EXHIBIT 2.2
AGREEMENT AMONG
(1) PACIFICNET STRATEGIC INVESTMENT HOLDINGS LIMITED, AND PACIFICNET INC.
(2) CHEER ERA LIMITED
(3) APEX LEGEND LIMITED
(4) SHEK, XXX XXXX
(5) SUNG, XXX XXXX
(6) XXXXX, XXX XXXX XXXXXX
FOR THE SALE AND PURCHASE OF SHARES IN
CHEER ERA LIMITED
THIS AGREEMENT is made on April 7, 2004.
AMONG:
(1) PACIFICNET STRATEGIC INVESTMENT HOLDINGS LIMITED (Chinese Company Name
"chinese characters here"), a company existing under the laws of the
British Virgin Islands whose principal place of business is at Xxxx 0000,
Xxxx Xxxx Xxxxx, 000 Xxxxxxxxx Xxxx Xxxx, Xxxx Xxxx. (hereafter referred
as the "PURCHASER"). The Purchaser is a wholly owned subsidiary of
PacificNet Inc. ("PACT"), a company incorporated under the laws of the
State of Delaware in the United States of America whose principal office
is situate at 000 Xxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxx, XX 00000-0000, the
United States of America, the shares of which are listed on the NASDAQ
stock exchange in the United States of America under the trading symbol
of "PACT".
(2) CHEER ERA LIMITED (Chinese Company Name "chinese characters here" and
Business Name "VIDEO CLUB INTERNATIONAL"), a company incorporated in Hong
Kong SAR whose principal place of business is Xxxx X, 00/X, Xxx Xxx
Xxxxxxxxxx Xxxxxxxx, 0-0 Wah Sing Street, Xxxx Xxxxx, N.T., Hong Kong
(hereinafter referred to as the "COMPANY");
(3) SHEK, XXX XXXX (HK ID: X000000(0)) and XXXXX, XXX XXXX XXXXXX (HK ID:
X000000(0))whose principal place of business is at Xxxx X, 00/X, Xxx Xxx
Xxxxxxxxxx Xxxxxxxx, 0-0 Wah Sing Street, Xxxx Xxxxx, N.T., Hong Kong
(hereinafter jointly referred to as the "WARRANTOR"); and
(4) APEX LEGEND LIMITED, a company existing under the laws of the British
Virgin Islands whose principal place of business is Xxxx X, 00/X, Xxx Xxx
Xxxxxxxxxx Xxxxxxxx, 0-0 Wah Sing Street, Xxxx Xxxxx, N.T., Hong Kong
(hereinafter jointly referred to as the "SELLER").
WHEREAS:
A. The Company is a private company incorporated under the laws of Hong Kong
SAR whose principal place of business is Xxxx X, 00/X, Xxx Xxx Xxxxxxxxxx
Xxxxxxxx, 0-0 Wah Sing Street, Xxxx Xxxxx, N.T., Hong Kong.
B. The Company has an authorized capital of HKD 10,000, representing the
entire capital of the Company (the "SHARES"), and is beneficially owned
by shareholder as set out in Part I of Schedule 1.
C. The Company owns an operation that engages in the development,
manufacturing, and marketing of digital multimedia entertainment kiosks
with the Trademark Video Club and the domain name xxxxxxxxx.xxx.xx. (the
"Business");
D. The Seller wishes to sell to the Purchaser, and the Purchaser wishes to
purchase from Seller the SALE SHARES; and in addition the Company agrees
to issue to the Purchaser, and the Purchaser agrees to subscribe from the
Company the Subscription Shares (details of which are set out in Part II
of Schedule 1), all upon the terms and subject to the conditions set
forth herein.
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E. The Purchaser requires the Warrantor to give such representations,
warranties, covenants and undertakings as are set out herein as a
condition to the Purchaser's entry into this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual agreements and
covenants hereinafter set forth, and intending to be legally bound hereby, the
parties to this Agreement hereby agree as follows:
1. INTERPRETATION
1.1 The Recitals and Schedules form part of this Agreement and shall have the
same force and effect as if expressly set out in the body of this
Agreement and any reference to this Agreement shall include the Recitals
and Schedules.
2.2 In this Agreement except where the context otherwise requires the
following words and expressions shall have the following meanings:
"BVI" The British Virgin Islands;
"COMPLETION" completion of the sale and purchase of the Sale Shares
in accordance with Clause 5 of this Agreement;
"COMPLETION DATE" March 31, 2004 on or before 6 p.m. Hong Kong Time (or
such later date as the parties shall agree in writing);
"CONDITIONS" the conditions contained or referred to in Clause 4;
"CONSIDERATION" the consideration payable for the sale and purchase of
the Sale Shares and the subscription of the
Subscription Shares to the COMPANY to the Company
pursuant to Clause 3 [as adjusted by clause 6];
"HONG KONG" Hong Kong Special Administrative Region of the PRC;
"HK$" Hong Kong dollars;
"NET INCOME" means, for any period, based on the management accounts
of the Company, all revenues, income, earnings or cash
flow of any kind or description received during such
period by the Company minus all costs, expenses and
taxes paid (whether income, corporate, sales or
otherwise to the relevant tax authorities) paid or
incurred during such period by the Company in the
ordinary course of its business, together with amounts
used to replenish and fund the reserves (if any) in
accordance with the US GAAP;
"PACT SHARES" Ordinary shares of PacificNet Inc. (NASDAQ:PACT);
"PRC" People's Republic of China, for the purpose of this
agreement, excluding Hong Kong, Taiwan and the Macau of
Special Administrative Region of the PRC;
"SALE SHARES" the 100 ordinary shares of HK$1.00 each in the capital
of the Company (being (10%) of the entire issued share
capital of the Company enlarged by the allotment and
issue of the Subscription Shares) such shares being
beneficially owned by and registered in the name of the
Seller in the proportions inter se set out in Part I of
Schedule 1;
"SUBSCRIPTION SHARES" the 200 new ordinary shares of HKD$1.00 each in the
capital of the Company (being (20%) which together with
the Sale Shares, being 30% of entire issued share
capital of the Company enlarged by the allotment and
issue of the Subscription Shares) to be issued to the
Purchaser;
"US$" United States dollars;
"UNITED STATES" United States of America;
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1.3 Words and phrases (not otherwise defined in this Agreement) the
definitions of which are contained or referred to in the Companies
Ordinance (Cap. 32) shall be construed as having the meanings thereby
attributed to them.
