Sale and Purchase Agreement
This
Sale
and Purchase Agreement, dated as of May 27,
2005,
is made by and among Metaphor Corp., a Nevada corporation (the “Acquiror”), 8
Holdings LLC, a Colorado limited liability company (“8 Holdings”), Hong Kong
Huicong International Group Limited, a British Virgin Islands company (the
“Shareholder”), each of Xx Xxxx, Li Shuangqing, Xxxx Xxxxx and Wang Li Hong
(collectively, “CMN Management”), and China Media Network International Inc., a
British Virgin Islands company (the “Company”).
BACKGROUND
The
Shareholder has agreed to transfer to the Acquiror, and the Acquiror has agreed
to acquire from the Shareholder, all of the Shares, which Shares constitute
100%
of the outstanding Common Stock of the Company, in exchange for (a) shares
representing 28.68% of the Acquiror’s Common Stock to be issued to the
Shareholder (the “Acquiror Shares”), subject to adjustment pursuant to Section
2.2; and (b) payment to the Shareholder of US$3,785,000 in cash, in accordance
with Section 2.1.
Subject
to the terms and conditions of this Agreement, the Shareholder and CMN
Management have agreed to procure the restructuring of the advertising and
media
network businesses being currently carried out by the Company Subsidiaries,
the
work of which shall commence immediately after the signing of this Agreement
and
be completed before or on the Closing Date (“Restructuring”).
Upon
completion of the Restructuring, (a) 北京华媒盛瘺信息技术有榰公司
(Beijing
Huamei Shengshi Information Technology Co., Ltd.) (“Huamei
Information”)
shall
become a Chinese-foreign invested joint venture enterprise incorporated in
China, and (b) Huamei Information shall become the holding company of all the
domestic advertising businesses being carried out by the group members of HC
International at
the
date of signing of this Agreement. A more detailed plan of the Restructuring
is
attached hereto as Exhibit F.
The
Acquiror is a non-operating U.S. public shell company that ceased business
operations in 2003. Since then the Acquiror has sought a candidate with which
to
merge.
SECTION
I
DEFINITIONS
Unless
the context otherwise requires, the terms defined in this Section 1 will have
the meanings herein specified for all purposes of this Agreement, applicable
to
both the singular and plural forms of any of the terms
herein defined.
1.1 “Accredited
Investor” has the meaning set forth in Regulation D under the Securities Act and
set forth on Exhibit B.
1.2 “Acquired
Companies” means, collectively, the Company and the Company
Subsidiaries.
1.3 “Acquiror
Balance Sheet” means the Acquiror’s balance sheet at December 31,
2004.
1.4 “Acquiror
Board” means the Board of Directors of the Acquiror.
1.5 “Acquiror
Nominees” means, from and after the Closing Date, the three members of the
Acquiror Board nominated by the Acquiror Stockholder pursuant to this Agreement
and the
Voting
Agreement.
1.6 “Acquiror’s
Common Stock” means the Acquiror’s common stock.
1.7 “Acquiror
Stockholder” means 8 Holdings.
1.8 “Acquisition
Transaction” has the meaning set forth in Section 12.1.7.
1.9 “Affiliate”
means any Person that directly or indirectly controls, is controlled by or
is
under common control with the indicated Person.
1.10 “Agreement”
means this Sale and Purchase Agreement, including all Schedules and Exhibits
hereto, as this Sale and Purchase Agreement may be from time to time amended,
modified
or
supplemented.
1.11 “Approved
Plans” means a stock option or similar plan for the benefit of employees or
others which has been approved by the stockholders of the Acquiror.
1.12 “Business
Day” means a day, other than Saturday or Sunday, on which banks in New York are
open for business.
1.13 “Claims
Period” has the meaning set forth in Section 13.2.1.
1.14 “Closing”
has the meaning set forth in Section 3.
1.15 “Closing
Acquiror Shares” means the aggregate number of Acquiror Shares issuable to the
Shareholder at Closing
1.16 “Closing
Date” has the meaning set forth in Section 3.
1.17 “CMN
Management” means Xx Xxxx, Li Shuangqing, Xxxx Xxxxx and Wang Li Hong,
collectively.
1.18 “CMN
Executives” means the selected members of the senior management of the Acquired
Companies to whom the Shareholder will transfer 8.68% of the Acquiror’s Common
Stock as
provided
in
Section 2.1 of this Agreement.
1.19 “Code”
means the Internal Revenue Code of 1986, as amended.
1.20 “Common
Stock” means the Company’s common shares.
1.21 “Commission”
means the Securities and Exchange Commission or any other federal agency then
administering the Securities Act.
1.22 “Company
Audited Financial Statements” has the meaning set forth in Section 5.8.
1.23 “Company
Balance Sheet” means the Company’s audited balance sheet at December 31,
2004.
1.24 “Company
Benefit Plans” means employee pension benefit plans, medical, disability,
severance pay, educational, life insurance and other employee welfare benefit
plans, and all other
bonus,
stock
option, stock purchase or other equity-based compensation arrangements, and
incentive, deferred compensation, supplemental retirement, severance,
disability, vacation,
cafeteria
and
other similar employee benefit plans, policies, programs or contracts (including
those which contain change of control provisions or pending change of control
provisions),
and any
employment, executive compensation or severance agreements (including those
with
change of control provisions or pending change of control provisions), as
amended,
modified or supplemented,
in any case that (a) are maintained or contributed to (or to which there was
an
obligation to contribute) by any Acquired Company, or (b) were
formerly
maintained or contributed
to (or to which there was an obligation to contribute), by any Acquired Company,
as well as each plan with respect to which any Acquired Company
has
or could
have any liability,
whether direct or indirect or actual or contingent (including any liability
arising out of an indemnification, guarantee, hold harmless or similar
agreement).
1.25 “Company
Board” means the Board of Directors of the Company.
1.26 “Company
Disclosure Schedule” means the Company Disclosure Schedule attached hereto,
dated as of the date hereof, delivered by the Company to the Acquiror in
connection
with this
Agreement.
1.27 “Company
Indemnified Party” has the meaning set forth in Section 13.3.1.
1.28 “Company
Nominees” means, from and after the Closing Date, the two members of the
Acquiror Board, nominated by the Shareholder pursuant to this Agreement and
the
Voting
Agreement.
1.29 “Company
Subsidiaries” means all of the direct and indirect Subsidiaries of the Company,
Beijing Informationô[B
Company] ,北京华媒盛瘺广告有榰公司
(Beijing
Huamei Shengshi
Advertising
Co., Ltd.) ,漯州华媒盛瘺广告传播有榰公司
(Zhengzhou
Huamei Shengshi Advertising Broadcasting Co., Ltd.) ô济南华媒盛瘺传播有榰公司
(Ji’nan
Huamei Shengshi
Broadcasting
Co., Ltd.) ,乌捿木悰华媒盛瘺传播有榰公司
(Urumqi
Huamei Shengshi Broadcasting Co., Ltd.) ,兰州华媒广告传播有榰公司
(Lanzhou
Huamei Advertising
Broadcasting
Co., Ltd.),and 兰州华媒盛瘺广告传播有榰公司(Lanzhou
Huamei Shengshi Advertising Broadcasting Co., Ltd.), and北京华媒盛瘺信息技术有榰公司
(Beijing
Huamei
Shengshi
Information Technology Co., Ltd.).
1.30 “Damages”
has the meaning set forth in Section 13.2.1.
1.31 “Distributor”
means any underwriter, dealer or other Person who participates, pursuant to
a
contractual arrangement, in the distribution of the securities offered or sold
in reliance on
Regulation
S.
1.32 “Environmental
Laws” means any Law or other requirement relating to the environment, natural
resources, or public or employee health and safety.
1.33 “Environmental
Permit” means all licenses, permits, authorizations, approvals, franchises and
rights required under any applicable Environmental Law or Order.
1.34 “Equity
Security” means any stock or similar security, including, without limitation,
securities containing equity features and securities containing profit
participation features, or any
security
convertible into or exchangeable for, with or without consideration, any stock
or similar security, or any security carrying any warrant, right or option
to
subscribe to or
purchase
any
shares of capital stock, or any such warrant or right.
1.35 “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
1.36 “Exchange
Act” means the Securities Exchange Act of 1934, as amended, or any similar
federal statute, and the rules and regulations of the Commission thereunder,
all
as the same will
then
be in
effect.
1.37 “Exhibits”
means the several exhibits referred to and identified in this
Agreement.
1.38 “GAAP”
means, with respect to any Person, United States or Hong Kong (as the case
may
be) generally accepted accounting principles applied on a consistent basis
with
such
Person’s
past
practices.
1.39 “GEM
Listing Rules” means the Rules Governing the Listing of Securities on The Growth
Enterprise Market of The Stock Exchange of Hong Kong Limited.
1.40 “Governmental
Authority” means any federal or national, state or provincial, municipal or
local government, governmental authority, regulatory or administrative agency,
governmental
commission, department, board, bureau, agency or instrumentality, political
subdivision, commission, court, tribunal, official, arbitrator or arbitral
body,
in each case
whether
U.S.
or non-U.S.
1.41 “HC
International” means HC International, Inc., a Cayman Island-incorporated
company, the shares of which are listed on The Growth Enterprise Market of
The
Stock Exchange of
Hong
Kong
Limited.
1.42 “Hedging
Transaction” means any short sale (whether or not against the box) with respect
to any security that includes, relates to or derives any significant part of
its
value from the
Shares.
1.43 “Hong
Kong” means the Hong Kong Special Administrative Region of the PRC.
1.44 “Indebtedness”
means any obligation, contingent or otherwise. Any obligation secured by a
Lien
on, or payable out of the proceeds of, or production from, property of the
relevant
party
will be
deemed to be Indebtedness.
1.45 “Indebtedness
for Borrowed Money” means (a) all Indebtedness in respect of money borrowed; (b)
all Indebtedness evidenced by a promissory note, bond or similar written
obligation
to
pay money; or (c) all such Indebtedness guaranteed by the relevant party or
for
which the relevant party is otherwise contingently liable.
1.46 “Intellectual
Property” means all industrial and intellectual property, including, without
limitation, all patents, patent applications, patent rights, trademarks,
trademark applications,
common
law
trademarks, Internet domain names, trade names, service marks, service xxxx
applications, common law service marks, and the goodwill associated therewith,
copyrights, in
both
published and unpublished works, whether registered or unregistered, copyright
applications, franchises, licenses, know-how, trade secrets, technical data,
designs, customer
lists,
confidential and proprietary information, processes and formulae, all computer
software programs or applications, layouts, inventions, development tools and
all documentation
and
media
constituting, describing or relating to the above, including manuals, memoranda,
and records, whether such intellectual property has been created, applied for
or
obtained
anywhere
throughout the world.
1.47 “Key
Employees” means the persons who hold positions as the general managers of the 4
TV Stations being acquired by the Acquiror immediately prior to Closing and
each
of the
CMN
Management.
1.48 “Laws”
means, with respect to any Person, any U.S. or non-U.S. federal, national,
state, provincial, local, municipal, international, multinational or other
law
(including common law),
constitution,
statute, code, ordinance, rule, regulation or treaty applicable to such
Person.
1.49 “Lien”
means any mortgage, pledge, security interest, encumbrance, lien or charge
of
any kind, including, without limitation, any conditional sale or other title
retention agreement, any
lease
in the
nature thereof and the filing of or agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction and including any lien
or
charge arising
by
Law.
1.50 “Material
Acquiror Contract” means any and all agreements, contracts, arrangements,
leases, commitments or otherwise, of the Acquiror, filed with the
Commission.
1.51 “Material
Adverse Effect” means, when used with respect to the Acquiror or the Acquired
Companies, as the case may be, any change, effect or circumstance which,
individually or in
the
aggregate, would reasonably be expected to (a) have a material adverse effect
on
the business, assets, financial condition or results of operations of the
Acquiror or the Acquired
Companies,
as
the case may be, in each case taken as a whole or (b) materially impair the
ability of the Acquiror or the Company, as the case may be, to perform their
obligations under
this
Agreement, excluding any change, effect or circumstance resulting from (i)
the
announcement, pendency or consummation of the transactions contemplated by
this
Agreement, (ii)
changes
in
the United States securities markets generally, or (iii) changes in general
economic, financial, currency exchange rate, political or regulatory conditions
in industries in which
the
Acquiror
or the Acquired Companies, as the case may be, operate.
1.52 “Material
Company Contract” means any and all agreements, contracts, arrangements, leases,
commitments or otherwise, of the Acquired Companies set forth on Schedule
5.21.1,
including
without limitation, the Advertisement Agency Contracts entered into by certain
of the Company Subsidiaries.
1.53 “Metaphor
Disclosure Schedule” means the Metaphor Disclosure Schedule attached hereto,
dated as of the date hereof, delivered by the Acquiror to the Company and the
Shareholder
in connection with this Agreement.
1.54 “OTCBB”
means the Over the Counter Bulletin Board,
1.55 “Order”
means any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any Governmental
Authority.
1.56 “Organizational
Documents” means (a) the articles or certificate of incorporation and the
by-laws, articles of association, or code of regulations of a corporation;
(b)
the partnership
agreement
and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the
articles
or
certificate of formation and operating agreement of a limited liability company;
(e) any other document performing a similar function to the documents specified
in clauses (a),
(b),
(c) and
(d) adopted or filed in connection with the creation, formation or organization
of a Person; and (f) any and all amendments to any of the
foregoing.
1.57 “Outside
Date” has the meaning set forth in Section 12.1.3.
1.58 “Permitted
Liens” means (a) Liens for Taxes not yet payable or in respect of which the
validity thereof is being contested in good faith by appropriate proceedings
and
for the payment
of
which the
relevant party has made adequate reserves; (b) Liens in respect of pledges
or
deposits under workmen’s compensation laws or similar legislation, carriers,
warehousemen,
mechanics,
laborers and materialmen and similar Liens, if the obligations secured by such
Liens are not then delinquent or are being contested in good faith by
appropriate proceedings
conducted
and
for the payment of which the relevant party has made adequate reserves; (c)
statutory Liens incidental to the conduct of the business of the relevant party
which were
not
incurred
in connection with the borrowing of money or the obtaining of advances or
credits and that do not in the aggregate materially detract from the value
of
its property or
materially
impair the use thereof in the operation of its business; and (d) Liens that
would not have a Material Adverse Effect.
1.59 “Person”
means all natural persons, corporations, business trusts, associations,
companies, partnerships, limited liability companies, joint ventures and other
entities, governments,
agencies
and
political subdivisions.
1.60 “PRC”
means the People’s Republic of China.
1.61 “Proceeding”
means any action, arbitration, audit, hearing, investigation, litigation, or
suit (whether civil, criminal, administrative, investigative, or informal)
commenced, brought,
conducted,
or
heard by or before, or otherwise involving, any Governmental
Authority.
1.62 “Regulation
S” means Regulation S under the Securities Act, as the same may be amended from
time to time, or any similar rule or regulation hereafter adopted by the
Commission.
1.63 “Restructuring”
means the restructuring of the advertising and media network businesses being
currently carried by the Company Subsidiaries.
1.64 “Rule
144” means Rule 144 under the Securities Act, as the same may be amended from
time to time, or any successor statute.
1.65 “Schedule
14(f) Filing” has the meaning set forth in Section 5.4.
1.66 “Schedules”
means the several schedules referred to and identified herein, setting forth
certain disclosures, exceptions and other information, data and documents
referred to at
various
places throughout this Agreement.
1.67 “SEC
Documents” has the meaning set forth in Section 6.24.
1.68 “Section
4(2)” means Section 4(2) under the Securities Act, as the same may be amended
from time to time, or any successor statute.
1.69 “Securities
Act” means the Securities Act of 1933, as amended, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as
the
same will be in
effect
at the
time.
1.70 “Service
Contracts” means the service contracts, dated the Closing Date, by and between
the Acquiror and each member of CMN Management.
1.71 “Shares”
means the 50,000 shares of Common Stock of the Company owned by the Shareholder
and exchanged pursuant to this Agreement.
1.72 “Shareholders’
Loan” means the indebtedness of the Company Subsidiaries to the Shareholder,
which shall be taken over and assumed by the Acquiror upon Closing, as more
particularly
described in the term sheet of the Shareholders’ Loan attached hereto as Exhibit
H.
1.73 “Shareholders’
Loan Agreement” means the Shareholders’ Loan Agreement to be entered into
between the Acquiror and the Shareholder in accordance with the term sheet
attached
hereto
as
Exhibit H.
1.74 “Subsidiary”
means, with respect to any Person, any corporation, limited liability company,
joint venture or partnership of which such Person (a) beneficially owns, either
directly or
indirectly,
more than 50% of (i) the total combined voting power of all classes of voting
securities of such entity, (ii) the total combined equity interests, or (iii)
the capital or profit
interests,
in
the case of a partnership; or (b) otherwise has the power to vote or to direct
the voting of sufficient securities to elect a majority of the board of
directors or similar
governing
body.
1.75 “Survival
Period” has the meaning set forth in Section 13.1.
1.76 “Taxes”
means all foreign, federal, state or local taxes, charges, fees, levies,
imposts, duties and other assessments, as applicable, including, but not limited
to, any income, alternative
minimum
or
add-on, estimated, gross income, gross receipts, sales, use, transfer,
transactions, intangibles, ad valorem, value-added, franchise, registration,
title, license, capital, paid-up
capital,
profits, withholding, payroll, employment, unemployment, excise, severance,
stamp, occupation, premium, real property, recording, personal property, federal
highway use,
commercial
rent, environmental (including, but not limited to, taxes under Section 59A
of
the Code) or windfall profit tax, custom, duty or other tax, governmental fee
or
other like
assessment
or
charge of any kind whatsoever, together with any interest, penalties or
additions to tax with respect to any of the foregoing; and “Tax” means any of
the foregoing
Taxes.
1.77 “Tax
Group” means any federal, state, local or foreign consolidated, affiliated,
combined, unitary or other similar group of which the Acquiror is now or was
formerly a member.
1.78 “Tax
Return” means any return, declaration, report, claim for refund or credit,
information return, statement or other similar document filed with any
Governmental Authority with
respect
to
Taxes, including any schedule or attachment thereto, and including any amendment
thereof.
1.79 “Transaction
Documents” means, collectively, all agreements, instruments and other documents
to be executed and delivered in connection with the transactions contemplated
hereby,
including the Voting Agreement, the Service Contracts and the PRC
Agreement.
1.80 “U.S.”
means the United States of America.
1.81 “U.S.
person” has the meaning set forth in Regulation S under the Securities Act and
set forth on Exhibit C hereto.
1.82 “Voting
Agreement” means the Voting Agreement, dated the Closing Date, by and among the
Acquiror, the Acquiror Stockholder and the Shareholder, in substantially the
form
attached
hereto as Exhibit G.
1.83 “$”
means
United States dollars, the lawful currency of the United States.
1.85
“RMB”
means Renminbi , the lawful currency of the People’s Republic of
China.
SECTION
II
EXCHANGE
OF SHARES AND SHARE CONSIDERATION
2.1 Sale
and Purchase of Shares.
The
Shareholder desires to transfer to, and the Acquiror desires to acquire from
the
Shareholder, the Shares of the Company for the consideration and on the terms
set forth in this Agreement. Subject to Section 2.2, the aggregate consideration
for the Shares acquired by the Acquiror pursuant to this Agreement will be
shares representing 28.68% of the Acquiror’s Common Stock to be issued to the
Shareholder; and (ii) payment in the aggregate amount of US$3,785,000 in cash
(the “Cash Payment”) to the Shareholder payable in two tranches. The first
tranche, in the amount of US$3,500,000, shall be paid within five business
days
of the Closing Date, and the second tranche, in the amount of US$285,000, shall
be paid within twelve (12) months of the Closing Date. The Cash Payment shall
be
made by wire transfer of immediately available funds in accordance with the
Shareholder’s wire transfer instructions set forth in Exhibit I.
The
Acquiror acknowledges that the Shareholder will transfer 8.68% of the shares
of
the Acquiror’s Common Stock to be issued to Shareholder by the Acquiror at
Closing pursuant to the foregoing provisions of this Section 2.1 to the CMN
Executives in consideration of CMN Executives entering into service contracts
with Acquired Companies and to provide incentive and reward to the CMN
Executives for their contribution to, and continuing efforts to promote the
interests of, the Company, at such time after the Closing as the Shareholder
shall deem desirable and appropriate, but in any event no later than December
31, 2006.
