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STOCK PURCHASE AGREEMENT
BY AND AMONG
THE PROPERTY PORTAL! LIMITED,
XXXXXXXXXXX.XXX, INCORPORATED,
CYBER EXPOSURES LIMITED,
DENWELL ENTERPRISES LIMITED,
GALAXY LUCK ENTERPRISES LIMITED,
WIRED TECHNOLOGY CONSULTANTS GROUP LIMITED,
UNICROWN LIMITED,
AND
NEWSINO LIMITED
DATED AS OF
MAY 16, 2000
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TABLE OF CONTENTS
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ARTICLE I
PURCHASE AND SALE OF COMMON STOCK................................................................................1
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Section 1.01 Sale and Issuance of Common Stock; Issuance of Warrants........................................1
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Section 1.02 Closing and Delivery...........................................................................2
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................................2
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Section 2.01 Organization; Good Standing, Qualification.....................................................2
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Section 2.02 Authorization..................................................................................3
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Section 2.03 Valid Issuance of Common Stock.................................................................3
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Section 2.04 Government Consents............................................................................3
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Section 2.05 Capitalization and Voting Rights...............................................................4
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Section 2.06 Subsidiaries...................................................................................4
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Section 2.07 Contracts and Other Commitments................................................................4
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Section 2.08 Related-Party Transactions.....................................................................5
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Section 2.09 Permits........................................................................................6
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Section 2.10 Compliance with Other Instruments..............................................................6
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Section 2.11 Litigation.....................................................................................6
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Section 2.12 Disclosure.....................................................................................7
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Section 2.13 Offering.......................................................................................7
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Section 2.14 Title to Property and Assets; Leases...........................................................7
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Section 2.15 Material Liabilities...........................................................................7
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Section 2.16 Changes........................................................................................7
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Section 2.17 Patents, Trademarks, Domain Names and Websites.................................................7
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Section 2.18 Employees; Employee Compensation...............................................................8
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Section 2.19 Tax Returns, Payments..........................................................................8
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Section 2.20 Regulation S...................................................................................9
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Section 2.21 Receipt of Information.........................................................................9
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Section 2.22 Investment Purpose.............................................................................9
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Section 2.23 Reliance on Exemptions.........................................................................9
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Section 2.24 Suitability and Sophistication.................................................................9
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Section 2.25 Governmental Review...........................................................................10
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Section 2.26 Transfer or Resale............................................................................10
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Section 2.27 Legends.......................................................................................10
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Section 2.28 Xxxx-Xxxxx-Xxxxxx Act.........................................................................11
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ARTICLE IIA
REPRESENTATIONS AND WARRANTIES OF EXISTING SHAREHOLDERS.........................................................11
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Section 2A.01 Authorization.................................................................................11
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Section 2A.05 Investment Purpose............................................................................12
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Section 2A.06 Reliance on Exemptions........................................................................12
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Section 2A.07 Suitability and Sophistication................................................................13
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Section 2A.08 Governmental Review...........................................................................13
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Section 2A.09 Transfer or Resale............................................................................13
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Section 2A.10 Legends.......................................................................................13
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Section 2A.11 Xxxx-Xxxxx-Xxxxxx Act.........................................................................15
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR..................................................................15
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Section 3.01 Organization; Good Standing, Qualification....................................................15
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Section 3.02 Authorization.................................................................................15
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Section 3.03 Valid Issuance of Common Stock................................................................15
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Section 3.04 Governmental Consents.........................................................................16
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Section 3.05 Capitalization and Voting Rights..............................................................16
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Section 3.06 Subsidiaries..................................................................................16
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Section 3.07 Contracts and Other Commitments...............................................................16
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Section 3.08 Related-Party Transactions....................................................................17
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Section 3.09 Permits.......................................................................................18
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Section 3.10 Compliance with Other Instruments.............................................................18
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Section 3.11 Litigation....................................................................................18
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Section 3.12 Disclosure....................................................................................19
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Section 3.13 Title to Property and Assets; Leases..........................................................19
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Section 3.14 Material Liabilities..........................................................................19
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Section 3.15 Changes.......................................................................................20
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Section 3.16 Patents, Trademarks, Domain Names and Websites................................................20
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Section 3.17 Employees; Employee Compensation..............................................................20
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Section 3.18 Tax Returns, Payments, and Elections..........................................................21
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Section 3.19 Receipt of Information........................................................................21
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Section 3.20 Investment Purpose............................................................................21
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Section 3.21 Accredited Investor Status....................................................................22
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Section 3.22 Reliance on Exemptions........................................................................22
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Section 3.23 Suitability and Sophistication................................................................22
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Section 3.24 Governmental Review...........................................................................22
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Section 3.25 Transfer or Resale............................................................................22
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Section 3.26 Legends.......................................................................................22
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Section 3.27 Public Sale...................................................................................23
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ARTICLE IV
COVENANTS OF THE INVESTOR.......................................................................................24
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Section 4.01 New Registration Statement....................................................................24
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Section 4.02 Registration Expenses.........................................................................26
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Section 4.03 Indemnification...............................................................................26
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Section 4.04 Amendment and Waiver..........................................................................28
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Section 4.05 Reconveyance of Company Property Listings.....................................................28
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ARTICLE V
CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING.................................................................29
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Section 5.01 Board of Directors............................................................................29
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Section 5.02 Opinion of Company Counsel....................................................................29
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Section 5.03 Shareholders Agreement........................................................................29
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Section 5.04 Licensing Agreement...........................................................................29
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ARTICLE VI
CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING..............................................................29
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Section 6.01 Opinion of Investor's Counsel.................................................................29
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Section 6.02 Shareholders Agreement........................................................................29
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Section 6.03 Licensing Agreement...........................................................................29
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Section 6.04 Warrants......................................................................................29
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ARTICLE VII
MISCELLANEOUS...................................................................................................30
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Section 7.01 Entire Agreement..............................................................................30
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Section 7.02 Survival......................................................................................30
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Section 7.03 Successors and Assigns; Assignment............................................................30
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Section 7.04 Governing Law.................................................................................30
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Section 7.05 Counterparts..................................................................................31
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Section 7.06 Titles and subtitles..........................................................................31
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Section 7.07 Notices.......................................................................................31
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Section 7.08 Finder's Fees.................................................................................31
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Section 7.09 Expenses......................................................................................31
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Section 7.10 Attorneys' Fees...............................................................................31
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Section 7.11 Amendments and Waivers........................................................................31
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Section 7.12 Severability..................................................................................32
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THE PROPERTY PORTAL! LIMITED
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") is made as of
this 16th day of May, 2000, by and between (i) the property portal! Limited, a
corporation incorporated under the laws of Hong Kong with its registered address
at 4th Floor, Onfem Tower, 00 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxx Xxxx, particulars of
which are set out in Schedule 1 hereto (the "Company"), (ii) XxxxXxxxxxx.xxx,
Incorporated, a company incorporated under the laws of the State of Nevada in
the United States of America with its registered address at 0000 Xxxxx XxXxxxxx
Xxxxxxxxx, Xxxxx X-00, Xxxx, Xxxxxx 00000, the United States of America,
particulars of which are set out in Schedule 2 hereto (the "Investor") and (iii)
the existing shareholders of the Company (the "Existing Shareholders"), namely,
(A) Cyber Exposures Limited, a company incorporated under the laws of the
British Virgin Islands, whose registered office is at TrustNet Xxxxxxxx, P.O.
Box 3444, Road Town, Tortola, British Virgin Islands ("CEL"); (B) Denwell
Enterprises Limited, a company incorporated under the laws of the British Virgin
Islands whose registered office is at the offices of Ansbacher (BVI) Limited of
International Trust Building, P.O. Box 659, Road Town, Tortola, British Virgin
Islands ("Denwell"); (C) Galaxy Luck Enterprises Limited, a company incorporated
under the laws of the Hong Kong SAR whose registered office is at 0X Xxxxx
Xxxxx, 000 Xxxxx Xxxx, Xxxxxxx, Xxxx Xxxx ("Galaxy"); (D) Wired Technology
Consultants Group Limited, a company incorporated under the laws of the Hong
Kong SAR whose registered office is at 7th Floor, Times Tower, 393 Xxxxx Road,
Wanchai, Hong Kong ("WTCG"); (E) Unicrown Limited, a company incorporated under
the laws of the British Virgin Islands whose registered office is at Tropic Isle
Building, P.O. Box 438, Road Town, Tortola, British Virgin Islands ("Unicrown");
and (F) Newsino Limited, a company incorporated under the laws of the British
Virgin Islands whose registered office is at Tropic Isle Building, P.O. Box 438,
Road Town, Tortola, British Virgin Islands ("Newsino").
In consideration of the mutual promises and covenants contained herein,
the Parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
---------------------------------
Section 1.01 Sale and Issuance of Common Stock; Issuance of Warrants.
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(a) Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase, and the Company agrees to sell and issue to the
Investor, at the Closing 1,613,000 shares (the "Shares") of the Company's
ordinary shares, HK$1.00 par value per share (the "Common Stock"), for a total
consideration to the Company of 1,638,750 shares (the "Consideration Shares") of
the Investor's common stock, US$0.001 par value per share (the "Investor Common
Stock"), which represents an agreed upon purchase price per share of Investor
Common Stock of US$8.00.