1.4 References in this Agreement to ordinances and to statutory provisions
shall be construed as references to those ordinances or statutory
provisions as respectively as modified (on or before the date hereof) or
re-enacted (whether before or after the date hereof) from time to time
and to any orders, regulations, instruments or subordinate legislation
made under the relevant ordinances or provisions thereof and shall
include references to any repealed ordinance or provisions thereof which
has been so re-enacted (with or without modifications).
1.5 The headings are for convenience only and shall not affect the
construction of this Agreement.
1.6 All representations, undertakings, warranties, indemnities, covenants,
agreements and obligations given or entered into by more than one person
are given or entered into jointly and severally.
1.7 Except where the context otherwise requires words denoting the singular
include the plural and vice versa; words denoting any one gender include
all genders; words denoting persons include incorporations and firms and
vice versa.
1.8 Reference to clauses, sub-clauses, paragraphs and schedules are (unless
the context requires otherwise) to clauses, sub-clauses, paragraphs and
schedules of this Agreement.
1.9 The expressions the "Company", the "Seller" and the "Purchaser" shall
unless the context requires otherwise shall include their successors,
personal representatives and permitted assigns.
1.10 The schedules and appendices form part of this Agreement.
2. SALE OF SHARES
2.1 Subject to the terms of this Agreement, the Seller shall sell as
beneficial owner and the Purchaser (relying on the representations,
warranties, agreements, covenants, undertakings and indemnities
hereinafter referred to) shall purchase the SALE SHARES free from all
options, liens, charges, pledges, claims, agreements, encumbrances,
equities and other third party rights of any nature whatsoever and
together with all rights of any nature whatsoever now or hereafter
attaching or accruing to it including all rights to any dividends or
other distribution declared paid or made in respect of them after the
date of this Agreement.
2.2 Subject to and upon the terms and conditions of this Agreement, the
Purchaser shall subscribe for and the Company shall allot and issue the
Subscription Shares free from all options, liens, charges, pledges,
claims, agreements, encumbrances, equities and other third parties rights
of any nature whatsoever subject to and upon the terms and conditions of
this Agreement.
2.3 The Subscription Shares shall be allotted and issued fully paid, and
shall rank pari passu in all respects among themselves and with the
Shares in issue on the date of allotment and issue, including the right
to receive all dividends, distributions and other payments made or to be
made the record date for which falls on or after the date of such
allotment and issue.
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3. CONSIDERATION
3.1 The Consideration below for the Sale Shares and Subscription Share shall
be settled in accordance with the following provisions that the Purchaser
will pay:
(a) 149,459 Restricted PACT Shares (the "Escrow Shares") with a values
of USD $771,208.44 (approximately HKD 6,000,001.66 using exchange
rate of 1USD= 7.78 HKD) based on a $5.16 PACT Share Price, PAYABLE
TO SELLERS FOR THE SALE SHARES, in accordance with the following:
(i) Within 30 days of the signing of this agreement, purchaser
shall deliver to the Escrow Agent (designated by the
Purchaser) the Escrow Shares, to be held under the terms of
an escrow agreement to be entered into with the Escrow
Agent, being the remaining payment of the purchase
consideration;
b) USD $385,604.11 (approximately HKD 3,000,000 using exchange rate
of 1USD= 7.78 HKD) PAYABLE TO THE COMPANY FOR THE SUBSCRIPTION
SHARES within 30 days after the Completion as defined in Clause 5
of this Agreement, and;
c) A Common Stock Purchase Warrant to purchase 80,000 shares
("Warrant Shares") of PACT Common Stock, par value $0.0001 per
share to the Company or its nominee. The purchase price of one
share of Common Stock (the "Exercise Price") under this Warrant
shall be $6.00, exercisable within 3 years from the date of
issuance.
3.2 In the event that:
(a) the Purchaser fails to receive any required regulatory approvals
by the SEC, NASDAQ, or fails to receive the approval of the
Shareholders of PACT if required; or
(b) the conditions set out in Clause 5 shall not have been fulfilled
by the Completion Date or such other date as the parties hereto
may agree in writing; or
(c) the transaction is not completed for any reason by April 30, 2004;
the Escrow Agreement shall provide that the Escrow Shares shall be
returned to the Purchaser within ten (10) days following the date on
which the Purchaser rescinds this Agreement.
