SHARE PURCHASE AND SUBSCRIPTION AGREEMENT by and among Ixworth Enterprises Limited Beijing Ninetowns Network and Software Co., Ltd. Mr. Fan Hui Yang Zhi Sheng Limited Ample Spring Holdings Limited BeijingBaichuan Tongda Science and Technology...
Execution
Version
Exhibit
4.72
by
and among
Ixworth
Enterprises Limited
Beijing
Ninetowns Network and Software Co., Ltd.
Mr.
Fan Xxx Xxxx
Xxx
Xxxxx Limited
Ample
Spring Holdings Limited
BeijingBaichuan
Tongda Science and
Technology Development Co., Ltd.
and
Xx.
Xxxx Peiji and Xx. Xxxx Xxxxx
April
9, 2007
This
SHARE PURCHASE AND SUBSCRIPTION AGREEMENT (this
“Agreement”) is entered
into on April 9, 2007 by and among the following parties:
A. Ixworth
Enterprises Limited, a British
Virgin Islands company (the “Purchaser”);
B. Beijing
Ninetowns Network and Software Co., Ltd., a wholly foreign-owned enterprise established
under the laws of the PRC
(the “WFOE”);
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C.
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Mr.
Fan Xxx Xxxx (“Mr.
Fan”);
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D.
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Xxx
Xxxxx Limited, a British Virgin
Islands company (“Xxx
Xxxxx”);
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E. Ample
Spring Holdings Limited, a British
Virgin Islands company (the “Company”);
F. BeijingBaichuan
Tongda Science and
Technology Development Co., Ltd.,a limited liability
company formed under the laws of the PRC
(“Baichuan”);
and
G. Xx.Xxxx
Peiji and Xx.Xxxx
Lijun (each a “Baichuan
Principal” and collectively, the
“Baichuan
Principals”).
WHEREAS,
Mr. Fan is the sole shareholder of
Xxx Xxxxx and Xxx Xxxxx owns the entire issued share capital of the
Company.
WHEREAS,
the Baichuan Principals
collectively own all the equity interests in Baichuan.
WHEREAS,
to further develop and expand the
Purchaser’s business in the PRC, the Purchaser desires to ensure that certain
cooperation and service agreements are entered into by and among the WFOE,
Baichuan and the Baichuan Principals, as applicable.
WHEREAS,
subject to the terms and conditions
hereof, the Purchaser desires to acquire from Xxx Xxxxx thirty-five (35)
issued
and outstanding ordinary shares of the Company and to subscribe for thirty-five
(35) new ordinary shares to be issued by the Company, in order for the Purchaser
to hold seventy percent (70%) of the Company’s fully-diluted share capital, and
Xxx Xxxxx desires to sell, and the Company desires to allot and issue such
ordinary shares to the Purchaser.
NOW,
THEREFORE, in consideration of the
mutual promises, covenants and conditions hereinafter set forth, the parties
hereto agree as follows:
ARTICLE
1
DEFINITIONS.
1.1 Certain
Defined Terms. As used in this Agreement,
the following terms shall have the following respective meanings:
“Action”
shall
mean any action, suit, proceeding, claim, arbitration or
investigation.
“Affiliate”
shall mean, with respect to any given Person, a Person that Controls, is
Controlled by, or is under common Control with the given Person, whereas
“Control” means, when
used with respect to any Person, the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of
Equity
Rights, by contract or otherwise, and the terms “Controlling” and “Controlled”
have
meanings correlative to the
foregoing.
“Board”
shall
mean the board of directors of the Company.
“Business
Day”
or “business
day”shall mean any day
that is not a Saturday, Sunday,
legal holiday or a day on which banks are required to be closed in the British
Virgin Islands, Hong Kong or the PRC.
“Encumbrance”
shall mean any lien, encumbrance, hypothecation, right of others, proxy,
voting
trust, or similar arrangement, pledge, security interest, collateral security
agreement, mortgage, objection, title defect, title retention agreement,
option,
restrictive covenant, restriction on transfer, right of first refusal or
first
offer, or any other comparable interest of any nature whatsoever.
“Environmental
Claim” shall mean any claim, action, cause of action,
investigation, or notice
(written or oral) by any person or entity alleging potential liability arising
out of, based on, or resulting from: (i) the presence, or release into the
environment, of any Material of Environmental Concern at any location; or
(ii)
circumstances forming the basis of any violation, or alleged violation, of
any
Environmental Law.
“Environmental
Laws” shall mean all laws and regulations of any
jurisdiction where a Group
Company is or has engaged in business activities relating to pollution or
protection of human health or the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of any Materials of Environmental Concern.
“Group
Companies” shall mean the Company and Baichuan (each
a “Group Company”), unless
the text
specifically indicates otherwise.
2
“Government
Authority” shall mean any court, tribunal, arbitrator,
authority, agency,
commission, official or other instrumentality, or governmental or
quasi-governmental entity, or any regional, provincial, county, city or other
political subdivision or regulatory body of the PRC, Hong Kong or British
Virgin
Islands.
“IAS”
shall
mean
the International Accounting Standards.
“
ICP License”
shall mean the Internet Content Provider
License issued by the Ministry of
Information Industry of the PRC.
“Material
Adverse Effect” means any change or effect (or aggregation
of changes and effects) that
is materially adverse to the business, financial condition, prospects, assets,
liabilities or operations of any Group Company.
“Materials
of Environmental
Concern” shall mean chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum,
and
petroleum products.
“Person”
shall
mean any corporation, company, partnership, limited liability company, other
business organization or entity, and any individual.
“PRC”
shall
mean
the People’s Republic of China, excluding Hong Kong, the Macau Special
Administrative Region, and the islands of Taiwan.
“PRC
GAAP”shall mean the accounting
principles generally
accepted in the PRC.
“Proprietary
Rights” shall mean any and all patents, patent rights
and applications therefor
and all reissues, re-examinations, continuations, continuations-in-part,
divisions, and patent term extensions thereof, inventions (whether patentable
or
not), discoveries, improvements, concepts, innovations, industrial models,
registered and unregistered copyrights, copyright registrations and
applications, author’s rights, works of authorship (including artwork of any
kind and software of all types in whatever medium, inclusive of computer
programs, source code, object code and executable code, and related
documentation), URLs, web sites, web pages and any part thereof, technical
information, know-how, trade secrets, drawings, designs, design protocols,
specifications for parts and devices, quality assurance and control procedures,
design tools, manuals, research data concerning historic and current research
and development efforts, including the results of successful and unsuccessful
designs, databases and proprietary data, proprietary processes, proprietary
rights, technology, engineering, discoveries, formulae, algorithms, operational
procedures, trade names, trade dress, trademarks, domain names, service marks,
mask works, and registrations and applications therefor, the goodwill of
the
business symbolized or represented by the foregoing, customer lists and other
proprietary information and common law rights.
“RMB”
shall
mean
the lawful currency of the PRC.
3
“Securities
Act”
shall mean the U.S. Securities Act of 1933,
as amended.
“Shares”
shall
mean the ordinary shares of the Company, par value US$1.00 per
share.
“Shareholders
Agreement” shall mean the
shareholders agreement to be entered into among the Company, the Purchaser,
Mr.
Fan and Xxx Xxxxx;
“Subsidiary”
or
“subsidiary”shall
mean, with respect to any subject entity (the
“subject entity”), (i) any company, partnership or other entity (x) more than
fifty percent (50%) of whose shares or other interests entitled to vote in
the
election of directors, or (y) more than a fifty percent (50%) interest in
the
profits or capital of such entity, are owned or controlled directly or
indirectly by the subject entity or through one or more Subsidiaries of the
subject entity; (ii) any entity whose assets, or portions thereof, are
consolidated with the net earnings of the subject entity and are recorded
on the
books of the subject entity for financial reporting purposes in accordance
with
IAS; or (iii) any entity with respect to which the subject entity has the
power
to otherwise direct the business and policies of that entity directly or
indirectly through another subsidiary.
“Transaction
Agreements” shall mean this Agreement, the Shareholders
Agreement and the Baichuan
Restructure Documents.
“US$”
shall
mean
the lawful currency of the United States of America.
“Warrantors”
shall mean the Company, Baichuan, Xxx Xxxxx, Mr. Fan and the Baichuan
Principals, unless the text specifically indicates otherwise.
