'▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ("FAN")
(3) GAINFUL CONCEPT LIMITED, a company incorporated under the laws of the
British Virgin Islands with a registered address at the Commonwealth Trust
Ltd, Drake Chamber, Tortola, British Virgin Islands ("GAINFUL CONCEPT")
(4) BEST GAIN GROUP LIMITED, a company incorporated under the laws of the
British Virgin Islands with a registered address at the Commonwealth Trust
Ltd, Drake Chamber, Tortola, British Virgin Islands ("BEST GAIN")
(5) ECONWORLD HOLDINGS LIMITED, a company incorporated under the laws of Hong
Kong with a registered address at ▇▇▇▇ ▇▇▇▇, ▇/▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇
▇▇▇▇'▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ("EHL")
(6) LO YUAN ▇▇▇▇ ▇▇▇▇▇▇▇, a citizen of Hong Kong with an address of Flat B,
13/F., King Fai Court, ▇▇-▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ("▇▇▇▇▇▇▇")
(7) CHEERS PERFECT LIMITED, a company incorporated under the laws of the
British Virgin Islands with a registered address at the Commonwealth Trust
Ltd, Drake Chamber, Tortola, British Virgin Islands ("CHEERS PERFECT")
(8) LO ▇▇ ▇▇▇▇, a citizen of Taiwan with an address of ▇▇, ▇▇. ▇▇▇, ▇▇▇▇▇-▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ ("LO")
(9) ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, a citizen of Hong Kong with an address of 9H, Lotus
Mansion, ▇▇▇ ▇▇▇ Shing, Hong Kong ("▇▇▇▇▇▇")
(10) LO ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, a citizen of Hong Kong with an address of Apt. 55G,
Manhattan Heights, ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ("▇▇▇▇▇▇▇")
(11) ▇▇▇▇▇ ▇▇▇▇ VI, with an address of c/o Zurich International Life, ▇▇▇▇▇
▇▇-▇▇ ▇▇▇▇▇▇▇▇▇ ▇, ▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ("▇▇▇▇▇")
(12) JUSTLY INVESTMENT INTERNATIONAL LIMITED, a company incorporated under the
laws of Hong Kong with a registered address at ▇▇▇▇ ▇▇▇▇, ▇▇/▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇. ("JUSTLY INVESTMENT")
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(13) ECONWORLD MEDIA LIMITED, a company incorporated under the laws of Hong Kong
with registration number 696257 and a registered address at ▇▇▇▇ ▇▇▇▇,
▇/▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇ ▇▇▇▇'▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ (the "COMPANY")
RECITALS
WHEREAS
(A) The Company is a private company incorporated in Hong Kong with limited
liability, whose further particulars are set out in Schedule 1. The Company
holds and owns all the issued share capital or equity interest in its
subsidiaries, whose further particulars are set out in Schedules 2 and 3.
(B) As at the date hereof, the Company has an issued share capital of
HK$1,400.00 divided into 140,000 Shares which are held and owned by the
shareholders in the proportions set out in Schedule 1 Part I.
(C) The Company has agreed to issue and allot, and the Subscriber has agreed to
subscribe for 210,000 new Shares, which will represent 60% of the total
number of issued Shares of the Company immediately after such subscription,
upon the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants set
forth herein, the parties do hereby agree as follows:
1. DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"ACCOUNTS RECEIVABLE" shall have the meaning provided in clause 4.8;
"ACTUAL EBITDA FOR 2005/6" means the consolidated earnings of the Group
before interest, taxes, depreciation and amortization for the period from
April 1, 2005 to March 31, 2006 as presented in the Audited Accounts for
2005/6;
"ACTUAL EBITDA FOR 2006" means the consolidated earnings of the Group
before interest, taxes, depreciation and amortization as presented in the
Audited Accounts for 2006;
"AFFILIATE" 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);
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"AGREED FORM" means, in relation to any document, the form of that document
which has been agreed upon by each of the parties thereto or their legal
advisors before Closing;
"AUDITED ACCOUNTS FOR 2005/6" means the consolidated balance sheet of the
Group made up as of March 31, 2006 and the related statements of
operations, statements of stockholders' equity and statements of cash flow
for the period from April 1, 2005 to March 31, 2006, reviewed and audited
by the Auditors;
"AUDITED ACCOUNTS FOR 2006" means the consolidated balance sheet of the
Group made up as of December 31, 2006 and the related statements of
operations, statements of stockholders' equity and statements of cash flow
for the period from January 1, 2006 to December 31, 2006, reviewed and
audited by the Auditors;
"AUDITORS" means a firm of Certified Public Accountants selected by the
Subscriber;
"BALANCE SHEET" shall have the meaning provided in Clause 4.7;
"BOARD" means the Board of Directors of the Company;
"BONUS PAYMENT" shall have the meaning provided in Clause 7.3(e);
"CALL OPTION" shall have the meaning provided in Clause 7.2;
"CALL OPTION NOTICE" shall have the meaning provided in Clause 7.2;
"CAPITAL CONTRIBUTION" means the remaining part of the Cash Consideration
to be paid in accordance with Clause 2.2(b);
"CASH CONSIDERATION" means the amount set out in Clause 2.2 which shall be
payable by the payment of the Cash Consideration (which includes the
Subscription Amount and the Capital Contribution);
"CHARTER DOCUMENTS" shall have the meaning provided in Clause 4.1;
"CLOSING" shall have the meaning provided in Clause 2.5;
"CLOSING DATE" shall have the meaning provided in Clause 2.5;
"CONSENTS" shall have the meaning provided in Clause 4.5;
"CONTRACTS" means the contracts described on Schedule 5 hereto;
"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 policies 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,
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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;
"EXISTING SHAREHOLDERS' LOANS" means the shareholders' loans of
RMB4,400,000 and US$350,000 owed by the Company to Fan and Lo respectively
as at the date hereof;
"FINANCIAL STATEMENTS" shall have the meaning provided in Clause 4.7;
"GOVERNMENTAL ENTITY" shall have the meaning provided in Clause 4.5;
"GROUP" means the Company, the Hong Kong Subsidiaries and the PRC
Subsidiaries and a "GROUP COMPANY" means any member of the Group;
"HK$" means the lawful currency of Hong Kong;
"HONG KONG" means the Hong Kong Special Administrative Region of the
People's Republic of China;
"HONG KONG SUBSIDIARIES" means EconWorld Publishing Limited, Money Journal
Publications Limited and Money Journal Advertising Company Limited, whose
further particulars are set out in Schedule 2;
"INDEMNIFIED PARTY" shall have the meaning in Clause 8.1;
"INDEMNIFYING PARTY" shall have the meaning in Clause 8.4;
"INTELLECTUAL PROPERTY" shall have the meaning provided in Clause 4.6(a);
"KEY MANAGEMENT" means all those members of the management of the Group
more particularly described in Exhibit A;
"LEASE" or "LEASES" shall have the meaning provided in Clause 4.11;
"LICENSED INTELLECTUAL PROPERTY" shall have the meaning provided in Clause
4.6(a)(iii);
"LIEN" shall have the meaning provided in Clause 4.2(c);
"LOSSES" shall have the meaning provided in Clause 8.1(a);
"MARKET VALUE" shall have the meaning provided in Clause 7.7;
"MATERIAL ADVERSE CHANGE" means any event or circumstance occurs which
might reasonably be expected to have a material adverse effect on the
prospects, business, operations or financial condition of the Group taken
as a whole or that would materially affect the ability of any of the Group
Companies;
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"MANAGEMENT PURCHASE PRICE" shall have the meaning provided in Clause 7.4;
"MANAGEMENT SHAREHOLDERS" means Fan, Gainful Concept, Best Gain, ▇▇▇,
▇▇▇▇▇▇▇ and Cheers Perfect and "MANAGEMENT SHAREHOLDER" means any one of
them;
"MEMORANDUM AND ARTICLES OF ASSOCIATION" means the memorandum and articles
of association of the Company as may be amended from time to time;
"NON-MANAGEMENT PURCHASE PRICE" shall have the meaning provided in Clause
7.3;
"NON-MANAGEMENT SHAREHOLDERS" means Lo, Cheung, Raymond, ▇▇▇▇▇ and Justly
Investment and "NON-MANAGEMENT SHAREHOLDER" means any one of them;
