Document:

Exhibit 10.3

 

 

December 20, 2005

 

 

BEIJING
E-CHANNELS COORDINATION TECHNOLOGY CO., LTD.

 

 

BEIJING E-CHANNELS CENTURY TECHNOLOGY CO., LTD.

 

 

PORT
WING DEVELOPMENT COMPANY LIMITED

 

 

INDIVIDUAL SHAREHOLDERS

 

 

AGREEMENT

 

for the sale and purchase of the equity interest of

 

BEIJING E-CHANNELS CENTURY TECHNOLOGY CO., LTD.

 

 

 

THIS
AGREEMENT for sale
and purchase of equity interest of Beijing Sihitech Co., Ltd. is made on December
20, 2005

 

Among

 

(1)                                  BEIJING E-CHANNELS COORDINATION
TECHNOLOGY CO., LTD. [ILLEGIBLE], with limited liability established and existing pursuant to the laws
of the PRC whose registered office is at Room 205, Shunpinda Bus Terminal, 8
Chuangxin Road, Beijing Changping Technology Park, Beijing, PRC (Vendor);

 

(2)                                  BEIJING E-CHANNELS CENTURY
TECHNOLOGY CO., LTD. [ILLEGIBLE], a company with limited liability established and existing pursuant to
the laws of the PRC whose registered office is at Middle District 4F, De Shi
Building, No.9 Shang Di East Road, Beijing, the PRC. (the Company
or e-Channels);

 

(3)                                  PORT WING DEVELOPMENT COMPANY
LIMITED, a company incorporated under the laws of
the British Virgin Islands whose registered office is at TrustNet Chambers, P.O. Box 3444, Road Town, Tortola,
British Virgin Islands (the Purchaser); and

 

(4)                                  INDIVIDUAL SHAREHOLDERS listed in Appendix A.

 

Whereas

 

(A)                              e-Channels provides electronic payment
software and solutions to banking and financial service industries (the e-Channels Business) in
the People’s Republic of China (the PRC).  Detailed information in respect of e-Channels
is set out in Schedule 1.

 

(B)                                Individual Shareholders are currently the registered
owners of such equity interest in e-Channels as set forth opposing their names
respectively on Appendix A (collectively, the Shares).

 

(C)                                The Vendor has entered into an equity
transfer agreement with the Individual Shareholders (the Equity
Transfer Agreement), a copy of which is attached hereto as
Appendix B, on the date hereof, pursuant to which, prior to Closing, Individual
Shareholders will irrevocably transfer the Shares to the Vendor, and the Vendor
will become the registered owner of the entire equity interest in e-Channels.

 

(D)                            subject to the terms and conditions of this
Agreement, the Purchaser, at the Closing, shall acquire by payment of the
Purchase Price, the Shares from the Vendor (the Transfer).

 

(E)                                 On the even date hereof, shareholder(s) of Sihitech
entered into an agreement for sale and purchase of equity interest of Sihitech
with Sihitech BVI in a form that is

 

1

 

substantially the same as
this Agreement for the transfer of 100% equity interest in Sihitech to Sihitech
BVI.

 

(F)                                 Upon completion of the Transfer as
contemplated by this Agreement, the Purchaser will be the registered owner of
one hundred per cent (100%) of the Shares and e-Channels will be converted into
a company wholly owned by the Purchaser, and e-Channels shall remain the sole
owner, user, occupier and conductor of the e-Channels Business.

 

It is Agreed as follows:

 

ARTICLE
I

INTERPRETATION

 

1.1                                 In this Agreement, unless this Agreement or
the Schedules hereto otherwise stipulate, the following expressions shall have
the following meanings:

 

Accountants
means KPMG Huazhen.

 

Action means
any claim, action, suit, litigation, arbitration, inquiry, proceeding or
investigation by or pending before any Governmental Authority.

 

Approval Authority means
the Ministry of Commerce of China [ILLEGIBLE], and its local branches in Beijing
(as the case may be), as well as the State Administration of Foreign Exchange.

 

Business Day means any day, other than a Saturday, Sunday
or a day on which banking institutions in Beijing or New York City are
authorized or obligated by law, regulation or executive order to close.

 

Claim means any claim, demand, suit, proceeding or
action.

 

Contracts mean any contract, agreement, arrangement,
plan, lease, license or similar instrument.

 

Copyrights shall mean all copyrights, including rights
in and to works of authorship and all other rights corresponding thereto
throughout the world, whether published or unpublished, including rights to
prepare, reproduce, perform, display and distribute copyrighted works and
copies, compilations and derivative works thereof.

 

Damages means the dollar amount of any loss, damage,
expense or liability, including, without limitation, reasonable attorneys’ fees
and disbursements incurred by an Indemnified Party in any action or proceeding
between the Indemnified Party and the Indemnifying Party or between the
Indemnified Party and a third party, which is determined (as provided in
Article X) to have been sustained, suffered or incurred by a Party or the
Company and to have arisen from or in connection with an event or state of
facts which is subject to indemnification under this Agreement; the amount of
Damages

 

2

 

shall be the amount finally determined by a
court of competent jurisdiction or appropriate governmental administrative
agency (after the exhaustion of all appeals) or the amount agreed to upon
settlement in accordance with the terms of this Agreement, if a Third Party
Claim, or by the Parties, if a Direct Claim.

 

Direct Claim means any claim other than a Third Party
Claim.

 

e-Channels Business shall have the meaning ascribed to it in the recitals to this
Agreement.

 

Encumbrance means
any mortgage, pledge, lien and/or security interest, as provided for,
recognized and/or enforceable under the laws of the PRC.

 

Governmental Authority means any PRC or non-PRC national, supranational,
state, provincial, local or similar government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal or
judicial or arbitral body.

 

Intellectual Property means any intellectual property rights,
including, without limitations, Patents, Copyrights, service marks, moral
rights, Trade Secrets, Trademarks, designs and Technology, together with (a)
all registrations and applications for registration therefore and (b) all
rights to any of the foregoing (including (i) all rights received under any
license or other arrangement with respect to the foregoing, (ii) all rights or
causes of action for infringement or misappropriation (past, present or future)
of any of the foregoing, (iii) all rights to apply for or register any of the
foregoing, (iv) domain names and URLs of or relating to the e-Channels and
variations of the domain names and URLs, (vi) Contracts which related to any of
the foregoing, including invention assignment, intellectual property
assignment, confidentiality, and non-competition agreements, and (vii) goodwill
of any of the foregoing).

 

Laws means all statutes, rules, regulations,
ordinances, orders, writs, injunctions, judgments, decrees, awards and
restrictions, including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, environment, hazardous substances, pollution controls, employment and
employment practices and access by the handicapped.

 

Material Adverse Effect means any change, circumstance, condition,
development, effect, event, occurrence or state of facts that, individually or
in the aggregate, has been, or would reasonably be expected to be, materially
adverse to the business, condition (financial or otherwise), operations or
results of operations of e-Channels, other than any change, circumstance,
condition, development, effect, event, occurrence or state of facts relating to
(i) economic, industry, or securities market conditions in the PRC or (ii) any
change in legal, regulatory or political conditions affecting the information
technology industry generally in the PRC, including any acts of war or
terrorist activities.

 

Party means the Purchaser, on the one hand, and e-Channels,
the Vendor or each of the Individual Shareholders, on the other hand
(collectively, the Parties)

 

3

 

Patents means all United States and foreign patents
and utility models and applications therefore and all reissues, divisions,
re-examinations, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in the
world in inventions and discoveries.

 

Permits means all governmental registrations,
licenses, permits, authorizations and approvals.

 

Person means an individual, partnership,
corporation, joint venture, unincorporated organization, cooperative or a
governmental entity or agency thereof.

 

PRC means
the People’s Republic of China, which, for the purposes of this Agreement only,
shall not include Chinese territories of Hong Kong, Macau and Taiwan.

 

PRC GAAP means PRC Accounting Standards for Business
Enterprises in effect from time to time applied consistently throughout the
periods involved.

 

Purchase Price is defined in Section 2.2.

 

Representatives of either Party means such Party’s
employees, accountants, auditors, actuaries, counsel, financial advisors,
bankers, investment bankers and consultants.

 

Renminbi or RMB means the legal
currency of the PRC.

 

SAIC means
the State or Beijing Administration of Industry and Commerce, as the case may
be.

 

Sihitech means Beijing Sihitech Co., Ltd.

 

Sihitech BVI means Ahead Billion Venture Limited..

 

Sihitech SPA means an agreement for
sale and purchase of equity interest of Sihitech between shareholder(s) of Sihitech
and Sihitech
BVI for the transfer of 100% equity interest in Sihitech to Sihitech BVI of the even date hereof.

 

Software means all software, in object,
human-readable or source code, whether previously completed or now under
development, including programs, applications, databases, data files, coding
and other software, components or elements thereof, programmer annotations, and
all versions, upgrades, updates, enhancements and error corrections of all of
the foregoing.

 

Tax or Taxes means
all income, gross receipts, sales, stock transfer, excise, bulk transfer, use,
employment, social security, franchise, profits, property or other taxes,
tariffs, imposts, fees, stamp taxes and duties, assessments, levies or other
charges of any kind whatsoever (whether payable directly or by withholding),
together with any interest and any penalties, additions to tax or additional
amounts imposed by any government or taxing authority with respect thereto.