1.2 Definitions.
The meanings of the following terms
are specified in the Sections set forth below:
Definition
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Location
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Baichuan
Principals
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Preamble
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Baichuan
Replacement Shareholders
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Section
6.1.11
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Baichuan
Restructure Documents
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Section
6.1.12
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Business
Plan
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Section
6.1.13
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Claim
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Section
9.2.1
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Closing
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Section
3.1.1
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Closing
Date
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Section
3.1.1
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Damages
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Section
9.1
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Deferred
Investment
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Section
2.2.4
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Disclosure
Schedules
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Article
4
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4
Definition
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Location
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Employment
Contracts
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Section
4.11.1
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Financial
Statements
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Section
4.6
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Governmental
Authorizations
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Section
4.4.1
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HKIAC
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Section
11.13
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Holdback
Amount
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Section
2.2.3
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Inbound
Technology Licenses
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Section
4.10.4
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Indemnified
Persons
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Section
9.1
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Knowledge
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Article
4
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New
Shares
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Section
2.1.2
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New
WFOE
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Section
2.2.4
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Outbound
Technology Licenses
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Section
4.10.4
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Public
Software
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Section
4.10.14
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Purchase
Price
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Section
2.2
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Sale
Shares
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Section
2.1.1
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Subscription
Price
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Section
2.2
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Technology
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Section
4.10.1
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Technology
Agreements
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Section
4.10.4
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Terms
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Section
10.1
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1.3 Interpretation.
Unless the context otherwise
requires, any noun or pronoun utilized in this Agreement is deemed to include
the plural as well as the singular and to cover all genders. Unless otherwise
specified, words such as “herein,” “hereof,” “hereby,” “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any
particular clause or sub-clause of this Agreement. References to “Articles,”
“sections” or “provisions” refer to particular Articles, sections or provisions
of this Agreement. Unless otherwise specified, references to the word
“including” shall be deemed to be followed by words “without limitation,” “but
not limited to,” or words of similar import as applicable.
1.4 Warrantor
Obligations. Where this Agreement or
any Transaction Agreement places an obligation on any Warrantor, each other
Warrantor shall use its best efforts to cause the obligated Warrantor to
perform
such obligation.
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ARTICLE
2
AGREEMENT
TO PURCHASE AND SUBSCRIBE SHARES.
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2.1
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Purchase
and Subscription of Shares.
Subject to the terms and conditions
hereof:
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2.1.1 Purchase
of Shares. Xxx Xxxxx shall sell, transfer, assign, and deliver
to the Purchaser thirty-five (35) Shares held by Xxx Xxxxx free and clear
of all
Encumbrances, and the Purchaser shall purchase and acquire such thirty-five
(35)
Shares from Xxx Xxxxx at the Closing (the “Sale
Shares”); and
2.1.2 Subscription
of Shares. The Company shall allot and issue, and the
Purchaser shall subscribe from the Company, thirty-five (35) Shares at the
Closing (the “New Shares”).
2.2 Consideration.
The consideration for the Sale
Shares shall be RMB105,000,000 (the “Purchase
Price”). The consideration for the New Shares shall
be RMB105,000,000 (the “Subscription
Price”). The parties hereto acknowledge and agree
that no consideration other than the Purchaser’s payment of the Purchase Price
and the Subscription Price shall be required in respect of any transaction
concerning the Company under this Agreement. The Purchase Price and the
Subscription Price shall be paid as follows:
2.2.1 An
amount equal to RMB85,000,000 shall be paid to Xxx Xxxxx at the
Closing (as defined below) in the manner set forth in Section 3.3.1;
2.2.2 An
amount equal to RMB2,500,000 shall be paid to the Company at the
Closing in the manner set forth in Section 3.3.2;
2.2.3 An
amount equal to RMB20,000,000 (the “Holdback Amount”) shall be
retained by the
Purchaser to secure the indemnification obligations of the Warrantors under
this
Agreement. The Holdback Amount shall be released to Xxx Xxxxx in accordance
with
Section 9.3; and
2.2.4 An
amount equal to RMB102,500,000 (the “Deferred Investment”) shall be
paid to the
Company by the Purchaser at its sole discretion in accordance with capital
requirement of the Company. The Deferred Investment shall be paid to the
Company
in any case no later than one (1) year after the successful establishment
of a
wholly foreign-owned enterprise in the PRC (the “New
WFOE”) by the Company and the execution of an
exclusive business cooperation agreement between the New WOFE and Baichuan,
which supersedes the exclusive business cooperation agreement entered into
among
the WFOE, Baichuan and the Baichuan Principals prior to the Closing pursuant
to
Section 6.1.12 hereto.
ARTICLE
3
CLOSING.
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3.1
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Closing.
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3.1.1 Subject
to the satisfaction or waiver of all the conditions in ARTICLE 6
and ARTICLE 7, the purchase of the Sale Shares and the subscription of the
New
Shares (the
6
“Closing”)
shall
take place simultaneously and remotely through facsimile and other electronic
transmissions or in such other manner and at such place as may be designated
by
the Purchaser, Xxx Xxxxx and the Company on April 20, 2007 or on such date
that
the Purchaser, Xxx Xxxxx and the Company may agree in writing (the
“Closing Date”).
3.1.2 Except
as otherwise specified, Xxx Xxxxx shall deliver to the Purchaser
or its counsel the documents and assurances required under ARTICLE 6 on or
before the Closing Date.
3.2 Deliveries
at the Closing. At the Closing, Xxx
Xxxxx and the Company shall deliver the following items to the
Purchaser:
3.2.1 share
certificate(s) duly issued to the Purchaser representing an
aggregate of seventy (70) Shares;
3.2.2 a
copy of the Company’s register of members as at the Closing Date and
giving effect to the transactions contemplated hereby, and a copy of the
Company’s register of directors as at the Closing Date, both certified by a
director of the Company to be a true and complete copy thereof;
3.2.3 a
certificate dated the Closing Date signed by Xx. Xxxx Peiji and Xx.
Xxxx Lijun, certifying that all of the conditions set forth in Section 6.1,
as
applicable, have been fulfilled, and attaching and certifying as true and
complete a copy of the Company’s Memorandum and Articles of Association as in
effect on the Closing Date;
3.2.4 a
compliance certificate dated the Closing Date signed by each of the
Warrantors certifying that the representations and warranties made by such
Warrantor as provided in ARTICLE 4 hereof, to the extent applicable, are
true,
correct and complete in all material respects on the Closing Date;
3.2.5 a
certificate of good standing issued by the Registrar of Corporate
Affairs of British Virgin Islands dated no more than ten (10) days prior
to the
Closing certifying that the Company is on the Register of Companies, has
paid
all required fees, annual fees and penalties that are due and payable and
is not
in voluntary liquidation;
3.2.6 a
legal opinion of the Company’s British Virgin Islands counsel covering,
among other things, the capitalization of the Company, in form and substance
satisfactory to the Purchaser and its legal counsel, dated the Closing Date
and
addressed to the Purchaser;
3.2.7 a
legal opinion of the Company’s PRC counsel covering, among other
things, the establishment and equity transfer of Baichuan and the validity
of
the Baichuan Restructure Documents, in form and substance satisfactory to
the
Purchaser and its legal counsel, dated the Closing Date and addressed to
the
Purchaser;
3.2.8 a
legal opinion of the Company’s Hong Kong counsel covering, among other
things, the validity and enforceability of the provisions hereto, in form
and
substance satisfactory to the Purchaser and its legal counsel, dated the
Closing
Date and addressed to the Purchaser; and
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3.2.9 Board
and members resolutions of the applicable Group Companies approving
the transactions contemplated herein and the execution of the Transaction
Agreements by the appropriate Group Company.
3.3 Proceedings
at the Closing. At
the Closing, against
simultaneous performance in full by Xxx Xxxxx and the Company of the obligations
in Section 3.2,
3.3.1 The
Purchaser shall pay the amount required by Section 2.2.1 in U.S.
Dollars via wire transfer of immediately available funds to one (1) bank
account, which shall be designated in writing by Xxx Xxxxx not less than
five
(5) Business Days before the Closing; and
3.3.2 The
Purchaser shall pay the amount required by Section 2.2.2 in U.S.
Dollars via wire transfer of immediately available funds to one (1) bank
account, which shall be designated in writing by the Company not less than
five
(5) Business Days before the Closing.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF THE WARRANTORS.
Unless
specifically indicated otherwise, the Warrantors hereby jointly
and severally represent and warrant to the Purchaser that the statements
in this
ARTICLE 4, except as set forth in the Disclosure Schedules (the
“Disclosure Schedules”)
attached to this Agreement as Schedule I (the contents of which
shall also be deemed to be representations and
warranties hereunder), are all true, correct and complete on the date hereof
and
on the Closing Date. For purposes of this ARTICLE 4, any reference to a party’s
“Knowledge” means such
party’s best knowledge and if applied to an entity, means such entity’s best
knowledge, after due and diligent inquiries of officers, directors, and other
employees of such party reasonably believed to have knowledge of the matter
in
question.
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4.1
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Organization,
Good Standing and Qualification.
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4.1.1 The
Company is duly organized, validly existing and in good standing
under, and by virtue of, the laws of the place of its incorporation or
establishment and has all requisite power and authority to own its properties
and assets and to carry on its business as now conducted and as presently
proposed to be conducted. The Company is qualified to do business and is
in good
standing in each jurisdiction where it currently operates and failure to
be so
qualified would have a Material Adverse Effect on its financial condition,
business, prospects or operations in such jurisdiction.
