[EXHIBIT 1 - CONTRACT,
DATED JANUARY 29, 0000,
XXXXXXX XXXXX XXXX XXXX
XXXXXX DEVELOPMENT CO. LTD.
AND THE COMPANY]
CONTRACT
Party A: Minghua Group International Holdings Ltd.
Address: Guangdong Bian Fang Building, 10th Floor
Fujing Road, Futian District, Shenzhen, 518033,
People's Republic of China
Chairman: Li Chuquan
Party B: Beijing Xxxxx Xxxx Real Estate Development Co. Ltd.
Address: 00 Xxxx Xxxx, Xxxxxxxx Industrial Development Zone, Yanqing County,
Beijing City
Chairman: Li Changde
IN VIEW OF THE FOLLOWING BACKGROUND:
1. Party B is a company registered in Beijing, China, with strong economic
force, thinking environmental protection vehicle has good prospect, and is
dedicated to the undertaking of the environmental protection vehicle.
2. Party A is a public reporting company in USA, whose securities are quoted
on the Over-the-Counter Bulletin Board (OTCBB: MGHA.OB).
ARTICLE 1 INVESTMENT TERMS
1. Party B hereby agrees that it shall pay USD$29,400,000 to Party A.
2. Party A hereby agrees that it shall issue, in the aggregate, 140 million
shares of Party A's common stock to Party B upon receipt of payment in full for
such shares.
3. The price per share equals USD$0.21.
4. The investment shall be effected in two installments:
(a) Party B shall pay Party A USD$12,600,000 on or before April 15, 2004 and
within sixty days of receiving such funds, Party A shall issue 60 million shares
of Party A's common stock to Party B; and
(b) Party B shall pay to Party A USD$16,800,000 within fifteen days following
a shareholders' meeting of Party A at which the shareholders will vote upon an
amendment to Party A's certificate of incorporation that would increase the
number of Party A's authorized share capital such that Party A may satisfy its
obligations hereunder.
5. Within 20 days after this contract is signed, Party B will pay USD$602,410
(RMB5 million) to Party A as a performance bond, which will be applied to the
first installment due hereunder and which will be forefeited by Party B if such
installment is not paid by Party B.
ARTICLE 2: APPLICABLE LAW AND DISPUTE SETTLEMENT
This contract will be governed and construed in accordance with the laws of the
State of New York, without giving effect to the conflicts of laws principles
thereof. Each party hereto hereby consents to the jurisdiction of the federal
and state courts sitting within the State of New York.
ARTICLE 3: CONTRACT EFFECTIVENESS
This contract will become effective after meeting the following conditions:
1. Both parties sign and stamp;
2. The boards of directors of both parties resolve to approve this contract;
3. After Party B pays RMB5 million as the down payment.
ARTICLE 4: MISCELLANEOUS
1. This contract is in six copies, with three copies for each party;
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF PARTY B
Party B hereby represents and warrants to Party A as follows:
1. ACCESS TO INFORMATION. Party B, in making the decision to purchase the
Shares, has relied upon its independent investigations made by it and/or
its representatives, if any. Except as set forth in this contract, no
representations, assurances or warranties have been made to Party B or
its advisers, by Party A or by any of its respective officers,
directors, agents, employees, or affiliates, nor anyone else on their
behalf, concerning, among other things, the future profitability of
Party A or Party B's investment in it. Party B and/or its
representatives during the course of this transaction, and prior to the
purchase of any Shares, has had the opportunity to ask questions of and
receive answers from the management of Party A concerning the business
of Party A and to receive any additional information, documents, records
and books relative to the business, assets, financial condition, results
of operations and liabilities (contingent or otherwise) of Party A.
Party B has obtained copies of the reports filed by Party A with the
Securities and Exchange Commission (the "SEC") since the filing of Party
A's last annual report on Form 10-KSB (the "SEC Filings"), including
Party A's most recently filed quarterly and current reports filed with
the SEC and has carefully reviewed all of the information contained in
the SEC Filings, including the risk factors contained in such reports
and fully understands all of the disclosure contained therein. Party B
recognizes that Party A has limited financial or operating history and
that the Shares as an investment involve significant risks.
