____________________________________________________________________________
| Characters in the Chinese language have been removed from this document. |
| The original document, in PDF format, has been filed separately. |
----------------------------------------------------------------------------
Exhibit 2.05
Dated the 14th day of February 2003
-----------------------------------
(Xx Xxxxxxxxxx)
(Xxx Xxxxxxxx)
(Xxxxx Xxx)
(Xxxx Xx)
(Xxx Xxxxxx)
(Xxx Xxxxxxx)
and
HARTCOURT CAPITAL, INC.
-------------------------------------------------------------------------------
AGREEMENT FOR SALE AND PURCHASE OF
CERTAIN INTEREST IN THE REGISTRED CAPITAL OF
(HUAQING CORPORATION DEVELOPMENT CO LTD)
-------------------------------------------------------------------------------
Preston|Gates|Xxxxx
Solicitors
10th Floor, Xxxxxxxxx House
00 Xxxxxxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Tel: (000) 0000 0000 Fax: (000) 0000 0000
Website: xxx.xxxxxxxxxxxx.xxx
Our ref: 47831-00002/KAL/VTSO
1
THIS AGREEMENT is dated the 14th of February, 2003.
BETWEEN:
(1) 310108511123403 571 2 202;
(2) , holder of PRC Identity Card No.310110540905003, of 2767 8 2;
(3) , holder of PRC Identity Card No.310110580501465, of 332;
(4) , holder of PRC Identity Card No.310112591122001, of 248 63 202;
(5) , holder of PRC Identity Card No.310110571117425, of 46 106; and
(6) , holder of PRC Identity Card No.310110561205382, of 436;
( and ] are hereinafter collectively referred to as the "Vendors" and
each individually referred to as the "Vendor"); and
(7) HARTCOURT CAPITAL, INC., a company incorporated in the British Virgin
Islands with its registered office situate at Akara Bldg., 00 Xx Xxxxxx
Xxxxxx, Xxxxxxxx Xxx 0, Xxxx Xxxx, Xxxxxxx, Xxxxxxx Xxxxxx Islands and
its principal office situate at Suite 1310, China VentureTech Plaza,
000 Xxx Xxxx Xx Xxxx, Xxxxxxxx Xxxxx (the "Purchaser").
WHEREAS:
(A) (HuaQing Corporation Development Co Ltd) (the "Company") is a domestic
joint venture company with limited liability incorporated in the PRC
and has as at the date hereof a registered capital of RMB20,000,000.
Brief particulars of the Company are set out in Schedule 1.
(B) As at the date of this Agreement, the Vendors are respectively the
beneficial owners of certain interests in the registered capital of the
Company as set out in column 2 of Schedule 2.
(C) As at the date of this Agreement, the Purchaser is a wholly owned
subsidiary of Hartcourt Companies, Inc. (the "Holding Company"), the
shares of which are currently listed on the Over-the-Counter Bulletin
Board ("OTCBB") of the United States (OTCBB Symbol: HRCT).
(D) The Vendors have agreed to sell and the Purchaser has agreed to
purchase certain interests in the registered capital of the Company as
set out in column 3 of Schedule 2, the aggregate of which represents
45% of the registered capital of the Company (the "Sale Interests") in
accordance with the terms and conditions of this Agreement.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. INTERPRETATION
--------------
1.1 In this Agreement (including the Recitals and Schedules), unless the
context otherwise requires, the following words and expressions shall
have the following meanings ascribed to each of them below:
2
"Agreement" this agreement for the sale and purchase of the
Sale Interest, as amended or supplemented from
time to time;
"Board" the board of directors of the Company from time
to time;
"Business Day" a day (other than Saturdays and days on which a
tropic cyclone warning No. 8 or above or a
rainstorm warning signal is hoisted in Hong
Kong at any time between 9:00 a.m. and 5:00
p.m.) on which banks in Hong Kong are generally
open for the transaction of normal banking
business;
"Company" has the meaning ascribed thereto in Recital
(A);
"Companies Ordinance" the Companies Ordinance (Chapter 32 of the Laws
of Hong Kong);
"Completion Date" the date falling on the 5th Business Day
after the conditions set out in Clause 3.1 have
----------
been fulfilled or waived by the Purchaser;
"Completion" completion of the sale and purchase of the Sale
Interests in accordance with the terms and
conditions of this Agreement;
"Consideration" the consideration payable by the Purchaser
pursuant to Clause 4.1 hereof;
----------
"Consideration Shares" 14,126,482 ordinary shares with par
value of US$0.001 each in the capital of the
Holding Company to be allotted and issued in
the name of the Vendors or their nominees
pursuant to Clause 4.1;
----------
"Directors" directors of the Company from time to time and
"Director" shall be construed as any one of
them;
"Encumbrance" any mortgage, charge, pledge, lien (otherwise
than arising by statute or operation of law),
equities, hypothecation or other encumbrance,
priority or security interest, deferred
purchase, title retention, leasing,
sale-and-repurchase or sale-and-leaseback
arrangement whatsoever over or in any property,
assets or rights of whatsoever nature and
includes any agreement for any of the same;
3
"Group" the Company and its subsidiaries and "member of
the Group" shall be construed as any one of
them;
"Guaranteed Net Profit" RMB4,500,000;
"Guaranteed Turnover" RMB400,000,000;
"HK$" Hong Kong dollars;
"Holding Company" Hartcourt Companies, Inc., a company
incorporated under the laws of the State of
Utah, United States and the registered and
beneficial owner of the entire issued share
capital of the Purchaser;
"Hong Kong" the Hong Kong Special Administrative Region of
the PRC;
"Listing Rules" the Rules Governing the Listing of Securities
on the Stock Exchange;
"Long Stop Date" 30 June 2003;
"Net Profit" in relation to the year ending on the date on
which the Restricted Trading Period ends, the
consolidated profits (less losses) of the Group
as shown by the Special Audited Accounts :
(a) after deducting all expenses of working and
management including, without limitation,
director's remuneration (whether by way of
fees, salary or commission) and
depreciation;
(b) without taking into account profits or
losses of a capital nature arising on
disposal of fixed assets, investments,
plant or any other assets of the Group; and
(c) after making such other adjustments as the
auditors of the Company consider
appropriate;
"PRC" the People's Republic of China, which for the
purpose of this Agreement, excludes Hong Kong
and Macau;
"Purchaser's Nominees" persons to be nominated by the Purchaser to
acquire the Sale Interests in accordance with
the terms and conditions of this Agreement;
4
"Relevant Proportion" the respective portion of Sale
Interests owned by each of the Vendors
expressed as a percentage of the entire
interest in the registered capital of the
Company as set out in column 4 of the Schedule
2; --------
-
"RMB" Renminbi, the lawfully currency of PRC;
"Restricted
Trading Period" a period of twelve (12) months from the date on
which the Consideration Shares being allotted
and issued to the Vendors or their nominees;
"Sale Interests" 45% of the entire interest in the registered
capital of the Company to be sold by the
Vendors to the Purchaser's Nominees;
"Special
Audited Accounts" the audited consolidated profit and loss
accounts of the Group for the year ended on the
date on which the Restricted Trading Period
ends;
"Tax Indemnity" the deed of indemnity to be given by each of
the Vendors in favour of the Purchaser and the
Group in such form and substance as may be
satisfactory and acceptable to the Purchaser;
"Taxation" all forms of taxation whenever created or
imposed and whether in the PRC or elsewhere and
without limiting the generality of the
foregoing, includes all forms of profits tax,
interest tax, salaries tax, property tax,
estate duty, stamp duty, sales tax, any
provisional tax, customs and import duty and
any amount equal to any deprivation of any
relief, allowance, set off, deduction in
computing profits or rights to repayment of
taxation granted by or pursuant to any
legislation concerning or otherwise relating to
taxation and also includes in addition and
without prejudice to the foregoing, all fines,
penalties, costs, charges, expenses and
interests relating thereto;
"US" the United States of America;
"US$" United States Dollars, being the lawful
currency of the United States of America;
5
"Vendors' Solicitors" Xx. Xx Xxxxxx
Shanghai Z&C Law Office
D/00X, 0 Xxxxx Xxxx 000,
Xxxxx Xxxx Xxxx, Xxxxxxxx
Tel:00000000,58358822-12
Fax:00000000
Mobile:00000000000
"Warranties" the representations and warranties set out in
Schedule 3.
----------
1.2 The headings of this Agreement are inserted for convenience only and
shall be ignored in construing this Agreement. Unless the context
otherwise requires, references in this Agreement to the singular shall
be deemed to include references to the plural and vice versa;
references to one gender shall include all genders and references to
any person shall include an individual, firm, body corporate or
unincorporated.
1.3 References in this Agreement to clauses, schedules and exhibits are
references to clauses, schedules and exhibits of this Agreement and
references to sub-clauses and paragraphs are unless otherwise stated,
references to sub-clauses and paragraphs of the clause, sub-clause or,
as appropriate, the schedule or the exhibit in which the reference
appears.
1.4 Reference to a "subsidiary" or "holding company" shall be construed in
accordance with section 2 of the Companies Ordinance.
1.5 Reference to any Ordinance, regulation or other statutory provision or
rules in this Agreement includes reference to such Ordinance,
regulation, provision or rule as modified, consolidated or re-enacted
from time to time.
2. SALE AND PURCHASE OF THE SALE INTERESTS
---------------------------------------
2.1 Subject to the terms and conditions of this Agreement, each of the
Vendors, as beneficial owners of the respective portion of Sale
Interests as set out in column 4 of Schedule 2, shall sell and the
Purchaser shall, relying on the warranties and indemnities herein
contained, purchase or procure its nominee to purchase the Sale
Interests, with full title guarantee with effect from the date of this
Agreement free from all Encumbrances together with all rights now or
hereafter attaching thereto including but not limited to all dividends
paid, declared and/or made in respect thereof on or after the date of
this Agreement.
2.2 The parties acknowledge and agree that the Vendors will enter into a
share transfer agreement with the Purchaser's Nominees as referred to
in Clause 3.1(b), pursuant to which the Purchaser's Nominees will be
-------------
registered as the beneficiary owner of the Sale Interests in accordance
with the instructions of the Purchaser.
