EXHIBIT 6.29
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of the 16th day of
December, 1999, by and among U.S. BUSINESS NETWORK, INC., a Delaware
corporation, which does business as "XxxxXxxxx.xxx" (the "Corporation"), with
its principal place of business located at 0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxx, Xxxxxxxxxx 00000, and TOTAL CHINA, INC., a Delaware corporation
("Total China") and a wholly owned subsidiary of TOTAL FILM GROUP, INC., a
Delaware corporation, and TOTAL FILM GROUP, INC., (unless the context
requires otherwise, "TFG" shall mean in this Agreement TFG and Total China
collectively) with its principal place of business at 0000 Xxxxxxxx Xxxx.,
Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000.
WHEREAS, TFG wishes to purchase from the Corporation, and the
Corporation wishes to issue and sell to TFG, certain shares of the
Corporation's Common Stock, par value $0.01 per share ("Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
SECTION 1. Purchase and Sale of Common Stock.
1.1 Purchase and Sale of the Common Stock. Subject to the terms and
conditions of this Agreement and on the basis of the representations and
warranties set forth herein, the Corporation agrees to issue and sell to TFG
and TFG agrees to purchase from the Corporation, 922,767 shares of the Common
Stock, par value $.01 per share, of the Corporation ("Common Stock"), at a
per share purchase price of $2.16739 and for an aggregate purchase price of
$1,999,995 (the "Purchase Price"). The shares of Common Stock to be purchased
by TFO are hereinafter referred as the "Shares."
1.2 Closing. The purchase and sale of the Shares (the "Closing")
will take place during normal business hours (E.S.T) at the offices of Xxxxx,
Xxxx & Xxxxx LLP ("FHE"), Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx at or
prior to 5:00 p.m. (E.S.T.) on December 17, 1999 upon delivery of the
Purchase Price by Total China. Contemporaneously with the signing of this
Agreement, the Corporation has deposited with FHE a stock certificate in the
name of Total China representing the Shares being purchased by Total China
hereunder, a copy of which is attached as Exhibit A hereto (the
"Certificate"). The Corporation has given irrevocable instructions to FHE to
deliver the Certificate by overnight courier to TFG at the address of TFG set
forth in the preamble to this Agreement, or as otherwise instructed by TFG,
upon the receipt of the Purchase Price from TFG by wire transfer or other
methods selected by TFG. If TFG fails to tender the payment for the Purchase
Price on or before 5:00 p.m. E.S.T. on December 17, 1999, the Corporations
obligation to sell the Shares, and FHE' s obligation to deliver the
Certificate, will terminate, provided, however, that in the event TFG
notifies the Corporation that it intended to tender the funds by wire
transfer and such transfer is delayed by inter-bank procedures, TFG may
postpone the time for payment of the Purchase Price until 12:00 p.m.
E.S.T. on December 20, 1999 (at which time the Corporation's obligations to
deliver the Shares shall terminate) by delivery to the Corporation, via fax,
a letter of an executive officer of TFG's bank stating that the bank had
commenced wiring funds for the Purchase Price prior to 2:00 p.m. E.S.T. on
December 17, 1999 and stating the federal funds number of such wire transfer.
SECTION 2. Agreement Regarding the Letter of Intent; Integration.
2. 1 Agreement Regarding the Letter of Intent. The Corporation and
TFG agree that, effective upon the Closing, the Letter of Intent dated July
13, 1999 by and between the Corporation and TFG (the "Letter of Intent") and
any other agreement, understanding or arrangement of whatever form or nature
relating to the purchase to the Corporation's equity securities are null and
void ab initio, and have no force and effect whatsoever as between the
Corporation and TFG. A copy of the Letter of Intent is attached as Exhibit B
hereto. This Agreement is in settlement of disputed claims and is intended by
the parties as the final expression of their agreement and as the entire,
complete and exclusive statement of the terms hereof. This Agreement
supersedes all prior undertakings and agreements, written or oral, between
the parties hereto in connection with the subject matter of the Letter of
Intent.
2.2 Releases and Waiver.
(a) Releases. Effective upon the Closing, the Corporation
releases, forever discharges, and covenants not to xxx, commence or prosecute
judicial or administrative proceedings against, TFG, its officers, directors,
employees, shareholders, subsidiary corporations, parent corporations,
general partners, limited partners, and agents, from and with respect to any
and all claims, demands, causes of action or damages of any kind whatsoever,
whether known or unknown, asserted or that might have been asserted, which
the Corporation now has or ever had arising up to the date of this Agreement
out of or in any manner relating directly or indirectly to the acquisition or
potential acquisition of shares of capital stock of the Corporation, and any
other rights or interest associated with the Letter of Intent.
Effective upon the Closing, TFG releases, forever discharges, and
covenants not to xxx, commence or prosecute judicial or administrative
proceedings against, the Corporation, its officers, directors, employees,
shareholders, subsidiary corporations, parent corporations, general partners,
limited partners, and agents (including FHE), from and with respect to any
and all claims, demands, causes of action or damages of any kind whatsoever,
whether known or unknown, asserted or that might have been asserted, which
TFG now has or ever had arising up to the date of this Agreement out of or in
any manner relating directly or indirectly to TFG's acquisition or potential
acquisition of shares of capital stock of the Corporation, and any other
rights or interest associated with the Letter of Intent.
