AGREEMENT ON CAPITAL INCREASE AND EQUITY SUBSCRIPTION
Exhibit
10.1
UNOFFICIAL ENGLISH TRANSLATION
AGREEMENT
ON CAPITAL INCREASE AND EQUITY
SUBSCRIPTION
THIS CAPITAL INCREASE AND EQUITY
SUBSCRIPTION (this “Agreement”) is made
and entered into as of January 29,
2009, by and among Guangzhou
AWA Wine Co. Ltd. (the “Company”), a wholly
owned Chinese domiciled enterprise duly organized and existing under the laws of
the People’s Republic of China (hereinafter referred to as “PRC” or “China”), with its
legal address at Suite
510 Block C No 88 Wenchan South Rd Liwan District, Guangzhou Guangdong, China,
and Mr. Nei Weifeng, Xx.
Xxxxx Huanxian, Mr. Xian Wenbin (each a “Chinese Equity Interest
Holder” and in the aggregate the “Chinese Equity Interest
Holders”), Regal Life
Concepts, Inc. (the “Investor”), a
corporation duly organized and existing under the laws of Nevada, with its legal
address at 0000 X. Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx, 00000, Xxxxxx Xxxxxx of
America.
The
Investor, the Company, the Chinese Equity Interest Holders are
hereinafter sometimes individually referred to as a “Party” and sometimes collectively
referred to as the “Parties.” The Company and the Chinese Equity Interest Holders are
referred to as “Chinese Parties”.
On a
fully diluted basis, Investor agrees to acquire 26% of the Company’s equity
interest by capital increase and equity subscription. The Company shall convert
to a Sino-foreign cooperative joint venture (“CJV”) after the capital
increase. The Investor may further acquire 25% equity interest in the
Company and have a 51% equity interest pursuant to the development of the
JV.
NOW, THEREFORE, in
consideration of the premises and of the mutual covenants contained herein, the
Parties agree as follows:
(a) Upon
the terms and subject to the conditions of this Agreement, at the Closing
referred to in Section 3.1 hereof, the Investor shall contribute to the Capital
Increase of the Company and shall acquire the Equity, free and clear of any and
all liens, mortgages, adverse claims, charges, security interests, encumbrances,
other restrictions or limitations, or rights of any third persons whatsoever
other than liens arising from acts of the Investor (collectively, “Liens”).
(b) To
effect the Transaction contemplated by Section 1.1(a), at the Closing, the JV
Company shall deliver or cause to be delivered to the Investor, against payment
therefor in accordance with Section 2.2 hereof, one or more certificates
representing the Equity, accompanied by evidence acceptable to the Investor
demonstrating Investor’s ownership of the Equity on the books of the JV
Company.
ARTICLE
III. CLOSING
(i) certificates
representing all of the Equity accompanied by evidence acceptable to the
demonstrating Investor’s ownership of the Equity on the books of the JV Company
in accordance with all Legal Requirements of the applicable Governmental
Authorities;
(ii) A
Capital Investment Certificate issued by the JV Company’s Chairman of the Board
of Directors evidencing the Investor’s ownership of the Equity;
(iii) a
counterpart of the JV Agreement signed by the Chinese Equity Interest Holders
and the Investor in a form of which is appended hereto as Exhibit
3.2(iii);
2
(iv) the Loan Agreement signed by the Company and the
First Installment Investment shall be ready to be remitted to the
CJV’s capital verification account ;
(v) any
other deliverables referenced in Section 7.1 and one or more certificate(s)
executed by the Company and the Chinese Equity Interest
Holders to the effect that the conditions set forth in Section 7.2(e) and
Section 7.2(j) have been satisfied;
(vi) written
approval of the Investor’s nominee to the Board of Directors; and
(vii) such
other agreements, certificates, and writings that the Investor may reasonably
request.
(i)
the Second Installment Investment required to be paid at Closing to
the Company pursuant to Section 2.2 hereof;
(ii) a
counterpart of the JV Agreement signed by the Investor;
(iii) the
name of Investor’s nominee to the Board of Directors;
(iv) Loan
Agreement signed the by Company Equity Interest Holders;
(v) one
or more certificates executed by an authorized officer of the Investor, on
behalf of the Investor, to the effect that the conditions set forth in Section
7.1(a) and Section 7.1(e) have been satisfied; and
(vi) such
other agreements, certificates, and writings that the Company may reasonably
request.
(a) If
the Closing has not occurred by the close of business on August 15, 2009 nor the
another Closing Date is agreed in writing pursuant to section 3.1, then any
Party hereto may thereafter terminate this Agreement by written notice to such
effect, to the other Parties hereto, without liability of or to any Party to
this Agreement or any stockholder, director, officer, employee, or
representative of such Party unless the reason for Closing having not occurred
is (i) such Party’s willful breach of the provisions of this Agreement, or (ii)
if all of the conditions to such Party’s obligations set forth in Article VII
have been satisfied or waived in writing by the date scheduled for the Closing
pursuant to Section 3.1, the failure of such Party to perform its obligations
under this Article III on such date; provided, however, that the
applicable provisions of Article X shall survive any such termination; and,
provided further, however, that any
termination pursuant to this Section 3.4 shall not relieve any Party hereto who
was responsible for Closing having not occurred as described in clauses (i) or
(ii) above of any liability for (x) such Party’s willful breach of the
provisions of this Agreement, or (y) if all of the conditions to such Party’s
obligations set forth in Article VII have been satisfied or waived in writing by
the date scheduled for the Closing pursuant to Section 3.1, the failure of such
Party to perform its obligations under this Article III on such
date.
