EXHIBIT 10.1
SHARE EXCHANGE AGREEMENT
BETWEEN XIN NET CORP. AND PROTECTSERVE PACIFIC LTD.
THIS AGREEMENT dated for reference the 1st day of October, 2001.
BETWEEN:
KWEI CHI PING, JUSTIN, of Flat A, 16th Floor, Cornell Court,
00 Xxxx'x Xxxx, Xxxxx Xxxxx, Xxxx Xxxx;
AND
XXXX XXX XXX YING, KATHERINE, of Flat A, 16th Floor, Cornell
Court, 00 Xxxx'x Xxxx, Xxxxx Xxxxx, Xxxx Xxxx;
AND
XXX XXXX KEUNG, WILSON, of Xxxx X, 00xx Xxxxx, Xxxxx 8, Melody
Garden, 2 Wa Chui Road, Tuen Mun N.T., Hong Kong
(hereinafter collectively called the "Vendors")
AND:
XIN NET CORP., a Florida corporation with a registered office
in the State of Florida, USA, located at Corporate Creations
Enterprises, Inc. of 0000 XXX Xxxxxxxxx, #000, Xxxx Xxxxx
Xxxxxxx, Xxxxxxx, 00000, and a head office within British
Columbia located at Suite 830 - 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxx
(hereinafter called the "Purchaser" or "Xin Net")
AND:
PROTECTSERVE PACIFIC LIMITED., a company duly incorporated
under the laws of Hong Kong and having an office and place of
business at 1101 China Insurance Group Xxxxxxxx, 000 Xxx
Xxxxx Xxxx, Xxxxxxx Xxxx Xxxx
(hereinafter called the "Company" or "PSP")
WITNESSES THAT WHEREAS:
A. The Vendors are the legal and/or beneficial owners of an aggregate of
5,623,036 shares in the capital of the Company (the "Shares"), allocated
as follows:
Kwei Chi Ping, Xxxxxx 3,092,670
Xxxx Xxx Wai Xxxx, Xxxxxxxxx 1,124,607
Xxx Xxxx Keung, Wilson 1,405,759
Total 5,623,036
B. The Vendors have each agreed to sell and the Purchaser has agreed to
purchase the Shares upon the terms and conditions herein set forth;
NOW THEREFORE in consideration of the premises, the covenants and agreements and
warranties hereinafter set forth, it is hereby agreed as follows:
SALE AND PURCHASE
1. Based on and relying upon the representations and warranties herein, the
Vendors hereby each agree to sell the Shares to the Purchaser and the
Purchaser hereby agrees to purchase the Shares from the Vendors on the
terms and conditions herein contained.
2. The purchase price payable by the Purchaser to the Vendors for the Shares
shall be US$1,571,640 (the "Purchase Price") payable on the Closing Date by
the issuance of 4,200,000 restricted common shares in the capital stock of
the Purchaser (the "Exchangeable Shares") as per the allocation table set
out in Schedule "A", to be issued in exchange for the Shares held by the
Vendors in the Company.
3. The Exchangeable Shares will be issued pursuant to exemptions under
Regulation S promulgated under the US Securities Xxx 0000 and under the
Securities Act of British Columbia.
GRANT OF STOCK PURCHASE OPTIONS
4. The Purchaser agrees to grant, pro rata, to the Vendors, stock purchase
options, each option entitling, upon the exercise of the options, the
holder to receive one common share in the capital stock of the Purchaser at
the price of US$0.001 per share. The stock purchase option will expire on
the fifth anniversary from the date of grant. The exact number of stock
purchase options to be granted will be determined according to a formulae
provided in Schedule "B" to this Agreement which is based on the
performance of PSP and geared towards a PSP net (after tax) profit
threshold of HK$13,000,000 calculated according to US Generally Accepted
Accounting Principles (the "US GAAP") for the 12 month operating period
ending on August 31, 2002. The date of grant will be within 10 days from
the date that PSP produces an auditors report providing the results of
PSP's performance and net profits according to US GAAP.
5. In addition to the stock purchase options referred to in Section 4 of this
Agreement, the Purchaser further agrees to grant to the management and
employees of PSP stock options in the event that PSP's net (after tax)
profit calculated according to the US GAAP, shall be more than
HK$13,000,001 for the 12 months ending on August 31, 2002. The amount,
price and expiry date of additional stock options shall be determined by
the board of Directors in accordance with the Purchasers' stock option
plan. The date of grant will be the same date discussed in Section 4 of
this Agreement.
CASH COMMITTMENT
6. The Purchaser agrees that upon successful Closing the Purchaser will
contribute to PSP cash of approximately US$800,000 in US funds or in RMB
equivalent for PSP's acquisition, expansion and management expenditures on
an "as required" basis and upon approval by both Parties. Considering the
need of funds by PSP before Closing, the Purchaser may provide to PSP part
of such cash contribution before Closing. Any such cash contribution made
by the Purchaser prior to the Closing Date of this Agreement, however,
shall be in the form of secured loans made by the Purchaser to PSP.
7. PSP agrees to report to the Purchaser, prior to the Closing Date of this
Agreement, its operating cash flow position on a bi-weekly basis and any
contract or capital expenditure commitment exceeding US$50,000 will need
the Purchaser's approval.