"OWNED INTELLECTUAL PROPERTY" shall have the meaning provided in Clause
4.6(a)(iii);
"PRC" means the People's Republic of China;
"PRC SUBSIDIARIES" means [Chinese Characters] whose further particulars are
set out in Schedule 3;
"PUT OPTION" shall have the meaning provided in Clause 7.1;
"PUT OPTION NOTICE" shall have the meaning provided in Clause 7.1;
"RESTRICTED CAPACITY" shall have the meaning provided in Clause 9.4;
"RETURNS" shall have the meaning provided in Clause 4.9(a);
"RETURN PERIODS" shall have the meaning provided in Clause 4.9(a);
"RMB" means Renminbi, the lawful currency of the PRC;
"SALE SHARES" shall have the meaning provided in Clause 7.1;
"SELLING SHAREHOLDERS" shall have the meaning provided in Clause 7.1;
"SHAREHOLDERS" means the holders of the Shares from time to time;
"SHAREHOLDERS AGREEMENT" means a shareholders agreement in the Agreed Form
relating to the Company and to be entered into between the Company, the
Warrantors, and the Subscriber;
"SHAREHOLDERS' REPRESENTATIVE" shall have the meaning provided in Clause
11.12;
"SHARES" means ordinary shares each with a par value of HK$0.01 in the
capital of the Company;
"SUBSCRIBER ORDINARY SHARES" shall have the meaning provided in Clause 7.7;
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"SUBSCRIPTION AMOUNT" means the amount of US$1,500,000 to be paid as part
of the Cash Consideration in accordance with Clause 2.2 (a);
"SUBSCRIPTION SHARES" means 210,000 new Shares to be subscribed for by the
Subscriber pursuant to Clause 2 and subject to the terms and conditions of
this Agreement;
"SUBSIDIARY" means a corporation, partnership, limited liability company,
or other entity of which such corporation or entity directly or indirectly
owns or controls voting securities or other interests that are sufficient
to elect a majority of the Board of Directors or other managers of such
corporation, partnership, limited liability company or other entity;
"TAX" AND "TAXES" shall have the meaning provided in Clause 4.9(c);
"US$" and "US DOLLARS" means the lawful currency of the United States of
America;
"WARRANTORS" mean the Management Shareholders and the Non-Management
Shareholders and "WARRANTOR" shall mean any one of them as the context
requires.
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 time and dates in this Agreement shall be Hong Kong time 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 a
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.
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2. ISSUE, ALLOTMENT AND SUBSCRIPTION OF NEW SHARES
2.1. Issue, Allotment and Subscription of New Shares.
(a) Subject to the terms and conditions of this Agreement, the Subscriber
shall subscribe for and the Company shall issue and allot to the
Subscriber, the Subscription Shares for a total subscription price of
US$1,500,000 (the "SUBSCRIPTION AMOUNT") to be paid at Closing subject
to fulfilment or waiver of all the conditions set out in Clause 6.1.
(b) The Subscription Shares shall be issued as fully paid and shall rank
pari passu in all respects with the existing Shares in issue in
accordance with the Memorandum and Articles of Association.
2.2. Capital Contribution. Within thirty (30) days of receiving the Audited
Accounts for 2005/6, the Subscriber shall invest a further US$2,820,000 in
the Company, for which the Subscriber shall receive one (1) Share (the
"CAPITAL CONTRIBUTION"), provided that if the Actual EBITDA for 2005/6 is
below US$1,200,000, the Capital Contribution shall be adjusted by the
following formula:-
Capital Contribution = (Actual EBITDA for 2005/6 x 6) x 60% less
US$1,500,000). If this calculation results in a negative number then the
amount of the Capital Contribution shall be zero, in which case the Company
shall not receive an additional Share.
2.3. Use of Subscription Amount. The Warrantors shall procure that an amount of
up to US$650,000 of the Subscription Amount shall be applied towards
repayment of the Existing Shareholders' Loan and the balance of the
Subscription Amount shall be used as operating funds of the Company.
2.4. Use of Capital Contribution. The Warrantors shall procure that the Capital
Contribution shall be used to repay the balance of the Existing
Shareholders' Loan and the balance of the Capital Contribution shall be
used as operating funds of the Company.
2.5. Closing. As promptly as practicable following the satisfaction or, if
permissible, waiver of the conditions set forth in Clause 6.1 hereof (or
such other date as may be agreed by the Subscriber and the Company), the
subscription of the Subscription Shares (the "CLOSING") shall take place at
the offices of the Company at such time and place as the Subscriber and the
Company mutually agree in writing. The date and time of the Closing are
herein referred to as the "CLOSING DATE".
2.6. Company Closing Obligations. Upon Closing the Company shall:
(a) deliver to the Subscriber:
(i) a share certificate representing the Subscription Shares;
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(ii) written confirmation to the satisfaction of the Subscriber that
none of the Warrantors are aware of any matter or thing which is
in breach of or inconsistent with any of the representations,
warranties and undertakings herein contained;
(iii) such other documents as may be required at the discretion of the
Subscriber to give to the Subscriber good title to the
Subscription Shares and to enable the Subscriber or its nominees
to become the registered holders thereof; and
(b) deliver to the Subscriber the counterparts of the Shareholders
Agreement dated the Closing Date and duly executed by the Company and
the Warrantors;
(c) cause a board meeting of the Company to be held (inter alia) at which
the Directors shall:
(i) approve the issue and allotment of the Subscription Shares to the
Subscriber; and
(ii) appoint such persons as the Subscriber may nominate to be validly
appointed as additional Directors of the Company;
(d) cause and procure each member of the Key Management to sign a 3-year
employment contract with the Company or any Group Company (as the case
may be) upon such principal terms approved by the Subscriber.
2.7. Company Further Obligations. Within 90 calendar days of March 31, 2006, the
Company shall cause to be prepared and shall deliver to the Shareholders'
Representative and the Subscriber the Audited Accounts for 2005/6 which
shall set out the Actual EBITDA for 2005/6. Within 90 calendar days of
December 31, 2006, the Company shall cause to be prepared and shall deliver
to the Shareholders' Representative and the Subscriber the Audited Accounts
for 2006 which shall set out the Actual EBITDA for 2006.
2.8. Subscriber Closing Obligations. Upon Closing the Subscriber shall deliver
to the Company:
(a) an application for the Subscription Shares duly signed for and on
behalf of the Subscriber;
(b) in immediately available funds and in US$ by wire transfer the amount
of the Subscription Amount to the Company; and
(c) 3 counterparts of the Shareholders Agreement dated the Closing Date
and duly executed by it.
2.9. Deferral of Closing. Without prejudice to any other remedies available to
the Subscriber, if in any respect the provisions of Clause 2.6 are not
complied with by
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any of the Warrantors on the Closing Date, or the conditions under Clauses
6.1 and 6.2 are not satisfied or waived, the Subscriber may:
(a) defer Closing to a date not more than 28 days after the Closing Date
(and so that the provisions of this Clause 2.10 shall apply to Closing
as deferred); or
(b) proceed to Closing so far as practicable (without prejudice to its
rights hereunder); or
(c) rescind this Agreement without prejudice to any other remedy and
without incurring any liability to any party to this Agreement, in
which case the Subscription Amount shall be returned to the Subscriber
by the Company.
2.10. Further Covenants. The Warrantors agree to use their best efforts to
fulfil the conditions set out in Clauses 6.1 and 6.2, and the Subscriber
agrees to cooperate with the Warrantors to the extent necessary for the
Warrantors to fulfil such conditions.
