Exhibit 4.(a).31
SHARE PURCHASE AGREEMENT
Among
Unitedcrest Investments Limited
The Related Entity (as defined herein)
CDC Mobile Media Corporation
(Purchaser)
and
Xxxxx Xxx Lan, Xx Xxxx Ning, Xxxxx Xxx, Ma Xxx Xxxxx
and Xxxxx Xxx Gang
(Sellers)
and
Palmweb Inc.
(Guarantor)
Dated as of June 27, 2005
Execution Version
TABLE OF CONTENTS
PAGE
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Section 1. Definitions and Principles of Construction.................... 1
1.01 Defined Terms................................................... 1
1.02 Principles of Construction...................................... 8
Section 2. Sale and Purchase of the Shares and Consideration............. 8
2.01 Sale and Purchase of the Shares................................. 8
2.02 Consideration................................................... 8
2.03 Closing......................................................... 9
2.04 [intentionally left blank]...................................... 11
2.05 Right to Set-off................................................ 11
Section 3. Representations and Warranties of the Sellers,
the Company and the Related Entity.............................. 11
3.01 Authority....................................................... 11
3.02 Organization of the Company..................................... 12
3.03 Total Equity.................................................... 13
3.04 [Intentionally left blank]...................................... 13
3.04A Related Entity.................................................. 13
3.05 No Conflicts.................................................... 14
3.06 Governmental Approvals and Filings.............................. 14
3.07 Legal Proceedings............................................... 15
3.08 Compliance with Laws and Orders................................. 15
3.09 Brokers or Finders.............................................. 15
3.10 No Bankruptcy or Insolvency..................................... 16
3.11 Financial Representations....................................... 16
3.12 No Undisclosed Indebtedness..................................... 17
3.13 Taxes........................................................... 17
3.14 Employment and Benefits......................................... 17
3.15 Real Property and Business Premises............................. 18
3.16 Tangible Personal Property and Plant & Equipment................ 18
3.17 Intellectual Property........................................... 19
3.18 Contracts....................................................... 20
3.19 Licenses........................................................ 20
3.20 [Intentionally left blank]...................................... 21
3.21 Disclosure and Information...................................... 21
3.22 Absence of Changes.............................................. 21
3.23 Powers of Attorney.............................................. 22
3.24 Products, Services and Assets................................... 22
3.25 Material Customers and Suppliers................................ 22
3.26 Related Party Transactions...................................... 23
Section 4. Representations and Warranties of the Purchaser............... 23
4.01 Organization of the Purchaser................................... 23
4.02 No Conflicts.................................................... 23
4.03 Litigation...................................................... 24
4.04 Transfer or Assignment of Trademark Application................. 24
Section 5. Covenants of the Sellers, the Company and the Related Entity.. 24
5.01 Financial Statements............................................ 24
5.02 Books and Records; Investigation................................ 24
5.03 Fulfillment of Conditions....................................... 25
5.04 Notice and Cure................................................. 25
5.05 Conduct of Business in Ordinary Course.......................... 25
5.06 Indebtedness.................................................... 25
5.07 Regulatory and Other Approvals.................................. 26
5.08 Tax Returns..................................................... 26
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5.09 [Internationally left blank].................................... 26
5.10 Arrangement in Determination Period............................. 26
5.11 Employee Matters................................................ 27
5.12 Related Entity.................................................. 27
5.13 Waiver of Right of First Refusal................................ 28
5.14 Taxes........................................................... 28
5.15 Dividends....................................................... 28
5.16 Integration Plan................................................ 28
5.17 Repayment of RMB9,850,000....................................... 28
5.18 Maintenance of Relationship..................................... 28
5.19 Intellectual Properties......................................... 28
5.20 Revenue Collection.............................................. 29
Section 6. Covenants of the Purchaser.................................... 29
6.01 Notice and Cure................................................. 29
6.02 Fulfillment of Conditions....................................... 29
6.03 Regulatory and Other Approvals.................................. 29
6.04 Late Payment Penalty............................................ 30
Section 7. Conditions to Obligations of the Purchaser.................... 30
7.01 Representations and Warranties.................................. 30
7.02 Performance..................................................... 30
7.03 Certificate..................................................... 30
7.04 Consents and Approval........................................... 30
7.05 Opinious of Counsel............................................. 30
7.06 Board........................................................... 31
7.07 Legal Action.................................................... 31
7.08 No Material Adverse Change...................................... 31
7.09 Share Transfers/Certificates.................................... 31
7.10 Termination of Rights and Certain Securities.................... 31
7.11 [Intentionally left blank]...................................... 31
7.12 Closing Documents............................................... 31
7.13 Board Approval of the Company................................... 32
7.14 Shareholders Approval........................................... 32
7.15 Completion of Due Diligence..................................... 32
7.16 Third Party Consent............................................. 32
7.17 Audited Accounts................................................ 32
7.18 Pre-closing Audit............................................... 32
7.19 Certified Management Accounts................................... 32
Section 8. Conditions to Obligations of the Sellers and the Company...... 33
8.01 Representations and Warranties.................................. 33
8.02 Performance..................................................... 33
8.03 Consents and Approvals.......................................... 33
8.04 Approval of the Purchaser's Board of Directors or
Delegated Subcommittee.......................................... 33
8.05 Board Approval of the Guarantor................................. 33
Section 9 Representations, Warranties, Covenants and Agreements.......... 33
Section 10. Indemnification; Limitations on Liabilities.................. 34
10.01 Indemnification................................................. 34
Section 11. Termination.................................................. 34
11.01 Termination..................................................... 34
11.02 Effect of Termination........................................... 35
Section 12. Miscellaneous................................................ 35
12.01 Notices......................................................... 35
12.02 Expenses........................................................ 36
12.03 Public Announcements............................................ 37
12.04 Waiver.......................................................... 37
12.05 Amendment....................................................... 37
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12.06 No Third Party Beneficiary...................................... 37
12.07 Assignment; Binding Effect...................................... 37
12.08 Invalid Provisions.............................................. 37
12.09 Governing Law................................................... 38
12.10 Arbitration..................................................... 38
12.11 Counterparts.................................................... 39
12.12 Confidentiality................................................. 39
12.13 Exercise of Rights.............................................. 39
12.14 Rule of Construction............................................ 39
12.15 Further Assurances.............................................. 39
12.16 Time shall be of Essence........................................ 39
12.17 Entire Agreement................................................ 40
Section 13. Guarantee.................................................... 40
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This SHARE PURCHASE AGREEMENT, dated as of June 27, 2005, is made by and among
CDC Mobile Media Corporation, a company organized and existing under the laws of
the British Virgin Islands and a 100% wholly owned subsidiary of Xxxxx.xxx Inc.
(the "Purchaser"); Unitedcrest Investments Limited, a company organized and
existing under the laws of British Virgin Islands (the "Compay"); the Related
Entity (as defined below); Xxxxx Xxx Lan, Xx Xxxx Ning, Xxxxx Xxx, Ma Xxx Xxxxx
and Xxxxx Xxx Gang (each the "Seller" collectively, the "Sellers"); Palmweb
Inc., a company incorporated and existing under the laws of Cayman Islands (the
"Guarantor"). Each of the parties hereto may be collectively referred to as the
"Parties" or individually as a "Party".
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the Parties agree as follows:
Section 1. Definitions and Principles of Construction
1.01 Defined Terms.
As used in this Agreement, and unless the context requires a different
meaning, the following terms have the meanings indicated:
"$" or "HK$" shall mean the Hong Kong dollar, the legal currency of the
Hong Kong Special Administrative Region of People's Republic of China.
"2004 Financial Statements" shall mean, collectively, the unaudited financial
statements of the Related Entity for each month ended and as of the end of each
calendar month of March, April, May, June, July, August, September, October,
November and December 2004, the audited balance sheets of the Related Entity as
of December 31, 2004 and the related audited statements of operations,
shareholders' equity and cash flow statements for the year ended December 31,
2004 prepared in accordance with GAAP, together with a true and correct copy of
the report on such audited information with all existing management letters from
the auditors with respect to the results of such audits. All above-mentioned
audited balance sheets, the related audited statements of operations,
shareholders' equity and cash flow statements, report, management letters shall
have been issued by Shenzhen Great Wall Certified Public Accountants Co., Ltd, a
licensed PRC independent public accounting firm mutually acceptable to the
Sellers and the Purchaser. The costs of preparing the 2004 Financial Statements
shall be solely borne by the Related Entity.
"Adjusted Net Asset Value" shall mean (i) the Net Asset Value (excluding
the accounts receivable balance as of June 30, 2005 in relation to the CMCC WAP
First Xxxx and /or the CMCC WAP Second Xxxx and/or the CMCC WAP Third Xxxx) as
reflected in the audited financial statements of the Related Entity minus (ii)
an amount equal to the sum of RMB9,850,000 plus all cash received by the Related
Entity in relation to the CMCC WAP Third Xxxx after the Closing Date minus (iii)
any outstanding PRC tax liability in relation to the unbilled amount of CMCC WAP
Third Xxxx as at or after the Closing date.
"Adjustment Payment" shall mean the amount equal to the product of the CMCC
WAP Third Xxxx multiplied by 30 and multiplied by 20%.
"Affiliate" shall mean any Person that directly, or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agreement" shall mean this Share Purchase Agreement, the exhibits and
schedules hereto, the certificates and Disclosure Schedule delivered in
accordance herewith, as the same may be amended, supplemented or modified from
time to time.
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"Assets" shall mean all assets and properties of the Company and the
Related Entity of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by the Company and the Related
Entity, including without limitation cash, cash equivalents, investment assets,
accounts and notes receivable, chattel paper, documents, instruments, general
intangibles, real estate, equipment, inventory, goods, Intellectual Property,
the IP Assets, the Material Contracts, the Property Leases and the Equipment
Leases.
"Associate" shall have the meaning given in The Rules Governing the Listing
of Securities on the Growth Enterprise Market of the Stock Exchange of Hong Kong
Limited. That is, with respect to any Person, any corporation or other business
organization of which such Person is an officer or partner or is the beneficial
owner, directly or indirectly, of ten percent (10%) or more of any class of
equity securities, any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person.
"Benefit Plan" shall mean any plan, scheme or arrangement established by
the Company or the Related Entity, or any predecessor or Affiliate of any of the
foregoing, existing at the Effective Date or prior thereto, to which the Company
or the Related Entity, as the case may be, contributes or has contributed, or
under which any employee, former employee or director of the Company or the
Related Entity or any beneficiary thereof is covered, is eligible for coverage
or has benefit rights whether provided by the Company or the Related Entity or
pursuant to any governmental program, or otherwise.
"Board" shall mean the board of directors of the Company.
"Business Day" shall mean a day other than Saturday, Sunday or any day on
which licensed banks in Hong Kong are authorized or obligated to close.
"Business or Condition of the Company" shall mean the business, condition
(financial or otherwise), results of operations and Assets and prospects of the
Company and the Related Entity taken as a whole.
"Business Premises" shall have the meaning given in Section 3.15(c).
"Xxxxx.xxx" shall mean Xxxxx.xxx Inc., a Cayman Islands company listed on
the Growth Enterprise Market of The Exchange of Hong Kong Limited.
"Closing" shall have the meaning given to such term in Section 2.03.
"Closing Date" shall mean the later of:
(a) June 30, 2005, subject to the conditions set out in Section 7 being
satisfied as determined by the Purchaser or waived by the Purchaser in its sole
and absolute discretion and the conditions set out in Section 8 being satisfied
as determined by the Sellers or waived by the Sellers in their sole and absolute
discretion; or
(b) such other date as the Purchaser and the Sellers may mutually agree in
writing.
"CMCC" shall mean China Mobile Communications Corporation.
"CMCC WAP First Xxxx" shall mean the revenue generated by the Related
Entity's WAP services provided through the nation-wide WAP platform operated by
the headquarter of CMCC and the regional WAP platform operated by the Guangdong
Branch of CMCC during the period commencing June 1, 2004 and ended March 31,
2005 after deduction of the bad debt and the fees
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charged by CMCC such as the collection commission and transmission fees, as
evidenced by any written communications from any designated CMCC officer in
charge of CMCC's transactions with the Related Entity.
"CMCC WAP Second Xxxx" shall mean the revenue generated by the Related
Entity's WAP services provided through the nation-wide WAP platform operated by
the headquarter of CMCC and the regional WAP platform operated by the Guangdong
Branch of CMCC during the period commencing April 1, 2005 and ended May 31, 2005
after deduction of the bad debt and the fees charged by CMCC such as the
collection commission and transmission fees, as evidenced by any written
communications from any designated CMCC officer in charge of CMCC's transactions
with the Related Entity.
"CMCC WAP Third Xxxx" shall mean the revenue generated by the Related
Entity's WAP services provided through the nation-wide WAP platform operated by
the headquarter of CMCC and the regional WAP platform operated by the Guangdong
Branch of CMCC during the period commencing June 1, 2005 and ending June 30,
2005 after deduction of the bad debt and the fees charged by CMCC such as the
collection commission and transmission fees, as evidenced by any written
communications from any designated CMCC officer in charge of CMCC's transactions
with the Related Entity.
"Company" shall have the meaning given in the preamble.
"Consideration" shall have the meaning given to such term in Section 2.02.
"Constitution" shall mean the memorandum of association, articles of
association, certificate or articles of incorporation and by-laws, or similar
charter documents, as may be amended from time to time.
"Contract" shall mean any agreement, instrument, written contract, together
with any related amendments, waivers, supplements, schedules, exhibits, work
orders, notices as to termination or change thereunder in writing.
"Determination Period" shall mean the period commencing the Effective Date
and ending June 30, 2005.
"Disclosure Schedule" shall mean a schedule delivered to the Purchaser by
the Sellers and the Company herewith and dated as of the Effective Date
containing all lists, descriptions, exceptions, qualifications and other
information and materials as are required to be included therein by the Sellers
pursuant to this Agreement. For the avoidance of doubt, all references to any
Schedule herein are deemed to have been produced by the Sellers to the Purchaser
upon the Effective Date.
"Effective Date" shall mean the date of this Agreement.
"Employment Agreements" shall mean each of the new or amended employment
agreements to be entered into between the Employees and the Company and/or its
designated subsidiary upon or prior to Closing.
"Equipment Leases" shall mean leases of, and agreements to hire, equipment
(including motor vehicles) to the Company including, without limitation, those
listed in Section 3.16(c) the Disclosure Schedule.
"Equity Transfer Agreement" shall have the meaning given in Section 5.12.