3
THE
COMPANY AND THE CHINESE EQUITY INTEREST
HOLDERS
The
Chinese Parties do hereby jointly and severally represent and warrant to the
Investor that:
(a) The
Company’s current authorized capital consists solely of RMB 500,000
(approximately equivalent to USD
73,529). An aggregate of only USD 73,529 or RMB 500,000 are issued
and outstanding as set forth on Exhibit A for the
time being, and the Equity being acquired by the Investor pursuant to this
Agreement represents 26% of the total equity in the JV Company on a fully
diluted basis after the completion of the capital increase contemplated
hereunder. Except for the previously stated Registered Capital, there
is no other Registered Capital or securities of the Company authorized, issued,
or outstanding. All of issued and outstanding equity interests of the
current Registered Capital are owned of record by the Chinese Equity Interest
Holders as set forth on Exhibit A, free and
clear of any and all Liens, and no equity interests of the current Registered
Capital or other securities are held by the Company. The Equity
subject to this Agreement is duly authorized, validly issued, fully paid, and
non-assessable and was not issued in violation of any: (i) preemptive or other
rights of any Person to acquire Registered Capital or other securities of the
Company, or (ii) any Legal Requirements of any Governmental
Authority. There are no outstanding subscriptions, options,
convertible securities, rights (preemptive or otherwise), warrants, calls, or
agreements relating to any Registered Capital or other securities of the
Company. Upon delivery to the Investor at the Closing of certificates
representing the Equity, accompanied by evidence acceptable to the Investor
demonstrating Investor’s ownership of the Equity on the books of the JV Company,
good and valid title to the Equity will pass to the Investor, free and clear of
all Liens.
4
(b) The
Company has provided the Investor with true, correct, and complete copies of the
Company’s Articles of Association and all other governing documents and
agreements, including, without limitation, any agreement among the Chinese
Equity Interest Holders, which reflect all amendments made through the date of
this Agreement. Books evidencing the Company’s current Registered
Capital and minute books made available to the Investor for review were true,
correct, and complete in all material respects as of the date of such review, no
further entries have been made through the date of this Agreement, and such
books contain a materially accurate record of all Chinese Equity Interest
Holders and corporate actions of the Chinese Equity Interest Holders and
directors (and any committees thereof) of the Company taken by written consent
or at a meeting since the organization of the Company. All corporate
actions taken by the Company have been duly authorized or
ratified. All accounts, books, ledgers, and official and other
records of the Company fairly and accurately reflect in all material respects
the Company’s transactions, properties, assets, and liabilities.
(c) Except
as otherwise set forth on Schedule 4.3(c)
attached hereto, the Company does not own, directly or indirectly, any
outstanding registered capital of, securities of or other interests in any other
Person. The Company has no Subsidiaries.
(i) violate
or conflict with any of the terms, conditions, or provisions of the Articles of
Association and all other governing documents and agreements, including, without
limitation, any agreement among the Company’s Chinese Equity Interest
Holders;
(ii) violate
any Legal Requirements applicable to the Company or each Chinese
Shareholder;
(iii) violate,
conflict with, result in a breach of, constitute a default under (whether with
or without notice or the lapse of time or both), or accelerate or permit the
acceleration of the performance required by, or give any other party the right
to terminate, any Contract or Permit binding upon or applicable to the Company
or the Chinese Equity
Interest Holders;
5
(iv) result
in the creation of any Lien on any Properties of the Company; or
(v) require
either the Company or the Chinese Equity Interest
Holders to obtain or make any waiver, consent, action, approval, or
authorization of, or registration, declaration, notice or filing with, any
private non-governmental third party or any Governmental Authority.
(a) (i)
The Company has delivered to the Investor true, correct, and complete copies of
the audited Financial Statements with respect to the Company and its business as
of and for the year ended December 31, 2007 and (ii) unaudited interim Financial
Statements with respect to the Company and its business as of and for the 9
months ended September 30, 2008. The said Financial Statements are
attached hereto as Schedule
4.6(a). All of such Financial Statements fairly present, and
the Company’s books and records accurately reflect, as applicable, the financial
condition, results of operations of the Company, and all the transactions that
the Company has entered into, as applicable, for the dates or periods indicated
thereon. All of such Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated, except that the interim Financial Statements do not contain footnote
disclosures and is subject to year end audit adjustments that will not,
individually or in the aggregate, be material.
(b) Except
for (i) the liabilities to be reflected on the Company’s December 31, 2007
balance sheet included in the Financial Statements attached as Schedule 4.6(a), (ii)
trade payables and accrued expenses incurred since December 31, 2007 (the “Balance Sheet Date”)
in the ordinary course of business, none of which are material, (iii) executory
contract obligations set forth on Schedule 4.6(b)
attached hereto, and (iv) the liabilities set forth on Schedule 4.6(b)
attached hereto, the Company does not have any liabilities or obligations,
including, without limitation, for capital commitments or deferred tax liability
(whether accrued, absolute, contingent, known, unknown, or otherwise, and
whether or not of a nature required to be reflected or reserved against in a
balance sheet in accordance with GAAP).
6
(c) Except
as otherwise set forth on Schedule 4.6(c)
attached hereto, the accounts receivable to be reflected on the December 31,
2007 balance sheet included in the Financial Statements referenced in Section 4.6(a) and
all of the Company’s accounts receivable arising since the Balance Sheet Date
arose from bona fide transactions in the ordinary course of business, and the
goods and services involved have been sold, delivered, and performed to the
account obligors, and no further filings (with Governmental Authorities,
insurers or others) are required to be made, no further goods are required to be
provided and no further services are required to be rendered in order to
complete the sales and fully render the services and to entitle the Company to
collect the accounts receivable in full. Except as otherwise set
forth on Schedule
4.6(c) attached hereto, no such account has been assigned or pledged to
any other Person, and, except only to the extent fully reserved against as set
forth in the December 31, 2007 balance sheet included in such Financial
Statements, no defense or set-off to any such account has been asserted by the
account obligor or, to Knowledge of the Company or to the knowledge of the Chinese Equity Interest
Holders or any of them, exists.
