EXHIBIT 4.4
SERIES A PREFERRED SHARES
SUBSCRIPTION AGREEMENT
by and among
E-house (China) Investments Holding Limited
[CHINESE CHARACTERS]
E-house Real Estate Limited
[CHINESE CHARACTERS]
Shanghai Real Estate Consultant and Sales (Group) Co., Limited
[CHINESE CHARACTERS]
Ordinary Shareholders
Founder
CHF Investment Limited
and
Other Investors
dated as of March 28, 2006
TABLE OF CONTENTS
PAGE NO.
ARTICLE 1 DEFINITIONS............................................................................ 1
1.1 Definitions............................................................................ 1
1.2 Accounting Terms....................................................................... 8
ARTICLE 2 SUBSCRIPTION FOR SERIES A PREFERRED SHARES............................................. 9
2.1 Subscription for Series A Preferred Shares; Subscription Price......................... 9
2.2 Closing................................................................................ 9
2.3 Payment of Subscription Price.......................................................... 9
2.4 Closing Deliveries..................................................................... 9
2.5 Ownership Adjustment................................................................... 9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMPANY, BVI SUBSIDIARY, PRC SUBSIDIARY AND ORDINARY
SHAREHOLDERS........................................................................... 12
3.1 Corporate Organization, Existence and Power............................................ 12
3.2 Corporate Authorization; No Conflicts.................................................. 12
3.3 Governmental Authorization............................................................. 13
3.4 Binding Effect; Enforceability......................................................... 13
3.5 No Legal Bar........................................................................... 14
3.6 Litigation............................................................................. 14
3.7 Compliance with Laws................................................................... 14
3.8 Governmental Licenses.................................................................. 14
3.9 Financial Statements................................................................... 15
3.10 Absence of Certain Changes or Events................................................... 16
3.11 Taxes.................................................................................. 16
3.12 Capitalization; Shareholders List...................................................... 17
3.13 Subsidiaries........................................................................... 18
3.14 Property and Assets.................................................................... 18
3.15 Intellectual Property Rights........................................................... 19
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3.16 Environmental Matters.................................................................. 20
3.17 Labor Agreements and Actions; Employee Compensation.................................... 20
3.18 Benefit Plans.......................................................................... 21
3.19 Related-Party Transactions............................................................. 22
3.20 Outstanding Borrowings................................................................. 23
3.21 Material Contracts..................................................................... 23
3.22 Insurance.............................................................................. 23
3.23 Customers.............................................................................. 24
3.24 Foreign Corrupt Practices Act.......................................................... 24
3.25 Registration, Information and Special Voting Rights.................................... 24
3.26 Broker's, Finder's or Similar Fees..................................................... 24
3.27 Disclosure............................................................................. 24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF INVESTORS............................................ 25
4.1 Status................................................................................. 25
4.2 Authorization; No Contravention........................................................ 25
4.3 Binding Effect......................................................................... 25
4.4 No Legal Bar........................................................................... 25
4.5 Purchase for Own Account............................................................... 25
4.6 No Public Market....................................................................... 26
4.7 Disclosure of Information.............................................................. 26
4.8 Investment Experience.................................................................. 26
4.9 Restricted Securities.................................................................. 26
4.10 Broker's, Finder's or Similar Fees..................................................... 26
ARTICLE 5 CONDITIONS TO OBLIGATIONS OF INVESTORS AT CLOSING...................................... 27
5.1 Representations and Warranties; Performance of Covenants............................... 27
5.2 Proceedings............................................................................ 27
5.3 Compliance Certificate................................................................. 27
5.4 Secretary's or Director's Certificate.................................................. 27
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5.5 Corporate Approval and Documents....................................................... 28
5.6 Subscription for Series A Preferred Shares Permitted by Applicable Laws................ 28
5.7 Due Diligence.......................................................................... 28
5.8 Opinions of Company Counsel............................................................ 28
5.9 Shareholders Agreement................................................................. 28
5.10 Registration Rights Agreement.......................................................... 28
5.11 Constitutive Documents................................................................. 28
5.12 Consents and Approvals................................................................. 29
5.13 No Material Adverse Change............................................................. 29
5.14 Articles of Association................................................................ 29
5.15 Transfer of Shares Under Company Share Plan............................................ 29
5.16 Election of Series A Designees to the Board............................................ 29
5.17 Employment and Non-Compete Agreements.................................................. 29
5.18 Investors' Business Principles......................................................... 29
5.19 Dividends.............................................................................. 30
5.20 Shareholder Loans...................................................................... 30
5.21 "Red Chip" Issue....................................................................... 30
5.22 Foreign Exchange Registration.......................................................... 30
ARTICLE 6 CONDITIONS TO OBLIGATIONS OF COMPANY AT CLOSING........................................ 30
6.1 Representations and Warranties......................................................... 30
6.2 Compliance with this Agreement......................................................... 30
6.3 Issuance of Shares Permitted by Applicable Laws........................................ 30
6.4 Consents and Permits................................................................... 31
6.5 Payment of Subscription Price.......................................................... 31
6.6 Execution of Transaction Documents..................................................... 31
ARTICLE 7 COVENANTS OF COMPANY, BVI SUBSIDIARY, PRC SUBSIDIARY, ORDINARY SHAREHOLDERS
AND FOUNDER............................................................................ 31
7.1 Covenants Until Closing................................................................ 31
7.2 Covenants After Closing................................................................ 32
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7.3 Founder's Covenants After Closing...................................................... 34
ARTICLE 8 TERMINATION............................................................................ 34
8.1 Termination............................................................................ 34
8.2 Effect of Termination.................................................................. 34
ARTICLE 9 INDEMNIFICATION........................................................................ 35
9.1 Indemnification by the Company, the BVI Subsidiary, the PRC Subsidiary and the Ordinary
Shareholders (other than Smart Create)....................................................... 35
9.2 Founder's Guarantee.................................................................... 35
9.3 Indemnification by the Investors....................................................... 36
9.4 Enforcement Action..................................................................... 36
ARTICLE 10 MISCELLANEOUS.......................................................................... 36
10.1 Survival of Representations and Warranties............................................. 36
10.2 Notices................................................................................ 36
10.3 Successors and Assigns................................................................. 37
10.4 Amendment and Waiver................................................................... 38
10.5 Signatures; Counterparts............................................................... 38
10.6 Headings............................................................................... 38
10.7 Governing Law.......................................................................... 38
10.8 Arbitration............................................................................ 39
10.9 Severability........................................................................... 39
10.10 Rules of Construction.................................................................. 40
10.11 Entire Agreement....................................................................... 40
10.12 Certain Expenses....................................................................... 40
10.13 Publicity.............................................................................. 40
10.14 Further Assurances..................................................................... 40
10.15 No Strict Construction................................................................. 41
10.16 Confidentiality........................................................................ 41
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SCHEDULE 1 LIST OF FOUNDER AND ORDINARY SHAREHOLDERS
PART 1 FOUNDER
PART 2 ORDINARY SHAREHOLDERS
SCHEDULE 2 LIST OF INVESTORS
SCHEDULE 3 PART 1 LIST OF SHAREHOLDERS BEFORE CLOSING
PART 2 LIST OF SHAREHOLDERS AFTER CLOSING
SCHEDULE 4 MANAGEMENT TEAM
SCHEDULE 5 INVESTORS' BUSINESS PRINCIPLES DECLARATION
SCHEDULE 6 DISCLOSURE SCHEDULE
EXHIBIT A ARTICLES OF ASSOCIATION
EXHIBIT B SHAREHOLDERS AGREEMENT
EXHIBIT C REGISTRATION RIGHTS AGREEMENT
EXHIBIT D FORM OF CAYMAN COUNSEL LEGAL OPINION
EXHIBIT E FORM OF PRC COUNSEL LEGAL OPINION
EXHIBIT F FORM OF EMPLOYMENT AND NON-COMPETE AGREEMENT
EXHIBIT G RED CHIP FINANCING PLAN
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SERIES A PREFERRED SHARES SUBSCRIPTION AGREEMENT
THIS SERIES A PREFERRED SHARES SUBSCRIPTION AGREEMENT (this "AGREEMENT") is made
as of March 28, 2006, by and among E-house (China) Investments Holding Limited
[CHINESE CHARACTERS], an exempted company with limited liability organized and
existing under the laws of the Cayman Islands (company registration
no.CR-139297) (the "COMPANY"), E-house Real Estate Limited [CHINESE CHARACTERS],
a wholly owned subsidiary of the Company and an international business company
organized and existing under the laws of the British Virgin Islands (the "BVI
SUBSIDIARY"), Shanghai Real Estate Consultant and Sales (Group) Co., Limited
[CHINESE CHARACTERS], a wholly foreign-owned enterprise established under the
laws of the PRC (the "PRC SUBSIDIARY"), the Founder listed in Part 1 of Schedule
1 attached hereto (the "FOUNDER"), each of the Ordinary Shareholders listed in
Part 2 of Schedule 1 attached hereto (each an "ORDINARY SHAREHOLDER" and
collectively, the "ORDINARY SHAREHOLDERS"), CHF Investment Limited, a limited
liability partnership organized and existing under the laws of the British
Virgin Islands ("CHF"), DLJ Real Estate Capital Partners III, L.P., a limited
liability partnership organized and existing under the laws of Delaware U.S.A
("DLJ"), RECP III Co-Investors A. L.P., a limited liability partnership
organized and existing under the laws of Delaware U.S.A. ("RECP") and other
subscribers of the Series A Preferred Shares (as defined below) listed in
Schedule 2 attached hereto (each an "INVESTOR", and collectively, the
"INVESTORS").
RECITALS
WHEREAS, the Company owns the entire registered capital of the PRC Subsidiary,
which is licensed to engage in the real estate services business in China;
WHEREAS, the Company wishes to issue to the Investors, and the Investors wish to
subscribe for, a certain number of the Series A Preferred Shares of the Company
as set forth opposite their respective names in Schedule 2 attached hereto upon
the terms and conditions of this Agreement;
WHEREAS, the Company, the Investors and the Ordinary Shareholders intend to
enter into a Shareholders Agreement dated as of the date hereof substantially in
the form attached hereto as Exhibit B;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions
As used in this Agreement, and unless the context requires a different
meaning, the following terms have the meanings indicated:
"2005 AUDITED FINANCIAL STATEMENTS" shall have the meaning ascribed to it
in Section 3.9(a) hereof.
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"2006 AUDITED INCOME STATEMENT" shall mean the consolidated income
statement of the Group for the financial year ended December 31, 2006
audited and approved by the Auditor in conformity with IFRS.
"2006 NET EARNINGS" shall mean the US Dollar equivalent (based on the then
applicable daily USD/CNY exchange rate set by the People's Bank of China
and published by the State Administration of Foreign Exchange at
xxx.xxxx.xxx.xx for the Business Day immediately prior to December 31,
2006, rounded to the nearest ten thousandth USD) of the Net Earnings (as
defined below) of the Group that is stated in Renminbi as determined from
the 2006 Audited Income Statement.
"2007 AUDITED INCOME STATEMENT" shall mean the consolidated income
statement of the Group for the financial year ended December 31, 2007
audited and approved by the Auditor in conformity with IFRS.
"2007 NET EARNINGS" shall mean the US Dollar equivalent (based on the then
applicable daily USD/CNY exchange rate set by the People's Bank of China
and published by the State Administration of Foreign Exchange at
xxx.xxxx.xxx.xx for the Business Day immediately prior to December 31,
2007, rounded to the nearest ten thousandth USD) of the Net Earnings of
the Group that is stated in Renminbi as determined from the 2007 Audited
Income Statement.
"ACTUAL GROWTH RATE" shall mean the percentage of increase of the 2007 Net
Earnings over the 2006 Net Earnings, which is stipulated as (2007 Net
Earnings - 2006 Net Earnings) / 2006 Net Earnings.
"AFFILIATE" shall mean with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or under common control with the first mentioned Person.
For purposes of this definition, "CONTROL" (including with correlative
meanings, the terms "CONTROLLING", "CONTROLLED BY" and under "COMMON
CONTROL WITH") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"AGREEMENT" shall have the meaning ascribed to it in the preamble.
"ANTICIPATED 2006 NET EARNINGS" shall mean the anticipated Net Earnings of
the Group for the financial year ended December 31, 2006, being an amount
that is US$15,000,000.
"ANTICIPATED GROWTH RATE" shall mean the anticipated percentage of
increase of the 2007 Net Earnings over the 2006 Net Earnings, being a
percentage that is fifty percent (50%).
"ARTICLES OF ASSOCIATION" shall mean the Amended and Restated Memorandum
and Articles of Association of the Company, substantially in the form
attached hereto as Exhibit A.
"ASSETS AND PROPERTIES" of any Person shall mean all assets and properties
of every kind, nature, character and description (whether real, personal
or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), operated, owned or
leased by such Person, including without limitation,
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goodwill, cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles,
real estate, equipment, inventory, goods and Intellectual Property Rights.
"ASSOCIATE" shall mean, with respect to any Person, any corporation or
other business organization of which such Person is a senior officer,
director or partner, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a
trustee or in a similar capacity or any spouse, children, grandchildren,
parents, parents-in-law or siblings of such Person, or a trust primarily
for the benefit of any of the foregoing.
"AUDITOR" shall mean Deloitte Touche Tohmatsu, Shanghai office or any
successor auditor retained by the Company being one of the "BIG-4"
international accounting firms.
"AUTHORIZATION" shall mean any license or approval (howsoever evidenced),
registration, filing or exemption from, by or with any Governmental
Authority, and all corporate, creditors' and shareholders' approvals or
consents.