3. COVENANTS PRIOR TO CLOSING
3.1. Covenants. From the date of this Agreement until Closing, except for the
transactions described herein or otherwise with the prior written consent
of the Subscriber:
(a) the Warrantors warrant and undertake that they will cause each of the
Group Companies to:
(i) conduct their business in the ordinary course and consistent with
past practices;
(ii) use their best efforts to maintain in full force and effect their
existence;
(iii) promptly and timely prepare and file any annual reports and
franchise tax returns and pay all taxes and assessments, if any,
required to maintain their existence;
(iv) keep records in which true and correct entries will be made of
all material transactions entered into;
(v) duly observe all material requirements of governmental
authorities unless contested in good faith by appropriate
proceedings with the consent of the Subscriber;
(vi) 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 the income, profits,
property or business of the Group Companies unless contested in
good faith by appropriate proceedings with the consent of the
Subscriber;
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(vii) at all times comply with the provisions of all contracts,
agreements and leases to which they are a party, unless contested
in good faith by appropriate proceedings with the consent of the
Subscriber; and
(viii) to use best endeavours to procure that their employees at the
date of this Agreement remain and continue as employees after
Closing;
(b) the Warrantors warrant and undertake to cause each of the Group
Companies not to:
(i) modify their Charter Documents;
(ii) cause or permit its liquidation or dissolution;
(iii) institute, or permit to be instituted against them, any
proceeding, which remains undismissed for a period of 30 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 any
of them or their 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
their property;
(iv) make a general assignment for the benefit of their creditors;
(v) declare or pay any dividend or make any distribution to any of
their shareholders;
(vi) issue, redeem, sell or dispose of, or create any obligation to
issue, redeem, sell or dispose of, any shares of their capital
stock or equity interest;
(vii) effect any stock split, reclassification or combination;
(viii) modify their agreements and other obligations with respect to
their long-term indebtedness, including but not limited to their
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 their assets
or enter into any material transaction or contract, or make any
commitment relating to their 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$20,000;
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(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;
(xii) take or omit to take any action which could be reasonably
anticipated to have a Material Adverse Change upon their
financial condition or assets;
(xiii) grant any director, officer, 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;
(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, including but
not limited to the Warrantors or any director, officer, employee
or agent of the Company.
3.2. Access to Information. Until Closing, the Warrantors shall procure that the
Subscriber, its agents and representatives are given reasonable access to
such documents relating to the each of the Group Companies as the
Subscriber shall request.
3.3. Rescission. The Subscriber shall be entitled to rescind this Agreement by
notice in writing to the Company if, prior to Closing, it appears that any
of the 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 Warranties or if there is any material non-fulfilment
of any of the Warranties which (being capable of remedy) is not remedied
prior to Closing.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS IN RESPECT OF THE COMPANY
The Warrantors represent and warrant to the Subscriber that the following
statements in respect of the Company (the "Warranties") (and in this
Agreement, references to Company shall include all Group Companies unless
the context specifically indicates otherwise) are true and correct as of
the date of this Agreement, and acknowledges that the Subscriber has
entered into this Agreement in reliance on, among other things, the
Warranties.
4.1. Organization, Standing, and Power. Each of the Company and the Hong Kong
Subsidiaries is a corporation duly organized, validly existing, and in good
standing
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under the laws of Hong Kong, 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.
Each of the PRC Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of 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. The Warrantors have made available to the Subscriber
complete and correct copies of the memorandum of association and articles
of association, and/or other organizational documents ("CHARTER DOCUMENTS")
of each of the Group Companies, in each case, as amended to the date
hereof. The minute books and stock records of Group Companies, complete and
correct copies of which have been made available delivered to the
Subscriber, contain correct and complete records of all material
proceedings and actions taken at all meetings of, or effected by written
consent of, the shareholders of the Group Companies and its Board of
Directors, and all original issuances and subsequent transfers,
repurchases, and cancellations of Group Companies shares.
4.2. Capital Structure.
(a) Immediately prior to Closing the authorised capital of the Company
shall be HK$10,000 divided into 1,000,000 ordinary shares of HK$0.01
each and the issued share capital of the Company immediately prior to
Closing shall be as set out in Schedule 1 Part I. Immediately
following Closing and completion of the issue and allotment of the
Subscription Shares the issued share capital of the Company will be as
set out in Schedule 1 Part II. The Subscription Shares, when issued,
delivered and paid for in accordance with this Agreement, will be duly
and validly issued, fully paid and nonassessable and will rank pari
passu with the issued share capital of the Company.
(b) There are not any options, warrants, calls, conversion rights,
commitments, agreements, contracts, restrictions, or rights of any
character to which any Group Company is a party or by which any Group
Company may be bound obligating any Group Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional Shares or
securities, or obligating any Group Company to grant, extend or enter
into any such option, warrant, call, conversion right, commitment,
agreement, contract, understanding, restriction, arrangement or right.
No Group Company has outstanding any bonds, debentures, notes or other
indebtedness other than the Existing Shareholders' Loans.
(c) Ownership of Shares. Each Warrantor has good and valid title to the
Shares set forth opposite his or its name on Schedule 1 Part I, free
and clear of any lien, charge, encumbrance, security interest, voting
agreement, voting trust, voting or transfer restriction, right of
first refusal, proxy, claim or right of others of whatever nature (a
"LIEN"), and at closing of any sale of such Shares by a Warrantor
pursuant to the Put or Call Option under Section 7, such Warrantor
will deliver to the Subscriber good and valid title to all of the
Shares beneficially owned by such Warrantor as set forth on Schedule 1
Part I hereto, free and clear of any Liens. No person or entity other
than such
-13-
Warrantor has any power or right, whether or not shared with any other
person or entity, to dispose of or direct the disposition of any of
the Shares or to vote or direct the voting of any of the Shares held
by such Warrantor as set forth on Schedule 1 Part I hereto.
4.3. Subsidiaries. The Company does not presently own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity, and is not a participant in any joint venture,
partnership, or similar arrangement, except the Hong Kong Subsidiaries and
PRC Subsidiaries. The Company has good and valid title to all the equity
interests of the Hong Kong Subsidiaries and PRC Subsidiaries, free and
clear of any Lien. There is no agreement to Control the Hong Kong
Subsidiaries and PRC Subsidiaries other than the agreement with the
Company. 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 share or loan capital of any of the Group Companies (including any
option, notes, warrants or other securities or rights convertible or
ultimately convertible into shares or equity interests in any of the Group
Companies).
4.4. Authority. The execution, delivery, and performance of this Agreement and
the Shareholders Agreement to be entered into by the Company have been duly
authorized by all necessary action of the Board. Certified copies of the
resolutions adopted by the Board approving this Agreement, the Shareholders
Agreement and transactions contemplated hereby and thereby have been
provided to the Subscriber. The Company has duly and validly executed and
delivered this Agreement and the Shareholders Agreement, and this Agreement
and the Shareholders Agreement constitute valid, binding, and enforceable
obligations of the Company 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.
4.5. Compliance with Laws and Other Instruments. The Company 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
such license, permit, or authorization, or any such statute, law,
ordinance, rule or regulation. Neither the execution and delivery of this
Agreement and the Shareholders Agreement nor the performance by the Company
of its obligations under this Agreement and the Shareholders Agreement
will:
(a) conflict with or result in any breach of the Company's Charter
Documents;
(b) require any consent, approval, order, or authorization of or
registration, declaration, or filing with or exemption (collectively
"CONSENTS") by, any court, administrative agency or commission or
other governmental authority or instrumentality, whether domestic or
foreign (each a "GOVERNMENTAL ENTITY"); and
-14-
(c) 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 the Company or Company 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
the Company is a party.