BUY BACK SHARES
8. The Parties agree that in the event that PSP's net (after tax) profit
calculated according to US GAAP shall be less than HK$3,000,000 for the 12
months ending on August 31, 2002, the Purchaser will have the right to buy
back from the Vendors, pro rata, certain common shares of the Purchaser
issued to the Vendor on the Closing Date at the rate of $US$0.001 per
share. The exact number of common shares to be bought back by the Purchaser
will be determined according to the formulae provided in Schedule "B" to
this Agreement. The Parties agree that within 5 days of written notice from
the Purchaser each Vendor will execute and deliver to the Purchaser all
transfer documents necessary to transfer the Vendors' shares, to be bought
back by the Purchaser, free and clear of all charges, liens and
encumbrances, and forthwith upon receipt and registration of all documents
necessary to transfer to the Purchaser the shares to be bought back by the
Purchaser free and clear of all charges, liens and encumbrances, the
Purchaser shall deliver to each Vendor a certified cheque payable to the
Vendor in the amount of the purchase price specified in the written notice.
COMPANY AND VENDORS' REPRESENTATIONS AND WARRANTIES
9. The Company and the Vendors, jointly and severally, represent and warrant
to the Purchaser, to the best of their knowledge, information and belief
after making due inquiry that:
(a) the Company is a company duly incorporated in Hong Kong on September
25, 2000 under Companies Ordinance under the name of Global
Surveillance Communications Limited and, effective January 15, 2001,
changed its name to ProtectServe Pacific Limited. The Company is not a
reporting company and is a valid and subsisting company in good
standing with all regulatory authorities;
(b) the authorized capital of the Company consists of 6,000,000 Shares
with a par value of HK$1.00 per share, of which there are 5,623,036
Shares issued and outstanding;
(c) attached hereto as Schedule "H" are true and complete copies of the
Company's audited financial statements for the period from date of
incorporation to June 30, 2001 (the "Company's Financial Statements").
The Company's Financial Statements have been prepared in accordance
with the Statements of Auditing Standards issued by the Hong Kong
Society of Accountants and present fairly the financial position,
results of operations and statements of changes in the Company's
financial position for the period indicated.
(d) since June 30, 2001, the Company's business has been operated
substantially in accordance with all laws, rules, regulations, orders
of competent regulatory authorities, and there has not been:
(i) any event or change in circumstances that has had, or which
the Company may expect to have, a material adverse effect on
the Company or its business;
(ii) any change in liabilities of the Company that has had, or
which the Company may expect to have, a material adverse
effect on the Company or its business;
(iii) any incidence, assumption or guarantee of any indebtedness for
borrowed money by the Company;
(iv) any payments by the Company in respect of any indebtedness
of the Company for borrowed money or in satisfaction of
any liabilities of the Company, other than in the ordinary
course of business;
(v) the creation, assumption or sufferance of the existence of
any lien on any assets reflected on the Company Financial
Statements;
(vi) any grant of any severance, continuation or termination pay to
any director, officer, stockholder or employee of the Company;
or any entering into of an employment, deferred compensation
or other similar agreement, or amendment or variation to any
such existing agreement;
(vii) any change by the Company in its accounting principles,
methods or practices or in the manner it keeps its books and
records;
(viii) any distribution, dividend or bonus by the Company to any of
its respective officers, directors, stockholders or
affiliates, or any of their respective affiliates or
associates; and
(ix) any material capital expenditure or commitment by the Company
or material sale, assignment, transfer, lease or other
disposition of or agreement to sell, assign, transfer lease or
otherwise dispose of any asset or property by the Company
other than in the ordinary course of business.
(e) the Shares are free and clear of all liens, claims, charges and
encumbrances of every nature and kind whatsoever;
(f) the Shares are duly authorized, validly issued and outstanding as fully
paid and non-assessable shares;
(g) the Vendors are the sole registered and/or beneficial owners of the
Shares and have due and sufficient right and authority to transfer the
legal and beneficial title and ownership of the Shares to the
Purchaser, and each of the Vendors and the Company has due and
sufficient right, power and authority (including any and all necessary
corporate and/or shareholder authorizations) to enter into this
Agreement on the terms and conditions herein set forth, and this
Agreement, when executed and delivered by the Vendors and Company, will
constitute a legal and binding obligation of each such party
enforceable against it in accordance with its terms;
(h) no person, firm or corporation has any agreement or option or a right
capable of becoming an agreement for the purchase of the Shares or any
other shares in the capital of the Company owned by the Vendors or any
right capable of becoming an agreement for the purchase, subscription
or issuance of any of the unissued shares in the capital of the
Company;
(i) the Company has the full corporate power and authority to carry on
the business presently being carried on by it and as proposed to be
carried on by it;
(j) the Company holds all licenses and permits as may be requisite for
carrying on its business in the manner in which it has heretofore been
carried on.