"BENEFIT PLAN" means any Plan established by the Company, the BVI
Subsidiary or the PRC Subsidiary existing at Closing Date or prior
thereto, to which the Company, the BVI Subsidiary or the PRC Subsidiary
contributes or has contributed, or under which any employee, former
employee or director of the Company or any of the BVI Subsidiary and the
PRC Subsidiary or any beneficiary thereof is covered, is eligible for
coverage or has benefit rights whether provided by the Company or any of
the BVI Subsidiary or the PRC Subsidiary or pursuant to any governmental
program, or otherwise.
"BOARD OF ARBITRATION" shall have the meaning ascribed to it in Section
10.8(a) hereof.
"BOARD OF DIRECTORS" shall mean the board of directors of the Company or
any of its Subsidiaries, as the context may require.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in China, Hong Kong or New York are
authorized or required by law or governmental order to close.
"BUSINESS OR CONDITION OF THE GROUP" shall mean the business, condition
(financial or otherwise), results of operation and Assets and Properties
of the Company and its Subsidiaries taken as a whole.
"BUSINESS PLAN" shall have the meaning ascribed to it in Section 3.9(b)
hereof.
"BVI SUBSIDIARY" shall have the meaning ascribed to it in the preamble.
"CLOSING" shall have the meaning ascribed to it in Section 2.2 hereof.
"CLOSING DATE" shall have the meaning ascribed to it in Section 2.2
hereof.
"CNY" or "RENMINBI" shall mean the lawful currency of the PRC.
"COMPANY" shall have the meaning ascribed to it in the preamble.
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"COMPANY SHARE PLAN" shall mean an employee share ownership plan to be
established by the Company pursuant to which shares will be granted out of
the Company Share Pool.
"COMPANY SHARE POOL" shall mean the pool of 3,636,364 Ordinary Shares
which shall be transferred from On Chance Inc. to certain management
personnel and employees of the Company and its Subsidiaries, including the
Management Team but excluding the Chief Financial Officer of the Company
appointed for a Qualified IPO, covering five percent (5%) of the aggregate
number of issued and outstanding shares (including Ordinary Shares and the
Series A Preferred Shares) of the Company on an as-converted and fully
diluted basis as of the Closing Date, which shall be only granted pursuant
to the Company Share Plan.
"COMPETITIVE POSITION" shall mean serving in a senior management capacity,
as an employee, consultant, advisor or otherwise, for any Person that
engages in business of real estate intermediary services anywhere in
China, including Hong Kong, Macau and Taiwan.
"CONFIDENTIAL INFORMATION" shall mean information of a confidential nature
created, discovered, prepared or otherwise developed by the Company or any
of its Subsidiaries, which is generally unavailable to the public and has
a material economic value in the business in which the Company or any of
its Subsidiaries is engaged. Such Confidential Information includes but is
not limited to, customer lists, pricing, marketing and sales strategies,
employee and consultant rosters and other business or financial
information or know-how developed by or disclosed to the Company or any of
its Subsidiaries.
"CONTINGENT OBLIGATION" shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument or arrangement
(whether in writing or otherwise) to which such Person is a party or by
which it or any of such Person's property is bound.
"CONTRACTUAL OBLIGATIONS" shall have the meaning ascribed to it in Section
3.2 hereof.
"DISCLOSURE SCHEDULE" shall have the meaning ascribed to it in the first
paragraph of Article 3 hereof.
"ENVIRONMENTAL LAWS" shall mean any applicable present national,
territorial, provincial, foreign or local law, common law doctrine, rule,
order, decree, judgment, injunction or regulation relating to
environmental matters, including those pertaining to land use, air, soil,
surface water, ground water (including the protection, cleanup, removal,
remediation or damage thereof), public or employee health or safety,
together with any other laws (national, territorial, provincial, foreign
or local) relating to emissions, discharges, releases or threatened
releases of any pollutant or contaminant including without limitation,
medical, chemical, biological, biohazardous or radioactive waste and
materials, into ambient air, land, surface water, ground water, personal
property or structures.
"EXCHANGE ACT" shall mean the U.S. Securities Exchange Act of 1934, as
amended.
"FINAL OWNERSHIP" shall have the meaning ascribed to it in Section 2.5(a)
hereof.
"FOUNDER" shall have the meaning ascribed to it in the preamble.
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"GOVERNMENTAL AUTHORITY" shall mean the government of any nation, state,
province, city, locality or other political subdivision thereof, any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GROUP" shall mean the Company and its Subsidiaries, collectively.
"HAZARDOUS MATERIALS" shall mean any chemical pollutant, contaminant,
pesticide, petroleum or petroleum product or by-product, radioactive
substance, solid waste, special, dangerous or toxic waste, hazardous or
toxic substance, chemical or material regulated, limited or prohibited
under any Environmental Law.
"HONG KONG" shall mean the Special Administration Region of Hong Kong.
"IFRS" shall mean the International Financial Reporting Standards
promulgated by the International Accounting Standards Board (IASB) (which
includes standards and interpretations approved by the IASB and
International Accounting Principles issued under previous constitutions),
together with its pronouncements thereon from time to time, and applied on
a consistent basis.
"INDEBTEDNESS" shall mean, as to any Person, without duplication, (i) all
indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property
or services, any obligation for the payment of money and any obligation
evidenced by bonds, debentures, notes or similar instruments, (ii) the
available amount of all letters of credit or obligations in respect of
bankers acceptances issued for the account of such Person and all unpaid
drawings with respect thereto, (iii) all liabilities secured by any Lien
on any property or assets owned by such Person, whether or not such
liabilities have been assumed by such Person, (iv) the aggregate amount
required to be capitalized under leases under which such Person is the
lessee, (v) all guaranties and similar undertakings to assume or pay the
Indebtedness for borrowed money of other Person, and (vi) any Contingent
Obligation of such Person incurred in respect of any Indebtedness referred
to in (i) to (v) above.
"INITIAL OWNERSHIP" shall have the meaning ascribed to it in Section 2.1
hereof.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed to it in
Section 3.15 hereof.
"INVESTMENT ASSETS" shall mean all debentures, notes and other evidences
of Indebtedness, shares, securities (including rights to purchase and
securities convertible into or exchangeable for other securities),
interests in joint ventures and general and limited partnerships, mortgage
loans and other investment or portfolio assets owned of record or
beneficially by the Company or any Subsidiary (other than securities
issued by any Subsidiary).
"INVESTOR" or " INVESTORS" shall have the meaning ascribed to it in the
preamble.
"KNOWLEDGE OF THE COMPANY" shall mean the knowledge of the Management Team
and the Founder, obtained after due inquiries and with (i) best endeavors
with respect to the Company, the BVI Subsidiary and the PRC Subsidiary,
and (ii) reasonable endeavors with respect to all the Subsidiaries of the
Company other than the BVI Subsidiary and the PRC
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Subsidiary, on the part of the Management Team and the Founder, as the
case may be, to ensure that the same is true and correct in all material
respects. With respect to a member of the Management Team, his or her
knowledge for the purpose of this definition shall be deemed to be his or
her knowledge taking account of and having regard to the length and scope
of his or her employment or engagement with the relevant entity.
"LAWS" shall mean all laws, statutes, rules, regulations, ordinances and
other pronouncements of any Governmental Authority having the effect of
law in the PRC, the Cayman Islands, Hong Kong or any other country or
region.
"LICENSES" shall mean all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental Authority.
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), charge, claim,
restriction or preference, priority, right or other security interest or
preferential arrangement of any kind or nature whatsoever (excluding
preferred share and equity related preferences) including without
limitation, those created by, arising under or evidenced by any
conditional sale or other title retention agreement, or any financing
lease having substantially the same economic effect as any of the
foregoing.
"MANAGEMENT ACCOUNTS" shall have the meaning ascribed to it in Section
3.9(a) hereof.
"MANAGEMENT TEAM" shall mean the individuals listed on Schedule 4 attached
hereto.
"MATERIAL ADVERSE EFFECT" shall mean any (a) event, occurrence, fact,
condition, change or development that has had a material adverse effect on
the operations, results of operations, financial condition, assets or
liabilities of the Company and its Subsidiaries, either individually or
taken as a whole, or (b) material impairment of the ability of any member
of the Company and its Subsidiaries to perform their respective material
obligations hereunder or under each of the other Transaction Documents, as
applicable.
"MATERIAL CONTRACTS" shall have the meaning ascribed to it in Section 3.21
hereof.
"NET EARNINGS" shall mean the consolidated and normalized positive profit
after tax (less one-off, non-recurring and extraordinary items)
attributable to the shareholders of the Company. For the avoidance of
doubt, non-recurring items shall mean profits from activities not related
to the principal business of the Company and its Subsidiaries, including
without limitation, the profits from sales of real properties.
"ON CHANCE " shall mean On Chance Inc., an international business company
organized and existing under the laws of the British Virgin Islands.
"ORDINARY SHAREHOLDERS" shall have the meaning ascribed to it in the
preamble.
"ORDINARY SHARES" shall mean the Company's ordinary shares, par value
US$0.001 per share.
"OUTSTANDING BORROWINGS" shall mean all Indebtedness of the Company and
its Subsidiaries for money borrowed that is outstanding at the relevant
time of determination.
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"OWNERSHIP" of any person at any time means the percentage owned by such
person of all Ordinary Shares in issue at such time on a fully diluted and
as converted basis, assuming the exercise, conversion or exchange of all
options, warrants and other securities exercisable for or convertible or
exchangeable into Ordinary Shares (including without limitation the
conversion of all Series A Preferred Shares), regardless of whether such
options, warrants or other securities are currently exercisable,
convertible or exchangeable at such time.
"PERMITTED TRANSFEREE" shall have the meaning ascribed to it in the
Shareholders Agreement.
"PERSON" shall mean any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, Governmental Authority or other entity
of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"PLAN" shall mean any bonus, incentive compensation, employment, deferred
compensation, pension, profit sharing, retirement, share purchase, share
option, share ownership, share appreciation rights, phantom share, leave
of absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, accident, disability, workmen's compensation or
other insurance, severance, change of control separation or other employee
benefit plan, practice, policy, agreement or arrangement of any kind,
whether written or oral, and whether or not required by applicable law.
"PRC" and/or "CHINA" shall mean the People's Republic of China, and for
purpose of this Agreement, does not include Taiwan and the Special
Administration Regions of Hong Kong and Macau.
"PRC GAAP" shall mean the generally accepted accounting principles of the
PRC in effect from time to time and applied on a consistent basis.
"PRC SUBSIDIARY" shall have the meaning ascribed to it in the preamble.
"PROJECTIONS" shall have the meaning ascribed to it in Section 3.9(b)
hereof.
"QUALIFIED IPO" shall have the meaning ascribed to it in the Shareholders
Agreement.
"RED CHIP FINANCING PLAN" shall mean a red chip financing plan
substantially in the form attached hereto as Exhibit G.
"REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed
to in Section 3.15 hereof.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement substantially in the form attached hereto as Exhibit C.
"SECURITIES ACT" shall mean the U.S. Securities Act of 1933, as amended.
"SERIES A PREFERRED SHARES" shall mean the convertible redeemable
participating series A preferred shares, par value US$ 0.001 per share, of
the Company.
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"SHAREHOLDERS AGREEMENT" shall mean the Shareholders Agreement
substantially in the form attached hereto as Exhibit B.
"SUBSCRIPTION PRICE" shall have the meaning ascribed to it in Section 2.1
hereof.
"SMART CREATE" shall mean Smart Create Group Limited, an international
business company organized and existing under the laws of the British
Virgin Islands.
"SUBSIDIARY" shall mean, with respect to any Person, a corporation or
other entity of which 50% or more of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such
Person. Unless otherwise qualified, all references to a "SUBSIDIARY" or to
"SUBSIDIARIES" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company.
"TAX" shall mean any federal, state, national, provincial, territorial,
local or foreign income, gross receipts, royalty, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, equity capital, franchise profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on-minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"TAX RETURNS" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"TRANSACTION DOCUMENTS" shall mean, collectively, this Agreement, the
Shareholders Agreement, the Registration Rights Agreement and the Articles
of Association.
"USD", "US DOLLAR" or "US$" shall mean the lawful currency of the United
States of America.
1.2 Accounting Terms
All accounting terms used herein and not expressly defined in this
Agreement shall have the respective meanings given to them in accordance
with IFRS. Financial statements and other accounting information furnished
pursuant to this Agreement or other Transaction Documents shall be
prepared in accordance with IFRS as in effect at the time of such
preparation.
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ARTICLE 2
SUBSCRIPTION FOR SERIES A PREFERRED SHARES
2.1 Subscription for Series A Preferred Shares; Subscription Price Subject to
the terms and conditions set forth herein, the Company will issue to the
Investors, and the Investors agree that they will subscribe for, the
number of Series A Preferred Shares set forth opposite each Investor's
name in Schedule 2 attached hereto. The obligations of the Investors with
respect to the subscription, including the obligation to pay the
Subscription Price, are several and not joint. The Series A Preferred
Shares shall have the powers, rights and preferences set forth in the
Shareholders Agreement to be executed by the parties thereto as soon as
practicable after the date hereof (and, in any event, on or prior to the
Closing) and/or the Articles of Association to be adopted at the general
meeting of the Company to be held or by the requisite written consent to
be obtained as soon as practicable after the date hereof (and, in any
event, on or prior to the Closing). The aggregate subscription price for
the Series A Preferred Shares shall be US$24,999,999.20 ("SUBSCRIPTION
PRICE"). The price per Series A Preferred Share at which the Series A
Preferred Shares are subscribed for by the Investors shall be US$1.10, and
the total number of Series A Preferred Shares to be subscribed for by the
Investors shall be 22,727,272 shares, representing a 31.25% Ownership in
the Company immediately after the Closing (the "INITIAL OWNERSHIP").