 

4

 

Technology means any know-how, confidential or
proprietary information, name, data, discovery, formulae, idea, method,
process, procedure, other invention, record of invention, model, research,
Software, technique, technology, test information, market survey, website, or
information or material of a like nature, whether patentable or unpatentable
and whether or not reduced to practice.

 

Third Party Claim means a Claim by a person, firm, corporation
or government entity other than a party hereto or any affiliate of such party.

 

Trademarks means any and all United States and foreign
trademarks, service marks, logos, trade names, corporate names, trade dress,
Internet domain names and addresses, and all goodwill associated therewith
throughout the world.

 

U.S. Dollars and US$ mean
the legal currency of the United States of America.

 

U.S. GAAP means generally accepted accounting
principles, consistently applied in the United States.

 

Vendor shall have the meaning
ascribed to it in the recitals to this Agreement.

 

1.2                                 The Appendices, Schedules and Recitals
comprise appendices, schedules and recitals to this Agreement and form part of
this Agreement.

 

1.3                                 The expressions Vendor, e-Channels and the Purchaser and references to
any other person in this Agreement shall, where the context permits, include
their respective successors, transferees and permitted assigns and any persons
deriving title under them.

 

1.4                                 References to person mean any natural person,
corporation, firm, joint venture, partnership, association, enterprise, trust
or other entity or organization or any governmental agency.

 

 

ARTICLE
II

SHARE
PURCHASE

 

2.1                                 Purchase and Sale.  Upon the terms and subject to the conditions
hereof, at the Closing, the Vendor shall sell, transfer, assign and convey to the
Purchaser, and the Purchaser shall purchase from the Vendor, all of the right,
title and interest of the Vendor in and to the Shares.  The Shares represent all of the equity
interest in e-Channels and shall be sold and transferred to the Purchaser free
from any Encumbrance.

 

2.2                                 Purchase Price.

 

(a)      Subject to adjustment and the Holdback Amount as hereinafter set forth,
the purchase price (Purchase Price) to be paid by
the Purchaser to the Vendor or its designees for the Shares shall be the
following:

 

5

 

(i)         cash in the amount of
One Million Two Hundred Sixty Eight Thousand One Hundred and Sixteen U.S.
Dollars (US$1,268,116), or

 

(ii)      cash in the amount equal to the total current assets minus the total current
liabilities of e-Channels at Closing,

 

whichever
amount is lower;

 

(b)     Payments.

 

(i)         Initial Payment.  Within sixty
(60) days after the Closing, the sum of the Purchase Price, less the Holdback
Amount (the Initial Payment), will be paid
by wire transfer of immediately available U.S. Dollars to the Vendor to the
account of the Vendor as specified on Schedule 2.2 (b).

 

(ii)      Holdback.  The sum of US$100,000 (Holdback Amount) to be withheld from
the Initial Payment, representing a portion of the Purchase Price, shall be
retained by the Purchaser for a period of 12 months starting from Closing.  The Holdback Amount will be security for the
indemnification obligations of the Vendor set forth in Article X.  Subject to this Section and Article X, on the
first anniversary of the Closing, or the first business day thereafter, the
Purchaser shall deliver the Holdback Amount pro rata to the Vendor in the same
proportions as the Initial Payment was allocated among them.  The Purchaser may withhold from the Holdback
Amount the equivalent of any amount then in dispute related to the Vendor’s
indemnification obligations arising pursuant to Article X or for which the
Purchaser has notified the Vendor of an indemnification Claim.  Any withheld Holdback Amount, to the extent
not applied in satisfaction of an indemnification claim, will be paid by the
Purchaser promptly on resolution of the dispute or claim.  Nothing in this section shall be construed as
limiting the liability of the Vendor for indemnification claims or any other
claim by the Purchaser or any other rightful claimant, and the Holdback Amount
shall not be considered liquidated damages or any breach of this Agreement or
any other matter related hereto.

 

 

ARTICLE
III

THE
CLOSING

 

3.1                                 The Closing.  Subject to the terms and conditions of this
Agreement, the consummation of the Transfer and the transactions contemplated
by this Agreement shall take place at a closing (Closing)
to be held at 9:30 p.m., local time, on the fourth business day after the date
on which the last of the conditions to Closing set forth in Article IX is
fulfilled, at the office of Beijing Sihitech Co., Ltd, 3rd Floor, Tower B,
Beijing Financial Trust Building, 5 Anding Road, Chaoyang District, Beijing
100029, the PRC,, or at such

 

6

 

other
time, date or place as the Parties may agree upon in writing.  The date on which the Closing occurs is
referred to herein as the Closing Date.

 

3.2                                 Deliveries.

 

(a)      Vendor.  At the Closing, the Vendor
will (i) assign and transfer to the Purchaser all of such Vendor’s right, title
and interest in and to his, her or its respective portion of the Shares by
delivering to the Purchaser the certificates representing such Shares, duly
endorsed for transfer and free and clear of Encumbrance and (ii) deliver to the
Purchaser the certificates, opinions and other agreements contemplated by
Article IX hereof and the other provisions of this Agreement.

 

(b)     the Purchaser.  Within sixty (60)
days after Closing, the Purchaser shall pay to the Vendor the Purchase Price to
which the Vendor is entitled pursuant to Section 2.2 and (ii) the certificates,
opinions and other agreements and instruments contemplated by Article IX hereof
and the other provisions of this Agreement.

 

3.3                                 Further Assurances.  Subject to the terms and conditions of this
Agreement, at any time or from time to time after the Closing, each of the
Parties hereto shall execute and deliver such other documents and instruments,
provide such materials and information and take such other actions as may
reasonably be necessary, proper or advisable, to the extent permitted by law,
to fulfill its obligations under this Agreement.

 

 

ARTICLE
IV

REPRESENTATIONS
AND WARRANTIES

OF E-CHANNELS,
INDIVIDUAL SHAREHOLDERS AND THE VENDOR

 

E-Channels, Individual Shareholders, jointly
and severally, and the Vendor represent and warrant to the Purchaser as of the
Closing, as follows:

 

4.1                                 The Shares.

 

(a)      Ownership.  Prior to the Closing
Date, the Vendor will become the registered and beneficial owners of all of the
Shares in the amounts set forth in Schedule 4.1(a) free and clear of all Encumbrance,
which shares constitute all of the shares of capital stock of e-Channels.  There are no options, warrants or other
contractual rights outstanding which give any person the right to acquire
shares of e-Channels owned by the Vendor, whether or not such rights are
presently exercisable.

 

(b)     Capitalization. The registered capital of e-Channels is set forth in
Schedule 1.  There are no options,
warrants or other contractual rights outstanding which give any person the
right to require the issuance of any capital stock of e-

 

7

 

Channels,
whether or not such rights are presently exercisable.  All of the Shares are validly issued, fully
paid and non-assessable.

 

4.2                                 Organization of e-Channels.  E-Channels is a private owned limited
liability company duly organized, validly existing and in good standing under
the law of the PRC.  E-Channels has all
requisite power and authority to own, lease and operate its properties and to
carry on the e-Channels Business as now being conducted and as presently
contemplated to be conducted.

 

4.3                                 Authority and Corporate Action; No Conflict.

(a)      E-Channels and each of the Individual Shareholders and Vendor have all
necessary power and authority to enter into this Agreement and to consummate
the Transfer and other transactions contemplated hereby.  All actions, corporate and otherwise,
necessary to be taken by e-Channels and Vendor to authorize the execution,
delivery and performance of this Agreement, and all other agreements and
instruments delivered by e-Channels and the Vendor in connection with the Transfer
have been duly and validly taken.  This
Agreement has been duly executed and delivered by e-Channels and the Vendor and
Individual Shareholders and constitute the valid, binding, and enforceable
obligation of e-Channels and the Vendor and Individual Shareholders,
enforceable in accordance with its terms, except (i) as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws of general application now or hereafter in
effect affecting the rights and remedies of creditors and by general principles
of equity (regardless of whether enforcement is sought in a proceeding at law
or in equity) and (ii) as enforceability of any indemnification provision may
be limited by federal and state securities laws and public policy of the United
States, BVI and the PRC.

 

(b)     Neither the execution and delivery of this Agreement by e-Channels or the
Vendor and Individual Shareholders nor the consummation of the transactions
contemplated hereby will (i) except as set forth in Schedule 4.3, conflict
with, result in a breach or violation of or constitute (or with notice of lapse
of time or both constitute) a default under, (1) the Articles of Association of
e-Channels or (2) any law, statute, regulation, order, judgment or decree or
any instrument, contract or other agreement to which e-Channels, any Individual
Shareholder or a Vendor is a party or by which it (or any of its properties or
assets) is subject or bound; (ii) result in the creation of, or give any party
the right to create, any lien, charge, option, security interest or other
encumbrance upon the assets of e-Channels or a Vendor; (iii) terminate or
modify, or give any third party the right to terminate or modify, the
provisions or terms of any contract to which e-Channels, any Individual
Shareholder or a Vendor is a party; or (iv) result in any suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
qualification, authorization or approval applicable to e-Channels, any
Individual Shareholder or a Vendor.

 

8

 

4.4                                 Consents and Approvals.  Other than as set forth on Schedule 4.4, the
execution and delivery of this Agreement by e-Channels, each Individual
Shareholder and the Vendor does not, and the performance of this Agreement by
it will not, require any consent, approval, authorization or other action by,
or filing with or notification to, any Governmental Authority, except where
failure to obtain such consents, approvals, authorizations or actions, or to
make such filings or notifications, would not prevent it from performing any of
its material obligations under this Agreement.