4.1.2 Baichuan
is a company duly organized and existing under the laws of the
PRC, and has all powers and all governmental licenses, permits, authorizations,
consents and approvals required to carry on its business as now conducted.
Baichuan has paid all such governmental fees, taxes and stamp duty required
to
be paid by it under applicable PRC and other laws prior to or upon Closing.
Copies of the business license, Articles of Association, and other
organizational documents of Baichuan, as amended to date, have been delivered
to
the Purchaser and are true, correct and complete and are in full force and
effect.
8
4.2 Due
Authorization. All corporate action on the
part of each Group Company, their respective officers, directors and
shareholders necessary for the authorization, execution and delivery of each
Transaction Agreement, the authorization, issuance, and delivery of all of
the
Shares, the performance of their respective obligations under each Transaction
Agreement and all other agreements, instruments and documents executed and
delivered in connection with the transactions contemplated hereby, has been
taken or will be taken prior to Closing. The Transaction Agreements are valid
and binding obligations of each Group Company who is a party thereto,
enforceable against such Group Company in accordance with their respective
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium, reorganization and similar laws affecting creditors’
rights generally and to general equitable principles. The Shares are not
subject
to any preemptive rights, rights of first refusal, or liens of any kind except
for rights imposed under the Transaction Agreements.
4.3 Capitalization.
The authorized share capital of
the Company will consist of the following immediately prior to the
Closing:
4.3.1 Shares.
A total of fifty thousand (50,000) Shares
are authorized, of which sixty-five (65) Shares are issued and
outstanding.
4.3.2 Options,
Warrants, Available Shares. Except the Transaction
Agreements, there are no options, warrants, conversion privileges or other
rights or agreements outstanding or under which the Company is or may become
obligated to issue any securities of any class or series. None of the Company’s
outstanding shares, and no shares issuable upon exercise, conversion, or
exchange of any outstanding options or other shares issuable by the Company,
are
subject to any preemptive rights, rights of first refusal, or other rights
to
purchase such shares (whether in favor of the Company or any other person),
pursuant to any agreement or commitment to which the Company is a party or
of
which the Company is aware, except for the rights imposed in the Transaction
Agreements.
4.3.3 Outstanding
Security Holders. Disclosure
Schedule 4.3.3 sets forth a complete list of all
outstanding shareholders, option holders and other security holders of the
Company, and their ownership percentage, on a fully diluted basis, next to
each
shareholder’s, option holder’s and other security holder’s name immediately
before the Closing.
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4.4
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Baichuan.
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4.4.1 All
consents, approvals, orders, permits, licenses, authorizations or
registrations, qualifications, designations, declarations or filings with
any
Governmental Authority (“Governmental
Authorizations”) required under PRC laws for the
due and proper establishment and operation of Baichuan as currently operated,
or
contemplated to be operated, have been duly obtained from the appropriate
PRC
authorities and are in full force and effect.
4.4.2 All
filings and registrations with the PRC authorities required in
respect of Baichuan and its operations as currently operated, including the
registrations with the State Administration of Industry and Commerce, the
Ministry of Information Industry, tax
9
bureau,
customs authorities, product registration authorities and health
regulatory authorities, as applicable, have been duly completed in accordance
with the relevant rules and regulations.
4.4.3 Baichuan
has not received any letter or notice from any relevant
authority notifying Baichuan of the revocation of any Governmental
Authorization, permit or license issued to it for non-compliance or the need
for
compliance or remedial actions in respect of the activities carried out directly
or indirectly by Baichuan.
4.4.4 With
respect to any land use right, building, property and investment
held or leased by Baichuan, it has exclusive, full and unimpaired legal and
beneficial ownership of its rights, leasehold interests, property and
investments free from any mortgages or security interests of any nature,
third
party rights, conditions, orders or other restrictions and has obtained all
necessary approvals and effected all necessary registrations with government
authorities with respect thereto.
4.4.5 Baichuan
has been conducting its business activities within the permitted
scope of business in its business license or is otherwise operating its business
in compliance with all relevant legal requirements, including producing,
processing and/or distributing products with all requisite licenses, permits
and
approvals granted by competent PRC authorities.
4.4.6 No
Warrantor has any valid reason to believe that any Governmental
Authorization, license or permit requisite for the conduct of any part of
Baichuan’s business, which is subject to periodic renewal, will not be granted
or renewed by the relevant PRC authorities.
4.4.7 All
applicable laws and regulations with respect to the opening and
operation of foreign exchange accounts and foreign exchange activities of
Baichuan have been complied with, and all requisite approvals from the State
Administration of Foreign Exchange in relation thereto have been duly
obtained.
4.4.8 With
regard to employment and labor matters, Baichuan has complied with
all applicable PRC laws and regulations, including laws and regulations
pertaining to welfare funds, social benefits, medical benefits, insurance,
retirement benefits, pensions, and the like.
4.4.9 Baichuan
owns, leases, rents or otherwise legally possesses all
properties and assets, including Proprietary Rights, necessary for its
operations as presently conducted.
4.4.10 The
equity interests of Baichuan are owned exclusively by the Baichuan
Principals and in the amounts and percentages set forth in Disclosure Schedule 4.4.10. Baichuan does not
have any shareholder, option holder or other security holder who is not set
forth in Disclosure Schedule 4.4.10.
10
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4.5
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Valid
Issuance of Shares.
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4.5.1 The
Shares, when issued, sold and delivered in accordance with the terms
of this Agreement, will be duly authorized and validly issued, fully paid,
non-assessable, and free of any liens.
4.5.2 All
presently outstanding Shares of the Company are duly and validly
issued, fully paid and non-assessable and free of any liens, and such Shares,
and all outstanding shares, options and other securities of the Company,
have
been issued in full compliance with the requirements of all applicable
securities laws and regulations, including the Securities Act, and all other
anti-fraud and other provisions of applicable securities laws and
regulations.
4.6 Financial
Statements. Disclosure Schedule
4.6 attaches un-audited
balance sheets of Baichuan as of February 28, 2007, and un-audited cash flow
statements and un-audited income statements of Baichuan for the 14-month
period
then ended (all such financial statements being collectively referred to
herein
as the “Financial Statements”). Such Financial
Statements (a) accord with the books and records of
Baichuan, (b) are true, correct and complete and present fairly the financial
condition and state of affairs of Baichuan at the date or dates therein
indicated and the results of operations for the period or periods therein
specified, and (c) have been prepared in accordance with IAS or PRC GAAP
applied
on a consistent basis, except, as to the un-audited financial statements,
for
the omission of notes thereto and normal year-end audit adjustments.
Specifically, but not by way of limitation, the respective balance sheets
included in the Financial Statements disclose all of Baichuan’s debts,
liabilities and obligations of any nature, whether due or to become due,
on
their respective dates (including absolute, accrued, and contingent liabilities)
to the extent such debts, liabilities and obligations are required to be
disclosed in accordance with the IAS or PRC GAAP, and Baichuan has good and
marketable unencumbered title to all assets set forth on the balance sheets
included in the Financial Statements, except for such assets as have been
spent,
sold or transferred in the ordinary course of business since their respective
dates.
4.7 Liabilities.
Except as described in
Disclosure Schedule 4.7, no Group
Company has any indebtedness for borrowed money that it has directly or
indirectly created, incurred, assumed, or guaranteed, or with respect to
which
such Group Company has otherwise become directly or indirectly liable, except
as
reflected on the Financial Statements and none of the Group Companies is
unable
to pay its debts as and when they fall due or is subject to any insolvency
proceedings or has had a receiver, liquidator or administrator appointed
over
its assets.
4.8 Title
to Properties and Assets. Each Group
Company has good and marketable title to all respective properties and assets
reflected on the Financial Statements, in each case subject to no mortgage,
pledge, lien, encumbrance, security interest or charge of any kind. With
respect
to the property and assets it leases, each Group Company and the lessor is
in
compliance with such leases and such Group Company holds valid leasehold
interests in such assets free of any liens, encumbrances, security interests
or
claims of any party other than the lessors of such property and
assets.
4.9 Activities
Prior to Closing. Except as described
in Disclosure Schedule 4.9, none
of the following events has occurred with respect to any Group Company prior
to
the Closing:
11
4.9.1 any
declaration or payment of any dividend, or authorization or payment
of any distribution upon or with respect to any class or series of its capital
shares or any other equity interest;
4.9.2 any
incurrence of indebtedness for money borrowed or any other
liabilities;
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4.9.3
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any
loans or advances to any
person;
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4.9.4 any
sale, exchange, assignment, or other disposition of any assets or
rights (including any Proprietary Rights or other intangible assets) or creation
of any encumbrance on any of its assets or rights;
4.9.5 any
commercial agreement or transaction with any of its officers,
directors or employees or any entity controlled by any of such individuals
or
with its shareholders or persons related to such shareholders;
4.9.6 any
damage, destruction or loss, whether or not covered by insurance,
affecting its assets, properties, financial condition, operating results,
prospects or business as presently conducted and as presently proposed to
be
conducted;
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4.9.7
|
any
waiver of a valuable right or of a debt owed to
it;
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4.9.8 any
satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation that exceeds RMB100,000;
4.9.9 any
change or amendment to a material contract or arrangement by which
any Group Company is bound or subject;
4.9.10 any
change in any compensation arrangement or agreement with any
executive-level employee, contractor or director;
4.9.11 any
resignation or termination of any of its directors or key officers;
or
4.9.12 any
other event or condition of any character which would materially
affect its assets, properties, financial condition, operating results or
business.
