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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
ASIAINFO HOLDINGS, INC.
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
04518A104
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(CUSIP Number)
with copies to:
Eric Mok Laura M. Sizemore, Esq.
23/F Lincoln House, Taikoo Place White & Case LLP
979 King's Road 1155 Avenue of the Americas
Quarry Bay, Hong Kong New York, NY 10036
+852-2516-4819 (212) 819-8200
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
July 1, 2005
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
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1
SCHEDULE 13D
CUSIP No. 04518A104
1 NAME OF REPORTING PERSONS
Lenovo Group Limited
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Hong Kong Special Administrative Region of the People's Republic of China
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED 0
BY EACH REPORTING 8 SHARED VOTING POWER
PERSON WITH 5,472,414
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
5,472,414
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,472,414
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.66%+
14 TYPE OF REPORTING PERSON
CO
+ Calculated using the number of outstanding shares of common stock as of
November 7, 2005 reported in the Issuer's most recent Form 10-Q filed with the
U.S. Securities and Exchange Commission on November 9, 2005.
2
SCHEDULE 13D
CUSIP No. 04518A104
1 NAME OF REPORTING PERSONS
Lenovo Holdings (BVI) Limited
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
British Virgin Islands
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED 0
BY EACH REPORTING 8 SHARED VOTING POWER
PERSON WITH 5,472,414
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
5,472,414
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,472,414
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.66%+
14 TYPE OF REPORTING PERSON
CO
+ Calculated using the number of outstanding shares of common stock as of
November 7, 2005 reported in the Issuer's most recent Form 10-Q filed with the
U.S. Securities and Exchange Commission on November 9, 2005.
3
SCHEDULE 13D
CUSIP No. 04518A104
1 NAME OF REPORTING PERSONS
Lenovo Sysware Limited
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
British Virgin Islands
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED 0
BY EACH REPORTING 8 SHARED VOTING POWER
PERSON WITH 5,472,414
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
5,472,414
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,472,414
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.66%+
14 TYPE OF REPORTING PERSON
CO
+ Calculated using the number of outstanding shares of common stock as of
November 7, 2005 reported in the Issuer's most recent Form 10-Q filed with the
U.S. Securities and Exchange Commission on November 9, 2005.
4
SCHEDULE 13D
CUSIP No. 04518A104
1 NAME OF REPORTING PERSONS
Lenovo IT Alliance Limited
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
British Virgin Islands
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED 0
BY EACH REPORTING 8 SHARED VOTING POWER
PERSON WITH 5,472,414
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
5,472,414
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,472,414
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.66%+
14 TYPE OF REPORTING PERSON
CO
+ Calculated using the number of outstanding shares of common stock as of
November 7, 2005 reported in the Issuer's most recent Form 10-Q filed with the
U.S. Securities and Exchange Commission on November 9, 2005.
5
ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D (this "Statement") relates to the common
stock, $0.01 par value per share (the "Common Stock"), of AsiaInfo Holdings,
Inc., a Chinese corporation (the "Issuer"). According to the Issuer's most
recent Form 10-Q filed with the U.S. Securities and Exchange Commission on
November 9, 2005, the principal executive offices of the Issuer are located at
4/F Zhongdian Information Tower, 6 Zhongguancun South Street, Haidian District,
Beijing 100086, People's Republic of China.
ITEM 2. IDENTITY AND BACKGROUND
(a) This statement on Schedule 13D is being filed by: (i) Lenovo Group
Limited, a company organized and existing under the laws of the Hong Kong
Special Administrative Region of the People's Republic of China ("Lenovo");
(ii) Lenovo Holdings (BVI) Limited, a corporation organized and existing under
the laws of the British Virgin Islands ("Lenovo Holdings"); (iii) Lenovo Sysware
Limited, a corporation organized and existing under the laws of the British
Virgin Islands ("Lenovo Sysware"); and (iv) Lenovo IT Alliance Limited, a
corporation organized and existing under the laws of the British Virgin Islands
("Lenovo IT Alliance"). Lenovo, Lenovo Holdings, Lenovo Sysware and Lenovo IT
Alliance are hereinafter sometimes collectively referred to as the "Reporting
Persons". The agreement between the Reporting Persons relating to the joint
filing of this Statement is attached as Exhibit A hereto.
(b) The address of the principal office of Lenovo is 23/F Lincoln House,
Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong.
The address of the principal office of Lenovo Holdings is P.O. Box 71,
Craigmuir Chambers, Road Town, Tortola, British Virgin Islands.
The address of the principal office of Lenovo Sysware is P.O. Box 957,
Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.
The address of the principal office of Lenovo IT Alliance is P.O. Box 957,
Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.
(c) Lenovo is an investment holding company. The principal activity of
Lenovo is the provision of desktop and notebook computers in worldwide markets.
Lenovo also provides information technology products including mobile handsets,
servers, peripherals and digital entertainment products in the People's Republic
of China.
Lenovo Holdings is a wholly-owned subsidiary of Lenovo. The principal
business of Lenovo Holdings is to function as a holding company.
Lenovo Sysware is a wholly-owned subsidiary of Lenovo Holdings. The
principal business of Lenovo Sysware is to function as a holding company.
Lenovo IT Alliance is a wholly-owned subsidiary of Lenovo Sysware. Lenovo
IT Alliance is a holding company that holds businesses and investments.
The attached Schedule A lists the executive officers and directors of
Lenovo, Lenovo Holdings, Lenovo Sysware and Lenovo IT Alliance and contains the
following information
6
with respect to each such person: (i) name; (ii) business address; (iii) present
principal occupation or employment and the name, principal business and address
of any corporation or other organization in which such employment is conducted;
and (iv) citizenship.
(d) During the past five years, neither Lenovo, Lenovo Holdings, Lenovo
Sysware, Lenovo IT Alliance nor, to the best of Lenovo's, Lenovo Holdings',
Lenovo Sysware's and Lenovo IT Alliance's knowledge, any person named in
Schedule A to this Statement, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(e) During the past five years, neither Lenovo, Lenovo Holdings, Lenovo
Sysware, Lenovo IT Alliance nor, to the best of Lenovo's, Lenovo Holdings',
Lenovo Sysware's and Lenovo IT Alliance's knowledge, any person named in
Schedule A to this Statement, was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activity subject to, federal or state
securities laws or finding any violation with respect to such laws.
(f) Lenovo is a corporation organized and existing under the laws of the
Hong Kong Special Administrative Region of the People's Republic of China. Each
of Lenovo Holdings, Lenovo Sysware and Lenovo IT Alliance is a corporation
organized and existing under the laws of the British Virgin Islands.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
No funds were used to acquire the Common Shares. The information set forth
in Item 4 hereof is hereby incorporated by reference into this Item 3.
ITEM 4. PURPOSE OF TRANSACTION
Pursuant to an Acquisition Agreement, dated July 27, 2004, by and between
the Issuer and Lenovo, as supplemented and amended by Supplement and Amendment
No. 1 to Acquisition Agreement, dated October 1, 2004 between the Issuer and
Lenovo (as amended, the "Acquisition Agreement") the Issuer acquired from Lenovo
(the "Acquisition") its non-telecom related IT services business (the
"Non-Telecom Business"). The consideration for the Acquisition was as follows:
(i) 974,284 shares of Common Stock with an aggregate market value of US$4.8
million (RMB40 million), delivered to Lenovo IT Alliance; (ii) execution of a
Forward Contract, dated October 19, 2004, between the Bonson Information
Technology Limited, a corporation organized and existing under the Laws of the
British Virgin Islands and a direct wholly-owned subsidiary of the Issuer
("BITL") and Lenovo IT Alliance (the "Forward Contract") with respect to the
Issuer's Common Stock having an aggregate market value of US$31.5 million
(RMB260 million) (the "Forward Contract Shares"); and (iii) assumption by the
Issuer of certain liabilities of Lenovo and its subsidiaries, as specified in
the Acquisition Agreement. In addition, under the terms of the Acquisition
Agreement, Lenovo is entitled to receive certain earnout payments consisting of
either cash or Common Stock, at the Issuer's sole discretion, upon the
attainment by the Non-Telecom Business of certain performance goals during the
first full twelve months following the closing of the Acquisition.
The Forward Contract provided for payment by BITL on behalf of the Issuer
of a portion of the purchase price relating to the Acquisition through the
transfer by BITL of the
7
Forward Contract Shares to Lenovo IT Alliance at any time during
a twelve-month period following the closing date of the Acquisition, as
determined by BITL in its sole and absolute discretion (such date, the
"Settlement Date"). Under the terms of the Forward Contract, if the value of the
Forward Contract Shares was less than US$31.5 million (the "Settlement Amount")
on the Settlement Date, then BITL was required to deliver either cash or
additional Common Stock in an amount equivalent to the difference between the
market value and the settlement Amount. On July 1, 2005, 4,498,130 shares of
Common Stock, constituting the Forward Contract Shares, were delivered by the
Issuer to Lenovo IT Alliance pursuant to the terms of the Forward Contract. In
addition, in accordance with the terms of the Forward Contract, the Issuer made
a cash payment to Lenovo IT Alliance via Lenovo Group Limited in the amount of
$2,023,842.
Pursuant to the terms of the Acquisition Agreement, the Issuer appointed
Mr. Bing Yu, a representative of Lenovo, to its Board of Directors and agreed to
maintain Lenovo's representation on the Board of Directors during the time
Lenovo holds at least 80% of the Forward Contract Shares. On January 4, 2006,
Mr. Bing Yu resigned as director of the Issuer. On January 18, 2006, Mr. Cheung,
Wing Chung Anders was nominated as Lenovo's representative on the Issuer's Board
of Directors.
The foregoing description of the Acquisition Agreement and the Forward
Contract is a summary and all statements made in this Statement related to such
agreements are qualified in their entirety by reference to the complete text of
each of the Acquisition Agreement and the Forward Contract, which are
incorporated herein by reference
Depending on market conditions, their continuing evaluation of the
business and prospects of the Issuer and other factors, the Reporting Persons
may dispose of or acquire additional securities of the Issuer. Additionally, if
the Issuer determines to explore strategic alternatives, the Reporting Persons
may or may not participate in any process established by the Issuer. Except as
otherwise described herein or as expressly stated below, no Reporting Person,
and to the best knowledge of the Reporting Persons, none of the persons set
forth on Schedule A, has any present plan or proposal that relates to or would
result in:
(a) The acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the Issuer;
(d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend policy
of the Issuer;
(f) Any other material change in the Issuer's business or corporate
structure;
(g) Changes in the Issuer's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control of the
Issuer by any person;
8
(h) Causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or
(j) Any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The information set forth in Item 4 hereof is hereby incorporated by
reference into this Item 5.
(a)-(b) Set forth in the table below is the number and percentage of shares
of Common Stock beneficially owned by each Reporting Person as of February 15,
2006.
NUMBER OF SHARES NUMBER OF SHARES AGGREGATE
BENEFICIALLY BENEFICIALLY OWNED NUMBER OF PERCENTAGE OF
OWNED WITH SOLE WITH SHARED VOTING SHARES CLASS
VOTING AND AND DISPOSITIVE BENEFICIALLY BENEFICIALLY
NAME DISPOSITIVE POWER POWER OWNED OWNED(1)
------------------ ----------------- ------------------ ------------ -------------
Lenovo (2) 0 5,472,414 5,472,414 11.66%
Lenovo Holdings(3) 0 5,472,414 5,472,414 11.66%
Lenovo Sysware (4) 0 5,472,414 5,472,414 11.66%
Lenovo IT Alliance 0 5,472,414 5,472,414 11.66%
(1) The percentages of Common Stock indicated in this table are based on the
number of shares of Common Stock outstanding as of November 7, 2005, as
reported in the Issuer's most recent Form 10-Q filed with the U.S.
Securities and Exchange Commission on November 9, 2005.
(2) Lenovo may be deemed to be the beneficial owner of the shares of Common
Stock of the Issuer because Lenovo IT Alliance, which is the record owner
of the Common Stock, is Lenovo's indirect wholly-owned subsidiary.
(3) Lenovo Holdings may be deemed to be the beneficial owner of the shares of
Common Stock of the Issuer because Lenovo IT Alliance, which is the record
owner of the Common Stock, is Lenovo Holdings' indirect wholly-owned
subsidiary.
(4) Lenovo Sysware may be deemed to be the beneficial owner of the shares of
Common Stock of the Issuer because Lenovo IT Alliance, which is the record
owner of the Common Stock, is Lenovo Sysware's wholly-owned subsidiary.
Other than as described above, no Reporting Person, and to the best
knowledge of the Reporting Persons, none of the persons set forth on Schedule A,
beneficially owns any securities of the Issuer.
(c) To the best of the Reporting Persons' knowledge, there have been no
transactions effected with respect any Common Stock during the past 60 days by
any of the persons named in response to Item 2.
9
(d) To the best knowledge of the Reporting Persons, no person (other than
the Reporting Persons) has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the Common Stock.
(e) Not applicable.
ITEM 6. CONTRACTS, AGREEMENTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
The information set forth, or incorporated by reference, in Item 4 is
hereby incorporated by this reference in this Item 6.
Other than as described in this Statement, to the best knowledge of the
Reporting Persons there are no contracts, arrangements, understandings or
relationships among the Reporting Persons or the persons set forth on Schedule
A, and between any such persons and any other person, with respect to any
securities of the Issuer, including but not limited to, transfer and voting of
any of the securities of the Issuer, joint ventures, loan or option
arrangements, put or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies or a pledge or contingency the
occurrence of which would give another person voting power or investment power
over the securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The exhibit index is incorporated herein by reference.
10
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 17, 2006
LENOVO GROUP LIMITED
/s/ Xuezheng Ma
--------------------------------
Name: Xuezheng Ma
Title: Executive Director
LENOVO HOLDINGS (BVI) LIMITED
/s/ Xuezheng Ma
--------------------------------
Name: Xuezheng Ma
Title: Director
LENOVO SYSWARE LIMITED
/s/ Xuezheng Ma
--------------------------------
Name: Xuezheng Ma
Title: Director
LENOVO IT ALLIANCE LIMITED
/s/ Xuezheng Ma
--------------------------------
Name: Xuezheng Ma
Title: Director
11
SCHEDULE A
Executive Officers and Directors of Lenovo, Lenovo Holdings, Lenovo Sysware and
Lenovo IT Alliance:
PRESENT PRINCIPAL
NAME CITIZENSHIP OCCUPATION OR EMPLOYMENT BUSINESS ADDRESS
--------------------- ----------- ------------------------------------- ------------------------------
Ms. Xuezheng Ma Chinese Executive Director of Lenovo Group 23/F., Lincoln House, Taikoo
Limited, Director of Lenovo Holdings Place, 979 King's Road,
(BVI) Limited, Lenovo Sysware Limited Quarry Bay, Hong Kong
and Lenovo IT Alliance Limited
Ms. Xiaoyan Wang Chinese Director of Lenovo Holdings (BVI) No. 6 Chuang Ye Road, Haidian
Limited, Lenovo Sysware Limited and District, Beijing, People's
Lenovo IT Alliance Limited Republic of China 100085
Mr. Yuanqing Yang Chinese Executive Director of Lenovo Group No. 6, Chuang Ye Road,
Limited Shangdi Information Industry
Base, Haidian District,
Beijing, People's Republic of
China 100085
Mr. William J. Amelio American Executive Director of Lenovo Group One Manhattanville Road,
Limited Suite PH Purchase, NY
10577-2100, USA
12
EXHIBIT INDEX
Exhibit A - Agreement among Lenovo Group Limited, Lenovo Holdings (BVI) Limited,
Lenovo Sysware Limited and Lenovo IT Alliance Limited, dated February 15, 2006,
to file this Statement jointly on behalf of each of them.
Exhibit B - Acquisition Agreement, dated as of July 27, 2004, by and between
AsiaInfo Holdings, Inc. and Lenovo Group Limited.
Exhibit C - Supplement and Amendment No. 1 to Acquisition Agreement, dated
October 1, 2004, by and between AsiaInfo Holdings, Inc. and Lenovo Group
Limited.
Exhibit D - Forward Contract, dated October 19, 2004, by and between Bonson
Information Technology Limited and Lenovo IT Alliance Limited.
13
EXHIBIT A
JOINT FILING AGREEMENT
This will confirm the agreement among the undersigned that the
Schedule 13D filed on or about this date and any amendments thereto with respect
to beneficial ownership by the undersigned of shares of common stock, $0.01 par
value per share, of AsiaInfo Holdings, Inc. is being filed on behalf of each of
the undersigned in accordance with Rule 13d-1(k)(1) under the Securities and
Exchange Act of 1934, as amended. This agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Dated: February 17, 2006
LENOVO GROUP LIMITED
/s/ Xuezheng Ma
--------------------------------
Name: Xuezheng Ma
Title: Executive Director
LENOVO HOLDINGS (BVI) LIMITED
/s/ Xuezheng Ma
--------------------------------
Name: Xuezheng Ma
Title: Director
LENOVO SYSWARE LIMITED
/s/ Xuezheng Ma
--------------------------------
Name: Xuezheng Ma
Title: Director
LENOVO IT ALLIANCE LIMITED
/s/ Xuezheng Ma
--------------------------------
Name: Xuezheng Ma
Title: Director
14
EXHIBIT B
[LOGO OF ASIAINFO] ASIAINFO HOLDINGS INC (ASIA)
4/F ZHONGDIAN INFORMATION TOWER 6
ZHONGGUANCUN SOUTH STREET HAIDIAN
BEIJING, F4 100086
008610821666
http://www.asiainfo.com
EX-10.15
ACQUISITION AGREEMENT
10-Q Filed on 08/09/2004 - Period: 06/30/2004
File Number 001-15713
[LOGO OF GSI]
LIVEDGAR(R)Information Provided by Global Securities Information, Inc.
800.669.1154
www.gsionline.com
EXHIBIT 10.15
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ACQUISITION AGREEMENT
by and between
AsiaInfo Holdings, Inc.
and
Lenovo Group Limited
Dated as of July 27, 2004
================================================================================
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS 1
Section 1.1. Definitions 1
Section 1.2. Other Defined Terms 9
Section 1.3. Interpretation 11
ARTICLE II PURCHASE AND SALE; CLOSING 11
Section 2.1. Purchase and Sale 11
Section 2.2. Excluded Assets 13
Section 2.3. Assumed Liabilities 14
Section 2.4. Excluded Liabilities 15
Section 2.5. Purchase Price 17
Section 2.6. Proration of Payments 17
Section 2.7. Closing 17
Section 2.8. Closing Deliveries by Purchaser 17
Section 2.9. Closing Deliveries by Seller 18
Section 2.10. Closing Balance Sheet 19
Section 2.11. Conversion of the Note 21
Section 2.12. Earn-out 21
Section 2.13. US$ to RMB Exchange Rate 22
Section 2.14. Escrow Arrangement 22
Section 2.15. Modification of Structure 23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER 23
Section 3.1. Organization and Qualification 23
Section 3.2. Authority; Non-Contravention; Approvals 24
Section 3.3. Financial Statements 25
Section 3.4. Absence of Undisclosed Liabilities 25
Section 3.5. Absence of Certain Changes or Events 26
Section 3.6. Books and Records 26
Section 3.7. Tax Matters 26
Section 3.8. Employee Benefits 27
Section 3.9. Employment Matters 28
Section 3.10. Labor Relations 28
Section 3.11. Litigation 29
- i -
TABLE OF CONTENTS
(continued)
Page
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Section 3.12. No Violation of Law; Permits 29
Section 3.13. Title to Assets; Encumbrances 30
Section 3.14. Entire Business 30
Section 3.15. Transactions with Affiliates 30
Section 3.16. Insurance 30
Section 3.17. Contracts and Other Agreements 31
Section 3.18. Tangible Personal Property 31
Section 3.19. Inventory 31
Section 3.20. Accounts Receivable; Disputed Accounts Payable 32
Section 3.21. Intellectual Property 32
Section 3.22. Real Property 34
Section 3.23. Environmental Matters 35
Section 3.24. Casualties 35
Section 3.25. Product Liability 35
Section 3.26. Product Returns and Warranties 36
Section 3.27. Bank and Brokerage Accounts; Investment Assets 36
Section 3.28. Significant Customers and Suppliers 36
Section 3.29. Brokers 36
Section 3.30. AsiaInfo Shares 37
Section 3.31. Selling Subsidiaries 38
Section 3.32. Sale and Distribution Network 38
Section 3.33. Disclosure 38
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER 38
Section 4.1. Organization and Qualification 38
Section 4.2. Authority; Non-Contravention; Approvals 38
Section 4.3. Brokers 39
Section 4.4. SEC Documents; Financial Statements 39
Section 4.5. Absence of Undisclosed Liabilities 39
Section 4.6. Consents and Approvals 39
Section 4.7. Litigation 40
Section 4.8. Absense of Certain Changes or Events 40
Section 4.9. Taxes 40
Section 4.10. Initial Shares and Conversion Shares 40
- ii -
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE V COVENANTS 40
Section 5.1. Conduct of the Business 40
Section 5.2. Access to Information 42
Section 5.3. Reasonable Efforts 43
Section 5.4. Takeover Proposals 43
Section 5.5. Notification 44
Section 5.6. Use of Names 44
Section 5.7. Tax Matters 45
Section 5.8. Non-Competition 46
Section 5.9. Assignment of Contracts and Rights 47
Section 5.10. Insurance Coverage 47
Section 5.11. Employee Matters 48
Section 5.12. Public Announcements 49
Section 5.13. Further Assurances; Post-Closing Cooperation 49
Section 5.14. Transitional Services 50
Section 5.15. Representation on Purchaser's Board 51
Section 5.16. Minority Interest in Han Consulting 51
Section 5.17. Lock-Up; Registration Rights Agreement 51
Section 5.18. [RESERVED] 52
Section 5.19. Operation of Business Post-Closing 52
Section 5.20. Security Business Permits 52
Section 5.21. Firewall Products 53
Section 5.22. Intellectual Property 53
Section 5.23. Initial Shares and Conversion Shares 53
ARTICLE VI CONDITIONS 53
Section 6.1. Conditions to Each Party's Obligations 53
Section 6.2. Conditions to Purchaser's Obligations 53
Section 6.3. Conditions to Seller's Obligations 55
ARTICLE VII SURVIVAL; INDEMNIFICATION 56
Section 7.1. Survival of Representations, Warranties,
Covenants and Agreements 56
Section 7.2. Indemnification of Purchaser 56
Section 7.3. Indemnification of Seller 58
Section 7.4. Limitations 58
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TABLE OF CONTENTS
(continued)
Page
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Section 7.5. Method of Asserting Claims 58
Section 7.6. Character of Indemnity Payments 59
ARTICLE VIII TERMINATION OF AGREEMENT 59
Section 8.1. Termination 59
Section 8.2. Effect of Termination 61
ARTICLE IX MISCELLANEOUS 61
Section 9.1. Notices 61
Section 9.2. Entire Agreement 61
Section 9.3. Expenses 61
Section 9.4. Waiver 61
Section 9.5. Amendment 61
Section 9.6. No Third-Party Beneficiary 61
Section 9.7. Assignment; Binding Effect 62
Section 9.8. Specific Performance 62
Section 9.9. Invalid Provisions 62
Section 9.10. Governing Law 62
Section 9.11. Arbitration 62
Section 9.12. Counterparts 63
Section 9.13. Joint and Several Obligations 63
Section 9.14. Interpretation 63
- iv -
TABLE OF CONTENTS
(continued)
Page
----
EXHIBITS
EXHIBIT A FORM OF SUBORDINATED MANDATORY CONVERTIBLE NOTE A-1
EXHIBIT B FORM OF BILL OF SALE B-1
EXHIBIT C FORM OF ESCROW AGREEMENT C-1
EXHIBIT D FORM OF OPINION OF SELLER'S PRC COUNSEL D-1
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ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (this "Agreement"), dated as of July 27,
2004, is made and entered into by and between AsiaInfo Holdings, Inc.
("Purchaser"), a corporation organized and existing under the laws of the State
of Delaware of the United States, on behalf of itself and the Purchasing
Subsidiaries (as defined below), and Lenovo Group Limited ([Chinese characters
omitted]) ("Seller"), a company organized and existing under the laws of the
Hong Kong Special Administrative Region ("Hong Kong") of the PRC, on behalf of
itself and the Selling Subsidiaries (as defined below).
WHEREAS, Seller and the Selling Subsidiaries own certain properties and
assets that are used or held for use in connection with the Business (as defined
below); and
WHEREAS, Seller wishes to sell (and cause the Selling Subsidiaries to
sell) to Purchaser and the Purchasing Subsidiaries, and Purchaser and the
Purchasing Subsidiaries wish to purchase from Seller and the Selling
Subsidiaries, the Assets (as defined below) on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified. The term
"control" (including the terms "controlling," "controlled by" and "under common
control with") means possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" means this Acquisition Agreement, together with the Exhibits
and the Seller Disclosure Schedule.
"AsiaInfo Shares" means shares of common stock, par value US$0.01 per
share, of Purchaser.
"Base Valuation" means RMB300 million.
"Business" means all of the businesses, assets and properties of Seller
and its Subsidiaries that constitute Seller's IT Services Group (referred to by
Seller as IT Fuwu Yewu Qun or IT [Chinese characters omitted]), which consists
of (A) the IT consulting services business conducted by Seller through Han
Consulting, HMCL or other Selling Subsidiaries, and (B) the IT services
businesses conducted by (i) the financial application services division of
Seller, (ii) the government application services division of Seller, (iii) the
IT system operation services division of Seller and (iv) the Security Services
Division, in the case of each of (i), (ii), (iii) and (iv), as conducted through
LCSTSL or other Selling Subsidiaries.
"Business Day" means any day other than a Saturday, Sunday or any day on
which banks located in the city of Beijing in the PRC or Hong Kong are
authorized or required to be closed for the conduct of regular banking business.
"Business Intellectual Property" means, other than the Excluded
Intellectual Property, all Intellectual Property that is now, or at the time of
the Closing will be, primarily used or held for use in the Business (other than
the Telecommunications Applications Services Division and the Insurance IT
Services Division), including all the Intellectual Property listed in
Section 3.21(a) of the Seller Disclosure Schedule.
"Business Material Adverse Effect" means any material adverse effect on
(i) the business, assets, condition (financial or otherwise), prospects or
results of operations of the Business, Assets or Assumed Liabilities or (ii) the
ability of the parties to perform their obligations under this Agreement or any
Transaction Document in a timely manner or to consummate the transactions
contemplated by this Agreement or the Transaction Documents without material
delay. In determining whether there has been a Business Material Adverse Effect,
any event, circumstance, change or effect shall be considered both individually
and together with all other events, circumstances, changes or effects and any
event, circumstance, change or effect that reasonably could be expected to
result in a Business Material Adverse Effect (individually or together with one
or more other events, circumstances, changes or effects) shall be considered a
Business Material Adverse Effect. For avoidance of doubt, a Business Material
Adverse Effect shall not be deemed to include any material adverse effect solely
on the business of the ChinaWeal Group or Lenovo AI.
"China" or "PRC" means the People's Republic of China. For purposes of
this Agreement, "China" or "PRC" shall not include Hong Kong, the Macau Special
Administrative Region of China, and Taiwan.
"ChinaWeal" means Lenovo ChinaWeal System & Services Co., Ltd. ([Chinese
characters omitted]), a company organized and existing under the laws of the
PRC.
"ChinaWeal Group" means ChinaWeal, together with High Honour
International Limited ([Chinese characters omitted]), a company organized and
existing in the British Virgin Islands, and all of their direct and indirect
Subsidiaries.
"Cleanup" means all actions to: (1) clean up, remove, treat or remediate
Hazardous Substances in the indoor or outdoor environment; (2) prevent the
Release of Hazardous Substances so that they do not migrate, endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment; (3) perform pre-remedial studies and investigations and
post-remedial monitoring and care; or (4) respond to any government requests for
information or documents in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment or remediation of Hazardous
Substances in the indoor or outdoor environment, that in any such case are
reasonably determined by the Person taking the actions to be required under any
applicable Environmental Law or reasonably determined to be desirable in order
to mitigate or avoid liability under any such law.
"Closing" means the closing of the sale and purchase of the Assets and
the assumption of the Assumed Liabilities, each as contemplated by this
Agreement.
"Closing Price" shall mean, with respect to each AsiaInfo Share, for any
day, the last reported sale price or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, in either case as reported
on the Nasdaq National Market, or a similar service if Nasdaq is no longer
reporting such information.
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"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Conversion Amount" means RMB260 million, subject to any adjustments
required pursuant to Sections 2.10(f), 2.11(c), or as otherwise specifically
provided in this Agreement.
"Conversion Date" means any Business Day during the 12-month period
following the Closing Date on which Purchaser determines, in its sole and
absolute discretion, that the Note shall be converted into or exchanged for
AsiaInfo Shares in accordance with its terms.
"Encumbrances" means any and all liens, charges, security interests,
mortgages, pledges, options, preemptive rights, rights of first refusal or first
offer, proxies, levies, voting trusts or agreements, or other adverse claims or
restrictions on title or transfer of any nature whatsoever.
"Environmental Claim" means any claim, action, cause of action,
investigation, demand, letter, request for information or notice (written or
oral) by any Person alleging potential liability (including potential liability
for investigatory costs, Cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (i) the presence, Release or threatened
Release of any Hazardous Substance, or (ii) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.
"Environmental Law" means any applicable law, treaty or governmental
restriction or agreement with any Governmental Authority which is in effect in
the PRC relating to the protection, investigation or restoration of the
environment (including natural resources) or the health or safety of human or
other living organisms, including the manufacture, introduction into commerce,
export, import, processing, distribution, use, generation, treatment, storage,
handling, presence, disposal, transportation, Release or management of, or other
activities with respect to, Hazardous Substances, in each case as in effect from
time to time prior to, on and after the Closing.
"Escrow Agent" means an internationally recognized financial institution
to be mutually agreed upon by Seller and Purchaser, which shall act as escrow
agent under the Escrow Agreement.
"Firewall Products" means the firewall products marketed and distributed
by or in connection with the Security Services Division, as identified and more
particularly described in the Procurement Agreement.
"Floating Charge" means the floating charge in relation to all of the
assets of Han Consulting, executed by Han Consulting in favor of LIAL on
November 27, 2002.
"Governmental Authority" means any international, supranational,
national, provincial, regional, federal, state, municipal or local government,
any instrumentality, subdivision, court, administrative or regulatory agency or
commission or other authority thereof, or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority.
"Han Consulting" means Han International Consulting Company Limited, a
company organized and existing under the laws of the British Virgin Islands.
- 3 -
"Han Loan Agreement" means the loan agreement dated November 27, 2002,
by and between Han Consulting and LIAL, for a revolving loan facility of up to
HK$50,000,000.
"Hazardous Substance" means (i) any petroleum or petroleum products,
flammable explosives, radioactive materials, medical waste, radon, asbestos or
asbestos-containing products or materials, chlorofluorocarbon,
hydrofluorocarbon, urea formaldehyde foam insulation, polychlorinated biphenyls
(PCBs) or lead-containing paint or plumbing; and (ii) any element, compound,
substance, waste or other material that is regulated under any Environmental Law
or is defined as, or included in the definition of, or deemed by or pursuant to
any Environmental Law or by any Governmental Authority to be "hazardous,"
"toxic," a "contaminant," "waste," a "pollutant," "hazardous substance,"
"hazardous waste," "restricted hazardous waste," "hazardous material,"
"extremely hazardous waste," a "toxic substance," a "toxic pollutant" or words
with similar meaning (in any language).
"HK$" means the lawful currency of Hong Kong.
"HMCL" means Han Management Consulting (China) Limited ([Chinese
characters omitted]), a company organized and existing under the laws of the
PRC.
"Hong Kong GAAP" means generally accepted accounting principles in Hong
Kong.
"Indemnified Party" means any Person claiming indemnification under any
provision of Article VII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article VII.
"Indemnity Notice" means written notification pursuant to Section 7.5(a)
of a claim for indemnity under Article VII by an Indemnified Party, specifying
the nature of and basis for such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith of such
claim.
"Information Security Products" means the products marketed and
distributed by the Security Services Division as of the date hereof or as of the
Closing, including Internet or intranet security products ([Chinese characters
omitted]) (including, firewall products ([Chinese characters omitted]), hacking
screening products ([Chinese characters omitted]), VPN products and Internet or
intranet physical separation devices ([Chinese characters omitted]), security
separation and information exchange system ([Chinese characters omitted]), and
security management and supervision system ([Chinese characters omitted])),
content security products ([Chinese characters omitted]) (including, but not
limited to, anti-virus products ([Chinese characters omitted]), content
filtering products ([Chinese characters omitted])), security management products
([Chinese characters omitted]) (including, but not limited to, unified security
management system products ([Chinese characters omitted]), authorization and
identification system products ([Chinese characters omitted]) and security
auditing system products ([Chinese characters omitted])).
"Insurance IT Services Division" means Seller's IT services business
operated through Lenovo AI and focused on IT services for the insurance
industry, including all of Seller's business, assets and properties used
primarily therein.
"Intellectual Property" means all intellectual property including
(i) all names and marks, including product names, brands and slogans, all
registered and unregistered trademarks, trade names, service marks, registered
designs and applications therefore and all goodwill associated therewith; (ii)
all patents, patent applications, rights in design and inventions, including any
provisional, utility,
- 4 -
continuation, continuation-in-part or divisional applications filed in the PRC,
Hong Kong, the United States or any other jurisdiction, and all reissues thereof
and all reexamination certificates issuing therefrom; (iii) all ownership rights
to any copyrightable works, including all related copyright registrations; (iv)
all know-how or other trade secrets, whether or not reduced to practice; (v) the
right to sue for and recover damages, assert, settle and/or release any claims
or demands and obtain all other remedies and relief at law or equity for any
past, present or future infringement or misappropriation of any of the
Intellectual Property; (vi) all licenses, options to license and other
contractual rights to use the Intellectual Property; and (vii) all computer and
electronic data processing programs and software programs (including source
codes and object codes) and related documentation, existing research projects,
computer software presently under development, and all software concepts owned
and all proprietary information, processes, formulae and algorithms, used in the
ownership, marketing, development, maintenance, support and delivery of such
software.
"Inventory" means all inventory that is now, or at the time of the
Closing will be, used or held for use in or otherwise necessary for the conduct
of, the Business (other than the Telecommunications Applications Services
Division or the Insurance IT Services Division), including finished goods, work
in process, supplies and raw materials.
"IRS" means the United States Internal Revenue Service.
"LBL" means Lenovo (Beijing) Limited ([Chinese characters omitted]), a
company organized and existing under the laws of the PRC.
"LCSTSL" means Lenovo Computer System and Technology Services Co., Ltd.
([Chinese characters omitted]), a company organized and existing under the laws
of the PRC.
"Lenovo AI" means Legend AI Computer Technology Co., Ltd. ([Chinese
characters omitted]), a company organized and existing under the laws of the
PRC.
"Lenovo Trademarks" means the trademarks, tradenames and brandnames set
forth in Section 1.1 of the Seller Disclosure Schedule.
"LIAL" means Lenovo IT Alliance Limited, a company organized and
existing under the laws of the British Virgin Islands.
"LHL" means Legend Holdings Limited ([Chinese characters omitted]), a
company organized and existing under the laws of the PRC.
"LHL Security Business Permits" means all Business Permits held by LHL,
as indicated and set forth in Section 2.1(g) of the Seller Disclosure Schedule
which are used or held for use in or otherwise necessary for the conduct of the
Business.
"LML" means Lenovo Manufacturing Limited, a company organized and
existing under the laws of the British Virgin Islands.
"Losses" means any and all damages, fines, fees, penalties,
deficiencies, liabilities, claims, losses (including loss of value), demands,
judgments, settlements, actions, obligations and costs and expenses (including
interest, court costs and fees and costs of attorneys, accountants and other
experts or other expenses of litigation or other proceedings or of any claim,
default or assessment).
- 5 -
"March 31st Balance Sheet" means the pro forma balance sheet of the
Business on a stand alone basis, as of March 31, 2004, a copy of which is set
forth in Section 3.3(b) of the Seller Disclosure Schedule.
"Market Value" means, with respect to the AsiaInfo Shares, the average
of the daily Closing Price per AsiaInfo Share for the ten consecutive trading
days immediately preceding the Conversion Date, the Closing Date, the last
Business Day of the Review Period, or other applicable date of determination, as
the case may be.
"MOFCOM" means the Ministry of Commerce of China.
"Non-Telecommunications Business" means (i) all aspects of the Business
acquired by Purchaser hereunder, and (ii) the business conducted by the
Enterprise Information Systems (EIS) business division of Purchaser as conducted
prior to the date hereof.
"Operating Income" means profit after cost of sales and operating
expenses, but before non-operating revenue and expense items (e.g., interest
income and expense, dividend income, extraordinary items, subsidy income, taxes,
and items pertaining to ancillary operations).
"Outstanding Customer Contracts" mean all of the outstanding contracts
for the provision of products and services of the Business to its customers
(other than contracts of Lenovo AI, the ChinaWeal Group and other contracts of
the Telecommunications Applications Services Division or the Insurance IT
Services Division) as of June 30, 2004, a complete list of which has been
prepared by Seller and is set forth in Section 3.17(d) of the Seller Disclosure
Schedule.
"Percentage Share" means, with respect to any Transferred Company, the
percentage of the shares or other equity interests of the Transferred Company
owned by Seller or its Affiliates, as the case may be, immediately prior to
Closing.