(k) there are no material liabilities, contingent or otherwise, other than
as set forth in Schedule "H" attached hereto;
(l) at the Time of Closing, the Company shall not have any liabilities,
contingent or otherwise, other than those liabilities set forth as of
September 25th, 2001 in Schedule "C" attached hereto, except that the
Company may have further liabilities incurred in its normal course of
business for the period from September 25th, 2001 to the Date of
Closing;
(m) the books and records of the Company fairly and correctly set out and
disclose in all material respects, in accordance with Hong Kong
generally accepted accounting principles, the financial position of the
Company as at the date hereof and all material financial transactions
of the Company relating to its business have been accurately recorded
in such books and records;
(n) no payments of any kind have been made or authorized to or on behalf of
the Vendors or any of them or to or on behalf of officers, directors or
shareholders of the Company or under any management agreements with the
Company which are not recorded in the books or records of the Company
or which have not been disclosed in writing to the Purchaser other than
payments made in the normal course of business;
(o) there is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the
knowledge of the Company or the Vendors, jointly or severally,
threatened against or affecting the Company at law or in equity or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau or agency;
(p) to the best of the Vendors' knowledge, the Company is not in breach of
any laws, ordinances, statutes, regulations, by-laws, orders or decrees
to which it is subject or which apply to it;
(q) the Company is not a party to any collective agreement with any labour
union or other association or employees and no attempt has been made to
organize or certify the employees of the Company as a bargaining unit;
(r) there are no pensions, profit sharing, group insurance or similar plans
or other deferred compensation plans affecting the Company;
(s) the Company is not indebted to any employee of the Company or other
workers engaged in the business of the Company for any wages or
salaries and the Company has not received or been notified of any
general wage claims;
(t) the Company is the sole beneficial owner and has good and marketable
title to all its properties and assets free and clear of all liens,
mortgages, pledges, deeds of trust, conditional sale agreements,
encumbrances, charges or claims of every kind and nature whatsoever;
(u) the Company has not experienced nor is it aware of any occurrence or
event which has had, or might reasonably be expected to have, a
materially adverse affect on its business or the results of its
operations;
(v) neither the Vendors nor any officer, director, employee or shareholder
of the Company is now indebted or under obligation to the Company on
any account whatsoever; and other than those set forth in Schedule "C"
attached hereto the Company is not indebted or under obligation to the
Vendors or any officer, director, employee or shareholder of the
Company.
10. The Vendors hereby jointly and severally represent and warrant to the
Purchaser as follows that:
(a) the Vendors have the capacity to protect their own interests in
connection with the acquisition of the common shares of the Purchaser
and are capable of evaluating the merits and risks of an investment in
the Purchaser by reason of their business and financial knowledge and
experience;
(b) the Vendors are acquiring the shares of common stock of the Purchaser
for investment for their own account, not as a nominee or agent, and
not with the view to, or for resale in connection with, any
distribution thereof. The Vendors understand that the shares of common
stock of the Purchaser have not been, and will not be, registered under
the US Securities Xxx 0000, as amended (the "Securities Act"), by
reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy
of the Vendors' representations as expressed herein;
(c) each Vendor acknowledges that the shares of common stock of the
Purchaser must be held indefinitely unless subsequently registered
under the Securities Act or unless an exemption from such registration
is available. Each Vendor is aware of the restrictions and limitations
on resale of the shares of common stock of the Purchaser into the
United States or to a US Person pursuant to the provisions of
Regulation S promulgated under the Securities Act. In addition, each
Vendor is aware of the provisions of Rule 144 promulgated under the
Securities Act ("Rule 144") which permit limited resales in the US of
shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the existence of a
public market for the shares of common stock of the Purchaser, the
availability of certain current public information about the Purchaser,
the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions directly with a "market
maker" and the number of shares being sold during any three-month
period not exceeding specified limitations;
(d) each Vendor also acknowledges that the shares of common stock of the
Purchaser must be held indefinitely unless subsequently registered
under the Securities Act (British Columbia) (the "BC Act") or unless an
exemption from such registration is available. Each Vendor is aware
that the shares of common stock of the Purchaser are subject to
restriction on transferability and resale and may not be transferred or
resold in British Columbia or to British Columbia residents except as
permitted by the Securities Act (British Columbia) (the "BC Act") and
Regulations made under the BC Act;
(e) each of the Vendors has had an opportunity to discuss the Purchaser's
business, management and financial affairs with the Company's
management and has also had an opportunity to ask questions of the
Purchaser's officers, which questions were answered to the Vendors'
satisfaction. Each Vendor has been furnished with or has had access to
such information as a sophisticated investor would customarily require
to evaluate the merits and risks of the proposed investment together
with such additional information as is necessary to verify the accuracy
of the information supplied. The Vendors represent and acknowledge that
they have been solely responsible for their own due-diligence
investigation of the Purchaser and its management and business, for
their own analysis of the merits and risks of this investment, and for
their own analysis of the terms of the investment, and that in taking
any action or performing any role relative to the proposed investment,
they have acted solely in their own interest, and that neither they nor
any of their agents or employees has acted as an agent, employee,
partner or fiduciary of any other person, or as an agent of the
Purchaser, or as an issuer, underwriter, broker, dealer or investment
advisor relative to this investment;
(f) each of the Vendors understands that the Purchaser has limited
operating history and is in the process of transferring its current
business assets and liabilities as referred to in Section 12(p) and
Section 12(q) of this Agreement, and that investment in the Purchaser
involves substantial risks. The Vendors further understand that the
acquisition of the shares of common stock of the Purchaser will be a
highly speculative investment. Each of the Vendors is able, without
impairing his financial condition, to hold the shares of common stock
of the Purchaser for an indefinite period of time and to suffer a
complete loss of his investment;
(g) each of the Vendors agrees to indemnify and hold harmless the Purchaser
and its officers, directors and agents for any costs, liabilities or
losses caused by any misstatement of material fact by such Vendor with
respect to the representations and warranties contained in this Section
or any other written information provided to the Purchaser by such
Vendor in connection with the investment contemplated by this
Agreement; and
(h) each Vendor represents and warrants to the Purchaser that he is not a
US Person as defined in Regulation S as promulgated under the
Securities Act and that the buy order for the common shares of the
Purchaser originated by each Vendor outside of the US.