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4.10
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Intellectual
Property; Status of Proprietary Rights.
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4.10.1 Each
Group Company (i) owns free and clear of all claims, security
interests, liens and other encumbrances, or (ii) has the valid right or license
to use, all products, materials, software, tools, software tools, computer
programs, specifications, source code, object code, improvements, discoveries,
user interfaces, mask works, internet domain names, enterprise or business
names, logos, data, information and inventions, and all documentation and
media
constituting, describing or relating to the foregoing that is required or
used
in its business as currently conducted together with all Proprietary Rights
in
or to all of the foregoing (collectively, the “Technology”). Disclosure
Schedule 4.10.1 contains a true,
complete and accurate list of all Proprietary Rights of the Group Companies
of
which patents have been filed or proposed to be
12
filed
and are presently used by each Group Company or necessary for the
conduct of each Group Company’s business as currently being conducted or
proposed to be conducted, and such Group Companies own, or have the right
to use
under the agreements, all the Proprietary Rights as set out in Disclosure Schedule 4.10.1.
4.10.2 The
possession, development, production, manufacturing, use, offering,
marketing, licensing, distribution, sale and other exploitation by each Group
Company of any Technology as now conducted does not (i) infringe, violate,
misappropriate or otherwise interfere or conflict with any patent and trademark
rights or (ii) infringe, violate, misappropriate or otherwise interfere or
conflict with any other rights, title or interest of any third
party.
4.10.3 No
Group Company has received any notice or claim (whether written,
verbal or otherwise) that (i) contests or challenges in any manner whatsoever
such Group Company’s ownership or other rights in any Technology, (ii) contests
or challenges in any manner whatsoever the validity or enforceability of
any of
the Proprietary Rights of such Group Company in the Technology, or (iii)
claims
or otherwise asserts that such Group Company, the Technology or the conduct
of
such Group Company’s business as currently conducted infringes, violates,
misappropriates or otherwise interferes or conflicts with any right, title
or
interest of any third party.
4.10.4 There
are no outstanding options, material licenses or agreements
granting third parties any right to own or use any Technology owned by any
Group
Company (“Outbound Technology
Licenses”), except as disclosed in Disclosure Schedule
4.10.4. The material licenses
or other agreements giving a Group Company the right to use a certain Technology
are listed in Disclosure Schedule 4.10.4 (“Inbound
Technology
Licenses”). True and complete copies of all
Outbound Technology Licenses and Inbound Technology Licenses (collectively,
the
“Technology Agreements”) have been
provided to the Purchaser.
4.10.5 To
the Knowledge of the Warrantors, all Technology Agreements are valid,
binding and in full force and effect with respect to each Group Company,
and
each other party thereto. All parties to the Technology Agreements have
performed in all material respects their obligations thereunder, and neither
any
Group Company nor any other party thereto is in material default thereunder,
nor
has there occurred any material event or circumstance that with notice or
lapse
of time or both would constitute a default or event of default on the part
of
such Group Company or any other party thereto or give to any other party
thereto
the right to terminate or modify any Technology Agreement. No Group Company
has
received written notice that any party to any Technology Agreement intends
to
cancel or terminate any Technology Agreement.
4.10.6 No
Group Company is or will be as a result of the execution or delivery
of this Agreement and the other Transaction Agreements to which it is a party,
the consummation of the transactions contemplated hereby and thereby or the
performance of obligations hereunder or thereunder, or as a result of conducting
its business as currently contemplated, in breach of any license or other
agreement relating to Technology.
4.10.7 No
Warrantor is aware of any third party that is infringing upon any
Technology.
13
4.10.8 To
the Knowledge of the Warrantors, no Group Company’s employees,
contractors or consultants is, nor is any Warrantor, obligated under any
contract or agreement, or subject to any judgment, decree or order of any
court
or administrative agency, that would interfere with the use of his or her
best
efforts to promote the interests of such Group Company or that would conflict
with such Group Company’s business.
4.10.9 Each
Group Company’s registered patents, copyrights, trademarks and
service marks are in full force and effect, are not subject to any taxes,
and
each Group Company has paid all the maintenance fees with respect
thereto.
4.10.10 No
Warrantor nor any current or former employee, contractor or consultant
of a Group Company has developed any Technology that is subject to any agreement
under which such employee, contractor or consultant has assigned or otherwise
granted to any third party any rights in or to such Technology.
4.10.11 No
royalties, fees or other payments are payable by any Group Company to
any third party by reason of the ownership, possession, sale, marketing,
use or
other exploitation of any Technology to the extent necessary for the conduct
of
such Group Company’s business as it is now conducted and none (or no additional
amounts) will be payable as a result of the consummation of the transactions
contemplated by this Agreement.
4.10.12 Each
Group Company maintains and diligently enforces commercially reasonable
procedures to protect all confidential information relating to the Technology.
No Group Company has deposited any source code or other Technology in any
escrow
account or otherwise delivered such source code or other Technology to any
escrow agent.
4.10.13 No
government funding or facilities, facilities of any university,
college or other educational institution or public research center, or funding
or facilities from any third party was used in the development of any
Technology.
4.10.14 None
of the software or firmware embedded or included in or on any
hardware or other products sold by a Group Company or any other software
or
firmware that a Group Company now or in the future intends to sell or license
either as a separate product or bundled with any other product or service,
is
required to be (i) disclosed or distributed in source code form, (ii) licensed
for the purpose of making derivative works, or (iii) redistributable at no
charge as the result of the use or incorporation of any Public Software (as
defined below) in any Technology, the use of any Public Software in connection
with the development of any Technology or for any other reason. For the purpose
of this Section 4.10, the term “Public
Software” means any software that contains, or is
derived (in whole or in part) from any software that is distributed as free
software, open source software or similar licensing or distribution
models.
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4.11
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Contracts.
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4.11.1 Material
Contracts and Obligations. All
agreements, contracts, leases, licenses, instruments, commitments (verbal
or
written), indebtedness, liabilities and other obligations to which any Group
Company is a party or by which it is bound, that (i) are material to the
conduct
and operations of its business and properties; (ii) involve any of the officers,
14
consultants,
directors, employees or shareholders of any Group Company
(the “Employment Contracts”); or (iii)
obligate any Group Company to share, license or develop any
material product or technology, are listed in Disclosure
Schedule 4.11 and have been provided to the Purchaser
and its counsel. For purposes of this Section 4.11, “material” shall mean
any agreement,
contract, indebtedness, liability, arrangement or other obligation either
(i)
having an aggregate value, cost, liability or amount of RMB500,000 or more,
or
(ii) not terminable upon no more than thirty (30) days notice without penalty
or
obligation, unless the aggregate value, cost, liability thereof is less than
RMB500,000.
4.11.2 Validity
and Status. With the exception of the
Employment Contracts, all material contracts listed in Disclosure Schedule 4.11 are legally valid
and
binding, in full force and effect, and enforceable in accordance with their
respective terms against the parties thereto. The Employment Contracts are
legally valid and binding, in full force and effect, and enforceable in
accordance with their respective terms against the parties thereto in all
material aspects. There is no existing default or breach by any party thereto
and no Group Company has received any notice or claim or allegation of default
or breach thereof from any party thereto.
4.12 Litigation.
There is no Action pending or
currently threatened against any Group Company, any Group Company’s activities,
properties or assets or against any officer, director or employee of any
Group
Company in connection with such officer’s, director’s or employee’s relationship
with, or actions taken on behalf of, any Group Company. There is no factual
or
legal basis for any such Action that might result, individually or in the
aggregate, in any material adverse change in the business, properties, assets,
financial condition, affairs or prospects of any Group Company. No Group
Company
is a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality and
there is no Action by any Group Company currently pending or which it intends
to
initiate.
4.13 Governmental
Consents. All Governmental
Authorizations on the part of each Group Company required in connection with
the
consummation of the transactions contemplated herein and with the business
of
each Group Company have been obtained and are currently effective. The offer,
sale and issuance of the Shares, in conformity with the terms of this Agreement,
are exempt from the registration and prospectus delivery requirements of
the
Securities Act and all other applicable securities laws and regulations.