"Permit" means any permit, license, franchise, approval, consent,
registration, clearance, variance, exemption, order, certificate or
authorization by or of any Governmental Authority.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due
and payable or (ii) mechanics', carriers', workers' and other similar
Encumbrances arising or incurred in the ordinary course of business, in each
case that individually or in the aggregate with other such title defect, does
not materially impair the value of the property subject to such Encumbrances or
other such title defect or the use of such property in the conduct of the
Business.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited or unlimited liability company, proprietorship,
joint venture, other business organization, trust, union, association or
Governmental Authority.
"Plan" means any employment, consulting, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, equity
(or equity-based), leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, medical, dental, vision, welfare,
accident, disability, workmen's compensation or other insurance, severance,
separation, termination, change of control, collective bargaining or other
benefit plan, understanding, agreement, practice, policy or arrangement of any
kind, whether written or oral.
"PRC GAAP" means generally accepted accounting principles in the PRC.
- 6 -
"Pre-Closing Environmental Liabilities" means all Losses asserted
against, resulting to, imposed on, or incurred by Purchaser or its Affiliates in
connection with: (i) any actual or alleged Release or threatened Release of any
Hazardous Substance prior to the Closing Date on or from or affecting any of the
Leased Real Property; (ii) any actual or alleged violation of any Environmental
Law prior to the Closing Date, by Seller or any of its Affiliates or in
connection with the Business by any other Person; and (iii) any Environmental
Claim made by any Person that relates to or is based upon the operation of the
Business prior to the Closing Date or to any act or omission of Seller or any of
its Affiliates prior to the Closing, including Environmental Claims based on
indemnities or other contractual undertakings.
"Procurement Agreement" means a procurement agreement, dated the Closing
Date, by and between Purchaser (or a Purchasing Subsidiary designated by
Purchaser) and LBL, in form and substance reasonably satisfactory to Purchaser
and its counsel, providing for the matters described in Section 5.21.
"Purchaser Material Adverse Effect" means a material adverse effect on
the enforceability of Purchaser's obligations under this Agreement or the
Transaction Documents or Purchaser's ability to perform its obligations under
this Agreement or the Transaction Documents in a timely manner or to consummate
the transactions contemplated by this Agreement or the Transaction Documents
without material delay.
"Purchaser SEC Documents" means each statement, report, registration
statement, definitive proxy statement, and other filings filed with the SEC by
Purchaser.
"Purchasing Subsidiaries" means the Subsidiaries of Purchaser that are
caused by Purchaser to purchase part or all of the Assets pursuant to the terms
and conditions of this Agreement.
"Release" means any releasing, spilling, leaking, discharging, disposing
of, pumping, pouring, emitting, emptying, injecting, leaching, dumping or
allowing to escape.
"RMB" means the renminbi, the lawful currency of China.
"Sales Agent Fees" means any cash or things in kind, including
promotional fees, advertising fees, sponsorship fees, labor service fees,
consultancy fees, commission, reimbursements for fees and expenses, travel
expenses, tuitions or any other fees, paid or promised to be paid at any time by
any of Seller or its Affiliates (or any of their respective representatives) in
connection with procuring or securing any contract or sales.
"SEC" means the United States Securities and Exchange Commission.
"Security Services Division" means Seller's security services division,
including all of Seller's business, assets and properties used therein devoted
to the provision of security consulting ([Chinese characters omitted]), security
integration ([Chinese characters omitted]), security training ([Chinese
characters omitted]) and Information Security Products ([Chinese characters
omitted]) and outsourcing services ([Chinese characters omitted]) to customers.
"Seller Material Adverse Effect" means a material adverse effect on the
enforceability of Seller's obligations under this Agreement or the Transaction
Documents or Seller's ability to perform its obligations under this Agreement or
the Transaction Documents in a timely manner or to consummate the transactions
contemplated by this Agreement or the Transaction Documents without material
delay.
- 7 -
"Seller Plan" means a Plan that Seller or any Selling Subsidiary, or any
Affiliate, sponsors, maintains, has any obligation to contribute to, has or may
have liability under or is otherwise a party to, or that otherwise provides
benefits for employees, former employees, independent contractors or former
independent contractors (or their dependents and beneficiaries) of the Business
(other than plans related solely to the Telecommunications Applications Services
Division or the Insurance IT Services Division), on the date of this Agreement
or at any time subsequent thereto and on or prior to the Closing Date.
"Selling Subsidiaries" means LML, LBL, LIAL and any and all other
Subsidiaries of Seller through which any of the Assets are held, including any
Transferred Company to the extent the transactions contemplated hereby are
structured as an acquisition of part or all of the Assets of such Transferred
Company pursuant to Section 2.15.
"Subsidiary" means, with respect to any Person, any other Person (i) of
which the first Person owns directly or indirectly 50% or more of the equity
interest in the other Person; (ii) of which the first Person or any other
Subsidiary of the first Person is a general partner or (iii) of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions with
respect to the other Person are at the time owned by the first Person and/or one
or more of the first Person's Subsidiaries.
"Takeover Proposal" means any inquiry or proposal relating to a merger,
consolidation, share exchange, business combination, disposition or transfer of
securities or assets (or any interest therein) or other similar transaction
involving the Business (other than a transaction related solely to the
Telecommunications Applications Services Division or the Insurance IT Services
Division), the Assets or the Assumed Liabilities or any entity directly or
indirectly holding the Business (other than a transaction related solely to the
Telecommunications Applications Services Division or the Insurance IT Services
Division), the Assets or the Assumed Liabilities.
"Tangible Property" means all machinery, tools, equipment, fixtures,
vehicles, spare parts, furniture, personal computers (including desktop and
notebook computers), other computer hardware, and other tangible personal
property (other than Inventory) at the time of the Closing will be, used or held
for use in or otherwise necessary for the conduct of, the Business (other than
the Telecommunications Applications Services Division or the Insurance IT
Services Division).
"Tax" and "Taxes" means any PRC, Hong Kong, U.S. or other federal,
state, provincial, local or foreign income, gross receipts, employment, payroll,
license, excise, severance, stamp, occupation, premium, 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.
"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.
"Telecommunications Applications Services Division" means Seller's
telecommunications applications services division of the Business, operated
primarily through the ChinaWeal Group, including all of Seller's business,
assets and properties used therein, and the other business, assets and
properties devoted primarily to the provision of information technology (IT)
software and services to customers engaged primarily in the telecommunications
industry.
- 8 -
"Transferred Companies" means LCSTSL, Han Consulting and Han
Consulting's Subsidiaries, including HMCL.
"Transaction Documents" means the Note, the Bill of Sale, the Escrow
Agreement, the Assignment Agreement, the Onshore Transfer Agreements, the
Registration Rights Agreement, the Procurement Agreement, the Trademark License
Agreement, the Technology License Agreement and the Transitional Services
Agreement, collectively.
"Transitional Services Agreement" means a transitional services
agreement, dated the Closing Date, by and between Purchaser and Seller, in form
and substance reasonably satisfactory to Purchaser and Seller, providing for the
matters described in Section 5.14.
"U.S." means the United States of America.
"U.S. GAAP" means generally accepted accounting principles in the U.S.
"US$" means the lawful currency of the United State of America.
"WTITL" means Wuhan Tongpu Information Technology Co., Ltd. ([Chinese
characters omitted]).
Section 1.2. Other Defined Terms. Other terms defined are in the other parts
of this Agreement indicated below:
"Accrued Salaries and Bonuses" 2.4(j)
"AsiaInfo Share Cap" 2.11(a)
"Assets" 2.1
"Assignment Agreement" 6.2(h)
"Assumed Contracts" 2.1(f)
"Assumed Liabilities" 2.3(a)
"Beijing Office Space" 5.14
"Bill of Sale" 2.9(a)
"Board of Arbitration" 9.11(a)
"Business Financial Statements" 3.3(b)
"Business Permits" 3.12(b)
"Closing Date" 2.7
"Closing Date Balance Sheet" 2.10(a)
"Closing Date Net Assets" 2.10(a)
"Confidentiality Agreement" 5.2(a)
"Conversion Shares" 2.11(a)
"Dispute Notice" 2.10(c)
"Earn-out Objection Notice" 2.12(d)
"Earn-out Payment" 2.12(a)
"Eligible Employees" 5.11(g)
"Equity Compensation Program" 5.11(g)
"Escrow Account" 2.14
"Escrow Agreement" 2.14
"Escrow Shares" 2.14
"Exchange Act" 4.4
"Excluded Assets" 2.2
"Excluded Intellectual Property" 5.22
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"Excluded Liabilities" 2.4
"Excluded Permits" 2.1(g)
"Five Year Lock-Up Shares" 5.17(a)
"Han Financial Statements" 3.3(c)
"Han Minority Interest" 5.16
"Hong Kong" preamble
"Indemnity Amount" 7.4
"Initial Shares" 2.5(a)
"Initial Term" 5.19(b)
"Key Employees" 6.2(f)
"LCSTSL Accounts" 3.3(d)
"Lease Agreement" 6.2(m)
"Lock-Up" 5.17(a)
"Note" 2.5(a)
"Onshore Transfer Agreements" 6.2(j)
"Post-Closing Statement" 2.12(c)
"Purchase Price" 2.5(a)
"Purchase Price Allocation" 2.5(b)
"Purchaser" preamble
"Purchaser Financial Statements" 4.4
"Purchaser Indemnified Parties" 7.2(a)
"Real Property" 3.22(a)
"R&D Employees" 3.9(c)
"Registration Rights Agreement" 5.17(b)
"Representatives" 5.2(a)
"Review Period" 2.12(a)
"Reviewing Accountant" 2.10(d)
"Rules" 9.11(a)
"SEC" 3.30(c)
"Seconded Employees" 5.11(c)
"Securities Act" 3.30(a)
"Security Business Permits" 7.2(b)
"Seller" Preamble
"Seller Competitor Acquisition" 5.17(a)
"Seller Disclosure Schedule" Article III
"Seller Financial Statements" 3.3(a)
"Seller Indemnified Parties" 7.3
"Seller's Review Period" 2.12(d)
"Straddle Periods" 5.7(c)
"Tax Loss" 5.7(d)
"Technology License Agreement" 5.22
"Trademark License Agreement" 5.19(b)
"Transfer Taxes" 5.7(b)
"Transferred Employees" 5.11(a)
"Valuation Gap" 2.12(a)
- 10 -
Section 1.3. Interpretation. As used in this Agreement, except to the extent
that the context otherwise requires:
(a) when a reference is made in this Agreement to an Article, Section,
Exhibit or Schedule, such reference is to an Article or Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated;
(b) the table of contents and headings for this Agreement are for
reference purposes only and do not affect in any way the meaning or
interpretation of this Agreement;
(c) whenever the words "include," "includes" or "including" (or similar
terms) are used in this Agreement, they are deemed to be followed by the words
"without limitation";
(d) the words "hereof," "herein" and "hereunder" and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and not
to any particular provision of this Agreement;
(e) all terms defined in this Agreement have their defined meanings when
used in any certificate or other document made or delivered pursuant hereto,
unless otherwise defined therein;
(f) the definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms;
(g) if any action is to be taken by any party hereto pursuant to this
Agreement on a day that is not a Business Day, such action shall be taken on the
next Business Day following such day;
(h) references to a Person are also to its permitted successors and
assigns;
(i) the use of "or" is not intended to be exclusive unless expressly
indicated otherwise;
(j) "contract" includes any note, bond, mortgage, indenture, deed of
trust, loan, credit agreement, franchise concession, contract, agreement,
Permit, license, lease, purchase order, sales order, arrangement or other
commitment, obligation or understanding, whether written or oral;
(k) "ordinary course of business" (or similar terms) shall be deemed
followed by "consistent with past practice";
(l) "assets" shall include "rights," including rights under contracts;
(m) "reasonable efforts", "best efforts" or similar terms shall not
require the waiver of any rights under this Agreement.
ARTICLE II
PURCHASE AND SALE; CLOSING
Section 2.1. Purchase and Sale. At the Closing, upon the terms and subject
to the conditions of this Agreement, Seller will (and will cause the Selling
Subsidiaries to) sell, transfer, assign, convey and deliver or cause to be sold,
transferred, assigned, conveyed and delivered, to Purchaser (or to one or more
Purchasing Subsidiaries as designated by Purchaser at least five Business Days
before Closing), and Purchaser will (or will cause one or more Purchasing
Subsidiaries to) purchase from Seller, and acquire
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good and valid title to, free and clear of all Encumbrances (other than
Permitted Encumbrances) all of the assets, properties and rights of Seller and
its Affiliates that are now, or at the time of the Closing will be, primarily
used or held for use in the Business (collectively, the "Assets"), including all
assets reflected on the most recent balance sheet included in the Business
Financial Statements and not subsequently disposed of in the ordinary course of
business without breach of any provision of this Agreement, in each case other
than the Excluded Assets described in Section 2.2. The Assets shall include:
(a) [RESERVED];
(b) all Tangible Property;
(c) all Inventory;
(d) all trade accounts receivable, all notes receivable and other rights
to receive payments arising out of sales occurring in the conduct of the
Business (other than the Telecommunications Applications Services Division or
the Insurance IT Services Division) and the security agreements related thereto,
including any rights of any of Seller or its Affiliates with respect to any
third-party collection proceedings or any other actions or proceedings that have
been commenced in connection therewith;
(e) all Business Intellectual Property;
(f) all rights of Seller and its Affiliates under all Outstanding
Customer Contracts and, except as specifically excluded pursuant to
Section 2.2(xi), all other contracts (other than contracts of the
Telecommunications Applications Services Division or the Insurance IT Services
Division) that are now, or at the time of the Closing will be, used or held for
use in or necessary for the conduct of, the Business or relating to or arising
out of the conduct of the Business, including all contracts under which Seller
or any of its Affiliates have the right to protect the confidentiality of
information relating to the Business or to prevent third parties from competing
with the Business or soliciting employees of the Business, all agency and
distributor agreements and also including the contracts listed in Section
3.17(a) of the Seller Disclosure Schedule (the "Assumed Contracts");
(g) all Permits, other than Permits held by and used solely by the
ChinaWeal Group or Lenovo AI and the Permits listed in Section 2.1(g) of the
Seller Disclosure Schedule (the "Excluded Permits") that are now, or at the time
of the Closing will be, used or held for use in or otherwise necessary for the
conduct of, the Business, including the Business Permits listed in
Section 3.12(b) of the Seller Disclosure Schedule;
(h) all material files, documents, instruments, papers, books and
records (whether in paper, digital or other tangible or intangible form) that
are now, or at the time of the Closing will be, used or held for use in or
otherwise necessary for the conduct of, the Business (other than the
Telecommunications Applications Services Division or the Insurance IT Services
Division), the Assets or the Assumed Liabilities, including all financial
records, technical information, operating and production records, quality
control records, blueprints, research and development notebooks and files,
customer credit data, manuals, engineering and scientific data, sales and
promotional literature, drawings, technical plans, business plans, budgets,
price lists, lists of customers and suppliers and human resources and employee
benefits data;
(i) all rights, claims and causes of action that are now, or at the time
of the Closing will be, used or held for use in or otherwise necessary for the
conduct of, the Business (other than the Telecommunications Applications
Services Division or the Insurance IT Services Division) or any of the Assumed
Liabilities or the Assets (including all of Seller's or its Subsidiaries'
pre-Closing rights, claims,
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credits, causes of action or rights of set-off or counter-claim against
manufacturers or vendors pursuant to manufacturers' and vendors' warranties,
representations and guarantees covering the Tangible Property as of the
Closing);
(j) all prepaid expenses, deferred charges, advance payments, security
deposits (whether deposited with or paid by Seller or any of its Affiliates) and
similar items that are now, or at the time of the Closing will be, used or held
for use in or otherwise necessary for the conduct of, the Business (other than
the Telecommunications Applications Services Division or the Insurance IT
Services Division);
(k) all rights of Seller or any of its Affiliates under or pursuant to
all warranties, representations and guarantees made by suppliers, manufacturers
and contractors in connection with products sold or services provided to Seller
or any of its Affiliates for or in connection with the Business (other than the
Telecommunications Applications Services Division or the Insurance IT Services
Division), or in respect of any Asset;
(l) all petty cash located on the Closing Date at any facility included
in the Assets;
(m) all insurance proceeds and all rights to insurance proceeds received
or receivable in respect of any loss or casualty with respect to any asset that
will be or would be, if held by Seller or any of its Affiliates on the Closing
Date, an Asset;
(n) all proceeds, net of any direct out-of-pocket cost of disposition,
from the sale or other disposition after the date of this Agreement and prior to
the Closing Date of any asset that (A) is of a type permitted or required by
U.S. GAAP to be treated as a fixed asset on the books of the Business and (B)
but for such sale or other disposition prior to the Closing would be an Asset;
(o) all websites and domain names that are now, or at the time of the
Closing will be, used or held for use in or otherwise necessary for the conduct
of, the Business (other than the Telecommunications Applications Services
Division or the Insurance IT Services Division) as set forth in Section 2.1(o)
of the Seller Disclosure Schedule;
(p) subject to Section 2.15, either (i) all of the Assets (other than
Excluded Assets, if any) held by Han Consulting and its Subsidiary, HMCL (it
being understood that the outstanding equity interest of WTITL held by Han
Consulting shall be considered an Asset for purposes of the foregoing clause),
or (ii) all of Seller's equity interest in Han Consulting;
(q) subject to Section 2.15, either (i) all of the Assets (other than
Excluded Assets, if any) held by LCSTSL or (ii) all of Seller's equity interest
in LCSTSL.
Section 2.2. Excluded Assets. Notwithstanding any provision of this
Agreement to the contrary, Purchaser shall not acquire and there shall be
excluded from the Assets, each of the following (the "Excluded Assets"):
(i) the business, assets and properties of the ChinaWeal Group, as well
as any equity capital of any entities in the ChinaWeal Group;
(ii) all rights of Seller and the Selling Subsidiaries under this
Agreement and the documents and other papers delivered to Seller pursuant to
this Agreement;
(iii) all original financial records and tax records of Seller and its
Affiliates (other than the original financial records and tax records of the
Transferred Companies) relating to the Business,
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the Assets or the Assumed Liabilities; provided that Seller and its Affiliates
will furnish Purchaser with copies upon request and will afford Purchaser and
its Representatives access to such records as contemplated in Section 5.13(c);
(iv) the Lenovo Trademarks licensed to Purchaser under Section 5.19(b)
and the other Excluded Intellectual Property;
(v) any assets sold or otherwise disposed of in the ordinary course and
not in violation of any provisions of this Agreement or any other Transaction
Document on or prior to Closing;
(vi) any inter-company payables or receivables between (1) Seller and
its Subsidiaries (other than the Transferred Companies) and (2) the Transferred
Companies;
(vii) the other assets and business of Seller used primarily in the
Telecommunications Applications Services Division (to the extent not owned and
operated by the ChinaWeal Group) as set forth in Section 2.2(vii) of the Seller
Disclosure Schedule);
(viii) all refunds of Taxes which Seller is required to pay under
Section 5.7(d) or which Seller has paid or caused the Selling Subsidiaries or
the Transferred Companies to pay prior to Closing, net of any Tax paid upon
receipt of such refunds, and not including any refunds which are set forth as
assets on the Closing Date Balance Sheet as finally determined under Section
2.10;
(ix) except as provided in Section 2.1(l), all cash on hand or in banks,
cash equivalents, all rights in any funds of any nature (including, without
limitation, funds relating to vacation pay, workers' compensation, unemployment
compensation and other employee benefits), bank and security accounts, safe
deposit boxes and vaults, wherever maintained or held by the Business;
(x) Lenovo AI and the assets and properties of the Insurance IT Services
Division conducted by Lenovo AI;
(xi) The Software License Framework Agreement dated June 1, 2003 between
LCSTCL and LBL, which Seller shall terminate on or prior to Closing;
(xii) the Excluded Permits;
(xiii) the Real Property, which shall be made available to Purchaser or
its Subsidiaries under the Transitional Services Agreement;
(xiv) the asset and properties as set forth in Section 2.2(xiv) of the
Seller Disclosure Schedule; and
(xv) any and all accounts receivable from the Nanguan District Bureau of
Education of Changchun in connection with products and services of the Business.
Section 2.3. Assumed Liabilities.
(a) Purchaser agrees that, on the Closing Date, Purchaser will assume
and thereafter pay, perform or discharge, as the case may be, except to the
extent being contested in good faith (collectively, the "Assumed Liabilities"):
(i) other than the liabilities excluded pursuant to Section 2.4
below, all liabilities under the contracts included in the Assets;
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(ii) all liabilities for Tax for which Purchaser is not entitled
to payment under Section 5.7(d);
(iii) any liabilities for statutory compensation or severance
benefits under PRC law for the Transferred Employees for the period from their
respective dates of employment with Seller or any of its Subsidiaries as set out
in Section 2.3(a)(iii) of the Seller Disclosure Schedule until the Closing Date;
(iv) the liabilities to be prorated pursuant to Section 2.6; and
(v) to the extent reflected in the March 31st Balance Sheet or
incurred after the date thereof in the ordinary course and consistent with past
practice, all trade accounts payable arising out of sales occurring in the
conduct of the Business (other than the Telecommunications Applications Services
Division or the Insurance IT Services Division).
(b) Notwithstanding the provisions of Section 2.3(a) Purchaser shall be
required to assume obligations and liabilities that were incurred prior to the
Closing Date only to the extent of any accrual thereof in the final Closing Date
Balance Sheet.
(c) In the event of any claim against Purchaser with respect to any of
the Assumed Liabilities, Purchaser shall have, and Seller hereby assigns to
Purchaser, any defense, counterclaim or right of setoff that would have been
available to Seller or the Business if such claim had been asserted against
Seller or the Business. The assumption by Purchaser of the Assumed Liabilities
and the transfer of the Assumed Liabilities by Seller shall in no way expand the
rights or remedies of any Person against Purchaser or Seller or their respective
officers, directors, employees, stockholders and advisors as compared to the
rights and remedies that such Person would have had against such parties had
Purchaser not assumed the Assumed Liabilities. Without limiting the generality
of the foregoing, the assumption by Purchaser of the Assumed Liabilities shall
not create any third-party beneficiary rights.
Section 2.4. Excluded Liabilities. Notwithstanding any provision of this
Agreement to the contrary (and without implication that Purchaser is assuming
any liability of Seller or the Business or any liability related to any of the
Assets not expressly excluded), Purchaser is not assuming and shall not be
required to pay, perform or discharge any liabilities or obligations that are
not specifically included in the Assumed Liabilities (the "Excluded
Liabilities"). Seller shall (or shall cause an Affiliate to) pay, perform or
discharge when due or required to be performed or discharged, or contest in good
faith, the Excluded Liabilities. The Excluded Liabilities shall include the
following:
(a) all obligations and liabilities relating to or incurred in
connection with the Excluded Assets;
(b) all warranty and other obligations and liabilities based on any
actual or alleged defect in the design, manufacture, quality, conformity to
specification or fitness for purpose or maintenance requirements of any product
manufactured, licensed or sold by the Business, or any service provided by the
Business, before the Closing Date, including all product liability, product or
service warranty or maintenance obligations and liabilities and all obligations
and liabilities in respect of product recalls or product warnings (including
voluntary recalls and warnings reasonably intended to avoid or mitigate
liability) in excess of the amount to be provided for such liabilities on the
Closing Date Balance Sheet in accordance with Section 2.10(b)(iv);
(c) all Pre-Closing Environmental Liabilities;
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(d) all liabilities for Tax for which Purchaser is entitled to payment
under Section 5.7(d);
(e) all liabilities related to, associated with or arising out of any
breach or default, failure to perform, overcharges or underpayments, in each
case arising from events or actions prior to the Closing under the contracts
included in the Assets or Assumed Liabilities;
(f) all legal, accounting, brokerage, investment banking and finder's
fees or other fees and expenses incurred by or on behalf of Seller or its
Affiliates in connection with this Agreement and the transactions contemplated
hereby;
(g) all liabilities related to, associated with or arising out of any
action, claim, suit or proceeding with respect to the Assets or the operation of
the Business prior to the Closing, whether such action, claim, suit or
proceeding is brought prior to, on or after the Closing;
(h) all liabilities owed to any shareholder of any of the Transferred
Companies or their respective Subsidiaries, including any liabilities under any
shareholders' agreement to which Seller or any of its Affiliates is or was a
party;
(i) all liabilities of Seller or its Affiliates related to, associated
with or arising out of any infringement by Seller or its Affiliates of the
Intellectual Property rights of any Person;
(j) except as specifically assumed pursuant to Section 2.3(a)(iii), with
respect to past or present employees of the Business, (1) all liabilities
arising out of or in connection with any Plan or the employment of any such
employee by Seller or any of its Affiliates (including all liabilities related
to housing fund or social security fund obligations of Seller or any of its
Affiliates to past or present employees pursuant to the Zhufang Gongjijin Guanli
Tiaoli, the Shehui Baoxianfei Zhengjiao Zanxing Banfa or other laws or
regulations of the PRC) prior to the Closing and (2) any liabilities for
(i) medical, dental, disability income, life insurance or accidental death
benefits, whether insured or self insured, for claims incurred or for
disabilities commencing prior to the Closing Date, (ii) workers' compensation
(both long term and short term) benefits, whether insured or self-insured, to
the extent accruing or based upon exposure to conditions prior to the Closing
Date or for claims incurred or for disabilities commencing prior to the Closing
Date, (iii) severance liabilities (including any severance liabilities under the
Weifan He Jiechu Laodong Hetong De Jingji Buchang Banfa or other laws or
regulations of the PRC) incurred prior to Closing, and whether or not accrued
prior to the Closing Date, and (d) any salaries, bonuses or other employee
compensation of any such employee accruing or accrued before the Closing Date,
including any accrued entitlements under Seller's or any of its Affiliate's
profit sharing plan ("Accrued Salaries and Bonuses");
(k) any obligation to pay any Sales Agent Fees related to the contracts
included in the Assets that were incurred prior to the Closing Date to the
extent such liabilities exceed the provisioning (if any) made in the Closing
Date Balance Sheet for such fees in accordance with section 2.10(b)(vi);
(l) any other non-trade related liabilities of the Business to Seller,
any of its Affiliates or any other third party;
(m) any and all liabilities of the ChinaWeal Group or the
Telecommunications Applications Services Division; and
(n) any and all liabilities of Lenovo AI or the insurance
industry-focused IT services business conducted by Lenovo AI.
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Section 2.5. Purchase Price.
(a) Subject to any adjustments required pursuant to Section 2.10, the
purchase price (the "Purchase Price") for the Assets shall be payable by (i)
delivery of a number of AsiaInfo Shares having an aggregate Market Value of
RMB40,000,000 (the "Initial Shares") on the Closing Date, (ii) the issuance and
delivery of a subordinated promissory note (the "Note") that shall be
mandatorily convertible or exchangeable into a number of shares of common stock
of Purchaser having an aggregate Market Value at the time of conversion or
exchange equal to the Conversion Amount, (iii) the Earn-out Payment, if any, and
(iv) the assumption by Purchaser of the Assumed Liabilities. A form of the Note
is attached hereto as Exhibit A. In the event that, pursuant to Section 2.15,
the parties determine to enter into a forward contract in lieu of Purchaser's
issuing the Note at Closing, Exhibit A shall be revised in the form of a forward
contract with substantially the same terms.
(b) Prior to the Closing Date, Seller and Purchaser shall attempt to
reach a good faith agreement regarding the manner in which the Purchase Price
and the Assumed Liabilities will be allocated among the Assets. If Seller and
Purchaser agree on such allocation (the "Purchase Price Allocation"), the
Purchase Price Allocation shall be set forth in a schedule attached hereto as
Schedule 2.5 at Closing. Each of Seller and Purchaser shall, and shall cause
their respective Subsidiaries, to act in accordance with the Purchase Price
Allocation in the preparation and filing of all PRC, Hong Kong or U.S. Tax
Returns or other similar filings in other jurisdictions, as applicable. If the
Purchase Price is adjusted under this Agreement after the Closing, then Seller
and Purchaser will revise the Purchase Price Allocation (if one has been
mutually agreed) to appropriately reflect such adjustment.
Section 2.6. Proration of Payments. After the Closing, any regular periodic
charges with respect to the Business or the Assets, including amounts payable
with respect to leases, insurance and utilities and all real property, personal
property and similar Taxes relating to the Assets, which become due and payable
on or after the Closing Date and relate to periods both before and after the
Closing Date, shall be prorated and adjusted between Seller and Purchaser as of
the Closing Date on a per diem basis and Seller shall be responsible for and pay
to Purchaser the portion of such amounts allocable to the period prior to the
Closing Date for which payment is due on or after the Closing Date within five
Business Days of the receipt of an invoice from Purchaser.
Section 2.7. Closing. The Closing shall be held at the offices of Clifford
Chance, 3326 China World Tower I, No. 1 Jianguomenwai Avenue, Chaoyang District,
Beijing 100004, China, at 10:00 a.m. local time, on the last day of the month
following the satisfaction or waiver of all conditions set forth in Article VI
(other than conditions that, by their nature, are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions) or at
such other time or place as Purchaser and Seller mutually agree (such date and
time of the Closing being herein referred to as the "Closing Date").
Section 2.8. Closing Deliveries by Purchaser.
At the Closing, Purchaser will deliver or cause to be delivered
to Seller:
(a) share certificates representing the Initial Shares issued in the
name of Seller or duly endorsed in blank;
(b) a duly executed Note;
(c) a duly executed copy of the Transitional Services Agreement;
(d) duly executed copies of any Onshore Transfer Agreements;
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(e) a duly executed copy of the Escrow Agreement;
(f) a duly executed copy of the Registration Rights Agreement;
(g) a duly executed copy of the Assignment Agreement;
(h) a duly executed copy of the Procurement Agreement
(i) a duly executed copy of the Trademark License Agreement
(j) a duly executed copy of the Technology License Agreement; and
(k) such further instruments and documents as may be required to be
delivered by Purchaser pursuant to the terms of this Agreement or as may be
reasonably requested by Seller in connection with the Closing of the
Transactions contemplated hereby or to complete the transfer of the Assets and
the Business (other than the Telecommunications Applications Services Division
or the Insurance IT Services Division) to Purchaser, including good, sufficient
instruments of assignment with respect to the Intellectual Property being
transferred by Seller to Purchaser in recordable form, endorsements, consents,
assignments and other good and sufficient instruments of conveyance and
assignment necessary or appropriate to vest in Purchaser all right, title and
interest in, to and under the Assets.
Section 2.9. Closing Deliveries by Seller.
At the Closing, Seller will deliver or cause to be delivered to
Purchaser:
(a) a duly executed original copy of the Bill of Sale (a "Bill of Sale")
in substantially the form of Exhibit B;
(b) a duly executed copy of the Transitional Services Agreement;
(c) a duly executed copy of the Escrow Agreement;
(d) a duly executed copy of the Assignment Agreement;
(e) resignations of certain directors and officers of the Transferred
Companies as contemplated in Section 6.2(r).
(f) a duly executed copy of the Procurement Agreement;
(g) duly executed copies of any Onshore Transfer Agreements.
(h) a duly executed copy of the Registration Rights Agreement;
(i) a copy of the Equity Compensation Program;
(j) a duly executed copy of the Trademark License Agreement;
(k) a duly executed copy of the Technology License Agreement;
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(l) subject to Section 2.15, share certificates representing all of the
outstanding equity capital of Han Consulting, including the Han Minority
Interest, duly endorsed in blank or in the name of Purchaser or a Purchasing
Subsidiary designated by Purchaser;
(m) subject to Section 2.15, a certificate of approval from the relevant
PRC regulatory authorities approving the transfer of the respective equity
interests held by LML and LBL in LCSTSL to Purchaser and/or one or more
Purchasing Subsidiaries designated by Purchaser; and
(n) such further instruments and documents as may be required to be
delivered by Seller pursuant to the terms of this Agreement or as may be
reasonably requested by Purchaser in connection with the Closing of the
transactions contemplated hereby or to complete the transfer of the Assets and
the Business (other than the Telecommunications Applications Services Division
or the Insurance IT Services Division) to Purchaser, including good, sufficient
instruments of assignment with respect to the Intellectual Property being
transferred by Seller to Purchaser in recordable form, endorsements, consents,
assignments and other good and sufficient instruments of conveyance and
assignment necessary or appropriate to vest in Purchaser all right, title and
interest in, to and under the Assets.
Section 2.10. Closing Balance Sheet.
(a) As promptly as practicable following the Closing Date, but in no
event more than 90 days following the Closing Date, with the reasonable
cooperation and assistance of Seller, Purchaser will prepare and deliver to
Seller a pro forma balance sheet as of the Closing Date (the "Closing Date
Balance Sheet") setting forth the Assets and the Assumed Liabilities (except for
liabilities described in Section 2.6) that shall be prepared in accordance with
U.S. GAAP and in accordance with Section 2.10(b) below (to the extent any
provision of Section 2.10(b) is inconsistent with U.S. GAAP, the Closing Balance
Sheet shall be consistent with Section 2.10(b), and not, to the extent set forth
in Section 2.10(b), U.S. GAAP), as if the Closing Date were the end of a fiscal
year and as if the Closing Date Balance Sheet were the balance sheet of a Person
whose only assets and liabilities were the Assets and Assumed Liabilities. As
used herein, "Closing Date Net Assets" means the amount determined by
subtracting from the aggregate amount of the Assets reflected on the final
Closing Date Balance Sheet, the aggregate amount of the Assumed Liabilities
reflected on the final Closing Date Balance Sheet, as determined pursuant to
this Section 2.10.
(b) In furtherance and not in limitation to Section 2.10(a), Purchaser
and Seller agree that the Closing Date Balance Sheet shall be prepared in
accordance with the following accounting methods and policies:
(i) the value of any asset permitted or required by U.S. GAAP to
be treated as a fixed asset in the Closing Date Balance Sheet shall have been
written down to zero;
(ii) the value of all Inventory which has been, or is scheduled
to be, returned to the related suppliers for compensation shall have been
eliminated from the line item for Inventory. The value of all other Inventory
shall be written down on the following basis:
(a) 10% for Inventories aged over 3 months;
(b) 25% for Inventories aged over 4 months;
(c) 45% for Inventories aged over 5 months;
(d) 70% for Inventories aged over 6 months; and
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(e) 100% for Inventories aged over 7 months.
(iii) provisioning for any overdue account receivable shall be
made in an amount equal to 10% of the gross amount of all receivables as set out
in the Closing Date Balance Sheet;
(iv) warranty liabilities shall be accrued in an amount equal to
the product of (A) 0.5% and (B) the sum of the total revenues for the fiscal
years ended March 31, 2003 and March 31, 2004;
(v) any inter-company receivables (other than trade account
receivables) between (1) Seller and its Subsidiaries (other than the Transferred
Companies) and (2) the Transferred Companies, shall have been written off;
(vi) provisioning for Sales Agent Fees relating to contracts
included in the Assets that were entered into on or prior to the Closing Date
shall be made consistent with Seller's prior practice;
(vii) for the avoidance of doubt, no assets or liabilities
related to the transfer of any rights under the Han Loan Agreement to Purchaser
shall be included in the Closing Date Balance Sheet for purposes of calculating
the Closing Date Net Assets, regardless of whether or not such assets are
transferred at Closing; and
(vii) any other adjustments to be agreed by Seller and
Purchaser.
(c) Unless within 30 days after delivery of the Closing Date Balance
Sheet, Seller shall deliver to Purchaser a notice setting forth, in reasonable
detail, any good faith dispute as to the Closing Date Balance Sheet and the
basis for such dispute (a "Dispute Notice"), the Closing Date Balance Sheet
shall be deemed accepted by Seller and shall be final and binding.
(d) For 15 days after Purchaser's receipt of a Dispute Notice, the
parties shall endeavor in good faith to resolve by mutual agreement all matters
in the Dispute Notice. If the parties are unable to resolve any matter in the
Dispute Notice within such 15-day period, Purchaser and Seller shall engage KPMG
(or, in the event either Seller or Purchaser is a client of KPMG at such time,
an accounting firm to be mutually agreed upon by Seller and Purchaser) as the
"Reviewing Accountant" (if such accounting firm is unable or unwilling to serve
as the Reviewing Accountant, the parties shall, within 15 days after the end of
such 15-day period, agree on an alternate independent accounting firm or have
such selection made pursuant to the rules of the Hong Kong International
Arbitration Centre to resolve the remaining disputes). Purchaser and Seller will
each pay one-half of the fees and expenses of the Reviewing Accountant.
(e) Purchaser and Seller shall instruct the Reviewing Accountant to
resolve the disputed matters as promptly as practicable. The parties shall
cooperate with each other and the Reviewing Accountant in connection with the
matters set forth in this Section 2.10, including by furnishing such information
as may be reasonably requested. Each party shall afford the other parties the
opportunity to participate in all communications with the Reviewing Accountant.
The determination of the Reviewing Accountant shall be final and binding and no
party shall seek recourse to courts, other tribunals or otherwise, other than to
collect any amounts due under this Section 2.10. Judgment may be entered to
enforce the Reviewing Accountant's determination in any court having
jurisdiction over the party against which such determination is to be enforced.