"Financial Statements" shall mean, collectively, 2004 Financial Statements,
the unaudited financial statements of the Related Entity and the Company for
each month ended and as of the end of
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each calendar month of January, February, March, April, May and June 2005 and
the audited financial statements for the period from January 1, 2005 to June 30,
2005 and as of June 30, 2005 of the Related Entity as are called for hereunder.
"First Installment" shall have the meaning given in Section 2.02(a)(i).
"GAAP" shall mean generally accepted accounting principles of the PRC.
"Governmental Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Governmental or Regulatory Authorities" shall mean any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the British Virgin Islands, PRC, Hong Kong or any applicable foreign country or
any domestic or foreign state, county, city or other political subdivision.
"Hong Kong" shall mean Hong Kong Special Administrative Region of the
PRCPeople's Republic of China.
"Hong Kong Dollar" or "HK$" shall mean the lawful currency of Hong Kong.
"Inception Date" shall mean May 12, 2005, the date of incorporation of the
Company.
"Indebtedness" means, with respect to any Person: (a) all indebtedness of
such Person, whether or not contingent, for borrowed money, (b) all obligations
of such Person for the deferred purchase price of property or services, (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person as lessee under
leases that have been or should be, in accordance with GAAP recorded as capital
leases, (f) all obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities, (g) all obligations of such
Person to purchase, redeem, retire, defease or otherwise acquire for value any
share capital of such Person or any warrants, rights or options to acquire such
share capital, valued, in the case of redeemable preferred stock, at the greater
of its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (h) all Indebtedness of others referred to in clauses (a) through (g)
above guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an agreement (i)
to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (iii) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether such property is received or such services
are rendered) or (iv) otherwise to assure a creditor against loss, and (i) all
Indebtedness referred to in clauses (a) through (g) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any encumbrance on property including, without
limitation, accounts and contract rights owned by such Person (including Assets
as relates to the Company and the Related Entity), even though such Person has
not assumed or become liable for the payment of such Indebtedness.
"Indemnified Party" shall have the meaning set forth in Section 10.01.
"Indemnifying Party" shall have the meaning set forth in Section 10.01.
"Installments" shall mean the First Installment, the Second Installment and
the Third Installment and "any Installment" shall mean any of the First
Installment, Second Installment or the Third
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Installment.
"Intellectual Property" shall mean: (a) copyrightable works, copyrights and
design rights including all applications, registrations, and renewals in
connection therewith; (b) trademarks, service marks, trade dress, logos, trade
names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith; (c) inventions, discoveries and patents (whether patentable or
unpatentable and whether or not reduced to practice); (d) trade secrets and
confidential information (including ideas, research and development, know-how,
formulas, manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals); (e) computer
software (including data and related documentation) or source or object code,
including improvements, revisions, amendments, modifications or alternations;
(f) other proprietary, intellectual and industrial rights in whatever form or
medium, including moral rights; and (g) the IP Assets.
"IP Assets" shall mean (a) the computer software and music content created,
developed, designed, licensed and owned by the Company and/or the Related Entity
and all improvements, revisions, amendments, modifications or alterations
thereto, including but not limited to those as set forth in Sections 3.17(c) and
(d) of the Disclosure Schedule; (b) the platform, carrier and/or protocol
specific applications; (c) the localization versions of software embedded with
content owned by third parties; and (d) all improvements, revisions, amendments,
modifications or alterations thereto.
"Law" shall mean all laws, statutes, rules, regulations, ordinances, Orders
and other pronouncements having the effect of law of the British Virgin Islands,
PRC, Hong Kong and any foreign country or any domestic or foreign state, county,
city or other political subdivision or of any Governmental or Regulatory
Authority, other than any non-public or "internal" policy, rule, order, guidance
or administrative practice of, or applied by, any Governmental or Regulatory
Authorities except to the extent that any such non-public or internal policy,
rule, order, guidance or administrative practice is known, or should have been
known to any relevant Person.
"Liability" as used either singularly or in the plural shall mean any
liability, debt or obligation of the Company or the Related Entity, including
any drawdowns under any loans made to the Company or the Related Entity after
the Closing Date.
"Lien" shall mean any lien, pledge, hypothecation, mortgage, charge,
security interest, claim, lease, charge, option, right of first refusal, right
to acquire, pre-emptive rights, conversion rights, easement, encroachment,
transfer restriction, or other encumbrance or commitment of any kind.
"Loss" shall mean any and all damages, fines, fees, penalties, obligations,
judgments, deficiencies, losses and expenses (including without limitation
interest, actual court costs, reasonable fees of attorneys, reasonable
retainers, reasonable fees of accountants and other experts or other reasonable
expenses of litigation, reasonable witnesses costs/expenses or other proceedings
or of any claim, default or assessment).
"Management Accounts" shall mean those financial records made available to
the Purchaser in the financial due diligence review performed by the latter
prior to Closing. These financial records shall include the unaudited monthly
balance sheet of the Related Entity and the Company up to June 30, 2005, and the
related unaudited monthly statements of income, retained earnings, stockholders'
equity and changes in financial position of the Related Entity and the Company,
together with all related notes and schedules thereto for 16 months starting
from March 19, 2004 and ending June 30, 2005.
"Material Adverse Effect" shall mean any event, change in or effect on the
Company or the Related Entity that, individually or in the aggregate, has had or
is reasonably expected to have a material adverse effect on the Business or
Condition of the Company or the Related Entity; provided,
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however, that any material adverse effect arising out of or resulting from the
following events shall not be included in determining whether a Material Adverse
Effect has occurred and that the Sellers shall not be responsible for any loss
incurred by the Purchaser as a result of the following:
(a) an event or series of events or circumstances affecting the economy of
the PRC generally in a material negative manner; or
(b) a change or changes in the fee rates of CMCC for mobile, WAP and other
data value-added services as a result of a change in the regulations, rules or
policies of MII or other relevant Governmental or Regulatory Authority or CMCC
or any branch thereof; or
(c) any change in the applicable law or accounting principles and/or
standard (including but not limited to XXXX; or
(d) the entering into of this Agreement or the transactions contemplated
hereby or the announcement thereof.; or
"Material Contracts" shall have the meaning given in Section 3.18(d).
"Material Customer" shall have the meaning given in Section 3.25.
"MII" shall mean the Ministry of Information Industry of the PRC.
"Minority Interest" shall mean an ownership interest less than fifty
percent (50%) of the voting interest in a business enterprise.
"MVAS License" shall mean the Nation-wide Telecommunications Value-added
Service (Second Category) License numbered B2- 20040535 issued by MII to the
Related Entity dated December 14, 2004.
"Net Asset Value" shall mean the at any date the aggregated balance sheet
assets less the aggregated balance sheet liabilities of the Related Entity as of
such date.
"Order" shall mean any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Other Payable" shall mean the aggregated amount of the liabilities owed by
the Related Entity and the Company before the Closing Date, which include only
(i) the amount payable to Xx. Xxxx Xxxx and (ii) the amount payable to Shenzhen
Jie Xin Da Technology Development Limited.
"Payment A" shall have the meaning given in Section 2.02(a)(i).
"Payment B" shall have the meaning given in Section 2.02(a)(i).
"Payment C" shall have the meaning given in Section 2.02(a)(ii).
"Payment D" shall have the meaning given in Section 2.02(a)(ii).
"Person" shall mean an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization, and any government,
governmental department or agency or political subdivision thereof.
"Plant and Equipment" shall have the meaning given in Section 3.16(b).
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"PRC" shall mean the People's Republic of China, for the purpose of this
Agreement, excluding Hong Kong, the Macao Special Administrative Region and
Taiwan.
"PRC WFOE" shall mean the wholly foreign-owned enterprise which is directly
or indirectly owned by or to be established by the Purchaser.
"Proceeding" shall have the meaning given in Section 3.07.
"Property Leases" shall mean all property leases executed by the Company or
the Related Entity that are effective as of the Effective Date.
"Purchaser" shall have the meaning given in the preamble.
"Records" shall mean originals or copies, of all books, files, reports or
records of or relating to or used in connection with the Company and the Related
Entity and including, without limitation: (a) minute books, statutory books and
registers, books of account and copies of taxation returns; (b) major sales
literature, market research reports, brochures and other major promotional
material; (c) all sales and purchasing records; and (d) lists of all regular
suppliers and customers (if any).
"Related Entity" or "SZKK" shall mean Shenzhen KK Technology Limited.
"Representatives" shall have the meaning given in Section 5.02.
"Second Installment" shall have the meaning given in Section 2.02(a)(ii).
"Sellers" shall have the meaning given in the Recitals hereto.
"Shares" shall mean those shares representing 100% of the total issued
share and outstanding equity in the capital of the Company on a fully diluted
basis as of the Closing Date.
"Subsidiaries" when used in plural or "Subsidiary" when used singly shall
mean, in relation to the Company, a corporate entity (a) whose voting shares or
equity interests are owned more than 50% by the Company and (b) over which
managing body the Company exercises control, directly or indirectly.
"Tax" and "Taxes" means and includes any and all taxes (including, without
limitation, any and all income, franchise, sale, useexcise, withholding,
employment, payroll, social security, property, fringe capital gains, goods and
service, group and stamp and custom duties taxes) and similar assessments,
customs, duties, charges and fees (including interest, penalties and additions
to such taxes, assessments, customs, duties, charges and fees, penalties for
failure to file or late filing of any return, report or other filing, and any
interest in respect of such penalties and additions) imposed or assessed by any
federal, state or local taxing authority, including without limitation, British
Virgin Islands, the PRC or Hong Kong.
"Tax Return" shall mean any declaration, statement, report, returns,
computations, notices and information required to be made or provided by the
Company or the Related Entity related to Taxes (including information required
to be supplied to a governmental entity in respect of such report or return)
including, if applicable, combined or consolidated returns for any group of
entities that includes the Company and the Related Entity.
"Tax Claim" shall mean any assessment notice (including a notice of
adjustment of a loss in a manner adversely affecting the Company or the Related
Entity), demand or other document issued or action taken by or on behalf of any
Governmental or Regulatory Authority, based on any facts or circumstances (or
part thereof) arising or existing prior to the Closing Date, as a result of
which the Company or the Related Entity is liable to make a payment for any tax,
levy, impost, deduction, charges, withholdings and duties (excluding stamp
duties) or has suffered a loss, together with related
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interest, penalties, fines and other statutory charges whether accrued before or
after the Closing Date.
"Third Installment" shall have the meaning given in Section 2.02(a)(iii).
"Transaction Documents" shall mean this Agreement (and all relevant share
transfers, share certificates, board and shareholder resolutions and any other
ancillary documents (if any) required for the implementation of the transactions
contemplated under this Agreement) and Employment Agreements, the Equity
Transfer Agreement and any document modifying or supplementing the contractual
arrangements between the Company and the Related Entity.
"Transfer" shall mean the making of any sale, exchange, assignment or gift,
the granting of any security interest, pledge or other encumbrance in, or the
creation of, any voting trust or other agreement or arrangement with respect to
the transfer of voting rights in the Shares, or the creation of any other claim
thereof or any other transfer or disposition whatsoever, whether voluntary or
involuntary, affecting the right, title or interest or possession in or of the
Shares.
"US GAAP" shall mean generally accepted accounting principles of the United
States of America.
"WAP" shall mean Wireless Application Protocol.
1.02 Principles of Construction.
(a) All references to sections, schedules and exhibits are to sections,
schedules and exhibits in or to this Agreement unless otherwise specified. The
words "hereof," "herein," and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provisions of this Agreement.
(b) All accounting terms not specifically defined herein shall be construed
in accordance with generally accepted accounting principles in the PRC.
(c) The singular terms include the plural and the plural terms include the
singular.
(d) The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions or their
interpretation hereof.
(e) Any reference to a Person's "knowledge" or "best knowledge" shall be
deemed to include an additional statement that all reasonable, due and careful
inquiry has been made.
Section 2. Sale and Purchase of the Shares and Consideration.
2.01 Sale and Purchase of the Shares.
Subject to the terms and conditions hereof, and in reliance upon the
representations, warranties and covenants contained in this Agreement as of the
date hereof and on the Closing Date each Seller shall Transfer and deliver to
the Purchaser, and the Purchaser shall purchase, the Shares owned by such Seller
set forth opposite such Seller's name on Schedule A.
2.02 Consideration.
(a) Subject to Section 2.02(b), the consideration payable to the Sellers
for the Shares purchased by the Purchaser under this Agreement and for the 100%
equity interests in the Related Entity acquired by the designated PRC
individuals nominated by the Purchaser under the Equity Transfer Agreement (the
"Consideration") shall be paid in the following manner:
8
(i) First Installment: (A) within 5 Business Days of the execution of
this Agreement the Purchaser shall pay to the Sellers an amount in HK Dollar
cash equivalent to RMB1,000,000 ("Payment A"); and
(B) within 5 Business Days after receipt by the Related Entity of its
WAP services revenue generated through the nation-wide WAP platform operated by
the headquarter of CMCC and the amount of such receipt of revenue is equal to or
greater than RMB 400,000, the Purchaser shall pay to the Sellers an amount in HK
Dollar cash equivalent to RMB1,000,000 ("Payment B") (together with Payment A,
collectively the "First Installment").
The First Installment payable to the Sellers shall be apportioned
between them on a pro-rata basis relative to the shareholding percentage held by
them in the Company as set forth in Schedule A.
(ii) (A) upon the Closing Date and subject to the amount of Other
Payable on the Closing Date being zero, the Purchaser shall pay to the Sellers
an amount in HK Dollar cash equivalent to RMB9,850,000 ("Payment C").
(B) subsequent to the Closing, within 5 Business Days after (X) the
Related Entity shall have received the CMCC WAP First Xxxx in full or any
portion greater than 99.5% thereof and (Y) the Related Entity shall have passed
the 2004 annual inspection of national MVAS license, the Purchaser shall pay to
the Sellers an amount in HK Dollar cash equivalent to RMB8,000,000 ("Payment D")
(together with Payment C, collectively, the "Second Installment").
The Second Installment payable to the Sellers shall be apportioned
between them on a pro-rata basis relative to the shareholding percentage held by
them in the Company as set forth in Schedule A.
(iii) subsequent to the Closing, within 5 Business Days after the
Company shall have received full payment of the CMCC WAP Second Xxxx and the
CMCC WAP Third Xxxx, the Purchaser shall pay to the Sellers an amount in HK
Dollar cash equivalent to the sum of the Adjustment Payment plus the Adjusted
Net Asset Value (the "Third Installment"), provided that neither Adjustment
Payment nor the Adjusted Net Asset Value shall exceed RMB3,000,000. The Third
Installment payable to the Sellers shall be apportioned between the Sellers on a
pro-rata basis relative to the shareholding percentage held by them in the
Company as set forth in Schedule A.