2.2 Adjustments.
If the
Company’s audited combined net profit after tax and net of all minority
interests for the year ended December 31, 2004 prepared in accordance with
Hong
Kong GAAP, as reflected in the relevant Company Audited Financial Statements
(the “Net Profit”), is less than RMB10 million (the “Estimated Net Profit”), the
number of Acquiror Shares to be issued to the Shareholder shall be adjusted
in
accordance with this Section 2.2. There shall be no adjustment in the number
of
Acquiror Shares issued to the Shareholder if the Net Profit is not less than
RMB9 million under Hong Kong GAAP. In the event the actual Net Profit is less
than RMB9 million under Hong Kong GAAP (the “Actual HK Net Profit”), the number
of Acquiror Shares issued to the Shareholder shall be adjusted so that the
Shareholder’s aggregate percentage ownership of the Acquiror Shares to be issued
to it as originally contemplated by the terms of this Agreement shall
be
decreased by the same amount of the decrease in percentage from the Estimated
Net Profit to the Actual HK Net Profit; provided, however, that in no event
shall the Shareholder’s percentage ownership of the Acquiror Shares to be issued
be decreased to less than 18.68%.. By way of example only, upon the consummation
of this Agreement, the Shareholder shall own 28.68% of the Acquiror. If Actual
HK Net Profit is RMB8 million, which is 20% less than the Estimated Net Profit,
the number of Acquiror Shares issued to the Shareholder shall be reduced so
that
their percentage ownership of the Acquiror upon consummation of this Agreement
shall be 22.94%
of the
Acquiror, representing 20% reduction of the Acquiror Shares to be issued to
the
Shareholder less
than
what was originally contemplated by the terms of this Agreement.
2.3 Withholding.
The
Acquiror shall be entitled to deduct and withhold from the Acquiror Shares
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts as it is required to deduct and withhold with respect to the making
of
such payment under the Code or any provision of state, local, provincial or
foreign Tax Law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid
to the holder of Shares in respect of which such deduction and withholding
was
made.
2.4 Directors
of Acquiror at Closing.
Simultaneous with the Closing of the transactions contemplated by this
Agreement, the Company Nominees shall be appointed to the Acquiror Board. From
and after the Closing Date, the Acquiror Stockholders and the Company shall
have
the right, pursuant to the terms of the Voting Agreement, to designate Acquiror
Nominees and Company Nominees, respectively, to serve on the Acquiror Board
for
a period of two (2) years.
SECTION
III
CLOSING
3.1 Closing.
The
closing (the “Closing”) of the sale and purchase of the Shares will occur at the
offices of Loeb & Loeb, LLP, in New York, New York, on July 31, 2005 or at
such later date as all of the closing conditions set forth in Sections 10 and
11
have been satisfied or waived (the “Closing Date”). At the Closing the
Shareholder will deliver to the Acquiror certificate(s) evidencing the Shares,
along with executed stock powers transferring the Shares to the Acquiror,
against delivery by the Acquiror to the Shareholder of certificates evidencing
the Acquiror Shares, and a wire transfer of the Cash Payment to the
Shareholder.
SECTION
IV
REPRESENTATIONS
AND WARRANTIES OF THE SHAREHOLDER AND CMN MANAGEMENT
4.1 Generally.
The
Shareholder, each member of CMN Management, severally and not jointly, hereby
represents and warrants to the Acquiror
4.1.1 Authority.
The
Shareholder and each member of CMN Management
have the right, power, authority and capacity to execute and deliver this
Agreement and each of the Transaction Documents, to which they are a party,
to
consummate the transactions contemplated by this Agreement and each of the
Transaction Documents, to which they are a party, and to perform its obligations
under this Agreement and each of the Transaction Documents, to which they are
a
party. This Agreement has been, and each of the Transaction Documents will
be,
duly and validly authorized and approved, executed and delivered by each member
of CMN Management. This Agreement has been, and each of the Transaction
Documents will be, upon the approval of the shareholders of HC International,
Inc. as required under Section 10 hereof, duly and validly authorized and
approved, executed and delivered by the Shareholder. Assuming this Agreement
and
the Transaction Documents have been duly and validly authorized, executed and
delivered by the parties thereto other than the Shareholder and each member
of
CMN Management,
this
Agreement is, and as of the Closing each of the Transaction Documents, to which
they are a party, will have been, duly authorized, executed and delivered by
the
Shareholder and each member of CMN Management and constitute or will constitute
the legal, valid and binding obligation of the Shareholder and each member
of
CMN Management, enforceable against the Shareholder and each member of CMN
Management in accordance with their respective terms, except as such enforcement
is limited by general equitable principles, or by bankruptcy, insolvency and
other similar Laws affecting the enforcement of creditors rights
generally.
4.1.2 No
Conflict.
Neither
the execution or delivery by the Shareholder and CMN Management of this
Agreement or any Transaction Document, to which they are a party, nor the
consummation or performance by the Shareholder and CMN Management of the
transactions contemplated hereby or thereby will, directly or indirectly, (a)
contravene, conflict with, or result in a violation of any provision of the
Organizational Documents of the Shareholder; (b) contravene, conflict with,
constitute a default (or an event or condition which, with notice or lapse
of
time or both, would constitute a default) under, or result in the termination
or
acceleration of, any agreement or instrument to which the Shareholder or any
member of CMN Management is a party or by which the properties or assets of
the
Shareholder or any member of CMN Management; or (c) contravene, conflict with,
or result in a violation of, any Law or Order to which the Shareholder or any
member of CMN Management,
or any of the properties or assets of the Shareholder or any member of CMN
Management, may be subject.
4.1.3 Ownership
of Shares.
The
Shareholder owns, of record and beneficially, and has good, valid and
indefeasible title to and the right to transfer to the Acquiror pursuant to
this
Agreement, the Shares free and clear of any and all Liens. Other than the
Organizational Documents, there are no options, rights, voting trusts,
stockholder agreements or any other contracts or understandings to which the
Shareholder is a party or by which the Shareholder or the Shares are bound
with
respect to the issuance, sale, transfer, voting or registration of the Shares.
At the Closing, the Acquiror will acquire good, valid and marketable title
to
the Shares free and clear of any and all Liens.
4.1.4 Litigation.
There
is no pending Proceeding against the Shareholder or any member of CMN
Management, as the case may be, that challenges, or may have the effect of
preventing, delaying or making illegal, or otherwise interfering with, any
of
the transactions contemplated by this Agreement and, to the knowledge of the
Shareholder or any member of CMN Management as the case may be, no such
Proceeding has been threatened, and no event or circumstance exists that is
reasonably likely to give rise to or serve as a basis for the commencement
of
any such Proceeding.
4.1.5 No
Brokers or Finders.
Except
as disclosed in the Company Disclosure Schedule no Person has, or as a result
of
the transactions contemplated herein will have, any right or valid claim against
the Shareholder or any member of CMN Management, as the case may be, for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, and the Shareholder or any member of CMN Management, as the case
may
be, will indemnify and hold the Acquiror harmless against any liability or
expense arising out of, or in connection with, any such claim.
4.2 Investment
Representations.
The
Shareholder hereby represents and warrants to the Acquiror:
4.2.1 Acknowledgment.
The
Shareholder understands and agrees that the Acquiror Shares have not been
registered under the Securities Act or the securities laws of any state of
the
U.S. and that the issuance of the Acquiror Shares is being effected in reliance
upon an exemption from registration afforded either under Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering
or
Regulation S for offers and sales of securities outside the U.S.
4.2.2 Status.
By its
execution of this Agreement, the Shareholder represents and warrants to the
Acquiror as indicated on its signature page to this Agreement, either
that:
(a) it
is an
Accredited Investor; or
(b) it
is not
a U.S. person.
The
Shareholder understands that the Acquiror Shares are being offered and sold
to
the Shareholder in reliance upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Shareholder
set forth in this Agreement, in order that the Acquiror may determine the
applicability and availability of the exemptions from registration of the
Acquiror Shares on which the Acquiror is relying.
4.2.3 Additional
Representations and Warranties of Accredited Investors.
If the
Shareholder indicates that it is an Accredited Investor on its signature page
to
this Agreement it further makes the representations and warranties to the
Acquiror set forth on Exhibit D.
4.2.4 Additional
Representations and Warranties of Non-U.S. Persons.
If the
Shareholder indicates that it is not a U.S. person on its signature page to
this
Agreement, it further makes the representations and warranties to the Acquiror
set forth on Exhibit E.
4.2.5 Stock
Legends.
The
Shareholder hereby agrees with the Acquiror as follows:
(a) Securities
Act Legend - Accredited Investors.
If the
Shareholder indicates that it qualifies as an Accredited Investor the
certificates evidencing the Acquiror Shares, and each certificate issued in
transfer thereof, will bear the following legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN
WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY
AN
OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.
(b) Securities
Act Legend - Non-U.S. Persons.
If the
Shareholder indicates that it qualifies as a non-U.S. person, the certificates
evidencing the Acquiror Shares, and each certificate issued in transfer thereof,
will bear the following legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND
NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS
OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, AND BASED ON AN OPINION
OF
COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY,
THAT THE PROVISIONS OF REGULATION S HAVE BEEN SATISFIED (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN
WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY
AN
OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE SECURITIES ACT.
(c) Other
Legends.
The
certificates representing such Acquiror Shares, and each certificate issued
in
transfer thereof, will also bear any other legend required under any applicable
Law, including, without limitation, any U.S. state corporate and state
securities law, or contract.
(d) Restriction
on Disposal of Acquiror Shares.
(i) For
a period of 12 months after the Closing (the “Lock-Up Period”), the
Shareholder and
the
Acquiror Stockholder shall not, without the prior written consent of the
Acquiror Board, directly or indirectly transfer, sell, gift, exchange, assign,
pledge or otherwise encumber or dispose of their respective shares of Acquiror
Common Stock, or enter into any Hedging Transaction (each of the foregoing
referred to as a “Disposition”). The foregoing restriction is intended to
preclude the Shareholder and the Acquiror Stockholder from engaging in any
Hedging Transaction, which is designed to or is reasonably expected to lead
to
or result in a Disposition during the Lock-Up Period even if such shares of
Acquiror Common Stock would be disposed of by someone other than the Shareholder
, or the Acquiror Stockholder. The above restriction on disposal of Acquiror
Shares shall not apply to the transfer by the Shareholder to the CMN Executives
of the 8.68% shares of the Acquiror Common Stock as described in Section 2.1
of
this Agreement, provided that, the Shareholder shall (i) make the
representations required by the provisions of Sections 4.2.1 through 4.2.4
and
(ii) procure the agreement of each member of the CMN Executives to be bound
by
the provisions of Section 4.2.5 and any other restrictions on transferability
set forth in Exhibits D and E after he/she become a stakeholder of the
Acquiror.
(ii) Notwithstanding
the foregoing, the Shareholder and the Acquiror Stockholder, with the prior
written approval of the Acquiror Board, may engage in a Disposition of their
respective shares of Acquiror Common Stock during the Lock-Up Period;
provided,
that,
such
Disposition of their respective shares of Acquiror Common Stock is made in
a
private resale to a bona fide investor, who is an Accredited Investor or not
a
U.S. Person in reliance upon the exemption from registration of their respective
shares of Acquiror Common Stock afforded either under Section 4(2) of the
Securities Act, or Regulation S. Each of the Shareholder and the Acquiror
Stockholder represent and warrant to the other party that in the case of an
approved Disposition of their respective shares of Acquiror Common Stock, the
Shareholder and/or
the Acquiror Stockholder, as the case may be, shall obtain appropriate
representations and warranties of the purchaser with respect to such purchaser’s
investment intent and its status as an accredited investor or a non-U.S. Person,
and its agreement to be bound by the provisions of Section 4.2.5(d) of this
Agreement.
(iii) The
Shareholder and the Acquiror Stockholder individually covenant and agree that
upon the expiration of the Lock-Up Period they shall not engage in a
Disposition, without the prior written approval of the Acquiror Board, of more
than 5% of their respective shares of Acquiror Common Stock in any one trading
day; provided,
however,
that
any such
Disposition of their respective shares of Acquiror Common Stock by the
Shareholder and the Acquiror Stockholder shall remain at all times subject
to
applicable securities laws, including without limitation the resale restrictions
imposed by Rule 144 of the Securities Act.
(e) Opinion.
Neither
the Shareholder nor the Acquiror Stockholder, will engage in a Disposition
of
any or all of their respective shares of Acquiror Common Stock pursuant to
Regulation S, Regulation D or absent an effective registration statement under
the Securities Act and applicable state securities law covering the disposition
of their respective shares of Acquiror Common Stock, without first providing
the
Acquiror with an opinion of counsel (which counsel and opinion are reasonably
satisfactory to the Acquiror) to the effect that such transfer will be made
in
compliance with Regulation S, or Regulation D, as applicable, or will be exempt
from the registration and the prospectus delivery requirements of the Securities
Act and the registration or qualification requirements of any applicable U.S.
state securities laws.
(f) Consent.
The
Shareholder and the Acquiror Stockholder understand and acknowledge that the
Acquiror may refuse to transfer their respective shares of Acquiror Common
Stock, unless the Shareholder and the Acquiror Stockholder comply with this
Section 4.2.5 and any other restrictions on transferability set forth in
Exhibits D and E. The Shareholder and
the
Acquiror Stockholder consent to the Acquiror making a notation on its records
or
giving instructions to any transfer agent of their respective shares of Acquiror
Common Stock in order to implement the restrictions on transfer of the Acquiror
Shares.
(h) Resales
under Rule 144.
The
parties hereto acknowledge and understand that pursuant to the Securities Act
and Rule 144, promulgated thereunder, for a period of one year after the Closing
of the transactions, the Acquiror Stockholder and the Shareholder are not
permitted to engage in the public resale of shares of Acquiror Common Stock,
unless such shares have been registered on a registration statement filed under
the Securities Act. Upon the expiration of such one year period, such shares
may
be re-sold subject to applicable securities laws, including without limitation
the resale restrictions imposed by Rule 144 of the Securities Act
SECTION
V
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Shareholder and each member of CMN Management, severally and not jointly,
represent and warrant to the Acquiror on behalf of the Company, as
follows:
5.1 Organization
and Qualification.
(a)
Each of the Acquired Companies is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has all requisite
authority and power (corporate and other), governmental licenses,
authorizations, consents and approvals to carry on its business as presently
conducted and to own, hold and operate its properties and assets as now owned,
held and operated by it, except where the failure to be so organized, existing
and in good standing or to have such authority and power, governmental licenses,
authorizations, consents or approvals would not have a Material Adverse Effect.
Each of the Acquired Companies is duly qualified, licensed or domesticated
as a
foreign corporation in good standing in each jurisdiction wherein the nature
of
its activities or its properties owned, held or operated makes such
qualification, licensing or domestication necessary, except where the failure
to
be so duly qualified, licensed or domesticated and in good standing would not
have a Material Adverse Effect. The Company Disclosure Schedule sets forth
a
true, complete and correct list of each Acquired Company’s jurisdiction of
organization and each other jurisdiction in which such Acquired Company
presently conducts its business or owns, holds and operates its properties
and
assets.
(b)
As of
the completion of the Restructuring, (i) Huamei Information and the Company
Subsidiaries shall be duly organized, validly existing and in good standing
as
joint venture companies under the laws of the People’s Republic of China, and
shall have all requisite authority and power (corporate and other), governmental
licenses, authorizations, consents and approvals to carry on their respective
businesses as presently conducted and to own, hold and operate its properties
and assets as well as its Company Subsidiaries as now owned, held and operated
by it, except where the failure to be so organized, existing and in good
standing or to have such authority and power, governmental licenses,
authorizations, consents or approvals would not have a Material Adverse Effect;
(ii) all registered capital and other capital contributions regarding Huamei
Information and the Company Subsidiaries shall have been duly paid up in
accordance with the relevant PRC regulations and requirements and all necessary
capital verification reports have been duly issued and not revoked.
5.2 Subsidiaries.
Except
as required by the Restructuring, no Acquired Company owns, directly or
indirectly, any equity or other ownership interest in any corporation,
partnership, joint venture or other entity or enterprise.
5.3 Organizational
Documents.
True,
correct and complete copies of the Organizational Documents of each Acquired
Company have been delivered to the Acquiror prior to the execution of this
Agreement, and no action has been taken to amend or repeal such Organizational
Documents. No Acquired Company is in violation or breach of any of the
provisions of its Organizational Documents, except for such violations or
breaches as, would not have a Material Adverse Effect. The Organizational
Documents of the Acquired Companies are valid and subsisting and have been
approved by all applicable Governmental Authorities, including, without
limitation, the State Administration of Industry and Commerce of the PRC and
the
Ministry of Foreign Trade and Economic Corporation/Ministry of Commerce, or
their respective delegated local authorities, which have jurisdiction over
the
registration of the Acquired Companies.
5.4 Authorization.
As of
the completion of the Restructuring, the Company will have all requisite
authority and power (corporate and other), governmental licenses,
authorizations, consents and approvals to enter into this Agreement and each
of
the Transaction Documents to which the Company is a party, to consummate the
transactions contemplated by this Agreement and each of the Transaction
Documents to which the Company is a party and to perform its obligations under
this Agreement and each of the Transaction Documents to which the Company is
a
party. The execution, delivery and performance by the Company of this Agreement
and each of the Transaction Documents to which the Company is a party and the
recording of the transfer of the Shares have been duly authorized by all
necessary corporate action The execution, delivery and performance by the
Company of this Agreement and each of the Transaction Documents to which the
Company is a party and the recording of the transfer of the Shares requires
no
authorization, consent, approval, license, exemption of or filing or
registration with any Governmental Authority or other Person other than (a)
such
filings and mailings required by Section 14(f) of the Exchange Act, Rule 14f-1
promulgated thereunder and any other policy or requirement of the Commission
imposed in connection therewith (including, without limitation, any requirement
arising from any comments of the Commission occasioned by the filing of the
Schedule 14(f) (the “Schedule 14(f) Filing”) and (b) such other customary
filings with the Commission for transactions of the type contemplated by this
Agreement.
5.5 No
Violation.
Neither
the execution or delivery by the Company of this Agreement or any Transaction
Document to which the Company is a party, the consummation or performance by
the
Company of the transactions contemplated hereby or thereby, nor the
Restructuring will, directly or indirectly, (a) contravene, conflict with,
or
result in a violation of any provision of the Organizational Documents of any
Acquired Company; (b) contravene, conflict with, constitute a default (or an
event or condition which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination or acceleration of, or result
in
the imposition or creation of any Lien under, any agreement or instrument to
which any Acquired Company is a party or by which the properties or assets
of
any Acquired Company are bound; (c) contravene, conflict with, or result in
a
violation of, any Law or Order to which any Acquired Company, or any of the
properties or assets owned or used by any Acquired Company, may be subject;
or
(d) contravene, conflict with, or result in a violation of, the terms or
requirements of, or give any Governmental Authority the right to revoke,
withdraw, suspend, cancel, terminate or modify, any licenses, permits,
authorizations, approvals, franchises or other rights held by any Acquired
Company or that otherwise relate to the business of, or any of the properties
or
assets owned or used by, any Acquired Company, except, in the case of clause
(b), (c) or (d), for any such contraventions, conflicts, violations, or other
occurrences as would not have a Material Adverse Effect.
5.6 Binding
Obligations.
Assuming this Agreement and the Transaction Documents have been duly and validly
authorized, executed and delivered by the parties thereto other than the
Company, this Agreement has been, and as of the Closing, each of the Transaction
Documents to which the Company is a party will be, duly authorized, executed
and
delivered by the Company and constitutes or will constitute, as the case may
be,
the legal, valid and binding obligations of the Company, enforceable against
the
Company in accordance with their respective terms, except as such enforcement
is
limited by general equitable principles, or by bankruptcy, insolvency and other
similar Laws affecting the enforcement of creditors rights
generally.
5.7 Capitalization
and Related Matters.