Effective upon the Closing, TFG also releases, forever discharges,
and covenants not to xxx, commence or prosecute judicial or administrative
proceedings against, the prospective investors in the Corporation who are
discussing or have discussed with the Corporation the purchase and sale of
certain of the Corporation's equity securities (including, but not limited to
Citicorp Capital Asia Limited) ("Prospective Investors"), their officers,
directors, employees,
shareholders, subsidiary corporations, parent corporations, affiliates,
general partners, limited partners, and agents, from and with respect to any
and all claims, demands, causes of action or damages of any kind whatsoever,
whether known or unknown, asserted or that might have been asserted, which
TFG now has or ever had arising up to the date of this Agreement out of or in
any manner relating, directly or indirectly, to TFG's acquisition or
potential acquisition of shares of capital stock of the Corporation, and any
other rights or interest associated with the Letter of Intent.
(b) Waiver of Civil Code Section 1542. All parties
acknowledge that they have read and understood the following language
contained in Section 1542 of the California Civil Code:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
But for the obligations arising under this Agreement, having
reviewed this provision, each party hereby voluntarily waives and releases
any rights it may have under this provision, or under any statutory or
non-statutory law of similar effect, and fully and generally releases all
liability for unknown or unsuspected claims set forth in the foregoing
release.
SECTION 3. The Corporation's Right to Repurchase.
3. 1 The Corporation's Right to Repurchase. Total China hereby
grants the Corporation a right to repurchase 44,457 shares of Common Stock
being sold hereunder, such number to be adjusted for subsequent stock split,
stock dividends, stock combination or the like (the "Repurchase Shares"), at
a cash price equal to two-thirds (2/3) of the Market Value of such Repurchase
Shares (the "Repurchase Nice"). Such repurchase right will be exercisable
only on the 120th day after an initial public offering of any class of the
capital stock of the Corporation on the Hong Kong Stock Exchange, the Growth
Enterprise Market of the Hong Kong Stock Exchange, the New York Stock
Exchange, NASDAQ, the Singapore Stock Exchange or similar exchanges or share
marketplace (the "IPO"). For purposes of this Section 3.1, the Market Value
of the shares subject to the Corporation's right to repurchase shall be
determined as follows:
(i) if such securities are listed on any established stock
exchange or a national market system, their market value shall be the average
closing sales price for such securities as quoted on such system or exchange
for the twenty trading days preceding the date on which the value is to be
determined (or if there are no sales for such date, then for the immediately
preceding business day on which there were sales), as reported in the Wall
Street Journal or similar publication, and
(ii) if such securities are regularly quoted by a
recognized securities dealer but selling prices are not reported, their fair
market value shall be the mean between the high bid and low asked prices for
such securities on the date the value is to be determined (or if there are no
quoted prices for such date, then for the immediately preceding business day
on which there were quoted prices).
3.2 Exercise of the Repurchase Right. The Corporation shall exercise
the repurchase right provided herein by giving irrevocable written notice to
TFG setting forth the number of Repurchase Shares to be repurchased by the
Corporation and the aggregate amount of the Repurchase Price. The closing of
the repurchase shall occur at the offices of the Corporation within 5
business days after the Corporation has given such written notice. At the
closing, TFG shall deliver a stock certificate representing the Repurchase
Shares against the payment by the Corporation of the Repurchase Price. The
repurchase right shall expire two (2) years after the date of this Agreement,
whether or not the IPO shall have occurred.
3.3 Expiration of the Repurchase Right. The Corporation's repurchase
right provided herein shall expire on the second anniversary of the date of
the Closing, whether or not the IPO has occurred.
SECTION 4. Representations and Warranties of the Corporation. The
Corporation hereby represents and warrants to TFG as follows:
4.1 Organization. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to carry out the
transactions contemplated hereby. The Corporation will, as promptly as
practicable after the date hereof, file a Statement by Foreign Corporation
with the Secretary of State of California and quality in California as a
foreign corporation. Exhibit C contains true, complete and accurate copies of
the Certificate of Incorporation and the By-Laws, as amended to date (the
"By-laws"), of the Corporation.
4.2 Capitalization. The entire authorized capital stock of the
Corporation consists of:
(a) Capitalization. As of the date hereof and prior to the
issuance of the Shares, the authorized capital stock of the Company consists
of 30,000,000 shares of Common Stock of which 3,691,070 shares are issued and
outstanding. All of the presently issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
non-assessable.