(b) Subject to the terms and conditions of this Agreement, the
Investor agrees to issue to the Existing Shareholders warrants to purchase
1,000,000 shares of the Investor Common Stock (the "Warrants"), exercisable at a
price of US$7.00 per share with such other terms and conditions as set forth in
the form of Warrant attached hereto as Exhibit A, to be distributed among the
Existing Shareholders in accordance with Schedule 3 hereto in consideration of
the Existing Shareholders execution and delivery of this Agreement and the
applicable Ancillary Agreements (as defined below).
Section 1.02 Closing and Delivery.
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(a) Closing. The purchase and sale of the Shares shall take
place at the offices of Xxxxxxx C.C. Man & Co., Xxxxx 0000, Xxxxxxx Xxxxx, 00
Xxxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx, at 10:00 a.m., local time, on May 19, 2000, or
at such other time and place as the Company and the Investor shall mutually
agree, either orally or in writing (which time and place are designated as the
"Closing").
(b) Delivery. At the Closing, the Company shall deliver to the
Investor a certificate representing the Shares that the Investor is purchasing
against delivery by the Investor of (i) a certificate representing the
Consideration Shares to the Company and (ii) a Warrant to each Existing
Shareholder to purchase the number of shares of Investor Common Stock as set
forth opposite the name of such Existing Shareholder in Schedule 3 hereto, or
such other form of payment as shall be mutually agreed upon by the Investor, the
Existing Shareholders and the Company.
(c) Concurrent or Subsequent Sale of Common Stock. The
Investor acknowledges that the Existing Shareholders may sell up to 1,066,667
shares of the Common Stock to AWT Holdings Company Limited or its nominee, or
such other investors as the Existing Shareholders shall select (the "Additional
Investors"), free from any restrictions of transfer or preemptive rights as may
be set forth in the Shareholders Agreement (as defined below) or other Ancillary
Agreements (as defined below), provided that such sale or sales are consummated
no later than July 31, 2000. The Company and the Existing Shareholders agree to
cause any such Additional Investor to become a party to the Shareholders
Agreement by executing a counterpart signature page to such agreement or a deed
of adherence to such agreement whereupon such Additional Investor shall have the
rights and obligations thereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to the Investor that as of
the date of this Agreement, except as set forth in the Disclosure Letter
furnished to the Investor, specifically identifying the principal relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
Section 2.01 Organization; Good Standing, Qualification. The Company is
a corporation duly organized and validly existing under the laws of Hong Kong,
has all requisite corporate power and authority to own and operate its
properties and assets and to carry on its
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business as now conducted and as presently proposed to be conducted, to execute
and deliver this Agreement and the Shareholders Agreement, to be dated the date
of the Closing, between the Company, the Investor and the Existing Shareholders,
substantially in the form attached hereto as Exhibit B (the "Shareholders
Agreement"), and the Licensing Agreement, to be dated the date of the Closing,
between the Company and the Investor, substantially in the form attached hereto
as Exhibit C (the "Licensing Agreement", together with the Shareholders
Agreement being collectively referred to herein as the "Ancillary Agreements"),
to issue and sell the Shares, and to carry out the provisions of this Agreement
and the Ancillary Agreements. The Company is duly qualified and is authorized to
transact business and is in good standing as a foreign corporation in each
jurisdiction in which it conducts business where the failure so to qualify would
have a material adverse effect on its business, properties or financial
condition (a "Company Material Adverse Effect").
Section 2.02 Authorization. Except such filings as have been made prior
to the closing, or such post-closing filings as may be required under the
applicable companies or securities law, all corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the Ancillary
Agreements, the performance of all obligations of the Company hereunder and
thereunder at the Closing and the authorization, issuance (or reservation for
issuance), sale and delivery of the Shares being sold hereunder has been taken
or will be taken prior to the Closing, and this Agreement and the Ancillary
Agreements, when executed and delivered, will constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent that the indemnification provisions contained
in the Ancillary Agreements may be limited by applicable laws.
Section 2.03 Valid Issuance of Common Stock. The Shares that are being
purchased by the Investor hereunder, when issued, sold, and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and nonassessable, and will
be free of restrictions on transfer other than restrictions on transfer under
the Articles of Association of the Company, this Agreement and the Ancillary
Agreements and under applicable companies or securities laws.
Section 2.04 Governmental Consents. No consent, approval,
qualification, order or authorization of, or filing with, any governmental or
regulatory authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this Agreement and
the Ancillary Agreements, or the offer, sale or issuance of the Shares by the
Company except such filings as have been made prior to the closing, or such
post-closing filings as may be required under the applicable companies or
securities law. The Company has not offered the Shares or any substantially
similar securities of the Company for sale to, or solicited any offers to buy
from, or otherwise approached or negotiated in respect thereof with, any person
other than the Investor and any Additional Investor referred to in to in Section
1.02(c) above, and the Company will not take any action that will cause the
issuance and delivery of the Shares as contemplated hereby to constitute a
violation of any applicable securities laws and the Securities Act of 1933, as
amended (the "Securities Act").
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Section 2.05 Capitalization and Voting Rights. The authorized capital
of the Company consists, or will consist, assuming the sale of the Common Stock
by the Existing Shareholders to the Additional Investor has not occurred,
immediately prior to the Closing, of:
(a) Ten million (10,000,000) shares of Common Stock, HK$1.00
par value per share, of which five million three hundred and thirty-three
thousand three hundred and thirty-three (5,333,333) shares are issued and
outstanding.
(b) The outstanding shares of Common Stock are owned by the
Existing Shareholders as specified in Schedule 1 hereto.
(c) The outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, and were issued
pursuant to valid exemptions from the registration or qualification provisions
of the Securities Act and any relevant state securities laws.
(d) Except for currently outstanding options to purchase
Common Stock granted to each of (i) CEL, pursuant to two Option Agreements both
dated 14th February 2000 between the Company and CEL, (ii) Xxxxxxx Chen, a
director of the Company, pursuant to the Option Deed dated 14th February 2000
between the Company and Xxxxxxx Xxxx, (iii) Xxx Xxx Fun Xxxxxxxx, a director of
the Company, pursuant to the Option Deed dated 14th February 2000 between the
Company and Xxx Xxx Fun Xxxxxxxx, (iv) Kong Xxxx, pursuant to the Employee
Option dated 14th February 2000 between the Company and Kong Xxxx, (v) Kong Xxxx
Xxx Xxxxxxx, pursuant to the Option Agreement dated 16 May 2000 between the
Company and Kong Xxxx Xxx Xxxxxxx, (iv) Xxxx Xxx, pursuant to the Option
Agreement dated 16 May 2000 between the Company and Xxxx Xxx, (vii) Sze Chi
Hong, pursuant to the Employment Contract dated 1st February 2000 between the
Company and Sze Chi Hung, (viii) Xxxxxxxx Xxxx Xxx-Xxx, pursuant to the
Employment Contract dated 28th March 2000 between the Company and Xxxxxxxx Xxxx
Kai-Yan, (ix) Xxxxxxx Xxx, pursuant to the Employment Contract dated 1st April
2000 between the Company and Xxxxxxx Xxx, and (x) Xxxxx Xxx Sai Kit, pursuant to
the Employment Contract dated 17th April 2000 between the Company the Xxxxx Xxx
Sai Kit, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements or agreements of any kind for the purchase or acquisition
from the Company of any of its securities. The Company is not a party or subject
to any agreement or understanding, and, to the best of the Company's knowledge,
there is no agreement or understanding between any persons that affects or
relates to the voting or giving of written consents with respect to any security
or the voting by a director of the Company.
Section 2.06 Subsidiaries. The Company does not own or control,
directly or indirectly, any interest in any other corporation, partnership,
limited liability company, association, or other business entity. The Company is
not a participant in any joint venture, partnership, or similar arrangement.
Section 2.07 Contracts and Other Commitments. (a) There are no material
contracts, obligations, agreements, arrangements or concert practices involving
the Company, and no practices in which the Company is engaged, which are void,
illegal, unenforceable, registrable or notifiable due to any contravention of
any applicable fair trading or anti-trust legislation or
4
regulations, nor has the Company received any threat, complaint or request for
information or investigation in relation to or in connection with any such
legislation or regulations.
(b) With respect to each material contract, commitment, arrangement,
understanding, tender and bid involving the Company:
(i) the Company has obtained all approvals and consents necessary
for the validity and enforceability thereof, and the Company
has duly performed and complied in all material respects with
each of its obligations thereunder;
(ii) the Company is under no obligation which cannot be readily
fulfilled, performed or discharged by the Company on time and
without undue or unusual expenditure, effort or loss;
(iii) there are no known grounds for, and the Company has not
received any notice of, rescission, avoidance, repudiation or
termination; and
(iv) none of the other parties thereto is in default thereunder.
(c) There are no loans, guarantees, pledges, mortgages, charges, liens,
debentures, encumbrances or unusual liabilities given, made or incurred by or on
behalf of the Company (and, in particular but without limiting the foregoing, no
loans have been made by or on behalf of the Company to any directors or
shareholders of the Company) and no person has given any guarantee of or
security for any liability of the Company.
(d) To the knowledge of the Company, the Company is not the subject of
any official investigation or inquiry and there are no facts which are likely to
give rise to any such investigation or inquiry.
(e) The Company has security procedures in place designed to prevent
unauthorized access, amendment or damage to the Company's data or the data of
third parties held, recorded, stored, maintained or operated by the Company or
on behalf of the Company by any third party as part of the Company's Web
site(s).