3.3 Escrow Arrangement for Consideration Shares
The Warrantor hereby agrees and acknowledges that the total Consideration
payable by the Purchaser is based on Warrantor's warranty in respect of
the Net Income of the Company as described in this section. In this
regard Warrantor hereby agrees to allow the Purchaser to appoint the
Escrow Agent upon the terms of the Escrow Agreement in the agreed terms
to hold all the Escrow Shares to be issued in accordance with the Escrow
Agreement and this Agreement on Completion and Warrantor undertakes that
it shall not either sell, transfer, charge, encumber, grant options over
or otherwise dispose of, or of any legal or beneficial interest in any of
the Consideration Shares until such part of the Consideration Shares are
released by the Escrow Agent to Warrantor in accordance with the
following schedule :
-------------------------------------------------------- ---------------- ---------------------------------
Release Date Number of Release Criteria based on
(If receiving funds by March 31, 2004, assuming Shares to be Accumulated Net Income
receipt by PACT Auditors of certification that the Released
auditor's review relating to Company and its business
is acceptable and can be consolidated into PACT's
audited accounts, balance sheet and financial
statements, in accordance with the US GAAP.)
-------------------------------------------------------- ---------------- ---------------------------------
3.3.1. 45 days after closing. 123,751
restricted
PACT Shares
-------------------------------------------------------- ---------------- ---------------------------------
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-------------------------------------------------------- ---------------- ---------------------------------
3.3.2. Within 30 days from the receipt of the 6,427 Company has achieved Net Income
Auditors certification of the Net Income for the 6 restricted for the 6 months ending on June
months ending on June 30, 2004. PACT Shares 30, 2004 not less than HKD 400,000.
-------------------------------------------------------- ---------------- ---------------------------------
3.3.3. Within 30 days from the receipt of the 6,427 Company has achieved Net Income
Auditors certification of the Net Income for the 9 restricted for the 3 months ending on
months ending on September 30, 2004. PACT Shares September 30, 2004 not less than
HKD 500,000.
-------------------------------------------------------- ---------------- ---------------------------------
3.3.4. Within 30 days from the receipt of the 6,427 Company has achieved Net Income
Auditors certification of the Net Income for the 12 restricted for the 3 months ending on December
months ending on December 31, 2004. PACT Shares 31, 2004 not less than HKD 600,000.
-------------------------------------------------------- ---------------- ---------------------------------
3.3.5. Within 30 days from the receipt of the 6,427 Company has achieved Net Income
Auditors certification of the Net Income for the 3 restricted for the 12 months ending on
months ending on March 31, 2004. PACT Shares December 31, 2004 plus the 3 months
ending on March 31, 2005 not less
than HKD 1,000,000.
-------------------------------------------------------- ---------------- ---------------------------------
TOTAL NUMBER of PACT Shares to be released from the 149,459 Company will be entitled to the
Escrow restricted entire escrow shares if it has
PACT Shares achieved Net Income for the 12 months
ending on December 31, 2004 plus
the 3 months ending on March 31,
2005 not less than HKD 2,500,000
-------------------------------------------------------- ---------------- ---------------------------------
Purchaser agrees that on the relevant release date (as referred to in
the above schedule) the Seller or its nominee(s) will collect the
relevant portion of the Escrow Shares from the Escrow Agent (if the
Release Criteria has been met).
3.4 Net Income Warranty by Warrantor, Bonus Shares, and Penalty
3.4.1 Warrantor warrants, represents and undertakes that:
(i) the total Net Income for the 12 months ending on
December 31, 2004 plus the 3 months ending on March
31, 2005 ("First Term") will not be less than HKD
2,500,000.
(ii) the total Net Income of COMPANY for the period from
April 1, 2005 to March 31, 2006 ("Second Term") will
not be less than HKD 3,500,000.
3.4.2 BONUS SHARES FOR ACHIEVING NET INCOME EXCEEDING THE PROFIT
GUARANTEE:
(i) Subject to Completion having occurred and the terms
of this Agreement, after the end of First Term,
within 30 days of the Auditors certification that the
audited financial statements relating to COMPANY and
its business is acceptable and can be consolidated
into PACT's audited accounts, balance sheet and
financial statements, in accordance with the US
GAAP., the Company Shareholder shall be entitled to
subscribe for and be issued and allotted the
following number of Bonus Shares at par value based
on the Net Income of the Company, according to the
following formula: Number of Bonus Shares to be
issued for First Term = (Net Income Amount in USD$
for First Term in excess of HKD 2,500,000) x 30%/(30-
Day Volume Weighted Average Price of the Common Stock
of PACT beginning from the day after the end of the
First Term).
(ii) The Number of Bonus Shares must not exceed
50,000 shares of the common stock of PACT.
(iii) Upon the Seller being entitled to subscribe for the
relevant number of Bonus Shares pursuant to the above
formula and payment of the par value on each Bonus
Share to PACT, the Purchaser shall procure PACT to
issue the relevant number of Bonus Shares to the
Seller within 30 days of the Announcement of the
First Term Result.