5.7.1 Capitalization.
The
Company has issued 50,000 shares which constitutes the Shares. There are no
outstanding or authorized options, warrants, purchase agreements, participation
agreements, subscription rights, conversion rights, exchange rights or other
securities or contracts that could require the Company to issue, sell or
otherwise cause to become outstanding any of its authorized but unissued shares
of capital stock or any Equity Security or to create, authorize, issue, sell
or
otherwise cause to become outstanding any new class of capital stock. Other
than
the Organizational Documents of the Company, there are no outstanding
stockholders’ agreements, voting trusts or arrangements, registration rights
agreements or agreements containing registration rights, rights of first refusal
or other contracts pertaining to the capital stock of the Company. The Shares
are duly authorized, validly issued, fully paid and nonassessable and have
not
been issued in violation of any preemptive or similar rights of any Person
or in
violation of any Law.
5.7.2 No
Redemption Requirements.
There
are no outstanding contractual obligations (contingent or otherwise) of the
Company to retire, repurchase, redeem or otherwise acquire any outstanding
shares of capital stock of, or other ownership interests in, the Company or
to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other Person.
5.7.3 Subsidiaries.
The
capitalization of each Company Subsidiary as of the completion of the
Restructuring will be as set forth on Schedule 5.7.3 of the Company Disclosure
Schedule. The issued and outstanding shares of capital stock of each Company
Subsidiary set forth on such schedule have been duly authorized and are validly
issued and outstanding, fully paid and non-assessable, and constitute all of
the
issued and outstanding capital stock of such Company Subsidiary. As of the
Completion of the Restructuring, all registered capital and other capital
contributions regarding the Acquired Companies have been duly paid up in
accordance with the relevant PRC regulations and requirements and all necessary
capital verification reports have been duly issued and not revoked or withdrawn.
As of the completion of the Restructuring, the owners of the shares of each
of
the Company Subsidiaries set forth on Schedule 5.7.3 of the Company Disclosure
Schedule own, and have good, valid and marketable title to, all shares of
capital stock of such Company Subsidiaries, and all such equity transfers and
change in shareholders of each Company Subsidiary as a result of the
Restructuring shall have been duly registered with the appropriate
Administration for Industry and Commerce, as required. As of the completion
of
the Restructuring, there will be no outstanding or authorized options, warrants,
purchase agreements, participation agreements, subscription rights, conversion
rights, exchange rights or other securities or contracts that could require
any
of the Company Subsidiaries to issue, sell or otherwise cause to become
outstanding any of its respective authorized but unissued shares of capital
stock or Equity Security, or to create, authorize, issue, sell or otherwise
cause to become outstanding any new class of capital stock. Other than the
Organizational Documents, as of the completion of the Restructuring, there
will
be no outstanding stockholders’ agreements, voting trusts or arrangements,
registration rights agreements or agreements containing registration rights,
rights of first refusal or other contracts pertaining to the capital stock
of
any of the Company Subsidiaries. None of the outstanding shares of capital
stock
of any of the Company Subsidiaries has been issued in violation of any rights
of
any Person or in violation of any Law.
5.8 Financial
Statements.
(a)
Attached as Schedule 5.8 to the Company Disclosure Schedules will be two sets
of
the Company’s and the Company Subsidiaries’ audited combined financial
statements, including, in each case, the notes thereto (the “Company Audited
Financial Statements”). The Company Audited Financial Statements (i) are in
accordance with the books and records of the Acquired Companies; (ii) present
fairly the financial condition and the results of operations, changes in
stockholder’s equity and cash flow of the Acquired Companies for the periods
therein specified; and (iii) one set shall have been prepared in accordance
with
Hong Kong GAAP for the year ended 31 December 2004 and the other set shall
have
been prepared in accordance with US GAAP for the two years ended 31 December
2003 and 2004 applied on a consistent basis during the periods concerned. Also
attached as Schedule 5.8 (as may be updated after the execution of this
Agreement but prior to Closing) shall be such unaudited interim financial
statements and such pro-forma combined financial statements as may be required
pursuant to applicable SEC regulations (“Company Unaudited Financial
Statements”). Specifically, but not by way of limitation, the Company audited
balance sheets included in the Company Audited Financial Statements disclose
all
of the debts, liabilities and obligations of any nature (whether absolute,
accrued, contingent or otherwise and whether due or to become due) of the
Acquired Companies for the periods therein specified which must be disclosed
on
a balance sheet in accordance with US GAAP. The Company Audited Financial
Statements and the Company Unaudited Financial Statements shall reflect the
advertising and media network business segment undertaken by Shareholder prior
to the establishment of the Company Subsidiaries. The Company Audited Financial
Statements will fairly contain the costs associated with operating the Company
Subsidiaries and will have such costs allocated as required under US GAAP and
Hong Kong GAAP for “carve out” financial statements.
(b)
As at
Closing, the Company’s unaudited management accounts prepared in accordance with
Hong Kong GAAP, shall reflect that the Company Subsidiaries are indebted to
the
Shareholder in the amount of no more than RMB30 million (on a U.S. $ equivalent
as of the Closing), including all payables due to the Shareholder and/or its
affiliates. Such indebtedness shall exist as of the Closing.
5.9 Shareholder.
The
Shareholder is the holder of 100% of the issued and outstanding shares of Common
Stock of the Company. Except as expressly provided in this Agreement, no Person
is entitled to any preemptive right, right of first refusal or similar right
as
a result of the sale and purchase of the Shares or otherwise. There is no voting
trust, agreement or arrangement affecting the exercise of the voting rights
of
the Shares.
5.10 Compliance
with Laws.
Except
as disclosed in the Company Disclosure Schedule, (i) the business and operations
of each Acquired Company have been and are being, (ii) as of the Restructuring
the business and operations of each Acquired Company shall be, and (iii) the
Restructuring shall have been conducted in accordance with all applicable Laws
and Orders in all material respects, except where the failure to so conduct
in
accordance with all such applicable Laws and Orders would not have a Material
Adverse Effect. No Acquired Company has received notice of any violation (or
any
Proceeding involving an allegation of any violation) of any applicable Law
or
Order by or affecting such Acquired Company and, to the knowledge of the
Shareholder and CMN Management, no Proceeding involving an allegation of
violation of any applicable Law or Order is threatened or contemplated. No
Acquired Company is subject to any obligation or restriction of any kind or
character, nor is there any event or circumstance relating to any Acquired
Company that materially and adversely affects in any way its business,
properties, assets or prospects or that prohibits the Company from entering
into
this Agreement or would prevent or make burdensome its performance of or
compliance with all or any part of this Agreement or the consummation of the
transactions contemplated hereby.
5.11 Certain
Proceedings.
There
is no pending Proceeding that has been commenced against the Company, or any
Company Subsidiary, and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the transactions
contemplated by this Agreement, and to the knowledge of the Shareholder and
CMN
Management, no such Proceeding has been threatened.
5.12 No
Brokers or Finders.
Except
as disclosed in the Company Disclosure Schedule, no Person has, or as a result
of the transactions contemplated herein will have, any right or valid claim
against any Acquired Company for any commission, fee or other compensation
as a
finder or broker, or in any similar capacity, and the Shareholder will indemnify
and hold the Acquiror harmless against any liability or expense arising out
of,
or in connection with, any such claim.
5.13 Employees.
5.13.1 Except
as
disclosed in the Company Disclosure Schedule,
(a) each
Acquired Company is in full compliance with all Laws regarding employment,
wages, hours, benefits, the payment of Taxes, occupational safety and health,
in
all material respects, except where the failure to so comply with all such
Laws
would not have a Material Adverse Effect; and (b) no Acquired Company is liable
for the payment of any compensation, including severance payments or other
termination payments, damages, Taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing Laws
5.13.2 To
the
knowledge of the Shareholder and CMN Management , no Key Employee is a party
to,
or is otherwise bound by, any contract (including any confidentiality,
non-competition or proprietary rights agreement) with any other Person that
in
any way adversely affects or will materially affect (a) the performance of
his
or her duties as a director, officer or employee of such Acquired Company or
(b)
the ability of such Acquired Company to conduct its business.
5.13.3 Each
of
the Key Employees and consultants to the Acquired Companies has executed and
delivered to such Acquired Company a confidentiality and non-competition
agreement and an employment agreement or consulting agreement, as the case
may
be. To the knowledge of the Shareholder and CMN Management, no Key Employee
or
consultant of any Acquired Company has excluded works or inventions made prior
to his or her employment with such Acquired Company from his or her employment
agreement or consulting agreement. As requested by the Acquiror, the Company
has
delivered to the Acquiror the form of each confidentiality and non-competition
agreement, and the employment agreement, or consulting agreement. To the
knowledge of the Shareholder and CMN Management, no Key Employee or consultant
is in violation of his or her non-competition agreement, or employment
agreement, or consulting agreement, as the case may be, and the Company will,
and will cause each Acquired Subsidiary to, use its best efforts to prevent
any
such violation.
5.14 Litigation;
Orders.
Except
as would not have a Material Adverse Effect on the operation of the Acquired
Companies, (a) there is no Proceeding (whether federal, state, local or foreign)
pending or, to the knowledge of the Shareholder and CMN Management, threatened
against or affecting any Acquired Company or any Acquired Company’s properties,
assets, business or employees and there is no fact that might result in or
form
the basis for any such Proceeding; and (b) no Acquired Company is subject to
any
Orders.
5.15 Licenses.
Each
Acquired Company possesses from the appropriate Governmental Authority and
as of
the Restructuring will possess, all licenses, permits, authorizations,
approvals, franchises and rights that are necessary for such Acquired Company
to
engage in its business as currently conducted and to permit such Acquired
Company to own and use its properties and assets in the manner in which it
currently owns and uses such properties and assets (collectively, “Company
Permits”), except where the failure to possess all such licenses, permits,
authorizations, approvals, franchises would not have a Material Adverse Effect.
No Acquired Company has received notice from any Governmental Authority or
other
Person that there is lacking any license, permit, authorization, approval,
franchise or right necessary for such Acquired Company to engage in its business
as currently conducted and to permit such Acquired Company to own and use its
properties and assets in the manner in which it currently owns and uses such
properties and assets. The Company Permits are valid and in full force and
effect. To the knowledge of the Shareholder and CMN Management, no event has
occurred or, circumstance exists that may (with or without notice or lapse
of
time): (a) constitute or result, directly or indirectly, in a violation of
or a
failure to comply with any Company Permit; or (b) result, directly or
indirectly, in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Company Permit. No Acquired Company
has received notice from any Governmental Authority or any other Person
regarding: (a) any actual, alleged, possible or potential contravention of
any
Company Permit; or (b) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to, any
Company Permit. All applications required to have been filed for the renewal
of
such Company Permits have been duly filed on a timely basis with the appropriate
Persons, and all other filings required to have been made with respect to such
Company Permits have been duly made on a timely basis with the appropriate
Person, except where the failure to so make such filings would not have a
Material Adverse Effect. All Company Permits are renewable by their terms or
in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine fees or
similar charges, all of which, to the extent due, have been duly paid. In
particular,
1. All
land
premiums, levies, charges, duties, taxes and imposts payable by the Company
Subsidiaries in respect of the Company Permits have been duly paid and no amount
is due or payable by any Company Subsidiaries in respect of the Company
Permits;
2. All
the
necessary licenses, permits, consents and approvals for the user of the Company
Permits as they are being used by the Company Subsidiaries have been duly
obtained and are in full force, validity and effect; and
3. The
Company Permits are used by the Company Subsidiaries for legal purposes and
the
Company Subsidiaries have not violated any law of the PRC relating to such
Company Permits,
except
where the
failure to so pay any such land premiums, levies, charges, duties, taxes and
imposts, to so obtain such licenses, permits, consents and approvals, or to
so
comply with
such
laws of the PRC would not
have a Material
Adverse Effect.
5.16 Interested
Party Transactions.
Except
as disclosed in the Company Disclosure Schedule no officer, director, or
beneficial holder of 5% or more of the stock of any Acquired
Company or
any
Affiliate or “associate” (as such term is defined in Rule 405 of the Commission
under the Securities Act) of any such Person has or has had, either directly
or
indirectly, (1)
an interest
in any Person which (a) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by any Acquired
Company,
or
(b)
purchases from or sells
or
furnishes to, or proposes to purchase from, sell to or furnish any Acquired
Company any goods or services; or (2) a beneficial interest in any
contract or
agreement to which any Acquired
Company is a party or by which it may be bound or affected.
5.17 Title
to and Condition of Properties.
Neither
the Company nor any of the Acquired Companies owns any real property. Each
Acquired Company holds under valid leases or other
rights
to use
all real property, plants, machinery, equipment and other personal property
necessary for the conduct of its business as presently conducted, free and
clear
of all Liens,
except
Permitted Liens, except where the failure to hold any such valid lease would
not
have a Material Adverse Effect. With respect to any and all sub-leases of office
space by any
Company
Subsidiary, each such sub-lease has been properly authorized and consented
to as
required in such master lease agreement and is currently valid and in full
force
and effect.
The
material
buildings, plants, machinery and equipment necessary for the conduct of the
business of each Acquired Company as presently conducted are structurally sound,
are in
good
operating condition and repair and are adequate for the uses to which they
are
being put, and none of such buildings, plants, machinery or equipment is in
need
of maintenance or
repairs,
except for ordinary, routine maintenance and repairs that are not material
in
nature or cost. The buildings, plants, machinery, equipment and other personal
property of the
Acquired
Companies are sufficient for the conduct of the Acquired Companies’ businesses
at Closing.
5.18 Board
Recommendation; Shareholder Approval.
The
Company Board, at a meeting duly called and held, by the vote of at least a
quorum present, has determined that this Agreement
and
the
transactions contemplated by this Agreement, are advisable and in the best
interests of the Shareholder and the Company. On or prior to the Closing Date,
the Shareholder, by
written
consent, shall have approved this Agreement and the transactions contemplated
by
this Agreement.
5.19 Absence
of Undisclosed Liabilities.
No
Acquired Company has any debt, obligation or liability, which would have a
Material Adverse Effect, that has not been disclosed on the
Company
Balance Sheet.
5.20 Changes.
Except
as set forth in the Company Disclosure Schedule or as required by the
Restructuring, no Acquired Company has, since December 31, 2004:
5.20.1 Ordinary
Course of Business.
Conducted its business or entered into any transaction other than in the usual
and ordinary course of business, except for this Agreement.
5.20.2 Adverse
Changes.
Suffered or experienced any change in, or affecting, its condition (financial
or
otherwise), properties, assets, liabilities, business, operations, results
of
operations or prospects
other
than changes, events or
conditions in the usual and ordinary course of its business, none of which
would
have a Material Adverse Effect;
5.20.3 Loans.
Made
any loans or advances to any Person other than travel advances and reimbursement
of expenses made to employees, officers and directors in the ordinary course
of
business;
5.20.4 Liens.
Created
or permitted to exist any Lien on any material property or asset of the Acquired
Companies, other than Permitted Liens;
5.20.5 Capital
Stock.
Issued,
sold, disposed of or encumbered, or authorized the issuance, sale, disposition
or encumbrance of, or granted or issued any option to acquire any shares of
its
capital stock
or
any other
of its securities or any Equity Security, or altered the term of any of its
outstanding securities or made any change in its outstanding shares of capital
stock or its capitalization, whether
by
reason of
reclassification, recapitalization, stock split, combination, exchange or
readjustment of shares, stock dividend or otherwise;
5.20.6 Dividends.
Declared, set aside, made or paid any dividend or other distribution to any
of
its stockholders;
5.20.7 Employees.
Materially increased the compensation or other remuneration or benefits payable
or to become payable to any of its directors, executive officers or employees,
except for increases in
the
ordinary
course of business, or entered into any employment, severance or similar
contracts with any of the foregoing;
5.20.8 Company
Benefit Plans.
Adopted, amended or increased the payments to or benefits under any Company
Benefit Plan;
5.20.9 Material
Company Contracts.
Terminated, modified, failed to renew or extend the term of any Material Company
Contract;
5.20.10 Claims.
Released, waived or cancelled any claims or rights relating to or affecting
such
Acquired Company in excess of $100,000 in the aggregate or instituted or settled
any Proceeding involving
in
excess of
$100,000 in the aggregate;
5.20.11 Discharged
Liabilities.
Paid,
discharged or satisfied any claim, obligation or liability in excess of $100,000
in the aggregate, except for liabilities incurred prior to the date of this
Agreement in the
ordinary
course of business;
5.20.12 Indebtedness.
Created, incurred, assumed or otherwise become liable for any Indebtedness
in
excess of $100,000 in the aggregate;
5.20.13 Guarantees.
Guaranteed or endorsed in a material amount any obligation or net worth of
any
Person;
5.20.14 Acquisitions.
Acquired the capital stock or other securities or any ownership interest in,
or
substantially all of the assets of, any other Person;
5.20.15 Accounting.
Changed
its method of accounting or the accounting principles or practices utilized
in
the preparation of its financial statements, other than as required by
GAAP;
5.20.16 Intellectual
Property.
Granted
any license, sublicense or other rights of use with respect to any Intellectual
Property of the Acquired Companies.
5.20.17 Agreements.
Entered
any agreement, or otherwise obligated itself, to do any of the
foregoing.
5.21 Material
Company Contracts.
5.21.1 The
Company has made available to the Acquiror, prior to the date of this Agreement,
true, correct and complete copies of each written Material Company Contract,
including each amendment, supplement and modification relating thereto. A list
of each such Material Company Contract is set forth on Schedule 5.21.1 to the
Company Disclosure Schedule, including, without limitation, a list of each
Advertising Agency Contract to which a Company Subsidiary is a party. Each
Material Company Contract is a valid and binding agreement of the Acquired
Company that is party thereto, and is in full force and effect.
5.21.2 As
of the
Restructuring, (a) no Acquired Company will be in breach or default of any
Material Company Contract to which it is a party and, no other party to any
Material Company Contract will be in breach or default thereof in any material
respect; (b) no event will have occurred or circumstance will exist that (with
or without notice or lapse of time), would (i) contravene, conflict with or
result in a violation or breach of, or become a default or event of default
under, any provision of any Material Company Contract or (ii) permit any
Acquired Company or any other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Material Company Contract.; (c) no Acquired Company
has
received notice of the pending or threatened cancellation, revocation or
termination of any Material Company Contract to which it is a party; and (d)
there are no renegotiations of, or attempts to renegotiate, or outstanding
rights to renegotiate any material terms of any Material Company
Contract.
5.22 Tax
Matters.
5.22.1
(a) All
material Tax Returns required to be filed by or on behalf of the Acquired
Companies have been timely filed and all such Tax Returns were (at the time
they
were filed) and are true, correct and complete in all material respects; (b)
all
material Taxes of each Acquired Company (whether or not reflected on any Tax
Return) have been fully and timely paid, except those Taxes which are presently
being contested in good faith or for which an adequate reserve for the payment
of such Taxes has been established on the Company Balance Sheet; (c) no waivers
of statutes of limitation have been given or requested with respect to any
Acquired Company in connection with any material Tax Returns covering such
Acquired Company or with respect to any Taxes payable by it; (d) no Governmental
Authority in a jurisdiction where an Acquired Company does not file Tax Returns
has made a claim, assertion or threat to such Acquired Company that such
Acquired Company is or may be subject to taxation by such jurisdiction; (e)
each
Acquired Company has duly and timely collected or withheld, and paid over and
reported to the appropriate Governmental Authority all amounts required to
be so
collected or withheld and paid over for all periods under all applicable Laws,
except where the failure to so collect or withhold would not have a Material
Adverse Effect(f) there are no Liens with respect to Taxes on any Acquired
Company’s property or assets other than Permitted Liens; (g) there are no Tax
rulings, requests for rulings, or closing agreements relating to any Acquired
Company for any period (or portion of a period) that would affect any period
after the date hereof; and (h) any adjustment of Taxes of an Acquired Company
made by a Governmental Authority in any examination that such Acquired Company
is required to report to the appropriate state, local or foreign taxing
authorities has been reported, and any additional Taxes due with respect thereto
have been paid.
5.22.2 No
Acquired Company is, or has ever been, a controlled foreign corporation, as
that
term is defined in Section 957 of the Code and the Treasury Regulations
promulgated thereunder.