(d) Except
as otherwise set forth on Schedule 4.6(d)
attached hereto, the Company has not entered into any transactions with any
Affiliate.
(e) Except
as provided under the provisions of the agreements described in Schedule 4.6(e)
attached hereto, the Company has and will have as of the Closing Date legal and
beneficial ownership of its Properties, free and clear of any and all
Liens.
(a) Except
as otherwise set forth on Schedule 4.7(a)
attached hereto, since the Balance Sheet Date, there has not been:
(i) any
event, circumstance, or change that had or can reasonably be expected to have a
Material Adverse Effect;
(ii) any
damage, destruction, or loss (whether or not covered by insurance) that had or
might have a Material Adverse Effect; or
(iii) any
material adverse change in the Company’s sales patterns, pricing policies,
accounts receivable, or accounts payable.
(b) Except
as otherwise set forth on Schedule 4.7(b)
attached hereto, since the Balance Sheet Date, the Company has not done any of
the following:
(i) merged
into or with or consolidated with, any other corporation or acquired the
business or assets of any Person;
(ii) purchased
any securities of any Person;
(iii) created,
incurred, assumed, guaranteed, or otherwise become liable or obligated with
respect to any indebtedness, or made any loan or advance to, or any investment
in, any Person, except in each case in the ordinary course of
business;
(iv) made
any change in any existing election, or made any new election, with respect to
any tax law in any jurisdiction which election could have an effect on the tax
treatment of the Company or the Company’s business operations;
7
(v) entered
into, amended, or terminated any material Contract;
(vi) sold,
transferred, leased, mortgaged, encumbered, or otherwise disposed of, or agreed
to sell, transfer, lease, mortgage, encumber, or otherwise dispose of, any
Properties except in the ordinary course of business;
(vii) settled
any claim or litigation, or filed any motions, orders, briefs, or settlement
agreements in any proceeding before any Governmental Authority or any
arbitrator;
(viii) incurred
or approved, or entered into any agreement or commitment to make, any
expenditures in excess of RMB 250,000 (other than those arising in the ordinary
course of business);
(ix) maintained
its books of account other than in the usual, regular, and ordinary manner in
accordance with GAAP and on a basis consistent with prior periods or made any
change in any of its accounting methods or practices that would be required to
be disclosed under GAAP;
(x) adopted
any benefit program or agreement, or granted any increase in the compensation
payable or to become payable to directors, officers, or employees (including,
without limitation, any such increase pursuant to any bonus, profit-sharing, or
other plan or commitment), other than merit increases to non-officer employees
in the ordinary course of business and consistent with past
practice;
(xi) suffered
any extraordinary losses or waived any rights of material value;
(xii) made
any payment to any Affiliate or forgiven any Indebtedness due or owing from any
Affiliate to the Company;
(xiii) changed
in any material respect the Company’s practices in connection with the payment
of payables and/or the collection of receivables;
(xiv) engaged
in any one or more activities or transactions with an Affiliate or outside the
ordinary course of business;
(xv) declared,
set aside, or paid any dividends, or made any distributions or other payments in
respect of its Registered Capital or other securities, or repurchased, redeemed,
or otherwise acquired any such Registered Capital or other
securities;
(xvi) amended
its Articles of Association or other governing documents and
agreements;
(xvii) issued
any Registered Capital or other securities, or granted, or entered into any
agreement to grant, any options, convertible rights, other rights, warrants,
calls, or agreements relating to its Registered Capital or other securities;
or
8
(xviii) committed
to do any of the foregoing.
(a) The Company has all Permits necessary for the
Company to own, operate, use, and/or maintain its Properties and to conduct its
business and operations as presently conducted and as expected to be conducted
in the future. All such Permits are in effect, no proceeding is
pending or, to the Knowledge of the Company, threatened to modify, suspend or
revoke, withdraw, terminate, or otherwise limit any such Permits, and no
administrative or governmental actions have been taken or, to the Knowledge of
the Company, threatened in connection with the expiration or renewal of such
Permits which could reasonably be expected to adversely affect the ability of
the Company to own, operate, use, or maintain any of its Properties or to
conduct its business and operations as presently conducted and as expected to be
conducted in the future.
9
(b) The
Company has all assets necessary for the Company to own, operate, use, and/or
maintain its Properties and to conduct its business and operations as presently
conducted and as expected to be conducted in the future.
10
The
Investor hereby represents and warrants to the Company and the Company
that:
11
(i) violate
or conflict with any of the terms, conditions, or provisions of the Investor’s
Certificate of Incorporation or Bylaws;
(ii) violate
any Legal Requirements applicable to the Investor;
(iii) violate,
conflict with, result in a breach of, constitute a default under (whether with
or without notice or the lapse of time or both), or accelerate or permit the
acceleration of the performance required by, or give any other party the right
to terminate, any Contract or Permit applicable to the Investor;
(iv) result
in the creation of any lien, charge, or other encumbrance on any property of the
Investor; or
(v) requires
the Investor to obtain or make any waiver, consent, action, approval or
authorization of, or registration, declaration, notice or filing with, any
private non-governmental third party or any Governmental Authority.