 

4.5                                 Licenses,
Permits, Etc.  To the best of the knowledge of the Vendor
and Individual Shareholders, e-Channels possesses or will possess prior to the Closing
all Permits necessary, in all material respects, to own and operate the e-Channels
Business, which necessary Permits are described or are as set forth on Schedule
4.5 hereto.  To the best of the knowledge
of e-Channels and the Vendor and Individual Shareholders, e-Channels is not in
default in any material respect under any of such Permits and no event has
occurred and no condition exists which, with the giving of notice, the passage
of time, or both, would constitute a default thereunder.  Neither the execution and delivery of this
Agreement, or any of the other documents contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby nor, to the
best of the knowledge of e-Channels and the Vendor and Individual Shareholders,
compliance by e-Channels with any of the provisions hereof or thereof will
result in any suspension, revocation, impairment, forfeiture or nonrenewal of
any Permit applicable to the e-Channels Business.

 

4.6                                 Taxes, Tax Returns and Audits.  Except as specifically set forth in Schedule 4.6,
(a) e-Channels has filed on a timely basis (taking into account any extensions
received from the relevant taxing authorities) all returns and reports
pertaining to all Taxes that are or were required to be filed by e-Channels with the appropriate taxing authorities in
all jurisdictions in which such returns and reports are or were required to be
filed, and all such returns and reports are true, correct and complete in all
material respects, (b) all Taxes that are due from or may be asserted against e-Channels
(including deferred Taxes) in respect of or attributable to all periods ending
on or before the Closing Date have been or will be fully paid, deposited or
adequately provided for on the books and financial statements of e-Channels or
are being contested in good faith by appropriate proceedings, (c) no issues
have been raised (or are currently pending) by any taxing authority in
connection with any of the returns and reports referred to in clause (a) which
might be determined adversely to e-Channels, (d) e-Channels has not given or
requested to give waivers or extensions of any statute of limitations with
respect to the payment of Taxes, and (e) no tax liens which have not been
satisfied or discharged by payment or concession by the relevant taxing
authority or as to which sufficient reserves have not been established on the
books and financial statements of e-Channels are in force as of the date
hereof.

 

4.7                                 Financial Statements.  Prior to the execution of this Agreement, the Individual
Shareholders and the Vendor have delivered to the Purchaser consolidated
balance sheets of each of e-Channels as at December 31, 2002, 2003 and 2004,
and related consolidated statements of income and source and application of
funds for the three years ended December 31, 2004, audited by the Accountants,
and the notes, comments, schedules, and

 

9

 

supplemental
data therein (collectively, the 2004 Financial Statements).  An interim consolidated balance sheet as of
June 30, 2005, and related consolidated statements of income and source and
application of funds for the six (6) months then ended (collectively, the Last Financial Statements)
have been delivered to the Purchaser. 
The 2004 Financial Statements and the Last Financial Statements shall be
prepared in accordance with U.S. GAAP throughout the periods indicated and
fairly present the financial condition of e-Channels at their respective dates
and the results of the operations of e-Channels for the periods covered thereby
in accordance with U.S. GAAP.  The 2004
Financial Statements and the Last Financial Statements are included in Schedule
4.7 to this Agreement.

 

4.8                                 No Undisclosed Liabilities.  e-Channels does not have any liabilities,
whether known or unknown, absolute, accrued, contingent or otherwise, except
(a) as and to the extent reflected or reserved against on the Last Financial
Statements, and (b) those since the Last Financial Statement Date, incurred in
the ordinary course of business and consistent with prior practice.  Schedule 4.8 contains an accurate and complete
list and description and all liabilities of e-Channels whether or not reflected
or reserved against on the Last Financial Statements which individually exceeds
US $75,000 or, if related liabilities, exceed $75,000 (or the equivalent of US
$75,000).

 

4.9                                 Real Property.  The Last Financial Statements and Schedule 4.9
together contain an accurate and complete list and description of all real
estate owned by e-Channels as well as any other real estate that is in the
possession of or leased by e-Channels and the improvements (including buildings
and other structures) located on such real estate (collectively, the Real Property), and lists and
accurately describes any leases under which any such Real Property is possessed
(the Real Estate Leases).  e-Channels is not in default under any of the
Real Estate Leases, and is not aware of any default by any of the lessors
thereunder.

 

4.10                           Certain Personal Property.  The Last
Financial Statements and Schedule 4.10 together contain an accurate and
complete list and description of the material fixed assets of e-Channels
specifying the location of all material items of tangible personal property of e-Channels.

 

4.11                           Non-Real Estate Leases.  The Last
Financial Statements and Schedule 4.11 together contain an accurate and
complete list and description of all assets and property (other than Real
Property and Real Estate Leases) that are used as of the date of this Agreement
in the operation of the e-Channels Business and that are possessed by e-Channels
under an existing lease.  All of such
leases are referred to herein as the Non-Real Estate Leases.
 e-Channels is not in default under any
of the Non-Real Estate Leases, and is not aware of any default by any of the
lessors hereunder.

 

4.12                           Accounts Receivable.  The accounts receivable of e-Channels
reflected on the Last Financial Statements and created after the Last Financial
Statements Date, are bona fide accounts receivable, created in the ordinary
course of business and subject to historical rates of uncollected liabilities,
as reserved against on e-Channels’s financial

 

10

 

statements,
are good and collectible within periods of time normally prevailing in the
industry at the aggregate recorded amounts thereof.

 

4.13                           Inventory.  The inventory of e-Channels consists of items
of quality and quantity useable or saleable in the ordinary course of business
at regular sales prices, subject to (a) changes in price levels as a result of
economic and market conditions and (b) reserves reflected in the Last Financial
Statements for spoiled and discontinued items.  Schedule 4.13 sets forth a break down of the
inventory balance of e-Channels as of the date of the Last Financial Statement,
but it is understood that any material or intentional inaccuracy in the
Schedule 4.13 estimates will not be a breach of this representation and
warranty.

 

4.14                           Contracts, Obligations and Commitments.  Except as set forth in the Last Financial
Statements and on Schedule 4.14 together, other than the Real Estate Leases and
the Non-Real Estate Leases, e-Channels does not have any existing contract,
obligation or commitment (written or oral) of any nature (other than
obligations involving payments of less than $300,000 individually or $300,000
in the aggregate), including without limitation the following:

 

(a)      Employment, bonus, severance or consulting agreements, retirement,
stock bonus, stock option, or similar plans;

 

(b)     Loans or other agreements, notes, indentures or instruments relating to
or evidencing indebtedness for borrowed money or mortgaging, pledging or
granting or creating a lien or security interest or other encumbrance on any of
the assets of e-Channels or any agreement or instrument evidencing any guaranty
by e-Channels of payment or performance by any other Person;

 

(c)      Agreements of any kind relating to employment matters such as labor
agreements or agreements providing for benefits under any plan;

 

(d)     Any contract or series of contracts with the same Person for the
furnishing or purchase of equipment, goods or services, except for purchase and
sales orders in the ordinary course of business;

 

(e)      Any joint venture contract or arrangement or other agreement involving
a sharing of profits or expenses to which e-Channels is a party or by which it
is bound;

 

(f)        Agreements which limit the freedom of e-Channels to compete in any line
of business or in any geographic area or with any Person;

 

(g)     Agreements providing for disposition of the assets, businesses or a
direct or indirect ownership interest in e-Channels;

 

(h)     Any contract, commitment or arrangement not made in the ordinary course
of business of e-Channels; or

 

(i)         Agreements with any Governmental Authority.

 

11

 

Except
as set forth on Schedule 4.14, each Contract to which e-Channels is a party is
a valid and binding obligation of e-Channels and, to the best of the knowledge
of e-Channels, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by any applicable bankruptcy, insolvency
or other laws affecting creditors’ rights generally or by general principles of
equity, regardless of whether such enforceability is considered in equity or at
law), and is in full force and effect (except for any Contracts which by their
terms expire after the date hereof or are terminated after the date hereof in
accordance with the terms thereof, provided, however, that e-Channels will not terminate
any Contract after the date hereof without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed), and e-Channels
has not breached any material provision of, nor is in default in any material
respect under the terms of any of the Contracts.

 

4.15                           Intellectual Property Rights.

 

(a)      Intellectual Property.  Schedule
4.15(a) contains an accurate and complete list and description of all
Intellectual Property used by e-Channels in connection with the e-Channels Business,
specifying as to each (i) the nature of such right, (ii) the ownership thereof,
(iii) the Governmental Authority that has issued or recorded a registration or
certificate or similar document with respect thereto or with which an
application for such a registration, certificate or similar document is pending
and (iv) any applicable registration, certificate or application number. e-Channels
has provided the Purchaser with complete and accurate copies of all registered
Intellectual Property relating to the e-Channels Business.

 

(b)     Other Intellectual Property Rights.  Schedule 4.15(b) includes an accurate and
complete list and description of all material inventions and trade secrets that
e-Channels has formally documented and that are owned, used, controlled,
authorized for use or held by, or licensed to, e-Channels that relate to or are
necessary to the e-Channels Business, including as conducted at or prior to
Closing or as proposed to be conducted by e-Channels, together with a
designation of the ownership thereof.

 

(c)      Software.  Schedule 4.15(c)
includes an accurate and complete list and description of all Software used by e-Channels
in connection with the e-Channels Business, including as conducted at or prior
to Closing or as proposed to be conducted by e-Channels, together with a
designation of ownership.