(iv) each of the Sellers agrees that there shall be no re-allocation
of the Consideration among the Sellers in any manner that is inconsistent with
this Section 2.02(a).
(b) For the avoidance of doubt, the sum of the First Installment and the
Second Installment and the Third Installment shall constitute the total
Consideration payable by the Purchaser under this Agreement and by its
designated PRC individuals under the Equity Transfer Agreement. Other than the
amounts set out in Section 2.02(a) above, the Purchaser and each PRC individual
designated by the Purchaser under the Equity Transfer Agreement shall not be
required to pay any other amount in connection with the purchase of the Shares
under this Agreement and the acquisition of the 100% equity interests in the
Related Entity under the Equity Transfer Agreement.
(c) The exchange rate between HK$ and RMB shall be the selling TT rate of
RMB announced by the paying bank on the date immediately proceeding the relevant
date of payment under Section 2.02.
2.03 Closing.
9
The closing for the purchase and sale of the Shares (the "Closing") shall
take place on the Closing Date at the office of the Purchaser in Hong Kong or at
such other time, date and place as the Parties may agree in writing. At or
before the Closing:
(a) the Sellers shall deliver or cause to be delivered to the Purchaser (in
a form reasonably satisfactory to the Purchaser):
(i) share certificate(s) representing the Shares owned and to be sold
hereunder by such Seller set forth opposite such Seller's name on Schedule A for
cancellation;
(ii) definitive share certificates evidencing the Shares in favor of
the Purchaser;
(iii) the instruments of transfer (with the name of the transferee
left blank) and sold notes (if required) in respect of the Shares duly executed
by the Sellers;
(iv) any waivers, consents or other documents required to vest in the
Purchaser or its nominee the full beneficial ownership of the Shares, and
entitling the Purchaser to procure the Shares to be registered in the name of
the Purchaser or its nominee;
(v) the written resignations of all directors, legal representative
and the company secretary (if any) of the Company or the Related Entity, each
confirming that he/she has no claim whatsoever against the Company or the
Related Entity;
(vi) such deed of waiver or other document as the Purchaser may
require duly executed by the Sellers whereby the Sellers irrevocably and
unconditionally waive all debts, liabilities and other obligations whatsoever
owed by the Company or the Related Entity (whether or not then due) to the
Sellers as at Closing;
(vii) certified copies of board or other necessary resolutions of the
Company, (if applicable) the Related Entity for the implementation of the
matters referred to in Section 2.03(b) below;
(viii) a certificate of incumbency of the Company issued within 3
Business Days before the Closing Date.
(b) the Sellers shall procure that the following business be transacted at
a meeting of the directors of the Company and (if applicable) the Related
Entity:
(i) the directors of the Company shall approve the transfer of the
Shares for registration and the entry of the transferee in the register of
members of the Company; and shall cause the shareholders of Related Entity to
approve the registration of the Equity Transfer Agreement and the transfer of
equity interest therein with the applicable PRC company registration
authorities.
(ii) all existing mandates for the operation of the accounts of the
Company and Related Entity shall be revoked and new mandates issued giving
authority to those persons nominated by the Purchaser;
(iii) persons nominated by the Purchaser for appointment as directors,
legal representative (in the case of the Related Entity) or the secretary (in
the case of the Company) of the Company and Related Entity shall be so
appointed; and
(iv) auditors nominated by the Purchaser (if any) for appointment as
auditors of the Company, the Related Entity shall be so appointed to replace the
existing auditors.
(c) At or before Closing, the Purchaser shall deliver or cause to be
delivered to Sellers:
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(i) a copy of such necessary bank document evidencing the wire
transfer of the payment for the First Installment which is payable in cash;
(ii) certified copies of resolutions duly adopted by the Board of
Directors of the Purchaser authorizing and approving (A) the execution of this
Agreement, (B) the purchase of the Shares from the Seller as provided in Section
2.01 and (C) the performance and completion of the transactions contemplated
hereby;
(iii) certified copy of the resolutions duly adopted by the board of
directors of the Guarantor authorizing and approving (A) the execution of this
Agreement by the Guarantor and (B) the performance of its duties and obligations
under this Agreement.
2.04 [intentionally left blank]
2.05 Right to Set-off.
Purchaser's payment of the Adjustment Payments will be subject to set-off
for the settlement of the indemnification obligations set forth in Section 10.
Section 3. Representations and Warranties of the Sellers, the Company and
the Related Entity.
Subject to Section 9(b) of this Agreement, each of the Sellers and the
Company (to their best knowledge, provided that such "best knowledge"
qualification shall not apply to Sections 3.04A, 3.07, 3.08, 3.11, 3.13 and
3.17(a)), jointly and severally represents and warrants to and for the benefit
of the Purchaser, the following:
3.01 Authority.
(a) The Company has all requisite corporate power and authority required to
enter into, execute and deliver this Agreement and the Transaction Documents to
which the Company is a party and to perform its obligations hereunder and each
of the other documents required to be entered into pursuant hereto. The Board
will have at the Closing approved the transactions contemplated by this
Agreement and each of the Transaction Documents to which the Company is a party.
This Agreement and the Transaction Documents to which the Company is a party
have been duly and validly executed and delivered by the Company and constitutes
a legal, valid and binding obligation of the Company enforceable against the
Company (and the Sellers as appropriate) in accordance with the terms subject to
bankruptcy, reorganization, insolvency, moratorium, restructuring or similar
levels of general applicability relating to or affecting creditors' generally
and to general principles of equity. No meeting has been convened or resolution
proposed, or petition presented, and no order has been made, for the winding-up
of the Company. No distress, execution or other similar order or process has
been levied on any of the Assets of the Company or the Related Entity. No
voluntary arrangement has been proposed or reached with any creditors of the
Company or the Related Entity. No receiver, manager, provisional liquidator, or
other officer of the court has been appointed in relation to the Company or the
Related Entity.
(b) Each Seller has full legal capacity, power and authority to enter into,
execute and
11
deliver this Agreement and, where applicable, the Transaction Documents to which
it is a party, and to perform each of its obligations hereunder, thereunder and
under each of the other documents required to be entered into pursuant hereto.
This Agreement and each applicable Transaction Document to which such Seller is
a party have been duly and validly executed and delivered by each such Seller
and will constitute a legal, valid and binding obligation of such Seller and
enforceable against such Seller in accordance with its terms subject to
bankruptcy, reorganization, insolvency, moratorium, restructuring or similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity. No meeting has been convened or
resolution proposed, or petition presented, and no order has been made, for the
winding-up of such Seller. No voluntary arrangement has been proposed or reached
with any creditors of such Seller. Such Seller is able to pay its debts as and
when they fall due and is solvent.
(c) The name of each Seller and his or her shareholding percentage in the
Company and in the Related Entity are listed in Section 3.01(c) of the
Disclosure Schedule.
(d) The Related Entity has full legal capacity, power and authority to
enter into, execute and deliver this Agreement and, where applicable, the
Transaction Documents to which it is a party, and to perform each of its
obligations hereunder, thereunder and under each of the other documents required
to be entered into pursuant hereto. This Agreement and each applicable
Transaction Document to which such Related Entity is a party have been duly and
validly executed and delivered by each such Related Entity and will constitute a
legal, valid and binding obligation of such Related Entity enforceable against
such Related Entity in accordance with its terms subject to bankruptcy,
reorganization, insolvency, moratorium, restructuring or similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity. No meeting has been convened or resolution
proposed, or petition presented, and no order has been made, for the winding-up
of such Related Entity. No voluntary arrangement has been proposed or reached
with any creditors of such Related Entity. Such Related Entity is able to pay
its debts as and when they fall due and is solvent.
(e) The name of each shareholder of the Related Entity and his or her
shareholding percentage in the Related Entity are listed in Section 3.01(e) of
the Disclosure Schedule.
3.02 Organization of the Company.
(a) The Company is a corporation duly organized and validly existing under
the laws of the British Virgin Islands, and has full corporate power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties. The Company has not engaged in any
business since its Inception Date.
(b) The Company is duly qualified, licensed or admitted to do business in
each of such jurisdiction to the extent that such qualification, licensure or
admission is required by that jurisdiction's laws. Except for disclosed hereof,
the Company has full corporate power to own its properties, assets and business
and to carry on its business operations and has done everything necessary to do
business lawfully in the aforementioned jurisdictions.
(c) The name of each director and officer of the Company on the date
hereof, and the position with the Company held by each, are listed in Section
3.02(c) of the Disclosure Schedule.
(d) Prior to the Effective Date, the Sellers and the Company have made
available to the Purchaser true copies of the Constitution and Records of the
Company as in effect on the Effective Date. Subject to the information and
documents as disclosed, the Records are: (i) true and accurate in all material
respects; (ii) give a true and fair view of the trading transactions, financial
and contractual position of the Company and of its assets and liabilities; (iii)
as far as is relevant, have been prepared in accordance with applicable Law; and
(iv) are in the possession of the Company in their original form
12
received by the Company.
(e) The total share capital of the Company consists of 50,000 shares, 1,000
of which are issued and outstanding. None of the issued Shares being sold to the
Purchaser hereunder are subject to any preemptive rights, put or call rights or
obligations, rights of first refusal, anti-dilution rights or liquidation rights
or other rights to subscribe for or purchase securities of the Company (if any).
(f) The Company and the Related Entity have filed and/or registered all
annual returns and other Records as and where required to be filed and/or
registered (if any).
3.03 Total Equity.
(a) Aside from the Shares, there are no issued or outstanding shares of the
Company. The Shares comprise the whole of the issued share capital of the
Company as of the Effective Date. The Sellers are the registered holders and
beneficial owners of the Shares.
(b) The Shares are being sold to the Purchaser by the Sellers free and
clear of any Lien or other interests of any other third party whatsoever. The
delivery of a certificate or certificates at the Closing representing the Shares
in the manner provided in Section 2.03 will transfer to the Purchaser good and
valid title to the Shares, free and clear of all Liens.
(c) There are no commitments in place under which the Company is obligated
at any time to issue any shares or other securities of the Company.
(d) There are no outstanding options with respect to the Company or the
Shares.
(e) There will be at the Closing no restriction(s) on the sale or transfer
of any of the Shares to the Purchaser whatsoever.
3.04 [Intentionally left blank]
3.04A Related Entity.
(a) Related Entity is a limited liability company duly established and
validly existing under the Laws of the PRC. Save as disclosed, it has full
corporate power and authority to conduct its existing mobile value-added service
businesses, including but not limited to the WAP business, as and to the extent
now conducted, and to own, use and lease its assets and properties. Section
3.04A(a) of the Disclosure Schedule sets forth the business scope of the Related
Entity as specified in its business license and its MVAS license. Each such
business scope is sufficient for the Related Entity to conduct its business to
the extent it has been and is currently conducted.
(b) The name of each director and officer of the Related Entity on the date
hereof, and the position with each respective Related Entity held by each, are
listed in Section 3.04A(b) of the Disclosure Schedule.
(c) Prior to the execution of this Agreement, the Sellers and the Company
have made available to the Purchaser true and complete (in all material
respects) copies of the Constitution and Records of the Related Entity as in
effect on the date hereof. The Records and the Financial Statements are: (i)
complete, true and accurate in all material respects; and (ii) give a true and
fair view of the trading transactions, financial and contractual position of the
Related Entity and of its assets and liabilities; (iii) as far as is relevant,
have been prepared in accordance with the applicable Law; and (iv) are available
to the Company in their original form.
13
(d) Except as disclosed in Section 3.04A(d) of the Disclosure Schedule, the
registered capital of the Related Entity has been fully paid according to the
capital payment schedule stipulated in the articles of association of the
Related Entity approved by PRC relevant authorities and the equity interest in
the Related Entity is not subject to any preemptive rights, put or call rights
or obligations, rights of first refusal, anti-dilution rights or liquidation
rights or other rights to subscribe for the registered capital of the Related
Entity. The equity interest in the Related Entity is owned, beneficially and of
record, by the shareholders identified in Section 3.01 (e) of the Disclosure
Schedule free and clear of all Liens. Save as disclosed, the Related Entity has
properly reserved from its after-tax profits (if any) in each fiscal year the
amounts required by applicable Law in the PRC to the reserve fund and staff
bonus and welfare fund.
(e) Save as disclosed, there are no other corporations, partnerships, joint
ventures, associations or other entities in which the Related Entity owns, of
record or beneficially, any direct or indirect equity or other interest or any
right (contingent or otherwise) to acquire the same.
(f) Related Entity is not directly or indirectly owned or beneficially or
legally held by any PRC stated owned enterprise.
(g) All the branch office of the Related Entity listed in Section 3.04A(g)
of the Disclosure Schedule are validly existing under the Laws of the PRC.
3.05 No Conflicts.
To the best knowledge of the Sellers, the execution and delivery by the
Sellers, the Company and the Related Entity of this Agreement and the
Transaction Documents to which they are parties do not, and the performance by
the Sellers and the Company of their respective obligations under this Agreement
and such Transaction Documents and the consummation of the transactions
contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the Constitution or any resolutions of the
shareholders or directors of the Company or the Related Entity;
(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order of any Governmental or Regulatory Authority of the
PRC, the British Virgin Islands, Hong Kong or any other governmental,
administrative or regulatory bodies applicable to any Seller, the Company or the
Related Entity or any of their respective assets and properties except for such
conflicts, violations or breaches as would not, individually or in the
aggregate, have a Material Adverse Effect; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute a default under, (iii) require the Sellers, the Company or the
Related Entity to obtain any consent, approval or action under, (iv) result in
or give to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments under, or (vi) result in the creation or imposition of any
Lien upon the Sellers, the Company or the Related Entity or any of their
respective Assets under, any Material Contract or Governmental License to which
the Sellers, the Company or the Related Entity is a party or holder of or by
which any of their respective Assets are bound, except for such conflicts,
violations, breaches, defaults, requirements to obtain consent, approval or
action, rights of termination, cancellation, acceleration or modification,
payments or Liens as would not have a Material Adverse Effect.
3.06 Governmental Approvals and Filings.
Except as disclosed in Section 3.06 of the Disclosure Schedule, no consent,
approval or action
14
of, filing with or notice to any applicable Governmental or Regulatory Authority
on the part of the Sellers, the Company or the Related Entity is required in
connection with the execution, delivery and performance of this Agreement, the
Transaction Documents or the consummation of the transactions contemplated
hereby.