(f) Upon the final determination of the Closing Date Balance Sheet, if
the Closing Date Net Assets are less than RMB100,000,000, then (i) in the event
the Conversion Date has not yet occurred
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prior to such final determination, the Conversion Amount shall be reduced by an
amount equal to such difference, or (ii) in the event the Conversion Date has
occurred prior to such final determination, Seller shall, within 5 Business Days
of such final determination, return to Purchaser, AsiaInfo Shares having a
Market Value as of the Conversion Date equal to the amount by which the Closing
Date Net Assets are less than RMB100,000,000.
Section 2.11. Conversion of the Note
(a) Conversion. Pursuant to the terms and conditions thereof, on the
Conversion Date, the Note shall be converted into a number of AsiaInfo Shares
(the "Conversion Shares") equal to the Conversion Amount divided by the Market
Value of the AsiaInfo Shares on such date; provided, however, that the aggregate
number of AsiaInfo Shares into which the Note shall be convertible will not
exceed 4,498,130 shares (the "AsiaInfo Share Cap"). The AsiaInfo Share Cap shall
be subject to proportionate adjustment in the event of share splits, share
combinations, or share dividends by Purchaser.
(b) Share Cap Adjustment Payment. In the event that, as a result of the
AsiaInfo Share Cap, the Conversion Amount is greater than the Market Value of
the maximum number of Conversion Shares on the Conversion Date, the difference
shall be paid by Purchaser to Seller in cash or in AsiaInfo Shares having an
aggregate Market Value on the Conversion Date equal to such difference, or in
any combination thereof, at the sole and absolute discretion of Purchaser.
(c) Indemnity Adjustment. If Seller is liable to make an indemnification
payment to Purchaser pursuant to Article VII of this Agreement and the
Conversion Date has not occurred at the time of delivery of the relevant
indemnity claim, the Conversion Amount shall be reduced by an amount equal to
such indemnification payment.
Section 2.12. Earn-out.
(a) Subject to, and in accordance with, the other provisions of this
Section 2.12, if during the first 12 full calendar months following the Closing
Date (the "Review Period"), the product obtained by multiplying the Operating
Income of Purchaser's Non-Telecommunications Business during such period times
ten exceeds the Base Valuation, Purchaser (or one or more Purchasing
Subsidiaries) shall pay Seller an amount (the "Earn-out Payment") equal to such
difference (the "Valuation Gap") in cash or in AsiaInfo Shares having an
aggregate Market Value as of the last Business Day of the Review Period equal to
such difference. The use of cash or AsiaInfo Shares to satisfy the Earn-out
Payment shall be at the sole and absolute discretion of Purchaser. For the
avoidance of doubt, no businesses, assets or companies acquired by Purchaser
after the date hereof, other than as contemplated in this Agreement, shall be
included in Operating Income for purposes of the Earn-out Payment.
(b) During the Review Period, Purchaser shall operate the Business only
in the ordinary course and any transaction relating to the Business between
Purchaser and its Affiliates shall be an arm's-length, negotiated transaction on
terms that shall not be less or more favorable than terms that would have been
received from an unrelated party. During the Review Period, Purchaser will
afford Seller and its Representatives (i) access to the financial records of the
Non-Telecommunications Business as Seller may reasonably request and (ii) the
right to make copies and extracts therefrom. The Earn-out Payment shall be made
within ninety (90) days after the end of the Review Period (A) in the event of
payment in cash, by wire transfer to an account designated by Seller, or (B) in
the event of payment in AsiaInfo Shares, by delivering a certificate reflecting
the number of AsiaInfo Shares to be issued or delivered by Purchaser under this
Section 2.12. In the event that the Earn-out Payment is made in AsiaInfo Shares,
such shares shall not be subject to the lock-up provisions in Section 5.17(a)
and Seller shall be entitled to one demand registration on Form S-3 in respect
of such shares pursuant to the Registration Rights Agreement.
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(c) Within sixty days following the end of the Review Period, Purchaser
shall (A) prepare or cause to be prepared a statement setting forth the
Operating Income of the Business, which shall be calculated in accordance with
U.S. GAAP, for the Review Period (the "Post-Closing Statement") and (B) deliver
or cause to be delivered to Seller the Post-Closing Statement.
(d) During the twenty business days immediately following the receipt by
Seller of the Post-Closing Statement (the "Seller's Review Period"), Seller and
its accountants and attorneys shall be entitled to review such items and any
working papers, trial balance and similar materials relating thereto prepared by
Purchaser, its accountants or other personnel. If Seller in good faith disagrees
with the Post-Closing Statement, Seller may deliver to Purchaser, within
Seller's Review Period, a notice (the "Earn-out Objection Notice") setting forth
in reasonable detail (A) the amounts with which Seller disagrees and the basis
for such disagreement and (B) Seller's proposed corrections to the Post-Closing
Statement. Seller shall be deemed to have agreed with all amounts contained in
the Post-Closing Statement to which no specific objection has been made. If
Seller does not deliver an Earn-out Objection Notice prior to the expiration of
Seller's Review Period, Seller shall be deemed to agree in all respects with
Purchaser's calculation of the Operating Income of the Business for the Review
Period, and the amounts set forth in the Post-Closing Statement shall be final
and binding upon Seller and Purchaser.
(e) If an Earn-out Objection Notice is properly and timely delivered,
Seller and Purchaser shall negotiate in good faith with each other to resolve
the disputed amounts set forth in the Earn-out Objection Notice. If the parties
are unable to resolve the disputed amounts set forth in the Earn-out Objection
Notice within five calendar days after Seller's delivery of the Earn-out
Objection Notice to Purchaser, the parties shall cause the Reviewing Accountant
to promptly review this Agreement and the disputed amounts in the Post-Closing
Statement for the purpose of calculating the Operating Income of the Business
for the Review Period. In making any such calculations, the Reviewing Accountant
shall consider only those amounts in the Post-Closing Statement as to which
Seller has, in the Earn-out Objection Notice, disagreed.
(f) The Reviewing Accountant shall deliver to Seller and Purchaser, as
promptly as practicable, but no later than ten (10) calendar days after the
Reviewing Accountant are engaged, a written report setting forth its calculation
of the disputed amounts. Upon such delivery, such report and the calculations
set forth therein shall be final and binding upon Seller and Purchaser. The cost
of such review and report shall be borne equally by Seller and Purchaser.
Section 2.13. US$ to RMB Exchange Rate. For purposes of the conversion of
the Note and for all other calculations to be made pursuant to this Agreement
where the value of currency, securities or other assets denominated in US$ is
compared to the value of currency, securities or other assets denominated in
RMB, the exchange rate for such calculation shall be US$1.00 to RMB8.2574,
regardless of any official, published or other exchange rate available on the
date hereof, on the date of such calculation, or otherwise.
Section 2.14. Escrow Arrangement. On the Conversion Date, Conversion Shares
issuable (or deliverable) upon conversion of the Note having an aggregate Market
Value of RMB100,000,000 on the Conversion Date (the "Escrow Shares") shall be
issued in the name of, or transferred to, Seller and deposited with the Escrow
Agent, who shall hold such Escrow Shares in an account (the "Escrow Account")
for a period of two years following the Closing Date, under an escrow agreement
substantially in the form of Exhibit C (the "Escrow Agreement") to be entered
into on the Closing Date by Seller, Purchaser and the Escrow Agent. For
avoidance of doubt, all Conversion Shares that are not Escrow Shares shall be
delivered to Seller as provided in the Note. Escrow Shares having an aggregate
Market Value as of the Conversion Date of up to RMB50,000,000 shall be used to
satisfy Seller's indemnification obligations (if any) under Section 7.2(a) and
Escrow Shares having an aggregate Market Value as of the
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Conversion Date of up to RMB50,000,000 shall be used to satisfy Seller's
indemnification obligations (if any) under Section 7.2(b). All Escrow Shares
delivered to Purchaser in satisfaction of an indemnity claim shall be valued on
the basis of the Market Value ascribed to such shares on the Conversion Date.
Release of the Escrow Shares shall be subject to the Escrow Agreement and this
Agreement.
Section 2.15. Modification of Structure; As promptly as practicable after
the date hereof the parties shall cooperate in good faith to determine the most
advantageous structure for the acquisition of the Assets contemplated hereunder
from the perspective of both parties' tax, accounting and regulatory concerns.
Such structure may take the form of (i) a direct transfer from Seller and/or
Selling Subsidiaries of the Assets to Purchaser and/or Purchasing Subsidiaries,
(ii) a transfer of the outstanding shares or equity interests of one or more
Transferred Companies, (iii) a statutory merger of one or more entities with
other heretofore existing or special purpose entities, or (iv) any combination
of one or more of the structures described in the foregoing clauses (i), (ii)
and (iii). Without limiting the generality of the foregoing, it is specifically
acknowledged and agreed that (a) the acquisitions of LCSTSL and Han Consulting
may take the form of an acquisition of equity or an acquisition of assets,
(b) with respect to any Assets, those Assets may be held prior to, and at the
time of, the Closing by an entity the shares of which are transferred at Closing
to Purchaser or one of its Affiliates, (c) a portion of the Purchase Price due
at Closing hereunder may be paid in cash, with a corresponding reduction in the
non-cash consideration to be paid at Closing, provided that such amount of cash
does not exceed one percent of the Purchase Price to be paid at Closing, (d) one
or more Affiliates of Purchaser, rather than Purchaser, may transfer the Initial
Shares to Seller, (e) in lieu of Purchaser's issuing the Note, the parties may
enter into a forward contract at Closing with substantially the same economic
characteristics of the Note in the event the issuance of such forward contract
would avoid adverse tax consequences otherwise associated with the Note and (f)
the Note may be issued in the name of Seller or any Subsidiary designated by
Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Selling Subsidiaries, jointly and severally, represent and
warrant to Purchaser that, except as set forth in the disclosure schedule
delivered by Seller and Selling Subsidiaries to Purchaser prior to the execution
and delivery of this Agreement, which identifies exceptions only by the specific
Section or subsection to which each entry relates (the "Seller Disclosure
Schedule"):
Section 3.1. Organization and Qualification.
(a) Each of Seller, the Selling Subsidiaries and the Transferred
Companies is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, license, use, lease and operate its assets
and properties (including the Assets) and to carry on its business (including
the Business) as it is now being conducted. Except for the equity capital of the
Transferred Companies, neither the Assets nor the Assumed Liabilities include
any securities or ownership interests of any Person.
(b) The name of each director and officer of each of the Transferred
Companies on the date hereof, and the position held by each, are listed in
Section 3.1(b) of the Seller Disclosure Schedule. Each of the Transferred
Companies has, prior to Closing, delivered to Purchaser true and complete copies
of its memorandum and articles of association or similar organization documents
as in effect on the date hereof.
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(c) The authorized share capital of Han Consulting consists of one class
and one series of shares divided into 50,000 shares of US$1.00 par value, of
which 5,000 shares are issued and outstanding. The shares outstanding are duly
authorized, validly issued, fully paid and nonassessable.
(d) The registered capital of LCSTSL has been fully paid up and LML and
LBL own 25% and 75%, respectively, of the outstanding equity interest in LCSTSL.
(e) The registered capital of HMCL has been fully paid up and Han
Consulting owns 100% of the equity interest in HMCL.
(f) The registered capital of WTITL has been fully paid up and Han
Consulting owns 40% of the outstanding equity interest in WTITL.
Section 3.2. Authority; Non-Contravention; Approvals
(a) Each of Seller and the Selling Subsidiaries has all requisite
corporate power and authority to execute and deliver this Agreement and the
Transaction Documents to which it is a party and to perform the transactions
contemplated by this Agreement and the Transaction Documents. The execution and
delivery of this Agreement and the Transaction Documents and the performance by
the Selling Subsidiaries and Seller of the transactions contemplated by this
Agreement and the Transaction Documents have been approved by the Board of
Directors of Seller and, where applicable, the respective shareholders of the
Selling Subsidiaries, and no other corporate or other proceedings on the part of
Seller or the Selling Subsidiaries are necessary to authorize the execution and
delivery of this Agreement and the Transaction Documents by Seller and the
Selling Subsidiaries and the performance by Seller and the Selling Subsidiaries
of the transactions contemplated by this Agreement and the Transaction
Documents. This Agreement has been, and upon their execution the Transaction
Documents will be, duly executed and delivered by Seller, assuming the due
authorization, execution and delivery of this Agreement and the Transaction
Documents by Purchaser, constitutes, and upon their execution the Transaction
Documents will constitute, valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms.
(b) Except as set forth on Section 3.2(b) of the Seller Disclosure
Schedule, the execution and delivery by Seller of this Agreement and the
Transaction Documents and the performance of the transactions contemplated by
this Agreement and the Transaction Documents do not and will not (i) conflict
with or result in a breach of any provision of the respective memorandum and
articles of association or similar corporate documents of Seller or any of the
Selling Subsidiaries or any of the Transferred Companies; (ii) result in a
violation or breach of or constitute a default (or an event which, with or
without notice or lapse of time or both, would constitute a default) under, or
result in the termination, modification or cancellation of, or the loss of a
benefit under or accelerate the performance required by, or result in a right of
termination, modification, cancellation or acceleration under the terms,
conditions or provisions of any contract or other instrument (including those
contracts or other instruments included in the Assets or Assumed Liabilities) of
any kind to which Seller or any of the Selling Subsidiaries or any of the
Transferred Companies is now a party or by which Seller, any of the Selling
Subsidiaries, or any of the Transferred Companies, the Business or any of the
Assets or Assumed Liabilities may be bound or affected; or (iii) violate any
order, writ, injunction, decree, statute, treaty, rule or regulation applicable
to Seller, any of the Selling Subsidiaries, or any of the Transferred Companies,
the Business, the Assets or the Assumed Liabilities other than, in the case of
clauses (ii) and (iii) above as would not have a Business Material Adverse
Effect or Seller Material Adverse Effect.
(c) Except as disclosed in Section 3.2(c) of the Seller Disclosure
Schedule, to the best knowledge of Seller, no declaration, filing or
registration with, or notice to, or authorization, consent,
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order or approval of, any Governmental Authority or other Person is required to
be obtained or made in connection with or as a result of the execution and
delivery of this Agreement and the Transaction Documents by Seller or the
performance by Seller or any of the Selling Subsidiaries or any of the
Transferred Companies of the transactions contemplated by this Agreement and the
Transaction Documents.
Section 3.3. Financial Statements.
(a) Section 3.3(a) of the Seller Disclosure Schedule sets forth the
audited balance sheet of Seller for each of the three years ended as of
March 31, 2002, 2003, and 2004 and the related audited statements of income,
cash flows and stockholders' equity for the periods then ended, (collectively,
the "Seller Financial Statements"). The Seller Financial Statements were
prepared in accordance with Hong Kong GAAP on a basis consistent with prior
periods and fairly present the financial position and results of operations of
Seller as of their respective dates and for the respective periods presented.
(b) Section 3.3(b) of the Seller Disclosure Schedule sets forth the
unaudited balance sheet of the Business on a stand alone basis for the year
ended March 31, 2004, and for the quarterly period ended June 30, 2004, and the
related unaudited statement of income for each of the periods then ended
(collectively, the "Business Financial Statements"). The Business Financial
Statements were prepared in accordance with Hong Kong GAAP on a basis consistent
with prior periods and fairly present the financial position and results of
operation of the Business as of their respective dates and for the respective
periods presented (subject to the absence of certain footnote disclosures
otherwise required by Hong Kong GAAP).
(c) Section 3.3(c) of the Seller Disclosure Schedule sets forth the
unaudited balance sheet of Han Consulting for each of the two years ended as of
March 31, 2003, and 2004 and the related unaudited statements of income and
stockholders' equity for the periods then ended (collectively, the "Han
Financial Statements"). The Han Financial Statements were prepared in accordance
with Hong Kong GAAP on a basis consistent with prior periods and fairly present
the financial position and results of operations of Han Consulting as of their
respective dates and for the respective periods presented (subject, in the case
of the unaudited portions of the Han Financial Statements, to the absence of
certain footnote disclosures otherwise required by Hong Kong GAAP).
(d) Section 3.3(d) of the Seller Disclosure Schedule sets forth the
statutory accounts of LCSTSL as of and for the year ended as of December 31,
2003 (the "LCSTSL Accounts"). The LCSTSL Accounts were prepared in accordance
with PRC GAAP on a basis consistent with prior periods and fairly present the
financial position and results of operations of LCSTSL as of such date and for
the period presented.
(e) Section 3.3(e) of the Seller Disclosure Schedule sets forth the
statutory accounts of HMCL as of and for each of the three years ended December
31, 2001, 2002 and 2003 (the "HMCL Accounts"). The HMCL Accounts were prepared
in accordance with PRC GAAP on a basis consistent with prior periods and fairly
present the financial position and results of operations of HMCL as of their
respective dates and for the respective period presented.
Section 3.4. Absence of Undisclosed Liabilities. There are no liabilities or
obligations relating to the Business of any nature, whether accrued, contingent
or otherwise, and there is no existing condition, situation or set of
circumstances that reasonably could be expected to result in such a liability or
obligation, except for liabilities or obligations (a) reflected in the March
31st Balance Sheet or (b) that were incurred since the date of the March 31st
Balance Sheet, were normal and recurring expenses
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incurred in the ordinary course of business and could not reasonably be expected
to have a Business Material Adverse Effect.
Section 3.5. Absence of Certain Changes or Events. Except as set forth in
Section 3.5 of the Seller Disclosure Schedule, since the date of the March 31st
Balance Sheet (a) there has not been any event, circumstance, change or effect
that has had or reasonably could be expected to have a Business Material Adverse
Effect; (b) the Business has been conducted only in the ordinary course; and
(c) none of the actions set forth in Section 5.1 have occurred with respect to
the Business, Assets or Assumed Liabilities.
Section 3.6. Books and Records. The minute books and other similar records
of Seller, the Selling Subsidiaries and the Transferred Companies as made
available to Purchaser prior to the execution of this Agreement contain a true
and complete record, in all material respects, of all actions taken at all
meetings and by written consents in lieu of meetings of the board of directors
and committees of the board of directors of Seller, the Selling Subsidiaries and
the Transferred Companies relating to the Business.
Section 3.7. Tax Matters.
(a) All Tax Returns required to be filed by Seller or its Subsidiaries
with respect to the Business or any of the Assets and all Tax Returns required
to be filed by the Transferred Companies have been timely filed. All such Tax
Returns were correct and complete. All Taxes (whether or not shown on any Tax
Return) of the Transferred Companies have been paid or accrued. All Taxes due
and payable (whether or not shown on any Tax Return) have been paid, the
nonpayment of which could result in an Encumbrance on an Asset, a Business
Material Adverse Effect or result in Purchaser or any of its Affiliates having
any liability therefor. No claim has been made by an authority in a jurisdiction
where Seller, a Subsidiary of Seller or a Transferred Company does not file Tax
Returns that Seller, such Subsidiary or such Transferred Company is or may be
subject to taxation by that jurisdiction.
(b) Seller, its Subsidiaries and the Transferred Companies have withheld
and paid all Taxes with respect to the Business or the Assets required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, except to
the extent such failure to withhold or pay could not reasonably be expected to
have a Business Material Adverse Effect.
(c) No audit or other administrative proceeding is pending or
threatened, and no judicial proceeding is pending or threatened, that involves
any Tax or Tax Return relating to a Transferred Company, the Business or any of
the Assets.
(d) Except as set forth in Section 3.7(d) of the Seller Disclosure
Schedule, to the best knowledge of Seller, there are no agreements and rulings
relating to Taxes requested or received from any Governmental Authority by or
with respect to a Transferred Company or with respect to the Assets or the
Business.
(e) None of the Assets are (i) located in a country outside Seller's or
any of the Selling Subsidiaries' country of incorporation; or (ii) U.S. real
property interests as described in Section 897 of the Code. None of the
Transferred Companies conduct a business in the United States or owns (i) real
property located in the United States, (ii) debt that is secured by (or any
other contractual right pursuant to which such Transferred Company is entitled
under any circumstances to acquire) real property located in the United States
or (iii) stock or securities issued by an entity formed under U.S. law. None of
the Transferred Companies have filed a U.S. Tax Return or made any election for
U.S. Tax purposes and, to
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the knowledge of Seller or any of its Subsidiaries, no direct or indirect
investor in a Transferred Company has reported information relating to such
Transferred Company on a U.S. Tax Return of such investor or has made an
election relating to such Transferred Company for U.S. Tax purposes.
(f) Neither Seller nor any of its Subsidiaries is obligated in
connection with the Business or any of the Assets to pay the Taxes of another
person by contract, as transferee, as successor or otherwise.
(g) No Transferred Company has been a member of an affiliated,
consolidated, combined or unitary group for Tax purposes, and no Transferred
Company is party to any Tax sharing, Tax allocation or Tax indemnity agreement.
Section 3.8. Employee Benefits.
(a) Section 3.8(a) of the Seller Disclosure Schedule contains a true and
complete list and description of each of the Seller Plans. Seller has delivered
to Purchaser accurate and complete copies of all Seller Plan documents
maintained by Seller or covering any employee of the Business. Seller has not
scheduled or agreed upon future increases of benefit levels (or creation of new
benefits) with respect to any Plan, and no such increases or creation of
benefits have been proposed, made the subject of representations to employees or
requested or demanded by employees under circumstances which make it reasonable
to expect that such increases would be granted. Except as disclosed in
Section 3.8(a) of the Seller Disclosure Schedule, no loan is outstanding between
Seller and its Subsidiaries and any employee of the Business other than cash
advances to such employee in the ordinary course.
(b) Each of the Seller Plans is, and its administration (including with
respect to reporting and disclosure) is and has been, in compliance with, its
terms and with applicable Law (including all tax rules compliance with which is
required for any intended favorable tax treatment).
(c) Except as set forth in Section 3.8(c) of the Seller Disclosure
Schedule, no benefit under any Seller Plan, including any severance or parachute
payment plan or agreement, will be established or become accelerated, vested or
payable by reason of any transaction contemplated under this Agreement.
(d) To the knowledge of Seller, there are no pending or threatened
claims by or on behalf of any Seller Plan, by any person covered thereby, or
otherwise, which allege violations of any applicable laws or regulations which
could reasonably be expected to result in liability on the part of Purchaser,
any Purchasing Subsidiary, Seller, any Selling Subsidiary, or any fiduciary of
any such Seller Plan, nor is there any basis for such a claim.
(e) Except as set forth in Section 3.8(e) of the Seller Disclosure
Schedule, all contributions, premiums and other payments required under
applicable laws or regulations or any Seller Plan or other agreement to be made
under any such Plan have been made by the due date thereof, and any and all
contributions, premiums and other payments with respect to compensation or
service before and through the Closing, or otherwise with respect to periods
before and through the Closing, due from Seller or its Subsidiaries to, under or
on account of each Seller Plan shall have been paid prior to Closing or shall
have been fully reserved and provided for in the Business Financial Statements.
(f) Neither Seller nor any of its Subsidiaries is in default in
performing any of its contractual obligations under any of the Seller Plans.
- 27 -
(g) To the knowledge of Seller, and without limiting the generality of
any other provision of this Section 3.8, no event has occurred and no condition
exists, with respect to any Plan, that has subjected or could subject Purchaser,
Seller, or any Seller Plan or any successor thereto, to any Tax, fine, penalty
or other liability (other than a liability arising in the normal course to make
contributions or payments, as applicable, when ordinarily due under the Seller
Plans with respect to employees of Seller, the Selling Subsidiaries or the
Transferred Companies).
(h) Neither Seller nor any of its Subsidiaries has ever maintained,
contributed to or had any liability with respect to any Plan that is or was ever
subject to any federal, state or local law in the United States, nor have any of
them ever had employees located in the United States.
Section 3.9. Employment Matters.
(a) Section 3.9(a) of the Seller Disclosure Schedule contains a true and
complete list of the name and current annual salary and any bonus or commitment
to pay any other amount or benefit in connection with a termination of
employment, if applicable, of all officers, directors and employees of or
related to the Business (other than the employees of the ChinaWeal Group and
Lenovo AI), together with a statement of the full amount of all remuneration
paid by Seller or its Subsidiaries. To the best knowledge of Seller, the Selling
Subsidiaries and the Transferred Companies, no such Persons have made a threat
or otherwise indicated any intent to Seller, to Selling Subsidiaries or to any
of the officers or directors of Seller or the Business to cancel or otherwise
terminate such Person's relationship with Seller, the Selling Subsidiaries, the
Transferred Companies or the Business.
(b) Except as otherwise contemplated in this Agreement, to the best
knowledge of Seller, neither the execution and delivery of this Agreement or the
Transaction Documents, nor the performance of the transactions contemplated
thereby, will (either alone or in conjunction with any other event, such as
termination of employment) (i) result in any material payment (including
severance payments, payments under any other agreements or unemployment
compensation payments) becoming due to any director or any employee of Seller,
any of the Selling Subsidiaries or any of the Transferred Companies under any
Seller Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Seller Plan or (iii) result in any acceleration of the time of
payment or vesting of any material benefits.
(c) Section 3.9(c) of the Seller Disclosure Schedule sets forth a true
and complete list of all employees of Seller engaged in research and development
in connection with products and services marketed and distributed by the
Security Services Division (the "R&D Employees").
Section 3.10. Labor Relations. Except as set forth in Section 3.10 of the
Seller Disclosure Schedule, there is no unfair labor practice, charge or
complaint or other proceeding pending or, to the knowledge of Seller, the
Selling Subsidiaries or the Transferred Companies, threatened against any of the
Assets or Seller, the Selling Subsidiaries or the Transferred Companies relating
to the Business. Seller, and any Affiliate of Seller that participates in any
part of the Business, are in compliance with all laws applicable to the Business
respecting employment and employment practices, terms, and conditions of
employment, and wages and hours. None of Seller, the Selling Subsidiaries and
the Transferred Companies is a party to and have liability with respect to any
collective bargaining agreement or other labor union contract applicable to
Persons employed by Seller or any Subsidiary of Seller in the Business, nor does
Seller know of any activities or proceedings of any labor union or other Person
to organize any such employees. There is no labor strike, slowdown, work
stoppage or lockout pending, or to the knowledge of Seller, threatened, against
or affecting the Business, nor has there been any such activity within the past
two years.
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Section 3.11. Litigation. Except as set forth in Section 3.11 of the Seller
Disclosure Schedule, there are no claims, suits, proceedings, actions,
investigations, oppositions, challenges, cancellation proceedings or changes
pending or, to the knowledge of Seller or Selling Subsidiaries, threatened
against or affecting Seller or Selling Subsidiaries or any of the Transferred
Companies or relating to or affecting the Assets, the Business or the Assumed
Liabilities that, if adversely determined, would reasonably be expected to
result in a Business Material Adverse Effect or Seller Material Adverse Effect.
There are no outstanding orders, writs, judgments, decrees, injunctions or
settlements that restrict the Business, the Assets or the Assumed Liabilities in
any material respect.
Section 3.12. No Violation of Law; Permits.
(a) Except as set forth in Section 3.12(a) of the Seller Disclosure
Schedule, none of Seller, the Selling Subsidiaries or the Transferred Companies
or the Business is or in the past three years has been in default under or in
violation of, or has been charged with any violation of, any law, statute,
order, rule, regulation, ordinance or judgment (including any applicable
environmental, labor, export control or foreign corrupt practices law,
ordinance, decree or regulation) of any Governmental Authority to which Seller,
the Selling Subsidiaries, or the Transferred Companies, the Business or any of
the Assets or Assumed Liabilities is or was subject.
(b) The Assets include all Permits that are now, or at the time of the
Closing will be, used or held for use in or otherwise necessary for the conduct
of, the Business and the Assets (collectively, the "Business Permits"), except
for the Excluded Permits and such Permits the absence of which could not
reasonably be expected to have a Business Material Adverse Effect.
Section 3.12(b) of the Seller Disclosure Schedule contains a true and complete
list of all of the Business Permits, setting forth the owner, the function and
the expiration and renewal dates of each. All the Business Permits have been
legally obtained and maintained and are in full force and effect. None of
Seller, the Selling Subsidiaries, or the Transferred Companies, the Business or
any of the Assets is in violation of or is being operated in violation of the
terms of any Business Permit.
(c) Except as set forth in Section 3.12(c) of the Seller Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
performance of any of the transactions contemplated hereby will: (i) require any
assignment, consent, waiver or other action in respect of any Business Permit;
(ii) result in the termination or modification of any Business Permit; or
(iii) result in a need for additional Permits.
(d) Without limiting the generality of paragraph (a) above, all Business
Permits required under PRC law for the due and proper establishment and
operation of each Seller Subsidiary and each Transferred Company (other than Han
Consulting) and for the conduct of the business of each Seller Subsidiary and
each Transferred Company (other than Han Consulting) have been duly obtained
from the relevant PRC authorities and are in full force and effect. All filings
and registrations with the relevant PRC authorities required in respect of each
Seller Subsidiary and each Transferred Company (other than Han Consulting) and
their respective operations, including but not limited to registration with
MOFCOM, the State Administration for Industry and Commerce, the State
Administration of Foreign Exchange or their respective local branches, and the
relevant tax bureau, customs authorities and product registration authorities,
have been duly completed in accordance with the relevant PRC rules and
regulations.
(e) To the best knowledge of Seller, there are no circumstances that
will result in the transactions contemplated by this Agreement or any other
Transaction Document to be invalidated under the relevant provisions of the
bankruptcy, liquidation or insolvency Laws of the PRC.
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Section 3.13. Title to Assets; Encumbrances. The Selling Subsidiaries have
good, valid and marketable title to all of the Assets, free and clear of all
Encumbrances other than Permitted Encumbrances and, at the Closing, will convey
to Purchaser good, valid and marketable title to all of the Assets, free and
clear of all Encumbrances other than Permitted Encumbrances.
Section 3.14. Entire Business. The Assets constitute all of the assets,
properties and rights used in or necessary for the conduct of the Business as
heretofore conducted by Seller, the Selling Subsidiaries or the Transferred
Companies (except for the Excluded Assets) and are adequate to conduct the
Business (other than the Telecommunications Applications Services Division or
the Insurance IT Services Division) as presently conducted. Except for the
Excluded Assets, immediately following the Closing, neither Seller nor any of
the Selling Subsidiaries will own any assets, properties or rights that are used
in or are necessary for the conduct of the Business. Other than the Excluded
Assets, there are no material facilities, services, assets or properties that
are used by Seller in the conduct or operation of the Business (other than the
Telecommunications Applications Services Division or the Insurance IT Services
Division). Upon consummation of the transactions contemplated by this Agreement,
Purchaser will have acquired good and valid title in and to, or a valid
leasehold interest in, each of the Assets free and clear of all Encumbrances
other than Permitted Encumbrances.
Section 3.15. Transactions with Affiliates. Except as set forth in
Section 3.15 of the Seller Disclosure Schedule, no portion of the Business is
conducted by, with or through an Affiliate of Seller or Selling Subsidiaries. No
director, officer, stockholder or parent company of Seller and Selling
Subsidiaries has since March 31, 2002: (a) borrowed money from or loaned money
to the Business that remains outstanding (other than cash advances to such
directors and officers in the ordinary course of business) (b) any contractual
or other claim, express or implied, of any kind whatsoever against or in respect
of the Business; (c) to the best knowledge of Seller, any interest in any assets
used or held for use in the Business; (d) engaged in any other transaction with
or in respect of the Business; or (e) owned any interest in (except not more
than ten percent stockholdings for investment purposes in securities of publicly
held and traded companies), or served as an officer, director, employee or
consultant of or otherwise receives remuneration from, any Person that is, or
has engaged in business as, a competitor, lessor, lessee, customer or supplier
of the Business.
Section 3.16. Insurance. Section 3.16 of the Seller Disclosure Schedule sets
forth a complete and correct list of all policies held by or on behalf of Seller
or any Affiliate of Seller relating to the Business and a brief description of
such policies, including the names and addresses of the insurers, the principal
insured and each named insured, the policy number and period of coverage, the
expiration dates, the annual premiums and payment terms, a brief description of
the interests insured by such policies and the amount of any deductible. Seller
has delivered to Purchaser a complete and correct copy of all such policies
together with (i) all riders and amendments thereto and (ii) if completed, the
applications for each of such policies. Neither Seller nor any of its
Subsidiaries maintains any self-insurance arrangement with respect to the
Business. The insurance policies listed on Section 3.16 of the Seller Disclosure
Schedule include all policies of insurance that are required by material
commercial contracts relating to the Business, in the amounts required under the
respective contracts. All the insurance policies listed on Section 3.16 of the
Seller Disclosure Schedule are in full force and effect, all premiums due and
payable thereon have been paid and no notice of cancellation or termination has
been received with respect to any such policy. The insurance policies referred
to in this Section 3.16 will remain in full force and effect and will not in any
way be affected by or terminate by reason of, any of the transactions
contemplated by this Agreement.
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Section 3.17. Contracts and Other Agreements.
(a) Section 3.17(a) of the Seller Disclosure Schedule lists all material
contracts to which Seller or any of its Subsidiaries is a party and that are
included in the Assets or the Assumed Liabilities in accordance with Article II,
other than contracts that involve the payment of less than US$20,000 per year
and that are not otherwise material to the Business. Notwithstanding the
foregoing, Section 3.17(a) of the Seller Disclosure Schedule lists all contracts
to which Seller or any of its Subsidiaries is a party and that are included in
the Assets or the Assumed Liabilities which could reasonably be expected to have
the effect of prohibiting or impairing the ability of Purchaser or any of its
Subsidiaries from carrying on any business or operation now or in the future.
(b) Each contract included in the Assets or Assumed Liabilities is in
full force and effect and constitutes a legal, valid and binding agreement,
enforceable against Seller or its Affiliate and, to the knowledge of Seller,
each other party thereto, in accordance with its terms, except as would not
reasonably be expected to result in a Business Material Adverse Effect. Neither
Seller nor any Affiliate of Seller nor, to the knowledge of Seller, any other
party to any such contract is in violation or breach of, or in default under,
nor has there occurred an event or condition that with the passage of time or
giving of notice (or both) would constitute a default under, or permit the
termination of, any such contract, except as would not reasonably be expected to
result in a Business Material Adverse Effect.
(c) Seller has delivered to Purchaser true and complete copies (or if
none exist, reasonably complete and accurate written descriptions) of each
contract listed on Section 3.17(a) of the Seller Disclosure Schedule, together
with all amendments and supplements thereto.
(d) Section 3.17(d) of the Seller Disclosure Schedule contains, to the
best knowledge of Seller, a complete list of all of the Outstanding Customer
Contracts for the provision of products and services of the Business (other than
the Telecommunications Applications Services Division or the Insurance IT
Services Division) to its customers. The matters set forth on Section 3.17(d) of
the Seller Disclosure Schedule with respect to the Outstanding Customer
Contracts (including, without limitation, the representations on Section 3.17(d)
of the Seller Disclosure Schedule regarding the contract amounts, amounts billed
and amounts collected under the Outstanding Customer Contracts as of the date
hereof) are true, complete and correct in all material respects. Seller and its
Subsidiaries have performed their respective obligations under the Outstanding
Customer Contracts in all material respects and have taken, and will take, all
actions necessary to discharge their respective future obligations as they
become due.
Section 3.18. Tangible Personal Property. The Tangible Property is in good
operating condition, subject to continued repair and replacement in accordance
with past practice, and Seller, the Selling Subsidiaries and the Transferred
Companies have not received notice that any of the Tangible Property is in
violation of any existing law or order of any Governmental Authority. During the
past three years there has not been any interruption of the operations of the
Business due to inadequate maintenance of the Tangible Property. No approval or
consent of any Person is needed so that the interest of Seller and its
Subsidiaries in the Tangible Property shall continue to be in full force and
effect and enforceable by Purchaser following the Closing.
Section 3.19. Inventory. The Inventory reflected on the balance sheets
included in the Business Financial Statements was properly stated therein at the
lesser of cost or fair market value determined in accordance with Hong Kong GAAP
consistently applied. The Inventory is owned free and clear of all Encumbrances.
At the Closing, the Inventory included in the Assets will be items of a quality
usable or saleable by the Business (other than the Telecommunications
Applications Services Division or the Insurance IT Services Division) in the
ordinary course of business and will be in quantities sufficient
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for the normal operation of the Business (other than the Telecommunications
Applications Services Division or the Insurance IT Services Division) in
accordance with past practice.
Section 3.20. Accounts Receivable; Disputed Accounts Payable.
(a) All accounts, notes receivable and other receivables (other than
receivables collected since the date of the March 31st Balance Sheet) reflected
on the March 31st Balance Sheet are, and all accounts, notes receivable and
other receivables arising from or otherwise relating to the Business will be at
the Closing Date valid, genuine and collectible in the aggregate amount thereof
subject to normal and customary trade discounts, less any reserves for doubtful
accounts recorded on the most recent balance sheet included in the Business
Financial Statements. Section 3.20(a) of the Seller Disclosure Schedule sets
forth a description of any security arrangements and collateral securing the
repayment or other satisfaction of any account, note receivable or other
receivable. All steps necessary to render all such security arrangements legal,
valid, binding and enforceable, and to give and maintain for the Business a
perfected security interest in the related collateral, have been duly taken.
(b) There are no unpaid invoices or bills representing amounts alleged
to be owed with respect to the Business, or other alleged obligations of Seller
or with respect to the Business, which Seller has disputed or determined to
dispute or refuse to pay.
Section 3.21. Intellectual Property.
(a) Section 3.21(a) of the Seller Disclosure Schedule sets forth a true,
complete and accurate list of all material Business Intellectual Property (other
than trade secrets, know-how and goodwill attendant to the Business Intellectual
Property and other intellectual property rights not reducible to schedule form).