 

(d)     Out-Bound Licenses.  Schedule 4.15(d)
includes an accurate and complete list and description of all licenses,
sublicenses, and other Contracts pursuant to which (i) any Person is authorized
to use any Intellectual Property rights used in connection with the e-Channels Business
or (ii) any right of e-Channels in, or its use of, any Intellectual Property
right used in connection with the e-Channels Business is otherwise materially
affected.

 

12

 

(e)      In-Bound Licenses.  Schedule 4.15(e)
includes an accurate and complete list and description of all licenses,
sublicenses, and other Contracts pursuant to which e-Channels is authorized to
use, or can be authorized to use (through, for example, the grant of a
sublicense), any Intellectual Property owned by any other Person in connection
with the e-Channels Business.

 

(f)        Ownership.  As of the date
hereof, e-Channels owns, and at the Closing Date, will own all right, title and
interest in and to all Intellectual Property rights used in connection with the
e-Channels Business, and those Intellectual Property rights were developed and
created solely by employees of e-Channels acting within the scope of their
employment or by third parties (all of which employees and third parties have
validly and irrevocably assigned all of their rights therein to e-Channels) and
e-Channels is duly and validly licensed to use all other Intellectual Property
used in connection with the e-Channels Business, free and clear of royalties.  e-Channels has not assigned or transferred
ownership of, agreed to so assign or transfer ownership of, or granted any
exclusive license of or exclusive right to use, any Intellectual Property used
in connection with the e-Channels Business.

 

(g)     Royalties.  Except for licenses
listed and accurately and completely described on the Last Financial Statements
or Schedule 4.15(g) as royalty-bearing, there are (and will be upon Closing) no
royalties, honoraria, fees, or other payments payable by e-Channels to any
Person by reason of the ownership, use, license, sale, or disposition of any
Intellectual Property used in connection with the e-Channels Business.

 

(h)     Infringement.  The Intellectual
Property used in connection with the e-Channels Business does not infringe or
misappropriate any Intellectual Property rights of any Person under the laws of
any jurisdiction.  To the best of e-Channels’s
knowledge, no notice, claim or other communication (in writing or otherwise)
has been received from any Person: (A) asserting any ownership interest in any
material Intellectual Property used in connection with the e-Channels Business;
(B) of any actual, alleged, possible or potential infringement, misappropriation
or unauthorized use or disclosure of any Intellectual Property used in
connection with the e-Channels Business, defamation of any Person, or violation
of any other right of any Person (including any right to privacy or publicity)
by e-Channels or relating to the Intellectual Property used in connection with
the e-Channels Business; or (C) suggesting or inviting e-Channels to take a
license or otherwise obtain the right to use any Intellectual Property in
connection with the e-Channels Business.  To the best of its knowledge, no Person is
infringing, misappropriating, using or disclosing in an unauthorized manner any
Intellectual Property used in connection with the e-Channels Business owned by,
exclusively licensed to, held by or for the benefit of, or otherwise controlled
by e-Channels.

 

13

 

(i)         Proceedings.  Except as set forth
on Schedule 4.15(i), there are no current or, to the best of its knowledge,
threatened Proceedings (including but not limited to any interference,
reexamination, cancellation, or opposition proceedings) arising out of a right
or claimed right of any person before any Governmental Authority anywhere in
the world related to any Intellectual Property used in connection with the e-Channels
Business owned by, exclusively licensed to, held by or for the benefit of, or
otherwise controlled by e-Channels.

 

4.16                           Title to and Condition of Assets.  e-Channels has good and marketable title to
all the properties and assets owned by it.  Except as set forth in the Last Financial
Statements and Schedule 4.16, none of such properties and assets is subject to
any Encumbrance, option to purchase or lease, easement, restriction, covenant,
condition or imperfection of title or adverse claim of any nature whatsoever,
direct or indirect, whether accrued, absolute, contingent or otherwise.

 

4.17                           Absence of Certain Changes.  Except as set forth on Schedule 4.17 or agreed
by the Purchaser in advance and incurred in ordinary business in compliance
with past practice, e-Channels has not, since the Last Financial Statements
Date:

 

(a)      issued, delivered or agreed to issue or deliver any stock, bonds or
other corporate securities (whether authorized and unissued or held in the
treasury), or granted or agreed to grant any options (including employee stock
options), warrants or other rights for the issue thereof;

 

(b)     borrowed or agreed to borrow any funds exceeding $200,000 (or other
currency equivalent) except current bank borrowings not in excess of the amount
thereof shown on the Last Financial Statements;

 

(c)      incurred any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due exceeding $200,000 (or other currency
equivalent), except current liabilities for trade obligations incurred in the
ordinary course of business and consistent with prior practice;

 

(d)     discharged or satisfied any encumbrance exceeding $200,000 (or other
currency equivalent) other than those then required to be discharged or
satisfied, or paid any obligation or liability other than current liabilities
shown on the Last Financial Statements and liabilities incurred since the Last
Financial Statements Date in the ordinary course of business and consistent
with prior practice;

 

(e)      sold, transferred, leased to others or otherwise disposed of any assets
exceeding $100,000 (or other currency equivalent), except for inventories sold
in the ordinary course of business and assets no longer used or useful in the
conduct of its business, or canceled or compromised any debt or claim, or
waived or released any right of substantial value;

 

(f)        received any notice of termination of any Contract, Lease or other
agreement, or suffered any damage, destruction or loss exceeding $100,000 (or
other

 

14

 

currency
equivalent) (whether or not covered by insurance) which, in any case or in the
aggregate, has had, or might reasonably be expected to have, a Material Adverse
Effect;

 

(g)     had any material change in its relations with its employees or agents,
clients or insurance carriers which has had or might reasonably be expected to
have a Material Adverse Effect;

 

(h)     transferred or granted any rights under, or entered into any settlement
regarding the breach or infringement of, any Intellectual Property or modified
any existing rights with respect thereto;

 

(i)         declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to any
shareholder of any e-Channels or any affiliate of any shareholder of e-Channels,
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock, or made or agreed to make any payment to any shareholder of e-Channels
or any affiliate of any shareholder of e-Channels, whether on account of debt,
management fees or otherwise;

 

(j)         suffered any other material adverse effect in its assets, liabilities,
financial condition, results of operations or business; or

 

(k)      entered into any agreement or made any commitment to take any of the
types of action described in any of the foregoing clauses (other than clauses
(f), (g) or (j)).

 

4.18                           Employee Plans; Labor Matters.  The Last Financial Statements and Schedule
4.18 together contain an accurate and complete list and description of all employee
benefits, including, without limitation, pension, medical insurance, work
related injury insurance, birth and nursery insurance, unemployment insurance
and educational benefits, which e-Channels is obligated to pay, including
amounts and recipients of such payments.  Except as disclosed in the Last Financial
Statements or Schedule 4.18, e-Channels has complied with all applicable Laws
relating to employment benefits, including, without limitation, pension,
medical insurance, work-related injury insurance, birth and nursery insurance,
unemployment insurance and educational benefits.  All contributions or payments required to be
made by e-Channels with respect to employee benefits have been made on or
before their due dates.  Except as
disclosed in the Last Financial Statements or Schedule 4.18, all such
contributions and payments required to be made by any employees of e-Channels
with respect to the employee benefits have been fully deducted and paid to the
relevant Governmental Authorities on or before their due dates, and no such
deductions have been challenged or disallowed by any Governmental Authority or
any employee of e-Channels.

 

4.19                           Compliance with Law.  To the best of its knowledge, the e-Channels Business
has been conducted, and is now being conducted, by e-Channels in compliance in
all material respects with all applicable Laws.  Neither e-Channels nor any officers, directors
and

 

15

 

employees
of e-Channels (i) is, and during the past five years was, in violation of, or not
in compliance with, in any material respect all such applicable Laws with
respect to the conduct of the e-Channels Business; and (ii) has received any
notice from any Governmental Authority, and to the best of its knowledge, no
Action is threatened which alleges that e-Channels has violated, or not
complied with, any of the above.

 

4.20                           No Illegal or Improper Transactions.  Neither e-Channels nor any other officer,
director, employee, agent or affiliate of e-Channels has offered, paid or
agreed to pay to any Person or entity (including any governmental official) or
solicited, received or agreed to receive from any such Person or entity,
directly or indirectly, in any manner which is in violation of any applicable
policy of e-Channels, ordinance, regulation or law, any money or anything of
value for the purpose or with the intent of (i) obtaining or maintaining
business for e-Channels, (ii) facilitating the purchase or sale of any product
or service, or (iii) avoiding the imposition of any fine or penalty.

 

4.21                           Related Transactions.  Except as set forth in the Last Financial
Statements or Schedule 4.21, and except for compensation to employees for
services rendered, neither e-Channels nor any other current or former director,
officer, employee or shareholder or any associate (as defined in the rules
promulgated under the Exchange Act) of e-Channels is presently, or during the
last three fiscal years has been, (a) a party to any transaction with e-Channels
(including, but not limited to, any Contract providing for the furnishing of
services by, or rental of real or personal property from, or otherwise
requiring payments to, any such director, officer, employee or shareholder or
such associate), or (b) the direct or indirect owner of an interest in any
corporation, firm, association or business organization which is a present (or
potential) competitor, supplier or customer of e-Channels nor does any such
Person receive income from any source other than e-Channels which relates to
the business of, or should properly accrue to, e-Channels.