(b) Shareholders List. Attached hereto as Schedule A is a
complete list of all holders of capital stock of the Company and securities
convertible into the capital stock of the Company as of the date hereof
Except as set forth in the Disclosure Schedule, no subscription, warrant,
option, convertible security or other right (contingent or other) to purchase
or acquire any share of any class of capital stock of the Company is
authorized or outstanding and there is no commitment by the Company to issue
shares, warrants, options or other such rights or to distribute to holders of
any class of its capital stock any evidence of indebtedness or asset. Other
than applicable stock restriction agreements with respect to restricted stock
granted certain of the Company's employees, the Company has no obligation
(contingent or other) to purchase, redeem
or otherwise acquire any share of its capital stock or any interest therein
or to pay any dividend or make other distribution in respect thereof.
4.3 Authorization. The execution, delivery and performance by the
Corporation of this Agreement and all other agreements to be entered into by
the Corporation pursuant hereto and the issuance, sale and delivery of the
Shares, have been duly authorized by all requisite corporate action of the
Corporation. This Agreement and all such other agreements have been duly
executed and delivered on behalf of the Corporation and constitute valid and
binding obligations of the Corporation, enforceable in accordance with the
terms hereof and thereof. The execution, delivery and performance of this
Agreement and all such other agreements do not, (a) violate any provision of
law, statute, ordinance, rule or regulation or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or other
governmental body or (b) conflict with or result in any breach of any of the
material terms, conditions or provisions of, or constitute a default (or give
rise to any right of termination, cancellation or acceleration) under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Corporation under, the
Certificate of Incorporation or By-laws or any material note, indenture,
mortgage, lease, contract, purchase order or other instrument, document or
agreement to which the Corporation is a party or by which it or any of its
property is bound or affected.
4.4 Authorization of Shares. The issuance, sale and delivery
hereunder by the Corporation of the Shares have been duly authorized by all
requisite corporate action of the Corporation. The Shares, when sold and
delivered in accordance with the terms hereof, will be validly issued and
outstanding, fully paid and nonassessable, with no personal liability
attaching to the ownership thereof, and not subject to preemptive or any
other similar rights of the stockholders of the Corporation or others.
4.5 Equity Investments. The Corporation formed USBN Computer Network
(Chengdu) Corporation Limited ("USBN-Chengdu") on December 1, 1998 as a
wholly foreign- owned enterprise in the People's Republic of China ('PRC").
No other person or entity has any interest in, or any right to acquire any
interest in USBN-Chengdu. USBN-Chengdu obtained a business license to operate
a branch in Shenzhen and Shanghai and is in the process of obtaining a
business license to operate a branch in Beijing. Except as stated above, the
Corporation has never had, nor does it currently own, any capital stock or
other equity interest or proprietary interest, directly or indirectly, in any
corporation, association, trust, partnership, joint venture or other entity.
Two of the shareholders of the Corporation have an equity interest
in LTH Corp., a U.S. corporation which in turn wholly owns an entity in the
PRC called XxxXxxxx Xxxx Computer Network (Shenzhen) Company Limited
("MSW-Shenzhen"). In July 1999, MSW-Shenzhen (i) stopped transacting
business, and (ii) transferred its assets and customers to USBN-Chengdu.
MSW-Shenzhen is not currently and will not engage in business activities that
would be competitive with the business of USBN-Chengdu. LTH Corp. applied to
dissolve MSW-Shenzhen with the PRC authorities in December 1999.
4.6 Financial Statements. The Corporation has furnished to TB) the
unaudited balance sheet of the Corporation as of July 31, 1999 (the "Balance
Sheet") and the related unaudited statements of operation and stockholders'
equity of the Corporation for the ten (10)months then ended ("Statement of
Operations"). The Balance Sheet and the Statement of Operations
(collectively, the "Financial Statements") have been prepared in accordance
with generally accepted accounting principles consistently applied. The
Balance Sheet fairly presents, in all material respects, the financial
position of the Corporation as of its date without regard to MSW- Shenzhen,
and the Statement of Operations fairly presents the results of operations of
the Corporation for the period therein set forth. A copy of the Financial
Statements is attached hereto as Exhibit D.
4.7 Absence of Changes. Except as disclosed in the Disclosure
Schedule, since July 31, 1999 there has not been (a) any material adverse
change in the financial condition, results of operations, assets, liabilities
or business of the Corporation, (b) any material asset or property of the
Corporation made subject to a lien of any kind, (c) any waiver of any
valuable right of the Corporation, or the cancellation of any material debt
or claim held by the Corporation, (d) any payment of dividends on, or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any shares of the capital stock of the Corporation, or any
agreement or commitment therefore, or (e) any mortgage, pledge or
hypothecation of any tangible or intangible asset of the Corporation, except
in the ordinary course of business.
4.8 Compliance with Laws. The Corporation has complied with all
applicable laws, rules, regulations and orders, except where noncompliance
would not materially adversely affect its business or condition, financial or
otherwise.
4.9 Taxes. All applicable tax returns required to be filed by the
Corporation have been filed and are true and complete, and all taxes,
assessments, fees, and other governmental charges upon the Corporation, or
upon any of its properties, income, or franchises, shown in its returns to be
due and payable, have been paid or, if any of its tax returns have not been
filed or if any taxes have not been paid or reserved for, the failure to file
or pay would not have a material adverse effect on the operation and
financial condition of the Corporation as a whole.