Unless otherwise provided in this Agreement, Ownership of the Investors
shall mean the total ownership held by the Investors.
2.2 Closing
The purchase and sale of the Series A Preferred Shares shall take place at
a closing (the "CLOSING") to be held at the offices of Xxxxx Day, 31st
Floor, Edinburgh Tower, The Landmark, 00 Xxxxx'x Xxxx Xxxxxxx, Xxxx Xxxx,
xx April 11, 2006, New York time, or at such other time and place as the
Company and the Investors may agree upon in writing (the "CLOSING DATE"),
subject to the satisfaction or waiver of the conditions set forth in
Articles 5 and 6 hereof.
2.3 Payment of Subscription Price
Payment of the Subscription Price shall be made to the Company on the
Closing Date by the Investors by delivery to the Company of (i) wire
transfer in immediately available funds to such account as designed by the
Company at least ten (10) Business Days prior to the Closing Date to the
Investors in writing, or (ii) cancellation of indebtedness as contemplated
under the Red Chip Financing Plan (as defined hereafter)
2.4 Closing Deliveries
At the Closing, subject to the terms and conditions of this Agreement, the
Company will deliver to the Investors (a) a copy of the certificate
representing the Series A Preferred Shares issued at the Closing to each
Investor against payment of the corresponding portion of the Subscription
Price by such Investor, (b) a copy of the register of directors certified
by a director of the Company evidencing the appointment of the directors
nominated by the Investors, and (c) a copy of the register of members duly
certified by a director of the Company evidencing the names of the
Investors and the number of Series A Preferred Shares subscribed by the
Investors under this Agreement.
2.5 Ownership Adjustment
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(a) If the 2006 Net Earnings are less than the Anticipated 2006 Net Earnings,
the final aggregate Ownership of the Investors in the Company after the
adjustment is made pursuant to this Section 2.5, if any (the "FINAL
OWNERSHIP"), shall remain unchanged as the Initial Ownership of the
Investors in the Company.
(b) If the 2006 Net Earnings are equal to or more than the Anticipated 2006
Net Earnings:
(i) In the event (A) the Actual Growth Rate is less than 25% and (B) a
Qualified IPO of the Company has not been completed prior to
December 31, 2007, the Final Ownership of the Investors shall remain
unchanged as the Initial Ownership of the Investors in the Company.
(ii) In the event (A) the Actual Growth Rate is more than 25% but less
than the Anticipated Growth Rate and (B) a Qualified IPO of the
Company has not been completed prior to December 31, 2007, the Final
Ownership of the Investors shall be adjusted in accordance with the
following formula within twenty (20) Business Days following the
issue of the 2007 Audited Income Statement:
FO=SP / AV1
The adjustment of the Final Ownership as contemplated herein shall
be effected by adjusting the Conversion Rate (as defined in the
Articles of Association) of the Series A Preferred Shares in
accordance with the following formula within twenty (20) Business
Days following the issue of the 2007 Audited Income Statement:
CR1=TP x (AV1-SP) / (SP x OS)
For purposes of this Section 2.5(b)(ii), (1) FO shall mean the Final
Ownership, as adjusted pursuant to this Section 2.5; (2) SP shall
mean the Subscription Price paid by the Investors at Closing; (3)
AV1 shall mean the adjusted valuation of the Company, which shall be
the lesser of US$120,000,000 or the product of (X) the sum of 6
times of the 2006 Net Earnings and 6 times of the 2007 Net Earnings
divided by (Y) 2.5; (4) OS shall mean the total number of Ordinary
Shares held by the Ordinary Shareholders at Closing; (5) TP shall
mean the total number of Series A Preferred Shares held by the
Series A Preferred Shareholders at Closing; and (6) CR1 shall mean
the effective Conversion Rate of the Series A Preferred Shares at
which the Series A Preferred Shares are converted into Ordinary
Shares.
Not withstanding anything contained herein to the contrary, in the
event AV1 as determined hereof is less than US$90,000,000, the Final
Ownership of the Investors shall remain unchanged as the Initial
Ownership of the Investors in the Company, and the Conversion Rate
of the Series A Preferred Shares will remain the same as the initial
Conversion Rate.
(iii) In the event a Qualified IPO of the Company has been completed on or
prior to December 31, 2007, the Final Ownership of the Investors
shall be adjusted in accordance with the following formula:
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FO = SP / AV2
The adjustment of the Final Ownership as contemplated herein shall
be effected by adjusting the Conversion Rate of the Series A
Preferred Shares in accordance with the following formula:
CR2=TP x (AV2-SP) / (SP x OS)
For purposes of this Section 2.5(b)(iii), (1) FO shall mean the
Final Ownership, as adjusted pursuant to this Section 2.5; (2) SP
shall mean the Subscription Price paid by the Investors at Closing;
(3) AV2 shall mean the adjusted valuation of the Company, which
shall be the lesser of US$120,000,000 or 6 times of the 2006 Net
Earnings; (4) OS shall mean the total number of Ordinary Shares held
by the Ordinary Shareholders at Closing; (5) TP shall mean the total
number of Series A Preferred Shares held by the Series A Preferred
Shareholders at Closing; and (6) CR2 shall mean the effective
Conversion Rate of the Series A Preferred Shares at which the Series
A Preferred Shares are automatically converted into Ordinary Shares
upon the closing of the Qualified IPO of the Company, provided,
however, the Conversion Rate of the Series A Preferred Shares shall
remain unchanged as the initial Conversion Rate if the Qualified IPO
of the Company does not complete by December 31, 2007.
(iv) In the event a Qualified IPO of the Company has been completed
between January 1, 2008 and the date the 2007 Audited Income
Statement is issued by the Auditor, the Final Ownership of the
Investors shall be adjusted in accordance with the formula set forth
in Section 2.5(b)(iii) above upon the closing of the Qualified IPO
of the Company.
The adjustment of the Final Ownership as contemplated herein shall
be effected by adjusting the Conversion Rate of the Series A
Preferred Shares in accordance with the formula set forth in Section
2.5(b)(iii) above.
(c) If (i) the 2006 Net Earnings are equal to or more than the Anticipated
2006 Net Earnings, but (ii) a Qualified IPO of the Company has not been
completed prior to the date the 2007 Audited Income Statement is issued by
the Auditor, in the event the Actual Growth Rate is equal or more than the
Anticipated Growth Rate, the Final Ownership of the Investors shall be
adjusted in accordance with the formula set forth in Section 2.5(b)(ii)
above within twenty (20) Business Days following the issue of the 2007
Audited Income Statement.
The adjustment of the Final Ownership as contemplated herein shall be
effected by adjusting the Conversion Rate of the Series A Preferred Shares
in accordance with the formula set forth in Section 2.5(b)(ii) above
within twenty (20) Business Days following the issue of the 2007 Audited
Income Statement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY, BVI SUBSIDIARY, PRC
SUBSIDIARY AND ORDINARY SHAREHOLDERS
Subject to such exceptions as may be specifically set forth in the
disclosure schedule attached to this Agreement as Schedule 6 (the
"DISCLOSURE SCHEDULE"), each of the Company, the BVI Subsidiary, the PRC
Subsidiary and the Ordinary Shareholders (other than Smart Create) hereby,
jointly and severally, and Smart Create, severally but not jointly, with
respect to Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.6 and 3.19(a) only,
represents and warrants to the Investors as set forth below as of the date
of this Agreement and as of the Closing Date (except for representations
and warranties made as of a specified date). The section numbers and
letters of the Disclosure Schedule correspond to the section numbers and
letters of this Agreement and the disclosures in any section of the
Disclosure Schedule shall qualify the corresponding section in this
Article 3.
Notwithstanding anything contained herein to the contrary, the
representations and warranties under this Article 3 with respect to the
Subsidiaries of the Company other than the BVI Subsidiary and the PRC
Subsidiary are made on the basis that breach of such representations or
warranties would not cause a Material Adverse Effect to the Business or
Condition of the Group.
3.1 Corporate Organization, Existence and Power
The Company, each of its Subsidiaries and each of the Ordinary
Shareholders: (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate power and authority
to carry on its business as now conducted; (c) is duly qualified,
licensed and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct
of its business requires such qualification; and (d) has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and each of the other Transaction
Documents to which it is a party upon the adoption of the Articles
of Association on or prior to the Closing Date. The constitutional
documents and related certificates of the Company and each of its
Subsidiaries are valid and have been duly approved or issued (as
applicable) by competent Governmental Authorities of the relevant
jurisdictions. Section 3.1 of the Disclosure Schedule contains a
true, complete and correct list of the Company, each Subsidiary and
each Ordinary Shareholder, its directors and shareholders, its
jurisdiction of incorporation and each jurisdiction where its
ownership, lease or operation of property or the conduct of its
business would require it to be qualified to do business. Without
limiting the generality of the foregoing representations and
warranties and except as disclosed in Section 3.1 of the Disclosure
Schedule, the Company was formed solely to form and hold all the
equity interest in the PRC Subsidiary and since its formation has
not engaged in any business and has not incurred any liability other
than in the course of forming and holding its equity interest in the
PRC Subsidiary.
3.2 Corporate Authorization; No Conflicts
The execution, delivery and performance by the Company, the BVI
Subsidiary, the PRC Subsidiary and each of the Ordinary Shareholders
of this Agreement and each of the other Transaction Documents to
which they are or will be parties and the consummation of the
transactions contemplated hereby and thereby, including without
limitation, the issuance of the Series A Preferred Shares: (a) have
been (in the case of this Agreement) and will be
- 12 -
(in the case of the other Transaction Documents) duly authorized by all
necessary corporate, and if required, shareholder action on or prior to
the Closing Date; (b) do not conflict with the terms of its articles of
association or similar constitutive documents (as applicable), or any
amendment thereof or any Laws applicable to the Company, its Subsidiaries
or any of the Ordinary Shareholders or their assets, business or
properties as of the Closing Date; (c) do not (i) conflict with,
contravene, result in any violation or breach of or default under (with or
without the giving of notice or the lapse of time or both), (ii) create in
any other Person a right or claim of termination or amendment under, or
(iii) require modification, acceleration or cancellation of any provision
of any security issued by such Person in any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument or
arrangement (whether in writing or otherwise) to which such Person or its
property is bound, or any amendment of any of the foregoing (collectively,
"CONTRACTUAL OBLIGATIONS"); and (d) do not result in the creation of any
Lien against any property, asset or business of the Company or any of its
Subsidiaries or any of the Ordinary Shareholders or the suspension,
revocation, impairment, forfeiture or non renewal of any permit, license,
authorization or approval applicable to the Company or any of its
Subsidiaries or any of the Ordinary Shareholders, or their businesses or
operations or any of their assets or properties.
3.3 Governmental Authorization
To the Knowledge of the Company and except as disclosed in Section 3.3 of
the Disclosure Schedule, no other approval, consent, compliance,
exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority in respect of any Law (in any
jurisdiction in which the Company or its Subsidiaries or the Ordinary
Shareholders operate, are organized or licensed to do business) or
Contractual Obligation, and no lapse of a waiting period under any Law (in
any jurisdiction in which the Company or its Subsidiaries or the Ordinary
Shareholders operate, are organized or licensed to do business) or
Contractual Obligation is necessary or required in connection with the
execution, delivery or performance by (including without limitation, the
issuance of Ordinary Shares upon the conversion of the Series A Preferred
Shares) the Company, the BVI Subsidiary, the PRC Subsidiary and the
Ordinary Shareholders of this Agreement and the other Transaction
Documents to which it is or will be a party or the consummation of the
transactions contemplated hereby or thereby.
3.4 Binding Effect; Enforceability
This Agreement has been, and each of the other Transaction Documents to
which the Company, the BVI Subsidiary, the PRC Subsidiary or the Ordinary
Shareholders will be a party shall be, duly executed and delivered by the
Company, the BVI Subsidiary, the PRC Subsidiary and the Ordinary
Shareholders, and this Agreement constitutes, and such other Transaction
Documents will constitute, the legal, valid and binding obligations of the
Company, the BVI Subsidiary, the PRC Subsidiary and the Ordinary
Shareholders (as applicable) enforceable against the Company, the BVI
Subsidiary, the PRC Subsidiary and the Ordinary Shareholders (as
applicable) in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity relating to enforceability.
- 13 -
3.5 No Legal Bar
Except as disclosed in Section 3.5 of the Disclosure Schedule, neither the
execution, delivery and performance of this Agreement and the other
Transaction Documents, nor the issuance of or performance of the terms of
the Series A Preferred Shares violates any Law currently in force in any
jurisdiction in which the Company or its Subsidiaries or the Ordinary
Shareholders operate, are organized or licensed to do business.
3.6 Litigation
To the Knowledge of the Company and except as disclosed in Section 3.6 of
the Disclosure Schedule, there are no legal actions, suits, proceedings or
claims pending in any jurisdiction in which the Company or its
Subsidiaries or the Ordinary Shareholders operate, are organized or
licensed to do business, or, to the Knowledge of the Company, threatened,
at law, in equity, in arbitration or before any governmental entity or
authority against or affecting the Business or Condition of the Group, or
any of the Ordinary Shareholders, and, to the Knowledge of the Company,
there are no facts or circumstances in existence that would give rise to
the same except those that would not be reasonable expected to have a
Material Adverse Effect on the Business or Condition of the Group. No
injunction, writ, temporary restraining order, decree or any order of any
nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or performance of
this Agreement or the other Transaction Documents. Except as disclosed in
Section 3.6 of the Disclosure Schedule, the Company and its Subsidiaries
have not commenced and do not currently intend to initiate any legal
action, suit, proceeding or claim.