 

4.22                           Records. 
The books of account, minute books, stock certificate books and stock
transfer ledgers of e-Channels are complete and correct in all material
respects, and there have been no material transactions involving e-Channels
which are required to be set forth therein and which have not been so set
forth.

 

4.23                           Insurance.  The Last Financial Statements and Schedule
4.23 together set forth a complete list and complete and accurate description
of all insurance policies maintained by e-Channels which are in force as of the
date hereof and the amounts of coverage thereunder.  During the past three years, e-Channels has
not been refused insurance in connection with the e-Channels Business, nor has
any claim in excess of US$10,000 been made in respect of any such agreements or
policies, except as set forth in the Last Financial Statements and Schedule
4.23 hereto.  Such insurance are
commercially reasonable for the companies in the information technology
industry in the PRC.

 

4.24                           Litigation.  Except as set forth in Schedule 4.24, there
are no Actions by any Governmental Authority or Person by or against e-Channels,
nor to the best of its knowledge, any threatened Action by any Governmental
Authority or Person against e-

 

16

 

Channels.
 Neither e-Channels nor any of its
property is subject to any Action by an Governmental Authority or Person which
would cause a Material Adverse Effect.

 

4.25                           Settled Litigation.  Schedule 4.25 sets forth a description of all
threatened, withdrawn, settled or litigated claims against e-Channels during
the last three years.

 

4.26                           Brokers.  No broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of e-Channels.

 

4.27                           Disclosure.  No representation or warranty by e-Channels,
any Individual Shareholder, or the Vendor contained in this Agreement and no
information contained in any Schedule or other instrument furnished or to be
furnished to the Purchaser pursuant to this Agreement or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained therein not misleading.

 

4.28                           Survival of Representations and
Warranties.  The representations and
warranties of the Vendor and Individual Shareholders set forth in this
Agreement shall survive the Closing for a period of two (2) years, except that
the representations and warranties set forth in Sections 4.1, 4.2 and 4.3 shall
survive without limitation as to time and the representations and warranties
set forth in Section 4.6 shall survive until the expiration of the statute of
limitations with respect to each respective Tax. Notwithstanding anything to
the contrary contained herein, the Individual Shareholders shall only be held
liable for the representations and warranties contained herein in respect of e-Channels
and e-Channels Business prior to, and shall not be held liable for such
representations and warranties after, the completion of the transfer of equity
contemplated under the Equity Transfer Agreement.

 

 

ARTICLE
V

REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER

 

The Purchaser represents and warrants to e-Channels
and the Vendor as follows:

 

5.1                                 Organization.  The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of BVI.  The Purchaser has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted and as presently contemplated to be conducted.

 

5.2                                 Authority and Corporate Action; No Conflict.

 

(a)      The Purchaser has all necessary corporate power and authority to enter
this Agreement and, subject to the requirement to obtain stockholder approval,
to consummate the Transfer and other transactions contemplated hereby.  All board of directors actions necessary to be
taken by the Purchaser to authorize the execution, delivery and performance of
this Agreement and all other

 

17

 

agreements
delivered in connection with this transaction have been duly and validly
taken.  This Agreement has been duly
executed and delivered by the Purchaser and constitutes the valid, binding, and
enforceable obligation of the Purchaser, enforceable in accordance with its
terms, except (i) as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or similar laws of
general application now or hereafter in effect affecting the rights and
remedies of creditors and by general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity), (ii) as
enforceability of any indemnification provision may be limited by federal and
state securities laws and public policy and (iii) as enforceability may be
limited by the absence of stockholder approval.

 

(b)     Neither the execution and delivery of this Agreement or any of the
other documents contemplated hereby by the Purchaser nor (assuming receipt of
stockholder approval) the consummation of the transactions contemplated hereby
or thereby will (i) conflict with, result in a breach or violation of or
constitute (or with notice of lapse of time or both constitute) a default
under, (A) the Certificate of Incorporation or By-Laws of the Purchaser or (B)
any law, statute, regulation, order, judgment or decree or any instrument
contract or other agreement to which the Purchaser is a party or by which the
Purchaser (or any of the properties or assets of the Purchaser) is subject or
bound; (ii) result in the creation of, or give any party the right to create,
any lien, charge, option, security interest or other encumbrance upon the
assets of the Purchaser; (iii) terminate or modify, or give any third party the
right to terminate or modify, the provisions or terms of any contract to which the
Purchaser is a party; or (iv) result in any suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, qualification, authorization
or approval applicable to the Purchaser.

 

5.3                                 Consents and Approvals.  The execution and delivery of this Agreement
by the Purchaser does not, and the performance of this Agreement by the Vendor will
not, require any consent, approval, authorization or other action by, or filing
with or notification to, any Governmental Authority, except where failure to
obtain such consents, approvals, authorizations or actions, or to make such
filings or notifications, would not prevent it from performing any of its
material obligations under this Agreement.

 

5.4                                 Compliance with Law.  The business of the Purchaser has been
conducted, and is now being conducted, in compliance in all material respects
with all applicable Laws.  The Purchaser
and its officers, directors and employees (i) are not, and during the periods
of the Purchaser’s existence were not, in violation of, or not in compliance
with, in any material respect all such applicable Laws with respect to the
conduct of the businesses of the Purchaser; and (ii) have not received any
notice from any Governmental Authority, and to the best of the knowledge of the
Purchaser none is threatened, alleging that the Purchaser has violated, or not
complied with, any of the above.

 

18

 

5.5                                 Litigation.  There are no actions, suits, arbitrations or
other proceedings pending or, to the best of the knowledge of the Purchaser,
threatened against the Purchaser at law or in equity before any Governmental
Authority.  Neither the Purchaser nor any
of their property is subject to any order, judgment, injunction or decree that
would have a Material Adverse Effect on the business or financial condition of the
Purchaser.

 

5.6                                 Brokers.  No broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.

 

5.7                                 Disclosure.  No representation or warranty by the Purchaser
contained in this Agreement and no information contained in any Schedule or
other instrument furnished or to be furnished to the Vendor pursuant to this
Agreement or in connection with the transactions contemplated hereby contains
or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary in order to make the statements contained
therein not misleading.

 

5.8                                 Records. 
The books of account, minute books, stock certificate books and stock
transfer ledgers of the Purchaser are complete and correct in all material
respects, and there have been no material transactions involving the Purchaser
which are required to be set forth therein and which have not been so set
forth.

 

5.
9                              Survival of Representations and
Warranties.  The representations and
warranties of the Purchaser set forth in this Agreement shall survive the
Closing for a period of two (2) years, except that the representations in
Sections 5.1 and 5.2 shall survive without limitation as to time.

 

 

ARTICLE
VI

COVENANTS
OF SIHITECH AND THE VENDOR

 

6.1                                 Conduct of the e-Channels Business.  e-Channels and the Vendor covenant and agree
that, from the date hereof through the Closing Date, except as otherwise set
forth in this Agreement or with the prior written consent of the Purchaser,
they shall, and shall use their best efforts to cause e-Channels to:

 

(a)      conduct the e-Channels Business only in the ordinary course and in a
manner consistent with the current practice of the e-Channels Business to
preserve substantially intact the business organization, to keep available the
services of the current employees, to preserve the current relationships of e-Channels
with customers and other persons with which e-Channels has significant business
relations and to comply with all Laws;

 

(b)     not pledge, sell, transfer, dispose or otherwise encumber or grant any
rights or interests to others of any kind with respect to all or any part of
the Shares, or enter into any discussions or negotiations with any other party
to do so;

 

19

 

(c)      not pledge, sell, lease, transfer, dispose of or otherwise encumber any
property or assets of e-Channels, other than consistent with past practices and
in the ordinary course of business or enter into any discussions or
negotiations with any other party to do so;

 

(d)     not issue any shares of capital stock of e-Channels or any other class
of securities, whether debt (other than debt incurred in the ordinary course of
business and consistent with past practice) or equity, or any options therefor
or any securities convertible into or exchangeable for capital stock of e-Channels
or enter into any agreements in respect of the ownership or control of such
capital stock;

 

(e)      Other than the dividend plan set forth in Schedule 6.1 (e), not declare
any dividend or make any distribution in cash, securities or otherwise on the
outstanding shares of capital stock of e-Channels or directly or indirectly
redeem, purchase or in any other manner whatsoever advance, transfer (other
than in payment for goods received or services rendered in the ordinary course
of business), or distribute to any of their affiliates or otherwise withdraw
cash or cash equivalents in any manner inconsistent with established cash
management practices, except to pay existing indebtedness of e-Channels;

 

(f)        not make, agree to make or announce any general wage or salary increase
or enter into any employment contract or, unless provided for on or before the
date of this Agreement, increase the compensation payable or to become payable
to any officer or employee of e-Channels or adopt or increase the benefits of
any bonus, insurance, pension or other employee benefit plan, payment or
arrangement, except for the renewal of any currently existing employment
agreement, and those increases, consistent with past practices, normally
occurring as the result of regularly scheduled salary reviews and increases,
and except for increases directly or indirectly required as a result of changes
in applicable law or regulations;

 

(g)     Except as set forth in Schedule 6.1(g), not to amend the Articles of
Association (or other organizational documents) of e-Channels;

 

(h)  not to merge or consolidate with, or acquire all or substantially all
the assets of, or otherwise acquire any business operations of, any Person,
except for the purpose of facilitating the consummation of any transaction
contemplated herein and tax reasons;

 

(i)         not to make any payments outside the ordinary course of business; and

 

(j)         not to make any capital expenditures, except in accordance with prudent
business and operational practices consistent with prior practice.

