EXHIBIT 1
Regulation S Subscription Agreement
15,000,000 Shares of Common Stock
THE SECURITIES BEING SUBSCRIBED TO HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR WITH ANY
SECURITIES REGULATORY AUTHORITY OF ANY JURISDICTION. THESE SECURITIES ARE
OFFERED PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
FEDERAL AND STATE SECURITIES LAWS.
THE SECURITIES BEING SUBSCRIBED TO MAY NOT BE SOLD, OFFERED, OR OTHERWISE
TRANSFERRED IN THE UNITED STATES OR TO A "U.S. PERSON" UNLESS THE SECURITIES ARE
REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE.
MINGHUA GROUP INTERNATIONAL HOLDINGS LIMITED
REGULATION S SUBSCRIPTION AGREEMENT
(FOREIGN SUBSCRIBERS)
Dated: September 29, 2003
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NAME AND ADDRESS OF SUBSCRIBER AMOUNT OF INVESTMENT
Beijing Xxxxx Xxxx Real Estate Development Co., U.S. $6,000,000
Ltd.
Xx. 00 Xxxxxx Xxxx CY 49,416,000
Xx Xx Xxx Industrial Development Zone
Yanqing County, Beijing
People's Republic of China NUMBER OF SHARES PURCHASED
15,000,000
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REGULATION S SUBSCRIPTION AGREEMENT, dated as of the date specified
above, by and between MINGHUA GROUP INTERNATIONAL HOLDINGS LIMITED, a New York
corporation (the "Company"), and the undersigned subscriber (the "Subscriber").
BACKGROUND
The Company is seeking to raise capital through an offering (the
"Offering") to non-U.S. Persons of Fifteen Million (15,000,000) shares (the
"Shares") of the Company's common stock, $0.01 par value per share ("Common
Stock"), at a price per share of Forty Cents (US$0.40) for an aggregate
consideration of Six Million US Dollars (US$6,000,000). The Subscriber desires
to irrevocably subscribe for the number of Shares specified in the box above
(the "Shares").
NOW, THEREFORE, in consideration of the premises and the respective
promises hereinafter set forth, the parties hereto hereby agree as follows:
1. SALE AND PURCHASE OF SECURITIES. Subject to compliance with applicable
laws of the People's Republic of China and other non-United States securities
laws, the Subscriber hereby irrevocably subscribes for the Shares at a price per
Share equal to U.S. $0.40 or an aggregate of U.S.$6,000,000 for 15,000,000
Shares. The payment of the subscription price shall be made to the Company in
separate installments as described below by delivery of a certified check or
through other means acceptable to the Company. Upon receipt of payment for the
Shares, the Company shall issue the corresponding number of Shares.
The Subscriber shall pay the purchase price for the Shares in installments
as follows:
(a) On the date of this Agreement, the Subscriber shall pay to the Company
Three Hundred Sixty Four Thousand, Two Hundred Fifty Four US Dollars and Forty
Nine Cents (US$364,254.49), which equals Three Million (CY3,000,000) China Yuan
Renminbi as of the date of this Agreement;
(b) On or before October 10, 2003, the Subscriber shall pay to the Company
Two Hundred Forty Two Thousand, Eight Hundred Thirty Six US Dollars and Thirty
Three Cents (US$242,836.33), which equals Two Million (CY2,000,000) China Yuan
Renminbi as of the date of this Agreement;
(c) On or before December 31, 2003, the Subscriber shall pay to the Company
One Million, Two Hundred Fourteen Thousand, One Hundred Eighty One US Dollars
and Sixty Four Cents (US$1,214,181.64), which equals Ten Million (CY10,000,000)
China Yuan Renminbi as of the date of this Agreement; and
(d) On or before February 29, 2004, the Subscriber shall pay to the Company
Four Million, One Hundred Seventy Eight Thousand, Seven Hundred Twenty Seven US
Dollars and Fifty Four Cents (US$4,178,727.54), which equals Thirty Nine
Million, Four Hundred Sixteen (CY39,416,000) China Yuan Renminbi as of the date
of this Agreement.