5.22.3 There
is
no pending Proceeding with respect to any Taxes of the Acquired Companies,
nor,
to the knowledge of the Shareholder and CMN Management, is any such Proceeding
threatened. The
Company
has
made available to the Acquiror, prior to the date of this Agreement, true,
correct and complete copies of all material Tax Returns, examination reports
and
statements of deficiencies
assessed
or
asserted against or agreed to by the Acquired Companies since their inception
and any and all correspondence with respect to the foregoing.
5.22.4 The
Company is not a party to any Tax allocation or sharing agreement.
5.22.5 Each
Company Subsidiary has duly obtained required state and local tax registration
certificates. Each such certificate is valid and in full force and
effect.
5.23 Material
Assets.
The
Company Audited Financial Statements reflect, the material assets owned or
leased by each Acquired Company and necessary for the conduct of its business
as
presently conducted, and include all of the operating assets of the Acquired
Companies. The Acquired Companies have, and will continue to have as of the
completion of the Restructuring and upon consummation of the transactions
contemplated by this Agreement, good and marketable title to, or a valid
interest in, such assets, free and clear of all Liens, other than Permitted
Liens. Such assets have been owned by the Company through the date reflected
in
the Company Audited Financial Statements, and have not been disposed of since
the date of the Company Audited Financial Statements. As of the completion
of
the Restructuring, no Person other than the Acquiror will have any contract,
right or option to purchase or acquire any of such properties or assets from
the
Acquired Companies. No Affiliate of any Acquired Company or the Shareholder
owns
or otherwise has any interest in or right to use any assets used or held for
use
in, or otherwise arising from or relating to, the business of the Acquired
Companies. As of the completion of the Restructuring, all of the business,
assets, rights and interests in relation to the advertising and media network
business currently carried out by the Company Subsidiaries as of the date of
signing this Agreement will be owned by the Acquired Companies.
5.24 Insurance
Coverage.
None of
the Acquired Companies maintain any insurance policy on their properties or
assets.
5.25 Intellectual
Property.
Except
as disclosed in the Company Disclosure Schedule, (a) each Acquired Company
owns,
licenses or otherwise has the legal right to use all Intellectual Property
for
its business as currently conducted; and (b) there are no outstanding options,
licenses or agreements of any kind relating to the foregoing, nor is any
Acquired Company bound by or a party to any options, licenses or agreements
of
any kind with respect to the Intellectual Property of any other Person other
than licenses or agreements arising from the purchase of “off the shelf” or
standard products. Except as would not have a Material Adverse Effect, each
Acquired Company’s Intellectual Property is in compliance will all applicable
legal requirements in all material respects. No Intellectual Property of any
Acquired Company has been or is now involved in any dispute, opposition,
invalidation or cancellation proceeding, and to the knowledge of the Shareholder
and CMN Management, no such action has been threatened. No Intellectual
Property, wherever situated, of any Acquired Company, is infringed, or has
been
challenged or, to the knowledge of the Shareholder and CMN Management ,
threatened in any way, and no Intellectual Property of any Acquired Company
interferes with or is alleged to infringe or interfere with the Intellectual
Property of any other Person. Except as would not have a Material Adverse
Effect. No Acquired Company has taken any action that would result in the
voiding or invalidation of any of its Intellectual Property. No Acquired Company
is aware that any of its employees, officers or consultants is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any Order, that would interfere with their duties
to the Acquired Companies or that would conflict with the business of the
Acquired Companies as currently conducted. It is not necessary for any Acquired
Company to utilize in its business any inventions, trade secrets or proprietary
information of any of its officers, employees, consultants or persons it
currently intends to hire made prior to their employment with any such Acquired
Company, except for inventions, trade secrets or proprietary information that
have been assigned to such Acquired Company.
5.26 Employee
Benefits.
5.26.1 The
Company has made available to the Acquiror, prior to the date of this Agreement,
copies of each written Company Benefit Plan and any related agreements and
other
contracts.
5.26.2 Except
as
disclosed in the Company Disclosure Schedule and would not have a Material
Adverse Effect, (a) all Company Benefit Plans have been established, maintained
and operated in accordance with their terms and the requirements of applicable
Law, have been maintained in good standing with applicable Government
Authorities in all material respects, and may by their terms be amended and/or
terminated at any time to the greatest extent permitted by applicable Law;
(b)
all Company Subsidiaries have obtained social security registration in respect
of its employees and have punctually paid all social security payments and
made
all social security filings as required by relevant laws and regulations of
the
People’s Republic of China in all material respects; (c) no Company Subsidiary
has failed to implement, or make required contributions to its Company Benefit
Plans as required by relevant PRC laws and local regulations; and (d) no Company
Subsidiary has any outstanding administrative penalties and late payment
interest for failure to form and contribute to such Company Benefit Plans.
No
event has occurred and, to the knowledge of the Shareholder and CMN Management,
there does not now exist any condition or set of circumstances, that could
subject any Acquired Company to any liability arising under any applicable
Law,
or under any indemnity agreement to which any Acquired Company is a party,
excluding liability for benefit claims and funding obligations payable in the
ordinary course.
5.26.3 Except
as
would not have a Material Adverse Effect, there are no outstanding or unpaid
severance or employee-related obligations or amounts due to employees or former
employees of any
Acquired
Company.
5.26.4 Neither
the consummation of the transactions contemplated hereby alone, nor in
combination with another event, with respect to each director, officer, employee
and consultant of the Acquired Companies, will not result in (a) any payment
(including, without limitation, severance, unemployment compensation or bonus
payments) becoming due from any Acquired Company or under any Company Benefit
Plan, (b) any increase in the amount of compensation or benefits payable to
any
such individual or (c) any acceleration of the vesting or timing of payment
of
benefits or compensation payable to any such individual. No Company Benefit
Plan
provides benefits or payments contingent upon, triggered by, or increased as
a
result of a change in the ownership or effective control of the
Company.
5.27 Receivables
and Payables.
All
accounts and notes receivable of each Acquired Company as of the date hereof
have arisen in the ordinary course of business, represent valid obligations
to
such Acquired Company arising from bona fide transactions in the ordinary course
of business and, are not subject to claims or set-off or other defenses or
counterclaims. All accounts and notes payable by each Acquired Company as of
the
date hereof arose in bona fide transactions in the ordinary course of business.
All items which are required by the Hong Kong and US GAAP to be reflected as
receivables and payables in the Company Audited Financial Statements and on
the
books and records of each Acquired Company are so reflected and have been
recorded in accordance with GAAP in a manner consistent with past
practice.
5.28 Foreign
Corrupt Practices Act.
No
Acquired Company, nor any director, officer, Key Employee, or other Person
associated with or acting on behalf of any Acquired Company, has used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; made any direct or indirect
unlawful payment to any Governmental Authority from corporate funds; or made
any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment
in
connection with the operations of any Acquired Company. No Acquired Company,
nor
any director, officer or Key Employee of such Acquired Company has committed
any
acts or omissions which would constitute a breach of relevant PRC criminal
laws,
including but not limited to corruption laws.
5.29 Money
Laundering Laws.
The
operations of the Acquired Companies are and have been conducted at all times
in
compliance with laundering statutes in all applicable PRC jurisdictions, the
rules and regulations thereunder and any related or similar rules, regulations
or guidelines, issued, administered or enforced by any Governmental Authority
(collectively, the “Money Laundering Laws”) and no Proceeding involving any
Acquired Company with respect to the Money Laundering Laws is pending or, to
the
knowledge of the Shareholder and CMN Management, threatened.
5.30 Governmental
Inquiry.
Neither
the Company, nor any Acquired Company has received any material written
inspection report, questionnaire, inquiry, demand or request for information
from
a
Governmental Authority.
5.31 Customers.
Set
forth in the Company Disclosure Schedules is a true, correct and complete list,
for each of the three (3) years prior to the date hereof, of the Company’s top
10 customers, based on the amount of the Company’s revenue generated from each
such customer in each such year. All services necessary for the conduct of
each
Acquired Company’s business as presently conducted may be obtained from readily
available alternate sources on terms and conditions comparable to those
presently available to such Acquired Company. There exists no actual or, to
the
knowledge of the Shareholder and CMN Management threatened, termination,
cancellation or material limitation of, or any material change in, the business
relationship of any Acquired Company with any such customer or suppliers. There
are no pending material disputes or controversies between any customer or
supplier of any Acquired Company and such Acquired Company. No customer of
any
Acquired Company has any right to any credit or refund for products sold or
services rendered or to be rendered by the Company pursuant to any contract
or
practice of the applicable Acquired Company other than pursuant to the normal
course return policy of such Acquired Company.
SECTION
VI
REPRESENTATIONS
AND WARRANTIES OF THE ACQUIROR
The
Acquiror represents and warrants to the Shareholder, the Company and CMN
Management as follows:
6.1 Organization
and Good Standing.
6.1.1 The
Acquiror is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada, with full corporate power and authority
to conduct its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform all its
obligations under applicable Contracts. The Acquiror is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each
state or other jurisdiction where such qualification is required.
6.1.2 The
Acquiror has delivered to the Company and the Shareholder complete and correct
copies of the Acquiror’s Organizational Documents as currently in effect, and
such Organizational Documents have not been amended, corrected, restated or
superseded in any way. The Acquiror is not in violation, nor has it taken any
action in violation, of any provisions of its Organizational Documents. The
Acquiror has delivered to the Company and the Shareholder minutes of all of
The
Acquiror’s board of directors and stockholders meetings, all of which are
complete and accurate as of the date of this Agreement and as of the Closing
Date.
6.1.3 The
Acquiror has delivered to the Company and the Shareholder complete and correct
copies of the Organizational Documents of ABCI Holdings, Inc., a Delaware
corporation (“ABCI”), as in effect as of the date of the merger between the
Acquiror and ABCI (the “ABCI Merger”). ABCI took no action in violation of any
provisions of its Organizational Documents in consummating either the ABCI
Merger, or any transactions incident to the ABCI Merger. The Acquiror has
delivered to the Company and the Shareholder minutes of all of ABCI’s board of
directors and stockholders meetings, all of which were complete and accurate
as
of the date of the ABCI Merger.
6.2 Authority;
No Conflict.
6.2.1 This
Agreement constitutes the legal, valid, and binding obligation of the Acquiror,
enforceable against the Acquiror in accordance with its terms. Upon the
execution and delivery of this Agreement b this Agreement will constitute the
legal, valid, and binding obligations of the Acquiror, enforceable against
the
Acquiror in accordance with their respective terms. The Acquiror has the
absolute and unrestricted right, power, authority, and capacity to execute
and
deliver this Agreement and the Metaphor Closing Documents and to perform its
obligations under this Agreement and the Metaphor Closing
Documents.
6.2.2 This
Agreement constitutes the legal, valid, and binding obligation of the Acquiror,
enforceable against the Acquiror in accordance with its terms.
6.2.3 Except
as
set forth in the Metaphor Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation or performance of the
transactions contemplated by this
Agreement
will, directly or indirectly (with or without notice or lapse of
time):
(a) contravene,
conflict with, or result in a violation of (A) any provision of the
Organizational Documents of the Acquiror, or (B) any resolution adopted by
the
board of directors or the
stockholders
of the Acquiror;
(b) contravene,
conflict with, or result in a violation of, or give any Governmental Authority
or other Person the right to challenge any of transactions contemplated by
this
Agreement or to
exercise
any
remedy or obtain any relief under, any legal requirement, Governmental
Authorization, or any Order to which the Acquiror, or any of the assets owned
or
used by the Acquiror,
may
be
subject;
(c) cause
the
Acquiror to become subject to, or to become liable for the payment of, any
Tax;
(d) cause
any
of the assets owned by the Acquiror to be reassessed or revalued by any taxing
authority or other Governmental Authority;
(e) contravene,
conflict with, or result in a violation or breach of any provision of, or give
any Person the right to declare a default or exercise any remedy under, or
to
accelerate the maturity or
performance
of, or to cancel, terminate, or modify, any Contract; or
(f) result
in
the imposition or creation of any Encumbrance upon or with respect to any of
the
assets owned or used by the Acquiror.
6.2.4 Except
as
set forth in the Metaphor Disclosure Schedule, the Acquiror is not or will
not
be required to give any notice to or obtain any consent from any Person in
connection with the execution
and
delivery
of this Agreement or the consummation or performance of any of the transactions
contemplated herein.
6.3 Capitalization;
Shareholders.
6.3.1 The
authorized equity securities of the Acquiror consists of: (1) 100,000,000 shares
of Acquiror Common Stock of which 509,705 shares are issued and outstanding,
and
(ii) 10,000,000 shares of preferred stock, none of which is issued or
outstanding. All of the outstanding shares of Acquiror Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts
or
commitments relating to the issuance, sale, or transfer of any Acquiror Common
Stock or other securities of the Acquiror. None of the outstanding equity
securities or other securities of the Acquiror was issued in violation of the
Securities Act or any other legal requirement. The Acquiror does not own, or
have any contract to acquire, any equity securities or other securities of
any
Person or any direct or indirect equity or ownership interest in any other
business.
6.3.2 The
Acquiror has delivered to the Shareholder, and will update at Closing, a
complete and correct list of all the shareholders of the Acquiror, including
the
number of shares of Acquiror Common Stock each shareholder owns. As of the
date
of this Agreement, as well as on the Closing Date, there are, and will be,
at
least 100 round-lot shareholders of the Acquiror. A “round-lot shareholder” is a
shareholder owning at least 100 shares of the Acquiror.
6.4 Financial
Statements;
Securities and Exchange Commission Filings.
6.4.1 The
Acquiror has made available to the Company and the Shareholder each statement,
report, registration statement (with the prospectus in the form filed pursuant
to Rule 424(b) of the Securities Act), definitive proxy statement, and other
reports filed with the SEC by the Acquiror prior to the date of this Agreement,
and will furnish to the Company and the Shareholder, at the time of filing
with
the SEC, true and complete copies of any additional documents filed with the
SEC
by the Acquiror after the date hereof and prior to the Closing (collectively,
the "SEC Documents"). As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act
and
the Securities Act, and the rules promulgated thereunder, except as modified
by
subsequent reports. All documents required to be filed as exhibits to the SEC
Documents have been so filed, and all material contracts so filed as exhibits
are in full force and effect, except those which have expired in accordance
with
their terms, and neither the Acquiror nor any of its Affiliates is in material
default thereof. None of the SEC Documents, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
6.4.2 The
financial statements of the Acquiror, including the notes thereto, included
in
the SEC Documents (the "Acquiror Financial Statements") were complete and
correct in all material respects as of their respective dates, complied as
to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with GAAP and Regulation
S-X (17 CFR Part 210), applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements included in quarterly
reports on Form 10-QSB, as permitted by Form 10-QSB of the SEC). The Acquiror
Financial Statements and the Balance Sheet fairly present the financial
condition and operating results of Acquiror at the dates and during the periods
indicated therein (subject, in the case of unaudited statements, o normal
year-end adjustments).Books
and
Records
6.4.3 The
books
of account, minute books, stock record books, and other records of Acquiror,
all
of which have been made available to the Purchaser, are complete and correct
and
have been maintained in accordance with sound business practices and the
requirements of Section 13(b)(2) of the Exchange Act, including the maintenance
of an adequate system of internal controls. The minute book of Acquiror contains
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the boards of directors, and committees of the
boards of directors of Acquiror, and no meeting of any such stockholders, board
of directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of Acquiror.
6.5 Assets;
Accounts Receivable.
Except
as set forth in the Metaphor Disclosure Schedule, Acquiror owns no direct or
indirect interest in any properties or assets (whether real, personal, or mixed
and whether tangible or intangible). All accounts receivable, if any, of
Acquiror on the accounting records of Acquiror as of the Closing Date
(collectively, the “Accounts Receivable”) represent or will represent valid
obligations arising from the ordinary course of business. Unless paid prior
to
the Closing Date, the Accounts Receivable are or will be as of the Closing
Date
current and collectible net of the respective reserves shown on the accounting
records of Acquiror as of the Closing Date (which reserves are adequate and
calculated consistent with past practice). There is no contest, claim, or right
of set-off under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable.
6.6 No
Undisclosed Liabilities;
Liabilities as of the Closing Date.
Acquiror
has no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued,
contingent,
or otherwise) except for liabilities or obligations reflected or reserved
against in the Balance Sheet and current liabilities incurred in the ordinary
course of business since the
date
thereof.
6.7 Taxes.
6.7.1
Acquiror
has filed or caused to be filed on a timely basis all Tax Returns that are
or
were required to be filed by or with respect to either of them, either
separately or as a member of a group of corporations, pursuant to applicable
Legal Requirements. Acquiror has delivered the Company and Shareholders copies
of, and the Metaphor Disclosure Statement contains a complete and accurate
list
of, all such Tax Returns. Acquiror has paid, or made provision for the payment
of, all Taxes that have or may have become due pursuant to those Tax Returns
or
otherwise, or pursuant to any assessment received by Acquiror, except such
Taxes, if any, as are listed in the Metaphor Disclosure Schedule and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Metaphor Disclosure
Statement.
6.7.2 The
United States federal and state income Tax Returns of Acquiror subject to such
Taxes have not been audited by the IRS or relevant state tax authorities. Except
as described in the Metaphor Disclosure Schedule, Acquiror has not given or
been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of Acquiror, or for which Acquiror may be
liable.
6.7.3 The
charges, accruals, and reserves with respect to Taxes on the respective books
of
Acquiror are adequate (determined in accordance with GAAP) and are at least
equal to Acquiror’s liability for Taxes. There exists no proposed tax assessment
against Acquiror. No consent to the application of Section 341(f)(2) of the
IRC
has been filed with respect to any property or assets held, acquired, or to
be
acquired by Acquiror. All Taxes that Acquiror is or was required to withhold
or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Authority or other Person.
1.1.1 All
Tax
Returns filed by Acquiror are true, correct, and complete. There is no tax
sharing agreement that will require any payment by Acquiror after the date
of
this Agreement.
6.7.4
1.1 No
Material Adverse Change.
Since
the date of the Balance Sheet, there has not been any material adverse change
in
the business, operations, properties, prospects, assets, or
condition
of
Metaphor, and no event has occurred or circumstance exists that may result
in
such a material adverse change.
6.8
6.9 Securities
Laws.
Assuming the accuracy of the representations and warranties of the Shareholder
and each member of CMN Management contained in Section 4 and Exhibits D and
E,
the issuance of the Acquiror Shares pursuant to this Agreement are and will
be
(a) exempt from the registration and prospectus delivery requirements of the
Securities Act, (b) have been registered or qualified (or are exempt from
registration and qualification) under the registration permit or qualification
requirements of all applicable state securities laws, and (c) accomplished
in
conformity with all other applicable federal and state securities
laws.
6.10 Employee
Benefits;
Labor Matters.
6.10.1 Except
as
disclosed in the Metaphor Disclosure Schedule, neither Acquiror has never
sponsored, maintained, or participated in any plan, program, policy, practice,
contract, agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, employee pension
benefit plans, stock or stock-related awards, welfare benefits, fringe benefits
or other employee benefits or remuneration of any kind, whether written,
unwritten or otherwise, funded or unfunded, including each “employee benefit
plan,” within the meaning of Section 3(3) of ERISA for the benefit of any
employee. Except as set forth in the Metaphor Disclosure Schedule, Acquiror
has
no employees, consultants, or independent contractors. The Metaphor Disclosure
Schedule sets forth any compensation, accrued time off, retention bonus, or
transaction bonus payable to any employee, consultant, or independent contractor
of Acquiror.
6.10.2 There
are
no collective bargaining agreements to which either Acquiror was a party or
was
subject to. Acquiror complied with all applicable then current laws respecting
employment and
employment
practices, terms and conditions of employment and wages and hour. Acquiror
has
not received written notice of any unfair labor practices complaint pending
against them before the
National
Labor Relations Board.
6.11 Compliance
With Legal Requirements; Governmental Authorizations.