The
Parties hereto do hereby covenant and agree, as follows:
12
(i) declare,
set aside, or pay any dividends, or make any distributions or other payments in
respect of its Registered Capital or other securities, or repurchase, redeem, or
otherwise acquire any such Registered Capital or other securities;
(ii) merge
into or with or consolidate with, any other corporation or acquire the business
or assets of any Person;
(iii) purchase
any securities of any Person;
(iv) amend
its Articles of Association or other governing documents and
agreements;
(v) issue
any Registered Capital or other securities, or grant, or enter into any
agreement to grant, any options, convertibility rights, other rights, warrants,
calls, or agreements relating to its Registered Capital or other
securities;
(vi) create,
incur, assume, guarantee, or otherwise become liable or obligated with respect
to any indebtedness, or make any loan or advance to, or any investment in, any
Person, except in each case in the ordinary course of business;
(vii) make
any change in any existing election, or make any new election, with respect to
any tax law in any jurisdiction which election could have an effect on the tax
treatment of the Company or the Company’s business operations;
13
(viii) enter
into, amend, or terminate any material Contract;
(ix) sell,
transfer, lease, mortgage, encumber, or otherwise dispose of, or agree to sell,
transfer, lease, mortgage, encumber, or otherwise dispose of, any Properties
except in the ordinary course of business;
(x) settle
any material claim or litigation, or file any material motions, orders, briefs,
or settlement agreements in any proceeding before any Governmental Authority or
any arbitrator;
(xi) other
than in the ordinary course of business consistent with past practices, incur or
approve, or enter into any agreement or commitment to make, any expenditures in
excess of RMB 250,000;
(xii) maintain
its books of account other than in the usual, regular, and ordinary manner in
accordance with GAAP and on a basis consistent with prior periods or make any
change in any of its accounting methods or practices;
(xiii) make
any change, whether written or oral, to any Contract with any of the suppliers
or customers;
(xiv) accelerate
or delay collection of any notes or accounts receivable in advance of or beyond
their regular due dates or the dates when they would have been collected in the
ordinary course of business consistent with past practices;
(xv) delay
or accelerate payment of any accrued expense, trade payable, or other liability
beyond or in advance of its due date or the date when such liability would have
been paid in the ordinary course of business consistent with past
practices;
(xvi) adopt
any benefit program or agreement or increase the compensation payable to any
employee (including, without limitation, any increase pursuant to any bonus,
profit-sharing, or other incentive plan or commitment);
(xvii) engage
in any one or more activities or transactions outside the ordinary course of
business;
(xviii) enter
into any transaction or make any commitment which could result in any of the
representations, warranties, or covenants of any of the Chinese Parties
contained in this Agreement not being true and correct after the occurrence of
such transaction or event; or
(xix) commit
to do any of the foregoing.
14
(a) The
Investor shall have furnished the Company with a certified copy of all necessary
corporate and other action on its behalf approving its execution, delivery, and
performance of this Agreement.
(b) The
Company’s receipt of the Approval Certificate issued by MOC of Guangdong
Province approving the Transaction.
(c) The
Company’s receipt of Evidence that the SAIC has registered the Investor as the
Equity holder of the Company and the Registered Capital of the Company is
revised to be RMB 3,900,000.
(d) The
Company’s receipt of MOC and all other relevant government approval for the
transaction contemplated in this Agreement;
15
(e) The
Company or its General Manager shall have delivered to the Investor a set of
corporate milestones and business plan to cover the management of the Company’s
business for a period of two years from the Closing, which business plan and
corporate milestones shall be in form and substance satisfactory to the Investor
and attached hereto as Schedule
7.1(e).
(f) The
Parties shall have agreed on a schedule for the use of the Subscription Price,
which shall be attached hereto as Schedule
7.1(f).
(g) All
representations and warranties of the Investor contained in this Agreement shall
be true and correct in all material respects at and as of the Closing, and the
Investor shall have performed and satisfied in all material respects all
covenants and agreements required by this Agreement to be performed and
satisfied by the Investor at or prior to the Closing.
(h) As
of the Closing Date, no suit, action, or other proceeding (excluding any such
matter initiated by or on behalf of the Chinese Parties) shall be pending or
threatened before any Governmental Authority seeking to restrain the Company or
prohibit the Closing or seeking Damages against the Company, its Properties or
the Chinese Equity Interest Holders as a result of the consummation of this
Agreement.
(i) The
Investor shall have made the deliveries set forth in Section 3.3
above.
(a) All
representations and warranties of the Chinese Parties contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing, and the Chinese Parties, as applicable, shall have performed and
satisfied in all material respects all agreements and covenants required by this
Agreement to be performed and satisfied by them at or prior to the
Closing.
(b) The
Investor’s receipt of the Approval Certificate issued by the MOC of Guangdong
Province approving the Transaction.
(c) The
Investor’s receipt of evidence that the SAIC has registered the Investor as the
Equity holder of the Company and the Registered Capital of the Company is
revised to be RMB 3,900,000.
(d) Investor’s
receipt of approvals from MOC and other relevant government authorities with
regard to execution and implementation of this Agreement and the
Transaction.
(e) As
of the Closing Date, no suit, action, or other proceeding (excluding any such
matter initiated by or on behalf of the Investor) shall be pending or threatened
before any court or Governmental Authority seeking to restrain the Investor or
prohibit the Closing or seeking Damages against the Investor as a result of the
consummation of this Agreement.
16
(f) Written
consents from Xx. Xxxxx Huangxian, Mr. Xian Wenbin and Mr. Nei
Weifeng to not to exercise their rights of first refusal to acquire
the Equity.