COMPANY AND VENDORS' COVENANTS
11. The Company and the Vendors jointly and severally covenant and agree that:
(a) the representations and warranties contained in this Agreement shall be
true at and as of the Time of Closing as if such representations and
warranties were made as of such time;
(b) the Company and the Vendors will permit the Purchaser or whoever it
directs on its behalf to examine the records, statements and accounts
of the Company on regular business days and during regular business
hours up to and including the Closing Date and make such audit of the
books of account of the Company and physical verification of the
inventory of the Company as the Purchaser may see fit;
(c) the representations, warranties, covenants and agreements contained
herein shall survive the Closing Date and notwithstanding the Closing
of the purchase and sale herein contemplated, shall continue in full
force and effect;
(d) the Company and the Vendors will, jointly and severally, prior to
Closing, take all steps and proceedings and execute such further
assurances and documents as may be required to obtain the transfer and
registration of the Shares into the name of the Purchaser provided that
all terms and conditions to be observed and performed by the Purchaser
at the Time of Closing have been observed and performed;
PURCHASERS' REPRESENTATIONS AND WARRANTIES
12. As an inducement to the Company and each of the Vendors to enter into this
Agreement and to consummate the transactions provided for herein, the
Purchaser represents and warrants to the Company and each of the Vendors,
to the best of its knowledge, information and belief after making due
inquiry that:
(a) the Purchaser was incorporated on September 6, 1996 under the laws of
the State of Florida under the name of Placer Technologies, Inc, and,
effective on July 24, 1998, changed its name to Xin Net Corp.;
(b) the Purchaser is duly incorporated, validly existing and in good
standing under the laws of the State of Florida;
(c) the Purchaser is now and as of the Closing Date will be traded on the
OTC Bulletin Board;
(d) it has full and absolute right, power and authority to enter into this
Agreement on the terms and conditions herein set forth, to carry out
the transactions contemplated hereby and, to transfer on the Closing
Date to the Vendors all legal and beneficial ownership in and to the
Exchangeable Shares;
(e) this Agreement once duly executed and delivered by the Purchaser will
constitute a legal, valid and binding obligation of the Purchaser;
enforceable against the Purchaser in accordance with its terms;
(f) no proceedings have been taken or authorized by the Purchaser, or to
the knowledge of the Purchaser, by any person, with respect to the
bankruptcy, insolvency, liquidation, dissolution or winding-up of the
Purchaser or with respect to any amalgamation, merger, consolidation,
arrangement or reorganization relating to the Purchaser;
(g) the authorized capital stock of the Purchaser consists of 50,000,000
shares of US $0.001 par value common stock of which 21,360,010 are
issued and outstanding;
(h) all of the issued and outstanding shares of the Purchaser have been
duly and validly authorized and issued in accordance with applicable
laws and are validly outstanding, fully paid and non-assessable;
(i) there are 5,884,990 Series "A" and 10 Series "B" Share Purchase
Warrants of the Purchaser issued and outstanding. Each Series "A" Share
Purchase Warrant entitles the holder to purchase, on the earlier of (1)
March 21, 2003 and (2) the 90th day after the day on which the weighted
average trading price of the Purchaser's shares exceeds US$1.25 per
share for 10 consecutive days, one additional unit at a price of
US$1.00 per unit, each unit consisting of one common share of the
Purchaser and one Series "B" Share Purchase Warrant. Each Series "B"
Share Purchase Warrant entitles the holder to purchase one additional
common share of the Purchaser at a price of $1.50 on the earlier of (i)
March 31, 2004 and (ii) one year after the occurrence of (i)(2)
described above in this section;
(j) there are 2,136,000 stock options granted by the Purchaser
outstanding. Each stock option entitles the holder to purchase
common shares of the Purchaser at US$1.30 per share. The stock options
expire on November 12, 2004;
(k) all of the Exchangeable Shares which will be issued to the Vendors
hereunder in compliance with applicable laws and the articles of the
Purchaser, and will be issued fully paid and non-assessable, and free
and clear of all liens, charges, encumbrances and trading restrictions
other than as may be imposed by applicable U.S. Federal and State laws;
(l) the Purchaser has five wholly owned subsidiaries:
(a) Infornet Investment Limited (a Hong Kong corporation);
(b) Infornet Investment Corp. (a Canadian corporation);
(c) Xinbiz Corp. (a British Virgin Islands corporation);
(d) Xinbiz (HK) Limited (a Hong Kong corporation); and
(e) Xin Net International Corp. (a Nevada corporation).
On August 25, 1997, through its wholly owned subsidiary Infornet
Investment Limited, under the laws of the Peoples' Republic of China,
the Purchaser formed an 80% cooperative joint venture called Xinnet
Telecom Corp., Ltd. with Xin Hai Technology Development Ltd. (a
Peoples' Republic of China Corporation) as a 20% partner for a term of
twenty years. The joint venture agreement was amended on April 13, 2000
to give Infornet Investment Limited control over the joint venture for
another fifteen years after the recovery of total investment and
interest from external financing in the joint venture
(m) the officers and directors of the Purchaser are as follows:
Name Position
---- --------
Xiao-Qing Du Director
S.Y. Xxxx Xxxx Director and President
Xxxxxx Xxxxxx Director and Secretary
Xxxxxxx Xxxxxx Director
(n) attached hereto as Schedule "D" are true and complete copies of the
Purchasers audited financial statements for the fiscal year ended on
December 31, 2000 as contained in the Purchasers' Form 10-KSB and
Unaudited Financial Statements as of March 31 and June 30, 2001
contained in the Purchaser's Form 10-QSB Interim Reports for the 1st
and 2nd Quarter, 2001, respectively (the "Purchaser's Financial
Statements"). The Purchaser's Financial Statements have been prepared
in accordance with the US Generally Acceptable accounting principles
and present fairly the financial position, results of operations and
statements of changes in the Purchaser's financial position for the
period indicated;
(o) no adverse material changes in the affairs of the Purchaser have
occurred since June 30, 2001;
(p) the Purchaser is currently in the business of providing internet access
and content services, domain name registration and other value-added
services, such as e-commerce and advertising. On June 22, 2001 the
Board of Directors authorized the Purchaser's Joint Venture partner,
Xin Hai Technology Development Ltd. in China to sign an Agreement to
sell the Purchaser's assets of Internet access provision ("ISP") to
Bejing Sino Soft Intel Information Technology Ltd. (the "ISP
Transaction"). The Purchaser filed on June 27, 2001 a Form 8-K "Current
Report" and on July 12, 2001 a Form 8-K "Amended Current Report" with
the US Securities and Exchange Commission ("SEC") regarding this
decision. The Purchaser will request shareholders approval of the
ISP Transaction at its Annual General Meeting of 2001, which is planned
to be held in October or November, 2001 (the "AGM");
(q) the Purchaser is also in the process of transferring its current
business assets [other than the ISP assets referred in Section 12(p)]
and liabilities, except for cash of US$800,000 (which will be used to
manage and expand PSP operation) to Xin Net International Corp., a
wholly owned subsidiary of the Purchaser referred to in Section 12(l)
in exchange of the shares of the Xin Net International Corp. to be
distributed by way of dividend to the Purchasers shareholders as of the
record date for the AGM on a share for share basis (the "Spin- Off").