4.10 Absence of Liabilities. Except as set forth in the Balance
Sheet, the Corporation has no obligation or liability (absolute, accrued or
contingent) as of the date of the Balance Sheet that is required to be set
forth in the Balance Sheet in accordance with generally accepted accounting
principles consistently applied.
4.11 Intellectual Property Rights.
(a) the Corporation has the right to use the Intellectual
Property Rights (as hereinafter defined) necessary or required for the
conduct of its business as presently conducted, free and clear of all rights
of others;
(b) no royalties or other amounts are payable by the
Corporation to other persons by reason of the ownership or use of said
Intellectual Property Rights;
(c) to the best of the Corporation's knowledge, no product
marketed or sold or proposed to be marketed or sold by the Corporation
violates or will violate any license or infringes any Intellectual Property
Rights of another; and
(d) the Corporation has not received any notice that any of
such Intellectual Property Rights or the operation or proposed operation of
the Corporation s business conflicts or will conflict with the rights of
others, nor is the Corporation aware of any reasonable basis to believe that
any such violation, infringement or conflict will or may exist;
(e) the Corporation is the registered owner of the
"xxxxxxxxx.xxx" domain name and has filed an application to register the
trademark "MEETCHINA" with the Patent and Trademark Office in the United
States. The Corporation has also filed an application to register the Chinese
characters _________ (having the meaning of "meet") with the Trademark Office
in China.
As used herein, the term "Intellectual Property Rights' means all
patents, trademarks, service marks, trade names, URLs, domain names,
copyrights, inventions, trade secrets, proprietary processes and formulae,
applications for patents, trademarks, service marks and copyrights, and other
industrial and intellectual property rights.
4.12 Proprietary Information of Third Parties. To the best of the
Corporation's knowledge, no third party has claimed or has reason to claim
that any person employed by or affiliated with the Corporation has (a)
violated or may be violating any of the terms or conditions of his or her
employment, non-competition, non-disclosure or inventions agreement with such
third party, (b) disclosed or may be disclosing or utilized or may be
utilizing any trade secret or proprietary information or documentation of
such third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Corporation
which suggests that such a claim might be contemplated. To the best of the
Corporation's knowledge, no person employed by or affiliated with the
Corporation has employed or proposes to employ any trade secret or any
information or documentation proprietary to any former employer, and, to the
best of the Corporation's knowledge, no person employed by or affiliated with
the Corporation has violated any confidential relationship which such person
may have had with any third party, in connection with the development,
manufacture or sale of any product or proposed product or the development or
sale of any service or proposed service of the Corporation, and the
Corporation has no reason to believe there will be any such employment or
violation.
4.13 Litigation. There is no action, suit, claim, proceeding or
investigation, at law, in equity or otherwise, or by or before any
governmental instrumentality or other agency, now pending, or, to the
Corporation's knowledge, threatened against or affecting the Corporation,
nor, to the Corporation's knowledge, does there exist any reasonable basis
therefore, which in either case could reasonably be expected to have a
material effect on the Corporation.
4.14 No Defaults. Except as set forth in the Disclosure Schedule,
the Corporation is not in violation or breach of, or in default under, any
provision of (a) the Certificate of
Incorporation or the By-Laws or any note, indenture, mortgage, lease,
contract, purchase order or other instrument, document or agreement to which
the Corporation is a party or by which it or any of its property is bound or
affected, including, without limitation, any licenses or legal requirements
of USBN-Chengdu, or (b) any law, rule or regulation of any jurisdiction; any
ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body, including, without
limitation, any licenses or legal requirements of USBN- Chengdu, which breach
could reasonably be expected to have a material adverse effect on the
Corporation. To the best knowledge of the Corporation, there exists no
condition, event or act which after notice, lapse of time, or both, could
constitute a violation or breach of, or a default under, any of the foregoing.
4. 15 Government Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the
Corporation in connection with the execution or delivery of this Agreement,
the offer, issuance, sale and delivery of the Shares, or the other
transactions to be consummated at the Closings, as contemplated by this
Agreement, except such filings as shall have been made prior to and shall be
effective on and as of the Closing. Subject to the accuracy of the
representations and warranties of TFG set forth in Section 5 hereof, the
provisions of Section 5 of the Securities Act are inapplicable to the
offering, issuance, sale and delivery of the Shares by virtue of the
exemption afforded by Section 4(2) of the Securities Act.
4.16 Employees. None of the Corporation's employees is represented
by any labor union, and there is no labor strike or other labor trouble
pending with respect to the Corporation or, to the Corporation's knowledge,
threatened.
4.17 No Brokers. There are no claims for brokerage commission or
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
or on behalf of the Corporation, and the Corporation agrees to indemnity and
hold TFG harmless against any liability or expense arising out of any such
claims.