To the knowledge of Seller, other than the Business Intellectual Property and
the Excluded Intellectual Property, no other material Intellectual Property
reducible to schedule form is used, held for use in or otherwise necessary for
the conduct of the Business (other than the Telecommunications Applications
Services Division and the Insurance IT Services Division).
(b) Except as would not have a Business Material Adverse Effect, Seller
or its Subsidiaries are the sole and exclusive owners of all right, title and
interest in and to the Business Intellectual Property, free and clear of all
Encumbrances, or a Person validly licensed or properly authorized to use all
such right and interest in and to the Business Intellectual Property, free and
clear of all Encumbrances. Upon the Closing, Purchaser shall receive all right,
title and interest in and to the Business Intellectual Property, free and clear
of all Encumbrances (other than Permitted Encumbrances).
(c) (i) All works of authorship and all other materials subject to
copyright protection, and included in Business Intellectual Property, including
the computer software, documentation, software design, technical and functional
specifications, and all other materials subject to copyright protection, and
included in the Business Intellectual Property are original and were either
created by employees of Seller or its Subsidiaries within the scope of their
employment or are otherwise works made for hire, or all right, title and
interest in and to such works of authorship have been legally and fully assigned
and transferred to Seller or its Subsidiaries, (ii) all rights in all inventions
and discoveries, made, developed or conceived by any employee or independent
contractor of Seller or its Subsidiaries, during the course of their employment
(or other retention) by Seller or its Subsidiaries and relating to or included
in Business Intellectual Property, or made, written, developed or conceived with
the use or assistance of Seller's or its Subsidiaries' facilities or resources;
or that are the subject of one or more issued letters patent or patent
application and that relate to are included in Business Intellectual Property
have been assigned in writing to Seller or its Subsidiaries, as the case may be;
and (iii) all employees and independent contractors of Seller or its
Subsidiaries have signed documents confirming that each of them will assign to
Seller or its
- 32 -
Subsidiaries, as the case may be, all Business Intellectual Property rights
made, written, developed or conceived by them during the course of their
employment (or other retention) by Seller or its Subsidiaries and that relate to
or are included in the Business Intellectual Property or made, written,
developed or conceived with the use or assistance of Seller's or its
Subsidiaries' facilities or resources to the extent that ownership of any such
Business Intellectual Property rights does not vest in Seller or its
Subsidiaries by operation of law.
(d) Any and all documentation relating to any know-how and/or trade
secrets included in the Business Intellectual Property: (i) is current,
accurate, and sufficient in detail and content to identify and explain such
know-how and/or trade secrets and to allow its full and proper use without
reliance on the knowledge or memory of any individual, and Seller or its
Subsidiaries has taken all reasonable precautions to protect the secrecy,
confidentiality and value of such know-how and/or trade secrets, and
(ii) pertains to the know-how and/or trade secrets necessary for the operation
of the Business (other than the Telecommunications Applications Services
Division and the Insurance IT Services Division) as currently conducted, and
furthermore, to the extent reasonably necessary to protect the Business
Intellectual Property, former and current employees of Seller or its
Subsidiaries have executed written agreements with Seller or its Subsidiaries,
as the case may be, designed to protect the Business Intellectual Property, and
furthermore, no employee of Seller or its Subsidiaries is in violation or breach
of any term of any such written agreements that would impair the Business
Intellectual Property.
(e) (i) None of the Business Intellectual Property, nor the conduct of
the Business infringes upon or misappropriates the rights of any other person
nor is infringed upon or misappropriated by any other person or its property;
(ii) none of Seller or its Subsidiaries have received any claim, any cease and
desist or equivalent letter or any other notice of any allegation that any of
the Business Intellectual Property or the Business infringes upon,
misappropriates or otherwise violates the Intellectual Property of any third
parties; (iii) there has been no unauthorized use by, disclosure to or by or
infringement, misappropriation or other violation of any of the Business
Intellectual Property by any third party and/or any current or former officer,
employee, independent contractor, consultant or any other agent of Seller or its
Subsidiaries; (iv) none of the Business Intellectual Property is subject to any
suits, actions, claims or demands of any third party and no action or
proceeding, whether judicial, administrative or otherwise, has been instituted
or is pending or threatened that challenges or affects the rights of Seller or
its Subsidiaries, as the case may be, and none of Seller or its Subsidiaries are
aware of any such claim, demand, action or proceeding that is unasserted with
respect to any of the Business Intellectual Property; (v) Purchaser's ownership
and/or use of any of the Business Intellectual Property and continuation of the
Business does not and will not infringe upon any Intellectual Property rights or
any other rights of any third party; and (vi) none of Seller or its Subsidiaries
have received any written opinions of counsel (outside or inside) relating to
infringement, invalidity or unenforceability of any Business Intellectual
Property.
(f) Upon the Closing, Purchaser shall have the right to: (i) sue for
(and otherwise assert claims for) and recover damages and obtain any and all
other remedies available at law or in equity for any past, present or future
infringement, misappropriation or other violation of any of the Business
Intellectual Property (and to settle all such suits, actions and proceedings);
(ii) seek protection therefor (including the right to seek and obtain copyright,
trademark and service mark registrations and letters patent in the United States
and all other countries and governmental divisions); and (iii) to claim all
rights and priority thereunder notwithstanding the other provisions hereof.
(g) (i) All registrations with and applications to Governmental
Authorities in respect of the Business Intellectual Property are valid and in
full force and effect, (ii) Each of Seller and its Subsidiaries is in compliance
with all government regulations regarding the manufacture, advertising, sale,
import, and export of the Business Intellectual Property and products
incorporating or made using
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the Business Intellectual Property, (iii) there are no restrictions on the
direct or indirect transfer of any license, or other contract or agreement
pursuant to which Seller or its Subsidiaries has been granted a right, to use
the Business Intellectual Property, or any interest therein, held by Seller or
its Subsidiaries in respect of the Business Intellectual Property and (iv) none
of Seller and its Subsidiaries are in default (or with the giving of notice or
lapse of time or both, would not be in default) in any material respect under
any license, or any other contract or agreement pursuant to which Seller or its
Subsidiaries has been granted a right, to use the Business Intellectual
Property.
(h) Seller or its Subsidiaries have taken all necessary steps to protect
and preserve the secrecy, confidentiality and value of all Business Intellectual
Property, including all trade secrets and source code included in the Business
Intellectual Property not subject to issued letters patents.
(i) Except as set forth in Section 3.21(i) of the Seller Disclosure
Schedule, neither Seller nor any of its Subsidiaries has granted or is obliged
to grant a license, assignment, consent, undertaking, security interest or other
right in respect of any of the Business Intellectual Property, other than
non-exclusive licenses for use of software granted to customers of the Business
in the ordinary course.
(j) To the knowledge of Seller or its Subsidiaries, to the extent that
the Business Intellectual Property consists of any software programs, such
software programs do not contain any material computer viruses, worms, software
bombs or similar items.
Section 3.22. Real Property
(a) Section 3.22(a) of the Seller Disclosure Schedule contains a true
and correct list of each parcel of real property owned by or leased to or by
Seller or its Subsidiaries that is now, or at the time of the Closing will be,
used or held for use in or otherwise necessary for the conduct of, the Business
(other than the Telecommunications Applications Services Division or the
Insurance IT Services Division) (the "Real Property"). To the extend utilized in
the Business, the interests of Seller and its Subsidiaries in each parcel of
Real Property shall be made available to Purchaser or its Subsidiaries under the
Transitional Services Agreement.
(b) Seller or its Subsidiaries has valid leasehold interests in all
leased Real Property and Seller or its Subsidiaries is in possession of each
parcel of Real Property, together with all buildings, structures, facilities,
fixtures and other improvements thereon, listed in Section 3.22(a) of the Seller
Disclosure Schedule, and in each case such parcel is free and clear of all
Encumbrances other than Permitted Encumbrances. Seller or its Subsidiaries have,
and at the Closing there will be provided to Purchaser, such rights of ingress
and egress with respect to such Real Property, buildings, structures,
facilities, fixtures and other improvements as are required to conduct the
applicable portions of the Business in a safe, efficient and lawful manner
consistent with past practice. None of such Real Property, buildings,
structures, facilities, fixtures or other improvements, or the use thereof,
contravenes or violates any building, zoning, administrative, occupational
safety and health or other applicable statute, law ordinance, rule or regulation
in any material respect (whether or not permitted on the basis of prior
nonconforming use, waiver or variance).
(c) Except as set forth in Section 3.22(c) of the Seller Disclosure
Schedule, Seller or its Subsidiaries have a valid and subsisting leasehold
estate in and the right to quiet enjoyment of all leased Real Property for the
full term of the lease of such properties. Each lease referred to in paragraph
above is a legal, valid and binding agreement, enforceable in accordance with
its terms and there is no, and none of Seller and its Subsidiaries have received
notice of any, default (or any condition or event that, after notice or lapse of
time or both, would constitute a default) thereunder. Neither Seller nor any of
its
- 34 -
Subsidiaries owes any brokerage commissions with respect to any such leased
space (including any contingent obligation in respect of future lease
extensions).
(d) Seller has delivered to Purchaser prior to the execution of this
Agreement true and complete copies of all leases (including any amendments and
renewal letters) and, to the extent reasonably available, all deeds, leases,
mortgages, deeds of trust, certificates of occupancy, title insurance policies,
title reports, surveys and similar documents, and all amendments thereof, with
respect to the Real Property.
Section 3.23. Environmental Matters.
(a) (i) Seller, the Assets and the Business comply and at all times have
complied with all applicable Environmental Laws; (ii) no Hazardous Substances
are present at or have been disposed on or released or discharged from, onto or
under any of the properties currently owned, leased, operated or otherwise used
by any Transferred Company or the Business (including soils, groundwater,
surface water, buildings or other structures); (iii) no Hazardous Substances
were present at or disposed on or released or discharged from, onto or under any
of the properties formerly owned, leased, operated or otherwise used by any
Transferred Company or the Business; (iv) none of the leased Real Property
contains an active or inactive incinerator, lagoon, landfill, septic system,
wastewater treatment system or underground storage tank; (v) none of any
Transferred Company, the Assets, and the Business are subject to any liability
or obligation in connection with Hazardous Substances present at any location
owned, leased, operated or otherwise used by any third party; (vi) none of any
Transferred Company and the Business has received any Environmental Claim;
(vii) none of any Transferred Company, any of the Assets and the Business is
subject to any order, decree, injunction or other directive of any governmental
authority and none of any Transferred Company, the Assets and the Business is
subject to any indemnity or other agreement with any person or entity relating
to Hazardous Substances; and (viii) there are no circumstances or conditions
involving any Transferred Company, any of the Assets or the Business, any assets
(including real property) or businesses previously owned, leased, operated or
otherwise used by any Transferred Company or any of the assets (including real
property) or businesses of any predecessors of any Transferred Company that
could reasonably be expected to result in any Loss to any Transferred Company,
any of the Assets or the Business arising under or pursuant to Environmental Law
or in any restriction on the ownership, use or transfer of any of the Assets
arising under or pursuant to any Environmental Law.
(b) There are no material environmental investigations, studies, audits,
tests, reports, reviews or other analyses conducted by or on behalf of, or that
are in the possession of, the Business, Seller or any Affiliate of Seller in
relation to any premises presently or formerly owned, used, leased or occupied
by the Business or by Seller or any of its Subsidiaries in connection with the
operation or conduct of the Business.
Section 3.24. Casualties. Since the date of the March 31st Balance Sheet,
neither the Business nor any Asset has been affected in any way by or as a
result of any flood, fire, explosion or other casualty (whether or not material
and whether or not covered by insurance). Seller is not aware of any
circumstance that is likely to cause the Business or any Asset to suffer any
adverse change in its business, operations or prospects.
Section 3.25. Product Liability. There are not presently pending, or, to the
knowledge of Seller or its Subsidiaries, threatened, and, to the knowledge of
Seller, there is no basis for, any civil, criminal or administrative actions,
suits, demands, claims, hearings, notices of violation, investigations,
proceedings or demand letters relating to any alleged hazard or alleged defect
in design, manufacture, materials or workmanship, including any failure to warn
or alleged breach of express or implied warranty or
- 35 -
representation, relating to any product manufactured, licensed, distributed or
sold by or on behalf of the Business, or any service provided by the Business.
The Business has not extended to any of its customers any written, non-uniform
product warranties, indemnifications or guarantees.
Section 3.26. Product Returns and Warranties. There are no liabilities for
product returns other than those arising in the ordinary course of business. To
the knowledge of Seller or its Subsidiaries, there are no threatened claims for
(i) product returns, (ii) warranty obligations or (iii) product services other
than in the ordinary course of business. None of Seller and its Subsidiaries
have made any express warranties with respect to products sold or distributed by
Seller or its Subsidiaries (other than passing on warranties made by the
manufacturers thereof) and, to the knowledge of Seller or its Subsidiaries, no
other warranties have been made by their respective officers, directors,
employees, consultants or agents. None of Seller and its Subsidiaries have
knowledge of any presently existing circumstances that would constitute a valid
basis for any voluntary or governmental recall of any product sold or
distributed by Seller or its Subsidiaries in the course of or that relates to
the Business.
Section 3.27. Bank and Brokerage Accounts; Investment Assets. Section 3.27
of the Seller Disclosure Schedule sets forth (a) a true and complete list of the
names and locations of all banks, trust companies, securities brokers and other
financial institutions at which Seller or any of its Subsidiaries has an account
or safe deposit box or maintains a banking, custodial, trading or other similar
relationship with respect to the Business or any of the Assets; (b) a true and
complete list and description of each such account, safe deposit box and
relationship, indicating in each case the account number and the names of the
respective officers, employees, agents or other similar representatives of the
Business having signatory power with respect thereto; and (c) a list of each
investment asset, the name of the record and beneficial owner thereof, the
location of the certificates, if any, therefor, the maturity date, if any, and
any stock or bond powers or other authority for transfer granted with respect
thereto.
Section 3.28. Significant Customers and Suppliers. Section 3.28 of the
Seller Disclosure Schedule lists the twenty most significant customers of the
Business (other than the Telecommunications Applications Services Division and
the Insurance IT Services Division), on the basis of revenues for goods sold or
services provided for the most recent fiscal year. None of Seller and its
Subsidiaries have received any notice and has no reason to believe that any
customer listed in Section 3.28 of the Seller Disclosure Schedule has ceased, or
will cease, to use the products, equipment, goods or services of the Business
(other than the Telecommunications Applications Services Division and the
Insurance IT Services Division), or has substantially reduced, or will
substantially reduce, the use of such products, equipment, goods or services at
any time. Section 3.28 of the Seller Disclosure Schedule list the twenty most
significant vendors or suppliers of raw materials, supplies, merchandise and
other goods of the Business, on the basis of contract value of goods or services
purchased for the most recent fiscal year. Neither Seller nor any of its
Subsidiaries has received any notice, and none of them have any reason to
believe, that any such vendor or supplier will not sell raw materials, supplies,
merchandise or other goods to Purchaser at any time after the Closing Date on
terms and conditions substantially similar to those used in its current sales to
Seller and its Subsidiaries, subject only to general and customary price
increases. To the knowledge of Seller or its Subsidiaries, no such customer,
vendor or supplier is threatened with bankruptcy or insolvency.
Section 3.29. Brokers. No agent, broker, investment banker, financial
advisor or other firm or Person is entitled to any brokerage, finder's,
financial advisor's or other similar fee or commission for which Purchaser or
any of its Subsidiaries could become liable in connection with the transactions
contemplated by this Agreement as a result of any action taken by or on behalf
of Seller, any Selling Subsidiary or any Transferred Company.
- 36 -
Section 3.30. AsiaInfo Shares.
(a) Seller understands that the Initial Shares and the Conversion
Shares, when issued or delivered to Seller, will not have been registered under
the United States Securities Act of 1933, as amended (the "Securities Act"), or
any state securities law by reason of specific exemptions under the provisions
thereof which depend in part upon the other representations and warranties made
by Seller in this Agreement. Seller understands that Purchaser is relying, in
part, upon Seller's representations and warranties contained in this Section
3.30(a) for the purpose of determining whether this transaction meets the
requirements for such exemptions.
(b) Either (i) Seller is an "accredited investor" (as defined in
Rule 501(a) under the Securities Act) or (ii) Seller is a Person that, at the
time the buy order (within the meaning of Regulation S promulgated under the
Securities Act) for the AsiaInfo Shares to be received hereunder was originated,
was outside the United States and was not a U.S. person (and was not purchasing
for the account or benefit of a U.S. person) within the meaning of Regulation S
and no offer, within the meaning of Regulation S, was made to Seller (or any
other person on its behalf) in the United States.
(c) Seller understands that the AsiaInfo Shares to be received by Seller
in the transactions contemplated hereby will be "restricted securities" under
applicable federal securities laws and that the Securities Act and the rules of
the United States Securities and Exchange Commission (the "SEC") promulgated
thereunder provide in substance that Seller may dispose of such shares only
pursuant to an effective registration statement under the Securities Act or an
exemption from registration if available. Seller further understands that,
except as provided in the Registration Rights Agreement, Purchaser has no
obligation or intention to register the sale of any of the AsiaInfo Shares to be
received by Seller in the transactions contemplated hereby, or take any other
action so as to permit sales pursuant to, the Securities Act. Seller further
understands that applicable state securities laws may impose additional
constraints upon the sale of securities. As a consequence, Seller understands
that Seller may have to bear the economic risk of an investment in AsiaInfo
Shares to be received by Seller pursuant to the transactions contemplated hereby
for an indefinite period of time.
(d) Seller is acquiring AsiaInfo Shares pursuant to the transactions
contemplated hereby for investment only and not with a view to or intention of
or in connection with any resale or distribution of such shares or any interest
therein in violation of the Securities Act.
(e) Seller understands and acknowledges that the certificate(s)
evidencing the AsiaInfo Shares to be issued or delivered pursuant to the
transactions contemplated hereby shall bear the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND OTHER DISPOSITION PURSUANT TO AN AGREEMENT
DATED AS OF JULY 27, 2004. A COPY OF SUCH AGREEMENT IS MAINTAINED AT THE
OFFICES OF THE CORPORATION BY THE SECRETARY OF THE CORPORATION."
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Section 3.31. Selling Subsidiaries. Except as set forth in Section 3.31 of
the Seller Disclosure Schedule, Seller owns, directly or indirectly, all of the
outstanding equity capital of each of the Selling Subsidiaries.
Section 3.32. Sale and Distribution Network. Section 3.32 of the Seller
Disclosure Schedule lists all of the outstanding sale and distribution
agreements to which Seller or any of its Affiliates is a party relating to the
distribution of the products and services of the Business (other than the
Telecommunications Applications Services Division or the Insurance IT Services
Division). Seller shall use its commercially reasonable best efforts to assist
Purchaser (or a Purchasing Subsidiary designated by Purchaser) in entering into
similar agreements with such distributors prior to the Closing Date.
Section 3.33. Disclosure. All material facts relating to the Business (other
than the Telecommunications Applications Services Division or the Insurance IT
Services Division) and the Assets have been disclosed to Purchaser in or in
connection with this Agreement. No representation or warranty contained in this
Agreement, and no statement or lists contained in the Seller Disclosure Schedule
(including the Seller Financial Statements and the Business Financial
Statements) or in any certificate or other writing furnished to Purchaser
pursuant to this Agreement, contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that:
Section 4.1. Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, license,
use or lease and operate its assets and properties and to carry on its business
as it is now conducted.
Section 4.2. Authority; Non-Contravention; Approvals.
(a) Purchaser has all requisite corporate power and authority to execute
and deliver this Agreement and the Transaction Documents and to perform the
transactions contemplated by this Agreement and the Transaction Documents. The
execution and delivery of this Agreement and the Transaction Documents and the
performance by Purchaser of the transactions contemplated by this Agreement and
the Transaction Documents have been approved by the Board of Directors of
Purchaser and no other corporate proceedings on the part of Purchaser are
necessary to authorize the execution and delivery of this Agreement or the
Transaction Documents and the performance by Purchaser of the transactions
contemplated by this Agreement and the Transaction Documents. This Agreement has
been, and upon their execution the Transaction Documents will be, duly executed
and delivered by Purchaser and, assuming the due authorization, execution and
delivery of this Agreement and the Transaction Documents by Seller, constitutes
and upon their execution the Transaction Documents will constitute, valid and
binding obligations of Purchaser enforceable against Purchaser in accordance
with their respective terms.
(b) The execution and delivery by Purchaser of this Agreement and the
Transaction Documents and the performance of the transactions contemplated by
this Agreement and the Transaction Documents do not and will not (i) conflict
with or result in a breach of any provisions of the certificate of incorporation
or bylaws of Purchaser; (ii) result in a violation or breach of or constitute a
default (or an
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event which, with or without notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or the loss of a benefit under
or accelerate the performance required by, or result in a right of termination,
modification, cancellation or acceleration under, the terms, conditions or
provisions of any contract or other instrument of any kind to which Purchaser or
any of its subsidiaries is now a party or by which Purchaser or any of its
subsidiaries or any of their respective properties or assets may be bound or
affected; or (iii) violate any order, writ, injunction, decree, statute, treaty,
rule or regulation applicable to Purchaser or any of its Subsidiaries other than
in the case of clauses (ii) and (iii) above as would not reasonably be expected
to result in a Purchaser Material Adverse Effect.
Section 4.3. Brokers. No agent, broker, investment banker, financial advisor
or other firm or person is entitled to any brokerage, finder's, financial
advisor's or other similar fee or commission for which Seller or any of its
Subsidiaries could become liable in connection with the transactions
contemplated by this Agreement as a result of any action taken by or on behalf
of Purchaser or any of its Subsidiaries.
Section 4.4. SEC Documents; Financial Statements. As of their respective
filing dates, the Purchaser SEC Documents complied in all material respects with
the applicable requirements of the United States Securities Exchange Act of
1934, as amended (the "Exchange Act") and the Securities Act, and none of the
Purchaser SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected or supplemented by a
subsequently filed Purchaser SEC Document. The financial statements of
Purchaser, including the notes thereto, included in the Purchaser SEC Documents
(the "Purchaser Financial Statements") complied 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 U.S. GAAP 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 Forms 10-Q, as permitted by Form 10-Q of the SEC). The Purchaser
Financial Statements fairly present and accurately reflect the consolidated
financial condition and operating results of Purchaser at the dates and during
the periods indicated therein (subject, in the case of unaudited statements, to
normal year-end adjustments). From the date of the Purchaser Financial
Statements contained in Purchaser's most recently filed Form 10-Q to the date
hereof, there has been no material change in the capitalization of Purchaser
other than in connection with the exercise of employee stock options or in
connection with borrowings or repayments under short term credit facilities in
the ordinary course and consistent with past practice.
Section 4.5. Absence of Undisclosed Liabilities. There are no liabilities or
obligations of any nature, whether accrued, contingent or otherwise, and there
is no existing condition, situation or set of circumstances that reasonably
could be expected to result in such liabilities or obligations, of Purchaser,
except for (a) liabilities or obligations reflected in Purchaser's Form 10-K for
the fiscal year ended December 31, 2003 and Purchaser's Form 10-Q for the
quarterly period ended March 31, 2004, in each case filed with the SEC, or
(b) liabilities or obligations incurred since March 31, 2004 in the ordinary
course which could not reasonably be expected to have a Purchaser Material
Adverse Effect.
Section 4.6. Consents and Approvals. No declaration, filing or registration
with, or notice to, or authorization, consent, order or approval of, any
Governmental Authority or other Person is required to be obtained or made in
connection with or as a result of the execution and delivery of this Agreement
and the other Transaction Documents by Purchaser or the performance by Purchaser
of the transactions contemplated by this Agreement and the other Transaction
Documents, except for (i) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
United States federal or state securities laws or the securities laws of any
foreign country, (ii)
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such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable PRC laws or regulations,
including the approval of MOFCOM or its local branch and other competent
Government Authorities of PRC (as applicable), and the registration of the State
Administration for Industry and Commerce or its local branch in connection with
the transfer of equity interests in, or assets of, any Selling Subsidiaries
and/or Transferred Companies that are organized under the laws of the PRC and
(iii) such other consents, authorizations, filings, approvals and registrations
that, if not obtained or made, would not have a Purchaser Material Adverse
Effect.
Section 4.7. Litigation. There are no claims, suits, proceedings, actions,
investigations, oppositions, challenges, cancellation proceedings or changes
pending or, to the knowledge of Purchaser, threatened against or affecting
Purchaser that, if adversely determined, would reasonably be expected to result
in a Purchaser Material Adverse Effect.
Section 4.8. Absence of Certain Changes or Events. From the date of the
Purchaser Financial Statements contained in Purchaser's most recently filed Form
10-Q to the date hereof, there has not been any event, circumstance, change or
effect that has had or reasonably could be expected to have a Purchaser Material
Adverse Effect and the business of Purchaser has been conducted only in the
ordinary course.
Section 4.9. Taxes. Purchaser has timely and duly filed, or will timely and
duly file, in each case, taking into account all available extensions, all Tax
Returns with respect to Taxes applicable to it or required to be filed by
applicable law. All Taxes and other charges due or claimed to be due from it by
federal, state, local or foreign taxing authorities (including those due in
respect of the properties, income, franchises, licenses, sales or payrolls
related to its business) have been paid or will be paid except to the extent the
same are being contested in good faith and have been adequately reserved for.
There are no Encumbrances with respect to any Taxes, upon any of the assets of
Purchaser other than (i) Permitted Encumbrances or (ii) Taxes or charges being
contested.
Section 4.10. Initial Shares and Conversion Shares. Purchaser has taken or
will have taken, with respect to the Initial Shares, as of the Closing Date and,
with respect to the Conversion Shares, as of the Conversion Date, all such
actions as are or will be necessary in order to ensure that each of (i) the
Initial Shares to be issued or delivered on the Closing Date and (ii) the
Conversion Shares issuable or deliverable on the Conversion Date, shall each be
either (a) in case of new AsiaInfo Shares, duly authorized, validly issued,
fully paid and nonassessable or (b) in the case of the delivery of AsiaInfo
Shares held by Purchaser as treasury stock or otherwise, validly transferred,
free and clear of all Encumbrances and, in each case, shall rank pari passu with
all other AsiaInfo Shares.
ARTICLE V
COVENANTS
Section 5.1. Conduct of the Business. During the period from the date of
this Agreement to the Closing, except as otherwise expressly provided in this
Agreement, Seller shall operate the Business only in the ordinary course. Except
as otherwise expressly provided in this Agreement or for the purpose of
effecting the transactions contemplated herein, Seller shall use its
commercially reasonable best efforts to preserve intact the present organization
of the Business, keep available the services of the present officers and key
employees of the Business and preserve relationships with customers, suppliers,
licensors, licensees, contractors, distributors and others having business
dealings with the Business. Without limiting the generality of the foregoing,
from the date of this Agreement to the Closing, Seller, its Subsidiaries and the
Transferred Companies shall not, to the extent related to the Business:
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(a) sell, lease, encumber, transfer or dispose of any assets or rights
or acquire any material assets or rights that, in either case, would be included
in the Assets, except in the ordinary course of business;
(b) engage in any activity of the type sometimes referred to as "trade
loading" or "channel stuffing" or in any other activity that reasonably could be
expected to result in a material reduction, temporary or otherwise, in the
demand for the products offered by the Business following the Closing, including
sales of a product (i) with payment terms longer than terms customarily offered
by Seller or any of its Subsidiaries for such product, (ii) at a greater
discount from listed prices than customarily offered for such product, other
than pursuant to a promotion of a nature previously used in the normal course of
business of Seller and its Subsidiaries for such product, (iii) at a price that
does not give effect to any previously announced general increase in the list
price for such product, (iv) with shipment terms more favorable to the customer
than shipment terms customarily offered by Seller and its Subsidiaries for such
product, (v) in a quantity greater than the reasonable retail or wholesale (as
the case may be) resale requirement of the particular customer or (vi) in
conjunction with other material benefits to the customer not previously offered
in the ordinary course of business to such customer;
(c) except as otherwise expressly provided in this Agreement, waive any
rights in respect of or write off any Account Receivable or fail to timely pay
any account payable, except in either case other than in the ordinary course of
business;
(d) enter into any material commitment or transaction except in the
ordinary course of business;
(e) incur, create or assume any indebtedness for borrowed money or take
or omit to take any action that results in an Encumbrance, other than a
Permitted Encumbrance, being imposed on any asset that may be an Asset;
(f) change (or permit to be changed) any accounting or Tax procedure or
practice, make (or permit to be made) any Tax election or settle or compromise
any Tax liability, in each case relating to the Business, any of the Assets or
any Transferred Company;
(g) except as otherwise expressly provided in this Agreement or for the
purpose of effecting the transactions contemplated hereby, enter into, adopt,
amend or terminate any Plan of the Transferred companies, increase in any manner
the compensation or benefits of any officer, employee or consultant or pay or
otherwise grant any benefit not required by any Plan of the Transferred
Companies, or enter into any contract to do any of the foregoing, except to the
extent bound by applicable law;
(h) except as otherwise expressly provided in this Agreement or for the
purpose of effecting the transactions contemplated hereby, enter into or offer
to enter into or amend, terminate or waive any right under any employment or
consulting arrangement with any Person or any group of Persons;
(i) make or commit to any capital expenditures outside the ordinary
course of business;
(j) enter into, amend or terminate any contract of a type that, if in
effect at the date of this Agreement, would be required to be disclosed pursuant
to Section 3.17(a) or, except in the ordinary course of business, enter into,
amend or terminate any other contract;
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(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) relating to
the Business, except in the ordinary course of business;
(l) settle or compromise any material claim, action, suit or proceeding
pending or threatened against Seller, the Business or the Assets, except in the
ordinary course of business or for the purpose of effecting the transactions
contemplated hereby;
(m) enter into any transaction or any contract with any Subsidiaries,
except in the ordinary course of business; or
(n) take, or agree or otherwise commit to take, any of the foregoing
actions or any other action that if taken would cause any representation or
warranty of Seller or the Selling Subsidiaries contained in this Agreement to be
untrue or incorrect as of the date when made or as of any subsequent date (as if
made as of such date) or that could prevent the satisfaction of any condition
set forth in Article VI.
Notwithstanding the foregoing, the covenants in this Section 5.1 shall
not prevent Seller from disposing of part or all of its interest in the equity
or assets of the ChinaWeal Group or Lenovo AI or taking any of the other actions
set forth above with respect to the ChinaWeal Group or Lenovo AI.
Section 5.2. Access to Information.
(a) Seller shall (i) provide Purchaser and its officers, directors,
employees, agents, counsel, accountants, financial advisors, consultants and
other representatives (together, its "Representatives") with reasonable access,
during normal business hours and upon reasonable prior notice to all personnel,
officers, employees, agents, accountants, properties and facilities, of Seller,
the Business, the Assets and the books and records relating to the Business and
the Assets and (ii) furnish Purchaser and its Representatives with all such
information and data (including copies of contracts, Plans and other books and
records) concerning the Business and operations of the Business and the Assets
as Purchaser or any of such Representatives reasonably may request in connection
with such investigation. All such information shall be kept confidential in
accordance with the terms of the confidentiality agreement, dated as of March 2,
2004, between Purchaser and Seller (the "Confidentiality Agreement"). In the
event of a conflict or inconsistency between the terms of this Agreement and the
Confidentiality Agreement, the terms of this Agreement will govern.
(b) The provisions of the Confidentiality Agreement shall remain binding
and in full force and effect until the Closing (or after the termination of this
Agreement in accordance with Article VIII), except that the Confidentiality
Agreement shall not apply to any documents prepared in connection with or
proceeding before or filed with, or other disclosure made to, a Government
Authority, court, arbitration tribunal or mediation service to enforce
Purchaser's rights arising in connection with the termination of this Agreement.
The information contained herein, in the Seller Disclosure Schedule or delivered
to Purchaser or its authorized representatives pursuant hereto shall be subject
to the Confidentiality Agreement as Confidential Information (as defined and
subject to the exceptions contained therein) until the Closing and, for that
purpose and to that extent, the terms of the Confidentiality Agreement are
incorporated herein by reference. All obligations of Purchaser under the
Confidentiality Agreement shall terminate simultaneously with the Closing.
Except as otherwise provided herein, Seller and its Affiliates and their
consultants, advisors and representatives shall treat after the date hereof as
strictly confidential (unless compelled to disclose by judicial or
administrative process or, in the opinion of legal counsel, by other
requirements of law) the terms of this Agreement and all nonpublic, confidential
or proprietary information concerning the Business, and Seller and its
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Affiliates and their consultants, advisors and representatives shall not use
such information to the detriment of the Business. Seller has not waived, nor
will it waive any provision of any confidentiality or similar agreement that
relates to any of the Business, the Assets or the Assumed Liabilities.
Section 5.3. Reasonable Efforts.
(a) Upon the terms and subject to the conditions of this Agreement, each
of the parties hereto shall use all commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including any and all necessary approvals of PRC Governmental Authorities.
Seller and Purchaser each shall comply as promptly as practicable with any other
laws of any Governmental Authority that are applicable to any of the
transactions contemplated hereby or by the Transaction Documents and pursuant to
which any consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority or any other Person in
connection with such transactions is necessary. Seller and Purchaser shall
furnish to each other such necessary information and reasonable assistance as
the other may request in connection with their preparation of any filing,
registration or declaration which is necessary under applicable laws. Purchaser
and Seller shall keep each other apprised of the status of any communications
with, and any inquiries or requests for additional information from, any
Governmental Authority (or other Person regarding any of the transactions
contemplated by this Agreement or the Transaction Documents) in respect of any
such filing, registration or declaration, and shall comply promptly with any
such inquiry or request (and, unless precluded by law, provide copies of any
such communications that are in writing). The parties shall use their respective
commercially reasonable efforts and take all necessary action to obtain any
consent, approval, order or authorization of any Governmental Authority under
United States or foreign antitrust or competition laws, necessary in connection
with the transactions contemplated hereby or to resolve any objections that may
be asserted by any Governmental Authority with respect to the transactions
contemplated hereby. Nothing in this Agreement shall require Purchaser or its
Affiliates to divest or hold separate or agree to any limitations on or other
requirements in respect of the operation of any business, division or operating
unit of Purchaser or any of its Affiliates, including the Business and the
Assets from and after the Closing.
(b) Subject to the terms and conditions of this Agreement, each party
shall use its commercially reasonable efforts to cause the Closing to occur as
promptly as practicable, including by defending against any lawsuits, actions or
proceedings, judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, and seeking to have any
preliminary injunction, temporary restraining order, stay or other legal
restraint or prohibition entered or imposed by any court or other Governmental
Authority that is not yet final and nonappealable vacated or reversed.
(c) Purchaser and Seller each shall use commercially reasonable efforts
to obtain as promptly as practicable all Permits required by law for Purchaser
to conduct the Business following the Closing and to own the Assets.
(d) Seller and Purchaser will cooperate and use their respective
commercially reasonable efforts to obtain as promptly as practicable all
consents, approvals and waivers required by third Persons to transfer the Assets
to, or for the use of the Assets by, Purchaser in a manner that will avoid any
applicable default, conflict, or termination of rights under or in respect of
the Assets.
Section 5.4. Takeover Proposals. Seller will not take, nor will Seller
permit any Affiliate of Seller (or authorize or permit any officer, director,
employee, investment banker, financial advisor, attorney, accountant or other
Person retained by or acting for or on behalf of Seller or any such Affiliate)
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to take, directly or indirectly, any action to initiate, assist, solicit,
receive, negotiate, participate in, facilitate, encourage or accept any offer or
inquiry from any Person (a) to make any Takeover Proposal; (b) to reach any
agreement or understanding (whether or not such agreement or understanding is
absolute, revocable, contingent or conditional) for, or otherwise attempt to
consummate, any Takeover Proposal; or (c) to furnish or cause to be furnished
any information with respect to the Business or the Assets to any Person (other
than as contemplated by Section 5.3) who Seller or such Affiliate (or any such
Person acting for or on their behalf) knows or has reason to believe is in the
process of considering a Takeover Proposal. If Seller or any such Affiliate (or
any such Person acting for or on their behalf) receives from any Person (other
than Purchaser or any other Person referred to in Section 5.3) any offer,
inquiry or informational request referred to above, Seller will promptly advise
such Person, by written notice, of the terms of this Section 5.4 and will
promptly, orally and in writing, advise Purchaser of such offer, inquiry or
request and deliver a copy of such notice to Purchaser. Seller will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted on or prior to the date of this
Agreement with respect to any Takeover Proposal. Seller shall demand the return
of any information previously furnished to others in connection with efforts to
sell the Business or any of the Assets.
Section 5.5. Notification.
(a) From time to time prior to the Closing, Seller shall notify
Purchaser in writing with respect to any matter hereafter arising or any
information obtained after the date hereof that, if existing, occurring or known
at or prior to the date of this Agreement, would have been required to be set
forth or described in the Seller Disclosure Schedule or that is necessary to
complete or correct any information in such schedule or in any representation
and warranty of Seller that has been rendered inaccurate thereby. Seller shall
promptly inform Purchaser of any claim by a third party that a contract has been
breached, is in default, may not be renewed or that a consent would be required
as a result of the transactions contemplated by this Agreement.
