Exhibit 10.38
AGREEMENT
THIS AGREEMENT is made as of this 12th day of February, 2004, by and
between TENGTU INTERNATIONAL CORP., a corporation incorporated in Delaware,
United States of America ("TIC"), and XXXX XXXXXX, as the last wishes executor
of Xxx Xx Zhang (the "Last Wishes Executor").
W I T N E S S E T H:
WHEREAS, FanQi Zhang, died on October 24, 2003. He wrote his last
wishes on September 30, 2003 and the description on share distribution to TIC
and the Board of Directors of TUC on October 2, 2004.
WHEREAS, pursuant to the terms of his last wishes and the description
on share distribution, Xx. Xxxxx directed that 15 million shares (the "Shares")
of TIC Common Stock ("Common Stock") to be received by him from TIC is to be
used by the Representative to "solve the funding difficulties of" TENGTU CHINA
COMPANIES; and
WHEREAS, the Last Wishes Executor (Executor), capable of civil
responsibility, legally received Xx. Xxxxx'x authorization and is fully
empowered under Chinese law to enter into this agreement and carry out its
terms; and
WHEREAS, pursuant to Article 2.3.2 in Share Purchase Agreement entered into
between BEIJING TENGTU CULTURE & EDUCATION DEVELOPMENT CO., LTD., ("TTC'),
BEIJING JIADE TENGTU TECHNOLOGY GROUP CO. LTD., ("Jiade"), BEIJING ORIENTAL TAI
HE TECHNOLOGY DEVELOPMENT CO., LTD.. ("Tai He") and Xx. Xxxxx Fanqi:
TIC deliveries:
to Xx. Xxxxx, or its nominee(s) certificates evidencing Thirty Million
(30,000,000) shares of Common Stock (the "Shares"). The Shares have not been,
and will not be, registered under the Securities Act, and will be issued in a
transaction that is exempt from the registration requirements of the Securities
Act. Therefore, the Shares will be "restricted securities" under the U.S.
federal securities laws and cannot be offered or resold except pursuant to
registration under the Securities Act or an available exemption from
registration, including, but not limited to, Rule 144, which requires that the
Shares be held for at least one year.
WHEREAS, Tengtu China is faced with various funding difficulties in current
operation. The solution of the funding difficulties will be unavailable through
resale of the shares due to the minimum one year restriction on such actions. To
have the Shares registered for free resale and the proceeds of share resale to
be applied pursuant to Xx. Xxxxx'x last wishes and Share Distribution
Description;
NOW, THEREFORE, in consideration of the above facts, both parties agree
to have the Shares registered and to be legally bound by the articles set forth
as follows:
ARTICLE I
DELIVERY OF SHARES; APPLICATION OF SALE PROCEEDS
1. REGISTRATION, SALE AND PROCEEDS APPLICATION OF COMMON STOCK
1.1. Upon the issuance of the Common Stock by TIC, the Shares shall be
delivered to a trustee or escrow agent selected by TIC and Executor,
to hold on behalf of Xx. Xxxxx'x estate;
1.2. TIC is in charge of share registration and have shares available for
resale at any time;
1.3. The trustee or escrow agent shall follow the resale instruction of TIC
which shall keep Executor advised in advance. Proceeds of the share
resale shall flow into the special funds account designated by the
Executor;
1.4. The Executor can not apply the proceeds of the share resale for any
purposes except for solving the funding difficulties of Tengtu China
in operation and any management charges incurred in connection with
the establishment and maintenance of the fund account.
1.5. Both parties agrees upon the following procedures of the fund
application:
1.5.1. TIC or Tengtu China Management Team ("Management Team" refers to any
management team that may be organized by TIC in China market and TIC
takes full responsibility for the team's actions) shall apply to
Executor for the use of the funds;
1.5.2. The Executor or its organized Fund Management Committee ("Committee")
shall verify the use of the fund, and after confirming the use
complies with the last wishes and Share Distribution Description, the
Executor or the Committee shall disburse the fund;
1.5.3. If the Executor has disputes with Management Team or TIC on Item
1.5.2, the Executor shall have the final decision power pursuant to
Xx. Xxxxx'x last wishes and Share Distribution Description;
1.5.4. The Management Team shall report the use of the fund to the Executor
or the Committee accurately and in time;
1.5.5. The Executor or the Committee shall have the right to inspect the use
of the proceeds from time to time.
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1.6. The Agreement shall be valid from the date of share issuance to the
date when the tasks referred to in Xx. Xxxxx'x last wishes and Share
Distribution Description is fully completed.
1.7. The termination of this Agreement shall mean that the trustee or
escrow agent has completed its obligation on the entrusted Shares. The
residual of the shares or proceeds shall be inherited by Xx. Xxxxx'x
legal heir under the Chinese Inheritance Law.
ARTICLE II
EXPLANATIONS AND STATEMENT
2. Explanation and Statement
2.1. "Tengtu China" referred to in the last wishes means the companies or
affiliates under the name of Xx. Xxxxx, including: 1) Jiade; 2) TTC;
3) Beijing Tengtu Electronic Publishing Company, Ltd. (TEP); 4)
Beijing Tengtu Tiandi Network Company, Ltd. (TTN); 5) Beijing Fengtai
Tengtu Training Center: 6)Beijing Huaxia Boxing Education Software
Company, Ltd. (CBERC), and Tai He.
2.2. The funding difficulties of Tengtu China in operation referred to in
Xx. Xxxxx Fanqi's last wishes and Share Distribution Description shall
mean:
2.2.1. Bank debts which can not be repaid in daily operation;
2.2.2. Various payables which can be redeemed in daily operation;
2.2.3. Shortfall of working capital in daily operation;
2.2.4. Any other funding difficulties perceived in daily operation.
2.3. The arrangement of Xx. Xxxxx Fanqi in his last wishes and Share
Distribution Description shall not be construed as his debt
obligations to TIC or TUC, and shall not be construed as his
obligations to Tengtu China companies as listed in 2.1;
2.4. This Agreement shall not be construed as any changes or amendments to
the Share Purchase Agreement.
ARTICLE III
MISCELLANEOUS
3. Miscellaneous
3.1. Headings. The section headings contained in this Agreement are for
purposes of convenience only, and shall in no way bear upon the
construction or interpretation of this Agreement.
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3.2. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
3.3. Jurisdictions. This Agreement shall be governed by the Law of the
People's Republic of China.
3.4. Language. This Agreement is written in both English and Chinese
languages. The Chinese language shall prevail in any interpretation
given any discrepancies between the two languages.
3.5. Counterparts. This Agreement may be executed in any one of the four
counterparts, TIC, Executor, Management Team and Xx. Xx Xxxxx shall
each have one counterpart.
TENGTU INTERNATIONAL CORP.
By: /S/ XXXX XXXX
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Xxxx Xxxx, President
/S/ XXXX XXXXXX
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Xxxx Xxxxxx, as the Last Wishes
Executor of Fanqi Zhang
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