6
2.3 The Purchaser and/or the Purchaser's Nominees shall not be obliged to
purchase any portion of the Sale Interests unless the purchase of all
the Sale Interests is completed simultaneously.
3. CONDITIONS
----------
3.1 Completion is conditional upon:
(a) the Purchaser having completed its due diligence (including
without limitation, legal, financial and commercial aspects) in
respect of the Group referred to in Clause 3.3 below and the
results of which are, in the absolute opinion of the Purchaser,
satisfactory and acceptable to the Purchaser in all respects;
(b) the due execution of a share transfer agreement by the Vendors and
the Purchaser's Nominees;
(c) if so required, passing of necessary resolutions by shareholders
of the Purchaser at a general meeting approving (i) this Agreement
and the transactions contemplated herein and (ii) the allotment
and issue of the Consideration Shares to the Vendors credited as
fully paid;
(d) all necessary consents permits and approval (whether governmental,
regulatory or otherwise) as may be required under US securities
laws or other relevant laws, regulations and rules in US in
respect of this Agreement, the allotment and issue of the
Consideration Shares and the transactions contemplated hereunder
having been obtained by the Purchaser;
(e) all necessary consents permits and approval (whether governmental,
regulatory or otherwise) as may be required in respect of the sale
and purchase of the Sale Interests and/or the change of control of
the Company having been obtained from the relevant PRC
governmental authorities, including but not limited to the new
business license for the Company;
(f) the Purchaser having obtained a legal opinion issued by a lawyer
(acceptable to the Purchaser) qualified to practice PRC securities
laws (which form and contents are satisfactory and acceptable to
the Purchaser at its absolute discretion) in respect of:
(i) the legality and validity of this Agreement and the
transactions contemplated herein;
(ii) the completion of all necessary procedures and obtaining of
all necessary approvals regarding the sale and purchase of
the Sale Interests;
(iii) the appointment of Director(s) nominated by the Purchaser
become effective;
(iv) no change in the permitted scope business of the Company
after the transfer of the Sale Interests;
7
(v) all other matters reasonably requested by the Purchaser;
(g) the Purchaser having obtained a legal opinion issued by a US legal
counsel (which form and contents are satisfactory and acceptable
to the Purchaser at its absolute discretion) in respect of:
(i) the legality and validity of this Agreement, allotment and
issue of the Consideration Shares and the transactions
contemplated herein;
(ii) the completion of all necessary procedures and obtaining of
all necessary approvals regarding the acquisition of the
Sale Interests; and
(iii) all other matters reasonably requested by the Purchaser;
(h) the Purchaser having obtained a consent letter duly signed by all
shareholders and person who has any direct or indirect interest in
the registered capital of the Company waiving their respective
rights of pre-emption or any other rights they may have in respect
of the Sale Interests;
(i) the due execution of a share transfer and pledge agreement by the
Purchaser's Nominees and the Purchaser;
(j) the Warranties and undertakings under this Agreement are true and
accurate and are not misleading in any material aspects at
Completion as if repeated at Completion and at all time between
the date of this Agreement and the Completion.
3.2 The Vendors shall jointly and severally procure the fulfillment of the
condition precedents mentioned in Clauses 3.1(e) above and shall keep
--------------
the Purchaser fully informed of all their actions and efforts in
connection with their obtaining the necessary consents, permits and
approvals from the relevant regulatory authorities, including without
limitation, providing the Purchaser immediately with all of their
correspondence with these relevant regulatory authorities.
3.3 In relation to Clause 3.1(a), the Vendors shall give and shall procure
-------------
that the Purchaser and/or any persons authorized by it in writing will
be given such access to the premises and all books, documents, title
deeds, records, returns, approvals, correspondence and accounts of the
Company and all members of the Group and all such information relating
to the Group as may be reasonably requested by or on behalf of the
Purchaser to undertake and conduct a full due diligence (including but
without limitation, in all legal, financial and commercial aspects)
against the Group and be permitted to take copies of any such books,
documents, title deeds, records and accounts and that the directors and
employees of all members of the Group shall be instructed to give
promptly all such information and explanations to any such persons as
aforesaid as may be requested by it or them. For the avoidance of
doubt, such due diligence shall not limit or otherwise qualify in any
way the obligations and liabilities of the Vendors under Clause 10.
---------
8
3.4 The Purchaser may at any time by notice in writing to the Vendors waive
any of the conditions set out in Clause 3.1. If (a) any of the
-----------
conditions set out in Clause 3.1 has not been satisfied (or as the case
----------
may be, waived by the Purchaser) on or before 5:00 p.m. on the Long
Stop Date or such later date as the Purchaser may agree; or (b) the
Purchaser is not satisfied with the results of the due diligence
conducted according to Clause 3.3 and informs the Vendors in writing at
----------
any time, this Agreement shall cease and determine and the parties to
this Agreement shall not have any obligations and liabilities hereunder
save for any antecedent breaches of the terms hereof and save that all
such reasonable out-of-pocket expenses properly incurred by the
Purchaser in connection with the purchase of the Sale Interests or
otherwise in connection with the arrangements contemplated under this
Agreement shall be borne and paid by the Vendors on demand.
4. CONSIDERATION
-------------
4.1 The consideration for the sale and purchase of the Sale Interests shall
be the sum of RMB 16.083 million, which shall be satisfied by the
Purchaser procuring the Holding Company to allot, issue and credit the
Consideration Shares to the Vendors in the Relevant Proportion as fully
paid at an issue price of US$0.138 per share upon Completion.
4.2 The Vendors shall notify the Purchaser in writing at least two (2)
Business Days before the Completion Date of the name(s) and other
particulars of the registered holder(s) of the Consideration Shares and
the board lot denomination of the share certificate(s) in respect of
the Consideration Shares to be issued to them or their nominee(s) and
all necessary information and details as is reasonably required to
enable the share registrars of the Holding Company to issue the
definitive share certificates for such Consideration Shares upon
Completion.
4.3 The Vendors understand that the Consideration Shares will not be
registered under the Securities Act. The Vendors also understand that
the Consideration Shares are being allotted and issued pursuant to an
exemption from registration contained in the Securities Act based in
part upon the Vendors' representations contained in this Agreement. The
Vendors hereby represent and warrant as follow:
(a) Vendors bear economic risk: the Vendors have substantial
experience in evaluating and investing in private placement
transactions of securities in companies similar to the Purchaser
so that it is capable of evaluating the merits and risks of its
investments in the Purchaser and have the capacity to protect its
own interests. The Vendors are able to bear the economic risk of
this investment;
(b) Acquisition for own account: the Vendors are acquiring the
Consideration Shares for their respective own account for
investment only, and not with a view towards their distribution;
9
(c) Vendors can protect their interest: the Vendors represent that by
reason of their management, business or financial experience, the
Vendors have the capacity to protect their own interests in
connection with the transactions contemplated in this Agreement.
Further, the Vendors are aware of no publication of any
advertisement in connection with the transactions contemplated in
this Agreement;
(d) Company information: the Vendors have had an opportunity to
discuss the Purchaser's business, management and financial affairs
with directors, officers and management of the Purchaser and have
had the opportunity to review the Purchaser's operations and
facilities. The Vendors have also had the opportunity to ask
questions of and receive answers from the Purchaser and its
management regarding the terms and conditions of this investment;
(e) Rule 144: The Vendors acknowledge and agree that the Consideration
Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available. The Vendors have been advised or are
aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased
in a private placement subject to the satisfaction of certain
conditions;
(f) Legends: The Vendors understand and agree that the Purchaser will
cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s)
evidencing ownership of the Consideration Shares, together with
any other legends that may be required by state or federal
securities laws, or by the Articles of Association and Bye laws of
the Company, or by any other agreement between the Vendors and the
Purchaser or between the Vendors and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
(g) Refusal to Transfer: The Purchaser will not be required to (i)
transfer on its books any Consideration Shares that have been sold
or otherwise transferred in violation of any of the provisions of
this Agreement; or (ii) treat as owner of such Consideration
Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Consideration Shares
have been so transferred.
10
4.4 The Purchaser agrees that upon expiry of the Restricted Trading Period
and upon presentation of the Consideration Shares to Purchaser,
Purchaser will attend to all necessary formalities and registration
procedures as may be required under the Securities Act and the
applicable State securities law to enable the Consideration Shares
becoming freely transferable and resalable.
5. COMPLETION
----------
5.1 Completion shall take place at the PRC office of the Vendors situated
at 000-000, Xxxx Chang Building, Xx.0, Xxxx 000, Xxxxx Xxxx Xx,
Xxxxxxxx, Xxxxx on the Completion Date at 2p.m. (or at such other place
and time as the parties may agree) when all the acts and requirements
set out in this Clause 5 shall be complied with.
5.2 On Completion, each of the Vendors shall jointly and/or severally (as
the case may be) deliver or procure the delivery to the Purchaser of
all the following:
(a) copies, certified as true and complete by a director/ legal
representative of the Company and its relevant subsidiaries, of
resolutions of the shareholders /board of directors meeting
approving the matters as stipulated in Clauses 5.3, 5.4(c) and
5.4(d); ------------------------
------
(b in respect of every member of the Group:
(i) all constitutional documents, statutory records and minute
books (which shall be written up to date as at Completion);
(ii) all common seals and all rubber stamps, cheque books, cheque
stubs and bank statements, receipt books, all current
insurance policies (if any), books and accounts and title
deeds and evidence of ownerships to all assets and all
current contracts and all other accounting records;
(iii) copies of all tax returns and assessments (receipted where
the due dates for payment fell on or before the Completion
Date); and
(iv) all other papers, correspondence and documents relating to
the Group which are in the possession of or under the
control of any of the Vendor;
provided that, if the Purchaser so agrees, delivery of all
documents and records as referred to in this Clause 5.2(b)
------
shall be deemed to have been effected where they are
situated in premises and shall continue to be in the sole
occupation of the relevant member of the Group following
Completion or otherwise in the custody of persons who shall
remain officers and/or employees of such member of the
Group following Completion;
11
(c) the Tax Indemnity duly executed by each of the Vendors.