The Founder is not involved, or has during the previous two years ending
on the date of this Agreement been involved in any litigation in any
jurisdiction, including without limitation, any civil, criminal,
arbitration, administrative or bankruptcy proceedings. There are no such
proceedings in any jurisdiction pending or threatened by or against any of
the Founder.
3.7 Compliance with Laws
To the Knowledge of the Company and except as disclosed in Section 3.7 of
the Disclosure Schedule, the Company and all of its Subsidiaries are not
in violation of any applicable Laws of any jurisdiction in which the
Company or its Subsidiaries conduct their business or own Assets and
Properties, of which the violation would cause a Material Adverse Effect
to the Business or Condition of the Group.
3.8 Governmental Licenses
To the Knowledge of the Company, all Licenses with the Governmental
Authorities of relevant jurisdictions required by applicable Laws in
respect of the Company and each of its Subsidiaries and their operations,
including but not limited to the registrations with the Ministry of
Commerce, the State Administration of Industry and Commerce, the State
Administration for Foreign Exchange, tax bureau and customs authorities
have been duly obtained in accordance with the relevant rules and
regulations, except for those the failure of obtaining would not cause a
Material Adverse Effect to the Business or Condition of the
- 14 -
Group. Section 3.8 of the Disclosure Schedule contains a true, complete
and correct list of all material Licenses used in the business or
operations of the Company or any of its Subsidiaries, setting forth the
owner, the function and the expiration and renewal date of each. Prior to
the execution of this Agreement, the Company has delivered to the
Investors true and complete copies of all such Licenses.
(a) The Company and each of its Subsidiaries validly holds all Licenses that
are necessary to conduct its business and to operate its Assets and
Properties under the current applicable Laws of the relevant
jurisdiction(s);
(b) Each License listed in Section 3.8 of the Disclosure Schedule is valid,
binding and in full force and effect;
(c) In respect of any Licenses required for the conduct of any part of the
business of the Company or any of its Subsidiaries which are subject to
periodic renewal, neither the Company nor any of its Subsidiaries has any
reason to believe that such requisite renewals will not be timely granted
by the relevant Government Authorities; and
(d) The Company and each of its Subsidiaries have been conducting and will
conduct their business activities within the permitted scope of business
outlined in the Licenses or are otherwise operating their business in
compliance with all relevant published legal requirements and with all
requisite Authorizations granted by competent Government Authorities.
To the Knowledge of the Company and except as disclosed in Section 3.8 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
default, or has received any notice notifying revocation of any such License for
noncompliance or the need for compliance or remedial actions under any such
License listed in Section 3.8 of the Disclosure Schedule.
3.9 Financial Statements
(a) The Company has made available to the Investors true, complete and correct
copies of the following:
(i) the balance sheet of the PRC Subsidiary as of December 31, 2005 and
the related statements of income, cash flow and changes in
shareholders' equity, together with the notes thereto, audited and
approved by the Auditors (the "2005 AUDITED FINANCIAL STATEMENTS")
(ii) the management profit and loss accounts of the PRC Subsidiary for
the months ended January 31, 2006 and February 28, 2006 (the
"MANAGEMENT ACCOUNTS"); and
(iii) the profit and loss accounts and balance sheets of the Company as of
December 31, 2005 and for the two months ended January 31, 2006 and
February 28, 2006.
The 2005 Audited Financial Statements fairly present, on a consolidated
basis, the financial position of the PRC Subsidiary, as of the respective
dates thereof, and the results of operations and cash flows of the PRC
Subsidiary on a consolidated basis as of the respective dates or for the
respective periods set forth therein in conformity with IFRS.
- 15 -
The Management Accounts were prepared by the PRC Subsidiary in good faith
in a manner materially consistent with past practice. As of the dates of
the 2005 Audited Financial Statements, the PRC Subsidiary had no
obligation, indebtedness or liability, which was required under IFRS to be
reflected or reserved against, but was not reflected or reserved against
in the balance sheets or the notes thereto which are part of the 2005
Audited Financial Statements. Except as disclosed in Section 3.9 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a
guarantor or indemnitor of any Indebtedness of any Person. Each of the PRC
Subsidiary and other Subsidiaries of the Company maintains a standard
system of accounting established and administered in accordance with PRC
GAAP.
(b) Projections and Business Plan. A copy of the business plan dated March 19,
2006 (the "BUSINESS PLAN") and the projections dated March 19, 2006 (the
"PROJECTIONS") of the Company and its Subsidiaries, as updated in writing
by the Company and delivered to the Investors prior to the Closing Date is
set forth in Section 3.9(b) of the Disclosure Schedule. The Business Plan
and the Projections were prepared by the Company in good faith in the
ordinary course of its operations consistent with past practice and on a
best-effort basis after careful examination and due consideration of all
relevant factors. The Projections are the most current projections
prepared by the Company relating to the periods covered thereby, and are
based on assumptions which were reasonable when made and such assumptions
and projections are reasonable on the date hereof. The Business Plan does
not contain any untrue statement of material fact or omit to state a
material fact necessary in order to make the statements contained therein,
in light of the circumstances under which they were made, not misleading.
The Company has not delivered to any person outside the Company any later
dated business plans or projections.
3.10 Absence of Certain Changes or Events
To the Knowledge of the Company and except as disclosed in Section 3.10 of
the Disclosure Schedule, since February 28, 2006, there has not been any
material changes in the assets, liabilities, financial condition or
operating results of the Company and its Subsidiaries, individually or
taken as a whole, that have had a Material Adverse Effect on the Business
or Condition of the Group, or would reasonably be expected to prevent the
Company or its Subsidiaries from consummating the transactions
contemplated under this Agreement and the other Transaction Documents.
3.11 Taxes
(a) Except as disclosed in Section 3.11(a) of the Disclosure Schedule, each of
the Company and its Subsidiaries has filed all Tax Returns it was required
to file. All such Tax Returns are true, correct and complete in all
material respects. All Taxes due and owed by the Company and its
Subsidiaries (whether or not shown on any Tax Return) have been paid,
except where the failure to make such payment would not cause a Material
Adverse Effect to the Business or Condition of the Group. Neither the
Company nor its Subsidiaries currently is the beneficiary of any extension
of time within which to file any Tax Return. To the Knowledge of the
Company, except as disclosed in Section 3.11(a) of the Disclosure
Schedule, no claim has ever been made by a Governmental Authority in a
jurisdiction where the Company or its Subsidiaries does not file Tax
Returns that the
- 16 -
Company or its Subsidiaries is or may be subject to taxation by that
jurisdiction. Except as disclosed in Section 3.11(a) of the Disclosure
Schedule, there are no Liens on any of the Assets and Properties of the
Company or its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax. To the Knowledge of the Company, each of
the Company and its Subsidiaries has withheld and paid all Taxes required
by applicable Laws to have been withheld and paid in connection with
amounts paid or owing to any employees except where the failure to make
such payment would not cause a Material Adverse Effect to the Business or
Condition of the Group. Neither the Company nor any of its Subsidiaries
has knowingly waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
3.12 Capitalization; Shareholders List
(a) As of the date hereof, before giving effect to the transactions
contemplated hereby, the authorized share capital of the Company consists
of 50,000 Ordinary Shares, all of which are issued and outstanding. Part 1
of Schedule 2 provides a true, complete and correct list as of the date
hereof, before giving effect to the transactions contemplated hereby and
by the other Transaction Documents, of (A) all shareholders owning issued
and outstanding shares of the Company, together with the number held by
each, and (B) all of the holders of warrants, options, rights and
securities convertible into equity capital, together with the number of
shares of equity capital to be issued upon the exercise or conversion of
such warrants, options, rights and convertible securities. As of the
Closing Date, after giving effect to the transactions contemplated hereby
and in the other Transaction Documents, there will be: (i) 80,000,000
authorized shares, which consist of (i) 22,727,272 Series A Preferred
Shares, all of which are issued and outstanding; and (ii) 57,272,728
Ordinary Shares, of which 50,000,000 shares are issued and outstanding,
including 3,636,364 Ordinary Shares to be transferred to the Company Share
Pool. All outstanding shares of equity capital of the Company have been
duly authorized by all necessary shareholder and other corporate action,
and all outstanding shares of equity capital of the Company are, and the
Series A Preferred Shares and the Ordinary Shares issuable hereunder or
pursuant to the other Transaction Documents upon conversion of the Series
A Preferred Shares, when issued, will be validly issued, fully paid and
nonassessable and shall be free and clear of all Liens and the issuance of
the foregoing has not been or will not be, as the case may be, subject to
preemptive rights in favor of any Person nor subject to the consent or
approval of any Person or under any Law and will not result in the
issuance of any additional shares of equity capital of the Company or the
triggering of any anti-dilution or similar rights contained in any
options, warrants, debentures or other securities or agreements of the
Company. Part 2 of Schedule 2 provides a true, complete and correct list
as of the Closing Date, after giving effect to the transactions
contemplated hereby and the other Transaction Documents of (A) all
shareholders owning the issued and outstanding shares of the Company,
together with the number held by each, and (B) all of the holders of
warrants, options, rights and securities convertible into equity capital,
together with the number of shares of equity capital to be issued upon the
exercise or conversion of such warrants, options, rights and convertible
securities.
(b) As of the Closing Date, except for the Series A Preferred Shares, there
will be no outstanding securities convertible into or exchangeable for
equity capital of the Company or options, warrants or other rights to
purchase or subscribe to equity capital of the
- 17 -
Company or contracts, commitments, agreements, understandings or
arrangements of any kind to which the Company is a party relating to the
issuance of any equity capital of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights.
3.13 Subsidiaries
(a) Section 3.13 of the Disclosure Schedule contains a true, complete and
correct list of the shareholding structure of each Subsidiary, including
the amount of its share capital or registered capital or other equity
capital, and the ownership of each shareholder thereof. All of the
outstanding shares or registered capital or other equity capital in the
Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable. All of the outstanding shares or registered capital of, or
other ownership interest in each of the Subsidiaries is owned by the
Company, the BVI Subsidiary, the PRC Subsidiary, or its respective
shareholders, as disclosed in Section 3.13 of the Disclosure Schedule,
free and clear of any Liens. No Subsidiary has outstanding options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Subsidiary to issue, transfer or
sell any securities of the Subsidiary. Except as disclosed in Section
3.13(a) of the Disclosure Schedule, none of the Subsidiaries own, of
record or beneficially, any direct or indirect equity or other interest in
any other company, partnership, joint venture or other non-corporate
business enterprise.
(b) Except as disclosed in Section 3.13(b) of the Disclosure Schedule and
except for the Subsidiaries of the Company, the Company does not own of
record or beneficially, directly or indirectly, (i) any shares of
outstanding equity capital or securities convertible into equity capital
of any other corporation, or (ii) any equity, voting or participating
interest in any limited liability company, partnership, joint venture or
other non-corporate business enterprises.
3.14 Property and Assets
(a) To the Knowledge of the Company, Part 1 of Section 3.14(a) of the
Disclosure Schedule contains a true, complete and correct list of all real
property owned by the Company and its Subsidiaries. The Company and its
Subsidiaries have good and marketable title in and to all real property
reflected on Part 1 of Section 3.14(a) of the Disclosure Schedule, free
and clear of all Liens, liabilities, rights or encumbrances, except such
Liens or encumbrances that arise in the ordinary course of business and do
not materially impair the ownership or use of such property or assets by
the Company or its Subsidiaries, as the case may be. Part 2 of Section
3.14(a) of the Disclosure Schedule contains a true, complete and correct
list of all real property leases used by the Company and its Subsidiaries.
The Company and its Subsidiaries hold all of the rights, titles and
interests of the tenant under the leases reflected on Part 2 of Section
3.14(a) of the Disclosure Schedule, free and clear of all Liens,
liabilities and rights. Except as disclosed in Section 3.14(a) of the
Disclosure Schedule, the Company and/or its Subsidiaries have good title
to all properties used in connection with their respective businesses,
free and clear of all Liens, liabilities and rights.
(b) To the Knowledge of the Company, the owned and leased real properties
reflected on the Disclosure Schedule have been used and operated by the
Company and its Subsidiaries in
- 18 -
compliance and conformity with all Contractual Obligations and applicable
Laws, except to the extent that the failure so to comply would not,
individually or in the aggregate, cause a Material Adverse Effect to the
Business or Condition of the Group. Each lease relating to leased real
property reflected on the Disclosure Schedule or used in connection with
the business of the Company and its Subsidiaries, is in full force and
effect and the Company or any of its Subsidiaries enjoy peaceful and
undisturbed possession thereunder. There is no default on the part of the
Company and its Subsidiaries and there is no event or condition which
(with notice or lapse of time, or both) would constitute a default on the
part of the Company or any of its Subsidiaries under any such lease. There
is no pending or, to the Knowledge of the Company, threatened condemnation
or imminent proceedings that would affect any part of the real property or
the leased property reflected on the Disclosure Schedule or used in
connection with the business of the Company and its Subsidiaries. There
are no actions, suits or proceedings pending or, to the Knowledge of the
Company, threatened against the real property or the leased property on
the Disclosure Schedule or used in connection with the business of the
Company and its Subsidiaries, at law or in equity, before any national,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality which would in any way affect title to such real
property or leased property.