SECTION 5. Representations and Warranties of TFG. Total China and
TFG represent and warrant to the Corporation severally and jointly that:
5.1 Organization and Corporate Power. Each of Total China and TFG is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction. Each of Total China and TFG has all required
corporate power and authority to own its property, to carry on its business
as presently conducted and to carry out the transactions contemplated hereby.
Total China is a wholly owned subsidiary of TFG.
5.2 Authorization. This Agreement has been duly executed and
delivered by each of Total China and TFG and is the valid and binding
obligations of Total China and TFG, enforceable in accordance with their
terms, except as limited by bankruptcy, insolvency and other laws affecting
the enforcement of creditors rights generally. The execution, delivery and
performance of this Agreement and any other agreement, instrument, or
document entered into by
Total China and TFG pursuant to this Agreement have been duly authorized by
all necessary corporate action of TFG.
5.3 Purchase Entirely for Own Account. The Shares to be received by
Total China will be acquired for investment for Total China's own account,
not as a nominee or agent and not with a view to the distribution of any part
thereof. Neither Total China, nor TFG has any present intention of selling,
granting any participation in, or otherwise distributing the same. Neither
Total China, nor TFG has any contract, undertaking, agreement or arrangement
with any person to sell, transfer, or grant participations to such person or
to any third person, with respect to any of the Shares.
5.4 Restricted Securities. TFG understands that the Shares may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act of 1933, as amended (the" 1933 Act"), or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Shares or an available exemption from registration under the
1933 Act, the Shares must be held indefinitely. In the absence of an
effective registration statement covering the Shares, TFG will sell,
transfer, or otherwise dispose of the Shares only in a manner consistent with
its representations and agreements set forth herein.
5.5 Brokerage. There are no claims for brokerage commission or
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
or on behalf of TFG, and TFG agrees to indemnify and hold the Corporation
harmless against any liability or expense arising out of any such claims.
5.6 Further Limitations on Disposition. TFG and Total China further
agree not to make any disposition of all or any portion of the Shares unless
and until:
(a) There is then in effect a registration statement under
the 1933 Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) (i) TFG shall have notified the Corporation of the
proposed disposition and shall have furnished the Corporation with a
statement of the circumstances surrounding the proposed disposition and (ii)
if reasonably requested by the Corporation, TFG shall have furnished the
Corporation with an opinion of counsel, satisfactory to the Corporation, that
such disposition will not require registration of such Shares under the 0000
Xxx.
5.7 Legends. It is understood that the stock certificates evidencing
the Shares may bear substantially the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel
satisfactory to the Corporation that such registration is not required."
(b) "These securities are subject to restrictions on
transfer and other terms and conditions set forth in the Stock Purchase
Agreement, dated as of December 1&', 1999, a copy of which may be obtained
from the corporation at its principal executive offices.
SECTION 6. Conditions Precedent to Closing by TFG. The obligation of
TFG to purchase and pay for Shares by TFG is subject to satisfaction of the
following conditions precedent at or before Closing:
6.1 Corporate Proceedings. All corporate and other proceedings to be
taken and all waivers and consents to be obtained in connection with the
transactions contemplated by this Agreement with respect to such Closing
shall have been taken or obtained and all documents incident to such
transactions shall be reasonably satisfactory in form and substance to TFG.
6.2 Representations and Warranties Correct. The representations and
warranties made by the Corporation in Section 4 hereof shall be true and
correct in all material respects when made, and shall be true and correct at
the time of the Closing in all material respects, with the same force and
effect as if they had been made at and as of the time of the Closing.
6.3 Compliance with Covenants. The Corporation shall have duly
complied with and performed all covenants and agreements of the Corporation
herein which are required to be complied with and performed at or before the
Closing including, without limitation, delivery of the Shares.
6.4 Certificate of President. The Corporation shall have provided to
TFG a certificate, signed by its President and dated the date of the Closing,
in form and substance reasonably satisfactory to TFG, confirming compliance
with the conditions set forth in Sections 6.1, 6.2 and 6.3.
SECTION 7. Conditions of the Corporation's Obligations at Closing.
The obligations of the Corporation under Section 1.2 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
7.1 Representations and Warranties. The representations and
warranties of TFG contained in Section 5 shall be true on and as of the date
of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
7.2 Payment of Purchase Price. TFG shall have delivered to the
Corporation payment of the Purchase Price.
SECTION 8. Financial Information.
8.1 Access to Records and Personnel. So long as TFG owns not less
than 44,457 of the Shares (which number shall be appropriately adjusted to
take account of any stock split, stock dividend, combination of shares or the
like (the "Minimum Shares"), TFG shall have the right to
receive certain information from the Corporation (in addition to and not in
lieu of rights as a stockholder or otherwise available to TFG), as set forth
in this Section 8.