5.3 On Completion, the Vendors shall procure a meeting of the shareholders
of the Company at which such matters shall be dealt with and resolved
upon as the Purchaser shall require for the purposes of giving effect
to the provisions of this Agreement including:
(a) approving the sale and purchase of the Sale Interests;
(b) appointing nominee(s) of the Purchaser to be Director(s) and of
the Company;
(c) amending the memorandum and articles of association of the Company
as may be required by the Purchaser to effect the transactions
contemplated hereunder; and
(d) procure the resignation of such existing Director(s) of the
Company as the Purchaser shall specify and that each person shall
confirm under seal that they have no claim against the Company for
compensation for loss of office or any other claim.
5.4 On Completion, each of the Vendors shall jointly procure that:
(a) all registration procedures as may be required under the PRC law
in respect of the transfer of the Sale Interests by the Vendors to
the Purchaser's Nominees shall be completed within reasonable
time;
(b) a new articles of association of the Company shall be signed by
the Purchaser's Nominees and filed with the relevant local
Administration of Industry and Commerce which shall state that the
Purchaser's Nominees hold 45% interest in the registered capital
of the Company;
(c) a board meeting of each subsidiary of the Company shall be held at
which such matters shall be dealt with and resolved upon as the
Purchaser shall require for the purposes of giving effect to the
provisions of this Agreement, including appointing such persons as
the board of directors may determine to be new director(s); and
(d) such existing directors, supervisor(s) and the secretary of each
subsidiary of the Company as the Purchaser shall specify shall
resign as directors, supervisor(s) and the secretary of such
relevant subsidiary of the Company and that each such person shall
confirm under seal that they have no claim against the relevant
subsidiary for compensation for loss of office or any other claim
whatsoever.
5.5 Against performance of the obligations by the Vendors under Clauses
-------
5.2, 5.3 and 5.4 above, the Purchaser shall:
----------------------
12
(a) procure the allotment and issue to each of the Vendors (or their
respective nominees) the Consideration Shares in the Relevant
Proportion and immediately thereafter to register each of the
Vendors (or their respective nominees) as a member of the
Purchaser;
(b) cause to be delivered to each of the Vendors certified copy of
instructions to the share registrar of the Holding Company for the
issue of definitive share certificates of title in respect of the
Consideration Shares in the Relevant Proportion in the respective
names of the Vendors or their respective nominee(s); and
(c) deliver to each of the Vendors a certified copy of the directors'
resolutions of the Purchaser approving:
(i) the acquisition of the Sale Interests and the terms and
conditions of this Agreement; and
(ii) the issue and allotment of the Consideration Shares.
5.6 If the Vendors shall fail to do anything required to be done by them
under Clauses 5.2, 5.3 and 5.4, without prejudice to any other right or
------------------------
remedy available to the Purchaser, the Purchaser may:
(a) defer Completion to a day not later than 14 days after the date
fixed for Completion (and so that the provisions of this paragraph
(a) shall apply to Completion as so deferred); or
(b) proceed to Completion so far as practicable but without prejudice
to the Purchaser's rights to the extent that the Vendors shall not
have complied with their obligations hereunder; or
(c) rescind this Agreement without liability on its part.
5.7 Clauses 6 to Clause 17 shall survive the Completion.
--------- ---------
6. MANAGEMENT OF THE COMPANY
-------------------------
6.1 Upon Completion, the business and operations of the Group shall be
managed by the Board.
6.2 The chairman of the Board and the legal representative of the Company
shall be nominated and appointed by the Board. The chairman of the
Board and the legal representative of the Company shall initially be
[ss.o+/-W+/-W].
6.3 The Board shall comprise of five Directors. The Purchaser's Nominees
shall be entitled to nominate and appoint two Directors at any time by
written notice addressed to the Company.
6.4 The quorum for meetings of the Board shall be two, of whom one shall be
a Director nominated by the Purchaser's Nominees.
13
6.5 Unless otherwise unanimously agreed by all Directors, meetings of the
Board shall be held at least once in each quarter.
6.6 At least 7 days' written notice of each meeting of the Board shall be
given to each Director and alternate director specifying the date, time
and place of the meeting and the business to be transacted thereat with
all documents and papers to be distributed in such meeting attached,
provided that if Directors and their nominated alternates who would
constitute a quorum at any meeting agree to a shorter period of notice,
then such meeting shall be deemed to be properly called.
6.7 The financial controller and/or the chief financial officer of the
Company shall be nominated and appointed by the Purchaser's Nominees.
6.8 Save with the consent of the Purchaser, the Vendors shall not sell or
otherwise dispose of any of their remaining interests in the Company.
6.8 So far as the Vendors remain as shareholders of the Company, each of
the Vendors undertakes that he/she/it shall procure and take all
actions to ensure that all obligations under Clauses 6.8 be duly
executed, done and/or performed.
7. DISPOSAL OF CONSIDERATION SHARES
--------------------------------
Each of the Vendors agrees and acknowledges that the Consideration
Shares are subject to the United States Securities and Exchange
Commission ("SEC") Rule 144 and in particular, hereby jointly and
severally undertakes to and covenants with the Purchaser and the
Holding Company that it will not, during the Restricted Trading Period,
dispose of (including without limitation by the creation of any option,
charge or other Encumbrance or rights over or in respect of) any of the
Consideration Shares or any interests therein owned by it/him/her or in
which it/he/she is, directly or indirectly, interested immediately
after Completion or dispose of (including without limitation by the
creation of any option, charge or other encumbrance or rights over or
in respect of) any shares in any company controlled by it/he/she which
is the beneficial owner of the Consideration Shares.
8. FURTHER UNDERTAKING OF THE VENDORS
----------------------------------
8.1 (HuaQing Economics Development Company Limited) is a domestic joint
venture company established in the PRC and is beneficially owned as to
50% by (HuaQing Economics Development Company), 16.67% by (HuaChen
Computer Company Limited)] and the remaining 33.33% by . Each of the
Vendors is a beneficial owner of certain interests in the registered
capital of (HuaQing Economics Development Company).
8.2 The Vendors hereby jointly and severally undertake to procure that:
(a) a new domestic joint venture company ("New JV Company") with a
registered share capital of not less than RMB 6 million will be
established within three 3 months after the date of this Agreement
and the Purchaser's Nominees will become the beneficial owner of
14
45% interest in the registered capital of the New JV Company and
the remaining 55% interest in the registered capital of the New JV
Company will be owned by the existing shareholders of the Company;
for the avoidance of doubt, the Vendors will, at their costs and
expenses, be responsible for all the contribution to the
registered capital of the New JV Company and the Purchaser's
Nominees will not be required to make any contribution or be
responsible for any other expenses;
(b) [all tangible and intangible assets and business currently owned
by u0(2)M gAUuo(R)i|(3)--*1/2(Y)q(HuaQing Economics Development
Company Limited) will be transferred to the New JV Company and all
existing shareholders (and each of their respective ultimate
beneficial owners) of u0(2)M gAUuo(R)i|(3)--*1/2(Y)q(HuaQing
Economics Development Company Limited) will consent to such
transfer and attend to all necessary formalities and procedures to
effect such transfer;]
(c) the registered capital of the New JV Company will be fully paid-up
and that the New JV Company shall have incurred no debt or
liabilities without the written consent of the Purchaser; and
(d) all necessary formalities and registration procedures for the
formation of the New JV Company as may be required under the PRC
law will be duly complied with and all necessary documentation in
relation thereto will be executed and performed by the relevant
parties to the satisfaction of the Purchaser.
8.3 The Purchaser agrees that, within five (5) Business Days after the
fulfillment of the undertakings as set out Clause 8.2 to its
-----------
satisfaction, it will procure the Holding Company to allot and issue
1,833,992 ordinary shares in the share capital of the Holding Company
to the Vendors or their nominees in addition to the Consideration
Shares.
8.4 For the avoidance of doubt, this Clause 8 shall survive the Completion.
9. REPURCHASE OPTION
-----------------
9.1 If, according to the Special Audited Accounts, the Company either:
(a) fails to attain a Net Profit exceeding the Guaranteed Net Profit
or fails to achieve the Guaranteed Turnover during the Restricted
Trading Period; or
(b) making loss in any single quarter in the Restricted Trading
Period,
then the Purchaser may at its sole and absolute discretion, within
three (3) months from the issue of the Special Audited Accounts, by
notice in writing ("Purchaser's Repurchase Notice") to the Vendors,
request the Vendors to repurchase the Sale Interests and the Vendors
shall transfer to the Purchaser or its nominee all of the Consideration
Shares which have been issued pursuant to Clause 4.1 and Clause 8.3
---------- ----------
15
free from Encumbrances in consideration of all beneficial and equitable
interest in the registered capital of the Company then held by the
Purchaser and/or the Purchaser's Nominees being transferred to the
Vendors.
9.2 If, upon expiry of the Restricted Trading Period, the return accrued or
derived from the Consideration Shares is less than the return accrued
or derived from the Sale Interests, then the Vendors may at its sole
and absolute discretion, within three (3) months from the issue of the
Special Audited Accounts, by notice in writing ("Vendors' Repurchase
Notice") to the Purchaser, request the Purchaser to repurchase the
Consideration Shares and transfer to the Vendors all beneficial and
equitable interest in the registered capital of the Company then held
by the Purchaser and/or the Purchaser's Nominees in consideration of
all of the Consideration Shares which have been issued pursuant to
Clause 4.1 and Clause 8.3 free from Encumbrances being transferred to
---------- ----------
the Purchaser.
9.3 The Vendors shall, within 7 days from the date of the Purchaser's
Repurchase Notice or the Vendors' Repurchase Notice (as the case may
be), deliver to or cause to be delivered to the Purchaser the following
in respect of the relevant Consideration Shares:
(a) duly executed transfer instruments and contract notes in favour of
the Purchaser or its nominees together with the relevant share
certificates; and
(b) such other documents as may be reasonably required to give good
title to the Consideration Shares free from Encumbrances to enable
the Purchaser or its nominees (or as it may nominate) to become
the registered holder thereof,
against which the Purchaser shall transfer and assign or procure
the transfer and assign to the Vendors of all equitable and
beneficial interest and all shareholding in the Company then held
by it and/or the Purchaser's Nominees.