(g) A
Capital Investment Certificate issued by the JV Company’s Chairman of the Board
evidencing Investor’s ownership of the Equity.
(h) The
Investor shall have received a JV Agreement in such form as the Investor shall
approve.
(i) Since
the Balance Sheet Date and up to and including the Closing, there shall not have
been any event, circumstance, change, or effect that, individually or in the
aggregate, had or could reasonably be expected to have a Material Adverse
Effect.
(j) Each
of the Chinese Parties, as necessary, shall have furnished the Investor with a
certified copy of all necessary corporate actions, or other action on its
behalf, approving in accordance with the Company’s Articles of Association,
approving the acquisition of the Equity; the amendment of the Articles of
Association; the increase of the Registered Capital of the Company to
RMB3,900,000; and the execution and delivery of the JV Agreement among the
Chinese Equity Interest Holders and the Investor, the Company’s execution,
delivery, and performance of this Agreement .
(k) The
Investor shall have completed its due diligence investigation, and the results
thereof shall not have revealed that any of the representations or warranties of
the Chinese Parties set forth herein are untrue or incorrect in any material
respect.
(l) All
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Investor and its counsel, and the Investor and said
counsel shall have received all such counterpart originals or certified or other
copies of such documents as it or they may request.
(m) No
proceeding in which the Company, or the Chinese Equity Interest Holders shall be
a debtor, defendant, or party seeking an order for its own relief or
reorganization shall have been brought or be pending by or against such person
under any Legal Requirement.
(n) Each
of the Chinese Parties shall have made the deliveries contemplated by Section
3.2 of this Agreement.
(o) The
execution and delivery of, and the consummation of the transactions contemplated
under that certain Loan Agreement of even date by and between the Investor and
the JV Company
ARTICLE VIII.
POST-CLOSING OBLIGATIONS
8.1 Further
Assurances. Following the Closing, the Chinese Equity Interest
Holders, each Chinese Equity Interest Holders of the Company, and the Investor
shall execute and deliver such documents, and take such other action, as shall
be reasonably requested by any other Party hereto to carry out the Transaction
contemplated by this Agreement.
17
8.2 Publicity. None
of the Parties hereto shall issue, or make, or cause to have issued or made, any
public release or announcement concerning this Agreement or the Transaction
contemplated hereby, without the advance approval in writing of the form and
substance thereof by each of the other Parties, except as required by law (in
which case, so far as possible, there shall be consultation among the Parties
prior to such announcement), and the Parties shall endeavor jointly to agree on
the text of any announcement or circular so approved or required.
8.3 Post-Closing
Indemnity. From and after the Closing, each of the Chinese
Parties shall, and hereby does, jointly and severally indemnify and hold
harmless the Investor, and its Affiliates, directors, officers, and employees
from and against any and all Damages arising out of, resulting from, or in any
way related to (a) a material breach of, or the failure to perform or satisfy in
any material respect any of, the representations, warranties, covenants, and
agreements made by the Chinese Parties in this Agreement or in any document or
certificate delivered by the Chinese Parties at the Closing pursuant hereto, (b)
the occurrence of any event on or prior to the date of Closing that is (or would
be, but for any deductible thereunder) covered by individual policies of
insurance, blanket insurance policies or self insurance programs maintained by
the Company. Any payment made to the Investor pursuant to the
indemnification obligations under this Section 8.3 shall constitute a reduction
in the Subscription Price hereunder
It is
recognized and hereby acknowledged by the Parties hereto that a breach or
violation by the Company, any Guarantor, and/or the Chinese Equity Interest
Holders of any or all of the covenants and agreements contained in this Section
8.3 may cause irreparable harm and Damage to the Investor in a monetary amount
which may be virtually impossible to ascertain. As a result, each of
the Chinese Parties recognizes and hereby acknowledges that the Investor shall
be entitled to an injunction from any court of competent jurisdiction enjoining
and restraining any breach or violation of any or all of the covenants and
agreements contained in this Section 8.3 by the Company, the Chinese Equity
Interest Holders, the Chinese Equity Interest Holders, and/or their associates,
Affiliates, partners, or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other rights
or remedies the Investor may possess hereunder, at law or in
equity. Nothing contained in this Section 8.3 shall be construed to
prevent Investor from seeking and recovering from the Company and/or the Chinese
Equity Interest Holders Damages sustained by it as a result of any breach or
violation by the Company, the Chinese Equity Interest Holders, or Chinese Equity
Interest Holders of any of the covenants or agreements contained
herein.
(a) The
Investor shall have an option to subscribe for, on a fully diluted basis, 25% of
the Registered Capital of the CJV subject to the following terms and
conditions set forth in this Section. The Investor would own 51% of the JV
Company’s Registered Capital, after giving effect to the Transaction
contemplated by this Agreement and the exercise of the Option contained in this
Section. . The Investor shall exercise such option within 90 days upon the
accomplishment of the milestones mentioned in Schedule 7.1 (e)
18
(b) The
terms and conditions of the Option are as follows:
(i) CJV
shall deliver the following within 180 days of establishment of capitalization
of the capital investment by Regal Life:
- opening
of a second AWA club location in Guangzhou (TianHe)
- opening
of the Nanjing and Shanghai club location
(ii) AWA
to receive a formal wine import license
(iii) a
logistics and product distribution JV with the Shangdong Provincial and Nanjing
Municipal branches of China Post.
(iv) AWA
will have greater than RMB10 million in sales turnover for the 6 month period
and to have an auditable base of greater than 30,000 active members directly
purchasing products from AWA, the parent company
(v) the
completed development membership backend administration system for the AWA
network of in-house owned and franchised store outlets.