(f) No act or transaction has been effected by or on behalf of the
Company involving the making or authorizing of any payment, or the giving of
anything of value, to any government official, political party, party official
or candidate for political office for the purpose of influencing the recipient
in his or her or its official capacity in order to obtain business, retain
business or direct business to the Company or any other person or firm.
Section 2.08 Related-Party Transactions. No employee, officer,
stockholder or director of the Company or member of his or her immediate family
is indebted to the Company, nor is the Company indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than (i) for payment
of salary for services rendered, (ii) reimbursement for reasonable expenses
incurred on behalf of the Company, and (iii) for other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under any stock option plan approved by the Board of
Directors of the Company). To the best of the Company's knowledge, none of such
persons has any direct or indirect
5
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, stockholders,
officers, or directors of the Company and members of their immediate families
may own stock in publicly traded companies that may compete with the Company.
Except for the management service agreement entered into in June 1999 between
Galaxy and the Company which has expired, and the agreement dated November 24,
1999 between the Company and WTCG, to the best of the Company's knowledge, no
officer, director, or stockholder or any member of their immediate families has
been or is currently, directly or indirectly, interested in any material
contract with the Company (other than such contracts as relate to any such
person's ownership of capital stock or other securities of the Company).
Section 2.09 Permits. To the best knowledge of the Company, the Company
has all franchises, permits, licenses, and any similar authority necessary for
the conduct of its business as now being conducted by it, the lack of which
could have a Company Material Adverse Effect, and the Company believes that it
can obtain, without undue burden or expense, any similar authority for the
conduct of its business as presently planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses or other similar authority.
Section 2.10 Compliance with Other Instruments. The Company is not in
violation or default in any material respect of any provision of its
organizational documents or in any material respect of any provision of any
mortgage, indenture, agreement, instrument, or contract to which it is a party
or by which it is bound or, to the best of its knowledge, of any judgment,
order, writ, decree, statute, rule, regulation or restriction applicable to the
Company. The execution, delivery, and performance by the Company of this
Agreement and the Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby, will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge, or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture,
or nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
Section 2.11 Litigation. Except for the claims disclosed in the
Disclosure Letter, there is no action, suit, proceeding, or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, the Ancillary Agreements or the
right of the Company to enter into such agreements, or to consummate the
transactions contemplated hereby or thereby, or that would reasonably be
expected to result, either individually or in the aggregate, in any Company
Material Adverse Effect, or in any material change in the current equity
ownership of the Company. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, or negotiations by the Company with
potential backers of, or investors in, the Company or its proposed business. The
Company is not a party to or, to the best of its knowledge, named in or
6
subject to any order, writ, injunction, judgment, or decree of any court,
government agency, or instrumentality.
Section 2.12 Disclosure. The Company has provided the Investor with all
the material information reasonably available to it without undue expense that
the Investor has requested for deciding whether to purchase the Shares. To the
best of the Company's knowledge after reasonable investigation, neither this
Agreement nor any other agreements, written statements or certificates made or
delivered in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
Section 2.13 Offering. Subject in part to the truth and accuracy of the
Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
Section 2.14 Title to Property and Assets; Leases. The Company does not
own any real property. With respect to the property and assets it leases, except
(i) for liens for current taxes not yet delinquent, (ii) for liens imposed by
law and incurred in the ordinary course of business for obligations not past due
to carriers, warehousemen, laborers, materialmen and the like, (iii) for liens
in respect of pledges or deposits under workers' compensation laws or similar
legislation or (iv) for minor defects in title, none of which, individually or
in the aggregate, materially interferes with the use of such property, the
Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims, or encumbrances.
Section 2.15 Material Liabilities. The Company has no material
liability or obligation, absolute or contingent (individually or in the
aggregate), except (i) obligations and liabilities incurred after the date of
incorporation in the ordinary course of business that are not material,
individually or in the aggregate, and (ii) obligations under contracts made in
the ordinary course of business that would not be required to be reflected in
financial statements prepared in accordance with the requirements of Hong Kong
law and generally accepted accounting principles.
Section 2.16 Changes. To the best of the Company's knowledge, since
January 31, 2000, there has not been any event or condition of any type that has
caused a Company Material Adverse Effect.
Section 2.17 Patents, Trademarks, Domain Names and Websites. To the
best of its knowledge (but without having conducted any special investigation or
patent search), the Company owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, and proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted without any conflict
with, or infringement of the rights of, others. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights,
7
trade secrets, or other proprietary rights or processes of any other person or
entity. The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants, or commitments of any nature) or
other agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the best of the Company's knowledge, conflict with or result in a
breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant, or instrument under which any of such employees
is now obligated. The Company does not currently believe it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company. To the best of
the Company's knowledge, all of the domain names used by the Company in its
business have been duly registered are current, active and fully paid, and the
Company is the sole and exclusive owner of and possesses all rights necessary to
use such domain names. To the best of the Company's knowledge, the Company has
the sole and exclusive right to operate the Websites used in the Company's
business (the "Company Websites") and to reproduce, use, perform, operate,
market, develop, sell, license, display, distribute, publish, transmit and
create derivative works of all information, content and software available at
the Company Websites.
Section 2.18 Employees; Employee Compensation. To the best of the
Company's knowledge, there is no strike, labor dispute or union organization
activities pending or threatened between it and its employees. None of the
Company's employees belongs to any union or collective bargaining unit. To the
best of its knowledge, the Company has complied in all material respects with
the Sex Discrimination Ordinance, the Disability Discrimination Ordinance, the
Family Status Discrimination Ordinance or any other laws conferring protection
against discrimination, harassment, victimization or vilification by reason of
age, gender, family circumstances, race, religion or disability. To the best of
the Company's knowledge, no employee of the Company is or will be in violation
of any judgment, decree, or order, or any term of any employment contract,
patent disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with the Company, or any other party because
of the nature of the business conducted or presently proposed to be conducted by
the Company or to the use by the employee of his or her best efforts with
respect to such business. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each officer and
employee of the Company is terminable at the will of the Company.
Section 2.19 Tax Returns, Payments. The requirement for the Company to
file any material tax returns and reports as required by law has not arisen.
None of the Company's material income have ever been audited by governmental
authorities. Since the date of its incorporation, the Company has made adequate
provisions on its books of account for all material taxes, assessments, and
governmental charges with respect to its business, properties, and operations
for such period.
8
Section 2.20 Regulation S. The Company (a) is not a U.S. person within
the meaning of Regulation S promulgated under the Securities Act ("Regulation
S") and is not acquiring the Consideration Shares for the account or benefit of
any U.S. person and (b) was outside the United States at the time the buy order
for the Consideration Shares was initiated.
Section 2.21 Receipt of Information. The Company believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Consideration Shares. The Company further represents
that it has had an opportunity to ask questions and receive answers from the
Investor regarding the terms and conditions of the offering of the Consideration
Shares and the business, properties, prospects, and financial condition of the
Investor and to obtain additional information (to the extent the Investor
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished to the
Company or to which the Company had access. The foregoing, however, does not
limit or modify the representations and warranties of the Investor in Article
III of this Agreement or the right of the Company to rely thereon.
Section 2.22 Investment Purpose. The Company is acquiring the
Consideration Shares for its own account for investment purposes only and not
with the view to, or for resale in connection with, the public sale or
distribution thereof, except (i) in compliance with the Securities Act and (ii)
that disposition of the Consideration Shares shall at all times be within the
Company's control. The Company understands that it must bear the economic risk
of the investment in the Consideration Shares indefinitely, unless any such
securities are registered pursuant to the Securities Act and any other
applicable securities or blue sky laws or an exemption from such registration is
available, and that the Investor has no present intention of registering any
such securities other than as contemplated by Article IV. Notwithstanding
anything in this Section 2.22 to the contrary, by making the representations
herein, the Company does not agree to hold any such securities for any minimum
or other specific term and reserve the right to dispose of any such securities
at any time in accordance with or pursuant to a registration statement or an
exemption under the Securities Act. The Company shall at no time sell, in any
one trading day, an aggregate amount of the Consideration Shares that exceeds
25% of the volume of the shares of Investor Common Stock traded on the previous
trading day.
Section 2.23 Reliance on Exemptions. The Company understands that the
Consideration Shares are being offered and sold to the Company in reliance upon
the exemption from the registration requirements of United States federal
securities laws provided by Regulation S and that the Investor is relying upon
the truth and accuracy of, and the Company's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Company set forth herein in order to determine the availability of such
exemptions and the eligibility of the Company to acquire the Consideration
Shares.
Section 2.24 Suitability and Sophistication. (i) The Company has such
knowledge and experience in financial and business matters that it is capable of
independently evaluating the risks and merits of purchasing the Consideration
Shares; (ii) the Company has been furnished all materials relating to the offer
and sale of the Consideration Shares that have been specifically requested by
the Company; (iii) the Company has been afforded the opportunity to ask
questions of the Investor's management and such questions have been answered to
its satisfaction; (iv) the Company has independently evaluated the risks and
merits of purchasing the Consideration
9
Shares; and (v) the Company has sufficient funds to bear the loss of its entire
investment in the Consideration Shares.
Section 2.25 Governmental Review. The Company understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Consideration Shares.