On August 3, 2001 the Purchaser filed a Form 8-K "Current Report" with
the SEC with the Purchaser's intent to carry out the Spin-Off described
herein. The Purchaser will request shareholders approval of the
Spin-Off at its AGM;
(r) there are no liabilities, contingent or otherwise of the Purchaser
which are not disclosed or reflected in its Financial Statements set
forth in Schedule "D" attached hereto;
(s) at the time of Closing, the Purchaser shall not have any liabilities,
contingent or otherwise, other than those liabilities set forth as of
September 25th, 2001 in Schedule "E" attached hereto, except that the
Purchaser may have further liabilities incurred in its normal course of
business for the period from September 25th, 2001 to the Date of
Closing;
(t) there is no litigation, proceeding, or investigation pending or
threatened against the Purchaser, nor does the Purchaser know, or have
grounds to know, of any basis for any litigation, proceeding or
investigation against the Purchaser, except as disclosed in writing to
the Vendors;
(u) since June 30, 2001, the Purchaser's business has been operated
substantially in accordance with all laws, rules, regulations, orders
of competent regulatory authorities, and there has not been:
(i) any event or change in circumstances that has had, or which
the Purchaser may expect to have, a material adverse effect on
the Purchaser or its business;
(ii) any change in liabilities of the Purchaser that has had, or
which the Purchaser may expect to have, a material adverse
effect on the Purchaser or its business;
(iii) any incidence, assumption or guarantee of any indebtedness for
borrowed money by the Purchaser;
(iv) any payments by the Purchaser in respect of any indebtedness
of the Purchaser for borrowed money or in satisfaction of any
liabilities of the Purchaser, other than in the ordinary
course of business;
(v) the creation, assumption or sufferance of the existence of any
lien on any assets reflected on the Purchaser Financial
Statements;
(vi) any grant of any severance, continuation or termination pay to
any director, officer, stockholder or employee of the
Purchaser; or any entering into of an employment, deferred
compensation or other similar agreement, or amendment or
variation to any such existing agreement;
(vii) any change by the Purchaser in its accounting principles,
methods or practices or in the manner it keeps its books and
records;
(viii) any distribution, dividend or bonus by the Purchaser to any of
its respective officers, directors, stockholders or
affiliates, or any of their respective affiliates or
associates; and
(ix) any material capital expenditure or commitment by the
Purchaser or material sale, assignment, transfer, lease or
other disposition of or agreement to sell, assign, transfer
lease or otherwise dispose of any asset or property by the
Purchaser other than in the ordinary course of business, the
ISP Transaction and the Spin-Off referred to in Section 12(p)
and 12(q) of this Agreement.
(v) the Purchaser does not own or lease any real property or material
assets other than those set forth in Schedule "F" attached hereto;
(w) there are no contracts or indebtedness between the Purchaser and any of
its shareholders, or affiliates or associates of any of its
shareholders other than those set forth in Schedule "I" attached
hereto;
(x) there are no material contracts to which the Purchaser is a party other
than those set forth in Schedule "G" attached hereto;
(y) the operation of the Purchaser's business has not violated or infringed
any U.S. Federal or State laws or regulations;
(z) all tax returns and reports of the Purchaser required by law to be
filed prior to the date hereof have been filed and are substantially
true, complete and correct, and all taxes and other government charges
have been paid or accrued in the Purchaser Financial Statements;
(aa)the information contained in the documents, certificates and written
statements (including this Agreement and the attachments thereto)
furnished by the Purchasers to the Vendors are true and complete in all
material respects and do not omit to state any material fact necessary
in order to make the statements therein; and
(bb)there is no fact known to the Purchaser that has not been disclosed to
the Vendors in writing that could reasonably have a material adverse
effect on the Purchaser.
Purchasers Covenants
13. The Purchaser covenants and agrees as follows:
(a) the management of the Purchaser will recommend for election, at the AGM
of the Purchaser, the following persons as the directors and officers
of the Purchaser:
Name Position
---- --------
S.Y. Xxxx Xxxx Director, President
Xxxxx Xxxxxx Director, Secretary
Xxxxxxx Xxxxxx Director
Xiao-Qing Du Director
Kwei Chi Ping, Xxxxxx Director
Xxx Xxx Xxxx Xxxx, Xxxxxxx Director
Xxx Xxxxx Keung, Wilson Director
of which Kwei Chi Ping, Justin, Xxx Xxxxx Xxxxx, Xxxxxx and Xxx Xxx
Xxxx Xxxx, Xxxxxxx are nominated by PSP.
