[Exhibit 10.1 - Contract, dated January 29, 2004, between Xxxxx Xxxx Real Estate
Development Co. Ltd. and the Company]
Contract
Party A: Minghua Group International Holdings Ltd.
Address: Guangdong Bian Fang Building, 10th Floor
Fujing Road, Futian District, Shenzhen, 518033,
People's Republic of China
Chairman: Li Chuquan
Party B: Beijing Xxxxx Xxxx Real Estate Development Co. Ltd.
Address: 00 Xxxx Xxxx, Xxxxxxxx Industrial Development Zone,
Yanqing County, Beijing City
Chairman: Li Changde
In view of the following background:
1. Party B is a company registered in Beijing, China, with strong economic
force, thinking environmental protection vehicle has good prospect, and is
dedicated to the undertaking of the environmental protection vehicle.
2. Party A is a public reporting company in USA, whose securities are quoted on
the Over-the-Counter Bulletin Board (OTCBB: MGHA.OB).
Article 1 Investment Terms
1. Party B hereby agrees that it shall pay USD$29,400,000 to Party A.
2. Party A hereby agrees that it shall issue, in the aggregate, 140 million
shares of Party A's common stock to Party B upon receipt of payment in full for
such shares.
3. The price per share equals USD$0.21.
4. The investment shall be effected in two installments:
(a) Party B shall pay Party A USD$12,600,000 on or before April 15, 2004
and within sixty days of receiving such funds, Party A shall issue 60 million
shares of Party A's common stock to Party B; and
(b) Party B shall pay to Party A USD$16,800,000 within fifteen days
following a shareholders' meeting of Party A at which the shareholders will vote
upon an amendment to Party A's certificate of incorporation that would increase
the number of Party A's authorized share capital such that Party A may satisfy
its obligations hereunder.
5. Within 20 days after this contract is signed, Party B will pay USD$602,410
(RMB5 million) to Party A as a performance bond, which will be applied to the
first installment due hereunder and which will be forefeited by Party B if such
installment is not paid by Party B.
Article 2: Applicable law and dispute settlement
This contract will be governed and construed in accordance with the laws of the
State of New York, without giving effect to the conflicts of laws principles
thereof. Each party hereto hereby consents to the jurisdiction of the federal
and state courts sitting within the State of New York.
Article 3: Contract Effectiveness
This contract will become effective after meeting the following conditions:
1. Both parties sign and stamp;
2. The boards of directors of both parties resolve to approve this contract;
3. After Party B pays RMB5 million as the down payment.
Article 4: Miscellaneous
1. This contract is in six copies, with three copies for each party;
Article 5: Representations and Warranties of Party B
Party B hereby represents and warrants to Party A as follows:
1. Access to Information. Party B, in making the decision to purchase
the Shares, has relied upon its independent investigations made by
it and/or its representatives, if any. Except as set forth in this
contract, no representations, assurances or warranties have been
made to Party B or its advisers, by Party A or by any of its
respective officers, directors, agents, employees, or affiliates,
nor anyone else on their behalf, concerning, among other things, the
future profitability of Party A or Party B's investment in it. Party
B and/or its representatives during the course of this transaction,
and prior to the purchase of any Shares, has had the opportunity to
ask questions of and receive answers from the management of Party A
concerning the business of Party A and to receive any additional
information, documents, records and books relative to the business,
assets, financial condition, results of operations and liabilities
(contingent or otherwise) of Party A. Party B has obtained copies of
the reports filed by Party A with the Securities and Exchange
Commission (the "SEC") since the filing of Party A's last annual
report on Form 10-KSB (the "SEC Filings"), including Party A's most
recently filed quarterly and current reports filed with the SEC and
has carefully reviewed all of the information contained in the SEC
Filings, including the risk factors contained in such reports and
fully understands all of the disclosure contained therein. Party B
recognizes that Party A has limited financial or operating history
and that the Shares as an investment involve significant risks.
2. Sophistication and Knowledge. Party B and/or its representatives has
such knowledge and experience in financial and business matters that
it can represent itself and is capable of evaluating the merits and
risks of the purchase of the Shares. Party B is not relying on Party
A with respect to the tax and other economic considerations of an
investment in the Shares, and Party B has relied on the advice of,
or has consulted with, only Party B's own advisor(s). Party B
represents that it has not been organized for the purpose of
acquiring the Shares.