4.14 Compliance
with Other Instruments. No Group
Company is in, nor will the conduct of business of any Group Company as proposed
to be conducted result in, any violation, breach or default of any
constitutional document of any Group Company, or in any material respect
of any
term or provision of any mortgage, indenture, contract, agreement or instrument
to which any Group Company is a party or by which it may be bound, or of
any
provision of any judgment, decree, order, statute, rule or regulation applicable
to or binding upon any Group Company. The execution, delivery and performance
of
and compliance with the Transaction Agreements and the consummation of the
transactions contemplated hereby will not result in any such violation, breach
or default, or be in conflict with or constitute, with or without the passage
of
time or the giving of notice or both, either a default under any such
constitutional documents, or in any material respects, any such contract,
agreement or instrument or a violation of any statutes, laws, regulations
or
orders, or an event which results in the creation of any lien, charge or
encumbrance upon any asset of any Group Company.
15
4.15 Registration
Rights. No Group Company has granted
or agreed to grant any Person or entity any registration rights with respect
to
any of the securities of any Group Company.
4.16 Tax
Matters. The provisions for taxes in the respective
Financial Statements are sufficient for the payment of all accrued and unpaid
applicable taxes of each Group Company, whether or not assessed or disputed
as
of the date of each such balance sheet. There have been no extraordinary
examinations or audits of any tax returns or reports by any applicable
governmental agency, and none are threatened or pending. Each Group Company
has
duly filed all tax returns required to have been completed and filed by it
and
paid all taxes shown to be due on such returns in a timely manner except
in such
cases where, individually or in the aggregate, that the failure to file such
returns would not have a Material Adverse Effect on any Group Company. There
are
in effect no waivers of applicable statutes of limitations with respect to
taxes
for any year.
4.17 Obligations
of Management; Labor Agreement and Actions; Employee
Compensation.
4.17.1 Each
employee of each Group Company is identified in Disclosure Schedule 4.17.1 and each executive
level employee is separately identified on the same schedule, and to the
Knowledge of the Warrantors, all of whom are currently devoting one hundred
percent (100%) of his or her working time to the conduct of the business
of a
Group Company. No Warrantor is aware that any such executive level employee
is
planning to work less than full time at a Group Company in the future. To
the
Knowledge of the Warrantors, no executive level employee is currently working
for a competitive enterprise, whether or not such person is or will be
compensated by such enterprise.
4.17.2 No
Group Company is bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or verbal, express or implied,
contract, commitment or arrangement with any labor union, and no labor union
has
requested or has sought to represent any of the employees, representatives
or
agents of a Group Company. There is no strike or other labor dispute involving
a
Group Company pending or threatened (nor has there been since the incorporation
of each Group Company), nor is any Group Company aware of any labor organization
activity involving its employees.
4.17.3 None
of the officers or key employees, or any group of key employees, to
the Knowledge of the Warrantors, intends to terminate his, her or their
employment with a Group Company, nor does such Group Company have a present
intention to terminate the employment of any of the foregoing individuals.
Except as disclosed in Disclosure Schedule
4.17.3, the employment of each officer and employee
of a
Group Company is terminable at the will of such Group Company.
4.17.4 Except
as disclosed in Disclosure Schedule
4.17.4, no Group Company is a party to or bound by any
currently effective employment contract that provides for compensation exceeding
the average of three (3) months’ remuneration of the employee upon termination,
deferred compensation agreement, severance agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement.
16
4.17.5 Each
Group Company has complied with all applicable national, provincial,
local or municipal equal employment opportunity and other laws related to
employment, except for any non-compliance or violation that would not have
a
Material Adverse Effect on any Group Company.
4.18 Employment
Agreements; Consulting Agreements.
Except as disclosed in Disclosure Schedule
4.18, each employee (if applicable) and officer of
each
Group Company has entered into an employment agreement with such Group Company
and each consultant of each Group Company has entered into a consulting
agreement.
4.19 Interested
Party Transactions. Except as
disclosed in Disclosure Schedule 4.19 and other than pursuant
to the Employment Contracts, no officer or
director of a Group Company or any Affiliate of any such person has any
agreement, understanding, or proposed transaction with, or is indebted to,
any
Group Company, nor is any Group Company indebted (or committed to make loans
or
extend or guarantee credit) to any of them. No officer or director of a Group
Company has any direct or indirect ownership interest in any firm or corporation
with which a Group Company is affiliated or with which a Group Company has
a
business relationship, or any firm or corporation that competes with a Group
Company, except that any of the foregoing persons may have record ownership
interest in the Company or own shares in publicly traded companies that may
compete with a Group Company. No Affiliate of any officer or director of
a Group
Company is directly or indirectly interested in any material contract with
a
Group Company. No officer or director of a Group Company or any Affiliate
of any
such person has had, either directly or indirectly, any interest in: (a)
any
person or entity which purchases from or sells, licenses or furnishes to
a Group
Company any goods, property, intellectual or other property rights or services;
or (b) any contract or agreement to which a Group Company is a party or by
which
it may be bound or affected.
4.20 Option
Agreements. Each person who, pursuant to any benefit,
bonus or incentive plan of the Company, holds any option, warrant or right
to
acquire Shares or other securities of the Company, has entered into or is
otherwise bound by, an agreement granting the Company (a) the right to
repurchase any unvested shares for the original purchase price, or to cancel
the
unvested option, warrant or right, in the event the holder’s employment or
services with the Company terminate for any reason, subject to release of
such
repurchase or cancellation right on terms and conditions specified by the
Board,
and (b) a right of first refusal with respect to all such shares. The Company
has furnished to the Purchaser true and complete copies of the forms of all
option agreements, as
set forth onDisclosure Schedule
4.20.
4.21 Minute
Books. The minute books of each Group Company made
available to the Purchaser contain the resolutions of all meetings of directors
and shareholders or owners of each Group Company since their respective time
of
formation, and reflect all transactions referred to in such meetings and
actions
accurately in all material respects.
4.22 Disclosure.
No representation or warranty by any
Warrantor in this Agreement or in any written statement or certificate furnished
or to be furnished to the Purchaser pursuant to any Transaction Agreement
contains or will contain any untrue statement of fact in any material respect
or
omits or will omit to state any fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances in
which
they are made, not misleading
17
in
any material respect. Each of the Warrantors has fully provided the
Purchaser with all the information that the Purchaser has requested for deciding
whether to purchase the Shares.
4.23 Limitation
of Liabilities. The provisions of this
Section 4.23 shall operate to limit the liability of the Warrantors in respect
of any claim for breach of any representation, warranty, covenant, undertaking
and provision under this Agreement. The Parties agree as follows:
4.23.1 The
total amount of liabilities of the Warrantors under this Agreement
for diminution in value of the Shares acquired by the Purchaser hereunder
as a
result of breach of any representation, warranty, covenant, undertaking and
provision under this Agreement by the Warrantors shall not exceed the aggregate
amount of the Purchase Price and the Subscription Price that has been received
by the Warrantors under this Agreement other than as a result of fraud or
intentional breach by the Warrantors.
4.23.2 The
Purchaser shall not bring any claims for breach of any
representation, warranty, covenant, undertaking and provision hereunder until
the aggregate amount of Damages it have incurred or could reasonably be expected
to incur for all such breaches exceeds RMB1,000,000, in which event the
Purchaser shall have the right to claim for the entire amount.
4.23.3 The
Warrantors shall have no liability in respect of the representations
and warranties under this Agreement to the extent that the facts and
circumstances giving rise to the claim have been specifically disclosed with
reasonable details in the Disclosure Schedules and any Transaction
Agreement.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF PURCHASER.
The
Purchaser hereby represents and warrants to the Company as follows,
on the date hereof, and on the Closing Date:
5.1 Authorization.
The Purchaser has full power and
authority to enter into this Agreement and the other Transaction Agreements,
and
each of the Transaction Agreements, when executed and delivered by the
Purchaser, will constitute a valid and legally binding obligation of the
Purchaser, subject as to enforcement of remedies to applicable bankruptcy,
insolvency, moratorium, reorganization and similar laws affecting creditors’
rights generally and to general equitable principles.
5.2 Investigation;
Economic Risk. The Purchaser
acknowledges that it has had an opportunity to discuss the business, affairs
and
current prospects of the Group Companies with their officers, and that it
has
had access to information about the Group Companies that it has requested.
The
Purchaser acknowledges that it is able to fend for itself in the transactions
contemplated by this Agreement and has the ability to bear the economic risks
of
its investment in the Shares.
5.3 Purchase
for Own Account. The Purchaser is
acquiring the Shares for its own account, not as a nominee or agent, and
not
with a view to or in connection with the sale or distribution of any part
thereof. By executing this Agreement, the Purchaser further represents
18
that
it does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participation to such person or
any
third person, with respect to any Shares, other than, with respect to the
Purchaser that is an investment fund, agreements or arrangements governing
the
acquisition, management and disposition of fund assets or interests in general
fund assets with participants in the fund.