4.6. Technology and Intellectual Property Rights.
(a) "INTELLECTUAL PROPERTY" shall mean:
(i) any and all of the following that are owned (including joint
ownership) or held by any Group Companies anywhere in the world:
trademarks, trade names, service marks and trade dress, and all
goodwill associated with trademarks, trade names, service marks
and trade dress; patents; mask works; utility models; domain
names; copyrights and copyrightable works; databases; graphics;
schematics; marketing, sales and user data; technology; trade
secrets, including confidential know-how, inventions,
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;
(ii) any and all license rights granted to any Group Companies in any
third party intellectual property or other proprietary or
personal rights, including the types of intellectual property
described in (i) above; and
(iii) Company Intellectual Property described in Clause (i) above is
referred to herein as "OWNED INTELLECTUAL PROPERTY" and Company
Intellectual Property described in Clause (ii) above is referred
to herein as "LICENSED INTELLECTUAL PROPERTY" (collectively,
"INTELLECTUAL PROPERTY").
(b) Each of the Group Companies 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 each Group Company or are under development by the Group,
and all products and/or technology underlying any and all services
that have been or currently are offered by the Group Companies or are
under development by any Group Company is either: (i) owned by such
Group Company, (ii) in the public domain, or (iii) rightfully used by
the Group Company pursuant to a valid written license or other
agreement.
(c) No Group Company is, nor as a result of the execution or delivery of
this Agreement, or performance of the Group Companies' obligations
hereunder,
-15-
will any Group Company be, in violation of any license, sublicense or
other agreement relating to the Intellectual Property or of any
non-disclosure agreement to which any Group Company is a party or
otherwise bound.
(e) Each Group Company's use, reproduction, modification, distribution,
licensing, sublicensing, sale, or any other exercise of rights in any
Owned Intellectual Property by the Group Company 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 any Group Company or
their 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 any Group Company 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 in
personal or other data of any person.
(f) No action, suit or proceeding (i) challenging the validity,
enforceability, or ownership by any Group Company 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 any Group Company or its licensees infringes,
misappropriate 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 any Group Company 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 Warrantors, is threatened by any
person. To the knowledge of the Warrantors, there is no unauthorized
use, infringement or misappropriation of any of Owned Intellectual
Property by any third party, employee or former employee.
(g) No other third party has any security interests in any Intellectual
Property.
(h) Each Group Company 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 the Group whose work product was
created by them entirely within the scope of their employment by such
Group Company and constitutes work made for hire owned by that Group
Company, valid written assignments or licenses of any such work or
other rights to the Group
-16-
Companies that are enforceable by the Group Companies and has made
available true and complete copies of such assignments or licenses to
the Subscriber.
(i) The Group Companies own all right, title and interest in and to all
data the Group Companies collect from, or discloses about, users of
its products and services. The Group Companies' 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 each Group Company operates.
4.7. Financial Statements. In respect of the Company and the PRC Subsidiaries,
there has been delivered to the Subscriber:
audited balance sheets as of 31 December 2004 (including the notes thereto,
the "BALANCE SHEET") and the related audited statements of operations,
statements of stockholders' equity and statements of cash flows for each of
the fiscal years then ended (the "FINANCIAL STATEMENTS").
The Financial Statements: (i) have been prepared from the books and records
of the relevant Group Company; (ii) present fairly in all material
respects, the financial position of the relevant Group Company as of and
for the periods indicated; and (iii) have been prepared in accordance with
generally accepted accounting principles consistently applied. There are no
liabilities in excess of US$50,000 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 Financial
Statements.
4.8. Accounts Receivable. All of the accounts receivable shown on the Balance
Sheet have and all of any Group Company's receivables as of the Closing
Date will have arisen out of bona fide transactions of the Group Companies
in the 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 the Group Companies' policies)
and can reasonably be anticipated to be paid in full without outside
collection efforts within one hundred and eighty (180) days of the due
date.
4.9. Taxes.
(a) Each Group Company has timely filed (or caused to be filed) all tax
returns ("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 ("RETURN PERIODS") have been paid or fully
accrued on the Closing Balance Sheet. No Group Company has requested
or been granted any extension of time to file any Return. The
Warrantors shall procure that there will be made available to the
Subscriber upon the Subscriber's request true and correct copies of
all Returns, and all material correspondence with any taxing
authority.
-17-
(b) No deficiencies or adjustments for any tax of any Group Company 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 any Group Company does not file Returns that any
Group Company is or may be subject to taxation by that jurisdiction.
No Group Company is subject to any pending or threatened tax audit or
examination. No Group Company has entered into any agreements, waivers
or other arrangements in respect of the statute of limitations in
respect of its taxes or Returns.
(c) 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.
(d) There are no liens for taxes upon the assets of the Group except for
taxes that are not yet payable. Each Group Company 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.
4.10. Absence of Certain Changes and Events. Since the date of the Balance Sheet
included in the Financial Statements, there has not been:
(a) Any transaction involving more than US$50,000 entered into by any
Group Company other than in the ordinary course of business;
(b) any increase in indebtedness for borrowed money or made any loan or
advance, or assumed, guaranteed or otherwise became liable with
respect to the liabilities or obligation of any Person;
(c) Any declaration, payment, or setting aside of any dividend or other
distribution to or for any of the holders of any Shares;
(d) Any termination, modification, or rescission of, or waiver by any
Group Company of rights under, any contract having or reasonably
likely to have a Material Adverse Change on the business of the Group
Company;
(e) Any discharge or satisfaction by any Group Company of any lien or
encumbrance, or any payment of any obligation or liability (absolute
or contingent) other than liabilities shown on the balance sheet
included in the Financial Statements as of December 31, 2004 and
liabilities incurred since December 31, 2004 in the ordinary course of
business;
(f) Any mortgage, pledge, imposition of any security interest, claim,
encumbrance, or other restriction created on any of the assets,
tangible or
-18-
intangible, of any Group Company having or reasonably likely to have a
Material Adverse Change on the business of the Group Companies;
(g) Any settlement amount of any claim, dispute, suit, proceeding or
investigation regarding any Group Company; or
(h) Any event or condition resulting in a Material Adverse Change on the
business of any of the Group Companies.
4.11. Leases in Effect; Real Estate. Each Group Company has a valid leasehold
interest under the relevant leases (each a "LEASE" and collectively, the
"LEASES"). There are no existing defaults, and no Group Company has
received or given any written notice of default or claimed default with
respect to any Lease nor is there any event that with notice or lapse of
time, or both, would constitute a default thereunder. All real property
occupied by the Group Companies are subject to a written lease. No Group
Company holds any interest in real property other than the Leases.
4.12. Personal Property. Each Group Company has valid title, free and clear of
all title defects, security interests, pledges, options, claims, liens, and
encumbrances of any nature whatsoever to all inventory, receivables,
furniture, machinery, equipment, and other personal property, tangible or
otherwise, reflected on the Balance Sheet or used in such Group Company's
business as of the date of such Balance Sheet even if not reflected
thereon, except for acquisitions and dispositions since December 31, 2004
in the ordinary course of business and not exceeding US$50,000.
4.13. Litigation and Other Proceedings. None of the Group Companies nor any of
their past or present officers, directors, or employees, is a party to any
pending or, threatened action, suit, labor 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 the actions or
omissions of the Group or, in the case of an individual, from acts in his
or her capacity as an officer, director, employee, agent or contractor of
any Group Company, which individually or in the aggregate would have a
Material Adverse Change on the business of the Group. No Group Company is a
named party to any order, writ, judgment, decree, or injunction.
4.14. No Defaults. No Group Company is, nor has any Group Company 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 Charter
Documents; (ii) any judgment, decree, or order to which any Group Company
is a named party; or (iii) any loan or credit agreement, note, bond,
mortgage, indenture, contract, agreement, lease, license, or other
instrument to which a Group Company is now 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 the business of any Group Company.
4.15. Sufficiency of Assets. No other Person owns any property and asset which
are being used by the Group except for the properties under the Leases and
personal property leased by the Group pursuant to the relevant contracts.