2. SOPHISTICATION AND KNOWLEDGE. Party B and/or its representatives has
such knowledge and experience in financial and business matters that it
can represent itself and is capable of evaluating the merits and risks
of the purchase of the Shares. Party B is not relying on Party A with
respect to the tax and other economic considerations of an investment in
the Shares, and Party B has relied on the advice of, or has consulted
with, only Party B's own advisor(s). Party B represents that it has not
been organized for the purpose of acquiring the Shares.
3. LACK OF LIQUIDITY. Party B acknowledges that the purchase of the Shares
involves a high degree of risk and further acknowledges that it can bear
the economic risk of the purchase of the Shares, including the total
loss of its investment. Party B acknowledges and understands that the
Shares may not be sold to a U.S. Person (as hereinafter defined) or into
the United States for a period of one (1) year from the date of purchase
and that Party B has no present need for liquidity in connection with
its purchase of the Shares.
4. NO PUBLIC SOLICITATION. Party B is not subscribing for the Shares as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar or
meeting, or any solicitation of a subscription by a person not
previously known to Party B in connection with investments in securities
generally. Neither Party A nor Party B has engaged in any `Directed
Selling Efforts in the U.S.' as defined in Regulation S promulgated by
the SEC pursuant to The Securities Act of 1933 (the "Securities Act").
5. AUTHORITY. Party B has full right and power to enter into and perform
pursuant to this contract and make an investment in Party A, and this
contract constitutes Party B's valid and legally binding obligation,
enforceable in accordance with its terms. Party B is authorized and
otherwise duly qualified to purchase and hold the Shares and to enter
into this contract.
6. BROKERS OR FINDERS. No person has or will have, as a result of the
transactions contemplated by this contract, any right, interest or valid
claim against or upon Party A for any commission, fee or
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other compensation as a finder or broker because of any act or omission
by such Party B or its respective agents.
7. COMPLIANCE WITH LOCAL LAWS. Any resale of the Shares during the
`distribution compliance period' as defined in Rule 902(f) to Regulation
S shall only be made in compliance with exemptions from registration
afforded by Regulation S. Further, any such sale of the Shares in any
jurisdiction outside of the United States will be made in compliance
with the securities laws of such jurisdiction. Party B will not offer to
sell or sell the Shares in any jurisdiction unless Party B obtains all
required consents, if any.
8. REGULATION S EXEMPTION. Party B understands, acknowledges and agrees
that the offering and sale of the Shares to Party B has not been
registered under the Securities Act or under any state securities laws
or regulations and that the Shares are being offered and sold to it in
reliance on an exemption from the registration requirements of United
States federal and state securities laws under Regulation S promulgated
under the Securities Act and that Party A is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments
and understandings of Party B set forth herein in order to determine the
applicability of such exemptions and the suitability of Party B to
acquire the Shares. In this regard, Party B represents, warrants and
agrees that:
a. Party B is not a U.S. Person (as defined below) and is not an
affiliate (as defined in Rule 501(b) under the Securities
Act) of Party A. A U.S. Person means any one of the
following:
(1) any natural person resident in the United States of
America;
(2) any partnership or corporation organized or incorporated
under the laws of the United States of America;
(3) any estate of which any executor or administrator is a
U.S. person;
(4) any trust of which any trustee is a U.S. person;
(5) any agency or branch of a foreign entity located in the
United States of America;
(6) any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person;
(7) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary
organized, incorporated or (if an individual) resident
in the United States of America; and
(8) any partnership or corporation if:
(a) organized or incorporated under the laws of any
foreign jurisdiction; and
(b) formed by a U.S. person principally for the
purpose of investing in securities not registered
under the Securities Act, unless it is organized
or incorporated, and owned, by accredited
investors (as defined in Rule 501(a) under the
Securities Act) who are not natural persons,
estates or trusts.
b. At the time of the origination of contact concerning this
contract and the date of the execution and delivery of this
contract, Party B was outside of the United States.
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c. Party B will not, during the period commencing on the date
of issuance of the Shares and ending on the first
anniversary of such date, or such shorter period as may be
permitted by Regulation S or other applicable securities law
(the "Restricted Period"), offer, sell, pledge or otherwise
transfer the Shares in the United States, or to a U.S.