3.07 Legal Proceedings.
(a) Prior to the Effective Date, there is no action, suit, arbitration
proceeding, inquiry, claim or investigation either before or brought by any
Governmental or Regulatory Authority or other Person pending or threatened in,
or before any court or quasi-judicial or administrative agency of any
jurisdiction or before any arbitrator (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) (any "Proceeding"),
against or affecting the Company or the Related Entityor any Seller (as it
relates to the Company). So far as the Company and each Seller is aware, there
are no facts likely to give rise to any Proceeding.
(b) Prior to the Effective Date, neither the Company nor any Seller (as it
relates to the Company) has commenced or settled any legal proceedings including
ordinary routine litigation incidental to the Company's or the Related Entity's
business. There are no outstanding Orders by which the Company or any Seller (as
it relates to the Company) or the Related Entity or any of their securities,
assets, properties or businesses are bound.
(c) Prior to the Effective Date, no material claim has been made against
the Company or the Related Entity in connection with any defective product or
services supplied by it in the course of carrying on its business and the
Company or the Related Party has maintained any insurance that is customary to
the applicable industry and type of business.
(d) Prior to the Effective Date, there does not exist any actual written
threat or any action, proceeding or other application pending before any court
or Governmental or Regulatory Authority brought by any Person or Governmental or
Regulatory Authority: (i) challenging or seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement, or seeking to
obtain any material damages from any of the Parties or their Affiliates as a
result of such transactions; (ii) seeking to prohibit or impose any limitations
on the Purchaser's ownership or operation of all or any portion of the Shares or
the underlying assets of the Company, or to compel the Purchaser to dispose of
or hold separate all or any portion of its or the Shares or the Company's
business or assets as a result of the transactions contemplated by the
Agreement; or (iii) that would cause any of the transactions contemplated by
this Agreement to be rescinded following consummation.
3.08 Compliance with Laws and Orders.
Except as disclosed, the Company and the Related Entity and each Seller has
complied in all material respects with applicable Law and Order and none of the
Company, the Related Entity or any Seller and their respective Affiliates is or
has at any time since their respective establishments been, or has received any
notice that it is or has at any time been, in violation of or in default under,
in any material respect, any Law or Order applicable to the Company or the
Related Entity or any of their respective Assets.
3.09 Brokers or Finders.
The Company or Related Entity has not incurred, or will not incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement. For the
avoidance of doubt, any brokerage, finders' fee, agents' commissions or any
similar charge(s) in relation to or associated with this Agreement, will be paid
by the Sellers.
15
3.10 No Bankruptcy or Insolvency.
(a) To the best knowledge of the Sellers, no order has been made, or
petition presented, or resolution passed for the winding-up or bankruptcy (as
the case may be) of the Company or the Related Entity or any Seller. None of the
Company or the Related Entity has had:
(i) any petition or order for winding-up filed against it;
(ii) any appointment of a receiver over the whole or part of the
undertaking of its assets;
(iii) any petition or order for administration against it;
(iv) any voluntary arrangement between any creditor and it;
(v) any distress or execution or other process levied in respect of it
which remain undischarged; or
(vi) any unfulfilled or unsatisfied judgment or court order against it
over the amount of US$10,000.
(b) None of the Company or the Related Entity or any Seller is insolvent or
bankrupt and each can pay its debts as and when they fall due.
(c) There are no circumstances which would entitle any Person to
successfully present a petition for the winding-up or bankruptcy or
administration of the Company or the Related Entity or any Seller or to appoint
a receiver over the whole or any part of the undertaking or assets of the
Company or the Related Entity or any Seller.
3.11 Financial Representations.
(a) Complete and unaltered copies of the Management Accounts have been
delivered by the Company to the Purchaser. The Management Accounts (i) were
prepared in accordance with the books of account and other financial records of
the Company and the Related Entity, (ii) present fairly the consolidated
financial condition and results of operations of the Company and the Related
Entity as at the dates thereof or for the respective periods covered thereby,
(iii) have been prepared in accordance with US GAAP or GAAP applied on a basis
consistent with the past practices of the Company and the Related Entity (except
as may be indicated in the notes thereto and except that the Management Accounts
do not contain footnotes and are subject to normal and recurring period-end
adjustments, which adjustments would not have a Material Adverse Effect) and
(iv) include all adjustments that are necessary for a fair presentation of the
consolidated financial condition of the Company and the Related Entity and the
results of the operations of the Company and the Related Entity as of the dates
thereof or for the periods covered thereby. There are no Liabilities of the
Company, or the the Related Entity, other than Liabilities that are reflected or
reserved against on the unaudited consolidated balance sheets of the Company and
the Related Entity for the period ended as of June 30, 2005 and would not have a
Material Adverse Effect.
(b) The 2004 Financial Statements and the Financial Statements as of June
30, 2005: (i) reflect all items of income and expense and all assets and
Liabilities required to be reflected therein in accordance with US GAAP or GAAP
applied on a basis consistent with the past practices of the Company and the
Related Entity, respectively, (ii) are in all material respects complete and
correct, and do not contain or reflect any material inaccuracies or
discrepancies and (iii) have been maintained in accordance with good business
and accounting practices.
(c) Section 3.11(c) of the Disclosure Schedule sets forth each and every
account
16
maintained by each of the Company and the Related Entity at a bank or other
financial institution, including the name of such bank or financial institution,
account number and the amount of balance on such account as of the Effective
Date.
3.12 No Undisclosed Indebtedness.
None of the Company or the Related Entity has any material liability for
Indebtedness in excess of HK$5,000 that has not been reflected or disclosed in
the Management Accounts for the period ended as of June 30, 2005.
3.13 Taxes.
(a) The Company and the Related Entity have duly filed all Tax Returns for
any period on or before the Closing Date and the same have been made or given in
good faith within the requisite periods and on a proper basis and when made were
true and accurate in all material respects and are up to date and none of them
contains any statement that is false or misleading in any material respects or
omits to refer to any material matter which is required to be included or
without which the statement is false or misleading. None of such Tax Return is
or is likely to be the subject of any dispute with any relevant tax authority.
(b) The Company and the Related Entity have paid when due, and have
withheld, deducted and accounted to the relevant authorities for, all Taxes
which they have become liable to pay, withhold, deduct or account for on or
before the Effective Date. For the purposes of this Section 3.13(b) "a liability
to pay" includes a liability to pay any penalty or interest incurred in relation
to tax dispute(s). None of the Company, the Related Entity, or any respective
director or officer thereof has paid or become liable to pay any fine, penalty,
surcharge or interest in relation to tax in relation to the business activities
of the Company and the Related Entity.
(c) The Company and the Related Entity have complied in all material
respects with all applicable legislation, regulations, executive orders and
directions relating to or associated with any Taxes.
(d) There are no outstanding or likely disputes or questions or demands
between the Company and the Related Entity, on the one hand, and any
Governmental or Regulatory Authority or agent thereof, on the other hand,
concerning any Tax liability. There are no Tax liens on any of the Assets of the
Company or the Related Entity. None of the Company or the Related Entity has
received any claim from any taxing authority in a jurisdiction in which the
Company or the Related Entity is or may be subject to taxation claim and in
which the Company or the Related Entity has failed to file Tax Returns required
by that jurisdiction. The Sellers have made available to the Purchaser correct
and complete copies of all Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Company and the Related
Entity since the Inception Date (if any).
(e) Other than pursuant to this Agreement, none of the Company or the
Related Entity has ever been a party to or bound by any Tax indemnity, Tax
sharing or similar agreement and none of the Company nor the Related Entity has
any material liability for any Taxes of any other person.
3.14 Employment and Benefits.
(a) Prior to Closing, the Company has already provided to the Purchaser:
(i) the names and commencement date of employment of current employees, and
directors of the Company and the Related Entity who will serve in such capacity
on the Closing Date and the names and commencement date of contractors who are
serving in such capacity; (ii) the monthly salary of each such employee and
(iii) bonus or commission scheme and any other benefits provided or which the
Company, or the Related
17
Entity is bound to provide (whether now or in the future) to all such employees
or otherwise.
(b) On or before the expiry date of the Determination Period, each of the
employee of the company and the Related Entity has executed a release letter
which states the Company has fully paid off all the salary and benefits for that
employee and such employee shall not lodge any claim or petition against the
Company and the Related Entity or any director, officer of them in the future.
(c) None of the Company or the Related Entity or any Seller has offered,
promised or agreed for the future any material variation in any employment or
contractor/service agreement of the Company or the Related Entity, as the case
may be, in the ordinary course of its business. Without limiting the generality
of the preceding sentence, there has been no material change in the remuneration
or benefits of any executives, directors, officers or employees of the Company
or the Related Entity within the past 12 months.
(d) There is no legal action or dispute existing or, to the best knowledge
of the Sellers and, threatened or anticipated in respect of or concerning any of
the employees relating to or based on any facts or circumstances (or part
thereof) arising or existing prior to the Effective Date. As far as the Company,
the Related Entity and each Seller is aware, there are no facts or circumstances
which are likely to result in such a dispute.
(e) Except as disclosed in Section 3.14(e) of the Disclosure Schedule, no
loans or other advances have been made to any director, officer, employee or
contractor of the Company or the Related Entity, other than for travel
allowances and other expenses in the ordinary course of business.
3.15 Real Property and Business Premises.
(a) None of the Company or the Related Entity owns any real property
whatsoever.
(b) All of the commercial leases and subleases executed by the Company or
the Related Entity (if any) are in full force and effect, and none of the
Company or the Related Entity has received notice of any claim of any sort that
is currently outstanding and that has been asserted by anyone adverse to the
rights of the Company or the Related Entity under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or the
Related Entity to the continued possession of the commercial leased or subleased
premises under any such commercial lease or sublease.
(c) Section 3.15(c) of the Disclosure Schedule accurately in
all material respects describes all the business premises leased or occupied by
the Company or the Related Entity (the "Business Premises"). The Company and the
Related Entity, as the case may be, has exclusive occupation of the Business
Premises.
3.16 Tangible Personal Property and Plant & Equipment.
(a) The Company and the Related Entity is in possession of and has good
title to, or has valid leasehold interests in or valid rights under contract to
use, all tangible personal property including all plant and equipment used in
the conduct of its business, including all tangible personal property reflected
on the balance sheets included in the Financial Statements and tangible personal
property acquired since the Inception Date other than property disposed of since
such date in the ordinary course of business. All such tangible personal
property including all plant and equipment that is owned or leased by the
Company and the Related Entity is free and clear of all Liens and is in good
working order and condition, ordinary wear and tear excepted, and its use
complies in all material respects with all applicable Laws.
(b) Section 3.16(b) of the Disclosure Schedule is a complete list of all
items of network and computer equipment owned by the Company and the Related
Entity with a written down value in excess of RMB2,000 as at May 31, 2005
("Plant and Equipment"). Except as set forth in Section 3.16(b) of the
18
Disclosure Schedule, each item of Plant and Equipment is in good repair taking
into account normal wear and tear, is in satisfactory working condition and
capable of doing the work for which it is designed and is physically in the
possession of the Company and the Related Entity.
(c) Section 3.16(c) of the Disclosure Schedule is a complete list of all
Equipment Leases. The Company and the Related Entity has made all payments
required by and has otherwise complied with the terms of each of the Equipment
Leases, except for such failure thereof as would not have a Material Adverse
Effect.
3.17 Intellectual Property.
(a) The Company and the Related Entity owns or has the right to use
pursuant to license, sublicense, agreement or permission all the Intellectual
Property set out in Section 3.17(c) and 3.17(d) of the Disclosure Schedule. The
Company and the Related Entity has taken all necessary, proper and reasonable
steps and actions to maintain and protect its own Intellectual Property.
(b) Save as disclosed, to the best knowledge of the Sellers, none of the
Company or the Related Entity has, on its own behalf or through an agent,
infringed upon, misappropriated, or used without a required license, any
Intellectual Property of third parties, or received any written charge,
complaint, claim, demand, or notice alleging any such infringement,
misappropriation, or misuse that has not been finally resolved (including any
claim that the Company or the Related Entity must license or refrain from using
any Intellectual Property of any third party). To the best knowledge of the
Sellers, no third party has infringed upon, misappropriated, or otherwise
misused any Intellectual Property of the Company or the Related Entity.
(c) Section 3.17(c) of the Disclosure Schedule identifies each Intellectual
Property, whether registered or otherwise, that is materially related to the
core business of, and is owned by, the Company or the Related Entity and
identifies each license, agreement, or other permission currently in effect
pursuant to which the Company or the Related Entity has granted to any third
party rights with respect to any of such Intellectual Property other than in the
ordinary course of business. The Company has delivered to the Purchaser correct
and complete copies of all written documentation evidencing ownership and
prosecution (if applicable) of rights of each such Intellectual Property that is
in the possession of the Company. With respect to each item of Intellectual
Property identified in Section 3.17(c) of the Disclosure Schedule:
(d) Section 3.17(d) of the Disclosure Schedule lists the items of
Intellectual Property that any third party owns and that the Company and the
Related Entity use pursuant to applicable licenses, sublicenses, agreements, or
permission (other than pursuant to shrink-wrap software licenses, shareware/open
source or site licenses). With respect to each item of Intellectual Property
identified on Section 3.17(d) of the Disclosure Schedule, save as disclosed, the
license, sublicense, agreement, or permission is and will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
immediately following the consummation of the transactions contemplated hereby;
and neither the Company nor the Related Entity has received any notice to the
effect (or is otherwise aware) that the use by the Company or the Related Entity
of the Intellectual Property conflicts with or allegedly conflicts with or
infringes the rights of any Person.
(e) To the best knowledge of the Sellers, there has not been:
(i) misuse or unauthorized disclosure of the Company's or the Related
Entity's confidential information in any material respect; or
(ii) other act which may affect the validity or enforceability of the
Intellectual Property rights of the Company or the Related Entity in any
material respect.
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(f) None of the Company or the Related Entity or any Seller is aware,
having made due and proper inquiries, of any inappropriate, improper,
unpermitted or infringing use by any other person of any of the business names
or the trade marks owned or used by the Company or the Related Entity.
3.18 Contracts.
(a) Save as disclosed, there are no contracts or obligations, agreements or
arrangements involving the Company or the Related Entity and no practices in
which the Company or the Related Entity is engaged, which are void, illegal,
unenforceable, registerable or under which contravene in any material respect,
any fair competition legislation or regulations of any applicable Governmental
or Regulatory Authority, nor has the Company or the Related Entity received any
threat or complaint or request for information or investigation in relation to
or in connection with any such legislation or regulations.