(c) Each
of the Chinese Equity Interest Holders shall use their respective commercially
reasonable efforts to cause the JV Company to accomplish the Investor’s business
objectives for the JV Company in order to facilitate the Investor’s exercise of
its Option set forth in this Section.
ARTICLE
IX. TAX
MATTERS
(a) The
Company has filed all Tax Returns that it was required to file. All
such Tax Returns were true, correct, and complete in all material
respects. All Taxes owed by the Company (whether or not shown on any
Tax Return and whether or not any Tax Return was required) have been paid. The
Company is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by any
Governmental Authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that
jurisdiction. There are no Liens on any of the assets of the Company
that arose in connection with any failure (or alleged failure) to pay any Tax,
except for Liens for Taxes not yet due.
(b) The
Company has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, Chinese Equity Interest Holders, or other third
party.
19
(c) No
director or officer (or employee responsible for Tax matters) of the Company
expects any Governmental Authority to assess any additional Taxes for any period
for which Tax Returns have been filed. There is no dispute or claim
concerning any Tax liability of the Company either (i) claimed or raised by any
Governmental Authority in writing or (ii) as to which any of the directors or
officers (or employees responsible for Tax matters) of the Company has actual
knowledge (after reasonable investigation) based upon personal contact with any
agent of such Governmental Authority. The Company has delivered to the Investor
true, correct, and complete copies of all income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Company since January 1, 2003.
(d) The
Company has not waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or
deficiency.
(e) Schedule 9.1(f) sets
forth the following information with respect to the Company as of the most
recent practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the Transaction contemplated
hereby): (i) the basis of the Company in its assets; and (ii) the
amount of any net operating loss, net operating loss carryover, net capital
loss, net capital loss carryover, Tax credit, Tax credit carryover, or excess
charitable contribution and similar credits or deductions of the
Company.
(f) The
unpaid Taxes of the Company (i) did not, as of the most recent fiscal month end,
exceed the reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the most recent balance sheet (rather than in any notes thereto)
and (ii) do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Company
in filing its Tax Returns.
(g) All
material elections with respect to Taxes affecting the Company are disclosed or
attached to a Tax Return of the Company.
(h) The
Company shall grant to the Investor or its designees access at all reasonable
times to all of the Company’s books and records (including tax workpapers and
returns and correspondence with tax authorities), including the right to take
extracts therefrom and make copies thereof, to the extent such books and records
relate to taxable periods ending on or prior to or that include the Closing
Date. Investor shall (i) grant to the Company access at all
reasonable times to all of the Company’s books and records (including tax
workpapers and returns and correspondence with tax authorities), including the
right to take extracts therefrom and make copies thereof, to the extent that
such books and records relate to the operations of the Company during taxable
periods ending on or prior to or that include the Closing Date, and (ii)
otherwise cooperate with the Company in connection with any audit of Taxes that
relate to the business of the Company prior to Closing.
20
(i) The
subscription for the Capital Increase by the Investor pursuant to the terms of
this Agreement will not result in any Tax liability to the Company or the
Investor.
(j) The
Company shall be responsible for preparing and filing, or causing the Company to
prepare and file, all Tax Returns of the Company required to be filed after the
Closing Date.
(k) As
used in this Agreement, “Affiliated Group”
means any affiliated group within the meaning of under any provision of
national, provincial, local, or foreign law; the “Company” means the
Company and/or any corporation that at any time has been a subsidiary of the
Company; “Tax”
means any national, provincial, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not, and “Taxes” means any or
all of the foregoing collectively; and “Tax Return” means any
return, declaration, report, claim for refund or information return or statement
relating to Taxes, including any schedule or attachment thereto and including
any amendment thereof.
(a) The
representations, warranties, agreements, and indemnities of the Chinese Equity
Interest Holders set forth in this Agreement or in connection with the
transactions contemplated hereby shall survive the Closing.
(b) Each
of the Company and each Guarantor shall be jointly and severally obligated to
indemnify as and to the extent set forth in Section 8.3 of this
Agreement.
(c) For
purposes of this Section 10.1(c), a party making a claim for indemnity under
Section 8.3 is
hereinafter referred to as an “Indemnified Party”
and the party against whom such claim is asserted is hereinafter referred to as
the “Indemnifying
Party.” All claims by any Indemnified Party shall be asserted
and resolved in accordance with the following provisions. If any
claim or demand for which an Indemnifying Party would be liable to an
Indemnified Party is asserted against or sought to be collected from such
Indemnified Party by such third party, said Indemnified Party shall with
reasonable promptness notify in writing the Indemnifying Party of such claim or
demand stating with reasonable specificity the circumstances of the Indemnified
Party’s claim for indemnification; provided, however, that any
failure to give such notice will not waive any rights of the Indemnified Party
except to the extent the rights of the Indemnifying Party are actually
prejudiced. After receipt by the Indemnifying Party of such notice,
then upon reasonable notice from the Indemnifying Party to the Indemnified
Party, or upon the request of the Indemnified Party, the Indemnifying Party
shall defend, manage, and conduct any proceedings, negotiations, or
communications involving any claimant whose claim is the subject of the
Indemnified Party’s notice to the Indemnifying Party as set forth above, and
shall take all actions necessary, including but not limited to, the posting of
such bond or other security as may be required by any Governmental Authority, so
as to enable the claim to be defended against or resolved without expense or
other action by the Indemnified Party. Upon request of the
Indemnifying Party, the Indemnified Party shall, to the extent it may legally do
so and to the extent that it is compensated in advance by the Indemnifying Party
for any costs and expenses thereby incurred,
21
(i) take
such action as the Indemnifying Party may reasonably request in connection with
such action,
(ii) allow
the Indemnifying Party to dispute such action in the name of the Indemnified
Party and to conduct a defense to such action on behalf of the Indemnified
Party, and
(iii) render
to the Indemnifying Party all such assistance as the Indemnifying Party may
reasonably request in connection with such dispute and defense.