Section 2.26 Transfer or Resale. The Company understands that (i)
except as provided in Article IV, the Consideration Shares have not been and are
not being registered under the Securities Act or any state securities laws, and
may not be transferred or sold except (A) in accordance with Regulation S or (B)
unless (1) subsequently registered thereunder, (2) the Company shall have
delivered to the Investor an opinion of counsel to the Company (which opinion
shall be reasonably satisfactory in form, substance and state that the
securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration), or (3) sold under Rule 144 promulgated under
the Securities Act (or a successor rule) ("Rule 144"); and (ii) neither the
Investor nor any other person is under any obligation to register such
Consideration Shares under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to Article IV). The Company agrees not to engage in hedging
transactions with regard to such Consideration Shares unless in compliance with
the Securities Act. Notwithstanding anything to the contrary contained in this
Article II, the Company understands that the Investor shall refuse to register
any transfer of the Consideration Shares not made in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act or
pursuant to an available exemption from registration.
Section 2.27 Legends. The Company understands that the Consideration
Shares and, until such time as any such securities have been registered under
the Securities Act as contemplated by Article IV or otherwise may be sold by the
Company under Rule 144 the certificates for any such securities, will bear a
restrictive legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") NOR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY
STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT (A) IN
ACCORDANCE WITH REGULATION S PROMULGATED UNDER THE SECURITIES
ACT ("REGULATION S") OR (B) PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE
UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT OR
(iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT,
PROVIDED THAT IN A TRANSACTION PURSUANT TO (iii) ABOVE, IF
REQUESTED BY THE ISSUER HEREOF, AN OPINION OF COUNSEL
10
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
SUCH ISSUER STATING THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE. IN ADDITION, HEDGING
TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
The legend set forth above shall be removed and the Investor shall
issue a certificate without such legend to the holder of any security upon which
it is stamped, if, unless otherwise required by state securities laws, (i) the
sale of such security is registered under the Securities Act, (ii) such holder
provides the Investor with an opinion of counsel reasonably satisfactory in
form, substance and scope stating that a public sale or transfer of such
security may be made without registration under the Securities Act or (iii) such
holder provides the Investor with reasonable assurances that such security can
be sold under Rule 144. The Company agrees to sell all securities, including
those represented by a certificate(s) from which the legend has been removed,
pursuant to an effective registration statement or in compliance with an
exemption from the registration requirements of the Securities Act. In the event
the above legend is removed from any security and thereafter the effectiveness
of a registration statement covering such security is suspended or the Investor
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance notice to the Company, the
Investor may require that the above legend be placed on any such security that
cannot then be sold pursuant to an effective registration statement or under
Rule 144 and the Company shall cooperate in the prompt replacement of such
legend. Such legend shall be removed when such security may be sold pursuant to
an effective registration statement or under Rule 144.
Section 2.28 Xxxx-Xxxxx-Xxxxxx Act. The Company is not controlled by
any other person or persons within the meaning of the rules promulgated under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); and the Company had less than US$10,000,000 of annual net sales on its
latest annual income statement and less than US$10,000,000 in total assets as
shown on its most recent regularly prepared balance sheet.
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES OF EXISTING SHAREHOLDERS
-------------------------------------------------------
Each of the Existing Shareholders hereby individually and for
themselves only severally (and not jointly and severally) represents and
warrants to the Investor that as of the date of this Agreement:
Section 2A.01 Authorization. All corporate action on the part of such
Existing Shareholder, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the Ancillary
Agreements, and the performance of all obligations of such Existing Shareholder
hereunder and thereunder at the Closing has been taken or will be taken prior to
the Closing, and this Agreement and the Ancillary Agreements, when executed and
delivered, will constitute valid and legally binding obligations of such
Existing Shareholder, enforceable in accordance with their respective terms
except (i) as limited by
11
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent that the
indemnification provisions contained in the Ancillary Agreements may be limited
by applicable laws.
Section 2A.02 Governmental Consents. No consent, approval,
qualification, order or authorization of, or filing with, any governmental
authority is required on the part of such Existing Shareholder in connection
with such Existing Shareholder's valid execution, delivery, or performance of
this Agreement and the Ancillary Agreements, or the offer, sale or issuance of
the Shares by such Existing Shareholder, except such filings as have been made
prior to the closing, or such post-closing filings as may be required under the
applicable companies or securities law.
Section 2A.03 Regulation S. Such Existing Shareholder (a) is not a U.S.
person (within the meaning of Regulation S) and is not acquiring the Warrants
for the account or benefit of any U.S. person and (b) was outside the United
States at the time the buy order for the Warrants was initiated.
Section 2A.04 Receipt of Information. Such Existing Shareholder
believes it has received all the information it considers necessary or
appropriate for deciding whether to acquire the Warrants. Such Existing
Shareholder further represents that it has had an opportunity to ask questions
and receive answers from the Investor regarding the terms and conditions of the
offering of the Warrants and the business, properties, prospects, and financial
condition of the Investor and to obtain additional information (to the extent
the Investor possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to such Existing Shareholder or to which such Existing Shareholder had access.
The foregoing, however, does not limit or modify the representations and
warranties of the Investor in Article III of this Agreement or the right of such
Existing Shareholder to rely thereon.
Section 2A.05 Investment Purpose. Such Existing Shareholder is
acquiring the Warrant being issued to it for its own account for investment
purposes only and not with the view to, or for resale in connection with, the
public sale or distribution thereof, except (i) in compliance with the
Securities Act and (ii) that disposition of such Warrant shall at all times be
within such Existing Shareholder's control. Such Existing Shareholder
understands that it must bear the economic risk of the investment in the such
Warrant indefinitely, unless any such securities are registered pursuant to the
Securities Act and any other applicable securities or blue sky laws or an
exemption from such registration is available, and that the Investor has no
present intention of registering any such securities other than as contemplated
by Article IV. Notwithstanding anything in this Section 2A.05 to the contrary,
by making the representations herein, such Existing Shareholder does not agree
to hold any such securities for any minimum or other specific term and reserve
the right to dispose of any such securities at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
Section 2A.06 Reliance on Exemptions. Such Existing Shareholder
understands that the Warrants are being offered and sold to such Existing
Shareholder and the other Existing
12
Shareholders in reliance upon the exemption from the registration requirements
of United States federal securities laws provided by Regulation S and that the
Investor is relying upon the truth and accuracy of, and the Existing
Shareholders' compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Existing Shareholders set forth herein
in order to determine the availability of such exemptions and the eligibility of
the Existing Shareholders to acquire the Warrants.
Section 2A.07 Suitability and Sophistication. (i) Such Existing
Shareholder has such knowledge and experience in financial and business matters
that it is capable of independently evaluating the risks and merits of
purchasing the Warrants; (ii) such Existing Shareholder has been furnished all
materials relating to the offer and sale of the Warrants that have been
specifically requested by such Existing Shareholder; (iii) such Existing
Shareholder has been afforded the opportunity to ask questions of the Investor's
management and such questions have been answered to its satisfaction; (iv) such
Existing Shareholder has independently evaluated the risks and merits of
purchasing the Warrants; and (v) such Existing Shareholder has sufficient funds
to bear the loss of its entire investment in any Investor Common Stock or any
other securities issued upon exercise of the Warrants.
Section 2A.08 Governmental Review. Such Existing Shareholder
understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation or
endorsement of the Warrants.
Section 2A.09 Transfer or Resale. Such Existing Shareholder understands
that (i) the Warrant to be issued to it has not been and is not being registered
under the Securities Act or any state securities laws, and may not be
transferred or sold except (A) in accordance with Regulation S or (B) unless (1)
subsequently registered thereunder, (2) such Existing Shareholder shall have
delivered to the Investor an opinion of counsel to such Existing Shareholder
(which opinion shall be reasonably satisfactory in form, substance and state
that the securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration), or (3) sold under Rule 144;
and (ii) neither the Investor nor any other person is under any obligation to
register such Warrant under the Securities Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder; provided,
however, that the shares of Investor Common Stock issuable upon exercise of the
Warrants shall have certain registration rights pursuant to Article IV of this
Agreement. Such Existing Shareholder also agrees not to engage in hedging
transactions with regard to such Warrants unless in compliance with the
Securities Act. Notwithstanding anything to the contrary contained in this
Article IIA, such Existing Shareholder understands that the Investor shall
refuse to register any transfer of the Warrants not made in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act or
pursuant to an available exemption from registration.
Section 2A.10 Legends. Such Existing Shareholder understands that the
Warrants being issued to it, any securities issuable upon any exercise of the
Warrants and, until such time as any such securities have been registered under
the Securities Act as contemplated by Article IV or otherwise may be sold by
such Existing Shareholder under Rule 144 the certificates for any such
securities, will bear a restrictive legend in substantially the following form:
13
THESE SECURITIES AND THE SECURITIES TO BE ISSUED UPON ANY
EXERCISE OF THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") NOR PURSUANT
TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT (A) IN ACCORDANCE
WITH REGULATION S PROMULGATED UNDER THE SECURITIES ACT
("REGULATION S") OR (B) PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE
UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT OR
(iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT,
PROVIDED THAT IN A TRANSACTION PURSUANT TO (iii) ABOVE, IF
REQUESTED BY THE ISSUER HEREOF, AN OPINION OF COUNSEL
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
SUCH ISSUER STATING THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE. IN ADDITION, SUCH
SECURITIES MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S.
PERSON (WITHIN THE MEANING OF REGULATION S) UNLESS REGISTERED
UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE, AND HEDGING TRANSACTIONS INVOLVING
THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT.