-19-
4.16. Material Relations. None of the parties to any of the contracts entered
into by any Group Company have terminated, or, to the knowledge of the
Warrantors, in any way expressed to any Group Company an intent to reduce
or terminate the amount of its business with any Group Company in the
future.
4.17. Insurance and Banking Facilities. All premiums and other payments due from
any Group Company with respect to any such contracts of insurance or
indemnity have been paid, and the Warrantors do not know of any fact, act,
or failure 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.
4.18. Employees. No Group Company has any 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 the Group Company without payment of severance or
termination payments or benefits. No Group Company is a party to any
pending or threatened labor dispute concerning such Group Company's
business or employment practices or the subject of any organizing drive,
labor grievance or petition to certify a labor union. Each Group Company
has complied with all applicable laws, treaties, ordinances, rules, and
regulations and requirements relating to the employment of labor. There are
no claims pending or threatened to be brought against any of the Group
Companies, in any court or administrative agency by any former or current
Group Company employees.
4.19. Material Contracts. Other than the Contracts, no Group Company is a party
to or bound by:
(a) Any union contract, collective bargaining agreement or any
employment contract or arrangement providing for annual salary in
excess of US$4,000 with any officer or employee or with any consultant
or director providing for annual compensation in excess of US$4,000;
(b) 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;
(c) Any joint venture contract or arrangement or any other agreement
that has involved or is expected to involve a sharing of profits;
(d) Reseller or distribution agreement, volume purchase agreement,
corporate end user sales or service agreement, reproduction or
replication agreement or manufacturing agreement in which the amount
involved exceeds annually, US$10,000 or pursuant to which any Group
Company has granted or received manufacturing rights, most favored
nation pricing provisions, or exclusive marketing, reproduction,
publishing or distribution rights related to any product, group of
products or territory;
-20-
(e) Any lease for real or personal property in which the amount of
payments which a Group Company is required to make on an annual basis
exceeds US$10,000;
(f) Any agreement, franchise, or indenture where the amount of
consideration payable thereunder is greater than US$10,000 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
Shareholders Agreement, Closing, or the consummation of the
transactions contemplated;
(g) 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 Shareholders Agreement, the
Closing or the consummation of the transactions contemplated;
(h) 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$10,000 or more; or
(i) Any contract containing covenants purporting to limit any Group
Company's freedom to compete in any line of business in any geographic
area.
All Contracts are valid and in full force and effect and no Group Company
has, nor, to the knowledge of the Warrantors, 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 the business of any Group
Company. The Warrantors have made available to the Subscriber a copy of
each Contract together with all amendments, material written waivers or
other material written changes thereto.
4.20. Certain Agreements. Neither the execution and delivery of this Agreement
nor the Shareholders Agreement will:
(a) result in any payment by any Group Company (including severance,
unemployment compensation, parachute payment, bonus or otherwise)
becoming due to any director, employee, or independent contractor of
any Group Company under any employee benefit plan, agreement, or
otherwise,
(b) increase any benefits otherwise payable under any employee benefit
plan or agreement, or
-21-
(c) result in the acceleration of the time of payment or vesting of any
such benefits.
4.21. Guarantees and Suretyships. No Group Company has any powers of attorney
outstanding and no Group Company has 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.
4.22. Absence of Questionable Payments. None of the Group Companies nor any of
their respective Affiliate, directors, officers, agents, employees or other
persons acting on their behalf, has 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. None of the Group Companies nor any of their respective Affiliate,
directors, officers, agents, employees or other persons acting on their
behalf, has accepted or received any unlawful contributions, payments,
gifts, or expenditures.
4.23. Brokers and Finders. The Company has not retained any broker, finder, or
investment banker in connection with this Agreement or any of the
transactions contemplated by this Agreement, nor does or will Company owe
any fee or other amount to any broker, finder, or investment banker in
connection with this Agreement or the transactions contemplated by this
Agreement.
4.24. Full Disclosure.
(a) The Warrantors are not aware of any facts pertaining to the Group or
its proposed business which could materially adversely affect the
Group or which are likely in the future to materially adversely affect
the Group and which have not been disclosed by or on behalf of the
Company in connection with or pursuant to this Agreement.
(b) No representation or warranty in this Agreement, nor any statement or
certificate furnished or to be furnished to the Subscriber 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 not misleading.
4.25. Reliance. The foregoing representations and warranties are made by the
Warrantors with the knowledge and expectation that the Subscriber are
placing reliance thereon.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBSCRIBER
The Subscriber hereby represents, warrants and covenants to the Company
that each of the following statements is true:
-22-
5.1. Organisation and Qualification. It is a person or a legal entity duly
organised and validly existing under the laws of its legal registration
jurisdiction.
5.2. 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 legal, valid and binding obligations of the Subscriber,
enforceable in accordance with their respective terms.
5.3. 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 execute, deliver and perform this Agreement.
6. CONDITIONS OF SUBSCRIBER'S OBLIGATIONS TO PAY CASH CONSIDERATION
6.1. Obligations to Pay Subscription Amount. The obligation of the Subscriber to
pay the Subscription Amount under Clause 2 of this Agreement is subject to
the satisfaction or waiver, on or before the Closing Date of each of the
following:
(a) Representations and Warranties. The representations and warranties of
the Warrantors relating to the Group contained in Clause 4 shall be
true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing
Date.
(b) Performance. The Warrantors and the Company shall have performed and
complied or procured the performance and compliance (as applicable)
with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on
or before the Closing.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form
and substance to that the Subscriber, and the Subscriber shall have
received all such counterpart original and certified or other copies
of such documents as it may reasonably request.
(d) Shareholders Agreement. The Shareholders Agreement has been duly
executed by the parties thereto and originals or certified true copies
thereof have been delivered to the Subscriber.
(e) Consent from Dow ▇▇▇▇▇. No notice has been received from Dow ▇▇▇▇▇ &
Company, Inc., terminating the memorandum of understanding entered
into between Dow ▇▇▇▇▇ & Company, Inc., and Money Journal Publishing
Limited dated April 2, 2004 pursuant to Article 4.2(3) of the
aforesaid memorandum of understanding.
-23-
(f) Existing Shareholders' Loans. The actual amount of the Existing
Shareholders' Loans have been verified from the audited accounts of
the Company or valid documentary proof has been submitted to the
Subscriber for inspection.
(g) Government Consents. All Government Consents necessary to complete the
transactions contemplated in this Agreement have been obtained.
6.2. Obligations to Pay Capital Contribution. The obligations of the Subscriber
to pay the Capital Contribution under Clause 2 of this Agreement shall be
subject to the satisfaction or waiver of each of the following:
(a) Representations and Warranties. The representations and warranties of
the Warrantors relating to the Group contained in Clause 4 shall be
true on and as of the payment of the Capital Contribution with the
same effect as though such representations and warranties had been
made on and as of that date.
(b) Audited Accounts of the Group. The Subscriber shall have received the
Audited Accounts for 2005/6.
(c) Permit to Operate Advertising Business. The existing permit to operate
advertising business held by the Beijing advertising company(Y)
[Chinese Characters] expiring on September 17, 2005 shall have been
renewed for a further term of 4 years.
(d) Consent from Dow ▇▇▇▇▇. No notice has been received from Dow ▇▇▇▇▇ &
Company, Inc., terminating the memorandum of understanding entered
into between Dow ▇▇▇▇▇ & Company, Inc., and Money Journal Publishing
Limited dated April 2, 2004 pursuant to Article 4.2(3) of the
aforesaid memorandum of understanding.
7. PUT OPTION AND CALL OPTION
7.1. Each of the Warrantors (a "SELLING SHAREHOLDER") shall have the right (a
"PUT OPTION") to sell the Shares held by it ("SALE SHARES") by delivering a
written notice (a "PUT OPTION NOTICE"), (which shall be in the form of
Exhibit A) to the Subscriber that it wishes to exercise the Put Option, and
the Subscriber shall be obliged upon receipt of such notice to purchase
such Sale Shares from the Selling Shareholder subject to the terms and
conditions set forth in this Clause 7.