ARTICLE
6
CONDITIONS
TO PURCHASER’S OBLIGATIONS AT CLOSING.
6.1 The
obligation of the Purchaser to purchase and subscribe the Shares from
Xxx Xxxxx and the Company, respectively, at the Closing is, unless otherwise
waived in writing by the Purchaser, subject to the fulfillment to the
satisfaction of the Purchaser on or prior to the Closing of the following
conditions:
6.1.1 Representations
and Warranties Correct. The
representations and warranties made by the Warrantors in ARTICLE 4 hereof
shall
be true and correct and complete with respect to the subjects covered therein
when made, and shall be true and correct and complete in all material respects
on the date of the Closing with the same force and effect as if they had
been
made on and as of such date except for such representations and warranties
which
pertain to a specific date (and such representations and warranties shall
be
true, correct and complete on such specific dates).
6.1.2 Performance
of Obligations. Each Warrantor shall
have performed and complied with all agreements, obligations and conditions
contained in this Agreement that are required or contemplated to be performed
or
complied with by it on or before the Closing.
6.1.3 Due
Diligence. The Purchaser shall have completed
its due diligence investigation of the Group Companies, and any corrective
items
identified by the Purchaser shall have been corrected, and the results of
the
due diligence investigation in legal, financial, managerial and technological
aspects shall be satisfactory to the Purchaser. Without limiting the foregoing,
the Purchaser shall have received from the Group Companies all documents
and
other materials requested by the Purchaser for the purpose of examining and
determining the rights in and to any Technology, products and Proprietary
Rights
now used, proposed to be used in, or necessary to, the business as now conducted
and proposed to be conducted by the Group Companies, and the status of its
ownership rights in and to all such Technology, products and Proprietary
Rights
shall be satisfactory to the Purchaser.
6.1.4 Consents
and Waivers. Each Warrantor shall have
obtained any and all consents and waivers necessary or appropriate for
consummation of the transactions contemplated by this Agreement.
6.1.5 Laws.
The offer and sale of the Shares to the
Purchaser pursuant to this Agreement shall be exempt from the registration
and
prospectus delivery requirements of the Securities Act and shall not violate
or
breach or result in a violation or breach of any other applicable laws or
regulations.
6.1.6 No
Litigation; No Material Change. Except as set
forth in the Disclosure Schedules, to the Knowledge of the Warrantors, no
Action
shall have been threatened
19
or
instituted against any Warrantor or the Purchaser seeking to enjoin,
challenge the validity of, or assert any liability against any of them on
account of, any transactions contemplated by this Agreement or the other
Transaction Agreements. There shall have been no material adverse change
to the
business, operations or prospects of any Group Company on the Closing
Date.
6.1.7 Transaction
Agreements. Counterparts of all
Transaction Agreements shall have been duly executed and delivered by the
Company, Baichuan, Baichuan Principals and Mr. Fan (if applicable).
6.1.8 Proceedings
and Documents. All corporate and
other proceedings of the Company, Xxx Xxxxx and Baichuan in connection with
the
transactions contemplated hereby and all documents and instruments incident
to
such transactions shall be reasonably satisfactory in substance and form
to the
Purchaser.
6.1.9 Board.
All actions shall have been taken to
appoint the representatives that have been designated by the Purchaser as
directors of the Company, effective upon the Closing.
6.1.10 Employees.
Each of the following shall be true in
respect of the workforce of the Group Companies: (i) the “key employees” set
forth in Exhibit A hereto shall
have given assurances reasonably satisfactory to the Purchaser that they
shall
continue to work for the Group Companies following the Closing; and (ii)
at
least ninety percent (90%) of the headcount of the workforce of the Group
Companies on the date hereof shall be maintained at Group Companies on the
Closing Date.
6.1.11 Shareholder
Replacement. The Baichuan Principals
shall have executed all the documents that would allow the Purchaser to transfer
(i) at Closing, seventy percent (70%) of the equity interests in Baichuan,
and
(ii) upon the incorporation of the New WFOE, the remaining thirty percent
(30%)
of the equity interests in Baichuan that are held by the Baichuan Principals,
to
the new shareholders designated by the Purchaser at its sole discretion (any
such new shareholders who become shareholders of Baichuan are hereinafter
referred to as the “Baichuan Replacement
Shareholders”). Such executed documents shall have
been delivered to the Purchaser at least two (2) Business Days prior to the
Closing Date.
6.1.12 Baichuan
Restructure Documents. (i) The Baichuan
Replacement Shareholders, Baichuan and the WFOE shall have executed loan
agreements, equity pledge agreements, exclusive purchase option agreements,
power of attorneys or any other agreement in relation thereto at the request
of
the Purchaser and to the Purchaser’s full satisfaction; and (ii) the Baichuan
Principals (or their designated entity), Baichuan and the WFOE shall have
signed
an exclusive business cooperation agreement and technical service agreement
and
any amendments thereof or any other agreement in relation thereto at the
request
of the Purchaser and to the Purchaser’s full satisfaction (all such documents
under this Section 6.1.12 are collectively referred to as the
“Baichuan Restructure Documents”).
6.1.13 Business
Plan. The Purchaser has received a copy
of the long-term business development plan (the “Business Plan”) of the
Group Companies
prepared by the Baichuan Principals and is fully satisfied with the content
of
such Business Plan, including the
20
contemplated
utilization of the Subscription Price by the Group Companies
as set forth in such Business Plan.
ARTICLE
7
CONDITIONS
TO THE OBLIGATIONS OF XXX XXXXX AND THE COMPANY AT
CLOSING.
The
obligation of Xxx Xxxxx to sell and the Company to allot and issue
the Shares to the Purchaser at Closing, unless otherwise waived in writing
by
the Company and Xxx Xxxxx, is subject to the fulfillment to the Company’s and
Xxx Xxxxx’x satisfaction on or prior to the Closing of the following
conditions:
7.1 Representations
and Warranties Correct. The
representations and warranties made by the Purchaser in ARTICLE 5 hereof
shall
be true and correct and complete in all material respects with respect to
the
subjects covered therein when made, and shall be true and correct and complete
on the Closing Date with the same force and effect as if they had been made
on
such date, subject to changes contemplated by this Agreement.
7.2 Performance
of Obligations. The Purchaser shall
have performed and complied with all agreements, obligations and conditions
contained in this Agreement that are required or contemplated to be performed
or
complied with by it on or before the Closing.
7.3 Laws.
The offer and sale of the Shares to the
Purchaser pursuant to this Agreement shall be exempt from the registration
and
prospectus delivery requirements of the Securities Act and shall not violate
or
breach or result in a violation or breach of any other applicable law or
regulation.
7.4 No
Litigation. No Action shall have been
threatened or instituted against the Purchaser seeking to enjoin, challenge
the
validity of, or assert any liability against any of them on account of, any
transactions contemplated by this Agreement or the other Transaction
Agreements.
ARTICLE
8
COVENANTS
OF THE WARRANTORS.
Unless
otherwise required by the Board to fulfill certain obligations and
duties as an employee of the Company, if applicable, each Warrantor hereby
jointly and severally covenants to the Purchaser as follows:
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8.1
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Implementation
of Business. Each
Warrantor shall take all necessary actions
to:
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8.1.1 implement
and carry out the business of the Group Companies as directed
by the Board; and
8.1.2 procure
that Baichuan shall obtain certain PRC Governmental
Authorizations required for the Group Companies’ business as currently operated
and as proposed to be conducted, including but not limited to the Online
News
and Information Service Permit, and that such permit and license shall (i)
be
used only in connection with the business of
21
the
Group Companies; (ii) not be transferred, directly or indirectly,
from Baichuan to any other party (other than another Group Company) without
the
Purchaser’s prior written approval and (iii) not be used for any purpose that is
not expressly approved by the Board.
8.2 Additional
Covenants. Except as required by this
Agreement, no resolution of the directors, owners, members, joint venture
parties, or shareholders of any Group Company shall be passed nor shall any
contract or commitment be entered into prior to the Closing without the written
consent of the Purchaser, except that the Group Companies may carry on their
businesses in the same manner as heretofore and may pass resolutions and
enter
into contracts and commitments in the ordinary course of business and consistent
with past practice.
8.3 Notice
of Certain Events. If at any time before
the Closing, any Warrantor comes to know of any material fact or event
which:
8.3.1 is
in any way inconsistent with any of the representations and warranties
in this Agreement;
|
8.3.2
|
renders
any fact warranted hereunder is false or misleading;
or
|
8.3.3 might
reasonably be expected to affect the willingness of a prudent
investor to purchase the Shares on the terms contained in the Transaction
Agreements or the amount of the consideration a prudent investor would be
prepared to pay for the Shares;
then
such Warrantor shall immediately notify the Purchaser and the other
Warrantors in writing, describing the fact or event in reasonable
detail.
8.4 Registration
of Intellectual Property Rights.