9.4 For the purposes of this Clause 9, return accrued or derived from the
--------
Consideration Shares or the Sale Interests respectively shall be
calculated by reference to:
(a) the multiple of the average closing price of the Consideration
Shares for the last thirty (30) trading days including the date on
which the Restricted Trading Period ends and the number of the
Consideration Shares; and
(b) 45% of the net assets value of the Company as at the date on which
the Restricted Trading Period ends according to the Special
Audited Accounts.
16
10. WARRANTIES
----------
10.1 Each of the Vendors hereby jointly and severally represents and
warrants to the Purchaser that the Warranties are true and accurate in
all respects as at the date of this Agreement and will continue to be
so up to and including Completion and agree to use their best
endeavours (including taking such remedial action as may be necessary)
to ensure that the Warranties have remained and will remain true and
accurate in all respects from date of signing of this Agreement up to
the time of Completion and acknowledges that the Purchaser, in entering
into this Agreement, is relying on, inter alia, such Warranties. For
the avoidance of doubt, the liabilities and obligations of each of the
Vendors under the Warranties shall in no circumstances be lessened,
modified, relieved or otherwise reduced due to any actual or
constructive knowledge of the Purchaser of any facts or events relating
to the business, operations or otherwise of the Group, whether such
knowledge is gained in the course of the due diligence conducted under
Clause 3.3 or otherwise.
----------
10.2 Each of the Vendors agrees that the Purchaser shall treat each of the
Warranties as a condition of this Agreement. In addition, each of the
Warranties is without prejudice to any other Warranty and, except where
expressly otherwise stated, no provision in any Warranty shall govern
or limit the extent or application of any other provision in any
Warranty.
10.3 Each of the Vendors agrees to fully indemnify and keep the Purchaser
and its assignee fully indemnified on demand from and against all
losses, liabilities, damages, costs and expenses (including legal
expenses) which the Purchaser and its assignee may incur or sustain
from or in consequence of any of the Warranties not being correct or
fully complied with. This indemnity shall be without prejudice to any
other rights and remedies of the Purchaser and its assignee in relation
to any such breach of Warranties and all such rights and remedies are
hereby reserved.
10.4 The Warranties shall survive Completion and the rights and remedies of
the Purchaser in respect of any breach of the Warranties shall not be
affected by Completion or by any investigation made by or on behalf of
the Purchaser into the affairs of the Group or by the Purchaser
rescinding, or failing to rescind this Agreement, or failing to
exercise or delaying the exercise of any right or remedy, or by any
other event or matter whatsoever, except a specific and duly authorised
written waiver or release and no single or partial exercise of any
right or remedy shall preclude any further or other exercise.
10.5 The Purchaser shall be entitled to take action both before and after
Completion in respect of any breach or non-fulfillment of any of the
Warranties and Completion shall not in any way constitute a waiver of
any right of the Purchaser.
10.6 Each of the Vendors undertakes in relation to any Warranty which refers
to the knowledge, information or belief of each of the Vendors that it
has made full enquiry into the subject matter of that Warranty and that
17
they do not have actual or constructive knowledge, information or
belief that the subject matter of that Warranty may not be correct,
complete or accurate.
10.7 If at any time before Completion the Vendors or any of them come to
know of any fact or event which:
(a) is in any way inconsistent with any of the undertakings given by
the Vendors, and/or
(b) suggests that any fact warranted may not be as warranted or may be
misleading; and/or
(c) might affect the willingness of a prudent purchaser for value of
the Sale Interests to complete its purchase or the amount of the
consideration which such purchaser would be prepared to pay for
the Sale Interests;
the Vendors shall give immediate written notice thereof to the
Purchaser in which event the Purchaser may within 14 days of
receiving such notice rescind this Agreement by written notice to
each of the Vendors.
10.8 If at any time before Completion, the Purchaser finds that any of the
Warranties is incorrect or has not been or is (in the reasonable
opinion of the Purchaser) incapable of being rectified the Purchaser
may rescind this Agreement by written notice to each of the Vendors.
10.9 The Purchaser's rights under the above clauses are in addition to and
without prejudice to all other rights and remedies available to it and
its exercise of or its failure to exercise its rights under any of the
above clauses shall not constitute a waiver of or prejudice any of its
other rights under this Agreement.
11. VENDORS' UNDERTAKINGS
---------------------
11.1 Each of the Vendors jointly and severally undertakes that the Vendors
will not directly or indirectly either alone or jointly with or as
manager or agent of any person and whether or not for gain, carry on,
engage or in any way be interested in any business that is similar to
and/or in competition with the business of the Company and/or any of
its subsidiaries for a period of three (3) years commencing from the
date on which the Restricted Trading Period ends.
11.2 The Vendors covenant and undertake that prior to Completion and without
the prior written consent of the Purchaser, the Vendors shall procure
that the Company and each member of the Group shall not:
a. incur any expenditure on capital account or enter into any option
in respect of any part of its assets;
b. dispose of or agree to dispose of or grant any option in respect
of any part of its assets;
18
c. borrow any money or make any payments out of or drawings on its
bank account(s) other than routine payments;
d. enter into any unusual or abnormal contract or commitment;
e. make any loan;
f. enter into any leasing, hire, purchase or other agreement or
arrangements for payment on deferred terms;
g. declare, make or pay any dividend or other distribution or do or
suffer anything which may render its financial position less
favourable than as at the date of this Agreement;
x. xxxxx or issue or agree to grant or issue any mortgages, charges,
debentures or other securities or give or agree to give any
guarantees or indemnities;
i. make any change in the terms and conditions of employment or
pension benefits of any of its directors or employees or employ or
terminate (other than for good cause) the employment of any
person;
j. create, issue or grant any option in respect of any class of share
or loan capital or agree so to do;
k. in any other way depart from the ordinary course of its respective
day-to-day business either as regards the nature scope or manner
of conducting the same;
l. voluntarily contravene or fail to comply with any material
obligation, statutory or otherwise; and
m. do anything whereby its financial position will be rendered less
favourable than at the date hereof.
11.3 Each of the Vendors agrees to fully indemnify and keep each member of
the Group and/or the Purchaser and its assignee fully indemnified on
demand from and against all losses, liabilities, damages, costs and
expenses (including legal expenses) which any member of the Group
and/or the Purchaser and its assignee may incur or sustain from or in
consequence of any liabilities of the Group, whether actual or
contingent including without limitation, the diminution of the value
(including without limitation, the net assets value or expected
profits) of the Group, arising from any act or omission or otherwise
incurred on or before the Completion Date.
12. ACCESS TO INFORMATION
---------------------
Each of the Vendors shall assist the Purchaser, its agents,
representatives and professional advisers in obtaining promptly on
request full access to all such facilities and information regarding
the business, assets, liabilities, contracts and affairs of the Group
19
and other evidence of ownership of the assets owned by the Group as the
Purchaser may require.
13. FURTHER ASSURANCE
-----------------
Each of the Vendors shall execute, do and perform or procure to be
executed, done and performed by other necessary persons all such
further acts, agreements, assignments, assurances, deeds and documents
as the Purchaser may require effectively to vest the registered and
beneficial ownership of the Sale Interests in the Purchaser free from
all Encumbrances and with all rights now and hereafter attaching
thereto.
14. CONFIDENTIALITY AND ANNOUNCEMENTS
---------------------------------
14.1 Each of the parties undertakes to the others that it will not, at any
time after the date of this Agreement, divulge or communicate to any
person other than to its professional advisers, or when required by law
or any rule of any relevant stock exchange body or regulatory
authorities, or to its respective officers or employees whose province
is to know the same any confidential information concerning the
business, accounts, finance or contractual arrangements or other
dealings, transactions or affairs of any of the others which may be
within or may come to its knowledge and it shall use its best
endeavours to prevent the publication or disclosure of any such
confidential information concerning such matters.
14.2 No public announcement or communication of any kind shall be made in
respect of the subject matter of this Agreement unless specifically
agreed between the parties or unless an announcement is required
pursuant to the applicable laws and the regulations or the requirements
of any relevant stock exchange or any other regulatory body or
authority. Any announcement by any party required to be made pursuant
to any relevant laws or regulation or the requirements of the relevant
stock exchange or any other regulatory body or authority shall be
issued only after such prior consultation with the other party as is
reasonably practicable in the circumstances.
15. GENERAL
-------
15.1 This Agreement constitutes the entire agreement between the parties
hereto with respect to the matters dealt with herein and supersedes all
previous agreements, arrangements, statements, understandings or
transactions between the parties hereto in relation to the matters
hereof and the parties acknowledge that no claim shall arise in respect
of any agreement so superseded.
15.2 Any variation to this Agreement shall be binding only if recorded in a
document signed by all the parties hereto.
15.3 Time shall be of the essence of this Agreement but no failure by any
party to exercise, and no delay on its part in exercising any right
hereunder will operate as a waiver thereof, nor shall any single or
partial exercise of any right under this Agreement (including a
settlement with the Vendor) preclude any other or further exercise of
20
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.
15.4 The obligations, liabilities (including without limitation, breach of
Warranties) and undertakings of the Vendors shall be joint and several.
15.5 This Agreement shall be binding upon and ensure for the benefit of the
successors of the parties but shall not be assignable.
15.6 All provisions of this Agreement, in so far as the same shall not have
been performed at Completion, shall remain in full force and effect
notwithstanding Completion.
15.7 If any provision of this Agreement shall be held to be illegal or
unenforceable, the enforceability of the remainder of this Agreement
shall not be affected.
15.8 Time shall be of the essence as regards any date or period mentioned in
this Agreement and any date or period substituted for the same by
agreement of the parties hereto or otherwise.