6.11.1 Except
as
set forth in the Metaphor Disclosure Schedule:
(a)
Acquiror
is, and Acquiror at all times since December 31, 1996 have been, in full
compliance with each Legal Requirement that is or was applicable to them or
to
the conduct or operation of
their
business or the ownership or use of any of their assets;
(b) no
event
has occurred or circumstance exists that (with or without notice or lapse of
time):
(A) may
constitute or result in a violation by Acquiror of, or a failure on the part
of
Acquiror to comply with, any Legal Requirement; or
(B) may
give
rise to any obligation on the part of Acquiror to undertake, or to bear all
or
any portion of the cost of, any remedial action of any nature; and
(c) Acquiror
has not received any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding:
(A) any
actual, alleged, possible, or potential violation of, or failure to comply
with,
any Legal Requirement or Government Authorization; or
(B) any
actual, alleged, possible, or potential obligation on the part of Acquiror
to
undertake, or to bear all or any portion of the cost of, any remedial action
of
any nature.
6.12 Legal
Proceedings; Orders.
6.12.1 There
is
no pending Proceeding: (i) that has been commenced by or against the Acquiror,
or that otherwise relates to or may affect the business of, or any of the assets
owned or used by, Acquiror; or (ii) that challenges, or that may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any
of
the transactions contemplated by this Agreement. To the knowledge of Acquiror,
(1) no such Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding.
6.12.2
Acquiror
is, and at all times Acquiror has been, in full compliance with all of the
terms
and requirements of each Order to which it, or any of the assets owned or used
by it, is or has been subject.
6.13 .No
Brokers or Finders.
Except
as disclosed in the Metaphor Disclosure Schedules, no Person has, or as a result
of the transactions contemplated herein will have, any right or valid claim
against any Acquiror Company for any commission, fee or other compensation
as a
finder or broker, or in any similar capacity, and the Acquiror will indemnify
and hold the Company harmless against any liability or expense arising out
of,
or in connection with, any such claim.
6.14 Absence
of Certain Changes and Events.
Except
as set forth in the Metaphor Disclosure Schedule, since December 31, 2004,
Acquiror has conducted its business only in the Ordinary
Course
of
Business and there has not been any of the following:
6.14.1 change
in
Acquiror’s authorized or issued capital stock; grant of any stock option or
right to purchase shares of capital stock of Acquiror; issuance of any security
convertible into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by Acquiror of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
6.14.2 amendment
to the Organizational Documents of Acquiror;
6.14.3 payment
or increase by Acquiror of any bonuses, salaries, or other compensation to
any
stockholder, director, officer, employee, or independent contractor, or entry
into any employment,
severance,
or
similar Contract with any director, officer, employee, or independent
contractor;
6.14.4 damage
to
or destruction or loss of any asset or property of Acquiror, whether or not
covered by insurance, materially and adversely affecting the properties, assets,
business, financial condition,
or
prospects
of Acquiror, taken as a whole;
6.14.5 entry
into, termination of, or receipt of notice of termination of any Contract or
transaction;
6.14.6 sale,
lease, or other disposition of any asset or property of Acquiror or mortgage,
pledge, or imposition of any lien or other encumbrance on any material asset
or
property of Acquiror, including
the
sale,
lease, or other disposition of any of the Intellectual Property
Assets;
6.14.7 cancellation
or waiver of any claims or rights with a value to Acquiror;
6.14.8 material
change in the accounting methods used by Acquiror; or
6.14.9 agreement,
whether oral or written, by Acquiror to do any of the foregoing.
6.15 Contracts;
No Defaults.
6.15.1 The
Metaphor Disclosure Schedule contains a complete and accurate list, and Metaphor
has delivered to the Company and the Shareholder true and complete copies,
of
each Material Acquiror
Contract
entered into by Acquiror, including without limitation, each of the
following:
(a) each
joint venture, partnership, and other agreement (however named) involving a
sharing of profits, losses, costs, or liabilities by Acquiror with any other
Person;
(b) each
agreement containing covenants that in any way purport to restrict the business
activity of Acquiror or limit the freedom of Acquiror to engage in any line
of
business or to compete
with
any
Person;
(c) each
power of attorney that is currently effective and outstanding;
(d) each
agreement for capital expenditures by Acquiror;
(e) each
written warranty, guaranty, and or other similar undertaking with respect to
contractual performance extended by Acquiror; and
(f) each
amendment, supplement, and modification (whether oral or written) in respect
of
any of the foregoing.
The
Metaphor Disclosure Schedule sets forth reasonably complete details concerning
the terms of such Material Acquiror Contracts, including the parties to the
Material Acquiror Contracts, and the amount of the remaining commitment of
Metaphor under the Material Acquiror Contracts.
6.15.2 Except
as
set forth in the Metaphor Disclosure Schedule, each Contract or other agreement
identified or required to be identified in the Metaphor Disclosure Schedule
is
in full force and effect and
is
valid and
enforceable in accordance with its terms.
6.15.3 Except
as
set forth in the Metaphor Disclosure Schedule:
(a) Acquiror
is in full compliance with all applicable terms and requirements of each
Contract under which Acquiror has or had any obligation or liability or by
which
Acquiror is bound;
(b) each
other Person that has or had any obligation or liability under any Contract
under which Acquiror has or had any rights is in full compliance with all
applicable terms and requirements
of
such
Contract;
(c) no
event
has occurred or circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with, or result in a violation or breach of,
or
give Acquiror or other Person
the
right to
declare a default or exercise any remedy under, or to accelerate the maturity
or
performance of, or to cancel, terminate, or modify, any Contract entered into
by
Acquiror; and
(d) Acquiror
has not given to or received from any other Person any notice or other
communication (whether oral or written) regarding any actual, alleged, possible,
or potential violation or
breach
of, or
default under, any Contract.
6.15.4 Except
as
set forth in the Metaphor Disclosure Schedule, there are no renegotiations
of,
attempts to renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to or by
Acquiror
under current or completed Contracts with any Person, and no such Person has
made written demand for such renegotiation.
6.16 Insurance.
6.16.1 Acquiror
has delivered to the Company and the Shareholder true and complete copies of
all
policies of insurance to which Acquiror is a party or under which Acquiror,
or
any director or officer of
Acquiror
is
or has been covered with respect to matters related to Acquiror at any time;
6.16.2 Acquiror
is not: (i) a Party to any self-insurance arrangement by or affecting Acquiror,
including any reserves established thereunder; (ii) a party to any contract
or
arrangement, other than a
policy
of
insurance, for the transfer or sharing of any risk by Acquiror; and (iii)
obligated to third parties with respect to insurance (including such obligations
under leases and service agreements).
6.17 Environmental
Matters.
Except
as set forth in the Metaphor Disclosure Schedule:
6.17.1 Acquiror
is, and Acquiror at all times has been, in full compliance with, and have not
been and are not in violation of or liable under, any Environmental Law.
Acquiror has no basis to expect, nor has it or any other Person for whose
conduct it is or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from any Governmental Body
or
Person of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any properties or assets (whether real, personal, or mixed) in which Acquiror
has had an interest, or with respect to any property at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used,
or
processed by Acquiror, or any other Person for whose conduct they are or may
be
held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or
received.
6.17.2 There
are
no pending or, to the knowledge of Acquiror, Threatened claims, Encumbrances,
or
other restrictions of any nature, resulting from any Environmental, Health,
and
Safety Liabilities or
arising
under
or pursuant to any Environmental Law, with respect to or affecting any
properties and assets (whether real, personal, or mixed) in which Acquiror
has
or had an interest.
6.17.3 Acquiror
has no basis to expect to receive, nor has it or any other Person for whose
conduct it is or may be held responsible received, any citation, directive,
inquiry, notice, Order, summons, warning, or other communication that relates
to
Hazardous Materials, or any alleged, actual, or potential violation or failure
to comply with any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any properties or assets (whether real,
personal, or mixed) in which Acquiror had an interest, or with respect to any
property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by Acquiror, or any other
Person for whose conduct Acquiror is or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
6.18 Disclosure.
6.18.1 No
representation or warranty of Acquiror in this Agreement and no statement in
the
Metaphor Disclosure Schedule omits to state a material fact necessary to make
the statements herein or
therein,
in
light of the circumstances in which they were made, not misleading.
6.18.2 No
notice
given pursuant to Section 14.4 will contain any untrue statement or omit to
state a material fact necessary to make the statements therein or in this
Agreement, in light of the
circumstances
in which they were made, not misleading.
6.18.3 There
is
no fact known to Acquiror that has specific application to Acquiror (other
than
general economic or industry conditions) and that materially adversely affects
the assets, business,
prospects,
financial condition, or results of operations of Acquiror that has not been
set
forth in this Agreement or the Metaphor Disclosure Schedule.
6.19 Board
Recommendation.
The
Acquiror Board, at a meeting duly called and held, has determined that this
Agreement and the transactions contemplated by this Agreement are
advisable
and
in the best interests of the Acquiror’s stockholders and has duly authorized
this Agreement and the transactions contemplated by this Agreement.
SECTION
VII
REPRESENTATIONS
AND WARRANTIES OF THE
ACQUIROR
STOCKHOLDER
The
Acquiror Stockholder represents and warrants to the Acquiror, the Shareholder,
the Company and CMN Management as follows:
7.1 Authority.
The
Acquiror Stockholder has the right, power, authority and capacity to execute
and
deliver this Agreement and each of the Transaction Documents, to which it is
a
party, to consummate the transactions contemplated by this Agreement and each
of
the Transaction Documents, to which it is a party, and to perform its
obligations under this Agreement and each of the Transaction Documents, to
which
it is a party. This Agreement has been, and each of the Transaction Documents
will be, duly and validly authorized and approved, executed and delivered by
the
Acquiror Stockholder.
7.2 No
Violation.
Neither
the execution or delivery by the Acquiror Stockholder, nor the consummation
or
performance by the Acquiror Stockholder of the transactions contemplated hereby
or thereby will, directly or indirectly, (a) contravene, conflict with, or
result in a violation of any provision of the Organizational Documents of the
Acquiror Stockholder; (b) contravene, conflict with, constitute a default (or
an
event or condition which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination or acceleration of, or result
in
the imposition or creation of any Lien under, any agreement or instrument to
which the Acquiror Stockholder is a party or by which the properties or assets
of the Acquiror Stockholder are bound; (c) contravene, conflict with, or result
in a violation of, any Law or Order to which the Acquiror Stockholder, or any
of
the properties or assets owned or used by the Acquiror Stockholder, may be
subject; or (d) contravene, conflict with, or result in a violation of, the
terms or requirements of, or give any Governmental Authority the right to
revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits,
authorizations, approvals, franchises or other rights held by the Acquiror
Stockholder or that otherwise relate to the business of, or any of the
properties or assets owned or used by, the Acquiror Stockholder, except, in
the
case of clause (b), (c) or (d), for any such contraventions, conflicts,
violations, or other occurrences as would not have a Material Adverse
Effect.
7.3 Binding
Obligation. Assuming
this Agreement and the Transaction Documents have been duly and validly
authorized, executed and delivered by the parties thereto other than the
Acquiror Stockholder, this Agreement is, and as of the Closing each of the
Transaction Documents, to which the Acquiror Stockholder is a party, will have
been, duly authorized, executed and delivered by the Acquiror Stockholder and
constitute or will constitute the legal, valid and binding obligation of the
Acquiror Stockholder, enforceable against the Acquiror Stockholder in accordance
with their respective terms, except as such enforcement is limited by general
equitable principles, or by bankruptcy, insolvency and other similar Laws
affecting the enforcement of creditors rights generally.
SECTION
VIII
COVENANTS
OF THE COMPANY, THE SHAREHOLDER
AND
CMN MANAGEMENT
8.1 Access
and Investigation.
Subject
to the confidentiality provisions set forth in Section 14.3 hereof, and the
reasonable availability of Company personnel, between the date of this Agreement
and the Closing Date, the Company will, and will cause each Company Subsidiary
to, (a) afford the Acquiror, the Acquiror Stockholder, and their respective
agents, advisors and attorneys during normal business hours, all reasonable
access to the Company’s and the Company Subsidiaries’ personnel, properties,
contracts, books and records, and other documents and data, (b) furnish the
Acquiror, the Acquiror Stockholder, and their respective agents, advisors and
attorneys with copies of all such contracts, books and records, and other
existing documents and data as the Acquiror may reasonably request, and (c)
furnish the Acquiror, the Acquiror Stockholder, and their respective and its
agents, advisors and attorneys with such additional financial, operating, and
other data and information as the Acquiror or the Acquiror Stockholder, may
reasonably request in relation to the operation, business and financial
condition of the Company and the Company Subsidiaries.
8.2 Operation
of the Business of the Company and the Company Subsidiaries.
8.2.1 Except
as
required by the Restructuring, between the date of this Agreement and the
Closing Date, the Company will, and will cause each Company Subsidiary
to:
(a) conduct
its business only in the ordinary course of business;
(b) use
its
best efforts to preserve intact its current business organization and business
relationships, including, without limitation, relationships with suppliers,
customers, landlords, creditors,
officers,
employees and agents;
(c) obtain
the prior written consent of the Acquiror prior to taking any action of the
type
specified in Section 5.20 or entering into any Material Company
Contract;
(d) confer
with the Acquiror concerning operational matters of a material nature;
and
(e) otherwise
report periodically to the Acquiror concerning the status of its business,
operations, and finances.
8.2.2 Notwithstanding
the foregoing, between the date of this Agreement and the Closing Date, except
as required by the Restructuring, the Company will not, and will cause each
Company Subsidiary not to, directly or indirectly, without the prior written
consent of the Acquiror, engage in any transaction with, or enter into any
agreement with any officer, director or stockholder of the Company or any
Company Subsidiary, or any Affiliate or “associate” (as such term is defined in
Rule 405 of the Commission under the Securities Act) of any such Person with
a
transaction or agreement value in excess of US$10,000.
8.3 No
Transfers of Capital Stock.
8.3.1 Except
as
required by the Restructuring, between the date of this Agreement and the
Closing Date, the Shareholder shall not assign, transfer, mortgage, pledge
or
otherwise dispose of any or all of
the
Shares
(or any interest therein) or grant any Person the option or right to acquire
such Shares (or any interest therein).
8.3.2 Except
as
required by the Restructuring, between the date of this Agreement and the
Closing Date, the Company shall not, and shall cause each Company Subsidiary
not
to, assign, transfer,
mortgage,
pledge or otherwise dispose of any or all of the capital stock of any Acquired
Company (or any interest therein) or grant any Person the option or right to
acquire the capital stock of any
Acquired
Company (or any interest therein).
8.4 Required
Filings and Approvals.
8.4.1 As
promptly as practicable after the date of this Agreement, the Company will,
and
will cause each Company Subsidiary to, make all filings required to be made
by
it in order to consummate the transactions contemplated by this Agreement,
if
applicable. Between the date of this Agreement and the Closing Date, the Company
will, and will cause each Company Subsidiary to, (a) cooperate with the Acquiror
with respect to all filings that the Acquiror elects to make or is required
to
make in connection with the transactions contemplated by this Agreement, and
(b)
cooperate with the Acquiror in obtaining any consents or approvals required
to
be obtained by the Acquiror in connection herewith.
8.4.2 Without
limiting the foregoing, the Company and the Shareholder shall promptly furnish
to the Acquiror any information reasonably requested by the Acquiror in
connection with the preparation, filing and mailing of the Schedule 14(f)
Filing, including, without limitation, information concerning the Acquired
Companies, the Shareholder and the Company Nominees. The Shareholder
and CMN
Management, severally and not jointly, represent and warrant to the Acquiror
that the information supplied by the Company for inclusion in the Schedule
14(f)
Filing will not, on the date the Schedule 14(f) Filing is filed with the
Commission or first mailed to the stockholders of the Acquiror, contain any
statement which, at such time and in light of the circumstances under which
it
shall be made, is false or misleading with respect to any material fact, or
omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not false or misleading. If, at any time prior
to
the Closing Date, any information should be discovered by the Company, the
Shareholder or any member of CMN Management which should be set forth in an
amendment to the Schedule 14(f) Filing so that such Schedule 14(f) Filing would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the Shareholder or CMN Management,
as the case may be, shall promptly notify the Acquiror.
8.5 Notification.
Between
the date of this Agreement and the Closing Date, the Company, the Shareholder
and CMN Management will promptly notify the Acquiror in writing if the Company,
the Shareholder, any Company Subsidiary or any member of CMN Management becomes
aware of any fact or condition that causes or constitutes a material breach
of
any of the representations and warranties of the Company, the Shareholder or
CMN
Management, as the case may be, as of the date of this Agreement, or if the
Company, the Shareholder, CMN Management or any Company Subsidiary becomes
aware
of the occurrence after the date of this Agreement of any fact or condition
that
would (except as expressly contemplated by this Agreement) cause or constitute
a
material breach of any such representation or warranty had such representation
or warranty been made as of the time of occurrence or discovery of such fact
or
condition. Should any such fact or condition require any change in the Schedules
to this Agreement if the Schedules to the Agreement were dated the date of
the
occurrence or discovery of any such fact or condition, the Company, the
Shareholder or CMN Management, as the case may be, will promptly deliver to
the
Acquiror a supplement to the Schedules to the Agreement specifying such change;
provided,
however,
that
such delivery shall not materially adversely affect any rights of the Acquiror
set forth herein, including the right of the Acquiror to seek a remedy in
damages for losses incurred as a result of such supplemented disclosure. During
the same period, the Company, the Shareholder and CMN Management will, and
will
cause each Company Subsidiary to, promptly notify the Acquiror of the occurrence
of any breach of any covenant of the Company, the Shareholder or CMN Management
in this Section 8 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 10 impossible or
unlikely.
8.6 Closing
Conditions.
Between
the date of this Agreement and the Closing Date, each of the Company, the
Shareholder and CMN Management will use its commercially reasonable
efforts
to
cause the conditions in Section 10 to be satisfied.
SECTION
IX
COVENANTS
AND UNDERTAKING OF THE ACQUIROR
9.1 Access
and Investigation.
Subject
to the confidentiality provisions set forth in Section 14.3 hereof, and the
reasonable availability of Acquiror personnel, between the date of this
Agreement and the Closing Date, the Acquiror will (a) afford the Company and
its
agents, advisors and attorneys during normal business hours full and free access
to the Acquiror’s personnel, properties, contracts, books and records, and other
documents and data, (b) furnish the Company and its agents, advisors and
attorneys with copies of all such contracts, books and records, and other
existing documents and data as the Company may reasonably request, and (c)
furnish the Company and its agents, advisors and attorneys with such additional
financial, operating, and other data and information as the Company may
reasonably request.
9.2 Operation
of the Business of the Acquiror.
Between
the date of this Agreement and the Closing Date, the Acquiror will:
9.2.1 conduct
its business only in the ordinary course of business;
9.2.2 use
its
best efforts to preserve intact the current business organization and business
relationships, including, without limitation, relationships with suppliers,
customers, landlords, creditors,
officers,
employees and agents;
9.2.3 obtain
the prior written consent of the Company prior to taking any action of the
type
specified in Section 6.13 or entering into any Material Acquiror
Contract;
9.2.4 confer
with the Company concerning operational matters of a material nature;
and
9.2.5 otherwise
report periodically to the Company concerning the status of its business,
operations, and finances.
9.2.6 Notwithstanding
the foregoing, between the date of this Agreement and the Closing Date, the
Acquiror will not, directly or indirectly, without the prior written consent
of
the Company and the Shareholder, engage in any transaction with, or enter into
any agreement with any officer, director or stockholder of the Acquiror, or
any
Affiliate or “associate” (as such term is defined in Rule 405 of the Commission
under the Securities Act) of any such Person with a transaction or agreement
value in excess of US$10,000.
9.3 Required
Filings and Approvals.
9.3.1 As
promptly as practicable after the date of this Agreement, the Acquiror will
make
all filings legally required to be made by it to consummate the transactions
contemplated by this Agreement. Between the date of this Agreement and the
Closing Date, the Acquiror will cooperate with the Company with respect to
all
filings that the Company is legally required to make in connection with the
transactions contemplated hereby.
9.3.2 Without
limiting the foregoing, as promptly as practicable after the execution of this
Agreement, the Acquiror shall prepare and file the Schedule 14(f) Filing with
the Commission. The Acquiror will advise the Company, promptly after it receives
notice thereof, of any request by the Commission for the amendment of the
Schedule 14(f) Filing or comments thereon and responses thereto or requests
by
the Commission for additional information. The Acquiror shall mail the Schedule
14(f) Filing to its stockholders as promptly as practicable pursuant to the
Securities Act, the Exchange Act and the rules and regulations of the Commission
related thereto.