(b) Seller shall give notice to Purchaser promptly after becoming aware
of (i) the occurrence or non-occurrence of any event whose occurrence or
non-occurrence would be likely to cause either (A) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Closing Date or (B) any
condition set forth in Article VI to be unsatisfied in any material respect at
any time from the date hereof to the Closing Date and (ii) any material failure
of Seller, the Selling Subsidiaries, any Affiliate or any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
(c) No notice given pursuant to this Section 5.5 shall have any effect
on the representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition contained
herein or shall in any way limit any party's right to indemnity under
Article VII.
Section 5.6. Use of Names. Seller agrees, for itself and its Affiliates,
that from and after the Closing none of them will use the names "Han", "Han
Consulting" "Han Pu" ("[Chinese characters omitted]"), "Han Pu" ("[Chinese
characters omitted]") or any abbreviation of or derivation from those names or
any names similar to it in any form whatsoever, including in respect of
advertising and promotional materials without the prior written consent of
Purchaser.
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Section 5.7. Tax Matters.
(a) Purchaser and the Purchasing Subsidiaries shall have the right to
withhold tax from amounts paid to Seller and the Selling Subsidiaries under this
Agreement as required by applicable law. Purchaser or the relevant Purchasing
Subsidiary shall notify Seller of the basis and amount of such withholding
within a reasonable time prior to such withholding. Any amount withheld by
Purchaser pursuant to applicable law shall be treated for all purposes of this
Agreement as if it were paid by Purchaser (or the relevant Purchasing
Subsidiary) to Seller and the Selling Subsidiaries.
(b) All transfer, registration, stamp, documentary, sales, use, value
added, business, recording, stock transfer and similar Taxes (including all
applicable real estate transfer or gains Taxes and transfer Taxes) and any
penalties, interest and additions to Tax in respect to such Taxes (collectively,
"Transfer Taxes"), and fees incurred in connection with this Agreement or the
transactions pursuant thereto shall be the responsibility of and be timely paid
by Seller or Purchaser as required by applicable law. Seller and Purchaser shall
cooperate in the timely making of all filings, returns, reports and forms as may
be required in connection therewith.
(c) Seller shall cause the Transferred Companies to file their Tax
Returns due on or before the Closing Date and Purchaser shall cause the
Transferred Companies to file their Tax Returns due after the Closing Date. All
Tax Returns due on or before the Closing Date, and all Tax Returns due after the
Closing Date with respect to Tax periods beginning on or before the Closing
Date, shall be filed in accordance with the respective past practices of the
Transferred Companies. Seller shall cause the Transferred Companies to pay all
Taxes due on or before the Closing Date and shall pay to the Transferred
Companies or the applicable Tax authority, as directed by Purchaser, all Taxes
due after the Closing Date that relate to Tax periods ending on or before the
Closing Date (or to the pre-Closing portion of Tax periods beginning on or
before and ending after the Closing Date) ("Straddle Periods") provided, that
Seller shall not be obligated to pay any Tax set forth as a liability on the
Closing Date Balance Sheet.
(d) Seller shall pay Purchaser an amount equal to (x) Seller's
Percentage Share of all Taxes of the Transferred Companies and WTITL that
(A) relate to Tax periods ending on or before the Closing Date (or relate to the
pre-Closing portion of Straddle Periods) and result directly from the
transactions occurring pursuant to this Agreement or (B) result from breaches of
the representations in Section 3.7 or breaches of the covenants in this Section
5.7, (y) the amount of any liability of Purchaser or its Affiliates for Taxes
that are Taxes of Seller or the Selling Subsidiaries, Taxes with respect to
periods ending on or before the Closing Date or to the pre-Closing portion of
the Straddle Periods, Transfer Taxes, or Taxes resulting from breaches of the
representations in Section 3.7 or the covenants in this Section 5.7 and
(z) liabilities, losses, costs and expenses (including, without limitation,
reasonable expenses of investigation and attorneys' fees and expenses) arising
out of or incident to the imposition, assessment or assertion of any Tax
described in (x) or (y) (the sum of (x), (y) and (z) being referred to herein as
a "Tax Loss"); provided, that Seller shall not have an indemnity obligation
under this Section 5.7(d) for any Tax Loss set forth as a liability on the
Closing Date Balance Sheet as finally determined under Section 2.10. For
purposes of Section 5.7(c) and this Section 5.7(d), in the case of any Straddle
Period, the Tax relating to the pre-Closing portion of such period shall be
determined (i) in the case of any Taxes other than gross receipts, sales or use
Taxes and Taxes based upon or related to income, be deemed to be the amount of
such Tax for the entire Tax period multiplied by a fraction the numerator of
which is the number of days in the Tax period ending on and including the
Closing Date and the denominator of which is the number of days in the entire
Tax period, and (ii) in the case of any Tax based upon or related to income and
any gross receipts, sales or use Tax, be deemed equal to the amount which would
be payable if the relevant Tax period ended on and included the Closing Date.
All determinations necessary to give effect to the allocation set forth in the
foregoing clause (ii) shall be made in a manner
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consistent with prior practices of the Transferred Companies. Seller shall make
payment under this Section 5.7(d) within 15 days after receiving notice from
Purchaser that Purchaser, its Affiliate, a Transferred Company or WTITL has
incurred a Tax Loss. For avoidance of doubt, the limitations in Section 7.4 do
not apply to this Section 5.7(d).
(e) Purchaser shall not settle any Tax audit or similar proceeding
relating to Taxes of the Transferred Companies and WTITL described in clause (x)
of Section 5.7(d) without the prior written consent of Seller (not to be
unreasonably withheld).
(f) With respect to any refund of Taxes contemplated in
Section 2.2(viii), Purchaser shall pay to Seller such refund within ten Business
Days of the receipt of such refund.
Section 5.8. Non-Competition.
(a) From the Closing and for five years thereafter, Seller will not, and
will cause its Subsidiaries not to, directly or indirectly anywhere in China,
(i) engage in, own any equity interest in or invest in any business, part or all
of the principal activities of which compete with the Business as conducted on
the Closing Date, directly or indirectly in any manner, (ii) solicit, sell or
attempt to sell software solutions or services offered by the Business as
conducted on the Closing Date, (iii) disclose any confidential or non-public
information regarding the Business or the Assets to any third party or provided,
however, that notwithstanding the foregoing (A) the prohibition on ownership of
direct or indirect interest in a competing business in this Section 5.8 (a)
shall not apply to Seller's or its Subsidiaries' current equity ownership in the
companies set forth in Section 5.8(a) of the Seller Disclosure Schedule as of
the date hereof, (B) Seller and its Subsidiaries may own, directly or
indirectly, solely as an investment, securities of any Person that are traded on
any internationally-recognized securities exchange if Seller (alone or
collectively with its Subsidiaries) (1) is not a controlling Person of, or a
member of a group that controls such Person and (2) does not, directly or
indirectly, own ten percent or more of any class of securities of such Person,
(C) nothing in the foregoing clauses shall be construed to prohibit Seller or
its Subsidiaries from engaging in repair, maintenance, technical support or
general after sales services in connection with any of Seller's business as
conducted on the Closing Date other than the Business and this Section 5.8(a)
shall not apply to the Telecommunications Applications Services Division as
operated as of the date hereof by the ChinaWeal Group or the Insurance IT
Services Division operated as of the date hereof by Lenovo AI, and (D) this
clause shall not be construed to prohibit Seller's continued employment of the
Seconded Employees. With respect to the Telecommunications Applications Services
Division of the ChinaWeal Group, Seller agrees that as long as the ChinaWeal
Group is, directly or indirectly, a Subsidiary of Seller, in the event there are
any activities that would constitute direct or indirect competition between the
ChinaWeal Group and any businesses conducted by Purchaser, Seller shall engage
in good faith discussions with Purchaser and use reasonable efforts to minimize
or avoid such competition.
(b) From the Closing and for two years thereafter, Seller will not, and
will cause its Subsidiaries not to, directly or indirectly solicit or encourage
to leave, employ or contract, or offer to employ or contract, any person who is
(or was, to Seller's knowledge after reasonable inquiry, during the previous
12 months) an employee of the Business (or any successor) or who is (or was
during the previous 12 months) hired by Purchaser in connection with the
transactions contemplated hereby.
(c) The parties hereto recognize that the laws and public policies of
China, the various states of the United States, and various other jurisdictions
may differ as to the validity and enforceability of covenants similar to those
set forth in this Section. It is the intention of the parties that the
provisions of this Section be enforced to the fullest extent permissible under
the laws and policies of each jurisdiction in which enforcement may be sought,
and that the unenforceability (or the modification to
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conform to such laws or policies) of any provisions of this Section shall not
render unenforceable, or impair, the remainder of the provisions of this
Section. Accordingly, if any provision of this Section shall be determined to be
invalid or unenforceable, such invalidity or unenforceability shall be deemed to
apply only with respect to the operation of such provision in the particular
jurisdiction in which such determination is made and not with respect to any
other provision or jurisdiction.
(d) The parties to this Agreement acknowledge and agree that any remedy
at law for any breach of the provisions of this Section would be inadequate, and
Seller hereby consents to the granting by any court of an injunction or other
equitable relief, without the necessity of actual monetary loss being proved, in
order that the breach or threatened breach of such provisions may be effectively
restrained. Notwithstanding the foregoing, this paragraph shall not apply to the
last sentence of Section 5.8(a) above.
Section 5.9. Assignment of Contracts and Rights. Anything in this Agreement
to the contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any Asset or any claim or right or any benefit arising
thereunder or resulting therefrom if such assignment, without the consent of a
third Person, would constitute a breach or other contravention of such Asset or
in any way adversely affect the rights of Purchaser or Seller or its Affiliates
thereunder. Seller and Purchaser will use their commercially reasonable efforts
(but without any payment of money by any of them) to obtain the consent of such
Persons in respect of any such Asset or any claim or right or any benefit
arising thereunder for the assignment thereto to Purchaser (or a Purchasing
Subsidiary designated by Purchaser) as Purchaser may request. If such consent is
not obtained, or if an attempted assignment thereof would be ineffective or
would adversely affect the rights of Seller or its Affiliates hereunder so that
Purchaser would not in fact receive all such rights, Seller and Purchaser will
cooperate in a mutually agreeable arrangement pursuant to which Purchaser (or a
Purchasing Subsidiary designated by Purchaser) would obtain the benefits and
assume the obligations thereunder in accordance with this Agreement, including
sub-contracting, sub-licensing or sub-leasing to Purchaser (or a Purchasing
Subsidiary designated by Purchaser), or under which Seller or its Affiliates
would enforce for the benefit of Purchaser, with Purchaser assuming Seller's or
its Affiliates' obligations, any and all rights of Seller or its Affiliates
against a third party thereto. Seller will promptly pay to Purchaser when
received all monies received by Seller or its Affiliates under any Asset or any
claim or right or any benefit arising thereunder, and Seller and Purchaser shall
continue to cooperate and use all commercially reasonable efforts to obtain such
consent and to provide Purchaser with all such rights shall continue to use all
reasonable efforts to obtain such consent. Nothing in this Section 5.9 shall
affect Purchaser's other rights under this Agreement and shall not affect the
conditions to Purchaser's obligation to close. The provisions of this Section
5.9 shall not limit, modify or otherwise affect any representation or warranty
of the Selling Subsidiaries or Seller under this Agreement.
Section 5.10. Insurance Coverage. If any of the insurance policies listed on
Section 3.16 of the Seller Disclosure Schedule cannot be assigned to Purchaser
on the date hereof, at Purchaser's request, before or after the date hereof,
Seller shall have Purchaser named as an additional insured, as its interest may
appear, on all current insurance policies maintained by Seller covering time
periods beginning prior to the date hereof and extending beyond the date hereof,
until the expiration date of such policy or policies. With respect to any
Assumed Liabilities and Purchaser's indemnification obligations pursuant to
Section 7.3 or any other liabilities to which Purchaser may become subject for
pre-Closing occurrences, in each case to the extent such liabilities may be
covered by insurance maintained by Seller or as to which Seller is additional
insured, Seller agrees to prosecute diligently any insurance claims that may be
asserted in respect thereof and to promptly notify Purchaser of the assertion of
each such claim. From and after the date of this Agreement, if Seller recovers
insurance proceeds in respect of any amounts in respect of the liabilities
described in the preceding sentence, Seller shall promptly remit such proceeds
to Purchaser and Purchaser shall pay such liabilities with such proceeds.
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Section 5.11. Employee Matters.
(a) As promptly as practicable, and in no event more than five Business
Days after the date hereof, Seller shall use its best efforts to make available
to Purchaser all employees listed on Section 3.9(a) of the Seller Disclosure
Schedule and any related employee records for the purposes of interviewing and,
if desired by Purchaser, hiring. The list of the employees to whom Purchaser
intends to extend an offer of employment is set forth in Section 5.11(a) of the
Seller Disclosure Schedule. Any offers of employment shall be at such salary or
wage and benefit levels and on such other terms and conditions generally
consistent with those previously provided to such employees by Seller or any of
its Affiliates, as the case may be; provided that to the extent that service is
relevant for eligibility and vesting (and solely for purposes of calculating
entitlement to vacation and sick days and benefit accruals) under any Plan
established or maintained by Purchaser or any Purchasing Subsidiary for the
benefit of the Transferred Employees, such Plan shall credit such Transferred
Employees for service on or prior to Closing with Seller or any of its
Affiliates. The employees who accept and commence employment with Purchaser are
collectively referred to as the "Transferred Employees". Seller or its
Affiliates, as the case may be, shall, as of the Closing, release each of the
Transferred Employees from any employment obligations that such employee may
have to Seller or its Affiliates. Seller will not take, and will cause each of
its Affiliates not to take, any action that would impede, hinder, interfere or
otherwise compete with Purchaser's effort to hire any Transferred Employees.
Purchaser shall not assume any responsibility for any Transferred Employee until
such employee commences employment with Purchaser.
(b) Seller shall use its reasonable best efforts to assist Purchaser in
securing an employment agreement for each of the employees of Seller listed on
Section 5.11(a) of the Seller Disclosure Schedule. If any such employee declines
the offer of employment from Purchaser (or any Purchasing Subsidiary), Seller
and its Affiliates agree not to offer any form of employment (full-time,
part-time or on an agency basis) to such employee for a period of two years
following the Closing Date.
(c) Seller agrees to assign the R&D Employees (the "Seconded Employees")
to Purchaser (or any Subsidiary of Purchaser) for a period of nine months
following the Closing Date The Seconded Employees shall remain at the research
and development facilities of Seller and shall have full access to use such
facilities for the purpose of performing any research or development projects in
connection with the Non-Telecommunications Business as may be requested by
Purchaser (or one or more of its Purchasing Subsidiaries). The Seconded
Employees shall also provide training for employees of Purchaser in relevant
aspects of their research and development activities for the Security Services
Division and be responsible for doing the necessary research and development
work to support the Purchaser's application for security licenses. Seller shall
continue to pay each Seconded Employee their respective base compensation and
benefits, consistent with past practice, during the period of assignment and
shall deliver detailed and itemized invoices to Purchaser on a monthly basis for
reimbursement of such salaries and benefits, along with reasonable out of pocket
variable costs and expenses related to the research performed by such Seconded
Employees solely for the benefit of the Non-Telecommunications Business during
the secondment. Seller shall provide Purchaser prior to the Closing Date with
the three month payroll records related to the Seconded Employees for purposes
of verifying the salary and benefits to be paid during the secondment. Sellers
agrees that Purchaser shall be responsible to pay any performance-based
compensation to the Seconded Employees during such period and Seller shall not
make any such payments to the Seconded Employees. Seller agrees not to terminate
any Seconded Employee (which shall not include an employee's voluntary
separation or resignation) prior to the end of the assignment without the
advance written consent of Purchaser.
(d) On or after the Closing, Seller shall take all actions reasonably
requested by Purchaser to transfer the registration of the Transferred
Employees' social insurance entitlements pursuant to the Shehui Baoxianfei
Zhengjiao Zanxing Banfa or other relevant laws or regulations of the PRC, and to
reflect their status as employees of Purchaser or its Affiliate in the records
of the Beijing Social Security Fund Center or other relevant authorities.
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(e) The parties agree to furnish each other with such information
concerning employees and employee benefit plans, and to take all such other
action, as is necessary and appropriate to effect the transactions contemplated
by this Agreement and to cooperate with each other in addressing inquiries from
employees.
(f) Seller shall have, as of the Closing, paid all Accrued Salaries and
Bonuses of each of the Transferred Employees.
(g) Seller shall have, as of the Closing Date, established a equity
compensation program (the "Equity Compensation Program") with certain of the
Transferred Employees (collectively, the "Eligible Employees") whereby the
Eligible Employees are entitled to acquire the Initial Shares from Seller. The
Equity Compensation Program shall (1) provide that such shares are subject to a
Lock-Up for a period of two years following the Closing Date and (2) include as
Eligible Employees certain of the Key Employees who become Transferred Employees
on the Closing Date, with their names and the number of Initial Shares to be
made available to each such Eligible Employee under the Equity Compensation
Program set forth in a list attached thereto.
(h) Seller agrees that neither Purchaser nor any Purchasing Subsidiary
shall be liable to any Transferred Employee or other employee of Seller for any
stock options or other equity incentives awarded to such employees under any
Plan of Seller or its Affiliates, as the case may be, whether or not such stock
options are vested or exercisable on the Closing Date. In the event any
Transferred Employees are unable to retain any such options or awards, or Seller
is otherwise unable to reach an agreement with such employees concerning such
employee's reimbursement for loss of any such awards in connection with the
transactions contemplated by this Agreement, or in the event Purchaser is
required under applicable law or regulation or under the terms of any Plan to
grant new stock options or equity incentives to any of the Transferred Employees
or any other past or present employees of the Business or Seller as a result of
the transactions contemplated by this Agreement, Seller shall indemnify and hold
harmless Purchaser for all expenses (including expenses representing the option
value of any new options) granted by Purchaser. For avoidance of doubt, the
foregoing indemnification is not limited by Section 7.4.
Section 5.12. Public Announcements. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
Purchaser and Seller. Until the Closing, neither Purchaser nor Seller nor any of
their respective Affiliates shall issue or cause the dissemination of any press
release or other public announcements or statements with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other party, which consent will not be unreasonably withheld, except as may be
required by law or by any listing agreement with an internationally-recognized
securities exchange or trading market (and in such case shall use all reasonable
efforts to consult the other party prior to such release or statement).
Section 5.13. Further Assurances; Post-Closing Cooperation.
(a) From time to time after the Closing, without additional
consideration, each of the parties hereto will (or, if appropriate, cause their
Affiliates to) execute and deliver such further instruments and take such other
action as may be necessary to make effective the transactions contemplated by
this Agreement and the Transaction Documents. If any party to this Agreement
shall following the Closing have in its possession any asset or right that under
this Agreement should have been delivered to the other, such party shall
promptly deliver such asset or right to the other.
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(b) Seller, on behalf of itself and its Affiliates, hereby constitutes
and appoints, effective as of the Closing Date, Purchaser and its successors and
assigns as the true and lawful attorney of Seller or its Affiliates, as
applicable, with full power of substitution in the name of Purchaser, or in the
name of Seller or its Affiliates, as applicable, but for the benefit of
Purchaser, (i) to collect for the account of Purchaser any items of Assets and
(ii) to institute and prosecute all proceedings that Purchaser may in its sole
discretion deem proper to assert or enforce any right, title or interest in, to
or under the Assets, and to defend or compromise any and all actions, suits or
proceedings in respect of the Assets. Purchaser shall be entitled to retain for
its own account any amounts collected pursuant to the foregoing powers,
including any amounts payable as interest in respect thereof.
(c) Following the Closing, Seller will afford Purchaser and its
Representatives (i) such access as Purchaser may reasonably request to all
books, records and other data and information, including any information from
employees of Seller and its Affiliates, relating to the Business, the Assets,
the Excluded Assets, the Assumed Liabilities and the Excluded Liabilities to the
extent necessary or useful for Purchaser in connection with any dispute or
litigation or any other reasonable business purpose relating to the Business;
and (ii) the right to make copies and extracts therefrom, provided that any such
access by Purchaser shall not unreasonably interfere with the conduct of the
business of Seller, and Purchaser shall bear all of the out-of-pocket costs and
expenses (including attorneys' fees) relating thereto. Further, each party
agrees for a period extending seven years after the Closing Date not to destroy
or otherwise dispose of any such books, records and other data unless such party
shall first offer in writing to surrender such books, records and other data to
the other party and such other party shall not agree in writing to take
possession thereof during the ten-day period after such offer is made.
(d) Following the Closing, Purchaser may receive and open all mail
addressed to Seller or the Selling Subsidiaries and deal with the contents
thereof in its discretion to the extent that such mail and the contents thereof
relate to the Business (other than the Telecommunications Applications Services
Division or the Insurance IT Services Division). Purchaser agrees to deliver or
cause to be delivered to Seller all mail received by Purchaser after the Closing
addressed to Seller or any of its respective Affiliates that does not relate to
the Business.
Section 5.14. Transitional Services. Pursuant to the Transitional Services
Agreement, Seller or its Affiliates shall provide such transition services as
Purchaser may reasonably request. Such services shall (i) include the use of
office facilities shared between the Business and Seller or its Affiliates and
any services provided by Seller or its Affiliates to the Business, (ii) be
performed in a prompt and commercially reasonable manner and (iii) be provided
at a fee consistent with Seller's past practices regarding allocation of
overhead to the Business prior to the date hereof. Pursuant to the Transitional
Services Agreement, Seller (or an Affiliate of Seller) shall make available to
Purchaser (or an Affiliate of Purchaser) any Real Property Purchaser reasonably
requests to use in connection with the ongoing operation of the Business,
including the Real Property currently used by the Business at No.6 Chuang Ye
Road, Haidian District, Beijing, China (the "Beijing Office Space"). The
Transitional Services Agreement shall provide for Purchaser's (or its
Affiliate's) continued use of the Beijing Office Space after the Closing Date
for a period of six months following the Closing Date at the same cost per
square meter as set forth under Purchaser's current lease agreement for its
office space located at 4/F, Zhongdian Tower, No.6 Zhongguancun, South Street,
Haidian District, Beijing, China. All other Real Property shall be made
available to Purchaser (1) in the case of Real Property owned by Seller or its
Subsidiaries, on the basis of Seller's past practices regarding allocation of
overhead to the Business prior to the date hereof and (2) in the case of Real
Property leased from a third party, under the same terms and conditions as set
forth under the lease agreement with such third party. The Transitional Services
Agreement shall otherwise be on terms and conditions reasonably satisfactory to
Purchaser. The term of the Transitional Services Agreement shall be longer of
(A) six months and (B) the period reasonably required for
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Purchaser to obtain alternative facilities and services (which in no event shall
be more than twelve months), and shall be subject to earlier termination at the
option of Purchaser upon reasonable notice.
Section 5.15. Representation on Purchaser's Board. As soon as practicable
following the Closing Date, Purchaser agrees to appoint a representative of
Seller to the Board of Directors of Purchaser and shall nominate and recommend
to the stockholders the election of such nominee, or a replacement reasonably
acceptable to Purchaser, to the Board of Directors at each subsequent annual
meeting during the time which Seller continues to hold at least 80% of all of
the Conversion Shares.
Section 5.16. Minority Interest in Han Consulting. After the date of this
Agreement and in no event later than the Closing Date, Seller and Purchaser
shall use their reasonable best efforts to cause the minority shareholders of
Han Consulting to appoint Seller as their attorney-in-fact, on their behalf and
in their name or otherwise, to sell their aggregate 49% equity interest in Han
Consulting (the "Han Minority Interest") to Purchaser (or a Purchasing
Subsidiary designated by Purchaser) for consideration of not more than
RMB13,000,000 in cash. In the event Purchaser and Seller are unable to
effectuate the foregoing, Seller shall transfer all of its rights and benefits
but not its obligations under the Han Loan Agreement and the Floating Charge to
Purchaser (or a Purchasing Subsidiary designated by Purchaser) for no additional
consideration at or prior to Closing. For the avoidance of doubt, the foregoing
shall be the sole remedy for Purchaser in the event Purchaser and Seller are
unable to effectuate Purchaser's acquisition of the Han Minority Interest prior
to Closing.
Section 5.17. Lock-Up; Registration Rights Agreement.
(a) In respect of the Conversion Shares issuable or deliverable upon
conversion of the Note, neither Seller nor any of its Subsidiaries (1) will
offer, sell, contract to sell, pledge, grant any option to purchase, make any
short sale or otherwise dispose of, or reduce its economic risks with regard to,
any Conversion Share, any options or warrants convertible or exercisable into
Conversion Shares, or any other securities convertible into, exchangeable for or
that represent the right to receive the Conversion Shares (except for transfer
into and out of the Escrow Account pursuant to and in accordance with the Escrow
Agreement) or (2) engage in any hedging or other transaction that is designed to
or which reasonably could be expected to lead to or result in a sale or
disposition of the Conversion Shares, including any short sale or any purchase,
sale or grant of any right (including any put or call option) with respect to
any of the Conversion Shares or with respect to any security that includes,
relates to, or derives any part of its value from the Conversion Shares (the
"Lock-Up"). The term of the Lock-Up shall commence on the Closing Date and end
on (i) the fifth anniversary of the Closing Date with respect to Conversion
Shares representing 5% of the total issued and outstanding AsiaInfo Shares as of
the Conversion Date, after giving effect to such conversion (the "Five Year
Lock-Up Shares") and (ii) the second anniversary of the Closing Date with
respect to the remaining Conversion Shares, if any. Notwithstanding the
foregoing, in the event that Purchaser enters into a merger, consolidation or
acquisition with a competitor of Seller in the business of manufacturing and
distributing personal computers and mobile phone handsets whereby such
competitor acquires control of Purchaser (a "Seller Competitor Acquisition"),
Seller shall be automatically released from this provisions of this
Section 5.17(a). For the purpose of this section, "control" means beneficial
ownership of more than 20% of the outstanding securities of Purchaser or the
right to appoint more than one half of the members of the Purchaser's board of
directors.
(b) Prior to Closing, Purchaser and Seller will enter into a
registration rights agreement (the "Registration Rights Agreement") providing,
among other things, that once the Conversion Shares have been released from the
Lock-Up restrictions in Section 5.17(a), Seller may, on not more than two
occasions, require Purchaser to register the public sale of part or all of the
Conversion Shares on Form S-3 or a similar short form registration statement.
The Registration Rights Agreement will also provide
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Seller with "piggy-back registration rights" for a reasonable period following
the termination of, or release from, the lock-up. In addition, in the event
Purchaser elects to make the Earn-out Payment, if any, in AsiaInfo Shares, the
Registration Rights Agreement will provide Seller with one demand registration
on Form S-3 in respect of such AsiaInfo Shares. The Registration Rights
Agreement will include other customary and commercially reasonable terms and
conditions including reasonable "cut-backs", "blackouts" and "market stand-off"
provisions as are typically included in market standard registration rights
agreements.
Section 5.18. [RESERVED]
Section 5.19. Operation of Business Post-Closing.
(a) Following the Closing and for a period of not less than two years
thereafter, Purchaser shall operate and manage its Non-Telecommunications
Business as an independent division of Purchaser pursuant to the memorandum
relating to the post-closing operation of the Non-Telecommunications Business, a
copy of which is set forth in Section 5.19 of the Seller Disclosure Schedule.
Purchaser agrees that it will not modify the terms of such memorandum or operate
the Business other than as an independent division of Purchaser without the
consent of Seller.
(b) Seller shall execute and deliver, and shall procure that any
relevant Selling Subsidiaries or other Subsidiaries of Seller execute and
deliver, a Trademark License Agreement with Purchaser on the Closing Date in
form and substance reasonably acceptable to the parties (the "Trademark License
Agreement"). The Trademark License Agreement shall provide for the use by
Purchaser and/or one or more Purchasing Subsidiaries engaged principally in
Purchaser's Non-Telecommunications Business of the Lenovo Trademarks on any
products and/or services offered, provided, manufactured and/or distributed by
Purchaser's Non-Telecommunications Business on a co-branded basis with logos and
brandnames used or held for use by Purchaser prior to the Closing Date,
including use of the brandname "Lenovo-AsiaInfo" (or "[Chinese characters
omitted]" in Chinese). The Trademark License Agreement will also provide for
Purchaser's use of the Lenovo Trademarks on a stand-alone basis in connection
with products of the Security Services Division for a period of six months
following the Closing Date for transitional purposes. After the Closing,
Purchaser shall operate the Non-Telecommunications Business under the name
"Lenovo-AsiaInfo" (or "[Chinese characters omitted]" in Chinese). Following the
Closing, Purchaser shall use the Chinese name "[Chinese characters omitted]" as
the name of the parent, listed company, AsiaInfo Holdings, Inc., or any
successor corporation, whenever the name of such company is translated into
Chinese. The Trademark License Agreement shall have a minimum term of five years
(the "Initial Term"). Following the expiration of the Initial Term, Seller shall
have the right to terminate the Trademark License Agreement by giving two years'
prior written notice to Purchaser and the Purchasing Subsidiaries at any time
Seller holds a number of AsiaInfo Shares less than the number of Five Year
Lock-Up Shares. Notwithstanding the foregoing, the Trademark License Agreement
shall be terminable by Seller at any time by giving two years' prior notice to
Purchaser in the event of a Seller Competitor Acquisition.
Section 5.20. Security Business Permits. Seller shall and shall cause LHL
and its other Affiliates to use their best efforts to assist Purchaser (or an
Affiliate of Purchaser designated by Purchaser) in obtaining from, or being
granted by, the relevant PRC Governmental Authorities, new Business Permits in
each of the seven categories of Security Business Permits set forth in
Section 7.2(b). To the extent that any one or more of such Security Business
Permit is not obtained by Purchaser within the relevant time periods specified
in Section 7.2(b), Purchaser shall be entitled to the indemnity payments set out
in Section 7.2(b). For avoidance of doubt, Seller shall have no obligation to
ensure that such Business Permits are maintained by Purchaser for any period of
time.
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Section 5.21. Firewall Products. Pursuant to the Procurement Agreement,
Seller shall continue to manufacture the Firewall Products for Purchaser (or a
Purchasing Subsidiary designated by Purchaser) and provide after sales services
to the customers of such Firewall Products under similar terms and conditions as
currently enjoyed by LCSTSL for a period of time to be agreed upon by the
parties, which shall not be less than two years.
Section 5.22. Intellectual Property. Following the date hereof and prior to
the Closing Date, Seller and Purchaser shall engage in good faith negotiations
to agree upon a schedule of Intellectual Property (other than the Lenovo
Trademarks) used or held for use in the Business (other than the
Telecommunications Applications Services Division or the Insurance IT Services
Division) that, because of its use primarily in connection with other business
segments of Seller, will not be transferred to Purchaser but instead will be
licensed on a perpetual, royalty-free basis to Purchaser (with rights of
sub-license as part of the ordinary course of business) (the "Excluded
Intellectual Property"). Seller shall execute and deliver, and shall procure
that any relevant Seller Subsidiaries execute and deliver, a technology license
agreement (the "Technology License Agreement") in form and substance reasonably
satisfactory to Purchaser, regarding Purchaser's perpetual, royalty-free use of
the Excluded Intellectual Property.
Section 5.23. Initial Shares and Conversion Shares. Purchaser shall take all
such actions as are necessary in order to ensure that each of (i) the Initial
Shares to be issued or delivered on the Closing Date and (ii) the Conversion
Shares issuable or deliverable on the Conversion Dates, shall each be either (a)
in case of new AsiaInfo Shares, validly issued, fully paid and nonassessable or
(b) in the case of the delivery of AsiaInfo Shares held by Purchaser as treasury
stock or otherwise, validly transferred, free and clear of all Encumbrances and,
in each case, shall rank pari passu with all other AsiaInfo Shares.
ARTICLE VI
CONDITIONS
Section 6.1. Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Closing are subject to the satisfaction
or waiver at or prior to the Closing of the following conditions:
(a) All necessary consents and approvals of any Governmental Authority
required for the consummation of the transactions contemplated by this Agreement
or any other Transaction Document shall have been obtained.
(b) No statute, rule, regulation, order, decree or injunction shall have
been enacted, entered, promulgated or enforced by a Governmental Authority that
prohibits the consummation of the transactions contemplated by this Agreement or
any other Transaction Document shall be in effect.
Section 6.2. Conditions to Purchaser's Obligations. The obligations of
Purchaser to effect the Closing are further subject to the satisfaction or
waiver at or prior to the Closing of the following conditions:
(a) Each of the representations and warranties made by Seller in this
Agreement that is qualified by reference to materiality or Business Material
Adverse Effect shall be true and correct, and each of the other representations
and warranties made by Seller in this Agreement shall by true and correct in all
material respects, in each case as of the date of this Agreement and at and as
of the Closing Date as if made on that date (except in any case that
representations and warranties that expressly speak as of a specified date or
time need only be true and correct as of such specified date or time).
- 53 -
(b) Seller shall have performed and complied in all material respects
with each agreement, covenant and obligation required by this Agreement to be so
performed or complied with by Seller at or before the Closing.
(c) Since the date of this Agreement, no event, circumstance or change
shall have occurred, that individually or in the aggregate with one or more
other events, circumstances or changes, have had or reasonably could be expected
to have, a Seller Material Adverse Effect or a Business Material Adverse Effect.
(d) All consents or approvals listed in Section 6.2(d) of the Seller
Disclosure Schedule, and any other consents or approvals the absence of which
would have a Business Material Adverse Effect, shall have been obtained and
Purchaser shall have received copies of such consents in form and substance
satisfactory to Purchaser.
(e) Seller shall have delivered to Purchaser a certificate, dated the
Closing Date and duly executed by the Chief Executive Officer of Seller, in form
and substance satisfactory to Purchaser, to the effect of (a) - (d) above.
(f) At least 60% of the employees listed on Section 5.11(a) of the
Seller Disclosure Schedule shall have executed and delivered employment
agreements in form and substance satisfactory to Seller and (ii) at least 85% of
the key employees listed on Section 6.2(f) of the Seller Disclosure Schedule
(the "Key Employees") shall have executed and delivered employment agreements
with Purchaser or its Affiliates in form and substance satisfactory to
Purchaser; provided, however, that the terms and conditions of employment
reflected in such agreements shall be no less favorable than the terms and
conditions currently enjoyed by such employees with Seller or any of its
Subsidiaries, as the case may be.
(g) Purchaser shall have received a legal opinion of Tian Yuan Law Firm,
PRC counsel to Seller, substantially in the form and substance as set forth in
Exhibit D.
(h) Either (1) Seller shall have delivered to Purchaser share
certificates representing all of the ordinary shares of Han Consulting, duly
endorsed in blank or in the name of Purchaser or a Purchasing Subsidiary
designated by Purchaser or (2) Seller shall have delivered to Purchaser share
certificates representing 51% of the ordinary shares of Han Consulting and
Seller and Han Consulting shall have executed and delivered to Purchaser an
assignment agreement ("Assignment Agreement") in form and substance reasonably
satisfactory to Purchaser and Seller, assigning any and all of the right, title
and interest of Seller or its Affiliates in the Floating Charge, the Han Loan
Agreement and all outstanding loans thereunder to Purchaser (or a Purchasing
Subsidiary designated by Purchaser).
(i) Seller shall have executed and delivered the Bill of Sale.
(j) Seller shall have executed and delivered any other assignment
agreements, equity transfer agreements or other instruments or documents in the
Chinese language collectively, (the "Onshore Transfer Agreements") as may be
required by MOFCOM or as may be reasonably requested by Purchaser in order to
complete the transfer of the Assets and/or the Transferred Companies to
Purchaser and the Purchasing Subsidiaries hereunder in accordance with PRC laws
and regulations.
(k) Seller shall have executed and delivered to Purchaser an Assignment
Agreement.
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(l) Seller shall have executed and delivered to Purchaser the
Transitional Services Agreement.
(m) Seller shall have executed and delivered to Purchaser the Trademark
License Agreement.
(n) Seller shall have executed and delivered to Purchaser the Technology
License Agreement.
(o) A certificate of approval from the relevant PRC regulatory
authorities shall have been received by Purchaser approving the transfer of the
respective equity interests held by LML and LBL in LCSTSL to Purchaser and/or
one or more Purchasing Subsidiaries designated by Purchaser.
(p) LCSTSL's Information System Integration Qualification (A level)
shall have been renewed by the Ministry of Information Industry of PRC.
(q) Purchaser shall have completed its legal due diligence investigation
and review of the Business, and the results of such investigation and review
(including with respect to the Assets, Assumed Liabilities, Outstanding Customer
Contracts, Business and business prospects) shall be satisfactory to Purchaser
in its reasonable discretion; provided that in the event Purchaser's legal due
diligence investigation reveals any aspects of the Business that Purchaser
reasonably determines are not satisfactory and consistent with the
representations, warranties and other provisions of this Agreement, Purchaser,
prior to exercising any other rights or remedies under this Agreement, shall
first offer to engage in good faith negotiations with Seller to modify the terms
of this Agreement, through additional indemnifications or otherwise to be agreed
upon by both parties, in order to reasonably address the matters revealed during
due diligence. For purposes of the forgoing, the parties acknowledge that issues
arising in Purchaser's legal due diligence relating to or arising out of the
Security Business Permits will not be deemed to be a basis for further
indemnifications or modifications of this Agreement provided the parties abide
by their respective obligations set forth in Sections 5.20 and 7.2(b).