16. NOTICES
-------
16.1 Any notice, claim, demand, court process, document or other
communication to be given under this Agreement (collectively
"communication" in this Clause 16) shall be in writing in the English
---------
language and may be served or given personally or sent to the address
or facsimile numbers (if any) stated after the relevant party's name in
Schedule 4 or to such other address as may have been last notified in
----------
writing by such party to the party serving the communication
specifically referring to this Agreement. All communications shall be
served by the following means and the addressee of a communication
shall be deemed to have received the same within the time stated
adjacent to the relevant means of dispatch:
Means of dispatch Time of deemed receipt
----------------- ----------------------
Local mail or courier 24 hours
Facsimile on receipt of a satisfactory report of
transmission printed out by the sending
machine
Air courier/Speedpost 3 days
Airmail 5 days
Provided that in the case of delivery by hand or by fax which occurs
after 6:00 p.m. on a Business Day or a day which is not a Business Day,
service thereof shall be deemed to occur at 9:30 a.m. on the next
following Business Day.
16.2 A communication served in accordance with Clause 16.1 shall be deemed
-----------
21
sufficiently served and in proving service and/or receipt of a
communication it shall be sufficient to prove that such communication
was left at the addressee's address or that the envelope containing
such communication was properly addressed and posted or dispatched to
the addressee's address or that the communication was properly
transmitted by facsimile to the addressee.
16.3 Nothing in this Clause 16 shall preclude the service of communication
---------
or the proof of such service by any mode permitted by law.
17. COSTS AND STAMP DUTY
--------------------
17.1 Each party shall bear its own costs and expenses (including legal fees)
incurred in connection with the preparation, negotiation, execution and
performance of this Agreement and all documents incidental or relating
to Completion.
17.2 All stamp duty (if any) payable in connection with the sale and
purchase of the Sale Interests shall be borne by the Vendors and the
Purchaser in equal shares.
18. GOVERNING LAW AND JURISDICTION
------------------------------
18.1 This Agreement shall be governed by and construed in accordance with
the laws of Hong Kong.
18.2 In relation to any legal action or proceedings to enforce this
Agreement or arising out of or in connection with this Agreement
("proceedings") each of the parties submits to the jurisdiction of the
High Court of Hong Kong and waives any objection to proceedings in that
court on the grounds of venue or on the grounds that the proceedings
have been brought in any inconvenient forum.
18.3 These submissions shall not affect the right of any party to take
proceedings in any other jurisdiction nor shall the taking of
proceedings in any jurisdiction preclude any party from taking
proceedings in any other jurisdiction.
18.4 Each of the Vendors hereby irrevocably appoints Mr.Xxxxxx Xxx of Flat
H, 27th Floor, Tang Kung Mansion, 00 Xxxxxx Xxxxx Xxxx, Xxxx Xxxx as
its process agent to receive on its behalf service of any writ,
summons, order, judgment or other notice of legal process in Hong Kong.
Such service shall be deemed completed on delivery to such process
agent (whether or not it is forwarded to and received by the Vendors).
If for any reason such process agent ceases to be able to act as
process agent, or no longer has an address in Hong Kong, each of the
Vendors irrevocably agrees to appoint a substitute process agent with
an address in Hong Kong and to deliver to the Purchaser a copy of the
new process agent's acceptance of that appointment within 30 days.
Nothing herein contained shall affect the right to serve process in any
other manner permitted by law.
22
19. LEGAL REPRESENTATION
--------------------
Each party confirms and acknowledges to the other that he/she/it has
sought separate legal representation and is fully aware of the
provisions of this Agreement and the transactions contemplated herein
before entering into this Agreement.
20. COUNTERPARTS
------------
This Agreement may be executed in one or more counter parts each of
which shall be binding on each party by whom or on whose behalf it is
so executed, but which together shall substitute a single instrument.
For the avoidance of doubt, this Agreement shall not be binding on any
party hereto unless and until it shall have been executed by or on
behalf of all persons expressed to be a party hereto.
23
SCHEDULE 1
----------
Particulars of the Company
--------------------------
1. Date of incorporation : 10 July 2000
2. Place of incorporation : PRC
3. Registration No. : 3101062011473
4. Registered capital : RMB20,000,000
5. Registered Address : 1486 2 211
5. Nature : domestic joint venture company with
limited liability
6. Legal Representative :
7. Directors :
8. Financial year end : 31 December
9. Auditors :
10. Scope of Business : Computer hardware, software, components
and services; electronic products,
biotech and health products; foods.
24
SCHEDULE 2
----------
The Vendors
-----------
Name Amount of Amount Sale Percentage
---- ---------- ----------- ----------
registered Interests of Sale Interests
---------- --------- -----------------
capital paid beneficially to the entire issued
------------ ------------ --------------------
up by each of owned by each share capital of the
------------- ------------- --------------------
the Vendors (RMB) of the Vendors Company
----------------- -------------- -------
3,070,000 1,600,000 8.0%
3,070,000 1,600,000 8.0%
3,070,000 1,600,000 8.0%
3,070,000 1,600,000 8.0%
2,500,000 1,300,000 6.5%
2,500,000 1,300,000 6.5%
Other shareholder 2,720,000 N/A N/A
of the Company ------------------------------------------------------------
Total: 20,000,000 9,000,000 45%
25
SCHEDULE 3
----------
Warranties
----------
1. INTERPRETATION
--------------
(A) In this schedule where the context admits:
"Accounts" means the consolidated balance sheet of the Group made up as
at the Balance Sheet Date and the consolidated profit and loss accounts
of the Company and its subsidiaries for the year ended on the Balance
Sheet Date, true copies of which are attached hereto marked "Appendix";
"Balance Sheet Date" means 31 December 2002;
"Connected Persons" shall have the meaning ascribed thereto in the
Listing Rules;
"Intellectual Property" means patents, trademarks, service marks, trade
names, registered designs, designs, copyrights and other forms of
intellectual or industrial property (in each case in any part of the
world and whether or not registered or registrable and for the full
period thereof and all extensions and renewals thereof and applications
for registration of or otherwise in connection with the foregoing),
know-how, inventions, formulae, confidential or secret processes and
information, computer programs and software, and any other protected
rights and assets, and any licences and permissions in connection
therewith;
(B) All references in this Schedule 3 to the Company, other than those in
----------
paragraphs 3(B), 4(A) and 4(C) shall be read and construed as a
reference to the Company and each of its subsidiaries.
2. INFORMATION
-----------
(A) Disclosures
-----------
The facts and information set out in the recitals and, the Schedules
and all documents attached are true and all information which has been
provided in writing to the Purchaser or its representatives or advisers
by the Vendors or by any Director, officer or other official of the
Company by its professional advisers or other agents was when given and
is now true and accurate in all material respects. There is no fact or
matter which has not been disclosed which renders any such information
untrue, inaccurate or misleading or the disclosure of which might
reasonably affect the willingness of a willing purchaser to purchase
the Sale Interests in accordance with the provisions of this Agreement.
(B) Assessment of prospects
-----------------------
The information disclosed to the Purchaser or its representatives or
professional advisers, by the Vendors and the directors, officers or
26
other officials of the Company regarding its current status or
prospects comprises all information which is material for the
reasonable assessment of the financial and trading prospects of the
Company or the Group as a whole.
3. COMPLIANCE AND ABILITY TO SELL
------------------------------
(A) Constitution of each member of the Group
----------------------------------------
The copy of the memorandum and articles of association of the Company
which have been provided to the Purchaser are true and complete in all
respects and have embodied in them or annexed to them a copy of every
such resolution and agreement required by law to be annexed thereto and
the Company has at all times carried on its business and affairs in all
respects in accordance with its respective memorandum and articles of
association and all such resolutions and agreements.
(B) Statutory compliance
--------------------
The Company is a domestic joint venture company with limited liability
duly established and validly existing under the laws of the PRC and has
the corporate powers and authorises to carry on the business presently
carried on by it and to own and hold the assets used therewith.
Each member of the Group are duly established and validly existing
under the laws of the place of its incorporation and has the corporate
powers and authorises to carry on the business presently carried on by
it and to own and hold the assets used therewith.
Each member of the Group has complied with the provisions of all
applicable laws, regulations (and all orders notices and directions
made thereunder) and all applicable codes or practices. All returns,
particulars, resolutions and other documents required to be filed with
or delivered to the registrar of companies or to any other authority
whatsoever by the relevant member of the Group have been correctly and
properly prepared and so filed or delivered.
(C) Power to sell
-------------
Each of the Vendors has full power to enter into and perform this
Agreement and the Tax Indemnity respectively and this Agreement and the
Tax Indemnity will constitute binding obligations on each such party,
enforceable in accordance with their terms.
4. CAPITAL STRUCTURE
-----------------
(A) Capital of the Company
----------------------
The Sale Interests together constitute 45% of the registered capital of
the Company as at the date of this Agreement and are fully paid up.
There is no Encumbrance or other form of agreement (including
conversion rights and rights of pre-emption) on, over or affecting the
Sale Interests and there is no agreement or commitment to give or
create any of the foregoing, and no claim has been made by any person
27
to be entitled to any of the foregoing, and no person has the right
(whether exercisable now or in the future and whether contingent or
not) to call for any portion of the capital of the Company under any of
the foregoing.
(B) Ownership
---------
All the Sale Interests are solely legally and beneficially owned by and
registered in the names of the Vendors in the proportions set out in
column 3 of Schedule 2 and are free from any Encumbrance and there are
----------
no arrangements in force or claimed entitling or allegedly entitling
any person to any Encumbrance.
(C) Connected business
------------------
Save as disclosed, the Company:
(i) does not have any subsidiary and there is no company, partnership
or unincorporated business or association in which the Company
owns or controls (whether directly or indirectly through another
company) any interests therein;
(ii) has not been and has not agreed to become a subsidiary of any
other company or under the control of any group of companies or
consortium;
(iii)has not at any time been and has not agreed to become a member of
any partnership, joint venture, consortium or other unincorporated
business or association; and
(iv) has no branch, place of business, permanent establishment or
substantial assets outside the PRC.