9.4 Notification.
Between
the date of this Agreement and the Closing Date, the Acquiror will promptly
notify the Company, the Shareholder and CMN Management in writing if the
Acquiror becomes aware of any fact or condition that causes or constitutes
a
breach of any of the representations and warranties of the Acquiror, as of
the
date of this Agreement, or if the Acquiror becomes aware of the occurrence
after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of any
such representation or warranty had such representation or warranty been made
as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Schedules to this Agreement
if
the Schedules to the Agreement were dated the date of the occurrence or
discovery of any such fact or condition, the Acquiror will promptly deliver
to
the Company, the Shareholder and CMN Management a supplement to the Schedules
to
the Agreement specifying such change; provided,
however,
that
such delivery shall not materially adversely affect any rights of the
Shareholder or CMN Management set
forth
herein, including the right of the Shareholder and CMN Management to seek a
remedy in damages for losses incurred as a result of such supplemented
disclosure. During the same period, the Acquiror will promptly notify the
Company, the Shareholder and CMN Management of
the
occurrence of any breach of any covenant of the Acquiror in this Section 9
or of
the occurrence of any event that may make the satisfaction of the conditions
in
Section 11 impossible or unlikely.
9.5 Closing
Conditions.
Between
the date of this Agreement and the Closing Date, the Acquiror will use
commercially reasonable efforts to cause the conditions in Section 11 to be
satisfied.
9.6 Elections
Under Treasury Regulations Section 301.7701-3. From
and
after the Closing, Acquiror shall execute and/or cause execution of any
elections made with respect to certain of the
Acquired
Companies under Treasury Regulations 301.7701-3, as described on Schedule
5.22.2.
9.7 Books
and Records.
The
Acquiror shall maintain all of its books and records currently in its possession
as of the date hereof, for a period of at least six (6) years after the Closing
Date.
SECTION
X
CONDITIONS
PRECEDENT TO THE ACQUIROR’S
OBLIGATION
TO CLOSE
The
Acquiror’s obligation to acquire the Shares and to take the other actions
required to be taken by the Acquiror at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Acquiror, in whole or in part):
10.1 Accuracy
of Representations.
The
representations and warranties of the Company, the Shareholder and CMN
Management set forth in this Agreement, including Section 10.11, or
in any
Company Disclosure Schedule or certificate delivered pursuant hereto that are
not qualified as to materiality shall be true and correct in all material
respects as of the date of this Agreement, and shall be deemed repeated as
of
the Closing Date and shall then be true and correct in all material respects,
except to the extent a representation or warranty is expressly limited by its
terms to another date and without giving effect to any supplemental Schedule.
The representations and warranties of the Company, the Shareholder and CMN
Management set forth in this Agreement or in any Schedule or certificate
delivered pursuant hereto that are qualified as to materiality shall be true
and
correct in all respects as of the date of this Agreement, and shall be deemed
repeated as of the Closing Date and shall then be true and correct in all
respects, except to the extent a representation or warranty is expressly limited
by its terms to another date and without giving effect to any supplemental
Schedule.
10.2 Performance
by the Company, the Shareholder and CMN Management.
10.2.1 All
of
the covenants and obligations that the Company, Shareholder and CMN Management
are required to perform or to comply with pursuant to this Agreement at or
prior
to the Closing
(considered
collectively), and each of these covenants and obligations (considered
individually), must have been duly performed and complied with in all
respects.
10.2.2 Each
document required to be delivered by the Company, the Shareholder and CMN
Management pursuant to this Agreement at or prior to Closing must have been
delivered.
10.3 No
Force Majeure Event.
Since
December 31, 2004, there shall not have been any delay, error, failure or
interruption in the conduct of the business of any Acquired Company, or any
loss,
injury,
delay, damage, distress, or other casualty, due to force majeur including but
not limited to (a) acts of God; (b) fire or explosion; (c) war, acts of
terrorism or other civil unrest;
or
(d)
national emergency that would severally or in the aggregate have a Material
Adverse Effect.
10.4 Certificate
of Officer.
The
Company will have delivered to the Acquiror a certificate, dated the Closing
Date, executed by an officer of the Company, certifying the satisfaction of
the
conditions
specified in Sections 10.1, 10.2 and 10.3.
10.5 Certificate
of Shareholder and CMN Management.
The
Shareholder and each member of CMN Management will have delivered to the
Acquiror a certificate, dated the Closing Date,
executed
by
an authorized officer of the Shareholder, and by each member of CMN
Management,
certifying the satisfaction of the conditions specified in Sections 10.1 and
10.2.
10.6 Consents.
10.6.1 All
material consents, waivers, approvals, authorizations or orders required to
be
obtained, and all filings required to be made, by the Company, the Shareholder
and/or CMN Management for the authorization, execution and delivery of this
Agreement and the consummation by them of the transactions contemplated by
this
Agreement, shall have been obtained and made by the Company, the Shareholder
and
CMN Management, as the case may be, except where the failure to receive such
consents, waivers, approvals, authorizations or orders or to make such filings
would not have a Material Adverse Effect on the Company or the
Acquiror.
10.6.2 Without
limiting the foregoing, the Schedule 14(f) Filing shall have been mailed to
the
stockholders of the Acquiror not less than 10 days prior to the Closing Date.
No
Proceeding occasioned by
the
Section
14(f) Filing shall have been initiated or threatened by the Commission (which
Proceeding remains unresolved as of the Closing Date).
10.7 Documents.
The
Company, the Shareholder and CMN Management must have caused the following
documents to be delivered to the Acquiror:
10.7.1 share
certificate evidencing the Shares along with an executed stock power
transferring the Shares to the Acquiror;
10.7.2 a
Secretary’s Certificate of the Company, dated the Closing Date, certifying
attached copies of (A) the Organizational Documents of the Company and each
Company Subsidiary, (B) the
resolutions
of the Company Board and the Shareholder approving this Agreement and the
transactions contemplated hereby; and (C) the incumbency of each authorized
officer of the Company
signing
this
Agreement and any other agreement or instrument contemplated hereby to which
the
Company is a party;
10.7.3 a
certificate of good standing, or equivalent thereof, of the
Company,
10.7.4 each
of
the Transaction Documents to which the Company, the Shareholder, and CMN
Management is a party, duly executed; and
10.7.5 such
other documents as the Acquiror may reasonably request for the purpose of (i)
evidencing the accuracy of any of the representations and warranties of the
Company, the Shareholder and CMN Management pursuant to Section 10.1, (ii)
evidencing the performance of, or compliance by the Company, the Shareholder
and
CMN Management with, any covenant or obligation required to be performed or
complied with by the Company, the Shareholder or CMN Management, as the case
may
be, (iii) evidencing the satisfaction of any condition referred to in this
Section 10, or (iv) otherwise facilitating the consummation or performance
of
any of the transactions contemplated by this Agreement.
10.8 No
Proceedings.
Since
the date of this Agreement, there must not have been commenced or threatened
against, the Company, the Shareholder or any member of CMN Management, or
against any Affiliate thereof, any Proceeding (which Proceeding remains
unresolved as of the Closing Date) (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
by this Agreement, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with any of the transactions
contemplated by this Agreement.
10.9 No
Claim Regarding Stock Ownership or Consideration.
There
must not have been made or threatened by any Person any claim asserting that
such Person (a) is the holder of, or has
the
right to
acquire or to obtain beneficial ownership of the Shares or any other stock,
voting, equity, or ownership interest in, the Company, or (b) is entitled to
all
or any portion of the
Shares.
10.10 Delivery
of Service Contracts.
On the
Closing Date, each member of CMN Management shall have executed for delivery
their respective Service Contracts with the Acquiror.
10.11 Satisfactory
Due Diligence.
The
Acquiror shall have completed and reasonably satisfied itself, in its sole
discretion, with the final results of its due diligence review of the Acquired
Companies’
contracts, books, records and other information or documents reasonably
requested by the Acquiror, including, without limitation, the corporate
structure of the Acquired
Companies.
10.12 Regulatory
Approval.
On
or
prior to the Closing Date, the Shareholder shall obtain any necessary regulatory
approval to enter into this Agreement and consummate the transactions
contemplated hereby.
10.13 HC
International Required Approvals.
On
or
prior to the Closing Date, HC International shall have obtained the approval
of
its shareholders to confirm and ratify the execution of this Agreement
including, without limitation, the Shareholder’s sale of the Shares to the
Acquiror and the Restructuring, as required by its Organizational Documents
and
the GEM Listing Rules.
10.14 Completion
of Restructuring.
Resignations and appointments with respect to Company Subsidiaries.
The
Restructuring of the PRC Acquired Companies shall have been duly approved by
the
competent PRC examination and approval authorities in accordance with
application PRC laws and regulations and duly completed as envisaged by the
parties. Except for those directors, legal representatives and bank signatories
who are nominated or appointed by independent third parties that own minority
interests in certain of the Acquired Companies, the
Acquired Companies shall appoint such directors, legal representatives and
bank
signatories as nominated by the Acquiror Stockholder for each Acquired Company
and each existing director, legal representative and bank guarantor of the
Acquired Companies shall resign at Closing.
10.15 Agreement
under PRC law.
The
Shareholder and CMN Management shall enter into an agreement governed under
PRC
law and subject to the jurisdiction of the PRC acceptable to the Acquiror
Stockholder (the “PRC Agreement”) that shall provide that they shall not disturb
the intention and purpose of Section 10.14 hereof and that they shall fully
cooperate with the intention and purpose of such paragraph which may include,
but not be limited, to amendments to the articles of association of such Company
Subsidiaries. The Acquiror and the Acquiror Shareholder shall have the right
under such agreement to petition a Chinese court of competent jurisdiction
to
obtain the equitable relief to achieve such purposes.
10.16 Financial
Statements.
The
Acquiror shall have received finalized Company Audited Financial Statements,
Company Unaudited Financial Statements and the Company’s
unaudited management
accounts prepared in
accordance with Hong Kong GAAP.
SECTION
XI
CONDITIONS
PRECEDENT TO THE OBLIGATION OF THE COMPANY,
THE
SHAREHOLDER AND CMN MANAGEMENT TO CLOSE
The
Shareholder’s obligation to transfer the Shares and the obligations of the
Company, the Shareholder and CMN Management to take the other actions required
to be taken by the Company at the Closing are subject to the satisfaction,
at or
prior to the Closing, of each of the following conditions (any of which may
be
waived by the Company, the Shareholder and CMN Management, in whole or in
part):
11.1 Accuracy
of Representations.
The
representations and warranties of the Acquiror and the Acquiror Stockholder
set
forth in this Agreement or in any Schedule or certificate delivered pursuant
hereto that are not qualified as to materiality shall be true and correct in
all
material respects as of the date of this Agreement, and shall be deemed repeated
as of the Closing Date and shall then be true and correct in all material
respects, except to the extent a representation or warranty is expressly limited
by its terms to another date and without giving effect to any supplemental
Schedule. The representations and warranties of the Acquiror and the Acquiror
Stockholder set forth in this Agreement or in any Schedule or certificate
delivered pursuant hereto that are qualified as to materiality shall be true
and
correct in all respects as of the date of this Agreement, and shall be deemed
repeated as of the Closing Date and shall then be true and correct in all
respects, except to the extent a representation or warranty is expressly limited
by its terms to another date and without giving effect to any supplemental
Schedule.
11.2 Performance
by the Acquiror and the Acquiror Stockholder.
11.2.1 All
of
the covenants and obligations that the Acquiror and the Acquiror Stockholder
are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered
collectively),
and
each of these covenants and obligations (considered individually), must have
been performed and complied with in all respects.
11.2.2 Each
document required to be delivered by the Acquiror and the Acquiror Stockholder
pursuant to this Agreement must have been delivered.
11.3 No
Force Majeure Event.
Since
December 31, 2004, there shall not have been any delay, error, failure or
interruption in the conduct of the business of the Acquiror and the Acquiror
Stockholder, or any loss, injury, delay, damage, distress, or other casualty,
due to force majeure including but not limited to (a) acts of God; (b) fire
or
explosion; (c) war, acts of terrorism or other civil unrest; or (d) national
emergency that would severally or in the aggregate have a Material Adverse
Effect.
11.4 Certificate
of Officer.
Each of
the Acquiror and the Acquiror Stockholder will have delivered to the Company
a
certificate, dated the Closing Date, executed by an officer of the
Acquiror
and
the Acquiror Stockholder, certifying the satisfaction of the conditions
specified in Sections 11.1, 11.2 and 11.3.
11.5 Consents.
11.5.1 All
material consents, waivers, approvals, authorizations or orders required to
be
obtained, and all filings required to be made, by the Acquiror and the Acquiror
Stockholder for the authorization, execution and delivery of this Agreement
and
the consummation by it of the transactions contemplated by this Agreement,
shall
have been obtained and made by the Acquiror and the Acquiror Stockholder, except
where the failure to receive such consents, waivers, approvals, authorizations
or orders or to make such filings would not have a Material Adverse Effect
on
the Company ,the Acquiror or the Acquiror Stockholder.
11.5.2 Without
limiting the foregoing, the Schedule 14(f) Filing shall have been mailed to
the
stockholders of the Acquiror not less than 10 days prior to the Closing Date.
No
Proceeding occasioned by
the
Section
14(f) Filing shall have been initiated or threatened by the Commission (which
Proceeding remains unresolved as of the Closing Date).
11.6 Documents.
Each of
the Acquiror and the Acquiror Stockholder, as applicable, must have caused
the
following documents to be delivered to the Company, the Shareholder, and CMN
Management:
11.6.1 In
respect of the Acquiror, share certificates evidencing the Shareholder’s Closing
Acquiror Shares;
11.6.2 a
Secretary’s Certificate, dated the Closing Date certifying attached copies of
(A) its Organizational Documents Acquiror Stockholder, (B) the resolutions
of
its Board approving this Agreement
and
the
transactions contemplated hereby; and (C) the incumbency of each authorized
officer of it signing this Agreement and any other agreement or instrument
contemplated hereby to which it
Acquiror
is a
party;
11.6.3 a
certificate of its good standing;
11.6.4 each
of
the Transaction Documents to which it is a party, duly executed;
and
11.6.5 such
other documents as the Company may reasonably request for the purpose of (i)
evidencing the accuracy of any of its representations or warranties pursuant
to
Section 11.1, (ii) evidencing its performance of, or the compliance by it with,
any covenant or obligation required to be performed or complied with by it,
(iii) evidencing the satisfaction of any condition referred to in this Section
11, or (iv) otherwise facilitating the consummation of any of the transactions
contemplated by this Agreement.
11.7 No
Proceedings.
Since
the date of this Agreement, there must not have been commenced or threatened
against the Acquiror or the Acquiror Stockholder, or against any Affiliate
thereof, any Proceeding (which Proceeding remains unresolved as of the Closing
Date) (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the transactions contemplated hereby, or (b) that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the transactions contemplated hereby.
11.8 Resignation
of Officers.
On the
Closing Date, each officer of the Acquiror shall execute and deliver to the
Company a letter of resignation, which shall include mutual releases of such
officer
and
the Acquiror
11.9 Satisfactory
Due Diligence.
The
Company shall have completed and reasonably satisfied themselves, in their
sole
discretion, with the final results of their due diligence review of the
Acquiror’s
contracts, books, records and other information or documents reasonably
requested by the Company.
11.10 Delivery
of Service Contracts.
On the
Closing Date, the Acquiror shall have executed for delivery a Service Contract
with each member of CMN Management.
11.11 Cash
Account.
As
reflected on the most recent balance sheet of the Acquiror, after payment of
the
Cash Payment, the Acquiror shall have not less than US$10 million in
cash.
11.12 Undertaking
to Repay the Advance.
On the
Closing Date, the Acquiror shall have executed for delivery an undertaking
to
the Shareholder that within twenty (20) days from the Closing Date, it will
repay the Shareholder in cash an amount in the U.S. Dollar equivalent of
Renminbi nineteen million (as of the execution date of this Agreement) being
the
advances that the Shareholder shall have injected into Huamei Information as
capital contribution for carrying out the Restructuring contemplated hereby.
Such undertaking shall be in substantially the form attached hereto as Exhibit
____.
11.13 Conclusion
of Shareholder’s Loan Agreement.
On the
Closing Date, the Acquiror shall have entered into the Shareholders’ Loan
Agreement with the Shareholder in accordance with
the
term
sheet of the Shareholder’s Loan attached hereto as Exhibit H, pursuant to which
the Acquiror agrees to repay the Shareholder’s Loan at such time and in such
amount as
specified
therein.
SECTION
XII
TERMINATION
12.1 Termination
Events.
This
Agreement may, by notice given prior to or at the Closing, be
terminated:
12.1.1 by
mutual
consent of the Acquiror, the Acquiror Stockholder and the Shareholder (acting
jointly);
12.1.2 by
the
Acquiror, if any of the conditions in Section 10 have not been satisfied as
of
the Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of the Acquiror to comply with its obligations
under this Agreement) and the Acquiror has not waived such condition on or
before the Closing Date; or (ii) by the Shareholder, if any of the conditions
in
Section 11 have not been satisfied as of the Closing Date or if satisfaction
of
such a condition is or becomes impossible (other than through the failure of
the
Shareholder and/or any member of CMN Management to comply with its obligations
under this Agreement) and the Shareholder has not waived such condition on
or
before the Closing Date;
12.1.3 by
the
Acquiror or the Shareholder, if the Closing has not occurred other than due
to
the failure of the Acquiror (in the event the Acquiror seeks to terminate this
Agreement) or the Shareholder (in the event it seeks to terminate this
Agreement) to comply with their respective obligations under this Agreement,
forty-five (45) days after the final mailing of the Schedule 14(f) Filing to
the
stockholders of the Acquiror (which mailing shall occur within five (5) Business
Days after the end of the SEC review period of the Schedule 14(f) Filing),or
such later date as the parties may agree upon ( the “Outside
Date”);
12.1.4 by
the
Acquiror, if there shall have been entered a final, nonappealable order or
injunction of any PRC Governmental Authority restraining or prohibiting the
consummation of the transactions contemplated hereby or the Company or the
Shareholder has not received all required PRC government approvals by September
30, 2005 required to consummate the transaction contemplated by this agreement;
12.1.5 by
the
Acquiror, if, prior to the Closing Date, the Company, the Shareholder or any
member of CMN Management is in material breach of any representation, warranty,
covenant or agreement herein contained and such breach shall not be cured within
10 days of the date of notice of default served by the Acquiror claiming such
breach; provided,
however,
that
the right to terminate this Agreement pursuant to this Section 12.1.5 shall
not
be available to the Acquiror if the Acquiror is in material breach of this
Agreement at the time notice of termination is delivered;
12.1.6 by
the
Company or the Shareholder, if, prior to the Closing Date, the Acquiror or
the
Acquiror Stockholder is in material breach of any representation, warranty,
covenant or agreement herein contained and such breach shall not be cured within
10 days of the date of notice of default served by the Company, or the
Shareholder claiming such breach or, if such breach is not curable within such
10 day period, such longer period of time as is necessary to cure such breach;
provided,
however,
that
the right to terminate this Agreement pursuant to this Section 12.1.6 shall
not
be available if the Company, the Shareholder or any member of CMN Management
to
is in material breach of this Agreement at the time notice of termination is
delivered; or
12.1.7 by
the
Company or the Shareholder (acting jointly), if prior to the Closing Date,
the
Company approves any merger, liquidation, recapitalization, consolidation or
other business combination involving the Company or the Company Subsidiaries
or
any capital stock or any material portion of the assets of the Company or any
Company Subsidiary, or any combination of the foregoing (an “Acquisition
Transaction”), except as required by the Restructuring.
12.1.8 by
the
Acquiror, if, in its sole discretion, the results of the Company’s corporate and
financial due diligence are unsatisfactory.
12.1.9 by
the
Acquiror if the Actual HK Net Profit is at or below RMB6 million.
12.2 Effect
of Termination.