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3.4.3 PENALTY IN CASE OF SHORTFALL OF NET INCOME BELOW HKD 2,500,000
FOR THE PERIOD 12 MONTHS AFTER RECEIVING FUNDS: In the event
that Company produces only a portion of the annual Net Income
warranted by Warrantor for the 12 months after receiving
funds, then Seller shall return to Purchaser the number of
PACT shares equivalent to the dollar amount of the shortfall
of the Net Income divided by US$6.00 (the original per share
price of the PACT stock at the closing).
3.5 Purchaser will help to the Company to apply for a credit-line bank
facility and Letter of Credits.
3.6 USE OF PROCEEDS: The cash from Purchaser to Company will be used for
general operation mainly to acquire hardware components and for market
development. Purchaser will appoint financial controller to Company.
3.7 In case of any stock split or reverse stock split by PACT, the number of
PACT shares to be issued, awarded, or returned will be adjusted according
to the stock split ratio.
3.8 Option Agreement for the Purchaser to Maintain 51% Ownership:
All parties hereby agree that upon Completion, the Company shall
immediately grant an option or warrant to the Purchaser to purchase
additional shares at the consideration of price against net earning ratio
of eight, in order for the Purchaser to maintain a 51% ownership in the
Company before the event of any share dilution. Such option or warrant
shall be exercisable before any share dilution caused by any new issuance
of shares by the Company for the purpose of fund raising, private
placement, public offering, or other corporate activity, after one year
and within two years after the Completion.
4 CONDITIONS
4.1 Any of the obligation of Purchaser hereunder is conditional upon:
4.1.1 the Purchaser being satisfied in its sole and absolute discretion
with the results of a legal and financial due diligence review to
be conducted by it on the Company;
4.1.2 if required, the relevant stock exchange, government and
securities authority and regulator in the United States granting
listing of the PACT Shares to be issued herein;
4.1.3 if required, a resolution at a meeting of the Directors of PACT
approving this Agreement, the purchase of the Sale Shares and the
Subscription of the Subscription Shares, creating and giving
authority for the issue of the Escrow Shares, the implementation
of the transactions contemplated hereunder and all other matters
incidental hereto in accordance with the provisions of PACT's
articles of association and Bylaws and such rules, regulations and
laws in force from time to time in the United States and which
apply to PACT;
4.1.4 all amounts outstanding to the Seller by the Company have been
either repaid to the Company or otherwise waived; and
4.1.5 the Purchaser being satisfied that the accounts of the Company can
be consolidated into PACT's pro-forma audited accounts, balance
sheet and financial statement in accordance with the US GAAP.
4.2 The Seller and the Company undertakes to disclose in writing to the
Purchaser anything which will or may prevent any of the conditions from
being satisfied at or prior to Completion, as applicable, immediately
upon the Seller and/or the Company becoming aware of such a situation.
4.3 From the date of this Agreement until Completion, except for the
transactions described herein or otherwise with the prior written consent
of the Purchaser:
(a) The Seller and Warrantor warrants and undertakes that they will
cause the Company to:
(i) conduct its Business in the ordinary course and consistent
with past practices;
(ii) use its best efforts to maintain in full force and effect
the existence of the Company;
(iii) promptly and timely prepare and file any financial reports
and franchise tax returns and pay all taxes and
assessments, if any, required to maintain the existence of
the Company;
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(iv) keep records in which true and correct entries will be made
of all material transactions by and with the Company;
(v) duly observe all material requirements of governmental
authorities unless contested in good faith by appropriate
proceedings with the consent of the Purchaser;
(vi) promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon
the income, profits, property or business of the Company
unless contested in good faith by appropriate proceedings
with the consent of the Purchaser;
(vii) at all times comply with the provisions of all contracts,
agreements and leases to which the Company is a party,
unless contested in good faith by appropriate proceedings
with the consent of the Purchaser; and
(viii) to use best endeavors to procure that the employees of the
Company at the date of this Agreement remain and continue
as employees after completion;
(b) The Seller and Warrantor warrants and undertakes to cause the
Company not to:
(i) modify its [Memorandum or Articles of Association] and
[Bylaws];
(ii) cause or permit its liquidation or dissolution;
(iii) institute, or permit to be instituted against it, any
proceeding, which remains undismissed for a period of [30]
days after the filing thereof, seeking to adjudicate it as
bankrupt or insolvent, or seeking liquidation, winding-up,
reorganization, arrangement, adjustment, protection, relief
or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of any order or relief or the
appointment of receiver, trustee or other similar official
for it or for any substantial part of its property;
(iv) make a general assignment for the benefit of its creditors;
(v) except as agreed in this Agreement or with consent of the
Purchaser, declare or pay any dividend or make any
distribution to any of its shareholders;
(vi) issue, redeem, sell or dispose of, or create any obligation
to issue, redeem, sell or dispose of, any shares of its
capital stock (whether authorized but unissued or held in
treasury);
(vii) effect any stock split, reclassification or combination;
(ix) modify its agreements and other obligations with respect to
its long-term indebtedness, including but not limited to
its loan agreements, indentures, mortgages, debentures,
notes and security agreements;
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4.4 Until Completion, the Warrantor and the Company shall procure that the
Purchaser, its agents and representatives are given reasonable access to
such documents relating to the Company, as the Purchaser shall request
reasonably request for the purpose of conducting its due diligence under
this Agreement. The Company will also assist the Purchaser's auditor to
complete the audit report of the Company in accordance with the US GAAP
by April 20, 2004.