5. ACCOUNTS
--------
(A) General
-------
The Accounts:
(i) were prepared in accordance with the requirements of all relevant
laws, statutes, with good accounting principles and practices
generally accepted at the date hereof in the PRC for companies
carrying on a similar business to that of the Group, comply with
all relevant statements of standard accounting practice and
accounting guidelines issued by the relevant authorities, are
prepared on a basis consistent with preceding accounting periods
of the Group and with the books of account of the Group and are
true and accurate in all material respects;
(ii) disclose a true and fair view of the assets and liabilities of the
Group at the Balance Sheet Date and of its profits for the
financial year ended on such date;
28
(iii)contain full provision or reserve for bad and doubtful debts,
burdensome contracts or other obligations, obsolescent or slow
moving stocks and for depreciation on fixed assets, which
provision or reserve was when made and is now adequate;
(iv) contain a note of all capital commitments (if any) of the Company
and its subsidiaries at the Balance Sheet Date, which note was
when made and is now adequate, fair and not misleading; and
(v) contain full provision or reserves (as appropriate) for all
Taxation.
(B) Liabilities
-----------
At the Balance Sheet Date, the Group had no liabilities known, actual
or contingent (including contingent liabilities to customers and
contingent liabilities for Taxation) which were not disclosed, noted or
provided for in the Accounts.
(C) Stock valuation
---------------
The stock-in-trade shown in the Accounts has been valued at the lower
of cost and net realisable value and includes no redundant, obsolete or
unsaleable items and no items which are the subject of any dispute
(other than minor disputes in the ordinary course of business) with a
supplier or customer. The basis of valuation of the stock-in-trade has
remained in all material respects consistent with that adopted for the
purpose of the Group's consolidated accounts at the beginning and end
of each of the accounting periods of the Group since its incorporation.
(D) Plant and machinery etc.
------------------------
All the fixed and loose plant and machinery, equipment, furniture,
fittings and vehicles used by the Group at the Balance Sheet Date are
reflected in the Accounts, were at the Balance Sheet Date and (except
for such items as have been disposed of or realised by the Group in the
ordinary course of business) remain in the absolute beneficial
ownership of the Group and are free from any Encumbrance, hire or hire
purchase agreement or leasing agreement or agreement for payment on
deferred terms and (apart from depreciation in the ordinary course of
business) their value is not less than at the Balance Sheet Date and
none has been acquired for any consideration in excess of its net
realisable value at the date of such acquisition or otherwise than by
way of a bargain at arm's length.
(E) Profits
-------
The profits of the Group for the two years ended on the Balance Sheet
Date as shown by the Accounts and by the audited accounts of the Group
for previous periods delivered to the Purchaser and the trend of
profits shown by them have not (except as disclosed in them) been
affected to a material extent by inconsistencies of accounting
practices, by the inclusion of non-recurring items of income or
expenditure, by transactions entered into otherwise than on normal
commercial terms or by any other factors rendering such profits for all
or any of such periods exceptionally high or low.
29
(F) Depreciation
------------
Depreciation of the fixed assets of the Group has been made at a rate
sufficient to write down the value of such assets to nil not later than
the end of their useful working lives and no fixed asset has attributed
to it a value exceeding the current market value thereof at the Balance
Sheet Date.
(G) Books of account
----------------
All accounts, books, ledgers, financial and other necessary records of
whatsoever kind of the Group (including all invoices and other records
required for tax):
(i) have been fully, properly and accurately maintained, are in the
possession of the relevant company and contain true and accurate
records of all matters including those required to be entered in
them by applicable laws and no notice or allegation that any of
the same is incorrect or should be rectified has been received;
(ii) do not contain or reflect any material inaccuracies or
discrepancies;
(iii)give and reflect a true and fair view of the matters which ought
to appear in them and in particular of the financial, contractual
and trading position of the relevant company and of its plant and
machinery, fixed and current assets and liabilities (actual and
contingent), debtors and creditors and stock-in trade; and
(iv) contain accurate information in accordance with generally accepted
accounting principles in the PRC relating to all transactions to
which any member of the Group has been a party and the Accounts do
not overstate the value of any asset or understate any liability
of the Group at the Balance Sheet Date.
6. POST BALANCE SHEET DATE EVENTS
------------------------------
Since the Balance Sheet Date, each member of the Group:
(A) Business
--------
has carried on its business in the ordinary and usual course and
without entering into any transaction, assuming any liability or making
any payment not provided for in the Accounts which is not in the
ordinary course of business and without any interruption or alteration
in the nature, scope or manner of its business and nothing has been
done which would be likely to prejudice the interests of the Purchaser
as a prospective purchaser of the Sale Interests;
(B) Financial position and prospects
--------------------------------
has not experienced any deterioration in its financial or trading
position or prospects or turnover or suffered any diminution of its
assets by the wrongful act of any person and the value of its net
30
assets is not less than the value of its net assets as at the Balance
Sheet Date as shown by the Accounts and each member of the Group has
not had its business, profitability or prospects adversely affected by
the loss of any important customer or source of supply or by any
abnormal factor not affecting similar businesses to a like extent and
there are no facts which are likely to give rise to any such effects;
(C) Assets and liabilities
----------------------
has not acquired or disposed of or agreed to acquire or dispose of any
assets or assumed or incurred or agreed to assume or incur any
liabilities (actual or contingent) otherwise than in the ordinary
course of business;
(D) Distributions and loan repayments
---------------------------------
has not declared, made or paid any dividend, bonus or other
distribution of capital or income (whether a qualifying distribution or
otherwise) and (excluding fluctuations in overdrawn current accounts
with bankers) no loan or loan capital of any member of the Group has
been repaid in whole or in part or has become due or is liable to be
declared due by reason of either service of a notice or lapse of time
or otherwise howsoever;
(E) Liability to tax
----------------
has not carried out or entered into any transaction and no other event
has occurred in consequence of which (whether alone or together with
any one or more transactions or events occurring before, on or after
the date of this Agreement) any liability of the Group to Taxation has
arisen or will arise (or would have arisen or would or might arise but
for the availability of any relief, allowance, deduction or credit)
other than profits tax on the actual income (not chargeable gains or
deemed income) of the relevant member of the Group arising from
transactions entered into in the ordinary course of business;
(F) Employees
---------
has not made any change to the remuneration, terms of employment,
emoluments or pension benefits of any present or former director,
officer or employee of the Group who on the Balance Sheet Date was
entitled to remuneration in excess of US$10,000 (or its equivalent in
any other currency) per annum and has not appointed or employed any
additional director, officer or employee entitled as aforesaid;
(G) Debts
-----
has not waived or released any debts in whole or in part and has not
written off debts in an amount exceeding US$10,000 (or its equivalent
in any other currency) in the aggregate;
(H) Contracts
---------
has not entered into contracts involving capital expenditure in an
amount exceeding in the aggregate US$10,000 (or its equivalent in any
other currency);
31
(I) Resolutions
-----------
has not passed any resolution whether in general meeting or otherwise;
(J) Third party rights
------------------
has not become aware that any event has occurred which would entitle
any third party to terminate any contract or any benefit enjoyed by it
or call in any money before the normal due date therefor;
(K) Stock-in-trade
--------------
has not purchased stocks in quantities or at prices materially greater
than was its practice prior to the Balance Sheet Date;
(L) Creditors
---------
has paid its creditors within the times agreed with such creditors and
does not have any debts outstanding which are overdue for payment by
more than four weeks;
(M) Borrowings
----------
has not borrowed or raised any money or taken any financial facility
(except such short term borrowings from bankers as are within the
amount of any overdraft facility which was available to the relevant
member of the Group at the Balance Sheet Date) or since the Balance
Sheet Date renegotiated or received any notice from any banker that
such banker wishes to renegotiate any overdraft facility available to
the Group at the Balance Sheet Date;
7. TRANSACTIONS WITH VENDORS, DIRECTORS AND CONNECTED PERSONS
----------------------------------------------------------
(A) Loans and debts
---------------
There is not outstanding:
(i) any indebtedness or other liability (actual or contingent) owing
by the Company to any of the Vendors or any director or supervisor
of the Company or any of its Connected Persons or owing to the
Company by any of the Vendors or any director or supervisor of the
Company or any of its respective Connected Persons; or
(ii) any guarantee or security for any such indebtedness or liability
as aforesaid.
(B) Contracts and arrangements
--------------------------
(i) There is not now outstanding, any agreement, arrangement or
understanding (whether legally enforceable or not) to which the
Company is a party or has an interest and in which any of the
Vendors, or any director or supervisor of the Company or any of
its Connected Persons is interested whether directly or
indirectly.
32
(ii) The Company is not a party to nor has its profits or financial
position during the last 3 years been affected by any agreement or
arrangement which is not entirely of an arm's length nature.
(C) Competitive interests
---------------------
None of the Vendors nor any director or supervisor of the Company nor
any of its Connected Persons intends to acquire, either individually or
collectively, or with any other person or persons, has any estate,
right or interest, directly or indirectly, in any business other than
that now carried on by the Group which is or is likely to be or become
competitive with the business of any member of the Group.
(D) Intellectual Property
---------------------
None of the Vendors nor any director or supervisor of the Company nor
any of its Connected Persons either individually, collectively or with
any other person or persons are interested in any way whatsoever in any
Intellectual Property used and/or not wholly owned by the Group.
(E) Benefits
--------
None of the Vendors nor any director or supervisor of the Company nor
any of its Connected Persons, is entitled to or has claimed entitlement
to any remuneration, compensation or other benefit from the Group.
8. FINANCE
-------
(A) Borrowings
----------
(i) The amount borrowed by the Company from its bankers does not
exceed the overdraft facility agreed with such banker.
(ii) The total amount borrowed by the Company from any source does not
exceed any limitation on its borrowing contained in its articles
of association or in any debenture or loan stock trust deed or
instrument or any other document executed by it.
(iii)No member of the Group has any outstanding loan capital or loan
stock.
(iv) Particulars of all money borrowed by each member of the Group have
been disclosed.
(B) Debts owed to each member of the Group
--------------------------------------
(i) No member of the Group owns the benefit of any debt (whether
present or future) other than debts which have accrued to it
in the ordinary course of business.
(ii) All debts owed to the Company are collectable in the ordinary
course of business and each such debt will realise in full its
face value within three months of its due date for payment.