The legend set forth above shall be removed and the Investor shall
issue a certificate without such legend to the holder of any security upon which
it is stamped, if, unless otherwise required by state securities laws, (i) the
sale of such security is registered under the Securities Act, (ii) such holder
provides the Investor with an opinion of counsel reasonably satisfactory in
form, substance and scope stating that a public sale or transfer of such
security may be made without registration under the Securities Act or (iii) such
holder provides the Investor with reasonable assurances that such security can
be sold under Rule 144. Such Existing Shareholder agrees to sell all securities,
including those represented by a certificate(s) from which the legend has been
removed, pursuant to an effective registration statement or in compliance with
an exemption from the registration requirements of the Securities Act. In the
event the above legend is removed from any security and thereafter the
effectiveness of a registration statement covering such security is suspended or
the Investor determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to such Existing
Shareholder, the Investor may require that the above legend be placed on any
such security that cannot then be sold pursuant to an effective registration
statement or under Rule 144 and such Existing Shareholder shall cooperate in the
prompt replacement of such legend. Such legend
14
shall be removed when such security may be sold pursuant to an effective
registration statement or under Rule 144.
Section 2A.11 Xxxx-Xxxxx-Xxxxxx Act. Upon the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements, none
of the Existing Shareholders, nor any ultimate parent entity of any of the
Existing Shareholders within the meaning of the rules promulgated under the HSR
Act, will hold US$15,000,000 or more of the assets of the Investor and Investor
Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
----------------------------------------------
The Investor hereby represents and warrants to the Company and the
Existing Shareholders that as of the date of this Agreement, except as set forth
on a Schedule of Exceptions furnished to the Company and the Existing
Shareholders, specifically identifying the principal relevant subparagraph
hereof, which exceptions shall be deemed to be representations and warranties as
if made hereunder:
Section 3.01 Organization; Good Standing, Qualification. The Investor
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Nevada, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as presently proposed to be conducted, to execute and deliver this
Agreement and the Ancillary Agreements, to issue and sell the Consideration
Shares, and to grant and execute the Warrants, and to carry out the provisions
of this Agreement and the Ancillary Agreements. The Investor is duly qualified
and is authorized to transact business and is in good standing as a foreign
corporation in each jurisdiction in which it conducts business where the failure
so to qualify would have a material adverse effect on its business, properties,
or financial condition (an "Investor Material Adverse Effect").
Section 3.02 Authorization. All corporate action on the part of the
Investor, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the Ancillary
Agreements, the performance of all obligations of the Investor hereunder and
thereunder at the Closing and the authorization, issuance (or reservation for
issuance), sale and delivery of the Consideration Shares and the Warrants being
sold hereunder has been taken or will be taken prior to the Closing, and this
Agreement and the Ancillary Agreements, when executed and delivered, will
constitute valid and legally binding obligations of the Investor, enforceable in
accordance with their respective terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent that the
indemnification provisions contained in the Ancillary Agreements may be limited
by applicable laws.
Section 3.03 Valid Issuance of Common Stock. The Consideration Shares
that are being purchased by the Company hereunder, when issued, sold, and
delivered in accordance with the terms of this Agreement, for the consideration
expressed herein, will be duly and validly
15
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Ancillary Agreements and under applicable securities laws.
Section 3.04 Governmental Consents. No consent, approval,
qualification, order or authorization of, or filing with, any governmental or
regulatory authority is required on the part of the Investor in connection with
the Investor's valid execution, delivery, or performance of this Agreement and
the Ancillary Agreements, or the offer, sale or issuance of the Consideration
Shares and the Warrants by the Investor, except such filings as have been made
prior to the Closing, or such post-closing filings as may be required under
applicable federal or state securities laws, which will be timely filed within
the applicable periods therefor. The Investor will not take any action that will
cause the issuance and delivery of the Consideration Shares or the Warrants as
contemplated hereby to constitute a violation of the Securities Act.
Section 3.05 Capitalization and Voting Rights. (a) The authorized
capital of the Investor consists, or will consist immediately prior to the
Closing, of 50,000,000 shares of Investor Common Stock, 5,000,000 shares of
Class A Preferred Stock, par value $.001 per share (the "Investor Class A
Preferred Stock"), and 200,000 shares of Class B Preferred Stock, par value
$10.00 per share (the "Investor Class B Preferred Stock").
(b) The beneficial owners of more than 5% of the outstanding shares of
the Investor Common Stock are owned by the entities with their shareholdings
specified in Schedule 2 hereto.
(c) The outstanding shares of Investor Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, and were issued
in accordance with the registration or qualification provisions of the
Securities Act and any relevant state securities laws or pursuant to valid
exemptions therefrom.
(d) As of May 8, 2000, 18,449,432 shares of Investor Common Stock and
no shares of Investor Class A Preferred Stock or Investor Class B Preferred
Stock were issued and outstanding. There are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or stockholder agreements or agreements of any kind for the purchase or
acquisition from the Investor of any of its securities. The Investor is not a
party or subject to any agreement or understanding, and, to the best of the
Investor's knowledge, there is no agreement or understanding between any persons
that affects or relates to the voting or giving of written consents with respect
to any security or the voting by a director of the Investor.
Section 3.06 Subsidiaries. The Investor does not own or control,
directly or indirectly, any interest in any other corporation, partnership,
limited liability company, association, or other business entity. The Investor
is not a participant in any joint venture, partnership, or similar arrangement.
Section 3.07 Contracts and Other Commitments. (a) There are no material
contracts, obligations, agreements, arrangements or concert practices involving
the Investor, and no practices in which the Investor is engaged, which are void,
illegal, unenforceable, registrable or notifiable due to any contravention of
any fair trading or anti-trust legislation or regulations
16
applicable to the Investor, nor has the Investor received any threat, complaint
or request for information or investigation in relation to or in connection with
any such legislation or regulations.
(b) With respect to each material contract, commitment, arrangement,
understanding, tender and bid involving the Investor required to be filed by the
Investor with the Securities and Exchange Commission (the "Commission") pursuant
to the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") since June 30, 1999 (collectively, the "SEC Reports"):
(i) the Investor has so filed such contract, commitment,
arrangement, understanding, tender or bid with the Commission;
(ii) the Investor has obtained all approvals and consents necessary
for the validity and enforceability thereof, and the Investor
has duly performed and complied in all material respects with
each of its obligations thereunder;
(ii) the Investor is under no obligation which cannot be readily
fulfilled, performed or discharged by the Investor on time and
without undue or unusual expenditure, effort or loss;
(iii) there are no known grounds for, and the Investor has not
received any notice of, rescission, avoidance, repudiation or
termination; and
(iv) none of the other parties thereto is in default thereunder.
(c) Except as disclosed in the SEC Reports, there are no loans,
guarantees, pledges, mortgages, charges, liens, debentures, encumbrances or
unusual liabilities given, made or incurred by or on behalf of the Investor
(and, in particular but without limiting the foregoing, no loans have been made
by or on behalf of the Investor to any directors or shareholders of the
Investor) and no person has given any guarantee of or security for any liability
of the Investor.
(d) To the knowledge of the Investor, the Investor is not the subject
of any official investigation or inquiry.
(e) The Investor has security procedures in place designed to prevent
unauthorized access, amendment or damage to the Investor's data or the data of
third parties held, recorded, stored, maintained or operated by the Investor or
on behalf of the Investor by any third party.
(f) To the best knowledge of the Investor, no act or transaction has
been effected by or on behalf of the Investor involving the making or
authorizing of any payment, or the giving of anything of value, to any
government official, political party, party official or candidate for political
office for the purpose of influencing the recipient in his or her or its
official capacity in order to obtain business, retain business or direct
business to the Investor or any other person or firm.
Section 3.08 Related-Party Transactions. Except as disclosed in the SEC
Reports or the Schedule of Exceptions, no employee, officer, stockholder or
director of the Investor or
17
member of his or her immediate family is indebted to the Investor, nor is the
Investor indebted (or committed to make loans or extend or guarantee credit) to
any of them, other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the Investor, and
(iii) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Investor). Except as disclosed in
the SEC Reports or the Schedule of Exceptions, to the best of the Investor's
knowledge, none of such persons has any direct or indirect ownership interest in
any firm or corporation with which the Investor is affiliated or with which the
Investor has a business relationship, or any firm or corporation that competes
with the Investor, except that employees, stockholders, officers, or directors
of the Investor and members of their immediate families may own stock in
publicly traded companies that may compete with the Investor. To the best of the
Investor's knowledge, no officer, director, or stockholder or any member of
their immediate families is, directly or indirectly, interested in any material
contract with the Investor (other than such contracts as relate to any such
person's ownership of capital stock or other securities of the Investor).
Section 3.09 Permits. To the best knowledge of the Investor, the
Investor has all franchises, permits, licenses, and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack
of which could have an Investor Material Adverse Effect, and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as presently planned to be conducted. The Investor is not in
default in any material respect under any of such franchises, permits, licenses
or other similar authority.
Section 3.10 Compliance with Other Instruments. The Investor is not in
violation or default in any material respect of any provision of its certificate
of incorporation or by-laws or in any material respect of any provision of any
mortgage, indenture, agreement, instrument, or contract to which it is a party
or by which it is bound or, to the best of its knowledge, of any judgment,
order, writ, decree, statute, rule, regulation or restriction applicable to the
Investor. The execution, delivery, and performance by the Investor of this
Agreement and the Ancillary Agreements, and the consummation of the transactions
contemplated hereby and thereby, will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge, or encumbrance upon
any assets of the Investor or the suspension, revocation, impairment,
forfeiture, or nonrenewal of any material permit, license, authorization, or
approval applicable to the Investor, its business or operations, or any of its
assets or properties.