3.15 Intellectual Property Rights
(a) To the Knowledge of the Company, Part 1 of Section 3.15(a) of the
Disclosure Schedule contains a true, complete and correct list of all
patents, patent applications, registered trademarks, trademark
registration applications, registered service marks, trade names,
registered copyrights, copyright registration applications, domain names
and licenses (collectively, the "REGISTERED INTELLECTUAL PROPERTY RIGHTS")
owned or, listed separately, licensed to or by the Company or any of its
Subsidiaries by or to third parties (other than shrink-wrap or standard
licenses for commercially available software) and used in the conduct of
the business of the Company and its Subsidiaries. To the Knowledge of the
Company, except as disclosed in Section 3.15(a) of the Disclosure
Schedule, each of the Company and its Subsidiaries owns or has a valid and
binding license to use or otherwise have the right to use all patents,
trademarks, service marks, trade names, copyrights, rights in software,
domain names, know-how, rights in design and inventions, licenses and
other intellectual property rights (the "INTELLECTUAL PROPERTY RIGHTS")
necessary for its conduct of the business.
(b) To the Knowledge of the Company, no Intellectual Property Right in any
product, service, process, method, substance or other material presently
produced by, sold by or employed by the Company or any of its
Subsidiaries, or in a product design which has been substantially
completed by the Company or any of its Subsidiaries, infringes upon
Intellectual Property Rights that are owned by others.
(c) Except as disclosed in Section 3.15(c) of the Disclosure Schedule, no
litigation is pending and, to the Knowledge of the Company, no claim has
been made against the Company or any of its Subsidiaries or is threatened,
contesting the right of the Company or any of its Subsidiaries to sell or
use any Intellectual Property Right or product, service, process, method,
substance or other material presently sold by or employed by the Company
or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries have asserted any
- 19 -
claim of infringement, misappropriation or misuse by any Person of any
Intellectual Property Rights owned or used by the Company or any of its
Subsidiaries in the conduct of their business.
(d) Except as disclosed in Section 3.15(d) of the Disclosure Schedule, all
material inventions, know-how and all other materials subject to the
Intellectual Property Rights that are conceived by employees of the
Company or its Subsidiaries and related to the conduct of the business of
the Company or its Subsidiaries are "works for hire", and all right, title
and interest therein have been transferred and assigned to the Company or
its Subsidiaries. The Company and each of its Subsidiaries have taken all
commercially reasonable measures to protect and preserve the security,
confidentiality and value of all Intellectual Property Rights owned by the
Company or any of its Subsidiaries and used in the conduct of the business
of the Company and its Subsidiaries, including trade secrets, know-how and
other confidential information.
(e) To the Knowledge of the Company, except as disclosed in Section 3.15(e) of
the Disclosure Schedule, in respect of Intellectual Property Rights which
are material to the operation of the business of the Company and its
Subsidiaries: (i) no employee, officer or consultant of the Company or any
of its Subsidiaries has any proprietary, financial or other interest in
any such Intellectual Property Rights owned or used by the Company or any
of its Subsidiaries in the conduct of their businesses; and (ii) neither
the Company nor any of its Subsidiaries (A) have any obligation to
compensate any Person for the use of any such Intellectual Property
Rights, or (B) have granted, other than in the ordinary course of
business, any license or other right to use any such Intellectual Property
Rights used in the conduct of the business of the Company and its
Subsidiaries, whether requiring the payment of royalties or not. To the
Knowledge of the Company, no statute, law, rule, regulation, standard or
code is pending or proposed which would restrict the Company's or any of
its Subsidiaries' ability to use any of the Intellectual Property Rights
used in the conduct of their business.
3.16 Environmental Matters
Except as disclosed in Section 3.16 of the Disclosure Schedule, neither
the Company nor any of its Subsidiaries is in violation of any applicable
Environmental Laws and no material expenditures are required in order to
comply with any such Environmental Laws. No Hazardous Materials are used
or have been used, stored or disposed of by the Company or its
Subsidiaries or, to the Knowledge of the Company, by any other Person on
any property owned, lease or used by the Company or its Subsidiaries.
3.17 Labor Agreements and Actions; Employee Compensation
(a) Except as disclosed in Section 3.17(a) of the Disclosure Schedule, the
Company is not aware that any member of the Management Team, senior
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a
present intention to terminate the employment of any of the foregoing. The
employment of each member of the Management Team, senior officer and
employee of the Company is terminable at the will of the Company without
giving rise to a claim for compensation or damages (other than a statutory
severance or redundancy
- 20 -
payment or statutory compensation for unfair dismissal). The Company has
complied in all material respects with all applicable Laws related to
employment.
(b) To the Knowledge of the Company, there are no threatened or contemplated
attempts to organize for collective bargaining purposes any of the
employees of the Company or any Subsidiary. No unfair labor practice
complaint or sex or age discrimination claim has been brought against the
Company or any of the Subsidiaries since the inception of the respective
company before any Governmental Authority. Since the inception of the
respective company, there has been no work stoppage or strike by employees
of the Company or any Subsidiary. During that period, the Company and the
Subsidiaries have complied in all material aspects with all applicable
Laws relating to the employment of labor, including without limitation,
those relating to wages, hours and collective bargaining.
(c) To the Knowledge of the Company, neither the Company nor any of its
Subsidiaries has any liability (whether legally binding or not) to make
any payment to or for the benefit of any employee, officer, consultant,
independent contractor or agent in respect of past service, pension or the
termination of the employment or engagement of that or any other person
(including without limitation, payments for wrongful or unfair dismissal,
loss of office or redundancy) that would have a Material Adverse Effect on
the Business or Condition of the Group, other than in respect to current
month payroll expenses and related deductions in relation to employee and
employer contributions.
(d) Except as disclosed in Section 3.17(d) of the Disclosure Schedule, neither
the Company nor any of its Subsidiaries have any contracts, agreements or
other arrangements with any member of the Management Team, officer or
employee involving any payments in excess of US$100,000 to such
individuals, including without limitation, any payment of consideration in
connection with the transfer of equity interest in the PRC Subsidiary to
the Company (other than in connection with their employment with the
Company or any of its Subsidiaries such as their employment agreements or
confidentiality, non-compete and intellectual property assignment
agreements or share option award agreements).
3.18 Benefit Plans
(a) Except as disclosed in Section 3.18(a) of the Disclosure Schedule, neither
the Company nor any of its Subsidiaries has scheduled or agreed upon
future increases of benefit levels (or creations of new benefits) with
respect to any Benefit Plan.
(b) Each of the Company and its Subsidiaries has complied with all applicable
Laws relating to any of the Benefit Plans. All contributions and payments
required to be made by any employees of the Company or any of its
Subsidiaries with respect to the employee benefits have been fully
deducted and paid to the relevant Governmental Authority, except where the
failure to make such payment would not cause a Material Adverse Effect to
the Business or Condition of the Group, and no such deductions have been
challenged or disallowed by any Governmental Authority or any employee of
the Company or any of its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries has been delinquent in
making any payment to or for the benefit of any current or former employee
with respect to statutory
- 21 -
social insurance plans operated under the Laws of the PRC, except where
the failure to make such payment would not cause a Material Adverse Effect
to the Business or Condition of the Group.
(d) Except as disclosed in Section 3.18(d) of the Disclosure Schedule, other
than statutory social insurance plans operated under the Laws of the PRC,
neither the Company nor any of its Subsidiaries provides or is required to
provide any retirement, social insurance, life insurance, medical, dental
or any other welfare benefits provided on ill-health, injury, death
disability or on termination of employment (whether voluntary or
involuntary) to any current or former employees of the Company or any of
its Subsidiaries.
3.19 Related-Party Transactions
(a) To the Knowledge of the Company and except as disclosed in Section 3.19(a)
of the Disclosure Schedule, neither the Management Team nor any directors
and shareholders of the Company, the BVI Subsidiary or the PRC Subsidiary:
(i) owns, directly or indirectly, any interest in (except less than 1%
shareholdings for investment purposes in securities of publicly held and
traded companies), or is an officer, director, employee or consultant of,
any Person that is, or is engaged in business as, a direct competitor,
lessor, lessee, sales agent or customer of, or lender to or borrower from,
the Company or any of its Subsidiaries; (ii) owns, directly or indirectly,
in whole or in part, any tangible or intangible property that is used in
and material to the conduct of the business of the Company and its
Subsidiaries; or (iii) has any cause of action or other claim whatsoever
against, the Company or any of its Subsidiaries, except for claims in the
ordinary course of business such as for accrued vacation pay, accrued
benefits under employee benefit plans, and similar matters and agreements
existing on the date hereof. Except as disclosed in Section 3.19(a) of the
Disclosure Schedule, none of the directors or shareholders of any of the
Company's Subsidiaries other than the BVI Subsidiary and the PRC
Subsidiary: (i) owns, directly or indirectly, any interest exceeding
US$500,000 (except less than 1% shareholdings for investment purposes in
securities of publicly held and traded companies) in any Person that is,
or is engaged in business as, a direct competitor, lessor, lessee, sales
agent or customer of, or lender to or borrower from the Company or any of
its Subsidiaries; (ii) owns, directly or indirectly, in whole or in part,
any tangible or intangible property worth more than US$500,000 that is
used in and material to the conduct of the business of the Company and its
Subsidiaries; or (iii) has any cause of action or other claim whatsoever
against the Company or any of its Subsidiaries which would cause a
Material Adverse Effect to the Business or Condition of the Group.
(b) To the Knowledge of the Company and except as disclosed in Section 3.19(b)
of the Disclosure Schedule, (i) there is no Indebtedness between the
Company or any Subsidiary, on the one hand, and the Founder, senior
officer, director, Affiliate of the Company or any Subsidiary, or any
Associate of any such Founder, officer, director or Affiliate (other than
the Company or any Subsidiary), on the other; (ii) neither the Company nor
any Subsidiary beneficially owns, directly or indirectly, any Investment
Assets of the Founder, senior officer, director, Affiliate or Associate.
Except as disclosed in Section 3.19(b) of the Disclosure Schedule, each of
the transactions listed in Section 3.19(b) of the Disclosure Schedule was
incurred or engaged in, as the case may be, on an arm's-length basis.
Except as disclosed in Section 3.19(b) of the Disclosure Schedule, since
January 1, 2003, all
- 22 -
settlements of intercompany Indebtedness between the Company or any
Subsidiary, on the one hand, and any Founder, officer, director, Affiliate
or Associate, on the other, have been made, and all allocations of
intercompany expenses have been applied, in the ordinary course of
business consistent with past practice.
3.20 Outstanding Borrowings
Section 3.20 of the Disclosure Schedule lists (i) the amount of all
Outstanding Borrowings of the Company and its Subsidiaries as of the
Closing; (ii) the Liens that relate to such Outstanding Borrowings and
that encumber the Assets and Properties of the Company; and (iii) the name
of each lender thereof.
3.21 Material Contracts
Section 3.21 of the Disclosure Schedule contains a true, complete and
correct list of all contracts, agreements, commitments and other
Contractual Obligations of the Group that have not expired or been
substantially performed, whether written or oral, other than (a) the
Transaction Documents and (b) during the twelve-month period ended
December 31, 2005 and the twelve-month period ended December 31, 2004, any
other contracts, agreements, commitments and other Contractual Obligations
of the Company or any of its Subsidiaries, (i) pursuant to which
commission of less than US$500,000 has been received or is reasonably
expected to be received by the Company or its Subsidiaries, (ii) where the
Company or any of its Subsidiaries has the Contractual Obligation to make
advance payments or non-refundable deposits, the amount of such payments
or deposits is less than US$500,000; provided that any exclusive sales
contracts to which the Company or any of its Subsidiaries is a party must
be contained in Section 3.21 of the Disclosure Schedule. Except as
disclosed in Section 3.21 of the Disclosure Schedule, each of the
contracts, agreements, commitments and other Contractual Obligations of
the Company or its Subsidiaries required to be set forth on Section 3.21
of the Disclosure Schedule (the "MATERIAL CONTRACTS") is in full force and
effect. The Group has satisfied in full or provided for all of its
liabilities and obligations under each Material Contract requiring
performance prior to the date hereof in all material respects, and is not
in default under any of them, nor, to the Knowledge of the Company, does
any condition exist that with notice or lapse of time or both would
constitute such a default which would cause a Material Adverse Effect to
the Business or Condition of the Group. To the Knowledge of the Company
and except as disclosed in Section 3.21 of the Disclosure Schedule, no
other party to any such Material Contract is in default thereunder, nor
does any condition exist that with notice or lapse of time or both would
constitute such a default. No approval or consent of any Person is needed
for all of the Material Contracts to continue to be in full force and
effect.
3.22 Insurance
Section 3.22 of the Disclosure Schedule contains copies of all of the
insurance policies or programs of the Company and each of its Subsidiaries
in effect as of the date hereof that have an insured amount of at least
US$500,000, and indicates the insurer's name, policy number, expiration
date, amount of coverage, type of coverage, annual premiums, exclusions
and deductibles, that is in effect. All such policies are underwritten by
financially sound and reputable insurers, and are sufficient to satisfy
all applicable Laws.
- 23 -
All such policies will remain in full force and effect and will not in any
way be affected by, or terminate or lapse by reason of any of the
transactions contemplated hereby.
3.23 Customers
Section 3.23 of the Disclosure Schedule contains a true, complete and
correct list of the ten (10) largest customers of the Company and its
Subsidiaries taken as a whole, (i) from which commission of more than
US$500,000 has been received or is reasonably expected to be received by
the Company or any of its Subsidiaries; (ii) which have entered into
exclusive sales contracts with the Company or any of its Subsidiaries;
(iii) to which the Company or any of its Subsidiaries has the Contractual
Obligation to make advance payments or non-refundable deposits for more
than US$500,000 (other than the salaries of the employees) during the
twelve-month period ended December 31, 2005 and the twelve month period
ended December 31, 2004. There exists no actual or, to the Knowledge of
the Company, threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship of the
Company, its Subsidiaries or their business with any customer or any group
of customers whose purchases are individually or in the aggregate material
to the business of the Company or any such Subsidiary, and there exists no
present condition or state of facts or circumstances that would cause a
Material Adverse Effect to the Business or Condition of the Group or
prevent the Company or its Subsidiaries from conducting their business
after the consummation of the transactions contemplated by this Agreement,
in substantially the same manner in which such business has heretofore
been conducted.