 

20

 

6.2                                 Access to Information.

 

(a)      Between the date of this Agreement and the Closing Date, during normal
business hours, e-Channels and the Vendor will (i) permit the Purchaser and its
Representatives reasonable access to all of the books, records, reports and
other related materials, offices and other facilities and properties of e-Channels;
(ii) permit the Purchaser and its Representatives to make such inspections
thereof as the Purchaser may reasonably request; and (iii) furnish the
Purchaser and its Representatives with such financial and operating data
(including, without limitation, the work papers of the Accountants, subject to the
Accountant’s consent) and other information with respect to e-Channels and the e-Channels
Business as the Purchaser may from time to time reasonably request, provided,
however, that any activity conducted pursuant to this clause shall not
interfere with or disrupt the normal operation and ordinary course of business
of e-Channels and the Vendor.

 

b)         Between the date of this Agreement and the Closing Date, during normal
business hours, the Purchaser shall be permitted to meet with and interview all
employees of e-Channels, provided, however, that such interview shall not
interfere with or disrupt the normal operation and ordinary course of business
of e-Channels and its employees.

 

6.3                                 Insurance.  Through the Closing Date, e-Channels and the Vendor
shall cause e-Channels to maintain the same insurance policies as it has as of the
date hereof.

 

6.4                                 Protection of Confidential Information;
Non-Competition.

 

(a)      Confidential Information. The Vendor acknowledges that:

 

(i)         As a result of its stock ownership of e-Channels, it has obtained
secret and confidential information concerning the e-Channels Business,
including, without limitation, financial information, trade secrets and “know-how,”
customers, and certain methodologies (Confidential Information).

 

(ii)      e-Channels and the Purchaser will suffer substantial damage which will
be difficult to compute if it should divulge Confidential Information or enter
a business competitive with that of e-Channels.

 

(iii)   The provisions of this Section are reasonable and necessary for the
protection of the e-Channels Business.

 

(b)     Maintain Confidentiality.  The Vendor
agrees to not at any time after the date hereof divulge to any person or entity
any Confidential Information obtained or learned as a result of stock ownership
of e-Channels and employment by e-Channels except (i) with the express written
consent of the Purchaser on or before the Closing Date and of e-Channels’ Board
of Directors thereafter; (ii) to the extent that any such information is in the
public domain other than as a result of a breach of any obligations hereunder;
or (iii) where required to be disclosed by court order, subpoena or other
government process.  If the

 

21

 

Vendor
shall be required to make disclosure pursuant to the provisions of clause (iii)
of the preceding sentence, it will promptly, but in no event more than 72 hours
after learning of such subpoena, court order, or other government process,
notify, by personal delivery or by electronic means, confirmed by mail, both of
e-Channels and the Purchaser, and shall: (i) take all reasonably necessary
steps required by e-Channels or the Purchaser to defend against the enforcement
of such subpoena, court order or other government process, and (ii) permit e-Channels
or the Purchaser to intervene and participate with counsel of its choice in any
proceeding relating to the enforcement thereof.

 

(c)      Records.  At the Closing, the Vendor
will promptly deliver to e-Channels all original memoranda, notes, records,
reports, manuals, formula and other documents relating to the e-Channels Business
and all property associated therewith, which they then possess or have under
their control; provided, however, that they shall be entitled to retain copies
of such documents reasonably necessary to document their financial relationship
with e-Channels.

 

(d)     Non-Compete.  During the
Non-Competition Period, the Vendor, without the prior written permission of e-Channels
and the Purchaser, shall, anywhere in the mainland of the PRC, Hong Kong, Macau
and Taiwan, directly or indirectly, (i) enter into the employ of or render any
services to any person, firm or corporation engaged in any business which is a Competitive Business (as defined
below); (ii) engage in any Competitive Business for his own account; (iii)
become associated with or interested in any Competitive Business as an
individual, partner, shareholder, creditor, director, officer, principal,
agent, employee, trustee, consultant, advisor or in any other relationship or
capacity; (iv) employ or retain, or have or cause any other person or entity to
employ or retain, any person who was employed or retained by Sihitech, e-Channels
or any other subsidiary of the Purchaser in the six-month period prior to the
date that all relationships of such person terminates with Sihitech, e-Channels
or any other subsidiary of the Purchaser; or (v) solicit, interfere with, or
endeavor to entice away from Sihitech, e-Channels or any other subsidiary of
the Purchaser, for the benefit of a Competitive Business, any of its customers
or other persons with whom Sihitech, e-Channels or any other subsidiary of the
Purchaser has a business relationship.  However,
nothing in this Agreement shall preclude them from investing their personal
assets in the securities of any corporation or other business entity which is
engaged in a Competitive Business if such securities are traded on a national
stock exchange or in the over-the-counter market and if such investment does
not result in their beneficially owning, at any time, more than 1% of the
publicly-traded equity securities of such Competitive Business.

 

(e)      Injunctive Relief.  If the Vendor
breaches, or threatens to breach, any of the provisions of Sections 6.4 (b),
(c) or (d), e-Channels and the Purchaser shall have the right and remedy to
have the provisions of this Section 6.4

 

22

 

specifically
enforced by any Governmental Authority, it being acknowledged and agreed by the
Vendor that any such breach or threatened breach will cause irreparable injury
to e-Channels and the Purchaser and that money damages will not provide an
adequate remedy.

 

(f)        Modification of Scope.  If any
provision of Sections 6.4 (b), (c) or (d) is held to be unenforceable because of
the scope, duration or area of its applicability, the Governmental Authority
making such determination shall have the power to modify such scope, duration,
or area, or all of them, and such provision or provisions shall then be
applicable in such modified form.

 

(g)     Competitive Business.  As used in
this Agreement,

 

(i)         Competitive Business means any business which operates in any
aspect of the e-Channels Business and the business of e-Channels; and

 

(ii)      Non-Competition Period means the period beginning on the Closing
Date and ending on the third anniversary of the Closing Date.

 

6.5                                 Post-Closing Assurances.  e-Channels and the Vendor from time to time
after the Closing, at the Purchaser’s request, will take such other actions and
execute and deliver such other documents, certifications and further assurances
as the Purchaser may reasonably require in order to manage and operate e-Channels
and the e-Channels Business, including but not limited to executing such
certificates as may be reasonably requested by the Purchaser’s accountants in
connection with any audit of the financial statements of e-Channels for any
period through the Closing Date.

 

6.6                                 Fulfillment of Conditions.  The Vendor and e-Channels shall use their best
efforts to fulfill the conditions specified in Article IX to the extent that
the fulfillment of such conditions is within their control.  The foregoing obligation includes (a) the
execution and delivery of documents necessary or desirable to consummate the
transactions contemplated hereby and (b) taking or refraining from such actions
as may be necessary to fulfill such conditions (including using their best
efforts to conduct the e-Channels Business in such manner that on the Closing
Date the representations and warranties of e-Channels and the Vendor contained
herein shall be accurate as though then made, except as contemplated by the
terms hereof).

 

6.7                                 Disclosure of Certain Matters.  From the date hereof through the Closing Date,
e-Channels and the Vendor shall give the Purchaser prompt written notice of any
event or development that occurs that (a) had it existed or been known on the
date hereof would have been required to be disclosed under this Agreement, (b)
would cause any of the representations and warranties of e-Channels and the Vendor
contained herein to be inaccurate or otherwise misleading, (c) gives e-Channels
and the Vendor any reason to believe that any of the conditions set forth in
Article IX will not be satisfied, (d) is of a nature that is or may be
materially adverse to the operations, prospects or condition (financial or
otherwise) of e-Channels or (e) would require any amendment or supplement to
the Proxy Statement.

 

23

 

6.8                                 Regulatory and Other Authorizations; Notices
and Consents.

 

(a)      E-Channels and the Vendor shall use their commercially reasonable
efforts to obtain all authorizations, consents, orders and approvals of all
Governmental Authorities and officials that may be or become necessary for
their execution and delivery of, and the performance of their obligations
pursuant to, this Agreement, and will cooperate fully with the Purchaser in
promptly seeking to obtain all such authorizations, consents, orders and
approvals.

 

(b)     E-Channels and the Vendor shall promptly give such notices to third
parties and use its or their best efforts to obtain such third party consents
as the Purchaser may in its reasonable discretion deem necessary or desirable
in connection with the transactions contemplated by this Agreement.

 

(c)      The Purchaser shall cooperate and use all reasonable efforts to assist e-Channels
and the Vendor in giving such notices and obtaining such consents; provided,
however, that the Purchaser shall have no obligation to give any guarantee or
other consideration of any nature in connection with any such notice, consent
or estoppel certificate or to consent to any change in the terms of any
agreement or arrangement which the Purchaser in its sole discretion may deem
adverse to the interests of the Purchaser or the e-Channels Business.

 

6.9                                 Use of Intellectual Property.  The Vendor acknowledges that from and after
the Closing, all the Intellectual Property of any kind related to or used in
connection with the e-Channels Business shall be owned by e-Channels, that neither
the Vendor nor any of their affiliates shall have any rights in the
Intellectual Property and that neither the Vendor nor any of their affiliates
will contest the ownership or validity of any rights of e-Channels in or to the
Intellectual Property.