Each Warrantor shall, as soon as practicable after the Closing, have any
updated
versions of software programs registered with the relevant PRC authorities,
with
Baichuan or the Company as the proprietor of each such intellectual property
right.
8.5 Tax
Indemnity. Subject to the limitation
provisions in Section 4.23 hereof, the Warrantors hereby jointly and severally
undertake to indemnify the Purchaser against any and all losses, liabilities,
damages, suits, obligations, judgments or settlements of any kind (including
all
reasonable legal costs, costs of recovery and other reasonable expenses incurred
by the Purchaser) resulting from any claim of taxation (including those
resulting from cancellation or reclamation of tax benefits of any kind relating
to the Group Companies) arising from an event that occurred or is deemed
to have
occurred prior to the Closing.
8.6 Limitation.
Without prejudice to the limitation
provisions in Section 4.23 hereof, the covenants contained in Section 8.5
do not
apply to any and all losses, liabilities, damages, suits, obligations,
judgments, settlements of any kind and Damages:
8.6.1 to
the extent that full and sufficient provision or reserve in respect
thereof has been made in the Financial Statements or to the extent that payment
or discharge of such losses, liabilities, damages, suits, obligations,
judgments, settlements of any kind and Damages has been taken into account
therein; and
22
8.6.2 in
respect of which provision or reserve has been made in the Financial
Statements which is insufficient only by reason of any increase in rate of
tax
made after the Closing Date.
8.7 Baichuan
Replacement Shareholders. At any time
after the Closing Date and upon the delivery by the Purchaser of a written
notice to any Warrantor, the Warrantors shall:
8.7.1 cause
the Baichuan Principals, and assist the Purchaser with best efforts
to cause the Company, to submit relevant documents to the PRC Government
Authorities for approval of the transfer of the equity interests of Baichuan
from the Baichuan Principals to the Baichuan Replacement Shareholders after
the
Closing Date; and
8.7.2 use
best efforts to provide any assistance reasonably requested by the
Purchaser to facilitate the submission of documents to the relevant Government
Authorities for the transfer of the equity interests of Baichuan from the
Baichuan Principals to the Baichuan Replacement Shareholders and the granting
of
approvals thereon.
8.8 Baichuan
Principals. At any time prior to
completion of the transfer of one hundred percent (100%) the equity interests
in
Baichuan from the Baichuan Principals to the Baichuan Replacement Shareholders,
the Baichuan Principals shall not:
8.8.1 sell,
contract to sell, transfer, mortgage, or dispose in any manner any
of the equity interests of Baichuan, or allow any placement thereon as a
security interest, except to the WFOE or the New WFOE;
8.8.2 cause
the shareholders meeting or the board of directors of Baichuan to
approve the sale, transfer, mortgage or disposition in any manner any of
the
equity interests of Baichuan, or allow the placement thereon of any security
interest, except to the WFOE or the New WFOE; or
8.8.3 cause
Baichuan to supplement, change, or amend its articles of
association in any manner, increase or decreases its registered capital,
or
change its share capital structure in any manner without the prior written
consent of the Purchaser and the WFOE.
ARTICLE
9
INDEMNIFICATION.
9.1 Indemnification
by the Warrantors. Subject to the
limitation provisions in Section 4.23 hereof, the Warrantors shall, jointly
and
severally, indemnify the Purchaser and its employees, officers, directors,
Affiliates and agents (the “Indemnified
Persons”), in respect of, and hold the Indemnified
Persons harmless against, any and all Damages resulting from:
|
9.1.1
|
a
Warrantor’s breach of any Transaction
Agreement;
|
9.1.2 any
audit or adjustment by a PRC tax or other government authority within
twenty-four (24) months after the Closing with respect to any Group Company’s
business activities conducted before the Closing; or
23
9.1.3 any
Damages incurred by the Company within twenty-four (24) months after
the Closing for infringement of third-party right or violation of any law,
rule
or regulation caused by or related to any of the Group Companies’ or their
Affiliates’ business and operations, including the use of the Technology to
transfer unlicensed media content over the internet, that occurred prior
to the
Closing.
For
purposes of this Agreement, “Damages” shall mean
and include any and all
monetary damages, fines, penalties, interest obligations, deficiencies
(including amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation) incurred or suffered
by an
Indemnified Person or any Affiliate thereof.
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9.2
|
Method
of Asserting Claims.
|
9.2.1 The
Indemnified Person shall give prompt written notification to the
Warrantors of the Damages which form the basis of any claim for which the
indemnification pursuant to this Section 9.2 may be sought (a
“Claim”), provided,
however, that the failure to provide such notice shall not release the
Warrantors from any obligations under this Section 9.2 except to the extent
such
Warrantors is materially prejudiced by such failure and shall not relieve
such
Warrantors from any other obligation or liability that it may have to any
Indemnified Person otherwise than under this Section 9.2. Within ten (10)
calendar days after delivery of such notification, the Warrantors may, upon
written notice thereof to the Indemnified Person, assume control of the defense
of such Claim with counsel reasonably satisfactory to the Indemnified Person,
provided that the Warrantors acknowledges in writing to the Indemnified Person
that any damages, fines, costs or other liabilities that may be assessed
against
the Indemnified Person in connection with such Claim constitute Damages for
which the Indemnified Person shall be entitled to indemnification pursuant
to
this Section 9.2. If the Warrantors do not assume control of such defense,
the
Indemnified Person shall control such defense. The party not controlling
the
defense of such Claim may participate therein at its own expense; provided
that
if the Warrantors assumes control of such defense and the Indemnified Person
reasonably concludes that the Warrantors and the Indemnified Person have
conflicting interests or different defenses available with respect to such
Claim, then the reasonable fees and expenses of counsel to the Indemnified
Person shall be considered “Damages” for purposes
of this
Agreement.
9.2.2 In
the event that the Warrantors exercises the right to undertake any
such defense against any such Claim as provided above, the Indemnified Person
shall cooperate with the Warrantors in such defense and as soon as practicable
make available to the Warrantors, at the Warrantors’ expense, all witnesses,
pertinent records, materials and information in the Indemnified Person’s
possession or under the Indemnified Person’s control relating thereto as is
reasonably required by the Warrantors. Similarly, in the event the Indemnified
Person is, directly or indirectly, conducting the defense against any such
Claim, the Warrantors shall cooperate with the Indemnified Person in such
defense and as soon as practicable make available to the Indemnified Person,
at
the Warrantors’ expense, all such witnesses, records, materials and information
in the Warrantors’ possession or under the Warrantors’ control relating thereto
as is reasonably required by the Indemnified Person. The party controlling
such
defense shall keep the other party advised of the status of such Claim and
the
defense thereof and shall consider in good faith recommendations made by
the
other party with respect thereto. The Indemnified
24
Person
shall not agree to any settlement of such Claim without the prior
written consent of the Warrantors, which shall not be unreasonably
withheld.
9.2.3 If
a third party asserts that an Indemnified Person is liable to such
third party for a monetary or other obligation which may constitute or result
in
Damages for which such Indemnified Person may be entitled to indemnification
pursuant to this Article 9, and such Indemnified Person reasonably determines
that it has a valid business reason to fulfill such obligation, then (i)
such
Indemnified Person shall be entitled to satisfy such obligation, without
prior
notice to or consent from the Warrantors, (ii) such Indemnified Person may
make
a claim for indemnification pursuant to this Section 9.2, and (iii) such
Indemnified Person shall be reimbursed for any such Damages for which it
is
entitled to indemnification pursuant to this Section 9.2.
|
9.3
|
Holdback.
|
9.3.1 With
respect to any Claim that has been accepted in writing by any
Warrantor or resolved pursuant to Section 11.13, to the extent the Holdback
Amount has not been consumed or paid to any Warrantor, the Purchaser shall
satisfy such Claim from the Holdback Amount.
9.3.2 On
the first Business Day following the expiration of six (6) months
after the Closing Date, the balance, if any, of the Holdback Amount after
deducting (i) the amount of any Claim that has been accepted by any Warrantor
in
writing or resolved pursuant to Section 11.13, and (ii) any and all reasonable
fees and expenses incurred by the Purchaser in connection with any Claim,
shall
be paid by the Purchaser to a single account specified by Xxx Xxxxx.
9.3.3 Notwithstanding
anything in the foregoing to the contrary, to the extent
that at the time for payment to any Warrantor of the balance of the Holdback
Amount there are any pending Claims, the Purchaser shall be entitled to retain
the amount of such Claims until a resolution of such Claims is reached pursuant
to Section 11.13, and upon such resolution, shall promptly pay any remaining
balance of the Holdback Amount to a single account designated by Xxx
Xxxxx.
ARTICLE
10
CONFIDENTIALITY
AND NON-DISCLOSURE.
10.1 Disclosure
of Terms. The terms and conditions of
this Agreement and any other Transaction Agreements (collectively, the
“Terms”), including
their existence, shall be considered confidential information and shall not
be
disclosed by any party hereto to any third party without the consent of all
other parties except in accordance with the provisions set forth
below.