(b) PSP will be entitled to nominate two (2) additional directors if it
achieves the HK$13,000,000 net (after tax) profit for the 12 month
operating period ending August 31, 2002 as referred to in Section 4 of
this Agreement.
(c) PSP will be entitled until August 31, 2002 to operate its business
without any interference from the Purchaser except that the Purchaser
will have the right to examine PSP's records, statements and accounts
as referred to in Sections 11 (b) of this Agreement.
(d) on the Closing Date, and provided that all terms and conditions to be
observed and performed by the Vendors at the Time of Closing have been
observed and performed, the Purchaser will issue the Exchangeable
Shares to the Vendors, such Exchangeable Shares to be issued free and
clear of any liens, encumbrances and charges, but subject to applicable
trading restrictions imposed by U.S. and British Columbia securities
legislation, and imposed under such other securities legislation
applicable in each jurisdiction where any of the Vendors are resident;
(e) in addition to the US$800,000 contribution referred to in Section 6 of
this Agreement, any proceeds from Xin Net stock purchase options and/or
warrants which are exercised after the date of this Agreement shall be
retained by the Purchaser as funds for expanding PSP business and/or
working capital for PSP business.
CONDITIONS PRECEDENT FOR THE VENDORS
14. The joint and several obligations of the Vendors to carry out the terms of
this Agreement and to complete the sale contemplated herein is subject to
the following conditions:
(a) the Purchaser shall have performed and satisfied each of its
obligations hereunder required to be performed and satisfied by it on
or prior to the Closing Date and each of the representations and
warranties of the Purchaser contained herein shall have been true and
correct and contained no misstatement or omission that would make any
such representation or warrant misleading when made, and shall be true
and correct and contain no misstatement or omission that would make any
such representation or warranty misleading at and as of the Closing
Date with the same force and effect as if made as of the Closing Date;
(b) the transactions contemplated by this Agreement shall not violate any
applicable law and there shall be no pending actions or proceedings by
any State, U.S. Federal or State regulatory authority or by any other
person challenging or seeking to materially restrict or prohibit the
transfer and exchange contemplated hereby or the consummation of the
transactions contemplated by this Agreement;
(c) the Purchaser's Board of Directors, by proper and sufficient vote
respectively, shall have approved this Agreement and the transactions
contemplated hereby;
CONDITIONS PRECEDENT FOR THE PURCHASER
15. All obligations of the Purchaser under this Agreement are subject to the
fulfillment on or prior to Closing, of each of the following conditions to
the satisfaction of the Purchaser's solicitor:
(a) the Purchaser has received regulatory approval of this Agreement, if
required;
(b) the shareholders of the Purchaser approved the ISP Transaction and the
Spin-Off at the AGM. The Purchaser has completed the ISP Transaction
and the Spin-Off referred to in Section 12(p) and 12(q) of this
Agreement respectively;
(c) all covenants, warranties and agreements of the Company and the Vendors
to be performed on or before the Closing Date pursuant to the terms and
conditions of this Agreement have been duly performed;
(d) the Vendors shall transfer the Shares to the Purchaser and such Shares
shall be registered on the books of the Company in the name of the
Purchaser at the Time of Closing; and
(e) the representations and warranties of the Company and the Vendors set
forth in this Agreement shall be true and correct as of the date of the
Agreement and shall be true and correct as at the Date of Closing as if
made by the Vendors on the Closing Date.
16. The Company and the Vendors jointly and severally agree that the foregoing
conditions in section 15 are inserted for the exclusive benefit of the
Purchaser and may be waived by the Purchaser in whole or in part at any
time.
17. In the event any of the conditions set forth in section 15, are not met by
the Closing Date for whatever reason, the Purchaser at his option, may
elect not to proceed with the purchase of the Shares contemplated herein
without prejudice to any other rights and remedies.
SHARE CERTIFICATE LEGENDS
18. It is understood that the certificates evidencing the Purchaser's shares of
common stock may bear one or more legends in substantially the following
forms, as well as any other legend required by the laws of any applicable
jurisdiction:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE U.S. OR TO US PERSONS 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 COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED. HEDGING TRANSACTIONS FOR SUCH SECURITIES
MAY NOT BE MADE UNLESS IN COMPLIANCE WITH SUCH ACT.
THE SHARES ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD IN THE U.S. OR TO US PERSONS EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
The Purchaser need not record a transfer of the shares, unless the
conditions specified in any applicable legends are satisfied. The Purchaser
may also instruct its transfer agent not to record the transfer of any of
the shares unless the conditions specified in the applicable legends are
satisfied.
19. The legend relating to the Securities Act endorsed on a stock certificate
pursuant to this Agreement and the stop transfer instructions with respect
to the shares represented by such certificate shall be removed and the
Purchaser shall issue a certificate without such legend to the holder of
such shares if such shares are registered under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is
available or if such holder provides to the Purchaser an opinion of counsel
reasonably satisfactory to the Purchaser, or a no-action letter or
interpretive opinion of the staff of the Securities and Exchange Commission
(the "SEC") to the effect that a public sale, transfer or assignment of
shares may be made without registration and without compliance with any
restriction such as Rule 144.