(r) Such members of the boards of directors and such officers of each of
the Transferred Companies as are designated in a written notice delivered at
least two Business Days prior to the Closing Date by Purchaser to Seller shall
have tendered, effective at Closing, their resignations as such directors and
officers.
(s) Seller and its relevant Affiliates shall have executed and delivered
to Purchaser the Procurement Agreement.
Section 6.3. Conditions to Seller's Obligations. The obligations of Seller
and Selling Subsidiaries to effect the Closing are further subject to the
satisfaction or waiver at or prior to the Closing of the following conditions:
(a) Each of the representations and warranties made by Purchaser in this
Agreement that is qualified by reference to materiality or Purchaser Material
Adverse Effect shall be true and correct, and each of the other representations
and warranties made by Purchaser in this Agreement shall by true and correct in
all material respects, in each case as of the date of this Agreement and at and
as of the Closing Date as if made on that date (except in any case that
representations and warranties that expressly speak as of a specified date or
time need only be true and correct as of such specified date or time).
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(b) Purchaser shall have performed and complied with, in all material
respects, each agreement, covenant and obligation required by this Agreement to
be so performed or complied with by Purchaser at or before the Closing.
(c) Purchaser shall have delivered to Seller a certificate, dated the
Closing Date and duly executed by Purchaser's Chief Executive Officer, in form
and substance reasonably satisfactory to Seller, to the effect of (a) and (b)
above.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. Survival of Representations, Warranties, Covenants and
Agreements.
(a) The representations and warranties of Seller, the Selling
Subsidiaries and Purchaser contained in this Agreement will survive the Closing
(a) until the fifth anniversary of the Closing Date in case of Section 3.7 and
(b) until the second anniversary of the Closing Date in the case of all other
representations and warranties; provided, however, that any representation,
warranty that would otherwise terminate in accordance with clause (a) or (b)
above will continue to survive if an Indemnity Notice shall have been given
under this Article VII on or prior to the date on which it otherwise would
terminate, until the related claim for indemnification has been satisfied or
otherwise resolved as provided in this Article VII. Except as otherwise
expressly provided in this Agreement, each covenant hereunder shall survive
without limit.
(b) For purposes of this Agreement, a party's representations and
warranties shall be deemed to include, with respect to Seller, the Seller
Disclosure Schedule, and all other documents or certificates delivered by or on
behalf of such party in connection with this Agreement. No party's rights
hereunder (including rights under this Article VII) shall be affected by any
investigation conducted by or any knowledge acquired (or capable of being
acquired) by such party at any time, whether before or after the execution or
delivery of this Agreement or the Closing, or by the waiver of any condition to
Closing.
Section 7.2. Indemnification of Purchaser.
(a) Seller shall indemnify and hold harmless Purchaser, its Affiliates
and their respective successors shareholders, officers, directors, employees and
agents (collectively, the "Purchaser Indemnified Parties") from and against any
and all Losses that may be asserted against or paid, suffered or incurred by any
Purchaser Indemnified Party that arise out of, result from, are based upon or
relate to:
(i) any inaccuracy in or any breach of, as of the date of this
Agreement or the Closing Date, any representation and warranty made by Seller in
this Agreement, in any of the Transaction Documents or in any document or other
paper delivered by Seller pursuant to this Agreement; provided, however, that if
any such representation or warranty (other than the representation and warranty
contained in Section 3.5(a)) is qualified in any respect by knowledge,
materiality or Business Material Adverse Effect, for purposes of this clause (i)
such knowledge, materiality or Business Material Adverse Effect qualification
will in all respects be ignored;
(ii) any failure by Seller to duly and timely perform or fulfill
any of its covenants or agreements required to be performed by Seller under this
Agreement, the Transaction Documents or any document or other paper delivered by
Seller pursuant to this Agreement; and
(iii) any Excluded Liability.
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(b) Seller shall indemnify and hold harmless Purchaser if,
notwithstanding Seller's efforts pursuant to Section 5.20, Purchaser or an
Affiliate of Purchaser is unable to obtain the following Business Permits (the
"Security Business Permits") within 270 days, with respect to each of the
categories in (i) to (v) below, and within 540 days, with respect to each of the
categories in (vi) and (vii) below, in each case, following the Closing Date:
(i) Sales License of Specialized Products for Computer
Information System Security ([Chinese characters omitted]), issued by the Public
Information Network Security Monitoring Bureau of Ministry of Public Security
([Chinese characters omitted]);
(ii) Product Model Certificate of China Information Security
Products Assessment and Certification Centre [Chinese characters omitted],
issued by China Information Security Products Assessment and Certification
Centre ([Chinese characters omitted]);
(iii) Secret-related Information System Product Test and
Examination Certificate or New Product Assessment Certificate ([Chinese
characters omitted]), issued by the Secret-related Information System Security
and Confidentiality Assessment Centre of the National Administration for
Protection of State Secrets ([Chinese characters omitted]);
(iv) Military Information Security Product Certification
Certificate ([Chinese characters omitted]), issued by Information Security
Assessment and Certification Centre of the PLA of China ([Chinese characters
omitted]);
(v) Software Enterprise Certificate and Software Product
Copyright Certificate ([Chinese characters omitted]), issued by the Ministry of
Information Industry, the Ministry of Science and Technology and China Software
Industry Association ([Chinese characters omitted]);
(vi) Certificate of Designated Unit for Production of Commercial
Crypto-Goods ([Chinese characters omitted]), Sales License for Commercial
Crypto-Goods ([Chinese characters omitted]) and a product certification
substantially similar to the SJW44 Network Cryptographic Facility Identification
Certificate (SJW44 [Chinese characters omitted]) for a similar product of the
Security Services Division, each issued by the General Office of the State
Cipher Administration Committee ([Chinese characters omitted]); and
(vii) Computer Information System Integration Concerning State
Secrets Qualification Certificate ([Chinese characters omitted]), issued by the
National Administration for Protection of State Secrets ([Chinese characters
omitted]).
Seller and Purchaser acknowledge that Purchaser's actual losses for failure
to obtain the Security Business Permits are not likely to be readily
quantifiable and, accordingly agree that Seller's liability for Purchaser's not
obtaining one or more of the Security Business Permits in each of the categories
in (i) to (v), within 270 days from the Closing Date, shall be RMB4,000,000 for
each such category, and in each of the categories in (vi) and (vii), within 540
days from the Closing Date, shall be RMB15,000,000 for each such category.
Notwithstanding anything to the contrary in this Agreement, the provisions of
this Section 7.2(b) shall be Purchaser's exclusive remedy for Seller's breach of
its obligations under Section 5.20 or for any other Losses arising out of or
relating to Seller's representation or warranties concerning the LHL Security
Business Permits.
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Section 7.3. Indemnification of Seller. Purchaser shall indemnify and hold
harmless Seller, its Affiliates, and their respective shareholders, officers,
directors, employees and agents (collectively the "Seller Indemnified Parties")
from and against any and all Losses that may be asserted against, or paid,
suffered or incurred by any Seller Indemnified Party that arise out of, result
from, are based upon or relate to:
(a) the inaccuracy, as of the date of this Agreement or the Closing
Date, of any representation or warranty made by Purchaser in this Agreement;
provided, however, that if any such representation or warranty is qualified in
any respect by materiality, for purposes of this paragraph such materiality
qualification will in all respects be ignored;
(b) any failure by Purchaser to perform or fulfill any of its covenants
or agreements required to be performed by Purchaser under this Agreement; and
(c) any Assumed Liability.
Section 7.4. Limitations. The maximum liability of Seller under clause (a)
of Section 7.2 shall not exceed RMB50,000,000 in the aggregate (the "Indemnity
Amount"). The maximum liability of Seller for any accounts receivable, notes
receivable or other receivables reflected on the Closing Date Balance Sheet that
are not fully collected after the Closing Date in the ordinary course, net of
the amount provided therefore in the Closing Date Balance Sheet, shall not
exceed an amount equal to 10% of the gross amount of such receivables as set out
in the Closing Date Balance Sheet; provided, however, that the foregoing
limitation on liability shall not apply to the account receivables from
Guizhousheng Nongcun Zhongxiaoxue Xiandai Yuancheng Jiaoyu Shidian Xiangmu
Lingdao Xiaozu Bangongshi ([Chinese characters omitted]) or Zhongguo Guangda
Yinghang Gufen Youxian Gongsi ([Chinese characters omitted]). The maximum
liability of Seller for any breach of the representation and warranty contained
in Section 3.26, net of the amount provided therefore in the Closing Date
Balance Sheet, shall not exceed RMB5,000,000. Seller shall not be liable to
indemnify Purchaser for any Losses of Purchaser if and to the extent full and
adequate provisions for such Losses have been made on the Closing Date Balance
Sheet. The maximum liability of Purchaser under Section 7.3 shall not exceed the
Indemnity Amount; provided that such limitation shall not apply to Purchaser's
obligations under the Note. Notwithstanding the foregoing, the limitations on
liability contained in this Section 7.4 shall not apply to any claim for
indemnity based on any of Sections 3.1, 3.2(a), 3.7, 3.13, 5.7(d) and 5.11(h) or
any claim for fraud or willful misconduct.
Section 7.5. Method of Asserting Claims. All claims for indemnification by
any Indemnified Party under this Article VII will be asserted and resolved as
follows:
(a) If an Indemnified Party intends to seek indemnification under this
Article VII, it shall promptly notify the Indemnifying Party in writing of such
claim. The failure to provide such notice will not affect any rights hereunder
except to the extent the Indemnifying Party is materially prejudiced thereby.
(b) If such claim involves a claim by a third party against the
Indemnified Party, the Indemnifying Party may, within ten days after receipt of
such notice and upon notice to the Indemnified Party, assume, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, the settlement or defense thereof (in which case any
Loss associated therewith shall be the sole responsibility of the Indemnifying
Party), provided that the Indemnified Party may participate in such settlement
or defense through counsel chosen by it. If the Indemnified Party determines in
good faith that representation by the Indemnifying Party's counsel of both the
Indemnifying
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Party and the Indemnified Party may present such counsel with a conflict of
interest, then the Indemnifying Party shall pay the reasonable fees and expenses
of the Indemnified Party's counsel. Notwithstanding the foregoing, (i) the
Indemnified Party may, at the sole cost and expense of the Indemnified Party, at
any time prior to the Indemnifying Party's delivery of the notice referred to in
the first sentence of this Section 7.5(b), file any motion, answer or other
pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate to protect its interests, (ii) the
Indemnified Party may take over the control of the defense or settlement of a
third-party claim at any time if it irrevocably waives its right to indemnity
under this Article VII with respect to such claim and (iii) the Indemnifying
Party may not, without the consent of the Indemnified Party, settle or
compromise any action or consent to the entry of any judgment, such consent not
to be unreasonably withheld. So long as the Indemnifying Party is contesting any
such claim in good faith, the Indemnified Party shall not pay or settle any such
claim without the Indemnifying Party's consent, such consent not to be
unreasonably withheld. If the Indemnifying Party is not entitled to assume the
defense of the claim pursuant to the foregoing provisions or is entitled but
does not contest such claim in good faith (including if it does not notify the
Indemnified Party of its assumption of the defense of such claim within the
ten-day period set forth above), then the Indemnified Party may conduct and
control, through counsel of its own choosing and at the expense of the
Indemnifying Party, the settlement or defense thereof, and the Indemnifying
Party shall cooperate with it in connection therewith. The failure of the
Indemnified Party to participate in, conduct or control such defense shall not
relieve the Indemnifying Party of any obligation it may have hereunder. Any
defense costs required to be paid by the Indemnifying Party shall be paid as
incurred, promptly against delivery of invoices therefor.
Section 7.6. Character of Indemnity Payments. The parties agree that any
indemnification payments made with respect to this Agreement shall be treated
for all Tax purposes as an adjustment to the Purchase Price, unless otherwise
required by law (including by a determination of a Tax authority that, under
applicable law, is not subject to further review or appeal). If an
indemnification payment by law cannot be treated as an adjustment to Purchase
Price, the Indemnifying Party will pay an amount to the Indemnified Party that
reflects the hypothetical Tax consequences of the receipt or accrual of such
indemnification payment, using the maximum applicable statutory rate (or, in the
case of an item that affects more than one Tax, rates) of Tax and reflecting,
for example, the effect of deductions available for Taxes such as state and
local income Taxes.
ARTICLE VIII
TERMINATION OF AGREEMENT
Section 8.1. Termination. This Agreement may be terminated, and the
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing by:
(a) the mutual written agreement of Seller and Purchaser;
(b) either Seller or Purchaser if any court of competent jurisdiction or
other competent Governmental Authority shall have issued a statute, rule,
regulation, order, decree or injunction or taken any other action permanently
restraining, enjoining or otherwise prohibiting all or any portion of the
transactions contemplated by this Agreement and such statute, rule, regulation,
order, decree or injunction or other action shall have become final and
nonappealable;
(c) Seller or Purchaser, in the event (i) of a material breach of this
Agreement by the non-terminating party if such non-terminating party fails to
cure such breach within five Business Days following notification thereof by the
terminating party or (ii) the satisfaction of any condition to the terminating
party's obligations under this Agreement becomes impossible if the failure of
such condition to be satisfied is not caused by a breach of this Agreement by
the terminating party or its Affiliates; or
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(d) Seller or Purchaser if the Closing shall not have occurred on or
before the date that is 180 days following the date hereof, unless the failure
to consummate the Closing is due to the failure to act by the terminating party
or its Affiliates.
Section 8.2. Effect of Termination. If this Agreement is validly terminated
pursuant to Section 8.1, this Agreement will forthwith become null and void and
have no further effect, without any liability on the part of any party hereto or
its Affiliates, directors, officers or stockholders, other than the provisions
of this Section 8.2 and Article IX hereof. Nothing contained in this Section 8.2
shall relieve any party from liability for any breach of this Agreement
occurring prior to termination.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Notices. All notices, requests and other communications under
this Agreement must be in writing and will be deemed to have been duly given
upon receipt to the parties at the following addresses or facsimiles (or at such
other address or facsimile for a party as shall be specified by the notice):
If to Seller:
Lenovo Group
No. 6 Chuang Ye Road, Haidian District
Beijing 100085
China
Facsimile No.: +8610-58865692
Attention: Mary Ma, Chief Financial Officer
With a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges, LLP
Suites 4101-4102 & 4108
CITIC Square
1168 Nanjing Road West
Shanghai 200004, PR China
Facsimile No.: +8621-52929166
Attention: Steven Xiang
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If to Purchaser:
AsiaInfo Holdings, Inc.
4th Floor, Zhongdian Information Tower
6 Zhongguancun South Street
Haidian District
Beijing 100086
PRC
Facsimile No.: +8610-6250-1893
Attention: Ying Han, Executive Vice President
and Chief Financial Officer
With a copy (which shall not constitute notice) to:
Clifford Chance
3326 China World Tower I
No. 1 Jianguomenwai Avenue
Chaoyang District, Beijing 100004
China
Facsimile No.: +8610 6505 9028
Attention: Matthew D. Adler
Section 9.2. Entire Agreement. This Agreement, the exhibits and schedules
hereto, the Confidentiality Agreement and the Transaction Documents supersede
all prior and contemporaneous discussions and agreements, both written and oral,
among the parties with respect to the subject matter of this Agreement and the
Transaction Documents and constitute the sole and entire agreement among the
parties to this Agreement with respect to the subject matter of this Agreement,
and supersedes all prior and contemporaneous agreements and understandings,
written or oral, with respect to the subject matter hereof.
Section 9.3. Expenses. Except as otherwise expressly provided in this
Agreement (including as provided in Section 8.2), whether or not the
transactions contemplated by this Agreement are consummated, each party will pay
its own costs and expenses incurred in connection with the negotiation,
execution and closing of this Agreement and the Transaction Documents and the
transactions contemplated by this Agreement and the Transaction Documents.
Section 9.4. Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
Section 9.5. Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party to this Agreement.
Section 9.6. No Third-Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article VII.
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Section 9.7. Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation under this Agreement may be assigned by any party
to this Agreement by operation of law or otherwise without the prior written
consent of the other party to this Agreement and any attempt to do so will be
void, except that Purchaser may assign any or all of its rights, interests and
obligations under this Agreement (i) before or after the Closing, to any
Affiliate and (ii) after the Closing, to any Person provided that any such
Affiliate or Person, as applicable, agrees in writing to be bound by all of the
terms, conditions and provisions contained in this Agreement, but no such
assignment shall relieve Purchaser of its obligations under this Agreement if
such assignee does not perform such obligations. Without limiting the generality
of the foregoing, if requested by Purchaser, Seller agrees to cause the Business
and the Assets or any portion thereof at Closing to be transferred to any Person
Purchaser may direct. Subject to the foregoing, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties to this Agreement and
their respective successors and assigns.
Section 9.8. Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 9.9. Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
Section 9.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
FOR THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
Section 9.11. Arbitration.
(a) Except as otherwise provided in this Agreement, any dispute or claim
arising out of or in connection with or relating to this Agreement, or the
breach, termination or invalidity hereof, shall be finally settled by
arbitration at the Hong Kong International Arbitration Centre under the rules of
UNCITRAL (the "Rules") as are in force at the date of the notice of arbitration
commencing any such arbitration, but subject to the amendments made to the Rules
by the rest of this Section 9.11. For the purpose of such arbitration, there
shall be a board of arbitration (the "Board of Arbitration") consisting of three
arbitrators, each of Purchaser and Seller shall select one (1) member and the
third member shall be selected by mutual agreement of the other members, or if
the other members fail to reach agreement on a third member within twenty (20)
days after their selection, such third member shall thereafter be selected by
the Hong Kong International Arbitration Centre upon application made to it for
such purpose. The place of arbitration shall be in Hong Kong. All arbitration
proceedings shall be conducted in the English language. The arbitrators shall
decide any such dispute or claim strictly in accordance with the governing law
specified in Section 9.10 of this Agreement. Judgment upon any arbitral award
rendered hereunder may be entered in any court, and/or application may be made
to any such court for a judicial acceptance of the award and/or an order of
enforcement, as the case may be.
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(b) Each party shall cooperate in good faith to expedite (to the maximum
extent practicable) the conduct of any arbitral proceedings commenced under this
Agreement.
(c) The costs and expenses of the arbitration, including the fees of the
arbitration, including the fees of the Board of Arbitration, shall be borne
equally by each party to the dispute or claim, and each party shall pay its own
fees, disbursements and other charges of its counsel.
(d) Any award made by the Board of Arbitration shall be final and
binding on each of the parties that were parties to the dispute. The parties
expressly agree to waive the applicability of any laws and regulations that
would otherwise give the right to appeal the decisions of the Board of
Arbitration so that there shall be no appeal to any court of law from the award
of the Board of Arbitration, and a party shall not challenge or resist the
enforcement action taken by any other party in whose favor an award of the Board
of Arbitration was given.
(e) Notwithstanding this Section 9.11 or any other provision to the
contrary in this Agreement, no party shall be obligated to follow the foregoing
arbitration procedures where that party intends to apply to any court of
competent jurisdiction for an interim injunction or similar equitable relief
against the other, provided there is no unreasonable delay in the prosecution of
that application.
(f) This Agreement and the rights and obligations of Purchaser and
Seller shall remain in full force and effect pending the award in any
arbitration proceeding hereunder.
Section 9.12. Counterparts. This Agreement may be executed in any number of
counterparts, all of which will constitute one and the same instrument.
Section 9.13. Joint and Several Obligations. All representations,
warranties, covenants, liabilities and obligations of Seller and the Selling
Subsidiaries under this Agreement shall be joint and several, whether so
expressed or not.
Section 9.14. Interpretation. The parties have participated jointly in the
negotiating and drafting of this Agreement. If an ambiguity or a question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
[Signatures begin on the next page.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LENOVO GROUP LIMITED
By: /s/ Ma Xue Zheng
-----------------------------------------
Name: Ma Xue Zheng
Title: Chief Financial Officer
ASIAINFO HOLDINGS, INC.
By: /s/ Xingsheng Zhang
-----------------------------------------
Name: Xingsheng Zhang
Title: President and Chief Executive Officer
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EXHIBIT C
EXECUTION COPY
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SUPPLEMENT AND AMENDMENT NO. 1 TO ACQUISITION AGREEMENT
By and between
ASIAINFO HOLDINGS, INC.
as Purchaser
and
LENOVO GROUP LIMITED
as Seller
Dated as of October 1, 2004
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TABLE OF CONTENTS
Page
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Section 1 Definitions, References And Interpretation........................1
Section 2 Forward Contract; Amendments......................................5
Section 3 Restructuring Of Han Consulting..................................12
Section 4 Beneficial Ownership Of LCSTSL...................................13
Section 5 Beneficial Ownership Of LWY......................................14
Section 6 [Reserved].......................................................15
Section 7 Representations, Warranties And Covenants........................16
Section 8 Seconded Employees...............................................18
Section 9 Indemnification..................................................19
Section 10 Legal Opinions...................................................19
Section 11 Tax Matters......................................................20
Section 12 Early Termination Of The Escrow Arrangement......................21
Section 13 Governing Law....................................................21
Section 14 Incorporation Of Terms...........................................21
Section 15 Effect On The Acquisition Agreement..............................22
Section 16 Effective Date; Closing..........................................22
Section 17 Execution In Counterparts........................................22
Exhibit A Form Of Forward Contract........................................A-1
Exhibit B Form Of Legal Opinion Of Tian Yuan Law Firm.....................B-1
Exhibit E Schedule Of The Security Business Permits.......................E-1
SUPPLEMENT AND AMENDMENT NO. 1 TO ACQUISITION AGREEMENT
This Supplement and Amendment No. 1 to Acquisition Agreement
(this "Supplement"), dated as of October 1, 2004, is made and entered into by
and among AsiaInfo Holdings, Inc. ("Purchaser"), a corporation organized and
existing under the laws of the State of Delaware of the United States, on behalf
of itself and the Purchasing Subsidiaries, and Lenovo Group Limited ([Chinese
characters omitted]) ("Seller"), a company organized and existing under the laws
of Hong Kong, on behalf of itself, Lenovo Holdings Limited ([Chinese characters
omitted]), a company organized and existing under the laws of the PRC, and the
Selling Subsidiaries.
WHEREAS, Seller and Purchaser entered into an Acquisition
Agreement dated as of July 27, 2004 (hereinafter the "Acquisition Agreement");
WHEREAS, pursuant to Section 2.15 of the Acquisition Agreement,
Seller and Purchaser have determined to structure part of the acquisition of the
Assets as contemplated by the Acquisition Agreement in the manner set forth
herein;
WHEREAS, Seller and Purchaser have reached other supplemental
understandings and agreements regarding the acquisition of the Assets, which
they wish to memorialize herein;
WHEREAS, Seller and Purchaser wish to make certain amendments to
the Acquisition Agreement, as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Supplement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree to supplement and amend the Acquisition Agreement as
follows:
SECTION 1
DEFINITIONS, REFERENCES AND INTERPRETATION
1.1 All capitalized terms used in this Supplement shall, unless
otherwise defined herein, have the same meanings ascribed to such terms in the
Acquisition Agreement.
1.2 The definition of "Transaction Documents" as used herein and in
the Acquisition Agreement shall be amended by (i) deleting the term "Note" and
(ii) adding the terms "Forward Contract", "Asset Transfer Agreement", "Patent
Assignment Agreement", "LCSTSL Beneficial Ownership Agreements" and "LWY
Beneficial Ownership Agreements" to the list of documents included in such
defined term.
1.3 The principles of interpretation set out in Section 1.3 of the
Acquisition Agreement shall apply hereto with the same effect as if set out in
this Supplement.
1.4 In the case of any inconsistency or conflict between the
provisions in this Supplement and any provision in the LCSTSL Beneficial
Ownership Agreements or the LWY Beneficial Ownership Agreements, the provisions
in this Supplement shall prevail.
1.5 Upon execution of this Supplement, each reference in the
Acquisition Agreement to (i) "this Agreement", "herein", "hereof", "hereunder"
or words of similar import shall mean, and be a reference to, the Acquisition
Agreement as supplemented and amended by this Supplement and (ii) the
"Transaction Documents" shall mean, and be a reference to, "Transaction
Documents" as amended by this Supplement.
1.6 As used in this Supplement, the following terms shall have the
following meanings:
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"Asset Transfer Agreement" means an asset transfer agreement to
be entered into on the Closing Date by and between LBL and Purchaser or an
Affiliate of Purchaser.
"Bonson" means Bonson Information Technology Limited, a company
organized and existing under the laws of the British Virgin Islands.
"BVI Holdco" means a direct or indirect wholly-owned subsidiary
of Seller incorporated in the British Virgin Islands.
"Foundational Patent" means an Excluded Intellectual Property
that is a patent that has been adopted or will be adopted into a technical
standard by an international or governmental authority or association (e.g.,
IGRS, Trusted PC or UPnP), or an official authority for setting technical
standards for an industry.
"Government Application Services Business" means the IT services
businesses as conducted by the government application services division of
Seller on the Closing Date.
"Han Minority Shareholders" means Vision On-line Limited,
Starling Technology Limited and UF International Holdings, Ltd., each a company
organized and existing under the laws of the British Virgin Islands.
"Han Shareholders' Agreement" means the Shareholders' Agreement
dated May 10, 2002 by and among LIAL and the Han Minority Shareholders.
"HMCL Loan Agreements" means, collectively, the loan agreements
dated June 15, 2002, November 25, 2002 and May 19, 2004, by and between Han
Consulting as lender and HMCL as borrower for loans of up to US$1.71 million,
HK$30 million and HK$20 million, respectively.
"IT System Operation Services Business" means the IT services
businesses as conducted by the IT system operation services division of Seller
on the Closing Date.
"LAI" means Lenovo-AsiaInfo Technologies, Inc. ([Chinese
characters omitted]), a company organized and existing under the laws of the
PRC.
"LCSTSL Beneficial Ownership Agreements" means the LCSTSL Power
of Attorneys, the LCSTSL Exclusive Business Cooperation Agreement, the LCSTSL
Equity Transfer Arrangement Agreement and the LCSTSL Share Pledge Agreement.
"LCSTSL Beneficial Ownership Period" means the period from the
Closing Date to the date on which the LCSTSL Equity Transfer is effectuated.
"LCSTSL Event of Default" means the occurrence of any one of the
following events:
(1) a material breach by LCSTSL of any law or regulation
of the PRC which has not been remedied within the grace period (if any)provided
under such law or regulation, provided such breach is not caused by Seller, LHL
or any of their respective Subsidiaries, or any of the transactions contemplated
by the Acquisition Agreement or this Supplement;
(2) LCSTSL's incurring, as determined under PRC GAAP, a
cumulative net loss of more than RMB50 million as of the end of any calendar
year during the LCSTSL Beneficial Ownership Period, calculated from the Closing
Date, through and including the last day of the calendar year in which such
determination is made, provided that such net loss is not caused by the breach
by Seller, LHL or any of their respective Subsidiaries of any of
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their respective obligations under the Acquisition Agreement, this Supplement or
the Transaction Documents; or
(3) LCSTSL's engaging in a business other than the
Security Services Business, the Government Application Services Business or the
IT System Operation Services Business, provided that LCSTSL shall only engage in
the Government Application Services Business and the IT System Operation
Services Business for a period of one year following the Closing Date to the
extent the operation of such business requires the Information System
Integration Qualification held by LCSTSL, any of the Security Business Permits
in category (vii) of the definition of "Security Business Permit" held by LCSTSL
or LHL, or to the extent PRC law or regulation requires that such business be
operated by a domestic PRC company, and provided, further, that, if at the end
of such one year period (the "Original Period") LAI has not obtained the
Information System Integration Qualification despite its best efforts to obtain
such permit, Seller and Purchaser shall negotiate in good faith (1) on or prior
to the last day of the Original Period to extend such period for an additional
year (the "Extended Period") and, (2) on or prior to the last day of Extended
Period (if applicable), to extend such period for an additional year, in each
case, based on the development of LCSTSL's business at that time and whether the
operation of LCSTSL's business in the upcoming one year period will require the
Information System Integration Qualification.
"LWY" means [Chinese characters omitted], a company to be
established by LHL and certain natural persons designated by Purchaser under the
laws of the PRC, in accordance with the terms hereof.
"LWY Beneficial Ownership Period" means the period from the
Closing Date to the date on which the LWY Equity Transfer is effectuated.
"LWY Beneficial Ownership Agreements" means the LHL Loan
Agreement, the LHL Power of Attorney, the LWY Exclusive Business Cooperation
Agreement, the LWY Equity Transfer Arrangement Agreement and the LWY Share
Pledge Agreement.
"LWY Event of Default" means the occurrence of any one of the
following events:
(1) a material breach by LWY of any law or regulation of
the PRCwhich has not been remedied within the grace period (if any) provided
under such law or regulation, provided such breach is not caused by Seller, LHL
or any of their respective Subsidiaries, or any of the transactions contemplated
by the Acquisition Agreement or this Supplement;
(2) LWY's accumulating, as determined under PRC GAAP, a
shareholders' deficit as of June 30th or December 31st of any calendar year, on
or after the date on which LWY is established by LHL, provided that LAI may at
its sole discretion at any time inject additional capital into LWY through the
LWY Minority Loan Agreement and the LHL Loan Agreement to prevent such default,
and provided, further, that such shareholders' deficit is not caused by a breach
by Seller, LHL or any of their respective Subsidiaries of any of their
respective obligations under the Acquisition Agreement, this Supplement or the
Transaction Documents; or
(3) LWY's engaging in a business other than the Security
Services Business, the Government Application Services Business or the IT System
Operation Services Business, provided that LWY shall only engage in the
Government Application Services Business and the IT System Operation Services
Business to the extent the operation of such business requires any of the
Security Business Permits held by LWY or LHL, or to the extent PRC law or
regulation requires that such business be operated by a domestic PRC company.
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"Patent Assignment Agreement" means a patent assignment
agreement to be entered into on the Closing Date by and between LBL and
Purchaser or an Affiliate of Purchaser.
"Security Services Business" means the portion of the Business
operated by the Security Services Division.
1.7 Other terms defined are in the other parts of this Supplement
indicated below:
"Acquisition Agreement"....................................preamble
"Effective Date".................................................16
"Forward Contract"..............................................2.1
"Goldfame"...................................................3.2(a)
"Han Bank Account"...........................................3.2(d)
"Han Distribution"...........................................3.2(e)
"Han Restructuring".............................................3.1
"HMCL Loan Consideration"....................................3.2(d)
"LCSTSL Beneficial Ownership Transfer"..........................4.1
"LCSTSL Equity Transfer".....................................4.1(d)
"LCSTSL Equity Transfer Arrangement Agreement"...............4.1(d)
"LCSTSL Exclusive Business Cooperation Agreement"............4.1(b)
"LCSTSL Power of Attorneys"..................................4.1(a)
"LHL Loan Agreement"............................................5.1
"LHL Power of Attorney"......................................5.2(a)
"LWY Beneficial Ownership Transfer".............................5.2
"LWY Equity Transfer"........................................5.2(d)
"LWY Equity Transfer Arrangement Agreement"..................5.2(d)
"LWY Exclusive Business Cooperation Agreement"...............5.2(b)
"LWY Minority Loan Agreement"...................................5.1
"LWY Minority Shareholders".....................................5.1
"LWY Purchase Notice"........................................5.2(d)
"MII"........................................................4.1(d)
"New Business Permits".......................................2.2(s)
"Onshore Han Transfer".......................................3.2(a)
"Purchaser"................................................preamble
"Restructuring Documents".......................................3.2
"Restructuring Tax"............................................11.1
"Restructuring Tax Cost".......................................11.1
"Security Services Contracts"...................................4.2
"Seller"...................................................preamble
"Supplement"...............................................preamble
SECTION 2
FORWARD CONTRACT; OTHER AMENDMENTS
2.1 Forward Contract. As further described in this Section, in lieu
of issuing the Note as contemplated in Section 2.5(a) of the Acquisition
Agreement, Purchaser shall cause its Subsidiary, Bonson, to enter into a forward
contract (the "Forward Contract") with LIAL at Closing. A form of the Forward
Contract is attached hereto as Exhibit A. Under the Forward Contract, Bonson
shall agree to provide for the forward payment of part of the Purchase Price for
the Assets and settle such payment within 12 months following the Closing Date
by delivery of a certain number of duly authorized, validly issued, fully paid
and nonassessable AsiaInfo Shares to LIAL, pursuant to the terms and conditions
set forth in the Forward Contract.
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2.2 Amendments. The following amendments shall be made to the
Acquisition Agreement.
(a) The definitions of "Conversion Amount" and "Conversion
Date" in Section 1.1 of the Acquisition Agreement shall be deleted in their
entirety and the following definitions shall be added to that Section:
"Settlement Amount" means RMB260 million, subject to any
adjustments required pursuant to Section 2.10(f), 2.11(c), or as otherwise
specifically provided in this Agreement."
"Settlement Date" means any Business Day during the
12-month period following the Closing Date on which Purchaser determines, in its
sole and absolute discretion, to pay the Settlement Amount by delivery of a
certain number of duly authorized, validly issued, fully paid and nonassessable
AsiaInfo Shares to LIAL, pursuant to the terms and conditions set forth in this
Agreement and in the Forward Contract".
(b) The definition of "Subsidiary" in Section 1.1 of the
Acquisition Agreement shall be amended by adding the following sentence to the
end of such definition:
"For the avoidance of doubt, LCSTSL and LWY shall be
deemed a Subsidiary of Purchaser after the Closing Date."
(c) The following definitions shall be added to Section 1.1
of the Acquisition Agreement:
"Related Vertical Business" means the provision by
Purchaser or its Subsidiaries after the Closing Date of products (other than
personal computers and mobile phone handsets) and services (other than hardware
services) offered by the Non-Telecommunications Business prior to the Closing
Date to public utilities ([Chinese characters omitted]) or to the defense
industry ([Chinese characters omitted]).
"Security Business Permits" means the following
categories of Business Permits from the relevant PRC Governmental Authorities:
(i) Sales License of Specialized Products for Computer
Information System Security ([Chinese characters omitted]), issued by the Public
Information Network Security Monitoring Bureau of Ministry of Public Security
([Chinese characters omitted]);
(ii) Product Model Certificate of China Information
Security Products Assessment and Certification Centre ([Chinese characters
omitted]), issued by China Information Security Products Assessment and
Certification Centre ([Chinese characters omitted]);
(iii) Secret-related Information System Product Test and
Examination Certificate or New Product Assessment Certificate ([Chinese
characters omitted]), issued by the Secret-related Information System Security
and Confidentiality Assessment Centre of the National Administration for
Protection of State Secrets ([Chinese characters omitted]);
(iv) Military Information Security Product Certification
Certificate ([Chinese characters omitted]), issued by Information Security
Assessment and Certification Centre of the People's Liberation Army of China
([Chinese characters omitted]);
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(v) Software Enterprise Certificate and Software Product
Copyright Certificate ([Chinese characters omitted]), issued by the Ministry of
Information Industry, the Ministry of Science and Technology and China Software
Industry Association ([Chinese characters omitted]);
(vi) Certificate of Designated Unit for Production of
Commercial Crypto-Goods ([Chinese characters omitted]), Sales License for
Commercial Crypto-Goods ([Chinese characters omitted]) and a product
certification substantially similar to the SJW44 Network Cryptographic Facility
Identification Certificate (SJW44[Chinese characters omitted]), each issued by
the General Office of the State Cipher Administration Committee ([Chinese
characters omitted]); and
(vii) Computer Information System Integration
Concerning State Secrets Qualification Certificate ([Chinese characters
omitted]), issued by the National Administration for Protection of State Secrets
([Chinese characters omitted])."
(d) References to "Conversion Shares" and "Note" in
Section 1.2 of the Acquisition Agreement shall be deleted and replaced by the
terms "Forward Contract Shares" and "Forward Contract", respectively.
(e) Exhibit A to the Acquisition Agreement shall be replaced
in its entirety with Exhibit A to this Supplement.
(f) Exhibit E to this Supplement (Schedule of the Security
Business Permits) shall be deemed to be attached to the Acquisition Agreement as
Exhibit E.
(g) Section 2.5(a) of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
"(a) Subject to any adjustments required pursuant to
Section 2.10, the purchase price (the "Purchase Price") for the Assets shall be
payable by (i) delivery of a number of AsiaInfo Shares having an aggregate
Market Value of RMB40 million (the "Initial Shares") on the Closing Date, (ii)
the execution and delivery by Bonson of a Forward Contract (the "Forward
Contract") that shall require Bonson to deliver to LIAL, as counterparty
thereto, a number of AsiaInfo Shares having an aggregate Market Value on the
Settlement Date equal to the Settlement Amount, (iii) the Earn-Out Payment, if
any, (iv) the assumption by Purchaser of the Assumed Liabilities, and (v)
payment by Bonson or LAI of RMB100 in cash in respect of each company 80% or
more of the voting shares of which will be beneficially owned by Purchaser or
its Affiliates at Closing. A form of the Forward Contract is attached hereto as
Exhibit A. The Initial Shares and the Earn-Out Payment shall be paid by, or at
the direction of, Bonson to Seller (or a Selling Subsidiary designated by
Seller)."
(h) Section 2.8(a) of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
"(a) a letter of instruction to the transfer agent of
Purchaser to deliver to, and in the name of, LIAL, share certificates
representing the Initial Shares;"
(i) Section 2.9(i) of the Acquisition Agreement shall be
deleted in its entirety.