7.2. Each of the Warrantors hereby irrevocably grants to the Subscriber an
option (a "CALL OPTION") to purchase the Sale Shares held by it by
delivering a written notice (a "CALL OPTION NOTICE") (which shall be in the
form of Exhibit B) to the Shareholders' Representative that it wishes to
exercise the Call Option, and the Warrantors shall be
-24-
obliged upon delivery of the Call Option Notice by the Subscriber to the
Shareholders' Representative to sell such Sale Shares to the Subscriber
subject to the terms and conditions set forth in this Clause 7.
7.3. The purchase price for the Sale Shares sold by each Non-Management
Shareholder pursuant to this Clause 7 shall be determined as follows (the
"NON-MANAGEMENT PURCHASE PRICE"):-
(a) If the Actual EBITDA for 2005/6 is equal to or greater than
US$1,500,000, the Non-Management Purchase Price shall be:-
(US$1,500,000 x 6 + the Bonus Payment) multiplied by a fraction, the
numerator of which is the number of Sale Shares to be sold by a
Non-Management Shareholder and the denominator of which is the total
number of issued and outstanding Shares.
(b) If the Actual EBITDA for 2005/6 is equal to or greater than
US$1,200,000 but less than US$1,500,000, the Non-Management Purchase
Price shall be:-
(Actual EBITDA for 2005/6 x 6) multiplied by a fraction, the numerator
of which is the number of Sale Shares to be sold by a Non-Management
Shareholder and the denominator of which is the total number of issued
and outstanding Shares.
(c) If the Actual EBITDA for 2005/6 is greater than zero but less than
US$1,200,000, the Non-Management Purchase Price shall be:-
(Actual EBITDA for 2005/6 x 5) multiplied by a fraction, the numerator
of which is the number of Sale Shares to be sold by a Non-Management
Shareholder and the denominator of which is the total number of issued
and outstanding Shares.
(d) If the Actual EBITDA for 2005/6 is less than zero, both the Put Option
and the Call Option for Sale Shares held by Non-Management
Shareholders shall immediately expire.
(e) For the purposes of this Section 7.3, the "Bonus Payment" shall mean
(Actual EBITDA for 2005/6 less US$1,500,000) x 50%.
7.4. The purchase price for the Sale Shares sold by Management Shareholders
shall be determined as follows (the "MANAGEMENT PURCHASE PRICE"):
(a) If the Actual EBITDA for 2006 is equal to or greater than
US$2,500,000, the Management Purchase Price shall be:-
(Actual EBITDA for 2006 x 6) multiplied by a fraction, the numerator
of which is the number of Sale Shares to be sold by a Selling
Shareholder and the denominator of which is the total number of issued
and outstanding Shares.
(b) If the Actual EBITDA for 2006 is equal to or greater than US$1,200,000
but less than US$2,500,000, the Management Purchase Price shall be:-
-25-
(Actual EBITDA for 2006 x 5) multiplied by a fraction, the numerator
of which is the number of Sale Shares to be sold by a Selling
Shareholder and the denominator of which is the total number of issued
and outstanding Shares.
(c) If the Actual EBITDA for 2006 is less than US$1,200,000, both the Put
Option and the Call Option for Sale Shares held by Non-Management
Shareholders shall immediately expire.
7.5 The Put or Call Option for Sale Shares held by Non-Management Shareholders
may only be exercised in whole and not in part, and in respect of the
number of Shares, and at the times set forth in Schedule 6, and shall
expire thereafter.
7.6 The Put or Call Option for all and not part of the Sale Shares held by
Management Shareholders may be exercised at any time starting 30 days after
receipt of the Audited Accounts for 2006 by the Subscriber and the
Shareholders' Representative and expiring 90 days after receipt of the
Audited Accounts for 2006 by the Subscriber and the Shareholders'
Representative.
7.7 The closing of the Put or Call Option shall be held at the principal office
of the Subscriber not later than thirty (30) days following delivery of a
Put Option Notice or a Call Option Notice, as the case may be, under Clause
7.1. At the closing of the Put or Call Option, the Subscriber shall deliver
a certified check or wire transfer in immediately available funds in the
full amount of the Management or Non-Management Purchase Price payable to
each Selling Shareholder, as the case may be, and each such Selling
Shareholder shall deliver the certificates representing all of the Sale
Shares, properly endorsed in form sufficient to pass good title to the
Subscriber, together with the execution of any relevant documents necessary
to complete the transaction; provided, however, that the Subscriber may,
(i) at its sole discretion, deliver to one or more Selling Shareholders
ordinary shares in the capital of the Subscriber ("SUBSCRIBER ORDINARY
SHARES") in lieu of all or a portion of Management or Non-Management
Purchase Price payable to each Selling Shareholder, as the case may be;
(ii) with the prior written consent of the Selling Shareholder, deliver
shares in an Affiliate of the Company prior to any proposed initial public
offering of such Affiliate, in amounts to be agreed between the Subscriber
and the Selling Shareholder. "MARKET VALUE" shall mean, with respect to the
Subscriber Ordinary Shares, the average of the closing price of the
Subscriber Ordinary Shares on the Tokyo Stock Exchange for the fifteen (15)
trading days up to and including the third trading day prior to the
applicable payment date. All stamp duty payable from the purchase of the
Sale Shares shall be paid by the Selling Shareholder. Along with the title
to the Sale Shares, all ancillary rights, including the right to any
dividends not yet distributed on the closing of the purchase of the Sale
Shares, shall be transferred to the Subscriber.
7.8 The warranties in Clause 4.2 (c) shall be deemed repeated by each Selling
Shareholder to the Subscriber at the closing of the Put or Call Option, and
the Subscriber shall not be obligated to complete the purchase of Sale
Shares from any Selling Shareholder if the warranties under Clause 4.2(c)
to be given by such Selling
-26-
Shareholder are not true as of the proposed date of closing of the Put or
Call Option under Clause 7.7.
8. INDEMNITY
8.1. Indemnity. The Warrantors will indemnify and will keep indemnified and save
harmless the Subscriber and its successors and assigns and each of its
shareholders, its current and former directors, officers and employees and
its agents and representatives (an "INDEMNIFIED PARTY") from and against:
(a) any and all losses, claims, damages (including lost profits,
consequential damages, interest, penalties, fines and monetary
sanctions) liabilities and costs ("LOSSES") incurred or suffered by an
Indemnified Party 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 in respect of the Group by the Warrantors contained or referred
to in this Agreement or in any agreement, instrument or document
delivered by the Company in connection therewith including, but not
limited to, any dimunition in the value of the assets of and any
payment made or required to be made by the Subscriber or any member of
the Group and any costs and expenses incurred as a result of such
breach provided that the indemnity contained in this Clause 8 shall be
without prejudice to any other rights and remedies available to an
Indemnified Party; or
(b) the nonfulfillment or breach of any covenant, undertaking, agreement
or other obligation of any of the Warrantors;
8.2. Costs. For the purposes of this Clause 8, "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.
8.3. Survival of Indemnification. The representations and warranties of the
Warrantors and the rights to indemnification under this Agreement with
respect thereto will survive the Closing Date.
8.4. Third Party Claims. 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
-27-
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.
8.5. Settlement of Claims. 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.
8.6. Set-Off. The Subscriber shall be entitled to set off the amount of any
indemnity required to be paid by the Warrantors against any amounts
payable, owing or due by the Subscriber to the Company under this
Agreement.