The Subscriber acknowledges and agrees that the subscription for the Shares
as specified above is irrevocable.
2. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER. The Subscriber by his
signature below hereby represents, warrants and certifies to the Company as
follows:
(a) The Subscriber is aware that the Offering has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or any
state securities laws or regulations in reliance upon exemptions of Section 4(2)
of the Securities Act and Regulation S thereunder, and similar exemptions under
state law. The Subscriber will not offer or sell the Shares unless they are
registered or are exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), and any applicable state securities laws or
regulations. Subscriber agrees not to engage in hedging transactions with regard
to such securities unless in compliance with the Securities Act.
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(b) The Subscriber is also aware that a legend will be placed on any
certificate or certificates evidencing the Shares stating that they have not
been registered under the Securities Act and setting forth or referring to the
restrictions on transfers and sales thereof and that other legends required by
Regulation S of the Securities Act may also be placed upon the certificates
evidencing the Shares. The Company will place stop transfer instructions against
the Shares and the certificates therefor to restrict the transfer thereof,
except as may be prescribed by the Securities Act.
(c) The Subscriber, or his adviser, has such knowledge and experience
in financial and business matters that he is capable of evaluating the merits
and risks of, and protecting his interests in connection with, an investment in
the Shares. The Subscriber is aware of the risks involved in his investment
herein.
(d) The Subscriber has been provided with the opportunity to discuss
the terms and conditions of this Offering and the business of the Company with
members of management and to review all relevant financial information, books,
records, and other information concerning the Company, such that the Subscriber
is familiar with the business, finances and general prospects for the future of
the Company which he may consider significant for the purpose of making an
investment decision. The Subscriber acknowledges that he has reviewed the
reports and other information filed by the Company (or others with respect to
the Company) with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 and the Securities Act.
(e) The Subscriber has the full right, power and authority to enter
into this Agreement and to carry out and consummate the transactions
contemplated herein. This Agreement constitutes the legal, valid and binding
obligation of the Subscriber. If the Subscriber is a corporation or trust, the
officer or trustee executing this Agreement represents and warrants that he is
authorized to so sign; that the corporation or trust is authorized by the
Articles (or Certificate) of Incorporation and By-laws of the corporation or by
the trust agreement, as the case may be, to make this investment.
(f) No representations, assurances or warranties have been made to the
Subscriber, or his adviser, by the Company or by any of its respective officers,
directors, agents, employees or affiliates, nor anyone else on their behalf,
concerning, among others, the future profitability of the Company or the
Subscriber's investment in it, and in entering into this transaction the
Subscriber is not relying upon any information, other than the results of his,
or his adviser's, own independent investigation.
(g) The Subscriber will not offer or sell the Shares (which term shall
include any pre-arrangement for a purchase by a U.S. person or other person in
the U.S.) directly or indirectly, in the United States or to any natural person
who is a resident of the United States or to any other "U.S. person" (as defined
below) or for the account or benefit of any "U.S. person" unless registered
under the Securities Act and all applicable state laws or an exemption from the
registration requirements of the Securities Act and similar state laws is
available.
(h) The Subscriber is neither a U.S. person nor acquiring the Shares
for the account or benefit of any U.S. person. The Subscriber, if other than a
natural person, was not formed for the purpose of acquiring the Shares.
The Subscriber understands that a "U.S. person", as defined by
Regulation S in Rules 901 through 905 promulgated under the Securities Act
("Regulation S"), includes any natural person resident in the United States; any
partnership or corporation organized or incorporated under the laws of the
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United States; any estate of which any executor or administrator is a "U.S.
person"; any trust of which any trustee is a "U.S. person"; any agency or branch
of a foreign entity located in the United States; 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"; 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 any partnership or corporation organized or incorporated
under the laws of a jurisdiction other than the United States which was formed
by a "U.S. person" principally for the purpose of investing in securities not
registered under the Act, unless it is organized or incorporated, and owned, by
accredited investors (as defined in Rule 501(a) of Regulation D promulgated
under the Act) who are not natural persons, estates or trusts.