8.2 Financial Reports. The Corporation agrees to furnish TFG with
the following, all of which shall include USBN-Chengdu for so long as it is a
subsidiary of the Corporation:
8.2.1 Within thirty (30) days after the end of each month and
each fiscal quarter, an unaudited financial report of the Corporation, which
report shall be prepared in accordance with generally accepted accounting
principles consistently applied (except that the financial report may (i) be
subject to normal year-end audit adjustments neither individually nor in the
aggregate material and (ii) not contain all notes thereto which may be required
in accordance with generally accepted accounting principles) and shall be
certified by either the chief executive officer or the chief financial officer
of the Corporation to have been so prepared, and which shall include the
following:
(a) a consolidated income statement for such period,
together with a cumulative income statement from the first day of the
then-current fiscal year to the last day of such period;
(b) a consolidated balance sheet as of the last day
of such period; and
(c) a statement of sources and application of funds
and statement of changes in working capital for such period.
8.2.2 Within ninety (90) days after the end of each fiscal
year of the Corporation, audited consolidated financial statements of the
Corporation, which shall include an income statement for such fiscal year and
a balance sheet as of the last day thereof, and statements of stockholders'
equity and changes in financial position for such fiscal year, each prepared
in accordance with generally accepted accounting principles consistently
applied, and certified by a firm of independent certified public accountants
of recognized national standing.
8.2.3 If for any period the Corporation shall have any
subsidiary whose accounts are consolidated with those of the Corporation,
then in respect of such period the financial statements delivered pursuant to
the foregoing Sections 8.2.1 and 8.2.2 shall be the consolidated and
consolidating financial statements of the Corporation and all such
consolidated subsidiaries.
SECTION 9. Additional Agreements of the Corporation.
9.1 Board Observer Right. As long as TFG holds not less than the
Minimum Shares and until the listing of any equity securities of the
Corporation on the Hong Kong Stock Exchange, the Growth Enterprise Market of
the Hong Kong Stock Exchange, the New York Stock Exchange, NASDAQ, the
Singapore Stock Exchange or similar exchanges or share marketplace, TFG shall
be entitled (i) to receive timely notice of all meetings of the Board of
Directors of the Corporation and (ii) to designate one representative, who
shall be reasonably acceptable to the Corporation, to attend the meetings of
the Board of Directors of the Corporation as an observer and without the
right to vote as such meetings. The TFG observer
shall recuse himself or herself from the meeting of the Board of Directors if
so reasonably requested by the Board of Directors.
9.2 Right of First Refusal.
(a) The Corporation hereby grants to TFG a right of first
refusal to purchase, pro rata, all (or any part) of any ANew Securities (as
defined in this Section 9.2) that the Corporation may, from time to time,
propose to sell or issue if the issue price of such New Securities is below
the per share purchase of the Shares being sold hereunder (appropriately
adjusted to take account of any stock split, stock dividend, combination of
shares or the like). TFG's pro rata share, for purposes of this right of
first refusal, is the ratio of (i) the number of shares of Common Stock then
held of record by TFG to (ii) the sum of the total number of shares of Common
Stock then issued and outstanding on a fully diluted basis.
(b) "New Securities" shall mean any equity securities of
the Corporation, whether now authorized or not, and rights, options, or
warrants to purchase such equity securities, and securities of any type
whatsoever that are, or may become, convertible into such equity securities;
provided, however, that New Securities do not include (i) shares of Common
Stock (or options, warrants or other rights to purchase Common Stock) issued
or to be issued to officers, employees or directors of the Corporation
pursuant to either a stock purchase or option plan or other employee stock
bonus arrangement approved by the directors of the Corporation not exceeding
20% of the all the issued and outstanding shares of capital stock of the
Corporation on a fully diluted basis; (ii) securities issued in a public
offering pursuant to a registration under the Securities Act or other
applicable laws and regulations; or (iii) shares of Common Stock issued in
connection with any stock split, stock dividend, combination of shares or
recapitalization by the Corporation.
(i) In the event that the Corporation proposes to
issue New Securities and the proposed issue price is below the per share
purchase price of the Shares being sold hereunder, at least 10 days before
such issuance, it shall give to TFG written notice of its intention,
describing in such notice the type of New Securities, the price, and the
terms upon which the Corporation proposes to issue such New Securities (the
"Offer Notice"). TFG shall have 10 days from the date of its receipt of any
such Offer Notice to agree to purchase all or a part of its pro rata share of
such New Securities for the price and upon the terms specified in the Offer
Notice by giving written notice to the Corporation and stating therein the
quantity of New Securities to be purchased. Upon the earlier of(x) the
expiration of such 10-day period or (y) receipt by the Corporation of notices
from TFG pursuant to the immediately preceding sentence, the Corporation
shall give to TFG a written notice setting forth the number of New Securities
subscribed to be purchased pursuant to the exercise of such rights by TFG.
Any agreement by TFG to purchase New Securities shall be binding on TFG.
(ii) In the event that TFG fail to exercise in
full the above-described right of first refusal within said 10-day period or
to purchase in a timely manner all New Securities respecting which such right
was exercised or such purchase made, the Corporation shall have 60 days
thereafter to issue or sell to one or more third parties the New Securities
respecting which
such right was not exercised or such purchase was not made, at a price and
upon terms no more favorable to the purchasers thereof than specified in the
Offer Notice. In the event the Corporation has not so sold the New Securities
within said 60-day period, the Corporation shall not thereafter issue or sell
any New Securities without first offering such New Securities to TFG in the
manner provided above.