(a) In
the event of any dispute with respect to or pursuant to this Agreement,
including but not limited to any dispute or claim in respect of any indemnities
or third party claims or otherwise for which the Investor shall seek
indemnification under this Agreement, the Exhibits, and Schedules hereto, the
Parties shall in good faith seek to settle or compromise such dispute or
claim. In the event that any such dispute or claim cannot be settled
or compromised, as aforesaid, within thirty (30) days of the other Party’s
receipt of written notice of the subject claim, any Party may submit the dispute
to final and binding arbitration to the Hong Kong International Arbitration
Center in Hong Kong, which proceeding shall be conducted in accordance with the
International Chamber of Commerce International Arbitration Rules in effect at
the time of applying for arbitration. The arbitration tribunal shall consist of
three arbitrators. The arbitration shall be conducted in Chinese. The Parties
shall use their collective best efforts to promptly schedule and conduct the
hearings before such arbitrators, with a view toward concluding such arbitration
proceedings not later than ninety (90) days from the first submission of the
dispute to arbitration. Any decision and award by the arbitrators
shall be in writing and shall be supported by reasonably detailed findings of
fact and conclusions of law. The arbitrators shall have no authority
to amend or modify this Agreement or any Exhibit hereto.
(b) In
connection with any Arbitration pursuant to this Section 10.2, the arbitrators
shall, as part of their award, allocate the fee of the Arbitration, including
all fees of the arbitrators, the cost of any transcripts, and the parties'
reasonable attorneys' fees, based upon and taking into account the arbitrators'
determination of the merits and good faith of the parties' claims and defenses
in the subject proceeding.
(c) The
decision and award of the arbitrators shall be final and binding upon the
Parties hereto and shall be enforceable in any court of competent
jurisdiction. Any process or other papers hereunder may be served by
internationally recognized overnight courier or by personal service, provided
that a reasonable time for appearance or response is allowed.
22
(a) Prior
to the Closing, the Investor shall, and shall cause its Affiliates and its and
their employees, agents, accountants, legal counsel, and other representatives
and advisers to, hold in strict confidence all, and not divulge or disclose any,
information of any kind concerning the Company and its business; provided, however, that the
foregoing obligation of confidence shall not apply to (i) information that is or
becomes generally available to the public other than as a result of a disclosure
by the Investor or its Affiliates or any of its or their employees, agents,
accountants, legal counsel, or other representatives or advisers, (ii)
information that is or becomes available to the Investor or its Affiliates or
any of its or their employees, agents, accountants, legal counsel, or other
representatives or advisers on a non-confidential basis prior to its disclosure
by the Investor or its Affiliates or any of its or their employees, agents,
accountants, legal counsel, or other representatives or advisers, and (iii)
information that is required to be disclosed by the Investor or its Affiliates
or any of its or their employees, agents, accountants, legal counsel, or other
representatives or advisers as a result of any applicable law, rule, or
regulation of any Governmental Authority; and, provided further, that the
Investor promptly shall notify the Company of any disclosure pursuant to clause
(iii) of this Section 10.3(a) and shall cooperate with the Company in seeking a
protective order for such information; and, provided further, that the
foregoing obligation of confidence shall not apply to the furnishing of
information by the Investor in bona fide discussions or negotiations with
prospective lenders.
(b) The
Chinese Parties shall, and shall cause its or his Affiliates and their
respective employees, agents, accountants, legal counsel, and other
representatives and advisers to, hold in strict confidence all, and not divulge
or disclose any, information of any kind concerning the Transaction contemplated
by this Agreement or the Investor or the Investor’s businesses; provided, however, that the
foregoing obligation of confidence shall not apply to (i) information that is or
becomes generally available to the public other than as a result of a disclosure
by the Company, the Chinese Equity Interest Holders, or its Affiliates or any of
their respective employees, agents, accountants, legal counsel, or other
representatives or advisers, (ii) information that is or becomes available to
the Company, the Chinese Equity Interest Holders, or its Affiliates or any of
their respective employees, agents, accountants, legal counsel, or other
representatives or advisers on a non-confidential basis prior to its disclosure
by the Company, the Chinese Equity Interest Holders, or its Affiliates or any of
their respective employees, agents, accountants, legal counsel, or other
representatives or advisers, and (iii) information that is required to be
disclosed by the Company, the Chinese Equity Interest Holders, or its or his
Affiliates or any of their respective employees, agents, accountants, legal
counsel, or other representatives or advisers as a result of any Legal
Requirement of any Governmental Authority; and, provided further, that the
Chinese Parties shall promptly shall notify the Investor of any disclosure
pursuant to clause (iii) of this Section 10.3(b).
23
IF
TO THE INVESTOR:
|
|
0000
X. Xxxxxx Xxxx
|
|
Xxxxxxx
XX 00000
|
|
Attn: Xxxx
Xxxxxxxxx
|
|
Fax
No. 000-000-0000
|
|
With a copy
to:
|
|
Xxxxxxx
Xxxxxx LLP
|
|
000
Xxxxxxxxx Xxxxxx, 00xx
Xxxxx
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
Attention: Xxxxx
Xxxxxxxxx, Esq.
|
|
Fax
No. 000-000-0000
|
IF
TO THE COMPANY
|
Guangzhou
AWA Wine Co. Ltd.
|
AND/OR
THE CHINESE EQUITY INTEREST HOLDERS:
|
Suite
510
Block C No 00 Xxxxxxx Xxxxx Xx
Xxxxx Xxxxxxxx, Xxxxxxxxx Xxxxxxxxx, Xxxxx |
Attn: Mr.