4.5 The Warrantor warrants, represents and undertakes that there shall have
been no Material Adverse Change in the assets or the business, prospects,
financial condition or results of operations of the Company.
4.6 The Purchaser shall be entitled to rescind this Agreement by notice in
writing to the Seller and the Company, if prior to Completion it appears
that any of the Warranties is not or was not true and accurate in any
respects or if any act or event occurs which, had it occurred on or
before the date of this Agreement, would have constituted a breach of any
of the Warranties or if there is any material non fulfillment of any of
the Warranties which (being capable of remedy) is not remedied prior to
Completion.
5 COMPLETION
5.1 Subject to the terms of this Agreement and subject to the approval of the
board of directors of the Purchaser, Completion shall take place pursuant
to this clause at the offices of the Purchaser's Legal Counsel on the
Completion Date.
5.2 Upon Completion the Seller and the Company shall:
(a) deliver to the Purchaser:
(i) duly completed and signed transfers of the Sale Shares by
the registered holders thereof in favor of the Purchaser or
as it may direct together with the relative bought/sold
notes and share certificates;
(ii) duly completed, executed and validly issued share
certificates of the Sale Shares and the Subscription Share
in favor of the Purchaser or as it may direct;
(iii) certified true copies of the minutes of meetings of the
Company's board of directors and shareholders approving the
transfer of the Sale Share and the issuance and allotment
of the Subscription Shares to the Purchaser.
6 REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
6.1 The Company, Seller, and the Warrantor jointly and severally, represents,
warrants and undertakes to the Purchaser (to the intent that the
provisions of this clause shall continue to have full force and effect
notwithstanding completion) that :
6.1.1 each of the Warranties is true and accurate in all respects and
not misleading at the date of this Agreement and will continue to
be true and accurate in all respects and not misleading up to and
including the Completion Date;
6.1.2 the Company and the Seller have and will have full power and
authority to enter into and perform this Agreement which
constitute or when executed will constitute binding obligations on
them in accordance with their respective terms;
6.1.3 the Sale Shares and the Subscription Shares will constitute 30
percent of the entire issued and allotted capital of the Company,
enlarged by the allotment and issuance of the Subscription Shares,
on a fully diluted basis;
6.1.5 there have been no options, warrants, pledges, bonds or any
instrument or agreement of the like whatsoever granted to any
third party by any of the Seller in favor of any third party in
respect of any shares in the Company;
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6.1.6 there is and at completion will be no pledge, lien or other
encumbrance on, over or affecting the Sale Shares and there is and
at completion will be no agreement or arrangement to give or
create any such encumbrance and no claim has been or will be made
by any person to be entitled to any of the foregoing;
6.1.7 the Seller will be entitled to transfer the full legal and
beneficial ownership of the Sale Shares to the Purchaser on the
terms of this Agreement without the consent of any third party;
6.1.8 the Seller is an "accredited investor" as defined pursuant to
Regulation D of the Securities Act of 1933, as amended. The Seller
acknowledges that the Escrow Shares have not been registered and
are "restricted securities";
6.1.9 the Company listed in Part I of Schedule 2 are all the present
subsidiaries of the Company;
6.1.10 the information in Schedule 2 relating to the Company is true and
accurate in all respects;
6.1.11 the contents of the Disclosure Letter and of all accompanying
documents are true and accurate in all respects and fully, clearly
and accurately disclose every matter to which they relate;
6.1.12 each of the Company and the Subsidiary are duly incorporated and
validly existing in its relevant jurisdiction of incorporation;
6.1.13 the Purchase will have the first right of refusal to purchase
equity of Zhu Kuan ID Innovation Ltd. ("ZKIDI" or Chinese Name:
"chinese characters here") at the same cost that the Seller or/and
thE WARRantor or their affiliates might acquire from ZKIDI's 70%
owner Harmony Asset;
6.1.14 With the exception of third party software such as Microsoft, all
software, know how, and all intellectual properties included in
the Multimedia Kiosks are owned by the Company and the Seller. The
Seller does hereby grant the Company perpetual and royalty free
license of all their individual intellectual property rights,
including but not limited to the patients granted and patients
pending.
7 RESTRICTIONS
7.1 The Sellers and the Warrantors undertakes to the Purchaser that they
shall not without the prior written consent of the Purchaser for a period
of 2 years after Completion either solely or jointly with or on behalf of
any other person, firm, company, trust or otherwise whether as director,
shareholder, employee, partner, agent or otherwise:
(a) carry on or be engaged or interested directly or indirectly in any
capacity (except as the owner of shares or securities listed or
dealt in on a stock exchange in Hong Kong, PRC, and USA or
elsewhere held by way of investment only) in any business which
shall be in competition within Hong Kong, PRC, and USA with the
Company or its subsidiaries in the current business of the Company;
(b) solicit or entice or endeavor to solicit or entice away from the
Company or its subsidiaries any employee, officer, manager,
consultant (including employees who are directors) of the Company
or its subsidiaries or any persons whose services are otherwise
made available to the Company or its subsidiaries;
(c) deal with, canvass, solicit or approach or cause to be dealt with,
canvassed or solicited or approached for business in respect of any
trade or business carried on or service provided by the Company or
its subsidiaries any person, firm or company who at Completion or
within two years prior to Completion was a customer, supplier,
client, representative, agent of or in the habit of dealing under
contract with the Company or the Subsidiaries;
7.2 The Sellers and the Warrantors further undertake to the Purchaser that:
(a) they will not at any time hereafter make use of or disclose or
divulge to any person other than to officers or employees of the
Company whose province it is to know the same any information
relating to the Company or the subsidiaries other than any
information properly available to the public or disclosed or
divulged pursuant to an order of a court of competent jurisdiction;
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(b) they will not at any time hereafter in relation to any trade,
business or company use a name, or internet domain name including
the word [or symbol, or logo design] ["Video Club"] or any similar
word [or symbol] in such a way as to be capable of or likely to be
confused with the name of the Company [or any subsidiary] and shall
use all reasonable endeavors to procure that no such name shall be
used by any person, firm or company with which [it is/they are]
connected;
(c) they will procure that its subsidiaries, holding company and any
other affiliated companies and its employees will observe the
restrictions contained in this Clause 7;
(d) they shall not do anything which might prejudice the goodwill of
the Company or its subsidiaries.