12.2.1 (a)
If
the Acquiror or the Acquiror Stockholder terminates this Agreement pursuant
to
Sections 12.1.5, or 12.1.9, then the Company and the Shareholder shall
immediately pay to the Acquiror Stockholder a termination fee equal to $500,000
in cash, or (b) if the Company or the Shareholder terminates this Agreement
pursuant to Section 12.1.6, then the Acquiror Stockholder shall immediately
pay
to the Company and the Shareholder a termination fee equal to $500,000 in cash
(the “Termination Fee”). If the Acquiror or Acquiror Stockholder terminates this
Agreement pursuant to Section 12.1.4, then the Shareholder shall immediately
pay
to the Acquiror Stockholder a termination fee of $375,000 in cash. If the
Company terminates this Agreement pursuant to Section 12.1.7, then the Company
shall immediately pay to the Acquiror Stockholder the Termination Fee. By
executing this Agreement Metaphor agrees that any such payment of the
Termination Fee be made directly to the Acquiror Stockholder.
12.2.2 Each
party’s right of termination under Section 12.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement
is
terminated pursuant to Section 12.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
5.12, 6.12, 12.2, and 14 will survive; provided,
however,
that if
this Agreement is terminated by a party because of the breach of the Agreement
by another party or because one or more of the conditions to the terminating
party’s obligations under this Agreement is not satisfied as a result of another
party’s failure to comply with its obligations under this Agreement, the
terminating party’s right to pursue all legal remedies will survive such
termination unimpaired.
SECTION
XIII
INDEMNIFICATION;
REMEDIES
13.1 Survival.
All
representations, warranties, covenants, and obligations in this Agreement shall
survive the Closing and expire ninety (90) days from the date on which the
audited financial statements of the Acquiror for its fiscal year ended December
31, 2006 shall have been filed as part of the Acquiror’s Annual Report on Form
10-KSB, but in no event earlier than June 30, 2007 (the “Survival Period”).
.
The
right
to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected
by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy
of
any representation or warranty, or on the performance of or compliance with
any
covenant or obligation, will not affect the right to indemnification, payment
of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
13.2 Indemnification
by the Company.
13.2.1 From
and
after the Closing until (a) the expiration of the Survival Period, or (b) with
respect to a specific claim made by the Acquiror against the Company prior
to
the expiration of the Survival Period, until a court of competent jurisdiction
renders a final unappealable decision (or appeals of a decision are not taken
within the time period permitted for filing same) (the “Claims Period”), the
Shareholder and
CMN
Management, severally and not jointly shall indemnify and hold harmless the
Acquiror from and against any liabilities, loss, claims, damages (excluding
consequential, punitive and other similar damages), fines, penalties, expenses
(including costs of investigation and defense and reasonable attorneys’ fees) or
diminution of value (collectively, “Damages”) arising, directly or indirectly,
from or in connection with:
(a) any
breach of any representation or warranty made by the Company in this Agreement
or in any certificate delivered by the Company pursuant to this Agreement
required to be performed
by
the
Company on or prior to the Closing Date;
(b) any
breach by the Company of its covenants or obligations in this Agreement required
to be performed by the Company on or prior to the Closing Date;
(c) any
Tax,
interest or penalty on the Company, including without limitation as a result
of
the untimely filing of any Tax returns relating to any tax period ending prior
to Closing, or any portion
of
a tax
period prior to Closing; and
(d) liabilities
arising out of events that occurred prior to the Closing.
13.2.2 The
amount of any and all Damages suffered by the Acquiror shall be recovered by
an
offset to any amounts of the Shareholder’s Loan owed by the Company Subsidiaries
to the Shareholder
equal
to the
aggregate amount of the Damages suffered by the Acquiror.
13.2.3 All
claims of the Acquiror pursuant to this Section 13.2 shall be brought by the
Acquiror Stockholder on behalf of the Acquiror and those Persons who were
stockholders of the Acquiror
immediately
prior to the Closing.
13.3 Indemnification
by the Acquiror.
13.3.1 From
and
after the Closing until the expiration of the Claims Period, the Acquiror shall
indemnify and hold harmless the Company, the Shareholder and CMN
Management (collectively,
the
“Company
Indemnified Parties”), from and against any Damages arising, directly or
indirectly, from or in connection with:
(a) any
breach of any representation or warranty made by the Acquiror in this Agreement
or in any certificate delivered by the Acquiror pursuant to this Agreement;
(b) any
breach by the Acquiror of any covenant or obligation of the Acquiror in this
Agreement required to be performed by the Acquiror on or prior to the Closing
Date; or
(c) any
Tax,
interest or penalty on the Acquiror, including without limitation as a result
of
the untimely filing of any Acquiror Tax returns relating to any tax period
ending prior to Closing, or
any
portion
of a tax period prior to Closing; or
(d) liabilities
arising out of events that occurred prior to the Closing.
13.4 Indemnification
by the Acquiror Stockholder.
13.4.1 From
and
after the Closing until the expiration of the Claims Period, the Acquiror
Stockholder shall indemnify and hold harmless the Company Indemnified Parties,
from and against any Damages arising,
directly
or
indirectly, from or in connection with:
(a) any
breach of any representation or warranty made by the Acquiror Stockholder in
this Agreement or in any certificate delivered by Acquiror Stockholder pursuant
to this Agreement;
13.5 Indemnification
Shares.
The
Company Indemnified Parties shall be indemnified by the Acquiror by the Acquiror
issuing to the Company Indemnified Parties an additional number of Acquiror
Shares equal to the aggregate amount of the Damages suffered by the Company
Indemnified Parties, divided by the market value of the Acquiror Common Stock
to
be calculated using the average of the closing price as quoted on the Over
the
Counter Bulletin Board (or such other public trading market on which the
Acquiror’s Common Stock may be trading at such time) for the thirty (30) trading
days immediately prior to the date that such amount of Damages is determined
by
a court of competent jurisdiction or pursuant to a binding settlement agreement
among the Acquiror and the Company Indemnified Parties (the “Market Value”).
13.6 Limitations
on Amount - the Shareholder and CMN Management.
The
Acquiror shall not be entitled to indemnification from the Shareholder and/or
CMN Management pursuant to Section 13.2, unless and until the aggregate amount
of Damages to the Acquiror with respect to such matters under Section 13.2.1
exceeds $50,000, at which time, the Acquiror shall be entitled to
indemnification for the total amount of such Damages in excess of $50,000
subject to a cap of Damages from the Shareholder and CMN Management in the
aggregate amount of RMB30,000,000 (on a U.S. $ equivalent as of the date of
execution of this Agreement). Notwithstanding the foregoing cap, in the event
any claim for indemnification and Damages suffered by the Acquiror directly
or
indirectly arise out of or from the gross negligence, fraud or willful
misconduct of the Company, the Shareholder, and/or CMN Management, there shall
be no cap.
13.7 Limitations
on Amount - the Acquiror
No
Company Indemnified Party shall be entitled to indemnification pursuant to
Section 13.3, unless and until the aggregate amount of Damages to all Company
Indemnified Parties with respect to such matters under Sections 13.3.1 and
13.4
exceeds $50,000, at which time, the Company Indemnified Parties shall be
entitled to indemnification for the total amount of such Damages in excess
of
$50,000 subject to a cap of $4,000,000. Notwithstanding the foregoing cap,
in
the event any claim for indemnification and Damages suffered by the Company
or
the Shareholder directly or indirectly arise out of or from the gross
negligence, fraud or willful misconduct of the Acquiror or the Acquiror
Shareholder, there shall be no cap
13.8 Determining
Damages.
Materiality qualifications to the representations and warranties of the Company
and the Acquiror shall not be taken into account in determining the amount
of
Damages occasioned by a breach of any such representation and warranty for
purposes of determining whether the baskets set forth in Sections 13.5 and
13.6
have been met.
13.9 Breach
by Shareholder and CMN Management.
Nothing
in this Section 13 shall limit the Acquiror or Acquiror Stockholder’s right to
pursue any appropriate legal or equitable remedy against the Shareholder or
any
member of CMN Management with respect to any Damages arising, directly or
indirectly, from or in connection with: (a) any breach by the Shareholder and
CMN Management of any representation or warranty made by the Shareholder and
CMN
Management in this Agreement or in any certificate delivered by the Shareholder
and CMN Management pursuant to this Agreement or (b) any breach by the
Shareholder and CMN Management of its covenants or obligations in this
Agreement. All claims of the Acquiror pursuant to this Section 13 shall be
brought by the Acquiror Stockholders on behalf of the Acquiror and those Persons
who were stockholders of the Acquiror immediately prior to the
Closing.
13.10 Breach
by the Acquiror and/or the Acquiror Stockholder.
Nothing
in this Section 13 shall limit the right of the Shareholder and any member
of
CMN Management to pursue any appropriate legal or equitable remedy against
the
Acquiror with respect to any Damages arising, directly or indirectly, from
or in
connection with: (a) any breach by the Acquiror or the Acquiror Stockholder
of
any representation or warranty made by the Acquiror or the Acquiror Stockholder
in this Agreement or in any certificate delivered by the Acquiror or the
Acquiror Stockholder pursuant to this Agreement or (b) any breach by the
Acquiror or the Acquiror Stockholder of its covenants or obligations in this
Agreement.
SECTION
XIV
GENERAL
PROVISIONS
14.1 Expenses.
Except
as otherwise expressly provided in this Agreement, each party to this Agreement
will bear its respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the transactions contemplated
by this Agreement, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another
party.
14.2 Public
Announcements.
The
Acquiror shall promptly, but no later than three days following the effective
date of this Agreement, issue a press release disclosing the transactions
contemplated hereby. Between the date of this Agreement and the Closing Date,
the Company and the Acquiror shall consult with each other in issuing any other
press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or stock market
or
trading facility with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, which consent shall not be unreasonably withheld or
delayed, except that no prior consent shall be required if such disclosure
is
required by law or applicable regulations and/or regulator, including, in the
case of the Shareholder, the Hong Kong Stock Exchange, in which case the
disclosing party shall provide the other party with prior notice of such public
statement, filing or other communication and shall incorporate so far as
practicable, into such public statement, filing or other communication the
reasonable comments of the other party. After the Closing Date, the Acquiror
shall consult with the Acquiror Nominees in issuing any press releases or
otherwise making public statements or filings and other communications with
the
Commission or any regulatory agency or stock market or trading facility with
respect to the transactions contemplated hereby and the Acquiror shall not
issue
any such press release or otherwise make any such public statement, filings
or
other communications without the prior written consent of the Acquiror Nominees,
which consent shall not be unreasonably withheld or delayed, except that no
prior consent shall be required if such disclosure is required by law or
applicable regulations and/or regulator, in the case of the Shareholder, the
Hong Kong Stock Exchange, in which case the Acquiror shall provide the Acquiror
Nominees with prior notice of such public statement, filing or other
communication and shall incorporate so far as practicable into such public
statement, filing or other communication the reasonable comments of the Acquiror
Nominees.
14.3 Confidentiality.
14.3.1 Subsequent
to the date of this Agreement, the Acquiror, the Shareholder, the Company,
CMN
Management will maintain in confidence, and will cause their respective
directors, officers, employees, agents, and advisors to maintain in confidence,
any written, oral, or other information obtained in confidence from another
party in connection with this Agreement or the transactions contemplated by
this
Agreement, unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any required filing with
the
Commission, or obtaining any consent or approval required for the consummation
of the transactions contemplated by this Agreement, or (c) the furnishing or
use
of such information is required by or necessary or appropriate in connection
with legal proceedings.
14.3.2 In
the
event that any party is required to disclose any information of another party
pursuant to clause (b) or (c) of Section 14.3.1, the party requested or required
to make the disclosure (the “disclosing party”) shall provide the party that
provided such information (the “providing party”) with prompt notice of any such
requirement so that the providing party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this Section
14.3. If, in the absence of a protective order or other remedy or the receipt
of
a waiver by the providing party, the disclosing party is nonetheless, in the
opinion of counsel, legally compelled to disclose the information of the
providing party, the disclosing party may, without liability hereunder, disclose
only that portion of the providing party’s information which such counsel
advises is legally required to be disclosed, provided that the disclosing party
exercises its reasonable efforts to preserve the confidentiality of the
providing party’s information, including, without limitation, by cooperating
with the providing party to obtain an appropriate protective order or other
relief assurance that confidential treatment will be accorded the providing
party’s information.
14.3.3 If
the
transactions contemplated by this Agreement are not consummated, each party
will
return or destroy as much of such written information as the other party may
reasonably request.
14.4 Notices.
All
notices, consents, waivers, and other communications under this Agreement must
be in writing and will be deemed to have been duly given when (a) delivered
by
hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), or (c) when received by the addressee, if
sent
by a nationally recognized overnight delivery service (receipt requested),
in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate
by
notice to the other parties):
|
If
to Acquiror:
c/o
8 Holdings LLC
0000
Xxxxx Xxxxxx, 0xx
Xxxxx
Xxxxxxx,
XX 00000
XXX
|
with
a copy to:
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
|
|
Attention:
Xxxxxx Xxxxxxx
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
|
Attention:
Xxxxxxxx X. Xxxxxxxx, Esq.
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
|
|
If
to Company:
HC
International, Inc.
Xxxxx
X, Xxxxxxx Xxxxxxxx
Xx.
00 Xxxxx Xxxxxx Xizhimen, Haidian
Beijing,
PRC 100088
|
with
a copy to:
Xxxxxxx
Xxxxx
0000
Xxxxx World Tower 1
0
Xxxxxxxxxxxxx Xxxxxx
Xxxxxxx,
XXX 000000
|
|
Attention:
Guo Fansheng
Telephone
No.: x00 (0)00 0000 0000
Facsimile
No.: x00 (0)00 0000 0000
|
Attention:
Xxxxxxx Xxxx
Telephone
No.: x00 (0)00 0000 0000
Facsimile
No.: x00 (0)00 0000 0000
|
|
If
to Shareholder:
HC
International, Inc.
Xxxxx
X, Xxxxxxx Xxxxxxxx
Xx.
00 Xxxxx Xxxxxx Xizhimen, Haidian
Beijing,
PRC 100088
|
with
a copy to:
Xxxxxxx
Xxxxx
0000
Xxxxx World Tower 1
0
Xxxxxxxxxxxxx Xxxxxx
Xxxxxxx,
XXX 000000
|
|
Attention:
Guo Fansheng
Telephone
No.: x00 (0)00 0000 0000
Facsimile
No.: x00 (0)00 0000 0000
|
Attention:
Xxxxxxx Xxxx
Telephone
No.: x00 (0)00 0000 0000
Facsimile
No.: x00 (0)00 0000 0000
|
|
If
to CMN Management:
Xx
Xxxx
Room
502-505, Tower B Tianhai Commercial Building
107
North Dongsi Road, Beijing, PRC
|
with
a copy to:
Xxxx
Xxxxx
Room
502-505, Tower B Tianhai Commercial Xxxxxxxx
000
Xxxxx Xxxxxx Xxxx, Xxxxxxx, XXX
|
|
Telephone
No.: x00 (0)00 0000 0000
Facsimile
No.: x00 (0)00 0000 0000
|
Telephone
No.: x00 (0)00 0000 0000
Facsimile
No.: x00 (0)00 0000 0000
|
|
If
to the Acquiror Stockholder:
8
Holdings LLC
0000
Xxxxx Xxxxxx, 0xx
Xxxxx
Xxxxxxx,
XX 00000
XXX
Attention:
Xxxxxx Xxxxxxx
Telephone
No.: 000-000-0000
Facsimile
No.: 000-000-0000
|
with
a copy to:
Loeb
& Loeb LLP
000
Xxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxxxx X. Xxxxxxxx, Esq.
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
|
14.5 Arbitration.
Any
dispute or controversy under this Agreement shall be settled exclusively by
arbitration in the City of New York, County of New York in accordance with
the
rules of
the
American
Arbitration Association then in effect. Judgment may be entered on the
arbitration award in any court having jurisdiction.
14.6 Further
Assurances.
The
parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents,
and
(c) to do
such
other
acts and things, all as the other party may reasonably request for the purpose
of carrying out the intent of this Agreement and the documents referred to
in
this Agreement.
14.7 Waiver.
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to
in
this Agreement will operate as a waiver of such right, power, or privilege,
and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless
in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
14.8 Entire
Agreement and Modification.
This
Agreement supersedes all prior agreements between the parties with respect
to
its subject matter (including the Term Sheet between the Acquiror and the
Company, dated December 6, 2004) and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the
party
against whom the enforcement of such amendment is sought.
14.9 Assignments,
Successors, and No Third-Party Rights.
No
party may assign any of its rights under this Agreement without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of
and
be enforceable by the respective successors and permitted assigns of the
parties. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
14.10 Severability.
If any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the
extent not held invalid or unenforceable.
14.11 Section
Headings, Construction.
The
headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to “Section”
or “Sections” refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word “including” does not limit the preceding words or terms.
14.12 Governing
Law.
This
Agreement will be governed by the laws of the State of New York without regard
to conflicts of laws principles.
14.13 Shareholder
Representative.
14.13.1 The
Acquiror shall be entitled to deal exclusively with __________ (the
“Representative”) as the sole and exclusive representative and agent of the
Shareholder and CMN Management in respect of all matters arising under or
pertaining to this Agreement, unless and until the Acquiror receives notice
to
the contrary as provided in Section 14.13.2 below. Without limiting the
foregoing, (a) any notice, communication, demand, claim, action or proceeding
required or permitted hereunder may be delivered by the Acquiror to, or brought
by the Acquiror against, the Representative in its capacity as agent and
representative of the Shareholder and CMN Management with the same effect,
and
which shall be binding to the same degree, as if delivered to, or brought
against, the Shareholder and CMN Management individually; (b) any settlement
or
other agreement of the Acquiror with the Shareholder and CMN Management in
its
capacity as agent and representative of the Shareholder and CMN Management
in
respect of all matters arising under or pertaining to this Agreement shall
have
the same effect, and be binding upon, the Shareholder and CMN Management to
the
same degree as if made with the Shareholder and CMN Management individually;
and
(c) except as provided in Section 14.13.2, the Acquiror shall not be required
to
recognize or respond to, and shall not be bound by, any notice, communication,
demand, claim, action or proceeding delivered to or brought against the Acquiror
by the Shareholder and CMN Management in respect of all matters arising under
or
pertaining to this Agreement except through the Representative in its capacity
as agent and representative of the Shareholder.
14.13.2 The
Shareholder and CMN Management by notice in writing to the Acquiror signed
by
each of them or their legal representative may designate another Person to
act
as representative and agent
as
provided
in Section 14.13.1 above.
14.14 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together,
will be deemed to constitute one and the same agreement.
COUNTERPART
SIGNATURE PAGE
IN
WITNESS WHEREOF, the parties have executed and delivered this Sale and Purchase
Agreement as of the date first written above.
Acquiror:
METAPHOR
CORP.
Signed:
Printed
name:
Xxxxxx Xxxxxxx
Title:
Partner
Company:
CHINA
MEDIA NETWORK INTERNATIONAL INC.
Signed:
Printed
name: Guo
Fansheng
Title:Director
Acquiror
Stockholder:
8
HOLDINGS, LLC
Signed:
Printed
name:
Xxxxxx Xxxxxxx
Title:
Partner
CMN
Management:
Xx
Xxxx
Li
Xxxxxxxxxx
Xxxx
Xxxxx
Xxxx
Li
Hong
COUNTERPART
SIGNATURE PAGE
(FOR
ISSUANCES PURSUANT TO REGULATION S)
IN
WITNESS WHEREOF, the parties have executed and delivered this Sale and Purchase
Agreement as of the date first written above.
Hong
Kong Huicong International Group Limited
By:
Name:
Guo
Fansheng
Title:
CEO
OFFSHORE
DELIVERY INSTRUCTIONS:
Hong
Kong Huicong International Group Limited
Attn: Guo
Fansheng
Address: Xxxxx
X,
Xxxxxxx Xxxxxxxx
Xx.
00
Xxxxx Xxxxxx Xizhimen, Haidian,
Beijing,
People’s
Republic of China
Phone
No. 00
(0)00
0000 0000
Facsimile
No. 00
(0)00
0000 0000
COUNTERPART
SIGNATURE PAGE
(FOR
ISSUANCES PURSUANT TO SECTION 4(2))
IN
WITNESS WHEREOF, the parties have executed and delivered this Sale and Purchase
Agreement as of the date first written above.
[ENTITY]
By:
Name:
Title:
Circle
the category under which you are an “accredited investor” pursuant to Exhibit
C:
1 2 3 4 5 6 7 8
____________________
PRINT
EXACT NAME IN WHICH YOU WANT THE SECURITIES TO BE REGISTERED
Attn:
Address:
Phone
No.