(i) The Subscriber is making this subscription from his residence or
offices at the address set forth above. The Subscriber understands that the
exemption afforded by Regulation S requires that the purchasers of the
securities not be in the United States when the offer is made. The purchase of
the Shares hereunder by the Subscriber is in accordance with all securities and
other laws of the jurisdiction in which it is incorporated or legally resident.
This Agreement has not been executed or delivered by the Subscriber in the
United States.
(j) Susbcriber is not an underwriter of, or dealer in, the Shares or
the Common Stock of the Company, and Susbcriber is not participating, pursuant
to a contractual agreement in the distribution of the Shares. No person is
entitled to receive a selling commission, fee or other remuneration in respect
of the sale of the Shares. The Shares are being acquired by the Susbcriber for
his own account, for investment purposes and not with a view to the sale or
distribution of all or any part of the Shares, nor with any present intention to
sell or in any way distribute the same, as those terms are used in the
Securities Act, and the rules and regulations promulgated thereunder.
3. INDEMNITY BY THE SUBSCRIBER. The Subscriber understands and acknowledges
that the Company is relying on the representations made by the Subscriber
herein, and, thus, hereby agrees to indemnify the Company, and its respective
officers and directors, agents, attorneys, and employees, and agrees to hold
them harmless from and against any and all loss, damage, liability, or expense,
including reasonable attorney's fees, that it or any of them may suffer,
sustain, or incur by reason of or in connection with any misrepresentation or
breach of warranty or agreement made by the Subscriber under this Agreement.
4. MARKET STANDOFF PROVISION. The Subscriber hereby agrees that, if so
requested by the Company or any representative of the underwriters (the
"Managing Underwriter") in connection with any registration of the offering of
any securities of the Company under the Securities Act, the Subscriber shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period (or such other period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "Market
Standoff Period") following the effective date of a registration statement of
the Company filed under the Securities Act. The Company may impose stop-transfer
instructions with respect to Shares subject to the foregoing restrictions until
the end of such Market Standoff Period.
5. ADDITIONAL ACTION. The Subscriber shall, upon the request of the
Company, from time to time, execute and deliver promptly to the Company all
instruments and documents of further assurances or otherwise and will do any and
all such acts and things as may be reasonably required to carry out the
obligations of the Subscriber hereunder and to consummate the transactions
contemplated hereby.
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6. BOARD DESIGNATION RIGHTS. As soon as practicable after the full purchase
price for all of the Shares has been paid to the Company, the Company and the
major stockholders executing this Agreement, shall use commercially reasonable
efforts, to cause two of the current members of the board of directors of the
company to resign and to appoint two designees of the Subscriber as the
successors of such resigning directors. The major stockholders of the Company
executing this Agreement below shall vote any and all of the shares of Common
Stock held by them in favor of the appointment of the Subscriber's designees.
7. MISCELLANEOUS.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective legal representatives, heirs, successors
and assigns. This Agreement shall not be assignable, in whole or in part.
(b) This Agreement and any additional agreements and other documents
delivered pursuant hereto set forth the entire agreement and understanding of
the parties in respect of the subject matter hereof and thereof and supersede
all prior agreements, arrangements and understandings relating to the subject
matter hereof and thereof, including, without limitation, any Chinese language
versions of this Agreement that may have been entered into prior to the date
hereof. This Agreement may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties.
(c) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. Facsimile execution and delivery of this
Agreement is legal, valid and binding for all purposes.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect any other provisions hereof, and the remainder of the
Agreement shall be construed as if such invalid or unenforceable provision were
modified to the extent necessary to make it valid or enforceable but remain
within the spirit of this Agreement, or if that is not possible, then omitted.