CLOSING
20. The sale and purchase of the Shares shall be closed within 10 days from the
date that the Purchaser has received the regulatory approval referred to in
Section 15 (a) of this Agreement and the Purchaser has completed the ISP
Transaction and the Spin-Off referred to in Sections 12(p) and 12(q) of
this Agreement or on such other date agreed by all of the parties
hereunder, at the office of the Purchaser, or at any other place agreed to
by all of the Parties, which date and time are referred to herein as the
"Date of Closing", the "Closing Date", the "Closing" and the "Time of
Closing".
21. At Closing, the Vendors shall deliver to the Purchaser:
(a) share certificates duly endorsed for transfer of 5,623,036 Shares,
constituting the totality of Shares issued and outstanding at Closing
Date, with a par value of HK$1.00 per share in the capital of the
Company into the Purchaser's name representing the Shares;
(b) certified copies of resolutions of the directors of the Company
authorizing and approving the transfer of the Shares, registration of
the Shares in the name of the Purchaser, authorizing the issue of new
share certificates representing the Shares in the name of the
Purchaser, and entry of the name and address of the Purchaser into the
Register of Members and Register of Directors of the Company;
(c) all corporate records and books of account of the Company, including,
without limitation, the minute book, corporate seal, share register
books, share certificate books and annual reports of the Company;
(d) certified copies of such resolutions of the shareholders and directors
of the Company as are to be passed to authorize the execution, delivery
and implementation of this Agreement and of all documents to be
delivered by the Vendor pursuant thereto;
(e) a certificate signed by the Company and the Vendors that all covenants,
warranties and agreements of the Vendors pursuant to the terms of this
Agreement have been duly performed and that the representations and
warranties of the Vendors set forth in this Agreement are true and
correct as at the Date of Closing;
22. At Closing the Purchaser shall deliver to the Vendor the following:
(a) share certificates representing the Exchangeable Shares in the names
and denominations set out in Schedule "A" hereto;
(b) certified copies of resolutions of the directors of the Purchaser
authorizing and approving the issuance of the Exchangeable Shares,
registration of the Exchangeable Shares in the name of the Vendors in
accordance with Schedule "A" hereto and authorizing the issue of the
new share certificates representing such Exchangeable Shares;
(c) all corporate records and books of account of the Company, including
without limitation, the minute book;
(d) certified copies of such resolutions of the directors of the Purchaser
as are to be passed to authorize the execution, delivery and
implementation of this Agreement and of all documents to be delivered
to the Vendors pursuant thereto; and
(e) a certificate signed by a duly authorized officer of the Purchaser that
all covenants, warranties and agreements of the Purchaser pursuant to
the terms of this Agreement have been duly performed and that the
representations and warranties of the Purchaser set forth in this
Agreement are true and correct as at the Closing;
INDEMNITY
23. The Purchaser shall be indemnified and held harmless by the Company and the
Vendors in respect of any and all damages incurred by the Purchaser as a
result of any inaccuracy or misrepresentation in or breach of any
representation or warranty, covenant or agreement made in this Agreement by
the Company and the Vendors.
24. The Vendors shall each be indemnified and held harmless by the Purchaser in
respect of any and all damages incurred by any of such Vendors as a result
of any inaccuracy or misrepresentation in or breach of any representation,
warranty, covenant or agreement made by the Purchaser in this Agreement.
SURVIVAL OF REPRESENTATION, WARRANTIES AND COVENANTS
25. Except as hereinafter provided, all representations, warranties, covenants,
agreements and obligations of the parties hereto shall survive the Closing
and shall expire one year following the Closing Date.
GENERAL
26. This Agreement shall be governed by and be construed in accordance with the
laws of the State of Florida, USA.
27. Any notice to be given to a party hereto shall be in writing and signed by
or on behalf of such party and shall be given to the other party by
delivery thereto, or by sending by prepaid registered mail, telex,
facsimile, telegram or cable to the address of the other as hereinbefore
set forth or to such other address of which notice is given, and any notice
shall be deemed not to have been sufficiently given until it is received.
Any notice or other communication contemplated herein shall be deemed to
have been received on the day delivered, if delivered; on the seventh
business day following the mailing thereof, if sent by registered mail; and
on the business day following the transmittal thereof, if sent by telex,
facsimile, telegram or cable. If normal mail, telex, facsimile, telegram or
cable service shall be interrupted by strike, slow down, force majeure or
other cause, the party sending the notice shall utilize any of the other
such services which have not been so interrupted or shall deliver such
notice in order to ensure prompt receipt of same by the other party.
28. The parties shall execute such further assurances and other documents and
instruments and do such further and other things as may be necessary to
implement and carry out the intent of this Agreement.
29. The provisions herein contained constitute the entire agreement between the
parties hereto and supersede all previous expectations, understandings,
communications, representations and agreements whether verbal or written
between parties.
30. This Agreement may be amended by a written instrument signed by the party
against whom enforcement of the amendment is sought and any waivers made on
the part of the Purchaser with respect to any terms or conditions herein
must be in writing and signed by them.
31. If any provision of this Agreement is unenforceable or invalid for any
reason whatever, such unenforceability or invalidity shall not effect the
enforceability or validity of the remaining provisions of this Agreement
and such provision shall be severable from the remainder of this Agreement.
32. Time shall be of the essence hereof.
33. The headings appearing in this Agreement are inserted for convenience of
reference only and shall not affect the interpretation of this Agreement.
34. This Agreement shall enure to the benefit of and be binding upon the
parties and their successors and permitted assigns.
35. This Agreement may be executed in as many counterparts as may be necessary
or by facsimile and each such agreement or facsimile so executed shall be
deemed to be an original and such counterparts together shall constitute
one and the same Agreement.