 

6.10                           Related Tax.  The Vendor covenants and agrees to pay any tax
and duties assessed on the part of such Vendor required by any Governmental
Authority.

 

 

ARTICLE
VII

COVENANTS
OF THE PURCHASER

 

7.1                                 Conduct of the Business.  The Purchaser covenants and agrees that, from
the date hereof through the Closing Date, except (i) in the context of an
unsolicited, bona fide written proposal for a superior transaction or
consummation of a superior transaction, (ii) as otherwise set forth in this
Agreement or (iii) with the prior written consent of the Vendor, it shall:

 

(a)      conduct its business only in the ordinary course and in a manner
consistent with the current practice of their business to preserve
substantially intact the business organization of the Purchaser, to preserve
the current relationships of

 

24

 

the
Purchaser with customers and other persons with which they have had significant
business relations and to comply with all Laws;

 

(b)     not pledge, sell, transfer, dispose or otherwise encumber or grant any
rights or interests to others of any kind with respect to all or any part of
the capital securities of the Purchaser;

 

(c)      not pledge, sell, lease, transfer, dispose of or otherwise encumber any
property or assets of the Purchaser, other than consistent with past practices
and in the ordinary course of business of the Purchaser;

 

(d)     not issue any shares of capital stock of the Purchaser or any other
class of securities, whether debt (other than debt incurred in the ordinary
course of business and consistent with past practice) or equity, of the
Purchaser or any options therefore or any securities convertible into or
exchangeable for capital stock of the Purchaser or enter into any agreements in
respect of the ownership or control of such capital stock;

 

(e)      not declare any dividend or make any distribution in cash, securities
or otherwise on the outstanding shares of capital stock of the Purchaser or
directly or indirectly redeem, purchase or in any other manner whatsoever
advance, transfer (other than in payment for goods received or services
rendered in the ordinary course of business), or distribute to any of their
affiliates or otherwise withdraw cash or cash equivalents in any manner
inconsistent with established cash management practices, except to pay existing
indebtedness of the Purchaser;

 

(f)        not make, agree to make or announce any general wage or salary increase
or enter into any employment contract or, unless provided for on or before the
date of this Agreement, increase the compensation payable or to become payable
to any officer or employee of the Purchaser or adopt or increase the benefits
of any bonus, insurance, pension or other employee benefit plan, payment or
arrangement, except for those increases, consistent with past practices,
normally occurring as the result of regularly scheduled salary reviews and
increases, and except for increases directly or indirectly required as a result
of changes in applicable law or regulations;

 

(g)     except as set forth in Schedule 7.1(g), not amend the Certificate of
Incorporation or By-laws or Memorandum and Articles of Association (or other
organizational documents) of the Purchaser;

 

(h)     not merge or consolidate with, or acquire all or substantially all the
assets of, or otherwise acquire any business operations of, any Person;

 

(i)         not make any payments outside the ordinary course of business; and

 

(j)         not make any capital expenditures, except in accordance with prudent
business and operational practices consistent with prior practice.

 

25

 

7.2                                 Fulfillment of Conditions.  From the date hereof to the Closing Date, the
Purchaser shall use its best efforts to fulfill the conditions specified in
Article IX to the extent that the fulfillment of such conditions is within its
control.  The foregoing obligation
includes (a) the execution and delivery of documents necessary or desirable to
consummate the transactions contemplated hereby, and (b) taking or refraining
from such actions as may be necessary to fulfill such conditions (including
conducting the business of the Purchaser in such manner that on the Closing
Date the representations and warranties of the Purchaser contained herein shall
be accurate as though then made).

 

7.3                                 Disclosure of Certain Matters.  From the date hereof through the Closing
Date, the Purchaser shall give e-Channels and the Vendor prompt written notice
of any event or development that occurs that (a) had it existed or been known
on the date hereof would have been required to be disclosed under this
Agreement, (b) would cause any of the representations and warranties of the
Purchaser and the Schedules contained herein to be inaccurate or otherwise
misleading, (c) gives the Purchaser any reason to believe that any of the
conditions set forth in Article IX will not be satisfied, (d) is of a nature
that is or may be materially adverse to the operations, prospects or condition
(financial or otherwise) of the Purchaser, or (e) would require any amendment or
supplement to the Proxy Statement.

 

7.4                                 Post-Closing Assurances.  the Purchaser from time to time after the
Closing, at e-Channels or the Vendor’s request, will take such other actions
and execute and deliver such other documents, certifications and further
assurances as e-Channels or Vendor may reasonably require in order to manage
and operate the Purchaser and the e-Channels Business, including but not
limited to executing such certificates as may be reasonably requested by e-Channels
or the Vendor’s accountants in connection with any audit of the financial
statements of the Purchaser for any period through the Closing Date.

 

7.5                                 Regulatory and Other Authorizations; Notices
and Consents.

 

(a)      The Purchaser shall use their commercially reasonable efforts to obtain
all authorizations, consents, orders and approvals of all Governmental
Authorities and officials that may be or become necessary for their execution
and delivery of, and the performance of their obligations pursuant to, this
Agreement, and will cooperate fully with e-Channels or the Vendor in promptly
seeking to obtain all such authorizations, consents, orders and approvals.

 

(b)     the Purchaser shall give promptly such notices to third parties and use
its or their best efforts to obtain such third party consents and estoppel
certificates as e-Channels or Vendor may in their reasonable discretion deem
necessary or desirable in connection with the transactions contemplated by this
Agreement.

 

26

 

ARTICLE
VIII

ADDITIONAL
COVENANTS OF THE PARTIES

 

8.1                                 Other Information.  If in order to properly prepare documents
required to be filed with any Governmental Authority or financial statements of
the Purchaser it is necessary that either Party be furnished with additional
information relating to the Purchaser or the Business, and such information is
in the possession of the other Party, such Party agrees to use its best efforts
to furnish such information in a timely manner to such other Party, at the cost
and expense of the Party being furnished such information.

 

8.2                                 Mail Received After Closing.

 

(a)      If e-Channels receives after the Closing any mail or other
communications addressed to the Vendor, e-Channels may open such mail or other
communications and deal with the contents thereof in its discretion to the
extent that such mail or other communications and the contents thereof relate
to e-Channels.  e-Channels will deliver
promptly or cause to be delivered to the Vendor all other mail addressed to
them and the contents thereof which does not relate to e-Channels or the e-Channels
Business.

 

(b)     If the Vendor receives after the Closing Date mail or other
communications addressed to them which relate to e-Channels, they shall
promptly deliver or cause to be delivered all such mail and the contents
thereof to e-Channels.

 

8.3                                 Further Action.  Each of the Parties shall execute such
documents and other papers and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby.  Upon the terms and
subject to the conditions hereof, each of the Parties shall use its best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement.

 

8.4                                 Schedules. 
The Parties shall have the obligation to supplement or amend the
Schedules being delivered concurrently with the execution of this Agreement and
annexed hereto with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Schedules.  The obligations of the Parties to amend or supplement
the Schedules being delivered herewith shall terminate on the Closing Date.

 

8.5                                 Confidentiality. e-Channels and the Vendor,
on the one hand, and the Purchaser on the other hand, on and after the Closing
Date, shall hold and shall cause their respective Representatives to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all documents and information
concerning the other Party furnished it by such other Party or its
Representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(a) previously known by the Party to which it was furnished, (b) in the public
domain through no fault

 

27

 

of
such Party or (c) later lawfully acquired from other sources, which source is
not the agent of the other Party, by the Party to which it was furnished), and
each Party shall not release or disclose such information to any other person,
except its Representatives in connection with this Agreement.  Each Party shall be deemed to have satisfied
its obligations to hold confidential information concerning or supplied by the
other Party if it exercises the same care as it takes to preserve
confidentiality for its own similar information.

 

8.6                                 Public Announcements.  From the date of this Agreement until Closing
or termination, the Purchaser, e-Channels and the Vendor shall cooperate in
good faith to jointly prepare all press releases and public announcements
pertaining to this Agreement and the transactions governed by it, and none of
the foregoing shall issue or otherwise make any public announcement or
communication pertaining to this Agreement or the transaction without the prior
consent of the Purchaser, except as required by any legal requirement or by the
rules and regulations of, or pursuant to any agreement of a stock exchange or
trading system.  If any party determines
with the advice of counsel that it is required to make this Agreement and the
terms of the transaction public or otherwise issue a press release or make
public disclosure with respect thereto, it shall at a reasonable time before
making any public disclosure, consult with the other party regarding such
disclosure, seek such confidential treatment for such terms or portions of this
Agreement or the transaction as may be reasonably requested by the other party
and disclose only such information as is legally compelled to be disclosed.  This provision will not apply to
communications by any party to its counsel, accountants and other professional
advisors.

 

8.7                                 Transfer to Vendor.  After the date hereof but no later than the
Closing, Individual Shareholders shall irrevocably complete the transfer of the
Shares to the Vendor.

 

 

ARTICLE
IX

CONDITIONS
TO CLOSING

 

9.1                                 Conditions to Each Party’s Obligations.  The respective obligations of each Party to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions.

(a)      Litigation.  No order, stay,
judgment or decree shall have been issued by any Governmental Authority
preventing, restraining or prohibiting in whole or in part, the consummation of
the transactions contemplated hereby or instrumental to the consummation of the
transactions contemplated hereby, and no action or proceeding by any
governmental authority shall be pending or threatened (including by suggestion
through investigation) by any person, firm, corporation, entity or Governmental
Authority, which questions, or seeks to enjoin, modify, amend or prohibit (a)
the ownership of e-Channels, (b) the Stockholders Meeting and use of the Proxy
Statement by the Purchaser, or (c) the conduct or ownership (direct or indirect
or beneficial) in any material respect the e-Channels Business.