9. NON-COMPETITION
9.1. Non-Competition. Save as contemplated in this Agreement, each of the
Management Shareholders hereby undertakes with the Subscriber that:
(a) it will not, in any Restricted Capacity, in PRC, Hong Kong or any
other country or place where a member of the Group is carrying on or
has carried on business, carry on or be engaged, concerned or
interested directly or indirectly in any business which may or could
compete with the business of the Group other than (a) as a holder of
not more than five per cent (5%) of the issued shares or debentures of
any company listed on any recognised stock exchange; or (b) through
the Group or the PRC Companies;
(b) it will not, in any Restricted Capacity, solicit or entice away or
attempt to solicit or entice away from any member of the Group the
custom of any person, firm, company or organisation who shall at any
time within twelve months prior to the date hereof have been a
customer, client, identified prospective customer or client,
representative, agent or correspondent of the
-28-
Group in the habit of dealing with the Group or enter into any
contract with or accept any business from any such person, firm,
company or organisation;
(c) it will not, in any Restricted Capacity employ, solicit or entice away
or attempt to employ, solicit or entice away from any member of the
Group any person who is at the date hereof or who shall have been at
the date of or within one year prior to any purported breach of this
Clause 9.1(c) an officer, manager, consultant or employee of the
Group whether or not such person would commit a breach of contract by
reason of leaving such employment;
(d) it will not at any time after the date of this Agreement make use of
or disclose or divulge to any third party any information concerning
the business, accounts or finances of the Group, or any of its
clients' or customers' transactions or affairs, which may, or may
have, come to his knowledge other than any information properly
available to the public or disclosed or divulged pursuant to an order
of a court of competent jurisdiction.
9.2. Separate Obligations. Each and every obligation under Clause 9.1 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 Clause 9.1 and any such deletion shall not affect the
enforceability of all such parts of Clause 9.1 as remain not so deleted.
9.3. Restrictions Adjudged Void. While the restrictions contained in Clause 9.1
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 Subscriber and 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.
9.4. Restricted Capacity. For the purposes of Clause 9.1, "RESTRICTED CAPACITY"
means, for its/his/her own account and whether through the medium of any
company which is its/his/her associate (for which purpose there shall be
aggregated with its/his/her shareholding or ability to exercise control the
shares held or controlled by any of its/his/her associates) or as
principal, partner, director, employee, consultant or agent.
10. TERMINATION
10.1. Termination. This Agreement may be terminated at any time prior to the
Closing:
-29-
(a) by the Subscriber if, between the date hereof and the Closing: (i)
there is a Material Adverse Change, (ii) any representations and
warranties contained in this Agreement shall not have been true and
correct when made, (iii) any party 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 Group Company makes a
general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against such Group 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 Company if, between the date hereof and the Closing: (i) any
representations and warranties of the Subscriber contained in this
Agreement shall not have been true and correct when made, (ii) the
Subscriber 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 Subscriber makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or
against the Subscriber in question seeking to adjudicate the
Subscriber 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) by the Subscriber or the Company if the Closing shall not have
occurred within 90 days of the date of this Agreement; provided,
however, that the right to terminate this Agreement under this Clause
10.1(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 Closing to occur on or
prior to such date;
(d) by the mutual written consent of the Subscriber and the Company.
10.2. Effect of Termination. In the event of termination of this Agreement as
provided in Clause 10.1 other than as provided in Clause 10.1(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
10.1(b), this Agreement shall forthwith become void and there shall be no
liability on the part of Subscriber.
11. MISCELLANEOUS
11.1. 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 Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on
behalf of the Subscriber or the Warrantors.
-30-
11.2. 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 Sale 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.
11.3. Governing Law and Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of Hong Kong. Any dispute arising out
of or in connection with this Agreement, including a dispute as to the
validity or existence of this Agreement, shall be submitted to
International Chamber of Commerce Court of Arbitration and resolved by
arbitration in Hong Kong conducted in English by a single arbitrator of
International Chamber of Commerce Court of Arbitration in accordance with
the rules of the United Nations Commission on International Trade Law
(UNCITRAL); provided, that, unless the parties agree otherwise: (i) each
party shall be required only to produce specific, identified documents
which are relevant to the dispute; and (ii) the parties agree the
arbitration award shall be final. In addition, the parties hereto agree
that no party shall have any right to commence or maintain any suit or
legal proceeding concerning a dispute hereunder until the dispute has been
determined in accordance with the arbitration procedure provided for herein
and then only to enforce or facilitate the execution of the award rendered
in such arbitration. The parties agree not to contest or seek relief from
the award in any court.
11.4. Prevailing Party Attorneys' Fees. 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 attorneys' 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 therein.
11.5. 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.
11.6. 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.
11.7. 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 ten (10) days' advance written notice
to the other parties.
-31-
11.8. 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.
11.9. 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.
11.10. Entire Agreement. This Agreement and the documents referred to herein
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.
11.11. Amendment and Waiver. No amendment of any provision of this Agreement
shall in any event be effective unless the same shall be in writing and
signed by the Subscriber and Warrantors holding a majority of the Shares
held by the Warrantors. Any failure of any party to comply with any
obligation, agreement or condition hereunder may be waived only in writing
by the other parties, but such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. No failure by
any party to take any action with respect to any breach of this Agreement
or default by any other party shall constitute a waiver of such party's
right to enforce any provision hereof or to take any such action.
11.12. Consenting Stockholders' Representative. Each Warrantor, by execution
hereof, constitutes and appoints, effective from and after the Closing
Date, Fan to be its or his representative and attorney in fact (the
"SHAREHOLDERS' REPRESENTATIVE") with power to act for and bind all
Warrantors for all purposes of this Agreement, including but not limited to
(i) the giving of notices and consents and (ii) with respect to receipt of
and disputes regarding the Audited Accounts for 2005/6 and the Audited
Accounts for 2006. Fan shall consult with each other Warrantor prior to
taking any action as the Shareholders' Representative.