Nie Weifeng
|
|
Fax
No. 00 00 0000 0000
|
24
(a) Whenever
required by the context, and is used in this Agreement, the singular number
shall include the plural and pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular, or plural, as the
identification the person may require. References to monetary
amounts, specific named statutes and generally accepted accounting principles
are intended to be and shall be construed as references to RMB or Yuan, as
applicable, statutes of the China, and China generally accepted accounting
principles, respectively, unless the context otherwise requires.
(b) The
provisions of this Agreement shall be construed according to their fair meaning
and neither for nor against any Party hereto irrespective of which Party caused
such provisions to be drafted. Each of the Parties acknowledges that
it has been represented by an attorney in connection with the preparation and
execution of this Agreement.
25
ARTICLE
XI. DEFINITIONS
Capitalized
terms used in this Agreement are used as defined in this Article XI or elsewhere
in this Agreement.
26
11.4
China. The
term “China” shall mean the People’s Republic of China, and for the purpose of
this Agreement only, not including Hong Kong SAR, Macau SAR and Province of
Taiwan.
27
28
29
11.30 Subsidiary. The
term “Subsidiary” shall mean any Person of which a majority of the outstanding
voting securities or other voting equity interests are owned, directly or
indirectly, by the Company.
[the
balance of this page intentionally left blank]
30
IN WITNESS WHEREOF, the
Parties hereto have executed this Agreement on Subscription for Capital Increase
as of the date first written above.
INVESTOR:
|
||
By:
|
/s/ Xxxx Xxxxxxxx
|
|
Name:
|
Xxxx
Xxxxxxxxx
|
|
Title:
|
President
|
|
COMPANY:
|
||
GUANGZHOU
AWA WINE CO. LTD.
|
||
By:
|
/s/ Nie Weifeng
|
|
Name:
|
Nie
Weifeng
|
|
Title:
|
Legal
Representative
|
|
CHINESE
EQUITY INTEREST HOLDERS:
|
||
/s/ Nei Weifeng
|
||
MR.
NEI WEIFENG
|
||
/s/ Liang Huanxian
|
||
XXX.
XXXXX HUANXIAN
|
||
/s/ Xian Wenbin
|
||
MR.
XIAN
WENBIN
|
31
AGREEMENT
ON CAPITAL INCREASE AND EQUITY SUBSCRIPTION
Among
|
GUANGZHOU
AWA WINE CO. LTD.,
|
and
|
MR.
NEI WEIFENG
|
XXX.
XXXXX HUANXIAN
|
MR.
XIAN WENBIN
|
January
29,
2009
|
32
LIST
OF EXHIBITS AND SCHEDULES
Exhibit
A
|
-
|
List
of Chinese Equity Interest Holders
|
A-1
|
Exhibit
B
|
-
|
The
Joint Venture Agreement
|
B-1
|
Schedules
|
-
|
C-1
|
- iv
-
Exhibit
A
The
Registered Capital of the Company as of the date of this Agreement is RMB
500,000 and held by the following individuals (“Chinese Equity Interest
Holders”). Pursuant to PRC Company Law, Chinese Equity Interest Holders own the
following percentages of the equity interest of the Company
respectively.
Name
|
Address
|
Percentage of Equity
ownership
|
||||
Mr.
Nie Weifeng
|
40 | % | ||||
Xx.
Xxxxx Huanxian
|
50 | % | ||||
Mr.
Xian Wenbin
|
10 | % |
A -
1
Exhibit
B
Form of Joint Venture
Agreement
B -
1
Schedules
To
be provided by the Company
Schedule
7.1(e)
Company
Milestones
a) CJV
shall deliver the following within 180 days of establishment of capitalization
of the capital investment by Regal Life:
- opening
of a second AWA club location in Guangzhou (TianHe)
- opening
of the Nanjing and Shanghai club location
b) AWA to
receive a formal wine import license
c) AWA
will have greater than RMB10 million in sales turnover for the 6 month period
and to have an auditable base of greater than 30,000 active members directly
purchasing products from AWA, the parent company
d) a
logistics and product distribution JV with the Shangdong Provincial and Nanjing
Municipal branches of China Post.
e) the
completed development membership backend administration system for the AWA
network of in-house owned and franchised store outlets.
C -
1
Schedule
7.1(f).
Timetable
on Use of Subscription Price
Use of
US$500,000 (commencing January 2009)
EXPENDITURE
ITEM |
PROJECTED
PERIOD
|
AMOUNT
|
REMARKS
|
||||
Guangzhou
Head Office
|
January
|
RMB
|
300,000
|
Provide
an upscale image to recruit new alliance stores.
|
|||
Guangzhou
Flagship Store
|
January
|
RMB
|
300,000
|
To
promote image and provide protocol to attract new alliance
stores
|
|||
Eastern
China Flagship Store
|
February
|
RMB
|
300,000
|
To
set up regional base to recruit alliance stores
|
|||
Central China
Flagship Store
|
April
|
RMB
|
300,000
|
To
set up regional base to recruit alliance stores
|
|||
Internet
Software Development
|
March
|
RMB
|
500,000
|
Unify
sales management system to integrate all alliance
stores
|
|||
Flowing
Capital
|
January
– March
|
RMB
|
180,000
|
Daily
expenditures for wine ordering
|
|||
Total
|
RMB
|
3.5
million
|
C -
2