33
(iii) The debts owing to the Company shown in the Accounts (subject
to any provision for bad and doubtful debts made in the
Accounts) were paid in full on their due dates or, if any such
debts are not yet due, each such debt is not now regarded by
the Company or by the Vendors as irrecoverable in whole or in
part.
(C) Bank accounts
-------------
Particulars of the balances on all bank accounts of the Company as at a
date not more than seven days before the date of this Agreement have
been disclosed and the Company has no other bank accounts; since the
date of such particulars there have been no payments out of any such
bank accounts except for routine payments and the aggregate balance on
all such bank accounts is not substantially different from the
aggregate balance shown in such particulars.
(D) Working capital requirements
----------------------------
Having regard to the existing banking and other facilities, the Company
has sufficient working capital for the purpose of continuing to carry
on its business in its present form and at its present level of
turnover for the foreseeable future and for the purposes of executing,
carrying out and fulfilling in accordance with their terms all orders,
projects and contractual obligations which have been placed with or
undertaken by the Company.
(E) Financial facilities
--------------------
In relation to any Encumbrance to which any asset of the Group is
subject and in relation to debentures, acceptance lines, overdrafts,
loans or other financial facilities outstanding or available to the
Group:
(i) the Vendors have disclosed full details of them and true and
correct copies of all documents relating to them; and
(ii) none of the Vendors nor any member of the Group has done anything
whereby the continuance of any such encumbrance or facility in
full force and effect might be affected or prejudiced.
(F) Options, guarantees etc.
-----------------------
The Company is not responsible for the indebtedness of any other
person, and in particular but without prejudice to the generality of
the foregoing is not a party to any option or pre-emption right or a
party to any guarantee or suretyship or any other obligation (whatever
called) to pay, purchase or provide funds (whether by the advance of
money, the purchase of or subscription for shares or other securities
or the purchase of assets or services or otherwise) for the payment of,
or as an indemnity against the consequence of default in the payment
of, any indebtedness of any other person.
34
9. TAXATION
--------
(A) General
-------
(i) Notices and returns
-------------------
All notices, returns and computations of the Company for the
purposes of Taxation have been made punctually on a proper basis
and are correct and none of them is, or is likely to be, the
subject of any dispute with any fiscal authority.
(ii) Payment of tax due
------------------
All Taxation that the Company is liable to pay prior to Completion
has been or will be so paid prior to Completion.
(iii)Penalties or interest on tax
----------------------------
No member of the Group has paid or become liable to pay any
penalty, fine or interest charged by virtue of the provisions of
any Taxation statute, law, rule or regulation.
(iv) Compliance with tax collection obligations
------------------------------------------
(a) All tax deductible and payable under any Taxation statute,
law, rule or regulation has, so far as is required to be
deducted, been deducted from all payments made or treated as
made by the Company and all amounts due to be paid to all
relevant Taxation authorities prior to the date of this
Agreement have been so paid.
(b) All payments by the Company to any person which ought to
have been made under deduction of tax have been so made and
the relevant company (if required by law to do so) has
accounted to the relevant fiscal authority for the tax so
deducted.
(c) Proper records have been maintained in respect of all such
deductions and payments and all applicable regulations have
been complied with.
(v) No back duty investigation
--------------------------
The Company has not in the last 3 years been the subject of a
discovery, audit or investigation by any Taxation authority and
there are no facts which are likely to cause a discovery, audit or
investigation to be made.
(vi) Tax provision
-------------
Full provision or reserve has been made in the Accounts for all
Taxation assessed or liable to be assessed on the Company or for
which it is accountable in respect of income, profits or gains
earned, accrued or received on or before the Balance Sheet Date,
35
including distributions made down to such date or provided for in
the Accounts, and proper provision has been made in the Accounts
for deferred taxation in accordance with internationally accepted
accounting standards.
(vii)Anti-avoidance provisions
-------------------------
The Company has not entered into or been a party to any scheme or
arrangement of which the main purpose, or one of the main
purposes, was the avoidance of or the reduction in liability to
taxation.
(viii)Calculation of tax liability
----------------------------
The Company has sufficient records to permit accurate calculation
of the tax liability or relief which would arise upon a disposal
or realisation on completion of each asset owned by the Company at
the Balance Sheet Date or acquired by the Company before
Completion.
(ix) Claims and disclaimers
----------------------
The Company has duly submitted all claims and disclaimers the
making of which has been assumed for the purposes of the Accounts.
(x) Sales at under-value or over-value
----------------------------------
The Company has not been a party to any sale or other disposal of
an asset either at an under-value or an over-value.
10. THE PROPERTIES
--------------
No member of the Group has owned any real properties.
11. OTHER ASSETS
------------
(A) Assets and charges
------------------
(i) All assets of the Company which are included in the Accounts or
have otherwise been represented as being the property of the
Company or which were at the Balance Sheet Date used or held for
the purposes of its business were at the Balance Sheet Date in the
absolute beneficial ownership of the Company and (except for
assets disposed of or realised by the Company in the ordinary
course of business) the Company is the absolute beneficial owner
of and has good, marketable title to all such assets and all such
assets are in the possession and control of the Company and are
sited within the PRC.
(ii) All assets which have been acquired by the Company since the
Balance Sheet Date are (except as aforesaid) now in the absolute
beneficial ownership of the Company and in the possession and
control of the Company and none is the subject of any Encumbrance
(excepting only liens arising in the normal course of trading) nor
has the Company created or agreed to create any encumbrance or
36
entered into any factoring arrangement, hire-purchase, conditional
sale or credit sale agreement which has not been disclosed and in
respect of any such encumbrance, arrangement or agreement so
disclosed there has been no default by the Company in the
performance or observance of any of the provisions thereof.
(B) Condition of assets
-------------------
The plant and machinery (including fixed plant and machinery) and all
vehicles and office and other equipment and assets shown in the
Accounts or acquired since the Balance Sheet Date or otherwise used in
connection with the business of the Company which have not been
disposed of in the ordinary course of business:
(i) do not contravene any requirement or restriction having the force
of law;
(ii) performs in accordance with its manufacturers specifications and
are in good repair and condition and are regularly maintained,
fully serviceable and in good working order;
(iii)are each capable of doing the work for which they were designed
and/or purchased and will each be so capable (subject to fair wear
and tear) during the period of time over which the value of such
assets will be written down to nil in the accounts of the Company;
(iv) are not surplus to the Company's requirements; and
(v) are not dangerous, inefficient, out-of-date, unsuitable or in need
of renewal or replacement and the vehicles owned by the Company
are road-worthy and duly licensed for the purposes for which they
are used.
(vi) Maintenance contracts are in full force and effect in respect of
the computer and all other assets owned or used by the Company
which it is normal or prudent to have maintained by outside or
specialist contractors.
(C) Condition of stock-in-trade
---------------------------
The Company's stock-in-trade is of merchantable quality and not
obsolete, defective or out of fashion and is capable of being sold by
the Company in the ordinary course of business in accordance with its
current price list without rebate or allowance to retail purchasers.
(D) Insurance
---------
(i) All the assets of the Company which are of an insurable nature
have at all material times been and are at the date hereof fully
insured to their full replacement value against fire and other
risks normally insured against by companies carrying on similar
businesses or owning property of a similar nature to those of the
Company and the Company has at all material times been and is at
the date of this Agreement adequately covered against all legal
liability and risks normally insured against by such companies
37
(including liability to employees or third parties for personal
injury or loss or damage to property, product liability and loss
of profit).
(ii) Particulars of all policies of insurance of the Company now in
force have been disclosed and such particulars are true and
correct and all premiums due on such policies have been duly paid
and all such policies are valid and in force and (so far as the
Company and the Vendors are aware) there are no circumstances
which might lead to any liability under such insurance being
avoided by the insurers or the premiums being increased and there
is no claim outstanding under such policy nor are the Company and
the Vendors aware of any circumstances likely to give rise to a
claim or cause an application for renewal of such policy to be
refused.
(iii)No insurance company has refused to insure the assets or risks of
the Company or has imposed conditions (by way of increased
premiums or otherwise) for such insurance.
(E) Retention of title
------------------
The Company has not acquired or agreed to acquire any material asset on
terms that title to such asset does not pass to the Company until full
payment is made.
(F) Equipment leases etc
--------------------
Rentals payable by the Company under any leasing, hire-purchase or
other similar agreement to which it is a party have not been and are
not likely to be increased and all such rentals are fully deductible by
the Company for tax purposes.
12. OPERATION
---------
(A) Licences, permits, consents and authorities
-------------------------------------------
The Company has all necessary licences (including statutory licences),
permits, consents and authorities (public and private) for the proper
and effective carrying on of its business and in the manner in which
such business is now carried on and all such licences, permits,
consents and authorities are valid and subsisting and none of the
Vendors knows of any reason why any of them should be suspended,
cancelled or revoked whether in connection with the acquisition of the
Sale Interests by the Purchaser or otherwise and so far as the Vendors
are aware there are no factors that might in any way prejudice the
continuance or renewal of any of those licences, permits, consents or
authorities and the Company is not restricted by contract from carrying
on any activity in any part of the world.
(B) Litigation and arbitration
--------------------------
The Company is not engaged in (nor are any of its director in relation
to the affairs of the Company engaged in) any legal proceedings
(including litigation, administrative, arbitration and prosecution) and
38
no such proceedings are pending or threatened, nor are there any facts
likely to give rise to such proceedings known or which would on
reasonable enquiry be known to the Company or its directors.
(C) Delegation of powers
--------------------
There are in force no powers of attorney given by the Company nor any
other authority (express, implied or ostensible) given by the Company
to any person to enter into any contract or commitment or do anything
on its behalf other than any authority of employees to enter into
routine trading contracts in the normal course of their duties.
(D) Confidentiality
---------------
No disclosure has been made of any of the confidential information,
including financial or trade secrets, of any member of the Group save
in the ordinary course of business and the Company has taken adequate
steps to preserve the confidential nature of all such information.
(E) Business names
--------------
The Company does not use on its letterhead, books or vehicles or
otherwise carry on its business under any name other than its corporate
name.