(c) The right of first refusal set forth in this Section
9.2 may not be assigned, in whole or in part.
9.3 Piggyback Registration Rights.
(a) If, after the Corporation has effected an initial
public offering of its Common Stock pursuant to a registration under the
Securities Act (or equivalent foreign laws) at a public offering with
aggregate net offering proceeds to the Corporation of more than $15,000,000
(a "Qualifying Public Offering"), the Corporation decides to register any of
its Common Stock for sale to the public and such registration proposes to
include shares of Common Stock held by Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxxxx and
Xxxxxx Xxxx or their Affiliates (each a "Founder" and collectively, the
"Founders"), the Corporation shall: (a) promptly give TFG written notice
thereof (which shall include a list of the jurisdictions in which the
Corporation intends to attempt to qualify those securities under the
applicable Blue Sky or other securities laws); and (b) include in that
registration (and any related qualification under Blue Sky laws or other
compliance), and in any underwriting involved therein, some of all the Shares
specified in a written request delivered to the Corporation by TFG 20 days
after delivery of the written notice from the Corporation. For purpose of
this Section 9.3(a), "Affiliates" means in respect of a person, any other
person if it directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the other
specified person. For the purpose of this definition, control means the
ownership, directly or indirectly, of shares possessing more than 50% of the
voting power of a person.
(b) In the event the general condition of the market, and
the status of the persons proposing to sell securities pursuant to the
registration requires a limitation of the number of shares to be
underwritten, the number of shares to be included in the registration shall
be allocated among all the Founders and TFG, in proportion, as nearly as
practicable, to the respective amounts of securities which the TFG and the
Founders would otherwise be entitled to include in the registration.
9.4 Corporate Existence. The Corporation shall preserve and maintain
its corporate existence, rights and franchises in full force and effect.
9.5 Use of Proceeds. The Corporation shall utilize the Purchase
Price for (i) working capital, (ii) repayment of the loans set forth in
paragraph 2 of the Disclosure Schedule, and (iii) payment of the salaries
(accrued or otherwise) set forth in paragraph 3 of the Disclosure Schedule.
SECTION 10. Exchanges; Lost. Stolen or Mutilated Certificates. Upon
surrender by TFG to the Corporation of a certificate or certificates
representing Shares purchased or acquired by TFG hereunder, the Corporation
at its expense shall issue in exchange therefore, and deliver to TFG, a new
certificate or certificates representing such shares, in such denomination or
denominations as may be requested by TFG. Upon receipt of evidence
satisfactory to the Corporation of the loss, theft, destruction or mutilation
of any certificate representing any Shares, and in case of any such loss,
theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory to the Corporation, or in case of any such mutilation, upon
surrender and cancellation of such certificate, the Corporation at its
expense shall issue and deliver to TFG a new certificate for such Shares, of
like tenor, in lieu of such lost, stolen or mutilated certificate.
SECTION 11. Survival of Representations, Warranties and Agreements.
The covenants, representations and warranties of the Corporation contained in
Section 4 hereof shall survive the Closing for twelve (12) months.
SECTION 12. Indemnification. The Corporation shall indemnify, defend
and hold harmless each of TFG and their respective officers, directors,
shareholders, attorneys, agents, etc., from and against all liabilities,
losses, and damages, together with all reasonable costs and expenses related
thereto (including, without limitation, legal and accounting fees and
expenses), which would not have been incurred if(a) all of the
representations and warranties of the Corporation herein had been true and
correct when made or (b) all of the covenants and agreements of the
Corporation herein had been duly and timely complied with and performed.
SECTION 13. Agreements of the Founders with TFG. For purpose of this
Section only, each of Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxxxx and Xxxxxx Xxxxxx
Xxxx agrees with TFG as follows:
(a) Co-Sale Right. If a Founder proposes to sell, pledge,
or otherwise transfer any shares of the Common Stock then held by such
Founder or his Affiliates (a 'Transferring Founder") (the "Stock") or any
interest therein to any person or entity, but excluding another Founder, the
Transferring Founder shall give written notice to TFG setting forth the
number of shares to be sold by such Transferring Founder, the proposed sale
price and the name of the prospective buyer (the 'Transfer Notice"), TFG
shall have the right, exercisable upon written notice to the Transferring
Founder within 20 days after the date the Transfer Notice is delivered to
TFG, to participate in the sale of Stock on the same terms and conditions as
the transferring Founder to the extent of TFG's Pro Rata Share (the "Co-Sale
Right"). "Pro Rata Share" means the percentage equal to: (x) the total number
of shares of Common Stock held by TFG , divided by (y) the total number of
shares of Common Stock then actually issued and outstanding. Notice of
exercise of a Co-Sale Right shall indicate the number of shares of Stock TFG
wishes to sell under its Co-Sale Right. To the extent that any prospective
purchaser or purchasers prohibits assignment or otherwise refuses to purchase
shares or other securities from TFG, the Transferring Founder shall not sell
to the prospective purchaser or purchasers any Stock unless and until,
simultaneously with the sale, the Transferring Founder purchases those shares
or other securities from TFG.