(e) All notices provided for in this Agreement shall be in writing
signed by the party giving such notice, and delivered personally or sent by
overnight courier or messenger or sent by registered or certified mail, return
receipt requested, or by telex, facsimile transmission, telegram or similar
means of communication if confirmed by mail to the Company at its current
address and to the Subscriber at its address as it appears on the books and
records of the Company. Notices shall be deemed to have been received on the
date of personal delivery or facsimile, or if sent by certified or registered
mail, return receipt requested, shall be deemed to be delivered on the third
business day after the date of mailing.
(f) This Agreement shall be governed and construed by the laws of the
State of New York, without giving effect to conflicts of law principles of such
state.
(g) In the event of any dispute or difference arising out of or
relating to this Agreement (the "Dispute"), the parties hereto shall use their
best efforts to settle such Dispute. To this end, the parties shall consult and
negotiate with each other, in good faith and understanding of their mutual
interests, to reach a just and equitable solution satisfactory to both parties.
If they do not reach such a solution within a period of thirty (30) days, either
party may then by written notice to the other (the "Notice of Arbitration")
submit the dispute to final and binding arbitration in the State of New York in
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accordance with the International Arbitration Rules of the American Arbitration
Association (AAA). The Company and the Subscriber expressly consent and agree to
arbitration hereunder. Within seven (7) days after receipt of the Notice of
Arbitration, the Company shall nominate and appoint an arbitrator (the "First
Arbitrator") and the Subscriber shall nominate and appoint an arbitrator (the
"Second Arbitrator"). Within seven (7) days after the appointment of the First
Arbitrator and the Second Arbitrator, the two arbitrators shall appoint a third
arbitrator (the "Third Arbitrator"), or, if the first two arbitrators cannot
agree on the appointment of the third, the Third Arbitrator shall be selected by
the AAA. If either party fails or refuses to appoint the First Arbitrator or the
Second Arbitrator within the specified time, the arbitrator appointed by the
other party shall be the sole arbitrator for purposes of resolving the Dispute.
The arbitrators or the sole arbitrator, as the case may be, shall resolve the
Dispute and render an award within one hundred eighty (180) days after receipt
of the Notice of Arbitration. Judgment upon the award may be entered, or
application for judicial acceptance or confirmation of the award may be made, in
any competent court having jurisdiction thereof. In the event of any Dispute,
the parties shall continue to perform their respective obligations under this
Agreement during the pendency of arbitration proceedings unless and until the
arbitration panel otherwise orders.
[signature page follows]
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SUBSCRIBER SIGNATURE PAGE
IN WITNESS WHEREOF, the Subscriber has executed this Subscription Agreement
as of the date first above written.
BEIJING XXXXX XXXX REAL ESTATE
DEVELOPMENT CO., LTD.
By: /s/ Xxxxx-xx Xx
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Name: Xxxxx-xx Xx
Title: Chairman
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MINGHUA GROUP INTERNATIONAL HOLDINGS LIMITED
SUBSCRIPTION ACCEPTANCE
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, hereby
accepts the subscription by Beijing Xxxxx Xxxx Real Estate Development Co., Ltd.
to purchase 15,000,000 Shares in accordance with the terms of the foregoing
Subscription Agreement as of the date first above written.
MINGHUA GROUP INTERNATIONAL HOLDINGS LIMITED
By: /s/ Xxxxxx Xxxx
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Its: CEO
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MAJOR STOCKHOLDER SIGNATURE
AS TO SECTION 6 OF THE AGREEMENT
IN WITNESS WHEREOF, the undersigned, intending to be legally bound with
regard to Section 6 of the above Agreement, hereby execute this Agreement as of
the date first above written.
/s/ Chuquan Li
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CHUQUAN LI, individually
/s/ Xxxx Xxxxx Chan
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XXXX XXXXX XXXX
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