(b) The Company and the Related Entity have duly performed and complied in
all material respects with its obligations under all Material Contracts. None of
the Company or the Related Entity has made any offers, tenders or quotations
which are still outstanding and capable of giving rise to a contract by the
unilateral act of a third party, other than in the ordinary course of business
and on customary terms.
(c) With respect to the Material Contracts:
(i) each Material Contract is valid and binding on the parties thereto
and is in full force and effect;
(ii) upon consummation of the transactions contemplated by this
Agreement and the Transaction Documents, each Material Contract shall continue
in full force and effect without penalty or Material Adverse Effect. None of the
Company or the Related Entity is in breach of, or default under, any Material
Contract;
(iii) none of the Company or the Related Entity has received any
notice of termination, cancellation, breach or default under any Material
Contract and, no party to any Material Contract is in breach thereof or default
thereunder.
(d) Section 3.18(d) of the Disclosure Schedule contains a true and correct
list of all material agreements, instruments, written contract or other
arrangement, together with any related amendments, waivers, supplements,
schedules, exhibits, work orders, notices as to termination or change
thereunder, to which the Company the Related Entity or any Seller (as it relates
to the Company) is a party (the "Material Contracts") which are material for the
Business or Condition of the Company and the Related Entity.
3.19 Licenses.
(a) Section 3.19 of the Disclosure Schedule contains a true and complete
list of all Governmental Licenses used in and material to the business or
operations of the Company or the Related Entity, setting forth the owner, the
function and the expiration and renewal date of each. Prior to the execution of
this Agreement, the Company has made available to Purchaser true and complete
copies of all such Governmental Licenses. Except as disclosed in Section 3.19 of
the Disclosure Schedule:
(i) The Company and the Related Entity owns or validly holds all
Governmental Licenses that are material to its business or operations;
20
(ii) each Governmental License listed in Section 3.19 of the
Disclosure Schedule is valid, binding and in full force and effect; and
(iii) to the best knowledge of the Sellers, none of the Company or
the Related Entity is, or has received any notice that it is, in default (or
with the giving of notice or lapse of time or both, would be in default) under
any such Governmental Licenses.
(b) Without limiting the generality of paragraph (a) above, all
Governmental Licenses required under PRC law for the due and proper
establishment and operation of businesses of the Company (if any) and the
Related Entity and for the conduct of the business of the Company (if any) and
the Related Entity have been duly obtained from the relevant PRC authorities and
are in full force and effect. All filings and registrations with the relevant
PRC authorities required in respect of Company (if any) and the Related Entity
and its operations, including but not limited to registration with the Ministry
of Information Industry, Ministry of Commerce, the State Administration of
Industry and Commerce, the State Administration of Foreign Exchange or their
respective authorized local agencies, and the relevant tax bureau, customs
authorities and product registration authorities, have been duly completed in
accordance with the relevant PRC rules and regulations.
3.20 [Intentionally left blank]
3.21 Disclosure and Information.
(a) No representation or warranty contained in this Agreement or in any
other Transaction Document and given by, or on behalf of, any Seller, the
Company, the Related Entity or any Key Employee and no statement contained in
the Disclosure Schedule, any certificates delivered pursuant hereto or the
Management Accounts delivered pursuant to this Agreement or such monthly
management accounts for the Company and the Related Entity for each month in
2004 from April 1, 2004 up to and including the most recently completed month
prior to the Closing, contains any material misstatement or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading.
(b) To the best knowledge of the Sellers, there are no facts or
circumstances that could adversely affect the Shares, the Company the Related
Entity, any Seller (as it relates to the Company), any of the Assets or the
condition (financial or otherwise), operations, profitability or prospects of
the Company or the Related Entity which have not been fully and properly
disclosed to the Purchaser.
(c) The Constitution, minute books and other similar records of the Company
and the Related Entity as made available to the Purchaser prior to the Effective
Date contain true and all material record, of actions taken at meetings and by
written consents in lieu of meetings of the shareholders, the boards of
directors and committees of the boards of directors of the Company and the
Related Entity. The share transfer ledgers and other similar records of the
Company and the Related Entity as made available to the Purchaser prior to the
Effective Date accurately reflect all record transfers prior to such date in the
share capital of the Company and the registered capital of the Related Entity.
Except as those maintained by the Company's registration agent or the relevant
Government and Regulatory Authorities.
3.22 Absence of Changes.
From March 19, 2004 to the Effective Date, there has not been any change
in the Business or Condition of the Company that would result in a Material
Adverse Effect and each of the Company and the Related Entity has been
conducting its business only in the ordinary course and in a manner consistent
with past practice. Without limiting the generality of the foregoing, from March
19, 2004
21
to the Effective Date, save as disclosed, none of the Company or the Related
Entity has:
(a) amended, terminated, canceled or compromised any material claims of, or
waive any other rights of substantial value to, the Company or the Related
Entity;
(b) sold, transferred, leased, subleased, licensed or otherwise disposed of
any properties or assets, real, personal or mixed, with a value in excess of
HK$5,000 individually or HK$40,000 in the aggregate (including, without
limitation, leasehold interests and intangible property);
(c) issued or sold any share capital, equity interests, notes, bonds or
other securities, or any option, warrant or other right to acquire the same, of
the Company or the Related Entity;
(d) made any capital expenditure or commitment for any capital expenditure
in excess of HK$5,000 individually or HK$10,000 in the aggregate;
(e) incurred any Indebtedness in excess of HK$10,000 individually or
HK$40,000 in the aggregate;
(f) amended, modified or consented to the termination of any Material
Contract or the Company's or the Related Entity's rights thereunder;
(g) amended or restated the Constitution of the Company or the Related
Entity, or
(h) changed any content of the Books and Records.
3.23. Powers of Attorney.
There are no outstanding powers of attorney executed on behalf of the
Company or the Related Entity or comparable delegations of authority
outstanding.
3.24. Products, Services and Assets.
(a) There are no current or (to the best knowledge of the Sellers)
threatened disputes with regards to the Company's or the Related Entity's IP
Assets. The Company's, and the Related Entity's products, as the case may be,
have been successfully installed and utilized by customers of the Company, or
the Related Entity, as the case may be, or have been delivered successfully and
satisfactorily to all such customers of the Company or the Related Entity, as
the case may be.
(b) Each of the Company and the Related Entity is the legal and beneficial
owner of, or has valid right to use, all its Assets and there are no Lien over
or affecting such Assets.
(c) The Assets are sufficient to enable the effective conduct of the
business of the Company and the Related Entity after Closing as it is carried on
at the date of this agreement and at Closing.
3.25 Material Customers and Suppliers.
(a) For purposes of this Section 3.25(a), a "Material Customer" shall mean
CMCC or any of its subsidiaries or branches at Guangdong, Henan and Beijing.
Section 3.25(a) of the Disclosure Schedule lists the Material Customers and
applicable contracts of the Company or the Related Entity with each of these
Material Customers. Each of the Material Customers, related contracts and
attributed revenues are not duplicative or redundant. With respect to the
applicable contracts with the Material Customers, save as disclosed, there
exists no event of default and, no event has occurred which would result in any
such event of default or prevent the Company or the Related Entity from
22
obtaining the benefit thereunder. The Company's and the Related Entity's
relationship with each Material Customer is good and, Save as disclosed, there
are no facts or circumstances (i) relating to any dispute threatened, actual or
pending between the Company or the Related Entity and any Material Customer that
cannot be settled in the ordinary course of business, (ii) relating to any
desire or plan of any Material Customer to terminate or modify or not to renew
such relationship or (iii) which, in connection with any Material Customer in
respect of which any relevant contract has not been executed or has expired,
have come to the attention of the Sellers indicating that such contract will not
be executed or renewed, as the case may be.
(b) The total paying users for the Related Entity as of May 31, 2005 was
not less than 200,000 and the total number of active WAP billing codes granted
by CMCC to and maintained by Company was not less than 28 and as of May 31,
2005.
(c) To the best knowledge of the Sellers, there is no existing Material
Customer of the Company or the Related Entity who is likely to materially reduce
its trading with the Company or the Related Entity as a result of the
acquisition of the Shares by the Purchaser.
3.26 Related Party Transactions.
(i) There are no intercompany Liabilities between the Company or the
Related Entity, on the one hand, and any Seller, or officer, director, Affiliate
or Associate of such Seller or any Associate of any such officer, director or
Affiliate (other than the Company or the Related Entity), on the other, (ii)
neither any such Seller nor any such officer, director, Affiliate or Associate
provides or causes to be provided any assets, services or facilities to the
Company or the Related Entity. All transactions engaged in by the Company or the
Related Entity, any Seller and any Associate or Affiliate thereof, was incurred
or engaged in, as the case may be, on an arm's-length basis.
Section 4. Representations and Warranties of the Purchaser.
4.01 Organization of the Purchaser.
The Purchaser represents and warrants that the Purchaser is a corporation
duly incorporated and validly existing and in good standing under the laws of
the British Virgin Islands and has all requisite power and authority to enter
into and perform its obligations under this Agreement. Once executed by the
Purchaser, this Agreement and the Transaction Documents required to be executed
by the Purchaser have been duly and validly executed and delivered by the
Purchaser and when duly executed will constitute a legal, valid and binding
obligation of the Purchaser enforceable against such Purchaser subject to
bankruptcy, reorganization, insolvency, moratorium, restructuring or similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
4.02 No Conflicts.
The execution and delivery by the Purchaser of this Agreement, and the
performance by the Purchaser of its agreements and obligation contemplated
hereunder and thereunder will not, (i) conflict with any of, or require the
Consent of any Person under, the terms, conditions or provisions of the
organizational documents of the Purchaser; (ii) violate any provisions of
applicable Law, or require any Consent of any Governmental Authority having
jurisdiction over the Purchaser or any of its Affiliates; (iii) conflict in any
way with, result in a beach of, constitute a default under (whether with the
giving of notice or the lapse of time or both), or accelerate or permit the
acceleration of the performance required by, or require any Consent under, any
indenture, mortgage, lien, lease agreement or instrument to which the Purchaser
is a party or by which it is bound or to which any of its property is subject or
(iv) result in the creation of any Lien upon the assets of the Purchaser under
any such indenture, mortgage, lien, lease, agreement or instrument, which
failure to obtain such Consent, or which violation, conflict, breach or
23
default with respect to the matters specified in clauses (iii) through (iv) of
this clause (c) would materially and adversely affect the ability of the
Purchaser to perform its obligations under, or prevent, prohibit or enjoin the
consummation of the transactions contemplated by this Agreement.
4.03 Litigation.
(i) There are no claims, actions, suits, proceedings or orders pending
or, to the Purchaser's knowledge, threatened against or affecting the Purchaser
or their assets or properties, at law or in equity, before or by any
Governmental Authority that would reasonably be expected to materially delay or
impair the ability of the Purchaser to consummate the transactions contemplated
hereby, and (ii) the Purchaser is not subject to any material order, writ,
injunction, judgement or decree of any court or any Governmental Authority
rendered against the Purchaser.
4.04 Transfer or Assignment of Trademark Application.
The Purchaser represents and warrants that it shall procure the transfer or
assignment of the trademark application in class 38 made by the Related Entity
on June 8, 2004 ("Trademark Application") to the Sellers (or their nominees) to
be effected as soon as practicable after the Closing Date without any
consideration if the alteration of the identity of the applicant of the
Trademark Application cannot be achieved before the Closing Date.
Section 5. Covenants of the Sellers, the Company and the Related Entity.
Each Seller and the Company, jointly and severally, covenants and agrees
with the Purchaser that, at all times from and after the Effective Date until
the Closing and, with respect to any covenant, agreement or appointment by its
terms to be performed in whole or in part after the Closing, for the period
specified herein, each Seller and the Company will comply with all covenants and
provisions of this Section, except to the extent the Purchaser otherwise consent
in writing.
5.01 Financial Statements.
(a) Prior to Closing, the Company and the Sellers shall deliver to the
Purchaser true and complete copies of the: (i) monthly management accounts for
the Company and the Related Entity for each month in 2004 and 2005 from March
19, 2004 up to and including the most recently completed month prior to the
Closing, and (ii) 2004 Financial Statements. The Management Accounts will be
prepared in accordance with or reconciled to US GAAP or GAAP, and such
management accounts will be prepared in accordance with US GAAP or GAAP, and
will fairly present the financial condition and results of operations of the
Company and the Related Entity as of the respective dates thereof and for the
respective period covered thereby.
5.02 Books and Records; Investigation.
At any time until the Closing, the Company and the Related Entity shall
cause its officers, directors, employees, agents and representatives to (a)
provide the Purchaser and its officers, directors, employees, agents, counsel,
accountants, financial advisors, consultants and other representatives (together
"Representatives") with full access, upon reasonable prior notice and during
normal business hours, to all officers, directors, employees, agents,
accountants, customers and suppliers of the Company and the Related Entity and
their Assets and Books and Records, and (b) furnish the Purchaser and such other
Persons with all such information and data (including without limitation copies
of Material Contracts, Benefit Plans, Constitutions and Records) concerning the
business and operations of the Company and the Related Entity as the Purchaser
or any of such other Persons may reasonably request in connection with such
investigation.
24
5.03 Fulfillment of Conditions.
From the date hereof until the Closing, each Seller, the Company and the
Related Entity will execute and deliver at the Closing each instrument that such
Seller or the Company is required to execute and deliver hereunder as a
condition to the Closing, shall take all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy all other
conditions to the obligations of the Purchaser contained in this Agreement and
shall not permit the Company to take, or fail to take, any action that could
reasonably be expected to result in the non-fulfillment of any such condition
save and except that the Purchaser is duly informed. Without limiting the
generality of the foregoing, each Seller and the Company shall not take or omit
to take any reasonable action, or permit such action or omission if it
reasonably can be expected that as a result of such action or omission, any
representation or warranty made by the Sellers, or the Company under this
Agreement shall not be true and correct in all respects at and as of the Closing
Date as if made on that date save and except that the Purchaser is duly
informed.