Facsimile
No.
EXHIBIT
A
SHARES
AND ACQUIROR SHARES TO BE EXCHANGED
|
Total
Shares to be delivered by the Shareholder to Acquiror:
|
__________
|
|
Total
Acquiror Shares to be delivered by the Acquiror to the
Shareholder:
|
__________
|
|
Name
and Address of
Each
Acquiror Shareholder
|
Number
of Shares Owned
|
Percentage
of Total Shares Owned
|
Number
of Total Acquiror Shares
|
Percentage
of Acquiror Common Stock
|
|
Hong
Kong Huicong International Group Limited
|
||||
EXHIBIT
B
Definition
of “Accredited Investor”
The
term
“accredited investor” means:
| (1) |
A
bank as defined in Section 3(a)(2) of the Securities Act, or a savings
and
loan association or other institution as defined in Section 3(a)(5)(A)
of
the Securities Act, whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of
the
Securities Exchange Act of 1934; an insurance company as defined
in
Section 2(13) of the Securities Act; an investment company registered
under the Investment Company Act of 1940 (the “Investment Company Act”) or
a business development company as defined in Section 2(a)(48) of
the
Investment Company Act; a Small Business Investment Company licensed
by
the U.S. Small Business Administration under Section 301(c) or (d)
of the
Small Business Investment Act of 1958; a plan established and maintained
by a state, its political subdivisions or any agency or instrumentality
of
a state or its political subdivisions for the benefit of its employees,
if
such plan has total assets in excess of $5,000,000; an employee benefit
plan within the meaning of the Employee Retirement Income Security
Act of
1974 (“ERISA”), if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings
and
loan association, insurance company, or registered investment advisor,
or
if the employee benefit plan has total assets in excess of $5,000,000
or,
if a self-directed plan, with investment decisions made solely by
persons
that are accredited investors.
|
| (2) |
A
private business development company as defined in Section 202(a)(22)
of
the Investment Advisers Act of
1940.
|
| (3) |
An
organization described in Section 501(c)(3) of the Internal Revenue
Code,
corporation, Massachusetts or similar business trust, or partnership,
not
formed for the specific purpose of acquiring the securities offered,
with
total assets in excess of
$5,000,000.
|
| (4) |
A
director or executive officer of the
Acquiror.
|
| (5) |
A
natural person whose individual net worth, or joint net worth with
that
person’s spouse, at the time of his or her purchase exceeds
$1,000,000.
|
| (6) |
A
natural person who had an individual income in excess of $200,000
in each
of the two most recent years or joint income with that person’s spouse in
excess of $300,000 in each of those years and has a reasonable expectation
of reaching the same income level in the current
year.
|
| (7) |
A
trust, with total assets in excess of $5,000,000, not formed for
the
specific purpose of acquiring the securities offered, whose purchase
is
directed by a sophisticated person as described in Rule 506(b)(2)(ii)
(i.e., a person who has such knowledge and experience in financial
and
business matters that he is capable of evaluating the merits and
risks of
the prospective investment).
|
| (8) |
An
entity in which all of the equity owners are accredited investors.
(If
this alternative is checked, the Shareholder must identify each equity
owner and provide statements signed by each demonstrating how each
is
qualified as an accredited
investor.)
|
EXHIBIT
C
Definition
of “U.S. Person”
| (1) |
“U.S.
person” (as defined in Regulation S)
means:
|
| (i) |
Any
natural person resident in the United
States;
|
| (ii) |
Any
partnership or corporation organized or incorporated under the laws
of the
United States;
|
| (iii) |
Any
estate of which any executor or administrator is a U.S.
person;
|
| (iv) |
Any
trust of which any trustee is a U.S.
person;
|
| (v) |
Any
agency or branch of a foreign entity located in the United
States;
|
| (vi) |
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;
|
| (vii) |
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;
and
|
| (viii) |
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)) who are
not
natural persons, estates or trusts.
|
| (2) |
Notwithstanding
paragraph (1) above, any discretionary account or similar account
(other
than an estate or trust) held for the benefit or account of a non-U.S.
person by a dealer or other professional fiduciary organized,
incorporated, or (if an individual) resident in the United States
shall
not be deemed a “U.S. person.”
|
| (3) |
Notwithstanding
paragraph (1), any estate of which any professional fiduciary acting
as
executor or administrator is a U.S. person shall not be deemed a
U.S.
person if:
|
| (i) |
An
executor or administrator of the estate who is not a U.S. person
has sole
or shared investment discretion with respect to the assets of the
estate;
and
|
| (ii) |
The
estate is governed by foreign law.
|
| (4) |
Notwithstanding
paragraph (1), any trust of which any professional fiduciary acting
as
trustee is a U.S. person shall not be deemed a U.S. person if a trustee
who is not a U.S. person has sole or shared investment discretion
with
respect to the trust assets, and no beneficiary of the trust (and
no
settlor if the trust is revocable) is a U.S.
person.
|
| (5) |
Notwithstanding
paragraph (1), an employee benefit plan established and administered
in
accordance with the law of a country other than the United States
and
customary practices and documentation of such country shall not be
deemed
a U.S. person.
|
| (6) |
Notwithstanding
paragraph (1), any agency or branch of a U.S. person located outside
the
United States shall not be deemed a “U.S. person”
if:
|
| (i) |
The
agency or branch operates for valid business reasons;
and
|
| (ii) |
The
agency
or branch is engaged in the business of insurance or banking and
is
subject to substantive insurance
or banking regulation, respectively, in the jurisdiction where
located.
|
| (7) |
The
International Monetary Fund, the International Bank for Reconstruction
and
Development, the Inter-American Development Bank, the Asian Development
Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar
international organizations, their agencies, affiliates and pension
plans
shall not be deemed “U.S. persons.”
|
EXHIBIT
D
ACCREDITED
INVESTOR REPRESENTATIONS
Each
Shareholder indicating that it is an Accredited Investor, severally and not
jointly, further represents and warrants to the Acquiror as
follows:
| 1. |
Such
Shareholder qualifies as an Accredited Investor on the basis set
forth on
its signature page to this
Agreement.
|
| 2. |
Such
Shareholder has sufficient knowledge and experience in finance,
securities, investments and other business matters to be able to
protect
such Shareholder’s interests in connection with the transactions
contemplated by this Agreement.
|
| 3. |
Such
Shareholder has consulted, to the extent that it has deemed necessary,
with its tax, legal, accounting and financial advisors concerning
its
investment in the Acquiror Shares.
|
| 4. |
Such
Shareholder understands the various risks of an investment in the
Acquiror
Shares and can afford to bear such risks for an indefinite period
of time,
including, without limitation, the risk of losing its entire investment
in
the Acquiror Shares.
|
| 5. |
Such
Shareholder has had access to the Acquiror’s publicly filed reports with
the SEC.
|
| 6. |
Such
Shareholder has been furnished during the course of the transactions
contemplated by this Agreement with all other public information
regarding
the Acquiror that such Shareholder has requested and all such public
information is sufficient for such Shareholder to evaluate the risks
of
investing in the Acquiror Shares.
|
| 7. |
Such
Shareholder has been afforded the opportunity to ask questions of
and
receive answers concerning the Acquiror and the terms and conditions
of
the issuance of the Acquiror
Shares.
|
| 8. |
Such
Shareholder is not relying on any representations and warranties
concerning the Acquiror made by the Acquiror or any officer, employee
or
agent of the Acquiror, other than those contained in this
Agreement.
|
| 9. |
Such
Shareholder is acquiring the Acquiror Shares for such Shareholder’s own
account, for investment and not for distribution or resale to
others.
|
| 10. |
Such
Shareholder will not sell or otherwise transfer the Acquiror Shares,
unless either (A) the transfer of such securities is registered under
the
Securities Act or (B) an exemption from registration of such securities
is
available.
|
| 11. |
Such
Shareholder understands and acknowledges that the Acquiror is under
no
obligation to register the Acquiror Shares for sale under the Securities
Act.
|
| 12. |
Such
Shareholder consents to the placement of a legend on any certificate
or
other document evidencing the Acquiror Shares substantially in the
form
set forth in Section 4.2.5(a).
|
| 13. |
Such
Shareholder represents that the address furnished by such Shareholder
on
its signature page to this Agreement and in Exhibit A is such
Shareholder’s principal residence if he is an individual or its principal
business address if it is a corporation or other
entity.
|
| 14. |
Such
Shareholder understands and acknowledges that the Acquiror Shares
have not
been recommended by any federal or state securities commission or
regulatory authority, that the foregoing authorities have not confirmed
the accuracy or determined the adequacy of any information concerning
the
Acquiror that has been supplied to such Shareholder and that any
representation to the contrary is a criminal
offense.
|
| 15. |
Such
Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution
and
delivery of this Agreement and the purchase of the Acquiror
Shares.
|
EXHIBIT
E
NON
U.S. PERSON REPRESENTATIONS
Each
Shareholder indicating that it is not a U.S. person, severally and not jointly,
further represents and warrants to the Acquiror as follows:
| 1. |
At
the time of (a) the offer by the Acquiror and (b) the acceptance
of the
offer by such Shareholder, of the Acquiror Shares, such Shareholder
was
outside the United States.
|
| 2. |
No
offer to acquire the Acquiror Shares or otherwise to participate
in the
transactions contemplated by this Agreement was made to such Shareholder
or its representatives inside the United
States.
|
| 3. |
Such
Shareholder is not purchasing the Acquiror Shares for the account
or
benefit of any U.S. person, or with a view towards distribution to
any
U.S. person, in violation of the registration requirements of the
Securities Act.
|
| 4. |
Such
Shareholder will make all subsequent offers and sales of the Acquiror
Shares either (x) outside of the United States in compliance with
Regulation S; (y) pursuant to a registration under the Securities
Act; or
(z) pursuant to an available exemption from registration under the
Securities Act. Specifically, such Shareholder will not resell the
Acquiror Shares to any U.S. person or within the United States prior
to
the expiration of a period commencing on the Closing Date and ending
on
the date that is one year thereafter (the “Distribution Compliance
Period”), except pursuant to registration under the Securities Act or an
exemption from registration under the Securities
Act.
|
| 5. |
Such
Shareholder is acquiring the Acquiror Shares for such Shareholder’s own
account, for investment and not for distribution or resale to
others.
|
| 6. |
Such
Shareholder has no present plan or intention to sell the Acquiror
Shares
in the United States or to a U.S. person at any predetermined time,
has
made no predetermined arrangements to sell the Acquiror Shares and
is not
acting as a Distributor of such
securities.
|
| 7. |
Neither
such Shareholder, its Affiliates nor any Person acting on such
Shareholder’s behalf, has entered into, has the intention of entering
into, or will enter into any put option, short position or other
similar
instrument or position in the U.S. with respect to the Acquiror Shares
at
any time after the Closing Date through the Distribution Compliance
Period
except in compliance with the Securities
Act.
|
| 8. |
Such
Shareholder consents to the placement of a legend on any certificate
or
other document evidencing the Acquiror Shares substantially in the
form
set forth in Section 4.2.5(b).
|
| 9. |
Such
Shareholder is not acquiring the Acquiror Shares in a transaction
(or an
element of a series of transactions) that is part of any plan or
scheme to
evade the registration provisions of the Securities Act.
|
| 10. |
Such
Shareholder has sufficient knowledge and experience in finance,
securities, investments and other business matters to be able to
protect
such Shareholder’s interests in connection with the transactions
contemplated by this Agreement.
|
| 11. |
Such
Shareholder has consulted, to the extent that it has deemed necessary,
with its tax, legal, accounting and financial advisors concerning
its
investment in the Acquiror Shares.
|
| 12. |
Such
Shareholder understands the various risks of an investment in the
Acquiror
Shares and can afford to bear such risks for an indefinite period
of time,
including, without limitation, the risk of losing its entire investment
in
the Acquiror Shares.
|
| 13. |
Such
Shareholder has had access to the Acquiror’s publicly filed reports with
the SEC.
|
| 14. |
Such
Shareholder has been furnished during the course of the transactions
contemplated by this Agreement with all other public information
regarding
the Acquiror that such Shareholder has requested and all such public
information is sufficient for such Shareholder to evaluate the risks
of
investing in the Acquiror Shares.
|
| 15. |
Such
Shareholder has been afforded the opportunity to ask questions of
and
receive answers concerning the Acquiror and the terms and conditions
of
the issuance of the Acquiror
Shares.
|
| 16. |
Such
Shareholder is not relying on any representations and warranties
concerning the Acquiror made by the Acquiror or any officer, employee
or
agent of the Acquiror, other than those contained in this
Agreement.
|
| 17. |
Such
Shareholder will not sell or otherwise transfer the Acquiror Shares,
unless either (A) the transfer of such securities is registered under
the
Securities Act or (B) an exemption from registration of such securities
is
available.
|
| 18. |
Such
Shareholder understands and acknowledges that the Acquiror is under
no
obligation to register the Acquiror Shares for sale under the Securities
Act.
|
| 19. |
Such
Shareholder represents that the address furnished by such Shareholder
on
its signature page to this Agreement and in Exhibit A is such
Shareholder’s principal residence if he is an individual or its principal
business address if it is a corporation or other
entity.
|
| 20. |
Such
Shareholder understands and acknowledges that the Acquiror Shares
have not
been recommended by any federal or state securities commission or
regulatory authority, that the foregoing authorities have not confirmed
the accuracy or determined the adequacy of any information concerning
the
Acquiror that has been supplied to such Shareholder and that any
representation to the contrary is a criminal
offense.
|
| 21. |
Such
Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution
and
delivery of this Agreement and the purchase of the Acquiror
Shares.
|
EXHIBIT
F
PLAN
OF RESTRUCTURING
|
1.
|
Background
|
|
Subject
to the terms and conditions of this Agreement, the Shareholder and
the CMN
Management have agreed to procure the restructuring of the advertising
and
media network businesses being currently carried out by the Company
Subsidiaries, the work of which shall commence immediately after
the
signing of this Agreement and be completed before or on the Closing
Date
(“Restructuring”).
The Restructuring will, briefly comprise of two parts: equity transfers
and capital increase.
|
|
2.
|
Equity
Transfer
|
|
The
equity transfers contemplated by the Restructuring will be carried
out in
the following manner and sequence:-
|
|
2.1
|
北京慧翔信息技术有榰公司(Beijing
Huixiang Information Technology Co., Ltd., ‘Huixiang
Information”)
will transfer its entire interest in北京华媒盛瘺信息技术有榰公司
(Beijing Huamei Shengshi Information Technology Co., Ltd.) (“Huamei
Information”)
to北京慧羖国榻犼瑑有榰公司
(Beijing HC International Information Co., Ltd, (“Beijing
HC International”);
|
|
2.2
|
Huamei
Information and the CMN Management will jointly set up a new company
in
China (“Company
B”).
|
|
2.3
|
Huamei
Information will transfer the 20% interest in 漯州华媒盛瘺广告传播有榰公司(Zhengzhou
Huamei Shengshi Advertising Broadcasting Co., Ltd., “Zhengzhou
Huamei”)
and济南华媒盛瘺广告传播有榰公司Jinan
Huamei Shengshi Broadcasting Co., Ltd., “Jinan
Huamei”)
owned and held by it to Huaxiang
Information;
|
|
2.4
|
Beijing
HC International will transfer its entire interest in Huamei Information
to a BVI company (“BVI
Company”)
wholly owned by the Company (i.e.晧港慧羖国榻椺团有榰公司
(Hong Kong Huicong International Group Limited)). The remaining 2%
interest in Huamei Information will be owned and held by the CMN
Management. At this point, Huamei Information will be transformed
into a
Chinese-foreign joint venture enterprise.
|
|
2.6
|
Huixiang
Information will transfer the 80% interest in北京华媒盛瘺广告有榰公司Beijing
Huamei Shengshi Advertising Co., Ltd., “Beijing
Huamei”)
owned and held by it to Company B.
|
|
2.7
|
北京慧羖港网广告有榰公司(Beijing
Huicong Goldnet Advertising Co., Ltd.) will transfer the 51% interest
in兰州华媒广告传播有榰公司(Lanzhou
Huamei Advertising Broadcasting Co., Ltd.) owned and held by it to
Beijing
Huamei;
|
|
2.8
|
北京慧翔网络技术有榰公司
(Beijing Huixiang Network Technology Co., Ltd.) and Xxxx Xx will
transfer
the 51% and 25% interest in 兰州华媒盛瘺广告传播有榰公司
(Lanzhou Huamei Shengshi Advertising Broadcasting Co., Ltd.) respectively
owned and held by them to Beijing
Huamei.
|
| 2.9 |
Huixiang
Information will transfer the 20% interest in Zhengzhou Huamei and
Jinan
Huamei held and owned by it to Company
B.
|
| 3. |
Capital
Increase
|
|
To
carry out the equity transfers and the overseas investment described
in
Section 2 above, Huamei Information will need to increase its registered
capital from RMB1,000,000 to RMB20,000,000. Beijing HC International
will,
in turn, have to increase its equity investment in Huamei Information
by
RMB19,000,000.
|
|
4.
|
Outcome
of the Restructuring
|
|
Upon
completion of the Restructuring, (a) Huamei Information shall become
a
Chinese-foreign invested enterprise incorporated in China, 98% interest
of
which shall be directly held by the Company; and (b) Huamei Information
shall become the holding company of all the domestic advertising
businesses being carried out by the group members of HC International
at
the date of signing of this
Agreement.
|
EXHIBIT
G
VOTING
AGREEMENT
EXHIBIT
H
Term
Sheet of the Shareholders’ Loan Agreement
Borrower: Metaphor
Corp.
Lender:
Hong
Kong
Huicong International Group Limited
|
Loan
Amount:
|
U.S.
$ equivalent of RMB30,000,000 as of the execution of the Sale and
Purchase
Agreement
|
|
Purpose:
|
To
repay the indebtedness owed to the Lender by the Acquired Companies
(as
defined in the Sale and Purchase Agreement between Metaphor Corp.,
Hong
Kong Huicong International Group Limited and 8 Holdings LLC (“SPA”),
which will become the subsidiaries of the Borrower upon closing of
the
SPA.
|
|
Final
Maturity Date:
|
Five
years from the closing of. The SPA (“Closing”)
|
|
Interest
Rate:
|
1%
over LIBOR
|
|
Interest
Payment Dates:
|
The
interest payment dates shall be June 30 and December 31 of each year.
Interest shall be payable semi-annually in arrear on the interest
payment
dates.
|
|
Repayment
(US$ equivalent as of the execution of the Sale and Purchase
Agreement)
|
3rd
anniversary of Closing RMB10,000,000
5th
anniversary of Closing RMB20,000,000
|
Currency:
|
All
principal repayments and interest payments to the Lender shall be
made in
cash and be the equivalent in US Dollars. The exchange rate of US
Dollars
for Renminbi to be applied to the principal repayment and interest
payment
shall be based on the average of the bid and offer prices for cash
remittance quoted by the People’s Bank of China on the date of repayment
and payment as the case may be.
|
|
Taxation
and Deductions:
|
All
payments by the Borrower to the Lender under the Shareholder’s Loan
Agreement shall be made free and clear of all taxes, levies, withholding
or deductions of whatever nature, as well as stamp duty, levy or
other
form of charge applied by the relevant tax
authorities.
|
|
Documentation:
|
The
Shareholder’s Loan will be subject to execution of a Shareholder’s Loan
Agreement in form and content satisfactory to the parties containing
provisions customary for transactions of this nature. The parties
shall
execute the Shareholder’s Loan Agreement on or prior to the Closing.
|
|
Governing
Law:
|
The
Laws of the Hong Kong Special Administrative
Region.
|
EXHIBIT
I
SHAREHOLDER
WIRE TRANSFER INSTRUCTIONS
Bank
Name: The
Hongkong and Shanghai Banking Corporation Limited
Bank
Address: Xx.
0
Xxxxx’x Xxxx, Xxxxxxx, Xxxx Xxxx
SWIFT
Code: XXXXXXXXXXX
Company
Name: Hong
Kong
Huicong International Group Limited
Account
No.:
USD
account: 000-000000-000
HSBC
phone no.: 00000-00000000