7.3 Each and every obligation under this clause shall be treated as a
separate obligation and shall be severally enforceable as such and in the
event of any obligation or obligations being or becoming unenforceable in
whole or in part such part or parts as are unenforceable shall be deleted
from this clause and any such deletion shall not affect the
enforceability of all such parts of this clause as remain not so deleted.
7.4 The restrictions contained in this clause 7 are considered reasonable by
the parties but in the event that any such restriction shall be found to
be void but would be valid if some part thereof were deleted or the area
of operation or the period of application reduced such restriction shall
apply with such modification as may be necessary to make it valid and
effective.
7.5 Nothing in this Clause 7 shall apply to:
(a) the continuing involvement or any involvement by any of Seller or
Warrantors in any business in which he is on the date of this
Agreement directly or indirectly interested; or
(b) the direct or indirect holding of any securities listed on a
recognized stock exchange where the total voting rights exercisable
at general meetings of the company concerned as represented by such
holding do not exceed 10 per cent of the total voting rights
attaching to the securities of the same class as that held by the
Seller or a Warrantor;
(c) the holding by the Seller or a Warrantor of any securities of any
member of the Group; or
(d) the use or disclosure of any information in the public domain
(otherwise than in consequence of any breach by any of the Seller
or Warrantors of any provisions of this Agreement).
8 RIGHT OF FIRST REFUSAL
8.1 Before any shares in the Company may be sold or otherwise transferred or
disposed of by any of the Shareholders of the Company ("Selling
Shareholder", including but not limited to the Seller), the Purchaser
shall have a right of first refusal ("Right of First Refusal") to
purchase such shares ("Offered Securities") in accordance with Clauses
(8.2) and (8.3) below.
8.2 Before the transfer or disposal of any Offered Securities, the Selling
Shareholder shall deliver to the Purchaser and the Company a written
notice ("Transfer Notice") stating :-
(a) the Selling Shareholder's intention to sell or otherwise dispose
of such Offered Securities;
(b) the name of each proposed purchaser or other transferee (a
"Proposed Transferee");
(c) the number of Offered Securities to be transferred to each
Proposed Transferee; and
(d) the cash price and/or other consideration for which the Selling
Shareholder proposes to transfer the Offered Securities to the
Proposed Transferee ("OFFERED PRICE").
The Transfer Notice shall certify that the Selling Shareholder has
received a firm offer from the Proposed Transferee(s) and in good faith
believes a binding agreement for the Disposal is obtainable on the terms
set forth in the Transfer Notice. The Transfer Notice shall also include
a copy of any written proposal, term sheet or letter of intent or other
agreement relating to the proposed disposal. The Transfer Notice shall
constitute an irrevocable offer by the Selling Shareholder to sell the
Offered Securities to the Purchaser.
10
8.3 The Purchaser shall have a right, upon notice to the Selling Shareholder
at any time within 15 calendar days after receipt of the Transfer Notice,
to purchase all, any or a portion of such Offered Securities at (a) such
price per share of the Offered Securities as (i) determined by an
independent international appraiser experienced in the valuation of such
shares and business of the Company as chosen by the Purchaser or (ii) the
Offered Price, which ever shall be lower ("Purchaser Offer Price"); and
(b) upon the same terms (or as similar as reasonably possible), upon
which the Selling Shareholder is proposing or is to dispose of such
Offered Securities, save the sale/purchase price shall be the Purchaser
Offer Price, and the Selling Shareholder shall, upon receipt of the
notice of purchase from the Purchaser, sell such Offered Securities to
the Purchaser pursuant to such terms, with such closing to take place
within 45 calendar days after delivery of the Transfer Notice ("Purchase
Right Period").
8.4 If any of the Offered Securities proposed in the Transfer Notice to be
transferred are not purchased by the Purchaser, then after expiry of the
Purchase Right Period, the Selling Shareholder may sell or otherwise
transfer or dispose of such Offered Securities which have not been
purchased by the Purchaser at the Offered Price or at a higher price,
provided that such sale or other transfer shall be completed and
consummated within 45 days after the expiry of Purchase Right Period, and
provided further that the Proposed Transferee agrees in writing that the
provisions of this Agreement and any shareholder's agreement between the
Purchaser and the Seller regulating their respective rights within the
Company (if any) shall continue to apply to the Offered Securities that
are transferred to the Proposed Transferee. If the Offered Securities
described in the Transfer Notice are not transferred to the Proposed
Transferee within such 45 day period, such Selling Shareholder will not
transfer or dispose of any Offered Securities unless such securities are
first re-offered to the Purchaser in accordance with Clauses (8.2) and
(8.3) above.