5.04 Notice and Cure.
From the Effective Date until the Closing, the Sellers, the Company and the
Related Entity shall notify the Purchaser promptly in writing of, and
contemporaneously, shall provide true copies of all material information or
documents relating to, and will use all commercially reasonable efforts to cure
before the Closing, any event, transaction or circumstance occurring after the
Effective Date that causes or shall cause any covenant or agreement of the
Sellers, the Company or the Related Entity under this Agreement to be breached
or that renders or shall render untrue any representation or warranty of such
party contained in this Agreement as if the same were made on or as of the date
of such event, transaction or circumstance. At any time until the Closing, the
Company and the Sellers shall notify the Purchaser promptly in writing of, and
shall use all commercially reasonable efforts to cure, before the Closing, any
violation or breach of any representation, warranty, covenant or agreement made
by such party in this Agreement, whether occurring or arising before, on or
after the Effective Date. No notice given pursuant to this Section 5.04 shall
have any effect on the representations, warranties, covenants or agreements
contained in this Agreement for purposes of determining satisfaction of any
condition contained herein or shall in any way limit the right of the Purchaser
to seek indemnity under this Agreement.
5.05 Conduct of Business in Ordinary Course.
From the Effective Date until the Closing, the Company and the Related
Entity will not, and the Sellers will cause the Company and the Related Entity
not to, take any actions inconsistent with Section 3.22 or which will lead to a
Material Adverse Effect occurring. With the exception of the provisions set
forth in this Agreement and the transactions contemplated hereby, each of the
Company and the Related Entity will carry on (and the Sellers shall cause the
Company and the Related Entity to carry on) its business in the ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use efforts consistent with past practice and
policies to preserve intact their respective present business organization, keep
available the services of their respective present officers, consultants and
employees and preserve their relationships with customers, suppliers and
distributors and others having business dealings with them. The Sellers shall
cause the officers of the Company and the Related Entity to confer at such times
as the Purchaser may reasonably request with representatives of the Purchaser to
report operational matters of a material nature and to report the general status
of the ongoing operations of the business of the Company and the Related Entity.
5.06 Indebtedness.
From the Effective Date until the Closing Date, without obtaining the prior
written consent of the Purchaser (which shall not be unreasonably withheld )
none of the Company or the Related Entity
25
will: (a) incur any Indebtedness in excess of HK$40,000 in aggregate; (b) cause
any existing debt facility to be drawn down in excess of HK$40,000 in aggregate.
5.07 Regulatory and Other Approvals.
From the Effective Date to the end of the Determination Period, save and
except for the issues and matters disclosed, the Sellers will, and will cause
the Company and the Related Entity to, (a) take all commercially reasonable
steps necessary or desirable, and proceed diligently and in good faith and use
all commercially reasonable efforts, as promptly as practicable to obtain or
renew all requisite consents, approvals or actions of, to make all filings with
and to give all notices to Governmental or Regulatory Authorities or any other
Person required of Sellers, the Company or the Related Entity to the
transactions contemplated hereby and by the Transaction Documents, (b) provide
such other information and communications to such Governmental or Regulatory
Authorities or other Persons as Purchaser or such Governmental or Regulatory
Authorities or other Persons may reasonably request, (c) cooperate with
Purchaser as promptly as practicable in obtaining or renewing all consents,
approvals or actions of, making all filings with and giving all notices to
Governmental or Regulatory Authorities or other Persons required of Purchaser to
implement the transactions contemplated hereby and by the Transaction Documents
and (d) execute all necessary documents, papers, forms, authorizations,
declarations or oaths required of Sellers, the Company or the Related Entity to
consummate the transactions contemplated hereby and by the Transaction
Documents. Sellers will provide prompt notification to Purchaser when any such
consent, approval, action, filing or notice referred to in clause (a) above is
obtained, taken, made or given, as applicable, and will advise Purchaser of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement or any of the Transaction Documents.
5.08 Tax Returns.
The Company and the Related Entity will make available to the Purchaser
copies of all Tax Returns that have been filed or are filed prior to the Closing
Date.
5.09 [Internationally left blank]
5.10 Arrangement in Determination Period.
During the Determination Period, the Sellers shall have the right to manage
the daily operations of the Company and the Related Entity and shall cause all
WAP services-related transactions between CMCC and the Related Entity to be
conducted on an arm's length basis on terms and conditions not less favorable to
the Related Entity than any current terms and conditions for all similar
transactions between CMCC and the Related Entity. Other than the WAP
services-related transactions with CMCC, the Sellers shall not cause the Company
or the Related Entity to engage in any new or potential business and commit any
exceptional expenses out of the ordinary course of business. Notwithstanding the
foregoing, during the Determination Period, the Sellers shall cause the Related
Entity to appoint a finance controller as designated by the Purchaser, who shall
take custody of one of the bank signatory chops of the Company and the Related
Entity and has the authority and power to veto any payment request in excess of
HK$2000 at the instruction of the Purchaser. The common seals of the Company and
company general chop of the Related Entity shall be in joint custodian of the
Sellers and the Purchaser.
26
5.11 Employee Matters.
(a) Subject to Section 5.11(c) below, effective from the Effective Date
until the Closing, except as may be required by Law, the Sellers will refrain,
and will cause the Company and the Related Entity to refrain, from directly or
indirectly:
(i) making any representation or promise, oral or written, to any
officer, employee or consultant of the Company or the Related Entity concerning
any Benefit Plan, except for statements as to the rights or accrued benefits of
any officer, employee or consultant under the terms of any existing Benefit
Plan;
(ii) making any increase in the salary, wages or other compensation of
any officer, employee or consultant of the Company or the Related Entity; or
(iii) adopting, entering into, amending, modifying or terminating
(partially or completely) any Benefit Plan except to the extent required by
applicable Law and, in the event compliance with legal requirements presents
options, only to the extent that the option which the Company or the Related
Entity reasonably believes to be the least costly is chosen.
(b) Before or upon the expiry date of the Determination Period, the Sellers
shall, at their own expense, cause each of the employees of the Company and the
Related Entity to execute an employment termination agreement.
(c) Before or upon the expiry date of the Determination Period, the Sellers
shall cause each of the employees of the Company and the Related Entity to
execute a release letter stating that the Company has fully paid off all the
salary and benefits to such employee and there shall be no outstanding payments
payable by the Company to such employee and such employee shall not lodge any
claim or petition against the Company and the Related Entity or any director,
officer thereof for any reason in the future.
5.12 Related Entity.
(a) The Sellers, namely, Xxxxx Xxx Lan, Xx Xxxx Ning, Xxxxx Xxx, Ma Xxx
Xxxxx and Xxxxx Xxx Gang, who collectively hold 100% equity interests in the
Related Entity, shall concurrently with the execution of this Agreement enter
into an equity transfer agreement with PRC individuals designated by the
Purchaser (the "Equity Transfer Agreement"). Pursuant to the Equity Transfer
Agreement, each of the Sellers shall agree to transfer all his or her equity
interest in the Related Entity to such two PRC individuals at an aggregate
consideration of RMB9,850,000. For the avoidance of doubt, the consideration
payable by such two PRC individuals under the Equity Transfer Agreement shall be
deemed to have been paid to the Sellers upon the completion of Payment as
pursuant to Section 2.02. Each Party shall bear all tax and stamp duty imposed
on such Party by any Governmental or Regularty Authorities or by any Law in
connection with the implementation of the Equity Transfer Agreement.
(b) Prior to the Closing, each of the Sellers shall use his or her best
efforts to take all such actions as necessary to effect the equity transfers as
contemplated under the Equity Transfer Agreement, including filing all necessary
documents with the Administration of Industry and Commerce of Shenzhen
Municipality.
(c) Prior to the Closing, each of the Sellers and the Related Entity shall
cause all the tenancy agreement of the branch offices listed in Section 3.0 (g)
of the Disclosure Schedule to be terminated without additional cost incurred by
the Company or the Related Entity.
27
5.13 Waiver of Right of First Refusal.
Each of the Sellers, by its execution and delivery hereof, irrevocably
waives any right of first refusal, co-sale right or other similar right it
enjoys with respect to the Shares, including without limitation, such right of
first refusal, co-sale right or other similar right as is set forth in the
Constitution or any other documents related to their rights as a shareholder of
the Company.
5.14 Taxes.
Payment by the Purchaser of the Consideration to each Seller and the
consummation of the transactions contemplated hereunder will not be subject to
any withholding or deduction of Taxes (including without limitation, income tax,
capital gains tax, transfer tax and stamp duty) under any applicable Laws. Each
Seller specifically instructs the Purchaser to pay the Consideration as
contemplated herein without any such withholding or deduction of Taxes and
hereby agrees and undertakes to the Purchaser that such Seller will pay any such
Taxes in accordance with applicable Law and will indemnify the Purchaser, and
hold the Purchaser harmless, against its failure to withhold or deduct Taxes
from the Consideration.
5.15 Dividends.
Prior to the Closing, the Company shall not, and the Sellers shall not
permit the Related Entity to, declare or distribute dividends or profits of the
Company or Related Entity respectively.
5.16 Integration Plan.
During the Determination Period, the Sellers, the Company and the Related
Entity shall work, in good faith, to formulate and carry out a technical
integration plan in order to effectively integrate the Related Entity's WAP
services platforms with those of the Purchaser or its relevant Subsidiaries or
Affiliates, including but not limited to Palmweb Inc., PRC WFOE, Beijing Newpalm
Information Technology Co. Ltd.
5.17 Repayment of RMB9,850,000.
On or before the Closing Date, the Sellers shall repay or cause to be
repaid RMB9,850,000 to the Related Entity which is currently due to the Related
Entity by Pu Ning City Liu Sha Xxxx Xxxx Construction Material Store.
5.18 Maintenance of Relationship.
During the Determination Period or thereafter, the Sellers shall assist PRC
WFOE or the Related Entity, as the case may be, to maintain good relationship
with the headquarter of CMCC and the Guangdong branch of CMCC.
5.19 Intellectual Properties.
Within 30 days after the Closing Date, the Sellers may cause the Related
Entity to transfer to any entity designated by the Sellers the ownership to the
logo "KK" (in the case of trademark application has not been assigned to the
entity designated by the Seller before the Closing) identified in Section
3.17(c) of Disclosure Schedule, provided that the Sellers shall ensure that all
the remaining Intellectual Properties identified or disclosed in Section 3.17
(c) and Section 3.17(d) of the Disclosure Schedule shall remain exclusively with
the Company and the Related Entity, including but not limited to the domain
names xxx.xxxxx.xxx and xxx.xxxxx.xxx.
28
5.20 Revenue Collection.
In the event that the aggregated amount actually received by the Related
Entity under the CMCC WAP First Xxxx and/or the CMCC WAP Second Xxxx and/or the
CMCC WAP Third Xxxx is less than RMB1,000,000 in aggregate by 6:00 p.m.,
September 30, 2005, the Sellers shall be jointly liable for making up any
shortfall to the Related Entity within 5 business days after September 30, 2005.
Section 6. Covenants of the Purchaser.
6.01 Notice and Cure.
From and after the Effective Date until the Closing, the Purchaser shall
notify the Company in writing of, and contemporaneously, shall provide true and
complete copies of any and all information or documents relating to, and will
use all commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance occurring after the Effective Date that causes or
shall cause any covenant or agreementof the Purchaser under this Agreement to be
breached or that renders or shall render untrue any representation or warranty
of such party contained in this Agreement as if the same were made on or as of
the date of such event, transaction or circumstance. The Purchaser shall notify
the Company promptly in writing of, and shall use all commercially reasonable
efforts to cure, before the Closing, any violation or breach of any
representation, warranty, covenant or agreement made by such party in this
Agreement, whether occurring or arising before, on or after the Effective Date.
No notice given pursuant to this Section 6.01 shall have any effect on the
representations, warranties, covenants or agreements contained in this Agreement
for purposes of determining satisfaction of any condition contained herein or
shall in any way limit the right of the Company or the Sellers to seek indemnity
under this Agreement.
6.02 Fulfillment of Conditions.
From and after the Effective Date until the Closing, the Purchaser will
execute and deliver at the Closing each instrument that the Purchaser is
required to execute and deliver as a condition to the Closing, shall take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy all other conditions to the obligations of the Sellers
and the Company contained in this Agreement and shall not permit the Company to
take, or fail to take, any action that could reasonably be expected to result in
the non-fulfillment of any such condition.
6.03 Regulatory and Other Approvals.
Purchaser will (a) take all commercially reasonable steps necessary or
desirable, and proceed diligently and in good faith and use all commercially
reasonable efforts, as promptly as practicable to obtain all consents, approvals
or actions of, to make all filings with and to give all notices to Governmental
or Regulatory Authorities or any other Person required of Purchaser to
consummate the transactions contemplated hereby and by the Transaction
Documents, (b) provide such other information and communications to such
Governmental or Regulatory Authorities or other Persons as a designated Seller
or such Governmental or Regulatory Authorities or other Persons may reasonably
request, (c) cooperate with Sellers as promptly as practicable in obtaining all
consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required of
Seller to consummate the transactions contemplated hereby and by the Transaction
Documents and (d) execute all documents, papers, forms, authorizations,
declarations or oaths required of Purchaser to consummate the transactions
contemplated hereby and by the Transaction Documents. Purchaser will provide
prompt notification to a designated Seller when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise a designated Seller of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated
29
by this Agreement or any of the Transaction Documents.
6.04 Late Payment Penalty
In the event that the Purchaser fails to pay any portion of the
Consideration when due pursuant to Section 2 of this Agreement, the Purchaser
shall pay to the Sellers a late payment penalty at a rate of 3% per day of any
outstanding amount payable in arrears, provided that the total aggregate amount
of such penalty shall not exceed 70% of the total amount of the Consideration
provided under Section 2 hereof.
Section 7. Conditions to Obligations of the Purchaser.
The obligations of the Purchaser under this Agreement are subject to the
fulfillment, at or before the Closing of each of the following conditions (all
or any of which may be waived in whole or in part by the Purchaser in its sole
discretion):
7.01 Representations and Warranties.
The representations and warranties made by the Sellers, the Company and/or
the Related Entity in this Agreement and the Transaction Documents and all facts
and statements specified in the Disclosure Schedules shall be true and correct
in all material respects in which they are given as of the Closing Date and if
specified on any other date, on such date, as though such representation or
warranty was made on each of those dates.
7.02 Performance.
Each Seller, the Company and the Related Entity shall have performed and
complied with, each agreement, covenant and obligation required by this
Agreement and the Transaction Documents to be so performed or complied with by
the Company, the Related Entity or any Seller at or before the Closing.
7.03 Certificates
Each of the Company and the Related Entity shall have delivered to the
Purchaser a certificate duly executed by the Chairman of its board of directors,
substantially in the form and substance as set forth in Exhibits 7.03(a) and
(b).
7.04 Consents and Approvals.
All such consents, approvals and actions of, filings with and notices to
any third party, Governmental or Regulatory Authority necessary to permit each
Seller, the Company and the Related Entity to perform their respective
obligations under this Agreement and each of the Transaction Documents and to
consummate the transactions contemplated hereby and thereby as set out in
Exhibit 7.04 attached hereto shall have been duly obtained, made or given, and
shall be in full force and effect as at the Closing Date.