Section 3.11 Litigation. Except as disclosed in the SEC Reports or the
Schedule of Exceptions, there is no action, suit, proceeding, or investigation
pending or, to the Investor's knowledge, currently threatened against the
Investor that questions the validity of this Agreement, the Ancillary Agreements
or the right of the Investor to enter into such agreements, or to consummate the
transactions contemplated hereby or thereby, or that would reasonably be
expected to result, either individually or in the aggregate, in any Investor
Material Adverse Effect, or in any material change in the current equity
ownership of the Investor. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Investor's employees, their use in
connection with the Investor's business of any information or techniques
allegedly proprietary to
18
any of their former employers, their obligations under any agreements with prior
employers, or negotiations by the Investor with potential backers of, or
investors in, the Investor or its proposed business. The Investor is not a party
to or, to the best of its knowledge, named in or subject to any order, writ,
injunction, judgment, or decree of any court, government agency, or
instrumentality.
Section 3.12 Disclosure. The Investor has provided the Company and the
Existing Shareholders with all the material information reasonably available to
it without undue expense that the Company and the Existing Shareholders have
requested for deciding whether to purchase the Consideration Shares and the
Warrants. Each SEC Report, as of its date, did not and this Agreement, including
the Schedule of Exceptions, as of the date hereof, does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein or herein not misleading.
Section 3.13 Title to Property and Assets; Leases. Except (i) for liens
for current taxes not yet delinquent, (ii) for liens imposed by law and incurred
in the ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (iii) for liens in respect of
pledges or deposits under workers' compensation laws or similar legislation or
(iv) for minor defects in title, none of which, individually or in the
aggregate, materially interferes with the use of such property, the Company has
good and marketable title to its property and assets free and clear of all
mortgages, liens, claims, and encumbrances. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to the best
of its knowledge, holds a valid leasehold interest free of any liens, claims, or
encumbrances, subject to clauses (i)-(iv) above.
Section 3.14 Material Liabilities. The Investor has delivered to the
Company and each Existing Shareholder its audited financial statements (balance
sheet and profit and loss statement, statement of stockholders' equity and
statement of cash flows including notes thereto) at June 30, 1999 and for the
fiscal year then ended and its unaudited financial statements (balance sheet and
profit and loss statement) as at, and for the six-month period ended December
31, 1999 (the "Financial Statements"). The Financial Statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis throughout the periods indicated and
with each other, except that unaudited Financial Statements may not contain all
footnotes required by generally accepted accounting principles. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein, subject in the
case of the unaudited Financial Statements to normal year-end audit adjustments.
Except as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1999 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which, in both cases, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. Except as disclosed in the Financial Statements, the Company is not
a guarantor or indemnitor of any indebtedness of any other person, firm, or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with United
States generally accepted accounting principles.
19
Section 3.15 Changes. To the best of the Investor's knowledge, since
the date of the last audited Financial Statements delivered to the Company and
the Existing Shareholders, there has not been any event or condition of any type
that has caused an Investor Material Adverse Effect.
Section 3.16 Patents, Trademarks, Domain Names and Websites. To the
best of its knowledge (but without having conducted any special investigation or
patent search), the Investor owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, and proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted without any conflict
with, or infringement of the rights of, others. The Schedule of Exceptions
contains a complete list of patents and pending patent applications of the
Investor. The Investor has not received any communications alleging that the
Investor has violated or, by conducting its business as proposed, would violate
any of the patents, trademarks, service marks, trade names, copyrights, trade
secrets, or other proprietary rights or processes of any other person or entity.
The Investor is not aware that any of its employees is obligated under any
contract (including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Investor or that would conflict with the
Investor's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Investor's business by
the employees of the Investor, nor the conduct of the Investor's business as
proposed, will, to the best of the Investor's knowledge, conflict with or result
in a breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant, or instrument under which any of such employees
is now obligated. The Investor does not currently believe it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Investor. To the best of
the Investor's knowledge, all of the domain names used by the Investor in its
business have been duly registered, are current, active and fully paid, and the
Investor is the sole and exclusive owner of and possesses all rights necessary
to use such domain names. To the best of the Investor's knowledge, the Investor
has the sole and exclusive right to operate the Websites used in the Investor's
business (the "Investor Websites") and to reproduce, use, perform, operate,
market, develop, sell, license, display, distribute, publish, transmit and
create derivative works of all information, content and software available at
the Investor Websites.
Section 3.17 Employees; Employee Compensation. To the best of the
Investor's knowledge, there is no strike, labor dispute or union organization
activities pending or threatened between it and its employees. None of the
Investor's employees belongs to any union or collective bargaining unit. To the
best of its knowledge, the Investor has complied in all material respects with
all applicable equal opportunity and other laws related to employment. To the
best of the Investor's knowledge, no employee of the Investor is or will be in
violation of any judgment, decree, or order, or any term of any employment
contract, patent disclosure agreement, or other contract or agreement relating
to the relationship of any such employee with the Investor, or any other party
because of the nature of the business conducted or presently proposed to be
conducted by the Investor or to the use by the employee of his or her best
efforts with respect to such business. The Investor is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Investor, nor does
20
the Investor have a present intention to terminate the employment of any of the
foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Investor is
terminable at the will of the Investor.
Section 3.18 Tax Returns, Payments, and Elections. The Investor has
timely filed all material tax returns and reports (federal, state and local) as
required by law. These returns and reports are true and correct in all material
respects. The Investor has paid all material taxes and other assessments due,
except those contested by it in good faith. The Investor has not elected
pursuant to the Internal Revenue Code of 1986, as amended ("Code"), to be
treated as an S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation, or amortization) that would have an Investor Material
Adverse Effect. The Investor has never had any material tax deficiency proposed
or assessed against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax or governmental charge.
None of the Investor's federal income tax returns and none of its state income
or franchise tax or sales or use tax returns has ever been audited by
governmental authorities. Since the date of its incorporation, the Investor has
made adequate provisions on its books of account for all material taxes,
assessments, and governmental charges with respect to its business, properties,
and operations for such period. The Investor has withheld or collected from each
payment made to each of its employees, the amount of all material taxes,
including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositaries.
Section 3.19 Receipt of Information. The Investor believes it has
received all the information the Investor considers necessary or appropriate for
deciding whether to purchase the Shares. The Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Shares and the
business, properties, prospects, and financial condition of the Company and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to the Investor or
to which the Investor had access. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Investor to rely thereon.
Section 3.20 Investment Purpose. The Investor is purchasing the Shares
for the Investor's own account for investment purposes only and not with the
view to, or for resale in connection with, the public sale or distribution
thereof, except (i) in compliance with the Securities Act and (ii) that
disposition of the Shares shall at all times be within the Investor's control.
The Investor understands that the Investor must bear the economic risk of this
investment indefinitely, unless the Shares are registered pursuant to the
Securities Act and any other applicable securities or blue sky laws or an
exemption from such registration is available, and that the Company has no
present intention of registering any such Shares other than as contemplated by
the Shareholders Agreement. Notwithstanding anything in this Section t) to the
contrary, by making the representations herein, the Investor does not agree to
hold the Shares for
21
any minimum or other specific term and reserves the right to dispose of the
Shares at any time in accordance with or pursuant to a registration statement or
an exemption under the Securities Act.
Section 3.21 Accredited Investor Status. The Investor is an "Accredited
Investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
Section 3.22 Reliance on Exemptions. The Investor understands that the
Shares are being offered and sold to the Investor in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Shares.
Section 3.23 Suitability and Sophistication. (i) The Investor has such
knowledge and experience in financial and business matters that it is capable of
independently evaluating the risks and merits of purchasing the Shares; (ii) the
Investor has been furnished all materials relating to the offer and sale of the
Shares that have been specifically requested by the Investor; (iii) the Investor
has been afforded the opportunity to ask questions of the Company's management
and such questions have been answered to its satisfaction; (iv) the Investor has
independently evaluated the risks and merits of purchasing the Shares; and (v)
the Investor has sufficient funds to bear the loss of its entire investment in
the Shares.
Section 3.24 Governmental Review. The Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the Shares.
Section 3.25 Transfer or Resale. The Investor understands that (i) the
Shares have not been and are not being registered under the Securities Act or
any state securities laws, and may not be transferred unless (A) subsequently
registered thereunder, (B) the Investor shall have delivered to the Company an
opinion of counsel to the Investor (which opinion shall be reasonably
satisfactory in form, substance and state that the Shares to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration), (C) sold under Rule 144 or (D) sold or transferred to an
affiliate of Investor; and (ii) neither the Company nor any other person is
under any obligation to register such Shares under the Securities Act or any
other securities laws or to comply with the terms and conditions of any
exemption thereunder. Notwithstanding the foregoing, the Investor understands
that any transfer of the Shares must comply with the provisions of the
Shareholders Agreement.
Section 3.26 Legends. The Investor understands that the Shares and,
until such time as the Shares have been registered under the Securities Act or
otherwise may be sold by the Investor under Rule 144, the certificates for the
Shares, will bear a restrictive legend in substantially the following form, in
addition to any legend imposed or required by the Company's organizational
documents or other applicable securities laws:
ANY DEALING OF THE SECURITIES REPRESENTED BY THIS SHARE
CERTIFICATE ARE GOVERNED BY THE
22
LAWS OF HONG KONG, THE SPECIAL ADMINISTRATIVE REGION OF THE
PEOPLES' REPUBLIC OF CHINA.