Notwithstanding the procedures set forth above, if one Party wishes to transfer
its ownership shares to its affiliate, the other Party shall promptly give
consent to such proposed transfer and waive the right of first refusal.
"Affiliate" shall mean any company which, through ownership of voting stock or
otherwise, is controlled by, under common control with, or in control of, a
Party; "control" shall mean ownership, directly or indirectly, of more than
fifty percent (50%) of the securities having the right to vote for the election
of directors in the case of a corporation, and more than fifty percent (50%) of
the beneficial interests in the capital in the case of a business entity other
than a corporation.
9 BOARD OF DIRECTORS, OPERATION AND MANAGEMENT
9.1 The board of directors of the Company shall be the highest authority of
the Company and shall determine all major issues of the Company.
9.2 The board of directors of the Company shall be nominated by the
shareholders and composed of Five (5) directors, 2 directors to be
nominated by Purchaser and 3 directors to be nominated by the Seller.
9.3 The board of directors shall meet at least once every quarter. A Board
meeting may be called by any director.
9.4 The Company shall establish an operation and management structure to be
responsible for the daily operation and management of the Company. The
Company officers shall include one (1) General Manager, one (1) Vice
General Manager, and one Chief Financial Officer.
9.5 The task of the General Manager shall be to carry out the various
resolutions of the board of directors of the Company and organize and
direct the daily operation and management of the Company. The operation
and management structure may consist of certain departments, the managers
for which shall be responsible for the work of the relevant departments,
handle matters delegated by the General Manager and the Vice General
Manager, and report to the General Manager and the Vice General Manager.
9.6 In the event of graft or serious dereliction of duty, the General Manager
and the Vice General Manager may be removed and replaced by the board of
directors of the Company with a resolution at any time.
11
10 INDEMNITY
The Seller and the Warrantor will indemnify and will keep indemnified and save
harmless the Purchaser (for itself and as trustee for the Company from and
against any and all losses, claims, damages (including lost profits,
consequential damages, interest, penalties, fines and monetary sanctions)
liabilities and costs incurred or suffered by the Purchaser by reason of,
resulting from, in connection with, or arising in any manner whatsoever out of
the breach of any Warranties or covenants or the inaccuracy of any
representation of the Seller or the Warrantor contained or referred to in this
Agreement or in any agreement, instrument or document delivered by or on behalf
of the Seller or the Warrantor in connection therewith including, but not
limited to, any dimunition in the value of the assets of and any payment made or
required to be made by the Purchaser or the Company or any Subsidiary and any
costs and expenses incurred as a result of such breach provided that the
indemnity contained in this clause 10 shall be without prejudice to any other
rights and remedies available to the Purchaser;
11 COSTS
The Purchaser shall pay for all the due diligence costs, not exceeding
HK$50,000, including auditing and valuation appraisal costs, fairness opinion
letter, legal costs, and expenses and other incidental costs and disbursements
in relation to the negotiations leading up to the purchase of the Sale Shares
and to the preparation, execution and carrying into effect of this Agreement.
The costs exceeding the amount of HK$50,000 shall be borne equally by the Seller
and the Purchaser.
12 COMPLETE AGREEMENT
This Agreement represents the entire and complete agreement between the parties
in relation to the subject matter hereof and supersedes any previous agreement
whether written or oral in relation thereto. No variations to this Agreement
shall be effective unless made or confirmed in writing and signed by all the
parties hereto.
13 SEVERABILITY
In the event that any provision of this Agreement is held to be unenforceable,
illegal or invalid by any court of competent jurisdiction, the validity,
legality or enforceability of the remaining provisions shall not be affected nor
shall any subsequent application of such provisions be affected. In lieu of any
such invalid, illegal or unenforceable provision, the parties hereto intend that
there shall be added as part of this Agreement a provision as similar in terms
to such invalid, illegal or unenforceable provision as may be possible and be
valid, legal and enforceable.
14 COUNTERPARTS
This Agreement may be executed in counterparts with the same force and effect as
if executed on a single document and all such counterparts shall constitute one
and the same instrument.
15 NOTICES
Any notice required to be given under this Agreement shall be sufficiently given
if delivered in person, forwarded by registered post or sent by overnight
international couriers or facsimile transmission to the relevant party at its
address, or fax number set out below (or such other address as the addressee has
by five days prior written notice specified to the other parties) :
To the Purchaser :
Xxxxxx Xxxx, President
PacificNet Strategic Investment Holdings Limited and PacificNet Inc.
Xxxx 0000, Xxxx Xxxx Xxxxx, 000 Xxxxxxxxx Xxxx Xxxx, Xxxx Xxxx.