7.05 Opinions of Counsel.
30
The Purchaser shall have received the opinion of the Company's and the
Sellers' PRC legal counsel on the Closing Date, in such form to the satisfaction
of the Purchaser. The PRC legal opinion shall opine, among others, on the
legality of the Related Entity in conducting its current WAP businesses under
the PRC laws.
7.06 Board.
Effective as of the Closing Date, the designees of the Purchaser shall have
been elected to the Board and the board of directors of the Related Entity and
the current directors as requested in writing by the Purchaser of the Company
and the Related Entity shall have resigned; provided that a properly constituted
board of directors of the Company and the Related Entity shall be in existence
at all times.
7.07 Legal Action.
As of the Closing Date, there will not be any actual written threats or any
action, proceeding or other application pending before any court or Governmental
or Regulatory Authority brought by any Person or Governmental or Regulatory
Authority: (i) challenging or seeking to restrain or prohibit the consummation
of the transactions contemplated by this Agreement, or seeking to obtain any
material damages from any of the Parties or their Affiliates as a result of such
transactions; (ii) seeking to prohibit or impose any limitations on the
Purchaser's ownership or operation of all or any portion of the Shares or the
underlying assets of the Company, or to compel the Purchaser to dispose of or
hold separate all or any portion of the Shares, or the Company's business or
assets as a result of the transactions contemplated by the Agreement, or to
compel the Company to dispose of or hold separate all or any portion of the
Subsidiaries and or the Related Entity; or (iii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation.
7.08 No Material Adverse Change.
From the Effective Date to the Closing Date and as at the Closing Date,
there shall not have occurred any Material Adverse Effect on the Shares, any of
the Assets or Business or Condition of the Company.
7.09 Share Transfers/Certificates.
The Purchaser shall have received duly executed transfers of the Shares in
its favor, in a registrable form and in accordance with the Company's
Constitution representing the Shares, together with share certificates for such
Shares and all other consents, approvals and/or documents needed by the
Purchaser to register the transfers and obtain ownership of the Shares as the
Purchaser may reasonably require.
7.10 Termination of Rights and Certain Securities
Any registration rights, rights of refusal, voting rights, rights to any
liquidation preference or redemption rights relating to any security of the
Company will be terminated, waived or satisfied as of the Closing Date.
7.11 [Intentionally left blank]
7.12 Closing Documents.
All closing documentation as set out in Sections 2.03(a) and (b) of this
Agreement must be received by the Purchaser.
31
7.13 Board Approval of the Company.
The Board of the Company and the board of directors of the Related Entity,
as the case may be, shall have: (a) approved the execution of the Transaction
Documents and the transactions contemplated herein and therein; (b) approved the
transfer of the Shares; (c) resolved and directed to have the transfers of the
Shares duly registered; and (d) approved the appointment of the representatives
of the Board and the resignation of all directors who were on the Board prior to
the Closing, but so that a properly constituted Board is in existence at all
times.
7.14 Shareholders Approval.
On or before the Closing Date, the Sellers shall have approved the
execution of this Agreement, each Transaction Document and the transactions
contemplated herein and therein by both the Company, the Related Entity and the
Seller.
7.15 Completion of Due Diligence.
The Purchaser shall have completed all necessary due diligence
investigations to its complete satisfaction which is determined at the
Purchaser's sole discretion.
7.16 Third Party Consent.
Each Seller shall deliver all third party consents, as required in any
agreements between such Seller or the Related Entity, on the one hand, and any
third party, on the other hand, consenting to the change of control of the
Company and the Related Entity as anticipated by this Agreement and the relevant
third parties agreeing not to terminate their respective agreements in a form
satisfactory to the Purchaser. Without limiting the foregoing, each of the
following Persons shall consent to the change of control of the Company and the
Related Entity as anticipated by this Agreement and agreeing not to terminate
their respective agreements in a form satisfactory to the Purchaser.
7.17 Audited Accounts.
The delivery to the Purchaser of true and correct copies of each of the
Financial Statements and such statements shall include true and complete copies
of the balance sheets of the Company and Related Entity and the related
statements of operations, shareholders' equity and cash flow statements for each
such period, together with a true and correct copy of the report on such audited
information and all existing management letters from the auditors, with respect
to the results of such audits.
7.18 Pre-closing Audit.
An audit opinion in accordance with auditing standards generally accepted
in the PRC stated that the financial statements of the Related Entity for the
six-month-period from January 1, 2005 to June 30, 2005 and as of June 30, 2005
present fairly, in all material respects, the financial position of the Related
Entity, in conformity with GAAP should be issued. The cost of such verification
shall be borne by the Related Entity.
7.19 Certified Management Accounts
A copy of the certified monthly management accounts of the Company for a
period from the March 19, 2004 to the Closing Date and as of the Closing Date
shall be issued and delivered by Sellers to the Purchaser, in conformity with US
GAAP. The cost of such verification shall be borne by the Company or the Related
Entity.
32
Section 8. Conditions to Obligations of the Sellers and the Company.
The obligations of the Sellers and the Company hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by the Sellers, the Company
and the Related Entity in their sole discretion):
8.01 Representations and Warranties.
Each of the representations and warranties made by the Purchaser prior to
June 30, 2004 in this Agreement shall be true and correct in all respects in
which they are given on and as of the Closing Date as though such representation
or warranty was made on and as of the Closing Date.
8.02 Performance.
The Purchaser shall have performed and complied with each agreement,
covenant and obligation required by this Agreement to be so performed or
complied with by such Purchaser at or before the Closing.
8.03 Consents and Approvals.
All consents, approvals and actions of, filings with and notices to any
third party, Governmental or Regulatory Authority necessary to permit the
Purchaser to perform its obligations under this Agreement and to consummate the
transactions contemplated hereby and thereby shall have been duly obtained, made
or given, and shall be in full force and effect.
8.04 Approval of the Purchaser's Board of Directors or Delegated
Subcommittee.
The board of directors of the Purchaser or its delegated subcommittee shall
have authorized and approved each of: (i) the terms and conditions of this
Agreement and each Transaction Document; and (ii) the execution and performance
of this Agreement and each Transaction Document by a duly authorized officer or
director of the Purchaser and the transactions contemplated herein and therein.
8.05 Board Approval of the Guarantor.
The board of directors of Palmweb Inc. shall have approved the execution of
the Transaction Documents and the transactions contemplated herein and therein
before the Closing Date.
Section 9. Representations, Warranties, Covenants and Agreements.
Unless otherwise expressly provided for in this Agreement:
(a) All representations and warranties and covenants contained in this
Agreement, any schedule, exhibit, the Disclosure Schedule or certificate or
document delivered pursuant hereto in connection with the transactions
contemplated by this Agreement or the Transaction Documents (the "Warranties")
shall survive one calendar month following the end of the Determination Period
or the Closing Date whichever is later.
(b) Each of the Warranties is true and correct in all material respects on
and as of the Effective Date and the Closing Date, provided that the
representations and warranties and conveants made under Sections 3.04A(a), 5.07,
5.12, 5.13 and 5.17 shall be true and correct on and as of the Effective Date
and the Closing Date.
(c) None of the Warranties are extinguished or affected by any
investigation made by or on behalf of a Party into the affairs of another Party.
Each Party acknowledges that it has made and
33
given the Warranties with the intention of inducing the other Parties to enter
into this Agreement and the Purchaser has entered into this Agreement in full
reliance on the Warranties given hereunder.
Section 10. Indemnification; Limitations on Liabilities.
10.01 Indemnification.
(a) Each Seller (each an "Indemnifying Party" and collectively
"Indemnifying Parties"), shall jointly and severally indemnify the Purchaser,
the Company and the Related Entity and their respective officers, directors,
shareholders, Subsidiaries and Affiliates (each an "Indemnified Party" and
collectively "Indemnified Parties") in respect of, and hold each of them
harmless from and against, any and all Loss or liability suffered, incurred or
sustained by any of them, resulting from, arising out of or associated with:
(i) any material misrepresentation, inaccuracy in or breach of any
representation or warranty or the nonfulfillment of, or failure to perform, any
covenant or agreement on the part of any Seller or the Company contained in this
Agreement or the Transaction Documents;
(ii) any Tax Claim that relates to an act or omission of the Company
or any Subsidiary, or occurrence affecting the Company, the Related Entity or
any Subsidiary prior to the Closing Date; or
(iii) any actual loss or liability suffered, incurred or sustained by
the Purchaser as a result of the early termination of the Material Contracts as
set out in items Section 3.18(d) of the Disclosure Schedule (except where such
termination results from an event or events which has/have been disclosed).
(b) The limits of liability in respect of any claim in relation to all
representations, warranties and covenants and other terms and conditions in this
Agreement are detailed in Schedule B of this Agreement.
(c) If any Indemnified Party is entitled to indemnification under this
Section 10.01 for some or a portion of the Loss or liability suffered, incurred
or sustained by it but not for the total amount, each Indemnifying Party shall,
jointly and severally, indemnify such Indemnified Party for the portion of such
Loss or liability as to which the Indemnified Party is so entitled.
(d) No claim shall be made under Section 10.01 or under any other
representation or warranty or covenant or agreement given under this Agreement
unless the sum of all liability of all the Sellers thereunder shall exceed
HK$5,000.
Section 11. Termination.
11.01 Termination.
This Agreement may be terminated, and the transactions contemplated hereby
may be abandoned:
(a) at any time after July 31, 2005 (or any later date as mutually agreed
by the Purchaser and the Sellers) in the event that Closing has not taken place
by that date, by either the Purchaser or by Sellers upon written notice to the
other; or
(b) at any time before the Closing, by the Sellers or the Purchaser, in the
event (i) of a proven material breach hereof by any non-terminating party if
such non-terminating party fails to cure such breach within Fourteen (14)
Business Days following notification thereof by the terminating party; or (ii)
upon notice to the non-terminating party by the terminating party that the
satisfaction of any
34
material condition to the terminating party's obligations under this Agreement
becomes impossible or impracticable with the use of commercially reasonable
efforts if the failure of such condition to be satisfied is not caused by a
material breach hereof by the terminating party (but not otherwise).
11.02 Effect of Termination.
If this Agreement is validly terminated pursuant to Section 11.01, this
Agreement will forthwith become null and void, and there will be no liability or
obligation on the part of any Seller or the Purchaser (or any of their
respective officers, directors, employees, agents or other representatives or
Affiliates), except that the provisions with respect to the indemnifications in
Section 10, expenses in Section 12.02, and confidentiality in Section 12.12
shall continue to apply following any such termination.
Section 12. Miscellaneous.
12.01 Notices.
All notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall be in writing and by Fedex
or other courier or fax to each party as follows:
If to the Company, to:
c/o Company Secretary
Xxxx 0X000, Xxxx, 0 Xxxxx, Xx. 0 Xxxxxxxx, Xxx Xx Ke Ji Yuan,
Hua Qiang Bei Rd, Xxxx Xxxx, PRC, 518028
Attention: The Board of Directors
Telephone No.: 000 0000 0000
Facsimile No.: 755 8376 4283
With a copy to: Xxxx 0000, 00/X, Xxxxx Resources Building, 00 Xxxxxxx Xxxx,
Xxxxxxx, XX Xxxx Xxxxxxx, Xxxx Xxxx
If to XXXXX Xxx Lan, to:
Dorm No.238 of Wujiang Gear Factory, Shaoguan, Guangdong Province
Telephone No.: 00000000000
Facsimile No.: ______________
If to YE Yong Ning Xxxxx, to:
Xxxx 000, Xx. 000, Xxxx Xxx Zhong Rd, Xxx Xxx District, Guangzhou
Telephone No.: 00000000000
Facsimile No.: ______________
If to XXXXX Xxx, to:
Talents Exchange Service Center, Xx.0 Xxxxx Xxxx xx Xxxxx'xx Xx,
Xxxxxx Xxxxxxxx, Xx'xx, Shanxi
Telephone No.: 00000000000
Facsimile No.: ______________
35
If to MA Zhi Qiang to:
Songjiaduan Huibu Village, Fengxin County, Jiangxi
Telephone No.: 00000000000
Facsimile No.: ______________
If to XXXXX Xxx Gang, to:
#703, Xx.00 Xxxx., Xx.0 Xxxxx, Xxxx Xxxx Xx., Xxxxxxxx, Xxxxxxxxx
Telephone No.: 00000000000
Facsimile No.: ______________
If to Shenzhen KK Technology Limited, to
Xxxx 0X000, Xxxx, 0 Xxxxx, Xx. 0 Xxxxxxxx, Xxx Xx Ke Ji Yuan,
Hua Qiang Bei Rd, Xxxx Xxxx, PRC, 518028
Attention: The Board of Directors
Telephone No.: 000 0000 0000
Facsimile No.: 755 8376 4283
If to the Purchaser, to:
c/o Xxxxx.xxx Inc.
00/X Xxxxxxxx Xxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxxx Xxx, Xxxx Xxxx
Attention: Company Secretary
Telephone No.: (000) 0000-0000
Facsimile No.: (000) 0000-0000
If to the Guarantor, to:
Palmweb Inc.
00/X Xxxxxxxx Xxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxxx Xxx, Xxxx Xxxx
Attention: Company Secretary
Telephone No.: (000) 0000-0000
Facsimile No.: (000) 0000-0000
All such notices, requests, demands, consents, instructions or other
communications shall be effective: (a) when sent by Fedex or other overnight
service of recognized standing, on the second business day following the deposit
with such service; and (b) when faxed, upon confirmation of receipt regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this
Section. Any party from time to time may change its address, facsimile number or
other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
12.02 Expenses.
Each Party shall pay for each of his/her/its own costs and expenses
relating to the negotiation, execution and closing of this Agreement and the
Transaction Documents and the transactions contemplated hereby.
36
12.03 Public Announcements.
Subject to the subsequent sentences, at all times at or before the Closing,
each Seller, the Company and the Purchaser shall not issue or make any reports,
statements or releases to the public or generally to the employees, customers,
suppliers or other Persons to whom the Company or the Related Entity provides
services or with whom the Company or the Related Entity otherwise has
significant business relationships with respect to this Agreement, the
Transaction Documents or the transactions contemplated hereby and thereby
without the consent of the other parties, which consent shall not be
unreasonably withheld. If any party proposes to make any such disclosure, such
disclosing party will deliver a copy of the text of the proposed disclosure, as
far in advance of its disclosure as is practicable, and will in good faith
consult with and consider the suggestions of the other non-disclosing parties
(provided that if the Sellers are the non-disclosing parties that the Sellers
designate one point of contact) concerning the nature and scope of the
information disclosing party proposes to disclose. Any disclosures in respect of
this Agreement and the Transaction Documents and the transactions contemplated,
hereby and thereby, made by the Purchaser in its regulatory filings, shall not
be subject to the provisions of this Section 12.03.