(b) Sale by Transferring Shareholder. If TFG does not
exercise its Co-Sale Right with respect to the sale of the Stock subject to
the Transfer Notice, the Transferring Founder may, not later than 90 days
following delivery to TFG of the Transfer Notice, conclude a transfer of all
of the Stock covered by the Transfer Notice on the terms and conditions not
more favorable than those contained in the Transfer Notice. Any proposed
transfer on terms and conditions more favorable than those described in the
Transfer Notice, as well as any subsequent proposed transfer of any Stock by
the Transferring Founder, or any transfer after the 90-day period, shall
again be subject to the Right of Co-Sale Right of TFG and shall require
compliance by the Transferring Founder with the procedures described in this
Section 13. This Section 13 will terminate upon the listing of any equity
securities of the Corporation on the Hong Kong Stock Exchange, the New York
Stock Exchange, NASDAQ, the Singapore Stock Exchange and similar exchanges or
share marketplace.
(c) Amendments. Except as otherwise provided herein, this
Section may be amended, and compliance with any provision of this Agreement
may be omitted or waived, only by the written agreement between the Founders
and TFG.
SECTION 14. Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, each of the parties hereto and, except as
otherwise expressly provided herein, each other person who shall become a
registered holder named in any certificate evidencing the Shares transferred
to such holder by TFG or its permitted transferees, and their respective
legal representatives, successors and assigns.
SECTION 15. Entire Agreement; Effect on Prior Documents. This
Agreement and the other documents referred to herein or delivered pursuant
hereto contain the entire agreement among the parties with respect to the
transactions contemplated hereby and supersede all prior negotiations,
commitments, agreements and understandings among them with respect thereto.
SECTION 16. Termination of Certain Covenants Upon Qualifying Public
Offering. Any provision hereof to the contrary notwithstanding, the covenants
of the Corporation set forth in Sections 8. 9.1 and 9.2 hereof shall
terminate upon the listing of any equity securities of the Corporation on the
Hong Kong Stock Exchange, the Growth Enterprise Market of the Hong Kong Stock
Exchange, the New York Stock Exchange, NASDAQ, the Singapore Stock Exchange
or similar exchanges or share marketplace. Notwithstanding the foregoing,
Section 2 of this Agreement shall survive this Agreement and the Closing and
shall remain in full force and effect indefinitely.
SECTION 17. Notices. Any notice or communication given pursuant to
this Agreement by any party to any other party shall be in writing and shall
be sufficiently given if personally delivered, sent by facsimile to the
party's facsimile number set forth in this Section or other means of
electronic transmission, or four (4) business days after deposit by mail,
postage prepaid to the parties at the following addresses or to such other
address as either party may hereafter designate to the others by like notice:
(i) if to the Corporation, to:
U.S. Business Network, Inc.
China Operations Shenzhen Office
1016 North Xxxxxxx Xxxx Xxxxxx Xxxxxxxx Xxxxx 000
Xxxxxxxx, Xxxxx
Attn: President
Telephone: 000-00-000-000-0000
Telecopy: 011-86-755-377-9063
with a copy to:
Xxxxxx Xxxxx, Esq
Xxxxx, Xxxx & Xxxxx, LLP
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(ii) if to TFG, to:
Total Film Group, Inc.
0000 Xxxxxxxx Xxxx., Xxx. 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxx, CEO
Telephone: 000-000-0000
Telecopy: 000-000-0000
with a copy to:
Xxxxx X. Xxxx, Esq.
0000 Xxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
SECTION 18. Amendments; Waivers. Except as otherwise provided
herein, this Agreement may be amended, and compliance with any provision of
this Agreement may be omitted or waived, only by the written agreement
between the Corporation and TFG.
SECTION 19. Counterparts. This Agreement may be executed in any
number of counterparts, each such counterpart shall be deemed to be an
original instrument, and all such counterparts together shall constitute but
one agreement.
SECTION 20. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not
be deemed to be a part of this Agreement.
SECTION 21. Nouns and Pronouns. Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine
or neuter forms, and the singular form of names and pronouns shall include
the plural and vice-versa.
SECTION 22. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of the State
of California without regard to its principles of conflicts of laws.
SECTION 23. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereto and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the day and year first above written.
U.S. BUSINESS NETWORK, INC.
By: /s/ Xxxxxxx Xxxxxxx
Title: Chairman
USBN Computer Network
(Chengdu)
Corporation Limited
By: /s/ Xxxxxx Xxxx
Title: CEO, President of China Operations
TOTAL FILM GROUP, INC.
By: /s/ Xxxxxx Xxxxx
Title: President
TOTAL CHINA, INC.
By: /s/ Xxxxxx Xxxxx
Title President
For Purpose of Section 13 only
/s/ Xxxxxxx Xxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
/s/ Xxxxxx Xxxx