Tel: x000-00000000
Fax: x000-00000000
To the Company:
Attn: Xx. Xxxx, Xxx Xxxx, CEO & President
Cheer Era Limited ("chinese characters here")
Xxxx X, 00/X, Xxx Xxx Xxxxxxxxxx Xxxxxxxx, 0-0 Wah Sing Street,
Xxxx Xxxxx, N.T., Hong Kong
To the Seller:
Attn: Xx. Xxxx, Xxx Xxxx
Apex Legend Limited
Flat C, 19/F, Mai Wah Industrial Building, 1-7 Wah Sing Street,
Xxxx Xxxxx, N.T., Hong Kong
To the Warrantor:
Attn: Xx. Xxxx, Xxx Xxxx
Xx. XXXXX, Xxx Xxxx Xxxxxx
Xxxx X, 00/X, Xxx Xxx Xxxxxxxxxx Xxxxxxxx, 0-0 Wah Sing Street,
Xxxx Xxxxx, N.T., Hong Kong
12
16 SETTLEMENT OF DISPUTES
16.1 The formation of this Agreement and its Appendices and related
agreements, and the validity, interpretation, performance and settlement
of disputes thereof shall be governed by the laws of the Hong Kong SAR.
16.2 Any disputes arising out of or in connection with this Agreement shall be
resolved through friendly consultations by the Parties; if no agreement
can be reached through consultations within thirty (30) days after the
occurrence of such dispute, either Party shall have the right to submit
such dispute to the International Economic and Trade Arbitration
Commission Hong Kong Branch for arbitration in Hong Kong in accordance
with its procedures of arbitration. The arbitral award shall be final and
binding upon both Parties.
17 GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by and construed in accordance with the laws of
Hong Kong. The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of the courts of Hong Kong.
13
IN WITNESS WHEREOF, each of the Purchaser, the Company, the Company,
the Seller, and the Warrantor has duly executed, or has caused to be duly
executed by their respective officers thereunto duly authorized, this Agreement
as of the date first written above.
THE PURCHASER: PACIFICNET STRATEGIC INVESTMENT HOLDINGS LIMITED AND
PACIFICNET INC.
By: /s/ Xxxxxx Xxxx
------------------------------------------
Name: Xxxxxx Xxxx
Title: President
THE COMPANY: CHEER ERA LIMITED ("chinese characters here")
By: /s/ Shek, Xxx Xxxx
------------------------------------------
Name: Xx. Xxxx, Xxx Xxxx
Title: President & CEO
THE SELLER:
By: /s/ Xxxxx, Xxx Xxxx Xxxxxx
------------------------------------------
Name: Xx. XXXXX, Xxx Xxxx Xxxxxx
APEX LEGEND LIMITED
THE WARRANTOR:
By: /s/ Shek, Xxx Xxxx
------------------------------------------
Name: Xx. Xxxx, Xxx Xxxx
By: /s/ Xxxxx, Xxx-Xxxx Xxxxxx
------------------------------------------
Name: Xx. XXXXX, Xxx Xxxx Xxxxxx
SCHEDULE 1
PART I
THE COMPANY, COMPANY SHAREHOLDER, AND SHARES
Company Name: Cheer Era Limited ("chinese characters here")
Name of Shareholder (3) Number of Shares held by the Shareholder (800)
----------------------- ----------------------------------------------
Apex Legend Limited 800
PART II
THE SUBSCRIPTION SHARES
Number of the Subscription Shares: 200
15
SCHEDULE 2
PART I
THE COMPANY
NAME : Cheer Era Limited
("chinese characters here")
INCORPORATED IN : Hong Kong SAR
AUTHORIZED SHARE CAPITAL : 10,000 HKD
NO. ISSUED SHARES : 800 SHARES
NOMINAL SHARE VALUE : 1 HKD
ISSUED SHARE CAPITAL : 800 HKD
REGISTERED OFFICE : Xxxx X, 00/X, Xxx Xxx Xxxxxxxxxx Xxxxxxxx,
0-0 Wah Sing Street, Xxxx Xxxxx, N.T.,
Hong Kong
BENEFICIAL SHAREHOLDERS : Apex Legend Limited
REGISTERED SHAREHOLDERS : Apex Legend Limited
DIRECTORS : Sung, Xxx Xxxx (HK ID: X000000(0))
Shek, Xxx Xxxx (HK ID: X000000(0))
XXXXX, XXX XXXX XXXXXX (HK ID: X000000(0))
16
PART II
Apex Legend Limited
NAME : Apex Legend Limited
INCORPORATED IN : British Virgin Islands
AUTHORIZED SHARE CAPITAL : US$50,000.00
NO. ISSUED SHARES : 100 SHARES
NOMINAL SHARE VALUE : US$1
ISSUED SHARE CAPITAL : US$100
REGISTERED OFFICE : Xxxxxxxx Xxxxx
X.X. Xxx 000, Xxxx Xxxx,
Xxxxxxx, Xxxxxxx Xxxxxx Xxxxxxx
BENEFICIAL SHAREHOLDERS : Xxxxx, Xxx Xxxx Xxxxxx
Xxxx, Xxx Xxxx
Xxxx Xxx Xxxx
Xxxxx, Xxxxx Xxxx Xxxxxx
REGISTERED SHAREHOLDERS : Sung, Xxx Xxxx
Xxxxx, Xxx Xxxx Xxxxxx
DIRECTORS : Sung, Xxx Xxxx
Xxxxx, Xxx Xxxx Xxxxxx
Apex Legend Limited SHAREHOLDERS
Company Name: APEX LEGEND LIMITED
Name of Shareholder (2) Number of Shares held by the Shareholder (85)
----------------------- ---------------------------------------------
Sung, Xxx Xxxx 00
Xxxxx, Xxx Xxxx Xxxxxx 30
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