12.04 Waiver.
Any term or condition of this Agreement may be waived at any time by the
party that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party waiving such term or condition. No waiver by any party of any term
or condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.
12.05 Amendment.
This Agreement may be amended, supplemented or modified only by a written
instrument duly executed by or on behalf of each party hereto.
12.06 No Third Party Beneficiary.
The terms and provisions of this Agreement are intended solely for the
benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other Person other than any Person entitled to
indemnity under Section 10.
12.07 Assignment; Binding Effect.
Subject always to the subsequent sentence, neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except for assignments and transfers by operation of Law and
except where the Purchaser transfers or assigns this Agreement or its rights and
obligations under this Agreement to its subsidiary or affiliated company or to
an entity within the group of Xxxxx.xxx. At any time after the execution of this
Agreement, the Purchaser may assign any or all of its rights, interests and
obligations hereunder (including without limitation its rights under Section 10)
provided that, each such assignee agrees in writing to be bound by all of the
terms, conditions and provisions contained herein. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
12.08 Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any
37
present or future Law, and if the rights or obligations of any party hereto
under this Agreement will not be materially and adversely affected thereby: (a)
such provision will be fully severable; (b) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance herefrom; and
(c) in lieu of such illegal, invalid or unenforceable provision, there will be
added automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
12.09 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of Hong Kong, SAR without giving effect to the conflicts of laws principles
thereof.. Each of the Sellers hereby irrevocably authorizes and appoints Xxxxx
Xxxx & Xxxx Solicitors, Suite 1203, 12th Floor, Wing Xx Xxxxx, 00 Xxx Xxxxx Xxxx
Xxxxxxx, Xxxx Xxxx (or such other person being resident of or incorporated in
Hong Kong as it may by notice to the other parties substitute) to accept service
of all legal process arising out of or in connection with this Agreement and
service on Xxxxx Xxxx & Pang Solicitors (or such substitute) shall be deemed to
be service on the Sellers respectively.
12.10 Arbitration
(a) Any dispute, controversy or claim arising out of or relating to this
Agreement shall be resolved at the first instance through consultation between
the highest ranking corporate officers of the relevant Parties. Such
consultation shall begin immediately after one Party has delivered to the other
Parties a written request for such consultation. If, within thirty (30) days
following the date on which such notice is given, the dispute cannot be
resolved, the dispute shall be submitted to arbitration upon the request of any
Party to the dispute with notice to the other Parties.
(b) Any dispute, controversy or claim arising out of or relating to this
contract, or the breach termination or invalidity thereof, shall be settled by
arbitration in accordance with the UNCITRAL Arbitration Rules as at present in
force and as may be amended by the rest of this clause.
(c) The appointing authority shall be Hong Kong International Arbitration
Centre.
(d) The place of arbitration shall be in Hong Kong at Hong Kong
International Arbitration Centre (HKIAC).
(e) There shall be three arbitrators, among which the Sellers shall jointly
nominate one arbitrator and the Purchaser shall nominate the second arbitrator.
The first two arbitrators shall then jointly nominate the third arbitrator.
(f) The arbitration proceedings shall be conducted in English and Chinese.
(g) Each Party to an arbitration hereunder shall cooperate with the other
in making full disclosure of and providing complete access to all information
and documents requested by the other in connection with such arbitration
proceedings, subject only to any confidentiality obligations binding on such
Party.
(h) The award of the arbitration tribunal shall be final and binding upon
the disputing Parties, and the prevailing Party may apply to a court of
competent jurisdiction for enforcement of such award.
(i) Any Party to the dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
38
12.11 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
will be deemed original, but all of which together will constitute one and the
same instrument.
12.12 Confidentiality.
Each party hereto will hold, and will use its reasonable endeavors to cause
its Affiliates to hold, in strict confidence from any Person (other than any
such Affiliate, unless: (i) compelled to disclose by judicial or administrative
process (including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law; or (ii)
disclosed in any action, suit, proceeding, inquiry, investigation either before
or brought by Governmental or Regulatory Authority or otherwise, brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party or any of
its Affiliates furnished to it by the other party in connection with this
Agreement or the transactions contemplated hereby, including, without
limitation, the terms and conditions of this Agreement except to the extent that
such documents or information can be shown to have been: (a) previously known by
the party receiving such documents or information; (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party; or (c) later acquired by
the receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential. In the event the transactions
contemplated hereby are not consummated, upon the request of the other party,
each party hereto shall, and shall cause its Affiliates to, promptly redeliver
or cause to be redelivered all copies of documents and information furnished by
the other party in connection with this Agreement or the transactions
contemplated hereby and destroy or cause to be destroyed all notes, memoranda,
summaries, analyses, compilations and other writings related thereto or based
thereon prepared by the party furnished such documents and information.
12.13 Exercise of Rights.
A party may exercise a right, power or remedy at its discretion, and
separately or concurrently with another right, power or remedy. A single or
partial exercise of a right, power or remedy by a party does not prevent a
further exercise of that or of any other right, power or remedy. Failure by a
party to exercise or delay in exercising a right, power or remedy does not
prevent its exercise. The rights, powers and remedies provided in this Agreement
are cumulative with and not exclusive of the rights, powers or remedies provided
by law independently of this Agreement.
12.14 Rule of Construction.
As each of the parties has reviewed this Agreement and has had the
opportunity to make revisions, the parties agree that any rule of construction
to the effect that any ambiguities are to be construed against the drafting
party shall not apply in the interpretation of this Agreement or any of the
Transaction Documents.
12.15 Further Assurances.
Each party agrees, at its own expense, on the request of any other party,
to do everything reasonably necessary to give effect to this Agreement and the
transactions contemplated by it (including, without limitation, the execution of
documents) and to use all reasonable endeavours to cause relevant third parties
to do likewise.
12.16 Time shall be of Essence.
39
Time shall be of the essence of this Agreement but no failure by any party
to exercise, and no delay on its part in exercising any right hereunder will
operate as a waiver thereof, nor shall any single or partial exercise of any
right under this Agreement (including a settlement with either the Sellers or
the Guarantor) preclude any other or further exercise of it or the exercise of
any right or prejudice or affect any right against any person under the same
liability whether joint, several or otherwise. The rights and remedies provided
in this Agreement are cumulative and not exclusive of any rights or remedies
provided by law.
12.17 Entire Agreement.
This Agreement constitutes the entire agreement between the parties hereto
with respect to the matters dealt with herein and supersedes all previous
agreements, arrangements, statements, understandings or transactions between the
parties hereto in relation to the matters hereof and the parties acknowledge
that no claim shall arise in respect of any agreement so superseded.
Section 13. Guarantee.
13.01 In consideration of the Sellers entering into this Agreement, the
Guarantor, irrevocably and unconditionally undertakes with the Sellers to
guarantee the full and complete punctual payment of any part or parts of the
total Consideration including the Adjustment Payment under Section 2.02 of this
Agreement and any late penalty payment now or subsequently payable by the
Purchaser to the Sellers under this Agreement.
13.02 The obligations of the Guarantor under this Section shall cease upon
the full payment of the Consideration under section 2.02 of this Agreement.
40
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party hereto, and shall be effective as of
the date first above written
UNITEDCREST INVESTMENTS LIMITED
By: /s/ Xxxxx Xxx Gang
---------------------------------
Name: Xxxxx Xxx Gang
Title: Director
SHENZHEN KK TECHNOLOGY LIMITED
By: /s/ Ye Yong Ning
---------------------------------
Name: Ye Yong Ning
Title: Chief Operating Officer
XXXXX XXX LAN
By: /s/ XXXXX Xxx Lan
---------------------------------
YE YONG NING XXXXX
By: /s/ YE Yong Ning Xxxxx
---------------------------------
XXXXX XXX
By: /s/ XXXXX Xxx
---------------------------------
MA ZHI QIANG
By: /s/ MA Zhi Qiang
---------------------------------
41
XXXXX XXX GANG
By: /s/ XXXXX Xxx Gang
---------------------------------
SIGNED by )
for and on behalf of )
CDC MOBILE MEDIA CORPORATION )
in the presence of: )
By: /s/ Xxxx Xxx Xx XXXX
---------------------------------
Name: Xxxx Xxx Xx XXXX
Title: Director
SIGNED by )
for and on behalf of )
PALMWEB INC. )
in the presence of: )
By: /s/ Xxxx Xxx Xx XXXX
---------------------------------
Name: Xxxx Xxx Xx XXXX
Title: Director
42
Schedule A
SHARE OWNERSHIP INTERESTS OF SELLERS AS AT THE EFFECTIVE DATE
SHAREHOLDERS NAME Number of Shares Percentage
----------------- ---------------- ----------
XXXXX Xxx Lan 530 53%
YE Yong Ning 310 31%
XXXXX Xxx 60 6%
MA Zhi Qiang 50 5%
XXXXX Xxx Gang 50 5%
----- ---
TOTAL 1,000 100%
===== ===
43
Schedule B
LIMITATIONS ON LIABILITY
The provisions of this Schedule B shall operate to limit the liability of the
Sellers in respect of any claim under the warranties, representations, covenants
and the indemnity referred to in Section 10 and any other terms and conditions
in this Agreement. The Parties agrees as follows:
1. in respect of any claim under the warranties, representations, covenants
and the indemnity referred to in Section 10, the Sellers shall have no
liability to the extent that the facts and circumstances giving rise to the
claim have been expressly Disclosed or referred to in the Disclosure
Schedule;
2. in respect of any claim under the warranties, representations, covenants
and the indemnity referred to in Section 10 and any other terms and
conditions in this Agreement, the maximum aggregate liability of the
Sellers to the Purchaser shall be the amount of HK$16,000,000; and
3. in respect of any claim under the warranties, representations, covenants
and the indemnity referred to in Section 10, no liability shall attach to
any of the Sellers where:
(a) the amount of an individual claim in respect of any warranty,
representation, covenant or indemnity is less than HK$5,000; and
(b) the aggregate of amount of all claims under in respect of all or any
of the warranties, representations, covenants or indemnities is less
than HK$400,000.
44
Execution Version
Exhibit 7.03(a)
Certificate of the Company
The undersigned, in his capacity as the Chairman of Unitedcrest Investments
Limited (the "Company"), and in accordance with Section 7.03(a) of the Share
Purchase Agreement (the "Agreement") dated as of June ____, 2005, by and between
the Company, CDC Mobile Media Corporation, Xxxxx Xxx Lan, Ye Yong Ning, Xxxx
Xxx, Ma Xxx Xxxxx, Xxxxx Xxx Gang and Shenzhen KK Technology Limited, hereby
certifies that, as of the date hereof (all capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Agreement):
1. the attached is a true and correct copy of the resolutions of the board of
directors and the resolutions of the shareholders of the Company approving
the execution by the Company of the Agreement and the other Transaction
Documents as well as the transactions contemplated thereby.
2. the Certificate of Incorporation, dated June 23, 2005, is valid and
effective and has not been revoked or cancelled by any relevant authority
in British Virgin Islands as of the date hereof;
3. the authorized capital of the Company is US$50,000, divided into 50,000
shares of US$1.00 each ("Shares"), among which 1,000 Shares are issued and
outstanding. All issued Shares are validly issued, fully paid and
non-assessable;
4. the representations and warranties of the Company contained in the
Agreement (i) that are not qualified by "materiality" or "Material Adverse
Effect" are true and correct in all material respects when made and have
been true and correct in all material respects as of hereof with the same
force and effect as if made as of the date hereof and (ii) that are
qualified by "materiality" or "Material Adverse Effect" are true and
correct when made and have been true and correct as of the date hereof,
except to the extent such representations and warranties are as of another
date, in which case, such representations and warranties have been true and
correct as of that date, in each case, with the same force and effect as if
made as of the date hereof, other than such representations and warranties
as are made as of another date; and
5. the covenants and agreements contained in the Agreement to be complied with
by the Company on or before the date hereof have been fully complied with.
Dated: ______________, 2005
1
Execution Version
Exhibit 7.03(b)
Certificate of Shenzhen KK Technology Limited
The undersigned, in his capacity as the Chairman and the Legal Representative of
Shenzhen KK Technology Limited (the "Company"), and in accordance with Section
7.03(b) of the Share Purchase Agreement (the "Agreement") dated as of June ___,
2005, by and between the Company, CDC Mobile Media Corporation, Xxxxx Xxx Lan,
Ye Yong Ning, Xxxxx Xxx, Ma Xxx Xxxxx, Xxxxx Xxx Gang and Shenzhen KK Technology
Limited, hereby certifies that, as of the date hereof (all capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Agreement):
1. the attached is a true and correct copy of the resolutions of the board of
directors and the resolutions of the shareholders of the Company approving
the execution by the Company of the Agreement and the other Transaction
Documents as well as the transactions contemplated thereby.
2. the business license of the Company issued by the Administration of
Industry and Commerce of Shenzhen Municipality (the "Shenzhen AIC"), dated
March 19, 2004, is valid and effective and has not been revoked or
cancelled by the Shenzhen AIC;
3. the MVAS License of the Company issued by MII, dated December 14, 2004, is
valid and effective and has not been revoked or cancelled by MII, and the
Company has completed the annual inspection process in respect of its MVAS
License for the year 2004;
4. the registered capital of the Company has been paid in full and there is no
circumstance that would result in any challenge by the Shenzhen AIC or any
other party with respect to the full payment of the registered capital of
the Company;
5. the representations and warranties of the Company contained in the
Agreement (i) that are not qualified by "materiality" or "Material Adverse
Effect" are true and correct in all material respects when made and have
been true and correct in all material respects as of hereof with the same
force and effect as if made as of the date hereof and (ii) that are
qualified by "materiality" or "Material Adverse Effect" are true and
correct when made and have been true and correct as of the date hereof,
except to the extent such representations and warranties are as of another
date, in which case, such representations and warranties have been true and
correct as of that date, in each case, with the same force and effect as if
made as of the date hereof, other than such representations and warranties
as are made as of another date; and
6. the covenants and agreements contained in the Agreement to be complied with
by the Company on or before the date hereof have been fully complied with.
Dated: June 23, 2005
2