Person for the account or for the benefit of a U.S. Person,
or otherwise in a manner that is not in compliance with
Regulation S. At no time shall Party B offer or sell the
Shares unless they are registered under the Securities Act
or are exempt from the registration requirements of the
Securities Act and any applicable state or foreign
securities laws or regulations.
d. Party B will, after expiration of the Restricted Period,
offer, sell, pledge or otherwise transfer the Shares only
pursuant to registration under the Securities Act or an
available exemption therein and, in accordance with all
applicable state and foreign securities laws.
e. Party B has not in the United States, engaged in, and prior
to the expiration of the Restricted Period will not directly
or indirectly engage in, any short selling of or any hedging
or similar transaction with respect to the Shares, including
without limitation, any put, call or other option
transaction, option writing or equity swap.
f. Neither Party B nor or any person acting on its behalf has
engaged, nor will engage, in any directed selling efforts to
a U.S. Person with respect to the Shares and Party B and any
person acting on its behalf have complied and will comply
with the "offering restrictions" requirements of Regulation
S under the Securities Act.
g. The transactions contemplated by this contract have not been
pre-arranged with a buyer located in the United States or
with a U.S. Person, and are not part of a plan or scheme to
evade the registration requirements of the Securities Act.
h. Neither Party B nor any person acting on its behalf has
undertaken or carried out any activity for the purpose of,
or that could reasonably be expected to have the effect of,
conditioning the market in the United States, its
territories or possessions, for any of the Shares. Party B
agrees not to cause any advertisement of the Shares to be
published in any newspaper or periodical or posted in any
public place and not to issue any circular relating to the
Shares, except such advertisements that include the
statements required by Regulation S under the Securities
Act, and only offshore and not in the U.S. or its
territories, and only in compliance with any local
applicable securities laws.
9. LEGENDS. Each certificate representing the shares of common stock
included in the Shares and each warrant certificate representing the
warrants included in the Unit shall be endorsed with the following
legends, in addition to any other legend required to be placed thereon
by applicable federal or state securities laws:
a. "THESE SECURITIES ARE BEING OFFERED TO INVESTORS WHO ARE NOT
U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE SECURITIES ACT"))
AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE
UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT."
b. "TRANSFER OF THESE SECURITIES IS PROHIBITED, EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO
AVAILABLE EXEMPTION FROM REGISTRATION.
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HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT."
10. STOP TRANSFER ORDERS. Party B consents to Party A making a notation on
its records or giving instructions to any transfer agent of Party A in
order to implement the restrictions on transfer of the Shares set forth
in this agreement and as required by Regulation S.
11. PATRIOT ACT. Party B is not, nor is it acting as an agent,
representative, intermediary or nominee for, a person identified on the
list of blocked persons maintained by the Office of Foreign Assets
Control, U.S. Department of Treasury. In addition, Party B has complied
with all applicable U.S. laws, regulations, directives, and executive
orders relating to anti-money laundering , including but not limited to
the following laws: (1) the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, Public Law 107-56; and (2) Executive Order 13224
(Blocking Property and Prohibiting Transactions with Persons Who
Commit, Threaten to Commit, or Support Terrorism) of September 23,
2001. Party B shall ensure that it obtains a representation similar to
the foregoing from any transferee of the Shares of Party A's Common
Stock purchased by Party B pursuant to this contract.
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Further, this transaction and any resale of Shares by Party B to
transferees shall not violate the statutes mentioned in this
representation.
12. TRANSFERS MUST COMPLY WITH REGULATION S. Notwithstanding anything
contained herein to the contrary, Party A may refuse to register any
transfer of the Shares of common stock of Party A that are not made in
accordance with Regulation S, pursuant to the registration under the
Securities Act or pursuant to an available exemption from registration.
ARTICLE 6: INDEMNITY
Party B understands and acknowledges that Party A is relying on the
representations made by Party B herein, and, thus, hereby agrees to indemnify
Party A, and its respective officers and directors, agents, attorneys, and
employees, and agrees to hold them harmless from and against any and all loss,
damage, liability, or expense, including reasonable attorney's fees, that it or
any of them may suffer, sustain, or incur by reason of or in connection with any
misrepresentation or breach of warranty or agreement made by Party A under this
contract.
Party A: Minghua Group International Holdings Limited
By: /s/
-------------------------------------------------
Name:
Title:
Party B: Beijing Xxxxx Xxxx Real Estate Development Co., Ltd.
By: /s/
-------------------------------------------------
Name:
Title:
This contract is signed January 29, 2004 in Shenzhen.
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