3. Lack of Liquidity. Party B acknowledges that the purchase of the
Shares involves a high degree of risk and further acknowledges that
it can bear the economic risk of the purchase of the Shares,
including the total loss of its investment. Party B acknowledges and
understands that the Shares may not be sold to a U.S. Person (as
hereinafter defined) or into the United States for a period of one
(1) year from the date of purchase and that Party B has no present
need for liquidity in connection with its purchase of the Shares.
4. No Public Solicitation. Party B is not subscribing for the Shares as
a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio, or presented at any
seminar or meeting, or any solicitation of a subscription by a
person not previously known to Party B in connection with
investments in securities generally. Neither Party A nor Party B has
engaged in any `Directed Selling Efforts in the U.S.' as defined in
Regulation S promulgated by the SEC pursuant to The Securities Act
of 1933 (the "Securities Act").
2
5. Authority. Party B has full right and power to enter into and
perform pursuant to this contract and make an investment in Party A,
and this contract constitutes Party B's valid and legally binding
obligation, enforceable in accordance with its terms. Party B is
authorized and otherwise duly qualified to purchase and hold the
Shares and to enter into this contract.
6. Brokers or Finders. No person has or will have, as a result of the
transactions contemplated by this contract, any right, interest or
valid claim against or upon Party A for any commission, fee or other
compensation as a finder or broker because of any act or omission by
such Party B or its respective agents.
7. Compliance with Local Laws. Any resale of the Shares during the
'distribution compliance period' as defined in Rule 902(f) to
Regulation S shall only be made in compliance with exemptions from
registration afforded by Regulation S. Further, any such sale of the
Shares in any jurisdiction outside of the United States will be made
in compliance with the securities laws of such jurisdiction. Party B
will not offer to sell or sell the Shares in any jurisdiction unless
Party B obtains all required consents, if any.
8. Regulation S Exemption. Party B understands, acknowledges and agrees
that the offering and sale of the Shares to Party B has not been
registered under the Securities Act or under any state securities
laws or regulations and that the Shares are being offered and sold
to it in reliance on an exemption from the registration requirements
of United States federal and state securities laws under Regulation
S promulgated under the Securities Act and that Party A is relying
upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of Party B set forth
herein in order to determine the applicability of such exemptions
and the suitability of Party B to acquire the Shares. In this
regard, Party B represents, warrants and agrees that:
a. Party B is not a U.S. Person (as defined below) and is not an
affiliate (as defined in Rule 501(b) under the Securities Act)
of Party A. A U.S. Person means any one of the following:
(1) any natural person resident in the United States of
America;
(2) any partnership or corporation organized or incorporated
under the laws of the United States of America;
(3) any estate of which any executor or administrator is a
U.S. person;
(4) any trust of which any trustee is a U.S. person;
(5) any agency or branch of a foreign entity located in the
United States of America;
(6) any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person;
(7) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary
organized, incorporated or (if an individual) resident
in the United States of America; and
(8) any partnership or corporation if:
(a) organized or incorporated under the laws of any
foreign jurisdiction; and
3
(b) formed by a U.S. person principally for the
purpose of investing in securities not registered
under the Securities Act, unless it is organized
or incorporated, and owned, by accredited
investors (as defined in Rule 501(a) under the
Securities Act) who are not natural persons,
estates or trusts.
b. At the time of the origination of contact concerning
this contract and the date of the execution and delivery
of this contract, Party B was outside of the United
States.
c. Party B will not, during the period commencing on the
date of issuance of the Shares and ending on the first
anniversary of such date, or such shorter period as may
be permitted by Regulation S or other applicable
securities law (the "Restricted Period"), offer, sell,
pledge or otherwise transfer the Shares in the United
States, or to a U.S. Person for the account or for the
benefit of a U.S. Person, or otherwise in a manner that
is not in compliance with Regulation S. At no time shall
Party B offer or sell the Shares unless they are
registered under the Securities Act or are exempt from
the registration requirements of the Securities Act and
any applicable state or foreign securities laws or
regulations.