(j) Section 2.10(a) of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
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"(a) As promptly as practicable following the Closing
Date, but in no event more than 90 days following the Closing Date, with the
reasonable cooperation and assistance of Seller, Purchaser will prepare and
deliver to Seller a pro forma balance sheet as of the Effective Date (the
"Effective Date Balance Sheet") setting forth the Assets and the Assumed
Liabilities (except for liabilities described in Section 2.6) that shall be
prepared in accordance with U.S. GAAP and in accordance with Section 2.10(b)
below (to the extent any provision of Section 2.10(b) is inconsistent with U.S.
GAAP, the Effective Date Balance Sheet shall be consistent with Section 2.10(b),
and not, to the extent set forth in Section 2.10(b), U.S. GAAP), as if the
Effective Date were the end of a fiscal year and as if the Effective Date
Balance Sheet were the balance sheet of a Person whose only assets and
liabilities were the Assets and Assumed Liabilities. As used herein, "Effective
Date Net Assets" means the amount determined by subtracting from the aggregate
amount of the Assets reflected on the final Effective Date Balance Sheet, the
aggregate amount of the Assumed Liabilities reflected on the final Effective
Date Balance Sheet, as determined pursuant to this Section 2.10."
(k) Section 2.10(f) of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
"(f) Upon the final determination of the Effective
Date Balance Sheet, if the Effective Date Net Assets are less than
RMB101,000,000, then (i) in the event the Settlement Date has not yet occurred
prior to such final determination, the Settlement Amount shall be reduced by an
amount equal to such difference, or (ii) in the event the Settlement Date has
occurred prior to such final determination, Seller shall, within 5 Business Days
of such final determination, return to Purchaser, AsiaInfo Shares having a
Market Value as of the Settlement Date equal to the amount by which the
Effective Date Net Assets are less than RMB101,000,000."
(l) Section 2.11(a) of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
"(a) Settlement. Pursuant to the terms and conditions of
the Forward Contract, on the Settlement Date, the Settlement Amount shall be
paid in full through delivery by Bonson of a number of duly authorized, validly
issued, fully paid and nonassessable AsiaInfo Shares (the "Forward Contract
Shares") equal to the Settlement Amount divided by the Market Value of the
AsiaInfo Shares on such date; provided, however, that the aggregate number of
AsiaInfo Shares to be delivered shall not exceed 4,498,130 shares (the "AsiaInfo
Share Cap"). The AsiaInfo Share Cap shall be subject to proportionate adjustment
in the event of share splits, share combinations, or share dividends by
Purchaser."
(m) Section 2.13 of the Acquisition Agreement shall be
amended by replacing the words "the conversion of the Note" with the words
"calculating the number of AsiaInfo Shares to be delivered under the Forward
Contract" in the first sentence of that Section.
(n) Section 2.14 of the Acquisition Agreement shall be
amended by replacing the words "On the Conversion Date, Conversion Shares
issuable (or deliverable) upon conversion of the Note" with the words "On the
Settlement Date, Forward Contract Shares deliverable under the Forward Contract"
and replacing the words "for a period of two years" with the words "for a period
of up to seven years" in the first sentence of that Section.
(o) Section 5.8(a) of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
"(a) From the Closing and for five years thereafter,
Seller will not, and will cause its Subsidiaries not to, directly or indirectly
anywhere in China, (i) engage in, own any equity interest in or invest in any
business, part or all of the principal activities of which
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compete with the Business as conducted prior to the Closing Date or as conducted
by a Related Vertical Business of Purchaser or its Subsidiaries after the
Closing Date, directly or indirectly in any manner, (ii) solicit, sell or
attempt to sell software solutions or services offered by the Business as
conducted prior to the Closing Date or as conducted by a Related Vertical
Business of Purchaser or its Subsidiaries after the Closing Date, (iii) disclose
any confidential or non-public information regarding the Business or the Assets
to any third party or (iv) transfer or license any Excluded Intellectual
Property (other than a Foundational Patent) to any party enabling such party to
engage in a business that competes with the Business as conducted prior to the
Closing Date or a Related Vertical Business of Purchaser or its Subsidiaries,
directly or indirectly, in any manner; provided, however, that notwithstanding
the foregoing (A) the prohibition on ownership of direct or indirect interest in
a competing business in this Section 5.8(a) shall not apply to Seller's or its
Subsidiaries' current equity ownership in the companies set forth in Section
5.8(a) of the Seller Disclosure Schedule as of the date hereof, (B) Seller and
its Subsidiaries may own, directly or indirectly, solely as an investment,
securities of any Person that are traded on any internationally-recognized
securities exchange if Seller (alone or collectively with its Subsidiaries) (1)
is not a controlling Person of, or a member of a group that controls such Person
and (2) does not, directly or indirectly, own ten percent or more of any class
of securities of such Person, (C) nothing in the foregoing clauses shall be
construed to prohibit Seller or its Subsidiaries from engaging in repair,
maintenance, technical support or general after sales services in connection
with any of Seller's business as conducted on the Closing Date other than the
Business, (D) this Section 5.8(a) shall not apply to the Telecommunications
Applications Services Division as operated as of the date hereof by the
ChinaWeal Group or the Insurance IT Services Division operated as of the date
hereof by Lenovo AI, and (E) this Section 5.8(a) shall not be construed to
prohibit Seller's continued employment of the Seconded Employees. With respect
to the Telecommunications Applications Services Division of the ChinaWeal Group,
Seller agrees that as long as the ChinaWeal Group is, directly or indirectly, a
Subsidiary of Seller, in the event there are any activities that would
constitute direct or indirect competition between the ChinaWeal Group and any
businesses conducted by Purchaser, Seller shall engage in good faith discussions
with Purchaser and use reasonable efforts to minimize or avoid such
competition."
(p) Section 5.9 of the Acquisition Agreement shall be
amended by adding the following sentence before the last sentence of that
Section.
"In the event any income, withholding, value-added,
business, turnover or other Tax results from any such payment by Seller or its
Affiliates to LAI, Bonson or any of their Affiliates, such Seller or its
Affiliates shall pay an additional amount in cash to LAI, Bonson or any of their
Affiliates so that the net amount received by LAI, Bonson or any of their
Affiliates after Tax (including any Tax imposed in respect of such additional
amount) is equal to the amount LAI, Bonson or any of their Affiliates would have
received if no such Tax had been imposed."
(q) Section 5.11(g) of the Acquisition Agreement shall be
deleted in its entirety.
(r) Section 5.17(a) of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
"(a) In respect of the Initial Shares and the Forward
Contract Shares, neither Seller nor any of its Subsidiaries (1) will offer,
sell, contract to sell, pledge, grant any option to purchase, make any short
sale or otherwise dispose of, or reduce its economic risks with regard to, any
Initial Share or Forward Contract Share, any options or warrants convertible or
exercisable into Initial Shares or Forward Contract Shares, or any other
securities convertible into, exchangeable for or that represent the right to
receive the Initial Shares or the Forward Contract Shares (except, in the case
of Forward Contract Shares, for transfer into and out of the Escrow Account
pursuant to and in accordance with the Escrow Agreement) or (2) engage in
- 8 -
any hedging or other transaction that is designed to or which reasonably could
be expected to lead to or result in a sale or disposition of the Initial Shares
or the Forward Contract Shares, including any short sale or any purchase, sale
or grant of any right (including any put or call option) with respect to any of
the Initial Shares or the Forward Contract Shares or with respect to any
security that includes, relates to, or derives any part of its value from the
Initial Shares or the Forward Contract Shares (the "Lock-Up"). The term of the
Lock-Up shall commence on the Closing Date and end on (i) the fifth anniversary
of the Closing Date with respect to Forward Contract Shares representing 5% of
the total issued and outstanding AsiaInfo Shares as of the Settlement Date,
after giving effect to such settlement (the "Five Year Lock-Up Shares") and (ii)
the second anniversary of the Closing Date with respect to the Initial Shares
and the remaining Forward Contract Shares, if any. Notwithstanding the
foregoing, in the event that Purchaser enters into a merger, consolidation or
acquisition with a competitor of Seller in the business of manufacturing and
distributing personal computers and mobile phone handsets whereby such
competitor acquires control of Purchaser (a "Seller Competitor Acquisition"),
Seller shall be automatically released from this provisions of this Section
5.17(a) with respect to the Forward Contract Shares. For the purpose of this
section, "control" means beneficial ownership of more than 20% of the
outstanding securities of Purchaser or the right to appoint more than one half
of the members of the Purchaser's board of directors."
(s) Section 5.20 of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
"Security Business Permits.
(a) Seller shall cause LHL to establish LWY as soon
as practicable after the Closing Date. Until such time as the LWY Equity
Transfer has been effectuated, Seller shall cause LHL and its other Affiliates
to use their best efforts to assist LWY in obtaining from the relevant PRC
Governmental Authorities new Business Permits substantially equivalent to the
Security Business Permits utilized by the Seller in connection with the Business
(the "New Business Permits").
(b) If LWY obtains from the relevant PRC Government
Authorities, all of the New Business Permits (within the meaning set forth in
the last sentence of this Section) on or prior to the third anniversary of the
Closing Date, Purchaser and Seller shall jointly instruct the Escrow Agent,
within ten Business Days after the last of such New Business Permit has been
obtained, to release Escrow Shares having an aggregate Market Value of RMB10
million as of the Settlement Date to LIAL pursuant to Section 4(d) of the Escrow
Agreement. For purposes of this Section 5.20(b), LWY shall be deemed to have
obtained all of the New Business Permits if (A) in the case of Security Business
Permits that are granted on a product-by-product basis, LWY's updated versions
of each of the products set out in Exhibit E has been granted a New Business
Permit by the relevant PRC Government Authorities and (B) in the case of
Security Business Permits that are granted on corporate basis, LWY has been
granted a New Business Permit for each such Security Business Permit set out in
Exhibit E by the relevant PRC Governmental Authorities."
(t) Section 6.2(f) of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
"at least 85% of the key employees listed on Section
6.2(f) of the Seller Disclosure Schedule (the "Key Employees") shall have
executed and delivered employment agreements with Purchaser or its Affiliates in
form and substance satisfactory to Purchaser; provided, however, that the terms
and conditions of employment reflected in such agreements shall be no less
favorable than the terms and conditions currently enjoyed by such employees with
Seller or any of its Subsidiaries, as the case may be."
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(u) Section 6.2(k) of the Acquisition Agreement shall be
amended by adding the word "Patent" before the words "Assignment Agreement".
(v) Section 7.2(b) of the Acquisition Agreement shall be
deleted in its entirety and replaced with the following:
"(i) If, at any time prior to the sixth anniversary of
the Closing Date, Purchaser exercises its right to acquire the outstanding
equity interest of LWY under the LWY Equity Transfer Arrangement Agreement and
such transfer results in the invalidation of any of the New Business Permits
held by LWY at the time of such transfer within a period of one year from the
date of such transfer (either as a result of the failure by LWY within such
period to renew such New Business Permit with the relevant PRC Governmental
Authorities or the failure by LWY to pass an inspection by the relevant
Governmental Authorities to maintain such New Business Permit within such
period, despite the best efforts of LWY to renew such New Business Permit or
pass such inspection), Seller shall indemnify Purchaser through Purchaser's
withdrawal from the Escrow Account of AsiaInfo Shares in the following amounts:
1) in the case of New Business Permits of the type
contemplated in categories (i), (ii), (iii), (iv) or (v) of Exhibit E, AsiaInfo
Shares having a Market Value as of the Settlement Date equal to the amount
derived from the following formula:
A 3
RMB4,000,000 x ---- x ----
B 10
where:
A = the number of New Business Permits invalidated in
such category; and
B = the number of New Business Permits held by LWY in
such category immediately prior to the transfer;
2) in the case of New Business Permits of the type
contemplated in categories (vi) and (vii) of Exhibit E, AsiaInfo Shares having a
Market Value as of the Settlement Date equal to RMB4,500,000 if any one or more
of the New Business Permits in such category is invalidated.
(ii) If at any time prior to the sixth anniversary of
the Closing Date, LHL transfers its equity interest in LWY to LAI or an
Affiliate of LAI by mutual agreement of Seller and Purchaser and such transfer
results in the invalidation of any of the New Business Permits held by LWY at
the time of such transfer within a period of one year from the date of such
transfer (either as a result of the failure by LWY with such period to renew
such New Business Permit with the relevant PRC Governmental Authorities or the
failure by LWY to pass or inspection by the relevant Governmental Authorities to
maintain such New Business Permit within such period, despite the best efforts
of LWY to renew such New Business Permit or pass such inspection), Seller shall
indemnify Purchaser through Purchaser's withdrawal from the Escrow Account of
AsiaInfo Shares in the following amounts:
1) in the case of New Business Permits of the type
contemplated in categories (i), (ii), (iii), (iv) or (v) of Exhibit E, AsiaInfo
Shares having a Market Value as of the Settlement Date equal to the amount
derived from the following formula:
A 1
RMB4,000,000 x ---- x ----
B 2
where:
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A = the number of New Business Permits invalidated in
such category; and
B = the number of New Business Permits held by LWY in
such category immediately prior to the transfer;
2) in the case of New Business Permits of the type
contemplated in categories (vi) and (vii) of Exhibit E, AsiaInfo Shares having a
Market Value as of the Settlement Date equal to RMB7,500,000 if any one or more
of the New Business Permits in such category is invalidated;
(iii) for the avoidance of doubt, if (1) Purchaser
exercises its right to acquire the outstanding equity interest of LWY under the
LWY Equity Transfer Arrangement Agreement after the sixth anniversary of the
Closing Date or (2) Purchaser is required to purchase the outstanding equity
interest of LWY as a result of the occurrence of an LWY Event of Default at any
time, in each case, the indemnification provisions of this Section 7.2(b) shall
not apply to any subsequent invalidation of any New Business Permit.
(w) All other references in the Acquisition Agreement to
"Conversion Amount", "Conversion Date", "Conversion Shares", "Note", "Closing
Date Balance Sheet", "Closing Date Net Assets" and "Technology License
Agreement" shall be deleted and replaced by references to "Settlement Amount",
"Settlement Date", "Forward Contract Shares", "Forward Contract", "Effective
Date Balance Sheet", "Effective Date Net Assets" and "Patent, Copyright and
Technology License Agreement", respectively.
SECTION 3
RESTRUCTURING OF HAN CONSULTING
In order to facilitate the transfer of beneficial ownership of
certain of the Assets, Purchaser and Seller have agreed upon the following
arrangements with respect to Han Consulting, HMCL and WTITL:
3.1 Equity Transfer. Pursuant to Sections 2.1(p), 2.9(l) and 6.2(h)
of the Acquisition Agreement, at the Closing, LIAL shall deliver to Bonson share
certificates representing the 51% of the ordinary shares of Han Consulting held
by LIAL. Further, LIAL shall cause Han Consulting to undergo the restructuring
as set out in Section 3.2 below on or prior to the Closing (the "Han
Restructuring").
3.2 Restructuring. Prior to the Closing, LIAL shall cause Han
Consulting and the Han Minority Shareholders to execute and deliver any and all
agreements, board resolutions, shareholders' resolutions and other instruments
and documents necessary or desirable (the "Restructuring Documents"), each in
form and substance reasonably satisfactory to Purchaser, to effectuate the Han
Restructuring as follows:
(a) prior to the Closing, Han Consulting shall (i) establish
a wholly-owned subsidiary in the British Virgin Islands, Goldfame Consultants
Limited ("Goldfame") and (ii) obtain the requisite board and shareholders
approvals to transfer its 100% and 40% equity interests in HMCL and WTITL,
respectively, to Goldfame (the "Onshore Han Transfer");
(b) on or within two Business Days following the Closing
Date, Han Consulting shall submit documentation to the relevant PRC Governmental
Authorities to approve the Onshore Han Transfer with respect to HMCL;
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(c) on or as soon as practicable following the Closing Date,
Han Consulting shall submit documentation to the relevant PRC Governmental
Authorities to approve the Onshore Han Transfer with respect to WTITL;
(d) simultaneously with the Onshore Han Transfer, (i) LIAL
shall terminate the Han Loan Agreement, release the Floating Charge related
thereto and waive its right of repayment under all outstanding loans thereunder,
(ii) LIAL shall enter into an agreement to transfer its 51% equity interest in
Han Consulting to Purchaser as of the Closing Date in consideration for payment
of US$1, and the Han Minority Shareholders shall waive any pre-emptive rights,
rights of first refusal, co-sale rights or similar rights they may have under
the Han Shareholders' Agreement, or otherwise, related to such transfer, (iii)
the Han Shareholders' Agreement shall be terminated by the parties thereto, and
(iv) Han Consulting shall assign any and all right, title and interest of Han
Consulting in the HMCL Loan Agreements and all outstanding loans thereunder to
Bonson in consideration for payment of an aggregate amount equal to the Hong
Kong dollar equivalent of RMB13 million (the "HMCL Loan Consideration"), which
shall be paid to Han Consulting in full on the Closing Date, into a bank account
of Han Consulting with respect to which Ms. Ying Han, in her capacity as a
member of the board of directors of Han Consulting (effective as of the Closing
Date), and Mr. Cheung Wing Chung, shall have joint signatory authority (the "Han
Bank Account"); for the avoidance of doubt, no part of the HMCL Loan
Consideration, or any interest therein or the proceeds or earnings thereof,
shall be included in the Effective Date Net Assets; and
(e) upon the receipt by Han Consulting of the relevant PRC
Governmental Authorities' approval of the Onshore Han Transfer, Han Consulting
shall distribute by way of dividend (the "Han Distribution"): (x) to Bonson,
100% of the outstanding share capital of Goldfame, which at the time of
distribution shall own 100% of the registered capital of HMCL and 40% of the
registered capital of WTITL, and all of Han Consulting's right, title and
interest in and to any other assets and properties of Han Consulting (other than
the HMCL Loan Agreements and the Hong Kong dollar equivalent of RMB13 million in
the Han Bank Account), including all such assets reflected in its most recent
balance sheet for the year ended as of March 31, 2004; and (y) to the Han
Minority Shareholders, an aggregate amount in cash equal to the Hong Kong dollar
equivalent of RMB13 million, pro rata in accordance with their proportionate
interests in Han Consulting.
3.3 Transfer of WTITL. In the event that the transfer of WTITL to
Goldfame has not been effectuated, or the receipt of the relevant PRC
Governmental Authorities' approval relating thereto has not been obtained, by
Han Consulting within 45 days following the Closing Date, Purchaser shall have
the right, in its absolute discretion, to exclude Han Consulting's 40% equity
interest in WTITL from the Assets being acquired under the Acquisition Agreement
and in the calculation of the Effective Date Net Assets in the Effective Date
Balance Sheet. If Purchaser exercises the right in the foregoing sentence, it
shall use its best efforts to cause Han Consulting or Goldfame, as the case may
be, to transfer the 40% equity interest in WTITL to Seller or a Subsidiary
designated by Seller as soon as practicable. Notwithstanding anything to the
contrary herein, in the event of such transfer of WTITL to Seller,
Section 5.8(a) of the Acquisition Agreement shall not apply to Seller's
ownership of such 40% equity interest in WTITL.
SECTION 4
BENEFICIAL OWNERSHIP OF LCSTSL
In order to facilitate the transfer of beneficial ownership of
certain of the Assets without undue interruption to the on-going operation of
the Business, and in lieu of transferring the entire equity interest of LCSTSL
held by LML and LBL to Purchaser on the Closing Date, Purchaser and Seller have
agreed upon the following arrangements with respect to LCSTSL:
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4.1 Beneficial Ownership of LCSTSL. In lieu of LBL and LML
transferring their respective 75% and 25% equity interests in LCSTSL to
Purchaser, or a Purchasing Subsidiary designated by Purchaser, as contemplated
in Sections 2.1(q), 2.9(m) and 6.2(o) of the Acquisition Agreement, LBL and LML
shall enter into a contractual arrangement with LAI, dated as of the Closing
Date, whereby LAI shall acquire beneficial ownership of, but not registered
title to, LBL's and LML's respective 75% and 25% equity interests in LCSTSL (the
"LCSTSL Beneficial Ownership Transfer"). Such contractual arrangement shall
provide LAI with all of the economic benefits and obligations of owning all of
the equity interest in LCSTSL (other than any Excluded Liabilities held by
LCSTSL, which, for avoidance of doubt, shall remain the joint and several
obligation of, and shall be duly performed by LBL, LML and Seller in accordance
with the Acquisition Agreement) as well as the right to control LCSTSL after the
Closing. LBL, LML and LCSTSL shall enter into the following LCSTSL Beneficial
Ownership Agreements in order to effectuate the LCSTSL Beneficial Ownership
Transfer, which shall be dated as of the Closing Date:
(a) LCSTSL Power of Attorneys. Each of LBL and LML shall
execute a power of attorney appointing LAI as its exclusive agent and attorney
to act on their behalf with respect to all matters concerning their respective
shareholdings in LCSTSL (collectively, the "LCSTSL Power of Attorneys").
(b) LCSTSL Exclusive Business Cooperation Agreement. LCSTSL
shall enter into an exclusive business cooperation agreement with LAI whereby
LCSTSL shall appoint LAI as its exclusive services provider to provide LCSTSL
with complete business support services and consulting services (the "LCSTSL
Exclusive Business Cooperation Agreement") for a fee equal to all of the revenue
of LCSTSL.
(c) LCSTSL Share Pledge Agreement. LBL, LML, LCSTSL and LAI
shall enter into a share pledge agreement whereby each of LBL and LML shall
pledge all of their respective equity interests in LCSTSL to LAI as security for
payment of the fee under the LCSTSL Exclusive Business Cooperation Agreement.
(d) LCSTSL Equity Transfer Arrangement Agreement. Seller,
LBL, LML and LAI shall enter into an equity transfer arrangement agreement (the
"LCSTSL Equity Transfer Arrangement Agreement") whereby, as promptly as
practicable after the earlier of (1) the receipt by LWY of the Information
System Integration Qualification (Level I), from the Ministry of Information
Industry of PRC (the "MII"), (2) the purchase by LAI or an Affiliate of LAI of
all of LHL's equity interest in LWY pursuant to Section 5.2 below and (3) the
occurrence of an LCSTSL Event of Default, Bonson shall purchase, and LBL and LML
shall sell, all of the equity interest of LCSTSL for an aggregate consideration
of RMB100 (the "LCSTSL Equity Transfer"). Pursuant to the LCSTSL Equity Transfer
Arrangement Agreement, at the reasonable discretion of Seller, Seller may
effectuate the transfer of the equity interest of LCSTSL to Bonson either
(i) through the direct transfer of such equity interest from LBL and LML to
Bonson,or (ii) through the transfer to Bonson of all of the outstanding shares
of a BVI Holdco established by Seller owning all of the outstanding equity
interest in LCSTSL.
4.2 Operation of LCSTSL's Business Post-Closing. At the Closing, LHL
shall, subject to Section 5.2 below, exclusively authorize LCSTSL to operate the
Security Services Business and execute contracts related thereto on LHL's behalf
(the "Security Services Contracts"). Such authorization shall remain in effect
until the earlier of: (1) October 19, 2011, (2) the receipt by LWY of the
Information System Integration Qualification (Level I), from the MII, and
(3) the purchase by LAI or an Affiliate of LAI of all of LHL's equity interest
in LWY as contemplated in Section 5.2 below. At the request of any existing or
prospective client of LCSTSL, or for the purpose of soliciting or bidding on any
projects relating to the Security Services Business, each of LHL and LBL shall
provide all requested documentation evidencing LCSTSL's authorization and
qualification to engage in the Security Services Business. The Security Services
Business shall continue to be operated by LCSTSL with the services of the
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relevant Affiliates and Subsidiaries of Seller pursuant to the Procurement
Agreement and the Transitional Services Agreement. The working capital for the
operation of LCSTSL's business shall be provided by LAI pursuant to the LCSTSL
Equity Transfer Arrangement Agreement. After the Closing, all new contracts of
the Business operated by LCSTSL (other than the Security Services Contracts)
shall be entered into by LAI to the extent practicable. All Assumed Contracts
shall continue to be performed by LCSTSL.
SECTION 5
BENEFICIAL OWNERSHIP OF LWY
In order to facilitate Purchaser's obtaining the Security
Business Permits as contemplated in Section 5.20 of the Acquisition Agreement,
Purchaser and Seller have agreed upon the following arrangements with respect to
LWY:
5.1 Establishment of LWY. Pursuant to Section 5.20(a) of the Acquisition
Agreement, LHL shall, as soon as practicable after the Closing Date, establish
LWY as a subsidiary in the PRC, and shall endeavor to obtain from the relevant
PRC Governmental Authorities, the New Business Permits in the name of, and on
behalf of LWY. LHL shall nominally hold not less than 51% of the equity interest
in LWY, and the remaining equity interest shall be held by natural persons
designated by LAI (the "LWY Minority Shareholders"). LAI shall enter into a loan
agreement with LHL (the "LHL Loan Agreement") and loan agreements with each of
the LWY Minority Shareholders (collectively, the "LWY Minority Loan Agreements")
to fund the respective contributions of LHL and the LWY Minority Shareholders to
the registered capital of LWY.
5.2 Beneficial Ownership of LWY. LHL and the LWY Minority
Shareholders shall enter into a contractual arrangement with LAI at Closing
whereby LAI shall acquire beneficial ownership of, but not registered title to,
LHL's and the LWY Minority Shareholders' respective 51% and 49% equity interests
in LWY (the "LWY Beneficial Ownership Transfer"). Such contractual arrangement
shall (i) provide LAI with all of the economic benefits and obligations of
owning all of the equity interest in LWY, as well as the right to control LWY
after the Closing, and (ii) shall remain effective, subject to Section 5.2(d)
below, until the seventh anniversary of the Closing Date. LHL shall enter into
the following LWY Beneficial Ownership Transfer Agreements as soon as
practicable after the Closing Date with LAI in order to effectuate the LWY
Beneficial Ownership Transfer:
(a) LHL Power of Attorney. LHL shall execute a power of
attorney appointing LAI as its exclusive agent and attorney to act on its behalf
with respect to all matters concerning its shareholdings in LWY (the "LHL Power
of Attorney").
(b) LWY Exclusive Business Cooperation Agreement. LWY shall
enter into an exclusive business cooperation agreement with LAI whereby LWY
shall appoint LAI as its exclusive services provider to provide LWY with
complete business support services and consulting services (the "LWY Exclusive
Business Cooperation Agreement") for a fee equal to all of the revenue of LWY.
(c) LWY Share Pledge Agreement. LHL shall enter into a share
pledge agreement whereby LHL shall pledge all of its equity interests in LWY to
LAI as security for payment of the fee under the LWY Exclusive Business
Cooperation Agreement.
(d) LWY Equity Transfer Arrangement Agreement. LHL shall
enter into an equity transfer arrangement agreement (the "LWY Equity Transfer
Arrangement Agreement") with LAI whereby as promptly as practicable after the
earlier of (i) the seventh anniversary of the Closing Date, (ii) the occurrence
of an LWY Event of Default and (iii) 60 days following the date of the LWY
Purchase Notice (as defined below), LAI or an Affiliate of LAI shall purchase,
and LHL shall sell, all of LHL's equity interest in LWY in consideration of
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the cancellation by LAI of all outstanding loans made to LHL under the LHL Loan
Agreement (the "LWY Equity Transfer"). Pursuant to the LWY Equity Transfer
Arrangement Agreement, at any time prior to the seventh anniversary of the
Closing Date, LAI or an Affiliate of LAI shall have the right to purchase all of
LHL's equity interest in LWY by giving a 60 days prior written notice to LHL
(the "LWY Purchase Notice") setting forth the date of such purchase. Such right
shall be exercisable by LAI or an Affiliate of LAI with or without the consent
of LHL or Seller. Notwithstanding anything to the contrary herein, Purchaser and
Seller agree to cooperate in good faith to effectuate the transfer of all of
LHL's equity interest in LWY to LAI or an Affiliate of LAI as contemplated in
this Section in a manner that would minimize their respective tax liabilities
arising from such transfer. Notwithstanding anything to the contrary in Section
11.1 below, LHL and LAI agree that any income or withholding tax related to or
imposed as a result of the transfer by LHL of all of its equity interest in LWY
to LAI or an Affiliate of LAI shall be borne equally by LHL and LAI.
5.3 Operation of LWY's Business. Upon the receipt by LWY of the
Information System Integration Qualification from the MII, LHL shall, subject to
Section 4.2 above, exclusively authorize LWY to operate the Security Services
Business and execute contracts related thereto on LHL's behalf. Such
authorization shall remain in effect until the earlier of (i) the date on which
LWY obtains all of the New Business Permits and (ii) the date on which the LWY
Equity Transfer is effectuated. At the request of any existing or prospective
client of LWY or for the purpose of soliciting or bidding on any projects
relating to the Security Services Business, LHL shall provide all requested
documentation evidencing LWY's authorization and qualification to engage in the
Security Services Business. As part of the development of LWY's Security
Services Business, LHL agrees that LWY may (i) establish a branch or office in
the PRC, at any time, without its prior consent, (ii) establish wholly-owned
subsidiaries in the PRC, at any time, only with its prior written consent (such
consent not to be unreasonably withheld or delayed) and (iii) make an investment
in, or merge with, consolidate with or acquire, a business engaged in the
Security Services Business only with its prior written consent (such consent not
to be unreasonably withheld or delayed).
SECTION 6
[RESERVED]
SECTION 7
REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Seller Representations and Warranties. The Seller hereby
represents and warrants that:
(a) Goldfame is a corporation duly organized, validly
existing and in good standing under the laws of the British Virgin Islands and
has all requisite corporate power and authority to own, license, use, lease and
operate its assets and properties and to carry on its business as it is now
being conducted and as contemplated in this Supplement;
(b) as of the Closing Date, all of the Assets (other than
Assets (i) that are owned or held by HICCL, HMCL or WTITL, (ii) that have been
transferred to Purchaser or an Affiliate of Purchaser pursuant to the Patent
Assignment Agreement or the Asset Transfer Agreement or (iii) that are Assets
contemplated in Section 5.9 of the Acquisition Agreement) are owned beneficially
and of record by LCSTSL, free and clear of any Encumbrance;
(c) as of the Closing Date, all Intellectual Property used
or held for use in the Business (other than Intellectual Property owned by
LCSTSL, Han Consulting, HMCL or
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WTITL, as the case may be) either (i) has been transferred to Purchaser or an
Affiliate designated by Purchaser pursuant to the Patent Assignment Agreement or
the Asset Transfer Agreement or (ii) has been licensed to Purchaser or an
Affiliate designated by Purchaser pursuant to the Trademark License Agreement or
the Patent, Copyright and Technology License Agreement. Exhibit A to the Patent
Assignment Agreement sets forth a true, complete and accurate list of all
Business Intellectual Property that are patents reducible to schedule form
(other than such Business Intellectual Property owned by LCSTSL, Han Consulting,
HMCL or WTITL, as the case may be). Schedule 1 to the Asset Transfer Agreement
sets forth a true, complete and accurate list of all Business Intellectual
Property (other than patents and Business Intellectual Property owned by LCSTSL,
Han Consulting, HMCL or WTITL, as the case may be). Schedules 2.1.1, 2.1.2 and
2.1.3 to the Patent, Copyright and Technology License Agreement set forth a
true, complete and accurate list of all Excluded Intellectual Property; all of
the Excluded Intellectual Property listed in Schedule 2.1.2 to the Patent,
Copyright and Technology License Agreement are Foundational Patents;
(d) on or prior to the Closing Date, all information and
documents requested by Purchaser or Purchaser's legal or financial advisors that
is material to Purchaser or Purchaser's legal or financial advisors' due
diligence review of the Business have been provided to Purchaser and/or its
legal or financial advisors; all such information provided by Seller or any of
its Subsidiary is true, accurate and not misleading (except for information that
expressly relates to a specified date or time need only be true and accurate as
of such specified date or time) and each of such documents provided by Seller or
any of its Subsidiary is in full force and effect (except for any document which
by its terms has terminated on or prior to the date hereof);
(e) the Restructuring Documents have been duly executed and
delivered by each of the parties thereto (other than Bonson) and constitute
valid and binding obligations of each of the parties thereto (other than
Bonson), enforceable against each of them in accordance with their respective
terms;
(f) the Onshore Han Transfer and the Han Distribution have
been approved by the board of directors and the shareholders of Han Consulting,
and no other corporate or other proceedings on the part of Han Consulting are
necessary to authorize the execution and the performance by Han Consulting of
the Onshore Han Transfer and the Han Distribution;
(g) the execution and performance by Han Consulting of the
Onshore Han Transfer and the Han Distribution will not (i) conflict with or
result in a breach of any provision of the certificate of incorporation or
bylaws of Han Consulting, HMCL or WTITL; (ii) result in a violation or breach of
or constitute a default (or an event which, with or without notice or lapse of
time or both, would constitute a default) under, or result in the termination,
modification or cancellation of, or the loss of a benefit under or accelerate
the performance required by, or result in a right of termination, modification,
cancellation or acceleration under the terms, conditions or provisions of any
contract or other instrument of any kind to which Han Consulting, HMCL or WTITL
is now a party; or (iii) violate any order, writ, injunction, decree, statute,
treaty, rule or regulation applicable to Han Consulting, HMCL or WTITL;
(h) other than approvals from the relevant PRC Governmental
Authorities and certain filings or registrations under the laws of the British
Virgin Islands with respect to the Han Restructuring, no declaration, filing or
registration with, or notice to, or authorization, consent, order or approval
of, any Governmental Authority or other Person is required to be obtained or
made in connection with or as a result of the execution and performance by Han
Consulting of the Han Restructuring; and
(i) the representations and warranties set out in Sections
3.2 (Authority; Non-Contravention; Approvals), 3.8(c) (Employee Benefits),
3.9(b) (Employee Matters), 3.12 (c) and (e) (No Violation of Law; Permits), the
last sentence of 3.16 (Insurance) and 3.29
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(Brokers) of the Acquisition Agreement are true and correct in all material
respects as if each reference in those representations and warranties to "this
Agreement" or "the Transaction Documents" includes a reference to (a) this
Supplement and (b) the Acquisition Agreement, as supplemented and amended by
this Supplement.
7.2 Purchaser Representations and Warranties. The Purchaser hereby
represents and warrants that the representations and warranties set out in
Sections 4.2 (Authority; Non-Contravention; Approvals), 4.3 (Brokers) and 4.6
(Consents and Approvals) are true and correct in all material respects as if
each reference in those representations and warranties to "this Agreement" or
"the Transaction Documents" includes a reference to (a) this Supplement and
(b) the Acquisition Agreement, as supplemented and amended by this Supplement.
7.3 Seller Intellectual Property Covenants. Seller covenants and
agrees that:
(a) if at any time after the Closing, Seller or any of its
Subsidiaries become aware of a breach by Seller of any of its representations or
warranties set forth in Section 7.1(c) in relation to the Intellectual Property
used or held for use in the Business, it shall promptly give notice to Purchaser
of such breach and Seller shall, or shall cause its Subsidiary to, execute and
deliver such instruments and take such other actions as may be necessary to (i)
in the case of Business Intellectual Property, sell, transfer, assign, convey
and deliver such omitted Business Intellectual Property to a Subsidiary
designated by Purchaser, and (ii) in the case of Excluded Intellectual Property
other than Foundational Patents, grant a limited, royalty-free, fully paid-up,
world-wide, exclusive license to a Subsidiary designated by Purchaser for the
period of validity thereof and (iii) in the case of Excluded Intellectual
Property that are Foundational Patents, grant a limited, royalty-free, full
paid-up, world-wide, non-exclusive license to a Subsidiary designated by
Purchaser for the period of validity thereof, in each case, as soon as
practicable after the date of such notice but in no event later than ten (10)
Business Days from the date thereof; provided that Purchaser's rights under this
Section 7.3(a) shall be in furtherance of, and not in limitation to, any and all
additional rights and remedies of Purchaser for any breach of the
representations and warranties set forth in Section 7.1(c); and
(b) if at any time after the Closing, Purchaser or any of
its Subsidiaries become aware of a breach by Seller of any of its
representations or warranties set forth in Section 7.1(c) in relation to the
Intellectual Property used or held for use in the Business, Seller shall
promptly upon the receipt of notice of such breach from Purchaser, or shall
cause its Subsidiary to, execute and deliver such instruments and take such
other actions as may be necessary to (i) in the case of Business Intellectual
Property, sell, transfer, assign, convey and deliver such omitted Business
Intellectual Property to a Subsidiary designated by Purchaser and (ii) in the
case of Excluded Intellectual Property other than Foundational Patents, grant a
limited, royalty-free, fully paid-up, world-wide, exclusive license to a
Subsidiary designated by Purchaser for the period of validity thereof and
(iii) in the case of Excluded Intellectual Property that are Foundational
Patents, grant a limited, royalty-free, fully paid-up, world-wide, non-exclusive
license to a Subsidiary designated by Purchaser for the period of validity
thereof, in each case, as soon as practicable after the date of such notice but
in no event later than ten (10) Business Days from the date thereof; provided
that Purchaser's rights under this Section 7.3(b) shall be in furtherance of,
and not in limitation to, any and all additional rights and remedies of
Purchaser for any breach of the representations and warranties set forth in
Section 7.1(c).