(F) Records of the Group
--------------------
(i) All the accounting records, statutory and other books and records
(including the register of members), and other deeds documents
records, data and information of the Company and its pension and
benefit schemes (if any) are, and have since its incorporation
been, kept up to date, properly, accurately and consistently
completed and are a complete and accurate record of all acts and
transactions of the Company and of all matters required by law or
best business practice to be recorded or registered therein; the
Company has not received any application or request for
rectification of any such registers are in the possession of the
Company.
(ii) The Company has no records, systems, controls, data or information
recorded, stored, maintained, operated or otherwise wholly or
partly dependent on or held by any means (including any
electronic, mechanical or photographic process whether
computerised or not) which (including all means of access thereto
and therefrom) are not under its exclusive ownership and direct
control.
(G) Winding up, insolvency and receivership
---------------------- ----------------
(i) No order has been made or petition presented or resolution passed
for the winding up of the Company and no distress, execution or
other process has been levied on any of its assets.
(ii) The Company is not insolvent nor unable to pay its debts as they
fall due.
39
(iii)No administrative or other receiver has been appointed by any
person of the business or assets of the Company or any part
thereof, nor has any order been made or petition presented for the
appointment of an administrator in respect thereof.
(iv) There has been no delay by the Company in the payment of any material
obligation due for payment.
(H) Guarantees, warranties and sureties
-----------------------------------
(i) The Company has not given any guarantee or warranty or made any
representation in respect of articles or trading stock sold or
contracted to be sold or service provided or contracted to be
provided by it save for any warranty or guarantee implied by law
and (save as aforesaid) has not accepted any liability or
obligation to service, maintain, repair, take back or otherwise do
or not do anything in respect of any articles, stock or service
that would apply after any such article or stock has been
delivered by it or service performed by it, as the case may be.
(ii) No person other than the Company has given any guarantee of or
security for any overdraft, loan or loan facility granted to the
Company.
13. CONTRACTS
---------
(A) Onerous contracts
-----------------
There are no long term contracts (i.e. contracts not terminable by the
Company without penalty on six months' notice or less) or onerous or
unusual or abnormal contracts (i.e. contracts for capital commitments
or contracts differing from those necessitated by the ordinary course
of business) binding upon the Company, nor is the Company a party to
any contract which contains any onerous or other provision material for
disclosure to an intending purchaser of the Sale Interests and no
expenses or liabilities of a material amount have been incurred before
the date of this Agreement by the Company otherwise than for the
purpose of the Company's business.
(B) Material contracts
------------------
Copies of all material contracts to which the Company is a party have
been disclosed or will be disclosed to the Purchaser during the due
diligence to be conducted by the Purchaser pursuant to Clause 3.3 of
----------
the Agreement and, save as those disclosed, the Company is not a party
to or subject to any agreement, transaction, obligation, commitment,
understanding, arrangement or liability which:
(i) is incapable of complete performance in accordance with its terms
within six months after the date on which it was entered into or
undertaken;
(ii) is known by any of the Vendors to be likely to be unprofitable or
result in a loss to the Company on completion of performance;
40
(iii)cannot readily be fulfilled or performed by the relevant member of
the Group on time and without undue or unusual expenditure of
money and effort;
(iv) involves or is likely to involve obligations, restrictions,
expenditure or receipts of an unusual, onerous or exceptional
nature and not in the ordinary course of business;
(v) requires an aggregate consideration payable by the Company in
excess of US$10,000 (or its equivalent in any other currency);
(vi) is a contract for services (other than contracts for the supply of
electricity or normal office services);
(viii)requires any member of the Company to pay any commission,
finder's fee, royalty or the like; or
(ix) is in any way otherwise than in the ordinary and proper course of
the Company's business.
(C) Performance of contracts
------------------------
(i) The terms of all contracts of the Company have been complied with
by the Company and by the other parties to the contracts in all
respects and there are no circumstances likely to give rise to a
default by the Company or by the other parties under any such
contract.
(ii) All the contracts of the Company except those between the Company
and its employees are assignable by the Company without the
consent of any other party.
(iii)There are no outstanding claims, separately or in the aggregate of
material amounts, against the Company on the part of customers or
other parties in respect of defects in quality or delays in
delivery or completion of contracts or deficiencies of design or
performance or otherwise relating to liability for goods or
services sold or supplied by the Company and no such claims are
threatened or anticipated and there is no matter or fact in
existence in relation to goods or services currently sold or
supplied by the Company which might give rise to the same.
(iv) The Company has no knowledge of the invalidity of or grounds for
rescission, avoidance or repudiation of any agreement or other
transaction to which it is a party and has received no notice of
any intention to terminate, repudiate or disclaim any such
agreement or other transaction.
(D) Restrictive contracts
---------------------
There are no agreements in force restricting the freedom of the Company
to provide and take goods and services by such means and from and to
such persons as it may from time to time think fit.
41
(E) Agency and distributorship agreements
-------------------------------------
Save as disclosed, the Company is not a party to any subsisting agency
or distributorship agreement.
14. EMPLOYEES
---------
(A) There is no current contract of service between the Company and any of
its directors, officers or employees which is not terminable by the
Company without compensation by three months notice or less given at
any time or payment of salary for such period in lieu of notice.
(B) Save as regards any scheme which the Company is or may become obliged
to join or subscribe under any applicable law or regulations, there is
no scheme or fund in respect of retirement, pension, health insurance,
housing, bonus, incentive, share option or other benefits to directors,
officers, staff, employees or any other party to which the Company is a
party or in respect of which there is any obligations or liabilities,
present or future, actual or contingent.
(C) The Company is not subject to or involved in any industrial dispute or
action whether official or unofficial.
15. INTELLECTUAL PROPERTY
---------------------
(A) Ownership and rights
--------------------
(i) General
-------
Full particulars of all Intellectual Property owned or otherwise
exploited or used by the Company in any part of the world will be
disclosed to the Purchaser during the due diligence to be
conducted by the Purchaser. All Intellectual Property exploited or
used by the Company is in the absolute beneficial ownership of the
Company or any member of the Group is a 1icensee of the same and
the Company does not own, use, exploit or have any other interest
in any Intellectual Property which has not been disclosed. In
particular but without prejudice to the generality of the
foregoing, none of the Intellectual Property disclosed is jointly
owned by the Company and a third party.
(ii) Enforcement
-----------
All applications for any Intellectual Property owned, used or
otherwise exploited by the Company are being diligently
prosecuted; patents, registered trademarks and registered designs
and other similar registered or recorded Intellectual Property
rights owned, used or otherwise exploited by the Company have been
maintained; nothing has been done to diminish or otherwise affect
the reputation of unregistered trademarks, trade names, brand
names or get up owned, used or otherwise exploited by the Company;
no copying or reproduction of the copyright material owned, used
or otherwise exploited by the Company has been permitted
(expressly or by implication); the technical information and other
knowhow owned, used or otherwise exploited by the Company has been
kept confidential; and (where applicable) all application,
registration and renewal fees necessary to procure, register,
42
record or maintain the Intellectual Property have been paid.
(iii)Intellectual Property Agreements
--------------------------------
All agreements in relation to any Intellectual Property used or
owned by the Company have been disclosed and are valid and
binding; none has been the subject of any breach or default by any
party thereto or of any event which with notice or lapse of time
or both would constitute a default; nor are there any disputes,
claims or proceedings arising out of or relating to such
agreements. No member of the Group has authorised or otherwise
permitted, expressly or by implication, any use whatsoever of the
Intellectual Property owned, used or otherwise exploited by the
Group save insofar as any such authority is contained in the
appropriate agreements. The Company does not use or otherwise
exploit any Intellectual Property belonging to a third party save
insofar as it is licensed to do so in the appropriate agreements.
All such agreements have been duly recorded or registered with the
proper authorities whenever a requirement to do so exists.
16. CONSEQUENCE OF THE PURCHASE OF THE SALE INTERESTS
-------------------------------------------------
The purchase of the Sale Interests by the Purchaser or compliance with
the terms of this Agreement and any change in the current management of
the Company:
(i) will not cause the Company to lose the benefit of any right or
privilege it presently enjoys or cause any person who normally
does business with the Company not to continue to do so on the
same basis as previously;
(ii) will not relieve any person of any obligation to the Company
(whether contractual or otherwise) or enable any person to
determine any such obligation or any right or benefit enjoyed by
the Company or to exercise any right whether under an agreement
with or otherwise in respect of the Company;
(iii)will not conflict with or result in the breach of or constitute a
default under any of the terms, conditions or provisions of any
agreement or instrument to which the Company is now a party or any
loan to or mortgage created by the Company or of its memorandum or
articles of association;
(iv) will not result in any present or future indebtedness of the
Company becoming due and payable or capable of being declared due
and payable prior to its stated maturity;
(v) will not cause any director, supervisor or senior employee of the
Company to leave employment;
(vi) will not conflict with, violate or result in a breach of any law,
regulation, order, decree or writ applicable to the Company; and
so far as the Company and the Vendors are aware the attitude or actions
of clients, customers and suppliers with regard to the Company will not
be prejudicially affected thereby.
43
SCHEDULE 4
----------
Addresses and facsimile numbers
for communication
-----------------
Name Address Facsimile
---- ------- ---------
571 202 [o] 62588795
2767 8 2 62588795
332 62588795
248 63 202 62588795
46 106 62588795
436 62588795
Hartcourt Capital, Inc. Suite 1310, China VentureTech Plaza 52130664
000 Xxx Xxxx Xx Xxxx,
Xxxxxxxx,Xxxxx,000000
44
IN WITNESS whereof this Agreement has been duly executed by all parties hereto
the day and year first above written.
SIGNED by )
)
in the presence of: )
SIGNED by )
)
in the presence of: )
SIGNED by )
)
in the presence of: )
SIGNED by )
)
in the presence of: )
SIGNED by )
)
in the presence of: )
SIGNED by )
)
in the presence of: )
SIGNED by )
for and on behalf of )
HARTCOURT CAPITAL, INC. )
in the presence of: )
45
APPENDIX
--------
Accounts
--------
46