IN WITNESS WHEREOF the parties hereto have caused this indenture to be executed
as of the day and year first above written.
Signed, sealed and delivered by )
KWEI CHI PING, XXXXXX in the presence of: )
)
________________________________ )
Witness Name ) ------------------------------
________________________________ ) KWEI CHI PING, XXXXXX
Witness Address )
________________________________ )
)
________________________________ )
Witness Occupation )
Signed, sealed and delivered by )
XXXX XXX WAI XXXX, XXXXXXXXX in the )
presence of: )
)
________________________________ )
Witness Name ) ------------------------------
________________________________ ) XXXX XXX WAI XXXX, XXXXXXXXX
Witness Address )
________________________________ )
)
________________________________ )
Witness Occupation )
Signed, sealed and delivered by )
XXX XXXX KEUNG, WILSON in the presence of: )
)
________________________________ )
Witness Name ) -----------------------------
________________________________ ) XXX XXXX XXXXX, XXXXXX
Witness Address )
________________________________ )
)
________________________________ )
Witness Occupation )
XIN NET CORP.
Per:
-----------------------------------
Authorized Signatory
-----------------------------------
Authorized Signatory
PROTECTSERVE PACIFIC LIMITED
Per:
-----------------------------------
Authorized Signatory
-----------------------------------
Authorized Signatory
SCHEDULE "A"
Share Allocation Table for shares of the Purchaser to be issued to the Vendors
Name No. of Shares
Kwei Chi Ping, Xxxxxx 2,310,000
Xxxx Xxx Wai Xxxx, Xxxxxxxxx 840,000
Xxx Xxxx Keung, Wilson 1,050,000
---------
Total 4,200,000
SCHEDULE "B"
Formulae For Determining Number of Xin Net
Stock Purchase Options to be Granted
and Xin Net Common Shares to be Bought Back
(a) Stock Purchase Option to be Granted:
PSP Net (after tax) Profit (US GAAP) for 12 Month Period Ended 08/31/2002 Stock Purchase Options to be Granted
HK$3,000,000 - 11,000,000 0 - 16,000,000 stock options pro-rated
HK$11,000,001 - 13,000,000 18,031,800 stock options
(b) Xin Net Common Shares to be Bought Back:
PSP Net (after tax) Profit (US GAAP) for 12 Month Period Number of Common Shares to be Bought Back
Ended 08/31/2002
Loss or zero 4,200,.000 shares
HK$1 - 2,000,000 4,200,000 - 2,200,000 shares pro-rated
HK$2,000,001 - 3,000,000 2,200,000 - 1 shares pro-rated
SCHEDULE "C"
Current Material Liabilities of PSP
As of September 25, 2001, PSP has no current material liabilities, contingent or
otherwise except for:
Long-term debt in the amount of US$68,741 with no interest bearing, owed to the
shareholders. There are no specific payment terms for the debt.
A loan in the amount of US$300,000 from Xin Net corp. The loan, which carries an
interest of 8% per annum, is payable on demand.
SCHEDULE "D"
Form 10-KSB including Financial Statements of Xin Net
for the year ended December 31, 2000 and Form
10-QSB Interim Reports for 1st Quarter, 2001 and
2nd Quarter, 2001
SCHEDULE "E"
Current Liabilities of Xin Net
As at September 25, 2001, Xin Net had no current liabilities, contingent or
otherwise, except for the following:
Accounts Payable and accrued liabilities $ 648,886
Unearned revenue $ 1,940,751
Security Deposit (from Sino Soft) $ 300,000
Obligation under capital lease $ 80,793
----------
$2,970,430
----------
SCHEDULE "F"
Current Real Properties or Material Assets
Owned or Leased by Xin Net
As at October 1st, 2001 Xin Net had no current real property or material asset
owned or leased by Xin Net except for the following:
(a) Property and Equipment Owned:
- Office Equipment
- Equipment
- Computer Software
- Furniture
(b) Leases:
(1) Xin Net through its wholly owned subsidiary, Internet
Investment Corp. leases computer equipment with a rental of
approximately US$5,330 per month to June 30, 2002. The
liability includes imputed interest at an average rate of
6.12% per annum.
(2) Xin Net leases office space under various operating leases
expiring through July, 2002. The rental equipment commitment
for 2001 is US$206,648 and for 2002 is US$47,838.
SCHEDULE "G"
Material Contracts of Xin Net
As at October 1st, 2001 Xin Net has no material contracts except for the
following:
1. Joint Venture Agreement between Infornet Investment Limited (Xin Net's
wholly owned subsidiary) and Xin Hai Technology Development Ltd. (a Peoples
Republic of China Corporation) dated August 25, 1997 and amended April 13,
2000.
2. Registrar Accreditation Agreement between Xin Net Corp. and ICANN (Internet
Corporation for Assigned Names and Numbers) dated December 21, 1999.
3. Registrar License Agreement (RLA) between Xin Net Corp. and Network
solutions, Inc. dated June 16, 2000.
SCHEDULE "H"
Audited Financial Statement of the Company for the period from
date of Incorporation to June 30, 2001
SCHEDULE "I"
Contracts or Indebtedness Between the Purchaser and any of its
Shareholders, or Affiliates or Associates of Any of its Shareholders
1. Promissory Note dated June 30, 2001 for US$2,292,729 from Xin Net Telecom
Corp. Ltd. to Xin Net Corp.
2. Promissory Note date June 30, 2001 for US$860,755 from Xin Net Telecom
Corp. Ltd. to Infornet Investment Corp.