SECTION 8
SECONDED EMPLOYEES
8.1 Costs and Expenses. Pursuant to Section 5.11(c) of the
Acquisition Agreement, Purchaser and Seller agree that all cost and expenses
related to the use of Seller's research and development facilities by, or the
research performed by, the Seconded Employees during the secondment period shall
be borne by Purchaser and Seller in accordance with this Section 8. Seller shall
be responsible for all fixed costs during the secondment period, including any
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amount internally allocated by Seller to the Seconded Employees from Seller's
overhead. Purchaser shall be responsible for all reasonable out-of-pocket
variable costs and expenses related to the research performed by the Seconded
Employees, provided Seller furnishes Purchaser with receipts and other
reasonable evidence of such variable costs.
8.2 New Intellectual Property. Purchaser and Seller shall have joint
ownership of all new Intellectual Property, or improvements and enhancements to
existing Intellectual Property owned by Seller or any of its Subsidiaries, made,
developed, created, invented or discovered by the Seconded Employees during the
secondment period contemplated by Section 5.11(c) of the Acquisition Agreement,
and Seller shall, or shall cause its Subsidiaries to, promptly execute and
deliver all necessary instruments and take all necessary actions to register
such Intellectual Property with the relevant Government Authorities to reflect
such joint ownership. Purchaser and Seller agree that all expenses relating to
the registration of any such Intellectual Property or the maintenance of any
such registration with the relevant PRC Governmental Authorities shall be borne
equally by Purchaser and Seller.
SECTION 9
INDEMNIFICATION
9.1 LCSTSL's Information System Integration Qualification. In
furtherance of, but without limitation to, Section 7.2 of the Acquisition
Agreement, in connection with the notice issued by the MII to LCSTSL, dated
July 16, 2004, regarding its intent to downgrade LCSTSL's Information System
Integration Qualification from Level I to Level II, Seller shall indemnify
Purchaser in the amount of RMB1 million if LCSTSL does not receive a written
confirmation from MII that LCSTSL has met all the requirements to maintain its
SI Qualification at Level I within three months following the Closing Date.
Seller agrees with Purchaser that (i) in the event that the Settlement Date has
not yet occurred, the RMB1 million shall be deducted from the Settlement Amount
or (ii) in the event that the Settlement Date has occurred, Purchaser shall have
the right pursuant to Section 3(g) of the Escrow Agreement to instruct the
Escrow Agent to deliver to Purchaser Escrow Shares having an aggregate Market
Value of RMB1 million on the Settlement Date.
9.2 Claims of Former Employees of HMCL. In furtherance of, and
without limitation to, Section 7.2 of the Acquisition Agreement, Seller shall
indemnify and hold harmless any Purchaser Indemnified Party (including, for the
avoidance of doubt, HMCL) from and against any and all Losses that may be
asserted against or paid, suffered or incurred by any of them that arise out of,
result from, are based upon or relate to (i) any action, claim, suit or
proceeding brought against any of them by former employees of HMCL with respect
to events or matters that occurred prior to the Closing Date, (ii) the
correspondence to Purchaser dated July 28, 2004 from Yao Jianrong, Zhong Zhigang
and Xu Xiaojian, or (iii) any past, present or future use, infringement,
misappropriation or other violation of any of the trademarks or other
Intellectual Property of HMCL by any such former employees based on any claim of
ownership of, or license to use, such trademarks or other Intellectual Property
of HMCL that such former employees may have against HMCL or any shareholders of
Han Consulting prior to the Closing Date. Notwithstanding anything to the
contrary in the Acquisition Agreement, the limitation on liability contained in
Section 7.4 therein shall not apply to any claim for indemnity based on this
Section 9.2.
SECTION 10
LEGAL OPINIONS
10.1 Legal Opinions. In addition to the legal opinions contemplated
by Section 6.1(g) of the Acquisition Agreement, Seller shall provide Purchaser
with the following legal opinions:
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(a) a legal opinion of Conyers Dill & Pearman, British
Virgin Islands counsel to Seller, dated the Closing Date, with respect to, among
other things, the due incorporation of Goldfame and the enforceability of the
Restructuring Documents, in form and substance reasonably satisfactory to
Purchaser;
(b) a legal opinion of Tian Yuan Law Firm, PRC counsel to
Seller, dated the Closing Date, with respect to, among other things, Goldfame's
ownership of 100% of the equity interest in HMCL, and the enforceability of the
LCSTSL Beneficial Ownership Agreements, in form and substance reasonably
satisfactory to Purchaser; and
(c) a legal opinion of Tian Yuan Law Firm, PRC counsel to
Seller, dated the date of the execution of the LWY Beneficial Ownership
Agreements, with respect to, among other things, Goldfame's ownership 40% of the
equity interest in WTITL, the due incorporation of LWY, the registered capital
of LWY and the enforceability of the LWY Beneficial Ownership Agreements,
substantially in the form and substance as set forth in Exhibit B hereto.
SECTION 11
TAX MATTERS
11.1 Tax Indemnity. Subject to Section 5.2 above, Seller shall
indemnify and hold harmless Purchaser, its Subsidiaries and its Affiliates
(including, from Closing, Han Consulting, Goldfame, BVI Holdco, LCSTSL, LWY,
WTITL and HMCL) against (i) any Tax (including, without limitation, any income,
withholding, value-added, business or turnover Tax) imposed as a result of any
transaction contemplated in Sections 2, 3, 4, 5 and 6 of this Supplement (a
"Restructuring Tax"), (ii) any liability for a Restructuring Tax imposed on
another person (including, without limitation, liability as a result of being a
successor to, or transferee of, another person), (iii) any Tax (including,
without limitation, any income, withholding, value-added, business or turnover
Tax) that relates to, or is imposed with respect to or as a result of (a) an
act, transaction or activity of Goldfame, LCSTSL, BVI Holdco, LWY, WTITL or HMCL
which occurs prior to Closing or (b) income, gain, profit or revenue of any such
Person which arises prior to Closing, (iv) any Tax arising out of or resulting
from a Transferred Company's ownership of an Excluded Asset after the Closing or
being obligated under or subject to an Excluded Liability after the Closing or
the transfer of such Excluded Asset or Excluded Liability, as the case may be,
to Seller or its Affiliates after the Closing and (v) any costs, expenses
(including, without limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax or liability described in (i), (ii), (iii) or (iv) (the sum of (i),
(ii), (iii), (iv) and (v) being referred to herein as a "Restructuring Tax
Cost"). Notwithstanding anything to the contrary in the Acquisition Agreement,
the limitation on liability contained in Section 7.4 therein shall not apply to
any claim for indemnity based on this Section 11.1.
11.2 Payment. Not later than 30 days after receipt by Seller of
written notice from Purchaser stating that any Restructuring Tax Cost has been
incurred by any of the Persons specified in Section 11.1 and the amount thereof,
Seller shall discharge its obligation under Section 11.1 with respect to such
Restructuring Tax Cost by paying to Purchaser (or, if so directed by Purchaser,
to a Tax authority) an amount equal to the amount of such Restructuring Tax
Cost.
11.3 Procedure. Purchaser agrees to give prompt notice to Seller of
any Restructuring Tax Cost or the assertion of any claim, or the commencement of
any suit, action or proceeding in respect of which indemnity may be sought
hereunder which Purchaser deems to be within the ambit of this Section 11.
Seller may, at its own expense, (i) participate in and (ii) upon notice to
Purchaser, assume the defense of any such suit, action or proceeding (including
any Tax audit); provided that (x) Seller shall thereafter consult with Purchaser
upon
- 19 -
Purchaser's reasonable request for such consultation from time to time with
respect to such suit, action or proceeding (including any Tax audit) and (y)
Seller shall not agree to any settlement or other final disposition with respect
to any Tax without the prior written consent of Purchaser (which shall not be
unreasonably withheld). If Seller assumes such defense, (i) Purchaser shall have
the right (but not the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by Seller and
(ii) Seller shall not assert that the Restructuring Tax Cost, or any portion
thereof, with respect to which Purchaser seeks indemnification is not within the
ambit of this Section 11. Unless and until Seller elects to assume such defense,
Purchaser may pay, compromise or contest the Tax at issue. Seller shall be
liable for the fees and expenses of counsel employed by Purchaser for any period
during which Seller has not assumed the defense thereof. Whether or not Seller
chooses to defend or prosecute any claim, all of the parties hereto shall
cooperate in the defense or prosecution thereof. Notwithstanding any other
provision of this Section 11, Seller shall not be liable under this Section 11
with respect to any Restructuring Tax Cost resulting from a claim or demand the
defense of which Seller was not offered the opportunity to assume as provided
under this Section 11.3, to the extent Seller's liability under this Section 11
is materially adversely affected as a result thereof.
SECTION 12
EARLY TERMINATION OF THE ESCROW ARRANGEMENT
Purchaser and Seller agree to jointly notify the Escrow Agent,
pursuant to Section 4(c) of the Escrow Agreement, to amend the Termination Date
of the Escrow Agreement from October 19, 2011 to the following dates under the
following circumstances:
(1) if Purchaser exercises its right to acquire the
outstanding equity interest of LWY under the LWY Equity Transfer Agreement at
any time prior to the sixth anniversary of the Closing Date, Purchaser and
Seller shall jointly notify the Escrow Agent to amend such Termination Date to
the first anniversary of the date on which the LWY Equity Transfer is
effectuated; and
(2) if Purchaser is required to purchase the outstanding
equity interest of LWY at any time as a result of the occurrence of an LWY Event
of Default, Purchaser and Seller shall jointly notify the Escrow Agent to amend
such Termination Date to the date on which the LWY Equity Transfer is
effectuated.
SECTION 13
GOVERNING LAW
THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD FOR THE CONFLICTS OF LAWS
PRINCIPLES THEREOF.
SECTION 14
INCORPORATION OF TERMS
The provisions set out in Section 5.3(a) (Reasonable Efforts),
Section 9.4 (Waiver), Section 9.9 (Invalid Provisions), Section 9.11
(Arbitration) and Section 9.14 (Interpretation) shall be incorporated into this
Supplement as if set out in full herein and as if references in those Sections
to "this Agreement" are references to this Supplement.
- 20 -
SECTION 15
EFFECT ON THE ACQUISITION AGREEMENT
Except as modified, supplemented or superseded hereby, the
Acquisition Agreement shall remain in full force and effect and binding between
the parties. The provisions of Article VII of the Acquisition Agreement
regarding indemnification shall apply to the provisions hereof as if the
provisions hereof were set forth in the Acquisition Agreement.
SECTION 16
EFFECTIVE DATE; CLOSING
Each of Seller and Purchaser agree that the acquisition of the
Assets as contemplated in the Acquisition Agreement and this Supplement shall
become effective as of the date (such date, the "Effective Date") when Purchaser
acquired control of the Assets from Seller, which Seller and Purchaser
acknowledge to have occurred on October 1, 2004, pursuant to a letter agreement
between Seller and Purchaser, regardless of whether the Closing occurs on the
Effective Date or any other date.
SECTION 17
EXECUTION IN COUNTERPARTS
This Supplement may be executed in any number of counterparts,
all of which will constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
- 21 -
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
LENOVO GROUP LIMITED
By:
-------------------------
Name:
Title:
ASIAINFO HOLDINGS, INC.
By:
-------------------------
Name:
Title:
[SIGNATURE PAGE TO SUPPLEMENT AND AMENDMENT NO. 1 TO
ACQUISITION AGREEMENT]
- 22 -
EXHIBIT A
FORM OF FORWARD CONTRACT
This FORWARD CONTRACT (this "Forward Contract"), dated as of
October [o], 2004, is made and entered into by and between Bonson Information
Technology Limited, a company organized and existing under the laws of the
British Virgin Islands ("Bonson"), and Lenovo IT Alliance Limited, a company
organized and existing under the laws of the British Virgin Islands ("LIAL").
This Forward Contract is the forward contract referred to in,
and is subject to all of the terms and conditions of, the Acquisition Agreement
dated July 27, 2004 (the "Acquisition Agreement") by and between AsiaInfo
Holdings, Inc., a corporation organized and existing under the law of the State
of Delaware of the United States ("Purchaser"), and Lenovo Group Limited, a
company organized and existing under the law of the Hong Kong Special
Administrative Region of the People's Republic of China ("Seller"), as
supplemented and amended by Supplement and Amendment No. 1 to Acquisition
Agreement (the "Supplement") dated October 1, 2004 by and between Purchaser and
Seller. The Acquisition Agreement, as supplemented and amended by the
Supplement, is referred to herein as the "Amended Acquisition Agreement".
Capitalized terms used and not otherwise defined herein shall have the meaning
ascribed to such terms in the Amended Acquisition Agreement. In the event of any
conflict between the provisions hereof and the provisions of the Amended
Acquisition Agreement, the relevant provisions of the Amended Acquisition
Agreement shall prevail.
Bonson and LIAL have agreed to enter into this Forward Contract
to provide for the forward payment of part of the Purchase Price for the Assets
in the amount of RMB260,000,000 (the "Settlement Amount"), as contemplated in
Section 2.5(a) of the Amended Acquisition Agreement. Bonson and LIAL agree that
the Settlement Amount shall be satisfied through the transfer by Bonson to LIAL,
at any time during the 12-month period following the Closing Date, as determined
by Bonson at its sole and absolute discretion (the "Settlement Date"), of an
aggregate number of duly authorized, validly issued, fully paid and
nonassessable shares of the common stock, par value $0.01 per share, of
Purchaser (the "Forward Contract Shares") having a Market Value equivalent to
the Settlement Amount as calculated in accordance with Section 2.11 of the
Amended Acquisition Agreement, subject to any adjustment as provided in Sections
2.10(f), 2.11(c) or elsewhere in the Amended Acquisition Agreement, and further
subject to the AsiaInfo Share Cap as provided in Section 2.11 of the Amended
Acquisition Agreement. In the event that the Settlement Amount is greater than
the Market Value of the maximum number of Forward Contract Shares available
under the AsiaInfo Share Cap, the difference shall be paid by Purchaser or
Bonson (at Purchaser's option) to Seller, in cash or in AsiaInfo Shares having
an aggregate Market Value on the Settlement Date equal to such difference, or in
any combination of cash and AsiaInfo Shares, at the sole and absolute discretion
of Purchaser. LIAL acknowledges and agrees that the Forward Contract Shares that
are Escrow Shares shall be delivered to the Escrow Agent pursuant to the terms
of the Escrow Agreement and that the release of such shares to LIAL shall be
subject to the terms thereof.
On the Settlement Date, Bonson shall transfer AsiaInfo Shares
that it holds free and clear of Encumbrances (other than Permitted Encumbrances
or Encumbrances arising by virtue of applicable securities laws) to LIAL or the
Escrow Agent, as the case may be, in order to fulfil its obligation to deliver
the Forward Contract Shares under this Forward Contract. As soon as possible
after the Settlement Date (but in any event within five Business Days), Bonson
shall deliver (i) to LIAL a certificate or certificates representing the number
of Forward Contract Shares that are not Escrow Shares and (ii) to the Escrow
Agent a certificate or certificates representing the number of Forward Contract
Shares that are Escrow Shares, in each
case, duly endorsed for transfer in blank or in the name of LIAL. The transfer
of the Forward Contract Shares shall be deemed to have been effected as of the
close of business on the Settlement Date. Bonson shall give written notice of
such delivery to LIAL no later than 2:00 p.m. on the Settlement Date. Such
notice shall include the number of AsiaInfo Shares to be transferred and shall
be delivered in accordance with the notice provisions in Section 9.1 of the
Amended Acquisition Agreement. This Forward Contract shall not entitle LIAL to
any rights as a shareholder of Purchaser or to any other rights except the
rights stated herein. At such time as such delivery has been effected, the
rights of LIAL under this Forward Contract shall cease, and LIAL shall be deemed
to have become the holder of record of the Forward Contract Shares.
The delivery of certificates for the Forward Contract Shares
shall be made without charge to LIAL for transfer tax (if any) in respect
thereof or other cost incurred by Bonson in connection with the delivery of the
Forward Contract Shares under this Forward Contract. On or prior to the
Settlement Date, Bonson shall take all such actions as are necessary in order to
ensure that the Forward Contract Shares deliverable under this Forward Contract
shall be validly issued by Purchaser, fully paid and nonassessable, and held by
Bonson, free and clear of all Encumbrances (other than Permitted Encumbrances or
Encumbrances arising by virtue of applicable securities laws), and shall rank
pari passu with all other AsiaInfo Shares.
Bonson hereby represents and warrants to Seller that, assuming
the accuracy of the representations and warranties of the Seller in Section 3.30
of the Amended Acquisition Agreement, the transfer of the AsiaInfo Shares to
LIAL on the Settlement Date will not require registration under the Securities
Act.
LIAL acknowledges and agrees that, except as contemplated in
Section 2.11(b) of the Amended Acquisition Agreement, in no event shall it be
entitled to receive cash or other assets, other than the Forward Contract
Shares, in respect of Bonson's obligation to deliver the Settlement Amount and
that such obligation shall be fully satisfied by prompt delivery (and in any
event within five Business Days following the Settlement Date) of (i) the
certificate or certificates representing the number of Forward Contract Shares
that are not Escrow Shares to LIAL and (ii) the certificate or certificates
representing the number of Forward Contract Shares that are Escrow Shares to the
Escrow Agent. LIAL acknowledges that the foregoing agreement is an essential
element of this Forward Contract, absent which Purchaser would not have entered
into the transactions contemplated in the Amended Acquisition Agreement and
hereby.
Each of the parties agrees that (i) for all United States
federal, state and local tax purposes, this Forward Contract in its entirety
shall be treated as a forward contract for the delivery of the Forward Contract
Shares and will be not be treated in whole or any portion thereof, as
constituting indebtedness or giving rise to any amount of interest or other
ordinary expense to LIAL and (ii) this Forward Contract is not intended to be
governed by the provisions of the United States Commodity Exchange Act of 1936,
as amended, or by the rules or regulations of the United States Commodity
Futures Trading Commission.
Bonson agrees that if it defaults in the performance of its
obligation hereunder, LIAL shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in equity.
This Forward Contract constitutes a "securities contract" within
the meaning of Section 741(7) of Title 11 of the United States Code as amended
(the "Bankruptcy Code"), and as such each party shall be entitled to the rights
and benefits afforded to such securities contract under the Bankruptcy Code.
This Forward Contract shall not be assigned or transferred by
either party, in whole or in part, without the prior written consent of the
other party; provided, however, that such consent shall not be unreasonably
withheld in the event of a proposed assignment by either
- 2 -
party to an Affiliate of such party that agrees in writing to be bound by all
relevant provisions of this Forward Contract and the other Transaction
Documents.
THIS FORWARD CONTRACT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES.
[SIGNATURE PAGE FOLLOWS]
- 3 -
IN WITNESS WHEREOF, the parties have executed this Forward
Contract as of the date and year first above written.
BONSON INFORMATION TECHNOLOGY
LIMITED
By:
-----------------------------
Name:
Title:
LENOVO IT ALLIANCE LIMITED
By:
-----------------------------
Name:
Title:
[SIGNATURE PAGE TO FORWARD CONTRACT]
- 4 -
EXHIBIT B
FORM OF LEGAL OPINION OF TIAN YUAN LAW FIRM
To: AsiaInfo Holdings, Inc.
[o], 2004
Dear Sirs,
1. We are qualified PRC lawyers and have acted on behalf of Lenovo Group
Limited ("Seller") in connection with the Acquisition Agreement dated as of
July 27, 2004 by and between Seller and AsiaInfo Holdings, Inc. ("Purchaser"),
and as supplemented and amended as of October 1, 2004 (the "Acquisition
Agreement").
2. Terms defined in the Acquisition Agreement shall, unless otherwise
defined in this letter, bear the same respective meanings when used herein.
3. In giving this opinion, we have examined, together with such corporate
and other documents and records as we have considered necessary or desirable to
examine in order that we may give the opinions set forth in this letter,
executed copies of the following documents and agreements related to the
transactions contemplated thereby (collectively, the "Documents"):
[FULL LIST OF OTHER TRANSACTION DOCUMENTS - TO BE INSERTED]
4. In giving this opinion, we have made the following assumptions:
(i) That all signatures, seals and chops on the documents submitted
to us are genuine;
(ii) That all documents submitted to us as originals are authentic
and that all documents submitted to us as copy documents are complete and
conform to their originals;
(iii) That each of the Documents has been duly authorized by, has been
duly executed and delivered by, and constitutes legal, valid, binding and
enforceable obligations of, all of the parties thereto (other than Seller or an
Affiliate of Seller); and
(iv) That all factual statements made in such documents are correct.
This legal opinion is confined to and given on the basis of the
published laws of the People's Republic of China as at the date hereof. We have
not investigated, and we do not express or imply any view or opinion on, or in
respect of, the laws of any other jurisdiction, and we have assumed that no such
laws and/or regulations would affect the opinions expressed below.
5. Based on the above assumptions and subject to the qualifications herein,
we are of the opinion that:
(i) Each of LHL, WTITL and [Chinese characters omitted] ("LWY") (each a
"PRC Entity" or together the "PRC Entities") is duly organized as a company with
limited liability, validly existing and in good standing under the laws of the
People's Republic of China, and has the power and authority (corporate or other)
(1) to carry on its business as it is currently conducted and to own, lease and
operate the properties and assets used in connection therewith and (2) to the
extent it is a party thereto, to execute, deliver and perform the Documents, and
the transactions contemplated thereby.
B-1
(ii) Each of the PRC Entities has obtained all necessary licenses,
authorizations and approvals to conduct its business as currently conducted,
such licenses, authorization and approvals being in full force and effect, and
no violations exist in respect of any such license, authorization or approval,
except where such violation would not have a material adverse effect on the
ability of any of the PRC Entities to perform its obligations under the
Documents.
(iii) The Documents have been duly authorized, executed and delivered
by, and constitute the legal, valid, binding and enforceable obligations of,
each of the PRC Entities (to the extent such PRC entity is a party thereto).
(iv) After due inquiry and to the best of our knowledge, none of the
PRC Entities is in violation of any PRC law, regulation or decree that has or
would have a material adverse effect on any of the PRC Entities.
(v) After due inquiry and to the best of our knowledge, none of the
PRC Entities is currently subject to any claims, suits or demands or actions
threatened or initiated by or before any PRC governmental or public body,
authority or regulatory agency, which may have a material adverse effect on the
ability of any of the PRC Entities to perform its obligations under the
Documents to the extent it is a party thereto.
(vi) The execution, delivery and the performance by each of the PRC
Entities of its obligations under the Documents and the consummation of the
transactions contemplated thereby did not and will not (a) conflict with or
result in a violation or breach of any of the terms, conditions or provisions of
the articles of association or other organizational documents of any of the PRC
Entities, (b) conflict with or result in a violation or breach of any term or
provisions of any law or order known to us or (c) require any of the PRC
Entities to obtain any consent, approval or action of, make any filing with or
give any notice to any Governmental Authority.
(vii) None of the PRC Entities nor any of their assets or properties
enjoys, under the laws of the PRC, any right of immunity from service of
process, jurisdiction, suit, judgment, immunity from any legal or other
proceedings or from enforcement, execution or attachment in respect of its
obligations in the transactions contemplated under the LWY Transaction
Documents.
(viii) The registered capital of LWY is RMB[ ], all of which has been
fully contributed and verified, and LHL, [ ] and [ ] are the record holders of
51%, [ ] and [ ], respectively, of the outstanding equity interest in LWY, in
each case free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity, except the pledge created under the LWY Share
Pledge Agreement and the option granted under the Equity Transfer Arrangement
Agreement.
(ix) The beneficial ownership structure of LWY, its business and its
contractual arrangement with LAI, as set forth in the LWY Documents, are in
compliance with all existing PRC laws and regulations and do not require any
consent, approval or action of, filing with, or notice to, any Governmental
Authority except as expressly set out therein.
(x) The registered capital of WTITL is RMB10,000,000, all of which
has been fully contributed and verified, and (as of the date hereof) HICCL,
Dongfeng Automobile Co., Ltd. [Chinese characters omitted] and Dongfeng
Automobile Limited [Chinese characters omitted] are the record holders of 40%,
35% and 25%, respectively, of the outstanding equity interest in WTITL. HICCL
holds its 40% equity interest in WTITL free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity. With respect to the
transactions contemplated by the WTITL Equity Transfer Agreement (the "WTITL
Transactions"), we have (1) prepared all the related corporate and other
documents, (2) arranged for such documents to be duly executed by the parties
thereto and (3) submitted the WTITL Equity Transfer Agreement and all such
documents to [insert name of relevant MOFCOM/COFCOM] for its approval of the
WTITL Transactions. To the best of our knowledge, we are not aware of any
B-2
substantial legal obstacle in obtaining such approval from [insert name of
relevant MOFCOM/COFCOM]. The receipt of approval from [insert name of relevant
MOFCOM/COFCOM] for the transactions contemplated by the WTITL Equity Transfer
Agreement will transfer to Goldfame good and valid title to all of the
outstanding equity interest in WTITL, free and clear of any adverse claim.
(xi) The courts of the PRC would recognize as a valid judgment, a
final and conclusive arbitral award obtained in accordance with Section 9.11 of
the Acquisition Agreement against any of the PRC Entities under which a sum of
money is payable and would recognize and enforce such award without
re-examination or re-litigation of any matter which shall be the subject of such
award.
This opinion letter may be relied upon only by you as at the date hereof
but not by any other person or for any purpose other than in connection with the
transactions contemplated by the Documents without, in each instance, our prior
written consent.
Yours faithfully,
TIAN YUAN LAW FIRM
B-3
EXHIBIT E
SCHEDULE OF THE SECURITY BUSINESS PERMITS
Category (i)
SALES LICENSE OF SPECIALIZED PRODUCTS FOR COMPUTER INFORMATION SYSTEM SECURITY
([Chinese characters omitted])
Title of Certificate Name of Product Issuing Authority Type
-------------------- ------------------ ----------------- ------------------------
1 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Super V omitted] basis
2 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Power V omitted] basis
3 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Smart V omitted] basis
4 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] SIS-3000 omitted] basis
5 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] V3.2 omitted] basis
6 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] V2.0 omitted] basis
Category (ii)
PRODUCT MODEL CERTIFICATE OF CHINA INFORMATION SECURITY PRODUCTS ASSESSMENT AND
CERTIFICATION CENTRE ([CHINESE CHARACTERS OMITTED])
Title of Certificate Name of Product Issuing Authority Type
-------------------- ------------------ ----------------- ------------------------
7 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Super V(3.0) omitted] basis
8 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Power V(2.5) omitted] basis
9 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Smart V omitted] basis
10 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] SIS-3000 omitted] basis
[Chinese characters
omitted] (V1.0)
11 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] (V3.2) omitted] basis
S-1
Category (iii)
SECRET-RELATED INFORMATION SYSTEM PRODUCT TEST AND EXAMINATION CERTIFICATE OR
NEW PRODUCT ASSESSMENT CERTIFICATE ([CHINESE CHARACTERS OMITTED])
Title of Certificate Name of Product Issuing Authority Type
-------------------- ------------------ ----------------- ------------------------
12 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] V3.2 omitted] basis
13 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] SIS-3000 omitted] basis
[Chinese characters
omitted] V1.0
14 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Smart V omitted] basis
15 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Power V omitted] basis
16 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Super V omitted] basis
Category (iv)
MILITARY INFORMATION SECURITY PRODUCT CERTIFICATION CERTIFICATE ([CHINESE
CHARACTERS OMITTED])
Title of Certificate Name of Product Issuing Authority Type
-------------------- ------------------ ----------------- ------------------------
17 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Super V omitted] basis
18 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Power V omitted] basis
19 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] Smart V omitted] basis
20 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] SIS-3000 omitted] basis
[Chinese characters
omitted] V1.0
21 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] V3.2 omitted] basis
Category (v)
SOFTWARE ENTERPRISE CERTIFICATE AND SOFTWARE PRODUCT COPYRIGHT CERTIFICATE
([CHINESE CHARACTERS OMITTED])
Title of Certificate Name of Product Issuing Authority Type
-------------------- ------------------ ----------------- ------------------------
22 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] V3.2 omitted] basis
23 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] SIS-3000 omitted] basis
[Chinese characters
omitted] V1.0
24 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] SJW44 omitted] basis
[Chinese characters
omitted] V1.0
25 [Chinese characters [Chinese characters [Chinese characters Product-by-product
omitted] omitted] V2.0 omitted] basis
B-2
Category (vi) CERTIFICATE OF DESIGNATED UNIT FOR PRODUCTION OF COMMERCIAL
CRYPTO-GOODS ([CHINESE CHARACTERS OMITTED]), SALES LICENSE FOR COMMERCIAL
CRYPTO-GOODS ([CHINESE CHARACTERS OMITTED]) AND A PRODUCT CERTIFICATION
SUBSTANTIALLY SIMILAR TO THE SJW44 NETWORK CRYPTOGRAPHIC FACILITY IDENTIFICATION
CERTIFICATE (SJW44 [CHINESE CHARACTERS OMITTED])
Title of Certificate Name of Product Issuing Authority Type
-------------------- ------------------ ----------------- ------------------------
26 [Chinese characters [Chinese characters Corporate basis
omitted] omitted]
27 [Chinese characters [Chinese characters Corporate basis
omitted] omitted]
28 [Chinese characters SJW44 [Chinese [Chinese characters Product-by-product
omitted] characters omitted] basis
omitted]
Category (vii)
COMPUTER INFORMATION SYSTEM INTEGRATION CONCERNING STATE SECRETS QUALIFICATION
CERTIFICATE ([CHINESE CHARACTERS OMITTED])
Title of Certificate Name of Product Issuing Authority Type
-------------------- ------------------ ----------------- ------------------------
29 [Chinese characters [Chinese characters Corporate basis
omitted] omitted]
30 [Chinese characters [Chinese characters [Chinese characters Corporate basis
omitted] omitted] (B [Chinese omitted]
characters omitted])
[Chinese characters
omitted]
B-3
EXHIBIT D
EXECUTION COPY
FORWARD CONTRACT
This FORWARD CONTRACT (this "Forward Contract"), dated as of October 18,
2004, is made and entered into by and between Bonson Information Technology
Limited, a company organized and existing under the laws of the British Virgin
Islands ("Bonson"), and Lenovo IT Alliance Limited, a company organized and
existing under the laws of the British Virgin Islands ("LIAL").
This Forward Contract is the forward contract referred to in, and is
subject to all of the terms and conditions of, the Acquisition Agreement dated
July 27, 2004 (the "Acquisition Agreement") by and between AsiaInfo Holdings,
Inc., a corporation organized and existing under the law of the State of
Delaware of the United States ("Purchaser"), and Lenovo Group Limited, a company
organized and existing under the law of the Hong Kong Special Administrative
Region of the People's Republic of China ("Seller"), as supplemented and amended
by Supplement and Amendment No. 1 to Acquisition Agreement (the "Supplement")
dated October 1, 2004 by and between Purchaser and Seller. The Acquisition
Agreement, as supplemented and amended by the Supplement, is referred to herein
as the "Amended Acquisition Agreement". Capitalized terms used and not otherwise
defined herein shall have the meaning ascribed to such terms in the Amended
Acquisition Agreement. In the event of any conflict between the provisions
hereof and the provisions of the Amended Acquisition Agreement, the relevant
provisions of the Amended Acquisition Agreement shall prevail.
Bonson and LIAL have agreed to enter into this Forward Contract to
provide for the forward payment of part of the Purchase Price for the Assets in
the amount of RMB260,000,000 (the "Settlement Amount"), as contemplated in
Section 2.5(a) of the Amended Acquisition Agreement. Bonson and LIAL agree that
the Settlement Amount shall be satisfied through the transfer by Bonson to LIAL,
at any time during the 12-month period following the Closing Date, as determined
by Bonson at its sole and absolute discretion (the "Settlement Date"), of an
aggregate number of duly authorized, validly issued, fully paid and
nonassessable shares of the common stock, par value $0.01 per share, of
Purchaser (the "Forward Contract Shares") having a Market Value equivalent to
the Settlement Amount as calculated in accordance with Section 2.11 of the
Amended Acquisition Agreement, subject to any adjustment as provided in Sections
2.10(f), 2.11(c) or elsewhere in the Amended Acquisition Agreement, and further
subject to the AsiaInfo Share Cap as provided in Section 2.11 of the Amended
Acquisition Agreement. In the event that the Settlement Amount is greater than
the Market Value of the maximum number of Forward Contract Shares available
under the AsiaInfo Share Cap, the difference shall be paid by Purchaser or
Bonson (at Purchaser's option) to Seller, in cash or in AsiaInfo Shares having
an aggregate Market Value on the Settlement Date equal to such difference, or in
any combination of cash and AsiaInfo Shares, at the sole and absolute discretion
of Purchaser. LIAL acknowledges and agrees that the Forward Contract Shares that
are Escrow Shares shall be delivered to the Escrow Agent pursuant to the terms
of the Escrow Agreement and that the release of such shares to LIAL shall be
subject to the terms thereof.
On the Settlement Date, Bonson shall transfer AsiaInfo Shares that it
holds free and clear of Encumbrances (other than Permitted Encumbrances or
Encumbrances arising by virtue of applicable securities laws) to LIAL or the
Escrow Agent, as the case may be, in order to fulfil its obligation to deliver
the Forward Contract Shares under this Forward Contract. As soon as possible
after the Settlement Date (but in any event within five Business Days), Bonson
shall deliver (i) to LIAL a certificate or certificates representing the number
of Forward Contract Shares that are not Escrow Shares and (ii) to the Escrow
Agent a certificate or certificates representing the number of Forward Contract
Shares that are Escrow Shares, in each case, duly endorsed for transfer in blank
or in the name of LIAL. The transfer of the Forward Contract Shares shall be
deemed to have been effected as of the close of business on the
Settlement Date. Bonson shall give written notice of such delivery to LIAL no
later than 2:00 p.m. on the Settlement Date. Such notice shall include the
number of AsiaInfo Shares to be transferred and shall be delivered in accordance
with the notice provisions in Section 9.1 of the Amended Acquisition Agreement.
This Forward Contract shall not entitle LIAL to any rights as a shareholder of
Purchaser or to any other rights except the rights stated herein. At such time
as such delivery has been effected, the rights of LIAL under this Forward
Contract shall cease, and LIAL shall be deemed to have become the holder of
record of the Forward Contract Shares.
The delivery of certificates for the Forward Contract Shares shall be
made without charge to LIAL for transfer tax (if any) in respect thereof or
other cost incurred by Bonson in connection with the delivery of the Forward
Contract Shares under this Forward Contract. On or prior to the Settlement Date,
Bonson shall take all such actions as are necessary in order to ensure that the
Forward Contract Shares deliverable under this Forward Contract shall be validly
issued by Purchaser, fully paid and nonassessable, and held by Bonson, free and
clear of all Encumbrances (other than Permitted Encumbrances or Encumbrances
arising by virtue of applicable securities laws), and shall rank pari passu with
all other AsiaInfo Shares.
Bonson hereby represents and warrants to Seller that, assuming the
accuracy of the representations and warranties of the Seller in Section 3.30 of
the Amended Acquisition Agreement, the transfer of the AsiaInfo Shares to LIAL
on the Settlement Date will not require registration under the Securities Act.
LIAL acknowledges and agrees that, except as contemplated in Section
2.11(b) of the Amended Acquisition Agreement, in no event shall it be entitled
to receive cash or other assets, other than the Forward Contract Shares, in
respect of Bonson's obligation to deliver the Settlement Amount and that such
obligation shall be fully satisfied by prompt delivery (and in any event within
five Business Days following the Settlement Date) of (i) the certificate or
certificates representing the number of Forward Contract Shares that are not
Escrow Shares to LIAL and (ii) the certificate or certificates representing the
number of Forward Contract Shares that are Escrow Shares to the Escrow Agent.
LIAL acknowledges that the foregoing agreement is an essential element of this
Forward Contract, absent which Purchaser would not have entered into the
transactions contemplated in the Amended Acquisition Agreement and hereby.
Each of the parties agrees that (i) for all United States federal, state
and local tax purposes, this Forward Contract in its entirety shall be treated
as a forward contract for the delivery of the Forward Contract Shares and will
be not be treated in whole or any portion thereof, as constituting indebtedness
or giving rise to any amount of interest or other ordinary expense to LIAL and
(ii) this Forward Contract is not intended to be governed by the provisions of
the United States Commodity Exchange Act of 1936, as amended, or by the rules or
regulations of the United States Commodity Futures Trading Commission.
Bonson agrees that if it defaults in the performance of its obligation
hereunder, LIAL shall be entitled to specific performance of the terms hereof,
in addition to any other remedy at law or in equity.
This Forward Contract constitutes a "securities contract" within the
meaning of Section 741(7) of Title 11 of the United States Code as amended (the
"Bankruptcy Code"), and as such each party shall be entitled to the rights and
benefits afforded to such securities contract under the Bankruptcy Code.
This Forward Contract shall not be assigned or transferred by either
party, in whole or in part, without the prior written consent of the other
party; provided, however, that such consent shall not be unreasonably withheld
in the event of a proposed assignment by either party to an Affiliate of such
party that agrees in writing to be bound by all relevant provisions of this
Forward Contract and the other Transaction Documents.
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THIS FORWARD CONTRACT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES.
[SIGNATURE PAGES FOLLOW]
- 3 -
IN WITNESS WHEREOF, the parties have executed this Forward Contract as
of the date and year first above written.
BONSON INFORMATION TECHNOLOGY
LIMITED
By:
-----------------------------
Name:
Title:
LENOVO IT ALLIANCE LIMITED
By:
-----------------------------
Name:
Title:
[SIGNATURE PAGE TO FORWARD CONTRACT]
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