HOWEVER, THE FOLLOWING LEGEND MAY HAVE APPLICATION IN RESPECT
OF ENTITIES, HOLDING SECURITIES REPRESENTED BY THIS
CERTIFICATE, WHICH ARE GOVERNED BY US SECURITIES LAWS:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE OF
THE UNITED STATES OF AMERICA. SUCH SECURITIES MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT,
(ii) RULE 144 OR RULE 144A UNDER SUCH ACT OR (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT, PROVIDED THAT IN A
TRANSACTION PURSUANT TO (iii) ABOVE, IF REQUESTED BY THE
ISSUER HEREOF, AN OPINION OF COUNSEL REASONABLY SATISFACTORY
IN FORM AND SUBSTANCE IS FURNISHED TO SUCH ISSUER STATING THAT
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any security upon which it is
stamped, if, unless otherwise required by state securities laws, (i) the sale of
such security is registered under the Securities Act, (ii) such holder provides
the Company with an opinion of counsel reasonably satisfactory in form,
substance and scope stating that a public sale or transfer of such security may
be made without registration under the Securities Act or (iii) such holder
provides the Company with reasonable assurances that such security can be sold
under Rule 144. The Investor agrees to sell all securities, including those
represented by a certificate(s) from which the legend has been removed, pursuant
to an effective registration statement or in compliance with an exemption from
the registration requirements of the Securities Act. In the event the above
legend is removed from any security and thereafter the effectiveness of a
registration statement covering such security is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance notice to the Investor the Company
may require that the above legend be placed on any such security that cannot
then be sold pursuant to an effective registration statement or under Rule 144
and the Investor shall cooperate in the prompt replacement of such legend. Such
legend shall be removed when such security may be sold pursuant to an effective
registration statement or under Rule 144.
Section 3.27 Public Sale. Notwithstanding anything to the contrary
contained in Section 3.26 above, the Investor agrees not to make, without the
prior written consent of the
23
Company, any public offering or sale of the Shares, although permitted to do so
pursuant to Rule 144(k) promulgated under the Securities Act, until the earlier
of (i) the date on which the Company effects its initial registered public
offering pursuant to the Securities Act, (ii) the date on which it becomes a
registered company pursuant to Section 12(g) of the Exchange Act or (iii) five
years after the Closing of the sale of the Shares to the Investor by the
Company. Notwithstanding the foregoing, the Investor understands that under Hong
Kong law the public offer or sale of the Shares may be prohibited regardless of
whether or not such offer or sale is otherwise permitted by the Securities Act.
ARTICLE IV
COVENANTS OF THE INVESTOR
-------------------------
Section 4.01 New Registration Statement. (a) The Investor hereby
agrees to:
(i) prepare and file with the Commission by the later of 20
days after the signing hereof and five days after the Closing a registration
statement (the "New Registration Statement") for the purpose of registering the
Consideration Shares and the shares of Investor Common Stock to be issued upon
exercise of the Warrants (collectively, the "Investor Shares") for resale by the
Company under the Securities Act and thereafter use its best efforts to cause
such Registration Statement to become effective at the earliest possible time;
(ii) use its best efforts to keep such New Registration
Statement continuously effective until the earlier of (A) the second anniversary
of the Closing; (B) the date on which all Investor Shares have been sold
pursuant to such New Registration Statement; and (C) the date on which all
Investor Shares may be sold in any consecutive three-month period in accordance
with Rule 144 under the Securities Act;
(iii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of the Investor Shares pursuant to the New
Registration Statement;
(iv) furnish to the Company, without charge, such number of
conformed copies of the New Registration Statement, and of each post-effective
amendment and supplement thereto, including financial statements and schedules,
and, if the Company so requests in writing, all reports, other documents and
exhibits that are filed with or incorporated by reference in the New
Registration Statement, and such number of copies of the prospectus contained in
the New Registration Statement and any other prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of the Securities
Act, and such other documents as the Company may reasonably request;
(v) use its reasonable best efforts to register or qualify all
securities covered by the New Registration Statement under such other securities
or blue sky laws of United States jurisdictions the Company or the Existing
Shareholders, as the case may be, shall reasonably request, to keep such
registration or qualification in effect for so long as the New Registration
Statement remains in effect, and to take any other action which may be
reasonably necessary or
24
advisable to enable the Company or the Existing Shareholders, as the case may
be, to consummate the disposition in such United States jurisdictions of the
Investor Shares owned by the Company or the Existing Shareholders, as the case
may be, except that the Investor shall not for any such purpose be required to
(A) qualify generally to do business as a foreign corporation in any United
States jurisdiction wherein it would not be obligated to be so qualified but for
the requirements of this subsection; (B) subject itself to taxation in any such
United States jurisdiction; or (C) consent to general service of process in any
such United States jurisdiction;
(vi) use its reasonable best efforts to (A) prevent the
issuance, and if issued obtain the withdrawal of, any order suspending the
effectiveness of the New Registration Statement or sales thereunder at the
earliest possible time and (B) cause the Investor Shares to be registered with
or approved by such other governmental agencies or authorities of United States
jurisdictions as may be necessary to enable the Company or the Existing
Shareholders, as the case may be, to consummate the disposition of all of the
Investor Shares owned by it;
(vii) use its reasonable best efforts to: (A) make available
for inspection by the Company and any attorney, accountant or other agent
retained by the Company all relevant financial and other records, pertinent
corporate documents and properties of the Investor and its subsidiaries, (B)
cause the Investor's officers, directors and employees to supply all information
reasonably requested by the Company or any such attorney, accountant or agent in
connection with the New Registration Statement, in each case, as is customary
for similar due diligence examinations and (C) deliver, in connection with any
offering which may be deemed an underwritten offering, such documents and
certificates as may be reasonably requested by the Company;
(viii) promptly upon learning thereof, advise the Company and
the Existing Shareholders, and confirm such advice in writing if so requested by
the Company or any Existing Shareholder: (A) when the New Registration Statement
and any amendment thereto has been filed with the Commission and when the New
Registration Statement or any post-effective amendment thereto has become
effective; (B) of any request by the Commission for amendments or supplements to
the New Registration Statement or the prospectus included therein or for
additional information; (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the New Registration Statement or the initiation
of any proceedings for such purpose; (D) of the receipt by the Investor of any
notification with respect to the suspension of the qualification of the
securities included in the New Registration Statement for sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (E) after
the Investor discovers that the prospectus included in the New Registration
Statement as then in effect includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made, and shall promptly prepare a post-effective
amendment or supplement to the New Registration Statement or the prospectus, or
any document incorporated therein by reference, or file any other required
document so that, as thereafter delivered to purchasers of Investor Shares
included therein, the prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and furnish to the Company and the Existing Shareholders a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary;
25
(ix) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission;
(x) provide and cause to be maintained a transfer agent and
registrar for all Investor Shares covered by the New Registration Statement from
and after a date not later than the effective date of the New Registration
Statement; and
(xi) use its reasonable best efforts to have approved for
listing or quotation all Investor Shares covered by such New Registration
Statement on a securities exchange or automated quotation system requested by
the Company or the Existing Shareholders and consented to by the Investor (which
consent shall not be unreasonably withheld), and shall take any other action
necessary or advisable to facilitate the disposition of all Investor Shares.
(b) The Company and each Existing Shareholder agrees that upon receipt
of any notice from the Investor of the happening of any event of the kind
described in subparagraph (vii)(E) of Section 4.01(a), it will discontinue
immediately its disposition of Investor Shares pursuant to the New Registration
Statement until it receives copies of the supplemented or amended prospectus
contemplated by such subparagraph (viii)(E) and, if so directed by the Investor,
will deliver to the Investor all copies, other than permanent file copies, then
in its possession of the prospectus relating to the Investor Shares current at
the time of receipt of such notice.
Section 4.02 Registration Expenses. The Investor will bear all expenses
incident to the Investor's performance of or compliance with this Article IV,
including, without limitation, all registration, filing and National Association
of Securities Dealers, Inc. fees, all securities and blue sky compliance fees
and expenses, all word processing expenses, duplicating expenses, printing
expenses, engraving expenses, messenger and delivery expenses, all Investor
general and administrative expenses, all Investor counsel and accountants fees
and disbursements, all special audit, financial statement and reconstruction
costs, all comfort letter costs, all expenses and allocations for other persons
retained by the Investor, but excluding (i) discounts, commissions or fees of
underwriters, selling brokers, dealer managers, sales agents or similar
securities industry professionals relating to the distribution of Investor
Shares and applicable transfer taxes, if any, and (ii) fees, disbursements of
any counsel, accountants, investment bankers or other financial advisors or
other professionals retained by the Company or any Existing Shareholder, which
shall be borne by the sellers of the shares of Investor Common Stock registered
under the New Registration Statement.
Section 4.03 Indemnification. (a) The Investor shall, and hereby does,
indemnify and hold harmless the Company, each Existing Shareholder, and the
partners, directors and officers, and each person who controls the Company and
each Existing Shareholder within the meaning of the Securities Act, against any
losses, claims, damages or liabilities to which the Company, such Existing
Shareholder, partner, director, officer, or controlling person, as the case may
be, may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of material fact contained in the
New Registration Statement or an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
26
therein not misleading, and the Investor will reimburse each such indemnified
person for expenses reasonably incurred by it in connection with defending such
loss, claim, damage, liability, action or proceeding; provided that the Investor
shall not be liable in any such case for any losses, claims, damages,
liabilities (or actions or proceedings in respect thereof) or expenses which
arise out of or are based upon an untrue statement or alleged untrue statement
or omission or alleged omission made by the Investor in a New Registration
Statement in reliance upon written information furnished to the Investor by such
person; and provided further that the Investor shall not be liable to and does
not indemnify any underwriter or person deemed to be an underwriter in the
offering or sale of shares of Investor Common Stock, or any person who controls
an underwriter or person deemed an underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such person's failure to send or give a copy of the final prospectus, as
the same may be supplemented or amended, to the person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Investor Common Stock to such
person, if such statement or omission was corrected in such final prospectus.
This indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of an indemnified party, and shall survive
the transfer of such Investor Common Stock by the seller thereof.
(b) The Company shall, and hereby does, indemnify and hold harmless (in
the same manner and to the same extent as set forth in (a) of this Section 4.03)
the Investor, its directors, its officers, and each other person who controls
the Investor within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from a New
Registration Statement, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Investor specifically stating that it is for use in
the preparation of the New Registration Statement. This indemnity shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Investor, its directors, officers or controlling persons, and shall
survive the transfer of Investor Common Stock by the seller thereof.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in
subsection (a) or (b) of this Section 4.03, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action. The failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 4.03, except to the
extent that the indemnifying party is prejudiced by the failure to give such
notice. If any such claim or action shall be brought against an indemnified
party, and its shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 4.03 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, any indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall be at the expense of
such
27
indemnified party unless (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified party
shall have been advised by counsel that there may be one or more legal defenses
available to it that are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnifying party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for all such indemnified parties, which firm shall be designated in writing
by the Company, if the indemnified parties under this Section 4.03 consist of
the Company or any Existing Shareholder or any of their respective controlling
persons, or by the Investor, if the indemnified parties under this Section 4.03
consist of the Investor or any of the Investor's officers, directors or
controlling persons. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable for any settlement made by the
indemnified party without its consent (which consent will not be unreasonably
withheld). Each indemnified party, as a condition of the indemnity agreements
contained in Section 4.03 shall use its best efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) The amount paid or payable by an indemnified party as a result of
the loss, claim, damage or liability, or action in respect thereof, referred to
in this Section 4.03 shall be deemed to include, for purposes of this Section
4.03, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Section 4.04 Amendment and Waiver. The provisions of this Article IV
may be amended by the written consent of the Investor and the holders of record
of a majority of the then outstanding Investor Shares. For purposes of this
Section 4.04, holders of record of Warrants shall be deemed to be holders of
record of the number of shares of Investor Common Stock for which such Warrants
are then exercisable.
Section 4.05 Reconveyance of Company Property Listings. The Company
shall, upon the Investor's request, reconvey any of the Company's property
listings to the Investor for display by the Investor on any Website owned or
operated by Investor or any affiliate of Investor that is not specifically
targeted at the Territory (as such term is defined in the Licensing Agreement).
In connection therewith, the Company shall reconvey and assign, on a
nonexclusive basis, any and all rights associated with any such property
listings to the Investor. The parties hereto agree that the display of the
Company's property listings on the Investor Websites contemplated by this
Section 4.05 shall not be deemed to be a violation of any noncompetition
agreement between the Company and the Investor, including, without limitation,
28
Clause 12.2(a) of the Shareholders Agreement. Notwithstanding the foregoing, the
Investor shall, upon the receipt of written notice from the Company at any time
revoking such reconveyance and related rights, retract all listings from all
Websites owned and operated by Investor or any affiliate of Investor within 90
days thereof.
ARTICLE V
CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING
-----------------------------------------------
The obligations of the Investor under Article I of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against the Investor
unless the Investor consents in writing thereto:
Section 5.01 Board of Directors. Effective as of the Closing, subject
to certain conditions of minimum shareholdings of the Investor as set forth in
the Shareholders Agreement, the directors of the Company shall be Xxxxxxx Xxxx,
Xxx Xxx Fun Xxxxxxxx, Xxx Xxxx Xxx Xxxxxxxx, Xxx Xxxx Xxxx, Xxxxxxx Xxxxxxx and
Xxxxxxx Xxxxxx.
Section 5.02 Opinion of Company Counsel. The Investor shall have
received from Xxxxxxx C.C. Man & Co., special Hong Kong counsel for the Company,
an opinion, dated the date of the Closing, substantially in the form of Exhibit
D hereto.
Section 5.03 Shareholders Agreement. The Company, the Existing
Shareholders and the Investor shall have entered into the Shareholders
Agreement.
Section 5.04 Licensing Agreement. The Investor and the Company shall
have entered into the Licensing Agreement.
ARTICLE VI
CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
--------------------------------------------------
The obligations of the Company to the Investor under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions by the Investor:
Section 6.01 Opinion of Investor's Counsel. The Company and the
Existing Shareholders shall have received from Xxxxxxx & Xxxxxx, Investor's
counsel, an opinion, dated the date of the Closing, substantially in the form of
Exhibit E hereto.
Section 6.02 Shareholders Agreement. The Investor, the Existing
Shareholders and the Company shall have entered into the Shareholders Agreement.
Section 6.03 Licensing Agreement. The Investor and the Company shall
have entered into the Licensing Agreement.
Section 6.04 Warrants.
--------
29
The Investor shall have executed and delivered the Warrants to the
Existing Shareholders.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01 Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
Section 7.02 Survival. The warranties, representations, and covenants
of the Company and the Investor contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing.
Section 7.03 Successors and Assigns; Assignment. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including permitted transferees of any Shares or Consideration Shares
sold hereunder or any Investor Common Stock issued upon conversion of the
Warrants). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement. This Agreement
and the rights and obligations herein may not be assigned by the Investor and
the Existing Shareholders without the written consent of all the other parties
hereto except to a parent corporation; provided, however, that, subject to any
transfer restrictions otherwise applicable to any Investor Shares, the Company's
and Existing Shareholders' rights under Article IV may be transferred or
assigned by the Company or an Existing Shareholder to any transferee of all or
any portion of the Investor Shares of the Company or such Existing Shareholder,
as the case may be, if: (i) the transfer to such transferee is permitted under
the Securities Act and applicable state securities law or exemption therefrom;
(ii) the aggregate amount of Investor Shares that will be held by the transferee
after giving effect to such transfer is not less than, in the case of a transfer
of Consideration Shares, 20% of the number of Consideration Shares outstanding
after giving effect to the transactions contemplated by this Agreement and in
the case of shares of Investor Common Stock underlying Warrants, 100,000 shares;
(iii) the Company or the Existing Shareholder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Investor after such assignment; (iv) the Investor is furnished
with written notice of (A) the name and address of such transferee or assignee
and (B) the securities with respect to which such rights are being transferred
or assigned; (v) following such transfer or assignment, the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act and applicable state securities laws; (vi) the transferee or
assignee agrees in writing for the benefit of the Investor to be bound by all of
the provisions contained herein; and (vii) such transfer shall have been made in
accordance with the applicable requirements of this Agreement.
Section 7.04 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York. All parties hereto hereby
submit to the exclusive
30
jurisdiction of the Federal or state courts in The City of New York, State of
New York, over any matters arising out of this Agreement or to any matters
appertaining thereto.
Section 7.05 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.06 Titles and subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 7.07 Notices. Unless otherwise provided, all notices and other
communications required or permitted under this Agreement shall be in writing
and shall be mailed by first-class mail, postage prepaid, sent by facsimile or
delivered personally by hand or by an internationally recognized courier
addressed to the party to be notified at the address or facsimile number
indicated for such person on Schedule 4 hereto, or at such other address or
facsimile number as such party may designate by ten (10) days' advance written
notice to the other parties hereto. All such notices and other written
communications shall be effective on the date of mailing, confirmed facsimile
transfer or delivery.
Section 7.08 Finder's Fees. Each party represents that it neither is
nor will be obligated for any finder's fee or commission in connection with this
transaction.
The Investor agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finder's fee
(and the cost and expenses of defending against such liability or asserted
liability) for which the Investor or any of its officers, partners, employees,
or representatives is responsible.
The Company agrees to indemnify and hold harmless the Investor from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees, or
representatives is responsible.
Section 7.09 Expenses. Subject to the provisions of Section 4.02, each
party shall be responsible for the costs and expenses that it incurs with
respect to the negotiation, execution, delivery, and performance of this
Agreement.
Section 7.10 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement and the Ancillary
Agreements, the prevailing party shall be entitled to reasonable attorneys'
fees, costs, and disbursements in addition to any other relief to which such
party may be entitled.
Section 7.11 Amendments and Waivers. Subject to Section 4.04, any term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the parties
hereto. Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each holder of any securities purchased under this Agreement at
the time outstanding, each future holder of all such securities and the Company.
31
Section 7.12 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
32
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
the property portal! Limited
By /s/
---------------------------------
Name:
Title:
XxxxXxxxxxx.xxx, Incorporated
By /s/
---------------------------------
Name:
Title:
Cyber Exposures Limited
By /s/
---------------------------------
Name:
Title:
Denwell Enterprises Limited
By /s/
---------------------------------
Name:
Title:
Galaxy Luck Enterprises Limited
By /s/
---------------------------------
Name:
Title:
[Signature page to Stock Purchase Agreement]
Wired Technology Consultants Group
Limited
By /s/
---------------------------------
Name:
Title:
Unicrown Limited
By /s/
---------------------------------
Name:
Title:
Newsino Limited
By /s/
---------------------------------
Name:
Title:
[Signature page to Stock Purchase Agreement]