3.24 Foreign Corrupt Practices Act
To the Knowledge of the Company, neither the Company, nor any of its
Subsidiaries, nor to the Knowledge of the Company, any member of the
Management Team, employees or directors of the Company or any of its
Subsidiaries, has knowingly offered, promised, authorized or made,
directly or indirectly, payments or other inducements to any government
officials in order to assist the Company, or any of its Subsidiaries in
obtaining or retaining business for or with, or directing business to, any
Person in violation of the United States Foreign Corrupt Practices Act.
3.25 Registration, Information and Special Voting Rights
Except as provided in the Shareholders Agreement and the Registration
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, information rights or special voting rights to any
Person.
3.26 Broker's, Finder's or Similar Fees
There are no brokerage commissions, finder's fees or similar fees or
commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with it or any
action taken by it.
3.27 Disclosure
- 24 -
This Agreement, together with the Disclosure Schedule and all schedules
and exhibits hereto, and the agreements, certificates and other documents
furnished to the Investors by the Company at the Closing (including
without limitation, the other Transaction Documents) do not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which they were made, not misleading.
There is no fact which has not been disclosed to the Investors or
reflected in materials provided to the Investors that the Management Team
and the Founder have foreseen to have a Material Adverse Effect on the
Business or Condition of the Group. All information given to the Investors
and their professional advisers by the Company, its Subsidiaries, the
Ordinary Shareholders and their respective officers, employees and
professional advisers during the negotiations prior to this Agreement was,
when given and is at the date hereof, true and accurate.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF INVESTORS
The Investors hereby represent and warrant as follows:
4.1 Status
Each of the Investors is a limited liability partnership or company, as
the case may be, duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its incorporation or formation.
4.2 Authorization; No Contravention
The execution, delivery and performance by each Investor of this
Agreement: (a) is within its power and authority and has been duly
authorized by all necessary action; (b) does not contravene the terms of
its organizational documents or any amendment thereof; and (c) will not
violate, conflict with or result in any breach or contravention of any of
its Contractual Obligations, or any order or decree directly relating to
it.
4.3 Binding Effect
This Agreement has been duly executed and delivered by each Investor and
this Agreement constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or
by equitable principles relating to enforceability.
4.4 No Legal Bar
The execution, delivery and performance of this Agreement by each Investor
will not violate any Law applicable to it.
4.5 Purchase for Own Account
Each Investor is acquiring the Series A Preferred Shares hereunder, and
the securities into which any of the Series A Preferred Shares may be
converted or exercised, for its own account for investment, not as a
nominee or agent, and not with a view to, or for sale in
- 25 -
connection with, any distribution thereof, nor with any present intention
of distributing or selling the same, and, except as contemplated by this
Agreement and the Schedules and Exhibits hereto, the Investor has no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof.
4.6 No Public Market
Each Investor understands that no public market now exists for the Series
A Preferred Shares or the securities issuable upon the conversion of any
of the Series A Preferred Shares, and that the Company has made no
assurances that a public market will ever exist for the Securities or the
securities issuable upon the conversion of any of the Series A Preferred
Shares.
4.7 Disclosure of Information
Each Investor has had an opportunity to ask questions and receive answers
from the Company, and its Subsidiaries regarding the terms and conditions
of the offering of the Series A Preferred Shares and the business,
properties, prospects, and financial condition of the Company and its
Subsidiaries and to obtain additional information from the Company and its
Subsidiaries necessary to verify the accuracy of any information furnished
to such Investor or to which such Investor had access. Each Investor
understands that a purchase of the Series A Preferred Shares involves a
high degree of risk, and there can be no assurances that the Company's and
its Subsidiaries' business objectives will be obtained.
4.8 Investment Experience
Each Investor is experienced in evaluating and investing in private
placement transactions of securities of companies in a similar stage of
development and acknowledges that its can bear the economic risk of its
investment for an indefinite period of time.
4.9 Restricted Securities
Each Investor understands that the Series A Preferred Shares are
characterized as "restricted securities" under U.S. federal securities
Laws in as much as they are being acquired from the Company in a
transaction not involving a public offering and that under such Laws and
applicable regulations such securities may be resold without registration
under the Securities Act only in certain limited circumstances. In this
connection, each Investor represents that it is familiar with Rule 144
promulgated under the Exchange Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities
Act. Furthermore, each Investor understands that the Series A Preferred
Shares have not been qualified or registered under the Laws of any other
jurisdiction and therefore may be viewed as restricted securities under
any or all of such other applicable securities Laws.
4.10 Broker's, Finder's or Similar Fees
Except for certain origination fees to be paid by certain Investors to
China Renaissance Capital Investment Inc., there are no brokerage
commissions, finder's fees or similar fees
- 26 -
or commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with it or any
action taken by it.
ARTICLE 5
CONDITIONS TO OBLIGATIONS OF INVESTORS AT CLOSING
The obligations of the Investors to subscribe for the Series A Preferred Shares
at the Closing and to perform any obligations hereunder shall be subject to the
satisfaction of each of the following conditions on or before the Closing Date
(unless waived by the Investors); provided, however, that any waiver of a
condition shall not be deemed a waiver of any breach of any representation,
warranty, agreement, term or covenant or of any misrepresentation by the
Company, the BVI Subsidiary, the PRC Subsidiary or the Ordinary Shareholders,
except to the extent expressly so waived.
5.1 Representations and Warranties; Performance of Covenants
Except those as disclosed in the Disclosed Schedule, the representations
and warranties of the Company, the BVI Subsidiary, the PRC Subsidiary and
Ordinary Shareholders contained in Article 3 hereof shall be true,
complete and correct at and as of the date hereof and the Closing Date as
if made at and as of each such date, and the Company, the BVI Subsidiary,
the PRC Subsidiary and the Ordinary Shareholders shall have performed and
complied with all the covenants, agreements and conditions set forth or
contemplated herein that are required to be performed by or complied with
by the Company, the BVI Subsidiary, the PRC Subsidiary and the Ordinary
Shareholders on or before the Closing Date.
5.2 Proceedings
All corporate and other proceedings required to have been taken by the
Company and the Company's shareholders in connection with the transactions
contemplated have been taken.
5.3 Compliance Certificate
The Investors shall have received at the Closing a certificate, dated as
of the Closing Date and signed by the Chief Executive Officer of the
Company and the PRC Subsidiary, certifying that (i) the conditions
specified in Section 5.1 hereof have been fulfilled and stating that there
has been no material adverse change in the Business or Condition of the
Group since the date of the most recent balance sheet included in the 2005
Audited Financial Statements, which were delivered to the Investors prior
to the Closing and (ii) the other conditions specified in this Article 5
have been fulfilled.
5.4 Secretary's or Director's Certificate
The Investors shall have received a certificate from the Company, dated as
of the Closing Date and signed by the Secretary or a director of the
Company, certifying (a) that the attached copies of the organizational
documents of the Company and each of its Subsidiaries and the resolutions
of the Board of Directors and/or shareholders (as appropriate) of the
Company approving this Agreement and the other Transaction Documents and
the transactions contemplated hereby and thereby, are all true, complete
- 27 -
and correct and remain unamended and in full force and effect, and (b) the
incumbency and specimen signature of each officer of the Company and the
PRC Subsidiary executing each such document or any other document
delivered in connection herewith or therewith on behalf of the Company.
5.5 Corporate Approval and Documents
The Investors shall have received true, complete and correct copies of the
resolutions of the Board of Directors and/or shareholders (as appropriate)
of the Company and such other agreements, schedules, exhibits,
certificates, documents, financial information and filings which are
reasonably required in connection with or relating to the transactions
contemplated hereby, all in form and substance reasonably satisfactory to
the Investors.
5.6 Subscription for Series A Preferred Shares Permitted by Applicable Laws
The subscription for the Series A Preferred Shares by the Investors
hereunder and the consummation of the transactions contemplated hereby (a)
shall not be prohibited by the Company's Articles of Association or any
applicable Laws, and (b) shall be permitted by all Laws to which the
Investors or the transactions contemplated by or referred to herein or in
the other documents and agreements contemplated hereby are subject.
5.7 Due Diligence
The Investors' partners, directors, officers, employees, agents or
representatives, including financial advisers, consultants and legal
counsel, shall have completed all operational, legal and financial due
diligence in connection with or relating to the transactions contemplated
hereby to the reasonable satisfaction of the Investors, with the full
cooperation and assistance from the Group.
5.8 Opinions of Company Counsel
The Investors shall have received opinions from (a) Xxxxxx and Xxxxxx,
Cayman Islands counsel to the Company, dated as of the Closing Date,
relating to the transactions contemplated by or referred to herein,
substantially in the form attached hereto as Exhibit D, and (b) Xxx Xxx
Law Firm, PRC counsel to the Company, dated as of the Closing Date,
relating to the transactions contemplated by or referred to herein,
substantially in the form attached hereto as Exhibit E.
5.9 Shareholders Agreement
The Shareholders Agreement shall have been duly executed and delivered by
all the parties thereto.
5.10 Registration Rights Agreement
The Registration Rights Agreement shall have been duly executed and
delivered by all the parties thereto.
5.11 Constitutive Documents
- 28 -
The Company shall have delivered to the Investors (a) copies of the
current certificates or articles of association (or other comparable
corporate charter documents), including all amendments thereto, of the
Company and each of its Subsidiaries, (b) current business licenses or
certificate of the Company and each of its Subsidiaries, and (c) a good
standing certificate for the Company.
5.12 Consents and Approvals
All consents, exemptions, authorizations, or other actions by, or notices
to, or filings with, Governmental Authority required to be obtained, made
or given in connection with the execution, delivery or performance by the
Company and its Subsidiaries for the Closing and are in full force and
effect, and the Investors shall have been furnished with appropriate
evidence thereof, and all waiting periods shall have lapsed without
extension or the imposition of any conditions or restrictions.
5.13 No Material Adverse Change
There shall have been no material adverse change in the Business or
Condition of the Group, nor shall there have been any damage, destruction
or loss to any Assets or Properties of the Company that would reasonably
be expected to result in a Material Adverse Effect on the Business or
Condition of the Group.
5.14 Articles of Association
The Company shall have adopted the Articles of Association containing the
rights, preferences and privileges of the Series A Preferred Shares
substantially in the form attached hereto as Exhibit A.
5.15 Transfer of Shares Under Company Share Plan
The Company shall have adopted a Company Share Plan, which shall be
presented to the Board of the Company, if and when deemed necessary by the
Founder and On Chance, and under which 3,636,364 Ordinary Shares equal to
five percent (5%) of the aggregate number of issued and outstanding shares
(including the Series A Preferred Shares as if they were already issued)
of the Company on an as-converted and fully diluted basis as of the
Closing Date shall be transferred pursuant to the Company Share Plan.
5.16 Election of Series A Designees to the Board
Xxxx Xxx [CHINESE CHARACTER] and Xxxxxx Xxxxxx, as the directors nominated
by the Investors, shall have been duly elected or appointed to the Board
of Directors of the Company and the PRC Subsidiary.
5.17 Employment and Non-Compete Agreements
The Founder and each member of the Management Team shall have entered into
employment agreements and confidentiality, non-compete and intellectual
property assignment agreements with the Company and/or the PRC Subsidiary
substantially in the form attached hereto as Exhibit F.
5.18 Investors' Business Principles
- 29 -
The Company shall have signed a copy of the Investors' business principles
declaration containing the matters set forth in Schedule 5 hereto.
5.19 Dividends
All dividends declared by the Company, the BVI Subsidiary or the PRC
Subsidiary before the Closing Date shall have been paid in full.
5.20 Shareholder Loans
The Company shall have repaid in full or documented properly each
outstanding loan between any of the directors or shareholders of the
Company or any of its Subsidiaries, on the one hand, and the Company or
any of its Subsidiaries, on the other hand.
5.21 "Red Chip" Issue
The Company shall have prepared the Red Chip Financing Plan substantially
in the form attached hereto as Exhibit G, which shall have been
implemented to the extent required thereunder as of the Closing.
5.22 Foreign Exchange Registration
The PRC Subsidiary shall have obtained the Certificate of Foreign Exchange
Registration, which shall not contain any qualification or limitation on
the PRC Subsidiary's capability to open foreign exchange accounts with any
commercial bank in China.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF COMPANY AT CLOSING
The obligations of the Company to issue the Series A Preferred Shares and to
perform its other obligations hereunder relating thereto shall be subject to the
satisfaction of the following conditions on or before the Closing Date (unless
waived by the Company); provided, however, that any waiver of a condition shall
not be deemed a waiver of any breach of any representation, warranty, agreement,
term or covenant or of any misrepresentation by the Investors, except to the
extent expressly so waived.
6.1 Representations and Warranties
The representations and warranties of the Investors contained in Article 4
hereof shall be true, complete and correct in all material respects at and
as of the date hereof and the Closing Date as if made at and as of each
such date.
6.2 Compliance with this Agreement
The Investors shall have performed and complied in all material respects
with all of their respective agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by
the Investors on or before the Closing Date.