- EXECUTION PAGE FOLLOWS -
- THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK -
-32-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE SUBSCRIBER
For and on behalf of
XINHUA FINANCE LIMITED
By: /s/ ▇▇▇▇▇ ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Chief Executive Officer
-33-
THE WARRANTORS
SIGNED, SEALED AND DELIVERED by
FAN CHO TAK ALEX
/s/ Fan Cho Tak Alex
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
For and on behalf of
GAINFUL CONCEPT LIMITED
/s/ Fan Cho Tak Alex
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
For and on behalf of
BEST GAIN GROUP LIMITED
/s/ Fan Cho Tak Alex
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
-34-
For and on behalf of
ECONWORLD HOLDINGS LIMITED
/s/ Fan Cho Tak Alex
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
SIGNED, SEALED AND DELIVERED by
LO YUAN ▇▇▇▇ ▇▇▇▇▇▇▇
/s/
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
For and on behalf of
CHEERS PERFECT LIMITED
/s/
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
-35-
SIGNED, SEALED AND DELIVERED by
LO ▇▇ ▇▇▇▇
/s/
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
SIGNED, SEALED AND DELIVERED by
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
/s/
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
SIGNED, SEALED AND DELIVERED by
LO ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
/s/
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
-36-
SIGNED, SEALED AND DELIVERED by
▇▇▇▇▇ ▇▇▇▇ VI
/s/
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
For and on behalf of
JUSTLY INVESTMENT INTERNATIONAL LIMITED
[Company chop of Justly Investment International Limited]
/s/ Chan ▇▇▇ ▇▇▇▇
-------------------------------------
in the presence of:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
THE COMPANY
For and on behalf of
ECONWORLD MEDIA LIMITED
By: /s/ Fan Cho Tak Alex
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-37-
SCHEDULE 1
PART I
CORPORATE DETAILS OF THE COMPANY IMMEDIATELY PRIOR TO CLOSING
Name: EconWorld Media Limited
Date and place of Incorporation December 1, 1999, Hong Kong
Registered Address ▇▇▇▇ ▇▇▇▇, ▇/▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇ ▇▇▇▇'▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Authorised share capital HK$10,000 divided into 1,000,000 shares of HK$0.01 each
Issued share capital
Shareholders Shareholder Name No. of Ordinary Shares
---------------- ----------------------
Gainful Concept Limited 30,000
Cheers Perfect Limited 20,000
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ 10,000
Lo ▇▇ ▇▇▇▇ 30,000
Lo ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ 10,000
Justly Investment International Limited 5,000
▇▇▇▇▇ ▇▇▇▇ Vi 10,000
EconWorld Holdings Limited 15,000
Best Gain Group Limited 10,000
-------
TOTAL: 140,000
=======
Directors Fan Cho Tak ▇▇▇▇
▇▇ Yuan ▇▇▇▇ ▇▇▇▇▇▇▇
Secretary Rayal Secretaries Limited
-38-
SCHEDULE 1
PART II
CORPORATE DETAILS OF THE COMPANY IMMEDIATELY AFTER CLOSING
Name: EconWorld Media Limited
Date and place of Incorporation December 1, 1999, Hong Kong
Registered Address ▇▇▇▇ ▇▇▇▇, ▇/▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇ ▇▇▇▇'▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Authorised share capital HK$10,000 divided into 1,000,000 shares of HK$0.01 each
Issued share capital
Shareholders Shareholder Name No. of Ordinary Shares
---------------- ----------------------
Gainful Concept Limited 30,000
Cheers Perfect Limited 20,000
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ 10,000
Lo ▇▇ ▇▇▇▇ 30,000
Lo ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ 10,000
Justly Investment International Limited 5,000
▇▇▇▇▇ ▇▇▇▇ Vi 10,000
EconWorld Holdings Limited 15,000
Best Gain Group Limited 10,000
Xinhua Finance Limited 210,000
-------
TOTAL: 350,000
=======
Directors Fan Cho Tak ▇▇▇▇
▇▇ Yuan ▇▇▇▇ ▇▇▇▇▇▇▇
3 directors nominated by the Subscriber
Secretary Rayal Secretaries Limited
-39-
SCHEDULE 2
CORPORATE DETAILS OF THE HONG KONG SUBSIDIARIES
(1)
Name: EconWorld Publishing Limited
Date and place of Incorporation June 27, 2003, Hong Kong
Registered Address ▇▇▇▇ ▇▇▇▇, ▇/▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇ ▇▇▇▇'▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Authorised share capital HK$1,000 divided into 100,000 shares of HK$0.01 each
Issued share capital
Shareholders Shareholder Name No. of Ordinary Shares
---------------- ----------------------
EconWorld Media Limited 99,999
Fan Cho Tak Alex 1
-------
TOTAL: 100,000
=======
Directors Fan Cho Tak ▇▇▇▇
▇▇ Yuan ▇▇▇▇ ▇▇▇▇▇▇▇
Secretary Rayal Secretaries Limited
-40-
(2)
Name: Money Journal Publication Limited
Date and place of Incorporation January 16, 2004, Hong Kong
Registered Address ▇▇▇▇ ▇▇▇▇, ▇/▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇ ▇▇▇▇'▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Authorised share capital HK$10,000 divided into 1,000,000 shares of HK$0.01 each
Issued share capital
Shareholders Shareholder Name No. of Ordinary Shares
---------------- ----------------------
EconWorld Media Limited 999
Fan Cho Tak Alex 1
-----
TOTAL: 1,000
=====
Directors Fan Cho Tak ▇▇▇▇
▇▇ Yuan ▇▇▇▇ ▇▇▇▇▇▇▇
Secretary Rayal Secretaries Limited
-41-
(3)
Name: Money Journal Advertising Limited
Date and place of Incorporation September 28, 2004, Hong Kong
Registered Address ▇▇▇▇ ▇▇▇▇, ▇/▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇-▇▇▇ ▇▇▇▇'▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Authorised share capital HK$10,000 divided into 1,000,000 shares of HK$0.01 each
Issued share capital
Shareholders Shareholder Name No. of Ordinary Shares
----------------- ----------------------
Money Journal Publication Limited 10,000
------
TOTAL: 10,000
======
Directors Money Journal Publication Limited
Secretary Fan ▇▇▇▇ ▇▇▇▇
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SCHEDULE 3
CORPORATE DETAILS OF THE PRC SUBSIDIARIES
(1)
Name EconWorld(Shanghai) Co., Ltd.
Date of Incorporation April 29, 2003
Registered Address Rm. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇
Registered Capital US$140,000
Total Investment Amount US$200,000
Term of Operation 10 years (from April 29, 2003 to April 28, 2013)
Type of Company limited company
Shareholder Shareholder's Name Shareholding Percentage (%)
------------------ ---------------------------
EconWorld Media Limited 100
Legal Representative and
Managing Director Lo Yuan ▇▇▇▇ ▇▇▇▇▇▇▇
Business Scope Business consulting, consulting on project management, market
research and enterprise image building (excluding advertising).
Licensed to operate where necessary).
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(2)
Name Financial World (Shanghai) Co., Ltd.
Date of Incorporation April 29, 2003
Registered Address ▇▇. ▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
Registered Capital US$210,000
Total Investment Amount US$300,000
Term of Operation 10 years (from April 29, 2003 to April 28, 2013)
Type of Company limited company
Shareholder Shareholder's Name Shareholding Percentage (%)
------------------ ---------------------------
EconWorld Media Limited 100
Legal Representative and
Managing Director Fan Cho Tak Alex
Business Scope Consulting on international economy, investment consulting,
trading information consulting, business consulting and
management consulting. Licensed to operate where necessary.
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SCHEDULE 4
KEY MANAGEMENT
[Names of key management officers]
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SCHEDULE 5
MATERIAL CONTRACTS
[List of material contracts in 2004.]
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SCHEDULE 6
SCHEDULE OF EXERCISING PUT OPTION OR CALL OPTION FOR
NON-MANAGEMENT SHAREHOLDERS
No. of shares available No. of shares available
for sale by exercising Put for sale by exercising
Option or Call Option Put Option or Call Option
starting 30 days after starting 30 days upon
receipt of the Audited receipt of the Audited
Accounts for 2005/6 by the Accounts for 2006 by the
Subscriber and the Subscriber and the
Shareholders' Shareholders'
Representative and Representative and
expiring 90 days after expiring 90 days after
receipt of the Audited receipt of the Audited
Accounts for 2005/6 by the Accounts for 2006 by the
Subscriber and the Subscriber and the
No. of Shareholders' Shareholders'
Name of shareholder shares held Representative Representative
------------------- ----------- -------------------------- -------------------------
▇▇▇▇▇▇ 10,000 10,000 0
Lo 30,000 12,000 18,000
▇▇▇▇▇▇▇ 10,000 8,000 2,000
Justly Investment 5,000 2,000 3,000
Quach 10,000 10,000 0
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EXHIBIT A
PUT OPTION NOTICE
To: Xinhua Finance Limited
I/We, [__________] of [__________] hereby exercise my/our rights to exercise the
Put Option for [__________] shares of par value HK$0.01 each in the capital of
EconWorld Media Limited at an aggregate price of [__________].
You are required to pay us the sum of [__________] to the following bank
account:-
Name of Account: ____________________
Account No. ____________________
Swift code: ____________________
I/We agree to comply with the terms and conditions in relation to the exercise
of Put Option as set out in the Subscription Agreement.
Date:
-------------------------------
By:
---------------------------------
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EXHIBIT B
CALL OPTION NOTICE
To: Management/Non-Management Shareholders
We, Xinhua Finance Limited hereby exercise our rights to exercise the Call
Option for [__________] shares of par value HK$0.01 each in the capital of
EconWorld Media Limited at an aggregate price of [__________].
Please provide us with your bank accounts details so that we can make payment to
you.
We agree to comply with the terms and conditions in relation to the exercise of
Call Option as set out in the Subscription Agreement.
Date:
-------------------------------
Yours faithfully,
For and on behalf of
Xinhua Finance Limited
By:
---------------------------------
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