10.2 Legally
Compelled Disclosure. In the event that any Party or any
of its Affiliates is requested or becomes legally compelled (including without
limitation, pursuant to securities laws and regulations of any jurisdiction)
to
disclose the existence of this Agreement or the content of any of the Terms
in
contravention of the provisions of this Section 10.2, that Party has the
right
to make such disclosure in its sole discretion and without giving prior written
notice to any other party hereto.
25
10.3 Other
Exceptions. Notwithstanding any other provision of this
Section 10.3, the confidentiality obligations of the parties shall not apply
to:
(i) information which a disclosing party learns from a third party having
the
right to make the disclosure, provided the disclosing party complies with
any
restrictions imposed by the third party; (ii) information which is in the
disclosing party’s possession prior to the time of disclosure by the protected
party and not acquired by the disclosing party under a confidentiality
obligation; (iii) information which enters the public domain without breach
of
confidentiality by the disclosing party; or (iv) any disclosure by a party
to
its employees, officers, bankers, partners, accountants, attorneys or other
professional advisers, in each case only where such Persons are under
appropriate confidentiality obligations.
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10.4
|
Press
Releases.
|
10.4.1 Mr.
Fan and Xxx Xxxxx shall not issue any press release or make any public
announcement with respect to this Agreement or any other Transaction Agreement
or the transactions contemplated hereby without the prior written consent
of the
Purchaser.
10.4.2 The
Purchaser may issue any press release or make any public announcement as
it
deems to be appropriate with respect to this Agreement or any other Transaction
Agreement or the transactions contemplated hereby at its own
discretion.
10.5 Other
Information. The provisions of this ARTICLE
10 shall survive the termination of this Agreement and shall be in addition
to,
and not in substitution for, the provisions of any separate non-disclosure
agreement executed by any of the parties hereto with respect to the transactions
contemplated hereby.
ARTICLE
11
MISCELLANEOUS.
11.1 Governing
Law. This Agreement shall be governed
in all respects by the laws of Hong Kong.
11.2 Survival.
The representations, warranties,
covenants and agreements made herein shall survive any due diligence
investigation made by any party hereto and shall survive the
Closing.
11.3 Successors
and Assigns. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit
of,
and be binding upon, the successors, permitted assigns, heirs, executors
and
administrators of the parties hereto whose rights or obligations hereunder
are
affected by such amendments. This Agreement and the rights and obligations
herein may be assigned by the Purchaser to any Affiliate of the Purchaser.
No
Warrantor may assign its rights or delegate its obligations under this Agreement
without the written consent of the Purchaser.
11.4 Entire
Agreement. This Agreement and the
schedules and exhibits hereto and thereto and the Transaction Agreements,
which
are hereby expressly incorporated herein by this reference, constitute the
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
26
11.5 Notices.
Except as may be otherwise provided
herein, all notices, requests, waivers and other communications made pursuant
to
this Agreement shall be in writing and shall be conclusively deemed to have
been
duly given (i) when hand delivered to the other party; (ii) when sent by
facsimile at the number set forth below, upon a successful transmission report
being generated by the sender’s machine; or (iii) three (3) Business Days after
deposit with an internationally-recognized overnight delivery service, postage
prepaid, addressed to the parties as set forth in Exhibit
B with next-business-day delivery guaranteed, provided
that the sending party receives a confirmation of delivery from the delivery
service provider. Each person making a communication hereunder by facsimile
shall promptly confirm by telephone to the person to whom such communication
was
addressed each communication made by it by facsimile pursuant hereto but
the
absence of such confirmation shall not affect the validity of any such
communication. A party may change or supplement the addresses given above,
or
designate additional addresses, for purposes of this Section 11.5 by giving
the
other party written notice of the new address in the manner set forth
above.
11.6 Amendments
and Waivers. This Agreement may be
amended only with the prior written consent of the Purchaser and the Baichuan
Principals.
11.7 Delays
or Omissions. No delay or omission to
exercise any right, power or remedy accruing to any party upon any breach
or
default of any other party hereto under this Agreement, shall impair any
such
right, power or remedy of the aggrieved party nor shall it be construed to
be a
waiver of any such breach or default, or an acquiescence therein, or of any
similar breach of default thereafter occurring; nor shall any waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit,
consent or approval of any kind or character on the part of any party of
any
breach of default under this Agreement or any waiver on the part of any party
of
any provisions or conditions of this Agreement, must be in writing and shall
be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, or by law or otherwise afforded to
the
parties shall be cumulative and not alternative.
11.8 Finder’s
Fees. Except as set forth in
Disclosure Schedule
11.8 by the
Company, each party (i) represents and warrants to the other party hereto
that
it has not retained any finder or broker in connection with the transactions
contemplated by this Agreement, and (ii) hereby agrees to indemnify and to
hold
harmless the other party hereto from and against any liability for any
commission or compensation in the nature of a finder’s fee of any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which the indemnifying party or any
of its
employees or representatives are responsible.
11.9 Interpretation;
Titles and Subtitles. This
Agreement shall be construed according to its fair language. The rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be employed in interpreting this Agreement. The
titles
of the sections and subsections of this Agreement are for convenience of
reference only and are not to be considered in construing this
Agreement.
27
11.10 Counterparts.
This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of
which
together shall constitute one instrument.
11.11 Severability.
Should any provision of this
Agreement be determined to be illegal or unenforceable, such determination
shall
not affect the remaining provisions of this Agreement.
11.12 Pronouns.
All pronouns and any variations thereof
are deemed to refer to the masculine, feminine, neuter, singular or plural,
as
the identity of the Person or Persons may require.
11.13 Dispute
Resolution. Any
dispute, controversy or claim arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, shall be settled
by
arbitration in accordance with the UNCITRAL arbitration rules then in effect.
The appointing authority shall be Hong Kong International Arbitration Centre
(“HKIAC”). The place
of
arbitration shall be in Hong Kong at HKIAC. There shall be three (3)
arbitrators. The language to be used in the arbitral proceedings shall be
English. Any such arbitration shall be administered by HKIAC in accordance
with
HKIAC procedures for arbitration in force at the date of this Agreement
including such additions to the UNCITRAL arbitration rules as are therein
contained.
[Signature
Page Follows]
28
Ixworth
Enterprises Limited
By:
/s/
Xxxx Xxxxxx
Name: Xx.
Xxxx Shuang
Title: Director
|
Fan
Xxx Xxxx
/s/
Fan Xxx Xxxx
|
Beijing
Ninetowns Network and Software Co.,
Ltd.
By:
/s/
Ng Kin Fai
Name: Xx.
Xx Kin Fai
Title: Director
|
Xxx
Xxxxx Limited
By:
/s/
Fan Xxx Xxxx
Name: Mr.
Fan Xxx Xxxx
Title: Director
|
Xxxx
Xxxxx
/s/
Xxxx Xxxxx
|
Ample
Spring Holdings Limited
By:
/s/
Fan Xxx Xxxx
Name: Mr.
Fan Xxx Xxxx
Title: Director
|
Xxxx
Xxxxx
/s/
Xxxx Xxxxx
|
Beijing
Baichuan Tongda Science and Technology Development Co.,
Ltd.
By:
/s/
Xxxx Xxxxx
Name: Xx.
Xxxx Peiji
Title: Director
|
[Signature
Page of Share Purchase and Subscription
Agreement]
Schedule
I
Disclosure
Schedules
Exhibit
A
Key
Employees
|
§
|
Xxxx
Xxxxx
|
|
§
|
Zheng
Min
|
|
§
|
Luo
Peng
|
|
§
|
Xxx
Xxx Qi
|
|
§
|
Xxxx
Xxxx
|
|
§
|
Xxx
Xxxxxx
|
|
§
|
Xxxxx
Xxx Jie
|
|
§
|
Yao
Hu
|
Exhibit
B
Notice
Addresses
To
the Purchaser and the WFOE:
|
Suites
1705-6,
17/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong Attn: Xxxxx Xxx Lun Fork Fax No.: (000) 0000 0000 |
To
the Company:
|
Xxxxx
00, Xxxxxxxx X, Xxxxxx Xxxxx,
Xx. 00 Xizhimen North Street, Haidian District, Beijing, PRC Attn: Xxxx Xxxxx Fax No.: (0000) 00000000 |
To
Baichuan:
|
Xxxxx
00, Xxxxxxxx X, Xxxxxx Xxxxx,
Xx. 00 Xizhimen North Street, Haidian District, Beijing, PRC Attn: Xxxx Xxxxx Fax No.: (0000) 00000000 |
To
Mr. Fan, Xxx Xxxxx and the
Baichuan Principals: |
Xxxxx
00, Xxxxxxxx X, Xxxxxx Xxxxx,
Xx. 00 Xizhimen North Street, Haidian District, Beijing, PRC Attn: Xxxx Xxxxx Fax No.: (0000) 00000000 |