6.3 Issuance of Shares Permitted by Applicable Laws
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The issuance of the Series A Preferred Shares by the Company hereunder and
the consummation of the transactions contemplated hereby and by the
Transaction Documents (a) shall not be prohibited by any Law, and (b)
shall be permitted by all Laws to which the Company or the transactions
contemplated by or referred to herein or in the Transaction Documents are
subject, and the Company shall have received such certificates or other
evidence as it may reasonably request to establish compliance with this
condition.
6.4 Consents and Permits
The Investors shall have obtained any and all consents, permits and
waivers (if any) necessary or appropriate for the execution, delivery and
performance of the transaction contemplated by this Agreement.
6.5 Payment of Subscription Price
The Investors shall have delivered the Subscription Price in accordance
with Section 2.3 hereof.
6.6 Execution of Transaction Documents
The Investors shall have executed and delivered all of the Transaction
Documents to which they are a party.
ARTICLE 7
COVENANTS OF COMPANY, BVI SUBSIDIARY, PRC SUBSIDIARY, ORDINARY
SHAREHOLDERS AND FOUNDER
7.1 Covenants Until Closing
The Company, the BVI Subsidiary, the PRC Subsidiary and the Ordinary
Shareholders (other than Smart Create) covenant and agree with the
Investors that, at all times from and after the date hereof until the
Closing, the Company, the BVI Subsidiary, the PRC Subsidiary and the
Ordinary Shareholders will comply with the following covenants and
provisions, except to the extent the Investors may otherwise consent in
writing.
(a) Governmental Authorization
The Company and its Subsidiaries will procure the Company and its
Subsidiaries to (i) proceed diligently and in good faith and use all
commercially reasonable efforts, as promptly as practicable, to obtain all
consents, approvals or actions of, to make all filings with and to give
all notices to Governmental Authorities required of the Company or any
Subsidiary to consummate the transactions contemplated hereby, (ii)
provide such other information and communications to such Governmental
Authorities as the Investors or such Governmental Authorities may
reasonably request in connection with the consummation of the transactions
contemplated hereby, and (iii) cooperate with the Investors in obtaining
as promptly as practicable all consents, approvals or actions of, making
all filings with and giving all notices to Governmental Authorities
required of the Investors to consummate the transactions contemplated
hereby.
(b) Dividends
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The Company will not, and the Founder will procure the Company not to,
declare any dividends for any class of shares of the Company.
(c) Major Transactions
The Company shall not, and the Founder shall ensure that the Company shall
not, effect any merger, consolidation, scheme of arrangement,
recapitalization or sale of all or substantially all of the assets of the
Company or any of its Subsidiaries, except for the transactions
contemplated in Section 7.2(e) hereof.
(d) Notice and Cure
The Group shall conduct its business in a manner, and shall otherwise use
all reasonable efforts, so as to ensure that the representations and
warranties set forth in Article 3 hereof shall continue to be true and
correct on and as of the Closing Date as if made on and as of the Closing
Date. The Company, the BVI Subsidiary, the PRC Subsidiary and the Ordinary
Shareholders (other than Smart Create) will notify the Investors promptly
in writing of, and will as soon as practicable provide the Investors with
true and complete copies of any and all information or documents relating
to, and will use all best efforts to cure before the Closing, any event,
transaction or circumstance occurring after the date of this Agreement
that causes or will cause any covenant or agreement of any such party
under this Agreement to be breached or that renders or will render untrue
any representation or warranty of any such party contained in this
Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. The Company also will notify the Investors
promptly in writing of, and will use all best efforts to cure, before the
Closing, any violation or breach of any representation, warranty, covenant
or agreement made by the Company in this Agreement, whether occurring or
arising before, on or after the date of this Agreement. No notice given
pursuant to this Section 7.1(d) shall have any effect on the
representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition
contained herein or shall in any way limit the Investors' right to seek
any remedy available at law or in equity.
(e) Fulfillment of Conditions
The Company will execute and deliver at the Closing each Transaction
Document that it is required hereby to execute and deliver as a condition
to the Closing, and will take all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy each
other condition to the obligations of the Investors contained in this
Agreement and will not, and will not permit the Company or any Subsidiary
to, take or fail to take any action that could reasonably be expected to
result in the nonfulfillment of any such condition.
7.2 Covenants After Closing
The Company, the BVI Subsidiary, the PRC Subsidiary and the Ordinary
Shareholders (other than Smart Create) covenant and agree with the
Investors that, at all times from and after the date hereof, the Company
and its Subsidiaries will comply with the following covenants:
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(a) Use of Proceeds
Without the Investors' prior written consent, the Subscription Price paid
by the Investors to the Company shall be only used by the Company to
finance the business expansion and operation of the PRC Subsidiary or
other business functions in accordance with the plan of proposed use of
proceeds that the Company will deliver to the Investors at Closing, which
plan shall be subject to the Investors' approval.
(b) Certificate of Financial Registration
Within thirty (30) days following the Closing Date, the PRC Subsidiary
shall have obtained the Certificate of Financial Registration.
(c) Certificate of Tax Registration
Within thirty (30) days following the Closing Date, the PRC Subsidiary
shall have obtained the Certificate of Tax Registration reflecting correct
information regarding the PRC Subsidiary, including its status as a wholly
foreign owned enterprise and the name of its legal representative as Xxxx,
Xxx.
(d) Audit
Upon the request of the Investors, the Company shall, as soon as
practicable, provide the Investors with the balance sheet of the PRC
Subsidiary as of December 31, 2004 and the related statements of income,
cash flow and changes in shareholders' equity, together with the notes
thereto, audited and approved by the Company's auditor.
(e) Restructuring
The Investors and the Ordinary Shareholders hereby covenant and agree that
as soon as practical but no later than 180 days after the Closing Date,
the Company and the PRC Subsidiary, as the case may be, shall have the
right, but not the obligation, to acquire all equity interest in E-House
Hong Kong and E-House Macau and all equity interest held by Jin Hong Yun
in the Subsidiaries of the Company other than the BVI Subsidiary and the
PRC Subsidiary (collectively, the "RESTRUCTURING"), with an aggregate
purchase price equal to the net asset values of these three entities as
reflected in the financial statements prepared in accordance with IFRS of
each of those entities for the twelve-month period ended December 31,
2005, minus the cost of capital, plus RMB3,000,000; provided there shall
have been no material adverse change in the business or condition of each
of those entities at the time of the completion of the Restructuring, nor
shall there have been any damage, destruction or loss to any Assets or
Properties of any of those entities that would reasonably be expected to
result in a Material Adverse Effect on the business or condition of such
entity.
(f) Internal Control and Financial Management
The Company, the BVI Subsidiary and the PRC Subsidiary shall use their
best efforts to adopt an internal control system that ensures the
separation of internal audit and financial control of the Company, the BVI
Subsidiary and the PRC Subsidiary, respectively.
(g) Key Man Insurance
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Within sixty (60) days following the Closing Date, the Company shall
obtain key man insurance policy for the Founder, the terms and conditions
of which shall be to the reasonable satisfaction of the Investors.
7.3 Founder's Covenants After Closing
The Founder covenants and agrees that until the consummation of a
Qualified IPO or the full redemption of all Series A Preferred Shares held
by the Investors pursuant to the Articles of Association of the Company,
whichever is earlier, that he shall not (a) serve in a Competitive
Position, or (b) engage in activities contrary or harmful to the interests
of the Company or any of its Subsidiaries, including without limitation:
(i) employ or recruit any present, former or future employee of the
Company or any of its Subsidiaries to serve in a Competitive Position;
(ii) own equity (other than as the holder of not more than 1% of total
outstanding shares of a publicly-held company) in any other Person that is
in the business of real estate intermediary services anywhere in China,
including Hong Kong;
(iii) disclose or misuse any Confidential Information; or
(iv) participate in a hostile takeover attempt of the Company or any of
its Subsidiaries.
ARTICLE 8
TERMINATION
8.1 Termination
Notwithstanding any other provision of this Agreement, this Agreement may
be terminated at any time prior to the Closing Date:
(a) by the mutual written consent of the Company and the Investors;
(b) at any time before Closing, by the Company or the Investors, in the event
of a material breach hereof by the non-terminating party if such
non-terminating party fails to cure such breach within five (5) Business
Days following notification thereof by the terminating party; or
(c) by either the Company or the Investors, upon written notice to the other
Parties, if the Closing has not been consummated in accordance with this
Agreement on or prior to May 28, 2006 unless otherwise extended by the
Parties.
8.2 Effect of Termination
In the event of termination of this Agreement pursuant to Section 8.1,
this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of any party hereto (or any of its
respective officers, directors, employees, agents or other
representatives, Associates or Affiliates), except as provided in Section
10.12 in respect of certain expenses and Section 10.13 in respect of
publicity, which shall survive the termination of this Agreement, and
except as provided in the next succeeding sentence.
- 34 -
Notwithstanding any other provision in this Agreement to the contrary,
upon termination of this Agreement pursuant to Section 8.1(b) or (c), the
parties will remain liable to each other for any breach of this Agreement
by the parties existing at the time of such termination and the parties
may seek such remedies, including damages and fees of attorneys, against
the other with respect to any such breach as are provided in this
Agreement or as are otherwise available at law or in equity.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by the Company, the BVI Subsidiary, the PRC Subsidiary and
the Ordinary Shareholders (other than Smart Create)
(a) The Company, the BVI Subsidiary, the PRC Subsidiary and each of the
Ordinary Shareholders (other than Smart Create) shall, jointly and
severally, indemnify, defend and hold harmless the Investors on demand for
any claims, losses, liabilities, damages, deficiencies, costs and
expenses, including without limitation any diminution in value of the
Series A Preferred Shares or Assets and Properties, legal fees and
expenses of investigation and defense, incurred by the Investors, their
officers, directors, agents or subsidiaries directly or indirectly
resulting from, arising out of or relating to any inaccuracy in, or breach
of, a representation or warranty of the Company, the BVI Subsidiary, the
PRC Subsidiary or any Ordinary Shareholder contained herein or any failure
by the Company, the BVI Subsidiary, the PRC Subsidiary or any Ordinary
Shareholder to perform or comply with any covenant, agreement or
obligation contained herein.
(b) The Founder shall indemnify, defend and hold harmless the Investors on
demand on any claims, losses, liabilities, damages, deficiencies, costs
and expenses, including without limitation any legal fees and expenses of
investigation and defense, incurred by the Investors, their officers,
directors, agents or subsidiaries directly or indirectly resulting from,
arising out of or relating to any claims against the Company or its
Subsidiaries arising from or in connection with any breach of the
non-compete provisions as set forth in Section 7.3 hereof.
(c) Notwithstanding anything contained herein to the contrary, Smart Create
shall indemnify, defend and hold harmless the Investors on demand for any
claims, losses, liabilities, damages, deficiencies, costs and expenses,
including without limitation any diminution in value of the Series A
Preferred Shares or Assets and Properties, legal fees and expenses of
investigation and defense, incurred by the Investors, their officers,
directors, agents or subsidiaries directly or indirectly resulting from,
arising out of or relating to any inaccuracy in, or breach of, a
representation or warranty of Smart Create contained herein.
9.2 Founder's Guarantee
(a) The Founder hereby undertakes to guarantee the performance of or
compliance with any covenant, agreement or obligation contained herein by
the Company, the BVI Subsidiary, the PRC Subsidiary or any Ordinary
Shareholder, and shall be liable to the Investors only (i) after all
remedies against the Company, the BVI Subsidiary, the PRC Subsidiary and
each of the Ordinary Shareholders (other than Smart Create) have been
exhausted, and (ii) if and
- 35 -
to the extent that such remedies obtained by the Investors are
insufficient to cover the damages claimed by the Investors.
(b) The Founder's liability under this Section 9.1(b) hereof shall not be
limited in amount.
(c) The aggregate liability of the Founder under this Section 9.2 shall be
limited to US$10,000,000. All liabilities (other than in respect of any
pending claims) of the Founder under this Section 9.2 will terminate on
the earlier of (i) the completion of the Qualified IPO (as defined in the
Shareholders Agreement); and (ii) the full redemption of all the Series A
Preferred Shares held by the Investors pursuant to the Articles of
Association of the Company.
(d) Nothing in this Section 9.2 shall have the effect of limiting or
restricting any liability resulting from or arising out of any fraud.
9.3 Indemnification by the Investors
(a) The Investors shall indemnify, severally but not jointly, defend and hold
harmless the Company, the BVI Subsidiary, the PRC Subsidiary, the Founder
and the Ordinary Shareholders on demand for any claims, losses,
liabilities, damages, deficiencies, costs and expenses, including without
limitation any diminution in value of the Ordinary Shares or Assets and
Properties, legal fees and expenses of investigation and defense, incurred
by the Company, the BVI Subsidiary, the PRC Subsidiary, the Founder and
the Ordinary Shareholders, their officers, directors, agents or
subsidiaries directly or indirectly resulting from, arising out of or
relating to any inaccuracy in, or breach of, any representation or
warranty of the Investors contained herein or any failure by the Investors
to perform or comply with any covenant, agreement or obligation contained
herein.
Notwithstanding anything contained herein to the contrary, the
indemnification obligations of the Investors pursuant to Section 9.3(a)
hereof shall expire at Closing.
9.4 Enforcement Action
For the avoidance of doubt, any obligation on the part of the Investors to
make the investment hereunder is made solely to the Company, and no other
party shall have any right to enforce such obligation against the
Investors.
ARTICLE 10
MISCELLANEOUS
10.1 Survival of Representations and Warranties
The representations and warranties made herein shall survive any
investigation made by any party hereto and the Closing until the earlier
of (i) the completion of the Qualified IPO, or (ii) the full redemption of
all the Series A Preferred Shares held by the Investors pursuant to the
Articles of Association of the Company, provided however that all
representations and warranties need only be accurate when made and as of
the Closing.