d. Party B will, after expiration of the Restricted Period,
offer, sell, pledge or otherwise transfer the Shares
only pursuant to registration under the Securities Act
or an available exemption therein and, in accordance
with all applicable state and foreign securities laws.
e. Party B has not in the United States, engaged in, and
prior to the expiration of the Restricted Period will
not directly or indirectly engage in, any short selling
of or any hedging or similar transaction with respect to
the Shares, including without limitation, any put, call
or other option transaction, option writing or equity
swap.
f. Neither Party B nor or any person acting on its behalf
has engaged, nor will engage, in any directed selling
efforts to a U.S. Person with respect to the Shares and
Party B and any person acting on its behalf have
complied and will comply with the "offering
restrictions" requirements of Regulation S under the
Securities Act.
g. The transactions contemplated by this contract have not
been pre-arranged with a buyer located in the United
States or with a U.S. Person, and are not part of a plan
or scheme to evade the registration requirements of the
Securities Act.
h. Neither Party B nor any person acting on its behalf has
undertaken or carried out any activity for the purpose
of, or that could reasonably be expected to have the
effect of, conditioning the market in the United States,
its territories or possessions, for any of the Shares.
Party B agrees not to cause any advertisement of the
Shares to be published in any newspaper or periodical or
posted in any public place and not to issue any circular
relating to the Shares, except such advertisements that
include the statements required by Regulation S under
the Securities Act, and only offshore and not in the
U.S. or its territories, and only in compliance with any
local applicable securities laws.
9. Legends. Each certificate representing the shares of common stock
included in the Shares and each warrant certificate representing the
warrants included in the Unit shall be endorsed with the following
legends, in addition to any other legend required to be placed
thereon by applicable federal or state securities laws:
4
a. "THESE SECURITIES ARE BEING OFFERED TO INVESTORS WHO ARE NOT
U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ("THE SECURITIES ACT")) AND WITHOUT
REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON
REGULATION S PROMULGATED UNDER THE SECURITIES ACT."
b. "TRANSFER OF THESE SECURITIES IS PROHIBITED, EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO
AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS
MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT."
10. Stop Transfer Orders. Party B consents to Party A making a notation
on its records or giving instructions to any transfer agent of Party
A in order to implement the restrictions on transfer of the Shares
set forth in this agreement and as required by Regulation S.
11. PATRIOT Act. Party B is not, nor is it acting as an agent,
representative, intermediary or nominee for, a person identified on
the list of blocked persons maintained by the Office of Foreign
Assets Control, U.S. Department of Treasury. In addition, Party B
has complied with all applicable U.S. laws, regulations, directives,
and executive orders relating to anti-money laundering , including
but not limited to the following laws: (1) the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56; and
(2) Executive Order 13224 (Blocking Property and Prohibiting
Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism) of September 23, 2001. Party B shall ensure that it
obtains a representation similar to the foregoing from any
transferee of the Shares of Party A's Common Stock purchased by
Party B pursuant to this contract.
5
Further, this transaction and any resale of Shares by Party B
to transferees shall not violate the statutes mentioned in
this representation.
12. Transfers Must Comply with Regulation S. Notwithstanding
anything contained herein to the contrary, Party A may refuse
to register any transfer of the Shares of common stock of
Party A that are not made in accordance with Regulation S,
pursuant to the registration under the Securities Act or
pursuant to an available exemption from registration.
Article 6: Indemnity
Party B understands and acknowledges that Party A is relying on the
representations made by Party B herein, and, thus, hereby agrees to indemnify
Party A, and its respective officers and directors, agents, attorneys, and
employees, and agrees to hold them harmless from and against any and all loss,
damage, liability, or expense, including reasonable attorney's fees, that it or
any of them may suffer, sustain, or incur by reason of or in connection with any
misrepresentation or breach of warranty or agreement made by Party A under this
contract.
Party A: Minghua Group International Holdings Limited
By: /s/
--------------------------------
Name:
Title:
Party B: Beijing Xxxxx Xxxx Real Estate Development Co., Ltd.
By: /s/
--------------------------------
Name:
Title:
This contract is signed January 29, 2004 in Shenzhen.
6