10.2 Notices
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All notices, demands and other communications provided for or permitted
hereunder shall be made in writing and shall be by telefax, commercial
express courier service or personal delivery:
if to the Company, the BVI Subsidiary or the PRC Subsidiary:
Shanghai Real Estate Consultant & Sales (Group) Co., Limited
17th Floor, Merchandise Harvest Building (East)
000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxx 000000, Xxxxx
Fax No.: x00 00 0000 0000
Attention: Xxxx Xxx
with a copy to:
Xxxxx Day
00xx Xxxxx, Xxxxxxxx Xxxxx Center
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxxx 000000, Xxxxx
Fax No.: x00 00 0000 0000
Attention: Xxxxxxx Xxxx
if to the Founder: to the address set forth in Part 1 of Schedule 1.
if to the Ordinary Shareholders: to the addresses set forth in Part 2 of
Schedule 1.
if to the Investors: to the addresses set forth in Schedule 2.
with a copy to:
Xxxxxxxx Chance LLP
40th Floor Bund Center
222 Xxx Xx Xxxx Xxxx
Xxxxxxxx 000000, Xxxxx
Fax No.: x00 00 0000 0000
Attention: Xxxxxxx Xxx
or to such other address or addresses as shall have been furnished in
writing to the other parties hereto. All such notices and communications
shall be deemed to have been duly given: when delivered by hand, if
personally delivered; when delivered by courier, if delivered by
commercial express courier service; or if faxed, when receipt is
acknowledged.
10.3 Successors and Assigns
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This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the parties hereto. Subject to
applicable Laws, the Investors may assign any of their rights under any of
the Transaction Documents to any Permitted Transferee (as defined in the
Shareholders Agreement). Neither the Company or its Subsidiaries nor any
of the Ordinary Shareholders or the Founder may assign any of its rights
or obligations under this Agreement without the prior written consent of
the Investors, and any such purported assignment by the Company, its
Subsidiaries, the Ordinary Shareholders or the Founder without the written
consent of the Investors shall be void and of no effect. No Person other
than the parties hereto and their successors and permitted assigns is
intended to be a beneficiary of any of the Transaction Documents.
10.4 Amendment and Waiver
(a) No failure or delay on the part of any of the parties hereto in exercising
any right, power or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to
the parties hereto at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any provision of this
Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by any party from the terms of any provision of this
Agreement, shall be effective only if it is made or given in writing and
signed by all of the parties hereto, and only in the specific instance and
for the specific purpose for which made or given. No amendment, supplement
or modification of or to any provision of this Agreement or any of the
other Transaction Documents, or any waiver of any such provision or
consent to any departure by any party from the terms of any such provision
may be made orally. Except where notice is specifically required by this
Agreement, no notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances.
10.5 Signatures; Counterparts
Telefacsimile transmissions of any executed original document and/or
retransmission of any executed telefacsimile transmission shall be deemed
to be the same as the delivery of an executed original. At the request of
any party hereto, the other parties hereto shall confirm telefacsimile
transmissions by executing duplicate original documents and delivering the
same to the requesting party or parties. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
10.6 Headings
The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
10.7 Governing Law
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This Agreement shall be governed by, construed in accordance with, and
enforced under, the laws of Hong Kong without giving effect to any choice
of law rule.
10.8 Arbitration
(a) Except as otherwise provided in this Agreement, any dispute, controversy
or claim arising out of or in connection with this Agreement, or the
breach, termination or validity thereof, shall be finally settled by a
board of arbitration ("BOARD OF ARBITRATION") at the Hong Kong
International Arbitration Center under the rules of the United Nations
Commission on International Trade Law. The language used in the arbitral
proceedings shall be English.
(b) The Board of Arbitration shall comprise of three (3) members. The
Investors on the one hand, and the Company, the BVI Subsidiary, the PRC
Subsidiary, the Ordinary Shareholders and the Founder on the other, shall
each select one (1) member to the Board of Arbitration and the third
member shall be selected by mutual agreement of the other members, or if
the other members fail to reach agreement on a third member within twenty
(20) calendar days after their selection, such third member shall
thereafter be selected by the Hong Kong International Arbitration Centre
upon application made to it for such purpose by either of the members.
(c) The arbitral proceeding shall accord the right of cross-examination of
witnesses, the right to provide witnesses, including expert witnesses, and
the right to make both written and oral submissions.
(d) The arbitral award made and granted by the Board of Arbitration shall be
final, binding and incontestable and may be used as a basis for judgment
thereon in any court having jurisdiction. All costs of arbitration
(including without limitation, those incurred in the appointment of
arbitrator) shall be borne by the losing party unless otherwise
apportioned in the arbitral award.
(e) No person who is, or has been, an employee or agent of, or consultant or
counsel to, the Investors, the Company or any of their respective
Affiliates shall be eligible to act as an arbitrator at any time.
(f) This Agreement and the rights and obligations of the Investors and the
Company shall remain in full force and effect pending the award in any
arbitration proceeding hereunder.
10.9 Severability
If any one or more of the provisions contained in this Agreement, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions of this Agreement. The
parties hereto further agree to replace such invalid, illegal or
unenforceable provision of this Agreement with a valid, legal and
enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid, illegal or
unenforceable provision.
- 39 -
10.10 Rules of Construction
Unless the context otherwise requires, "OR" is not exclusive, and
references to sections or subsections refer to sections or subsections of
this Agreement.
10.11 Entire Agreement
This Agreement, including the exhibits and schedules hereto, and the other
Transaction Documents, are intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement
of the agreement and understanding of the parties hereto in respect of the
subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or
referred to herein or therein. This Agreement, together with the exhibits
and schedules hereto, and the other Transaction Documents supersede all
prior agreements and understandings between the parties with respect to
such subject matter.
10.12 Certain Expenses
The Company will pay all expenses of the Investors (including without
limitation, travel fees, charges and disbursements of legal counsel,
financial advisors and consultants) incurred by the Investors in
connection with the negotiation, execution and closing of this Agreement,
the other Transaction Documents and the transactions contemplated hereby
and thereby, up to a maximum of US$150,000 upon the Closing of the
transactions contemplated under this Agreement and the other Transaction
Documents. Should the Company decide unilaterally not to close the
transactions contemplated by this Agreement for no cause, the Company
shall bear all reasonable costs and expenses incurred by or on behalf of
both the Investors and the Company by the professional advisers appointed
by the Investors and the Company in connection with the transaction
contemplated under this Agreement and the other Transaction Documents.
Should the Investors decide unilaterally not to close the transaction
contemplated by this Agreement for no cause, the Investors shall bear all
reasonable costs and expenses incurred by or on behalf of both the
Investors and the Company by the professional advisers appointed by the
Investors and the Company in connection with the transaction contemplated
under this Agreement and the other Transaction Documents.
10.13 Publicity
Except as may be required to be disclosed by applicable law or any
requirement of any competent governmental or statutory authority or rules
or regulations of any relevant regulatory, administrative or supervisory
body (including without limitation, any relevant stock exchange or
security council), none of the parties hereto shall issue a publicity
release or announcement or otherwise make any public disclosure concerning
this Agreement or the transactions contemplated hereby, without prior
approval of the Company and the Investors. If any announcement is required
by law to be made by any party hereto, prior to making such announcement
such party will deliver a draft of such announcement to the other parties
and shall give the other parties an opportunity to comment thereon.
10.14 Further Assurances
- 40 -
Each of the parties shall execute such documents and perform such further
acts (including without limitation, obtaining any consents, exemptions,
authorizations, or other actions by, or giving any notices to, or making
any filings with, any governmental entity or authority or any other
Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement and the other Transaction
Documents, including without limitation, any post-closing transfer(s) by
the Investors of a portion of the Series A Preferred Shares to a Person
not currently a party hereto.
10.15 No Strict Construction
The parties hereto have participated jointly in the negotiation and
drafting of this Agreement and the other Transaction Documents. In the
event an ambiguity or question of intent or interpretation arises under
any provision of this Agreement or any Transaction Document, this
Agreement or such other Transaction Document shall be construed as if
drafted jointly by the parties thereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement or any other
Transaction Document. No knowledge of, or investigation, including without
limitation, due diligence investigation, conducted by, or on behalf of,
the Investors shall limit, modify or affect the representations set forth
in Article 3 of this Agreement or the right of the Investors to rely
thereon.
10.16 Confidentiality
Each party hereto agrees that it will maintain the confidentiality of any
proprietary information of the Company; provided, however, such obligation
of confidentiality shall not apply to (i) information which was in the
public domain or otherwise known to the relevant party before it was
furnished to it by another party hereto or, after it was furnished to that
party, entered the public domain otherwise than as a result of (1) a
breach by that party of this Section 10.16 or (2) a breach of a
confidentiality obligation by the disclosing party, where the breach was
known to that party; (ii) the disclosure of information which is necessary
in order to comply with applicable law, the order of any court, the
requirements of a stock exchange or other governmental or regulatory
authority or to obtain tax or other clearances or consents from any
relevant authority; (iii) the disclosure of information by the Investors
to a bona fide proposing purchaser of any Series A Preferred Shares, or
(iv) the disclosure of information by the Investors to its directors,
officers, employees, partners, accountants and attorneys where such
Persons or entities are under appropriate nondisclosure obligation to the
Investors.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 41 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective officers hereunto duly authorized as of the
date first above written.
E-HOUSE (CHINA) INVESTMENTS HOLDING LIMITED
[CHINESE CHARACTERS]
By: /s/
----------------------------------------------------
Name:
Title:
E-HOUSE REAL ESTATE LIMITED
[CHINESE CHARACTERS]
By: /s/
----------------------------------------------------
Name:
Title:
SHANGHAI REAL ESTATE CONSULTANT AND SALES
(GROUP) CO., LIMITED
[CHINESE CHARACTERS]
By: /s/
----------------------------------------------------
Name:
Title:
CHF INVESTMENT LIMITED
By: /s/
----------------------------------------------------
Name: Xxxx Xxxx
Title: Director
RECP E-HOUSE INVESTORS LTD.
By: DLJ REAL ESTATE CAPITAL PARTNERS III, L.P.
By: /s/
----------------------------------------------------
Name:
Title:
- 42 -
E-HOUSE CO-INVESTORS, LTD.
By: RECP III CO-INVESTORS A, L.P.
By: /s/
----------------------------------------------------
Name:
Title:
SIG CHINA INVESTMENT ONE, LTD.
By: /s/
----------------------------------------------------
By: Susquehanna Asia Investment, LLLP
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
Susquehanna Asia Investment, LLLP
(authorized agent)
JUNHENG INVESTMENT LIMITED
By: /s/
----------------------------------------------------
Name:
Title:
SMART CREATE GROUP LIMITED
By: /s/
----------------------------------------------------
Name:
Title:
ON CHANCE INC.
By: /s/
----------------------------------------------------
Name:
Title:
- 43 -
FOUNDER
By: /s/
----------------------------------------------------
Name:
Title:
- 44 -
FARALLON CAPITAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P.
FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P.
FARALLON CAPITAL OFFSHORE INVESTORS II, L.P.
By: /s/
----------------------------------------------------
By: Farallon Partners, L.L.C., its General Partner
Name: Xxxx X Xxxxxx
Title: Managing Member
- 45 -
SCHEDULE 1
LIST OF FOUNDER AND ORDINARY SHAREHOLDERS
PART 1
FOUNDER
PART 2
ORDINARY SHAREHOLDERS
- 46 -
SCHEDULE 2
LIST OF INVESTORS
- 47 -
SCHEDULE 3
PART 1
LIST OF SHAREHOLDERS BEFORE CLOSING
- 48 -
PART 2
LIST OF SHAREHOLDERS AFTER CLOSING
- 49 -
SCHEDULE 4
MANAGEMENT TEAM
- 50 -
SCHEDULE 5
INVESTORS' BUSINESS PRINCIPLES DECLARATION
The business of the Company and its Subsidiaries will be carried on in a way
that:
1. provides safe and healthy working conditions for its employees and
contractors;
2. encourages the efficient use of natural resources and promotes the
protection of the environment;
3. treats all employees fairly in terms of recruitment, progression,
remuneration and conditions of work, irrespective of gender, race, colour,
language, disability, political opinion, age, religion or national/social
origin;
4. allows consultative work-place structures and associations which provide
employees with an opportunity to present their views to management;
5. takes account of the impact of its operations on the local community and
seeks to ensure that potentially harmful occupational health and safety,
environmental and social effects are properly assessed, addressed and
monitored; and
6. upholds high standards of business integrity and honesty, and operates in
accordance with local laws and international good practice (including
those intended to fight extortion, bribery and financial crime).
- 51 -
SCHEDULE 6
DISCLOSURE SCHEDULE
[TO BE INSERTED]
- 52 -
EXHIBIT A
ARTICLES OF ASSOCIATION
OF
E-HOUSE (CHINA) INVESTMENTS HOLDING LIMITED
[TO BE INSERTED]
- 53 -
EXHIBIT B
SHAREHOLDERS AGREEMENT
[TO BE INSERTED]
- 54 -
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
[TO BE INSERTED]
- 55 -
EXHIBIT D
FORM OF CAYMAN COUNSEL LEGAL OPINION
[TO BE INSERTED]
- 56 -
EXHIBIT E
FORM OF PRC COUNSEL LEGAL OPINION
[TO BE INSERTED]
- 57 -
EXHIBIT F
FORM OF EMPLOYMENT AND NON-COMPETE AGREEMENT
[TO BE INSERTED]
- 58 -
EXHIBIT G
RED CHIP FINANCING PLAN
[TO BE INSERTED]
- 59 -