 

28

 

(b)     Regulatory Approvals.  Any
Governmental Authority whose approval or consent is required each shall have
unconditionally approved of the transactions contemplated by this Agreement and
the Purchaser shall have received written confirmation thereof;

 

The Approval Authority has:

 

(i)                  approved this Agreement in its present form;

 

(ii)               approved the conversion of e-Channels from a limited
liability company into a foreign invested limited liability company; and

 

(iii)            issued an Approval Certificate to the
post-Transfer e-Channels, which characterizes the post-Transfer e-Channels as a
company wholly owned by the Purchaser.

 

(c)      SAIC has:

 

(i)                  registered this Agreement in its present
form; and

 

(ii)               issued a Business License or its official
duplicate to the post-Transfer e-Channels.

 

9.2                                 Conditions to Obligations of e-Channels and
the Vendor.  The obligations of e-Channels
and the Vendor to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:

 

(a)      Deliveries.  The Purchaser shall
have delivered and e-Channels and the Vendor shall have received such
documents, certificates and instruments as may be reasonably requested by each
of e-Channels or the Vendor for the purpose of satisfying the approval
requirements in the PRC.

 

(b)     Representations and Warranties; Covenants. Without supplementation after
the date of this Agreement, the representations and warranties of the Purchaser
contained in this Agreement shall be with respect to those representations and
warranties qualified by any materiality standard, true and correct as of the
Closing, and with respect to all the other representations and warranties, true
and correct in all material respects as of the Closing, with the same force and
effect as if made as of the Closing, and all the covenants contained in this Agreement
to be materially complied with by the Purchaser on or before the Closing shall
have been materially complied with, and the Purchaser shall have delivered a
certificate signed by a duly authorized officer thereof to such effect.

 

(c)      Consents.  The Purchaser shall
have obtained and delivered to e-Channels and the Vendor consents of all third
parties, as appropriately required for the consummation of the transactions
contemplated by this Agreement.

 

29

 

(d)     Performance of Agreements.  All
covenants, agreements and obligations required by the terms of this Agreement
to be performed by the Purchaser at or prior to the Closing shall have been
duly and properly performed or fulfilled in all material respects.

 

(e)      No Adverse Changes.  At the
Closing, there shall have been no material adverse change in the assets,
liabilities or financial condition of the Purchaser from that shown in the Purchaser
Balance Sheet and related statements of income.  Between the date of this Agreement and the
Closing Date, there shall not have occurred an event which, in the reasonable
opinion of Vendor, would have had a material adverse effect on the operations,
financial condition or prospects of the Purchaser.

 

(f)        Necessary Proceedings.  All
proceedings, corporate or otherwise, to be taken by the Purchaser in connection
with the consummation of the transactions contemplated by this Agreement shall
have been duly and validly taken, and copies of all documents, resolutions and
certificates incident thereto, duly certified by the Purchaser as of the
Closing, shall have been delivered to e-Channels and the Vendor.

 

(g)     Resignations.  Effective as of
the Closing, the directors of the Purchaser and the officers of the Purchaser
will have resigned and that they have no claim for employment compensation in
any form from the Purchaser.

 

(h)     Supplemental Disclosure.  If the
Purchaser shall have supplemented or amended any schedule pursuant to their
obligations set forth in Section 8.4 in any material respect, e-Channels and
the Vendor shall give notice to the Purchaser that as a result of information
provided to e-Channels and the Vendor in connection with any or all of such
amendments or supplements, e-Channels and the Vendor have determined not to
proceed with the consummation of the transactions contemplated hereby.

 

9.3                                 Conditions to Obligations of the Purchaser.  The obligations of the Purchaser to consummate
the transactions contemplated by this Agreement shall be subject to the fulfillment,
at or prior to the Closing, of each of the following conditions:

 

(a)      Deliveries.  The Vendor shall
have delivered the Shares and the Purchaser shall have received the same and
such other documents, certificates and instruments as may be reasonably requested
by the Purchaser.

 

(b)     Representations and Warranties; Covenants.  Without supplementation after the date of this
Agreement, the representations and warranties of e-Channels and the Vendor
contained in this Agreement shall be with respect to those representations and
warranties qualified by any materiality standard, true and correct in all
respects as of the Closing, and with respect to all the other representations
and warranties, true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing, and

 

30

 

all
the covenants contained in this Agreement to be materially complied with by e-Channels
and the Vendor on or before the Closing shall have been materially complied
with, and the Purchaser shall have received a certificate of e-Channels and the
Vendor to such effect;

 

(c)      Consents.  E-Channels and the Vendor
shall have obtained and delivered to the Purchaser consents of all third
parties required by the Contracts and Permits set forth in Schedule 4.4;

 

(d)     Performance of Agreements.  All
covenants, agreements and obligations required by the terms of this Agreement
to be performed by e-Channels and the Vendor at or prior to the Closing shall
have been duly and properly performed or fulfilled in all material respects;

 

(e)      No Adverse Change.  At the
Closing, there shall have been no material adverse change in the assets,
liabilities, financial condition or prospects of e-Channels or the e-Channels Business
from that shown or reflected in the Last Financial Statements and as described
in the Proxy Statement.  Between the date
of this Agreement and the Closing Date, there shall not have occurred an event
which, in the reasonable opinion of the Purchaser, would have a Material
Adverse Effect;

 

(f)
Necessary Proceedings.  All proceedings,
corporate or otherwise, to be taken by e-Channels and the Vendor in connection
with the consummation of the transactions contemplated by this Agreement shall
have been duly and validly taken, and copies of all documents, resolutions and
certificates incident thereto, duly certified by e-Channels and the Vendor, as
appropriate, as of the Closing, shall have been delivered to the Purchaser.

 

(g)     Minimum Assets.  At the Closing, e-Channels
and the Vendor will certify to the Purchaser that on a consolidated basis,
immediately prior to closing, e-Channels will only have short- and long-term
debt arising in the ordinary course.

 

(h)     e-Channels SPA.  e-Channels SPA has
been executed by the parties thereto and approved by the Approval Authority of
the PRC, and has become effective.

 

ARTICLE
X

INDEMNIFICATION

 

10.1                           Indemnification by Vendor and Individual
Shareholders.  Subject to the limitations
set forth in Section 10.4, the Vendor shall indemnify and hold harmless the
Purchaser from and against, and shall reimburse the Purchaser for, any Damages
which may be sustained, suffered or incurred by them, whether as a result of
any Third Party Claim or otherwise, and which arise from or in connection with
or are attributable to the

 

31

 

breach
of any of the representations or warranties or covenants by e-Channels, any
Individual Shareholder or the Vendor contained in this Agreement.  Indemnification pursuant to this Section 10.1
shall be the sole remedy of the Purchaser with respect to any breach of the
representations and warranties or covenants by e-Channels, any Individual
Shareholder or the Vendor contained in this Agreement.  The Vendor shall give prompt written notice to
the Purchaser of any Third Party Claims or other facts and circumstances known
to them which may entitle the Purchaser to indemnification under this Section
10.1.

 

10.2                           Indemnification by the Purchaser.  Subject to the limitations set forth in
Section 10.4, the Purchaser shall indemnify and hold harmless the Vendor from
and against, and shall reimburse the Vendor for, any Damages which may be
sustained, suffered or incurred by such Vendor, whether as a result of Third
Party Claims or otherwise, and which arise or result from or in connection with
or are attributable to the breach of any of the Purchaser’s representations or
warranties or covenants contained in this Agreement.  The Purchaser shall give the Vendor prompt
written notice of any Third Party Claims or other facts and circumstances known
to it which may entitle them to indemnification under this Section 10.2.

 

10.3                           Notice, Etc.  A Party required to make an indemnification
payment pursuant to this Agreement (Indemnifying Party)
shall have no liability with respect to Third Party Claims or otherwise with
respect to any covenant, representation, warranty, agreement, undertaking or
obligation under this Agreement unless the Party entitled to receive such
indemnification payment (Indemnified Party)
gives notice to the Indemnifying Party specifying (i) the covenant,
representation or warranty, agreement, undertaking or obligation contained
herein which it asserts has been breached, (ii) in reasonable detail, the
nature and dollar amount of any Claim the Indemnified Party may have against
the Indemnifying Party by reason thereof under this Agreement, and (iii)
whether or not the Claim is a Third Party Claim.  With respect to Third Party Claims, an
Indemnified Party (i) shall give the Indemnifying Party prompt notice of any
Third Party Claim, (ii) prior to taking any action with respect to such Third
Party Claim, shall consult with the Indemnifying Party as to the procedure to
be followed in defending, settling, or compromising the Third Party Claim,
(iii) shall not consent to any settlement or compromise of the Third Party
Claim without the written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld or delayed), and (iv) shall permit the
Indemnifying Party, if it so elects, to assume the exclusive defense of such
Third Party Claim (including, except as provided in the penultimate sentence of
this Section, the compromise or settlement thereof) at its own cost and
expense.  If the Indemnifying Party shall
elect to assume the exclusive defense of any Third Party Claim pursuant to this
Agreement, it shall notify the Indemnified Party in writing of such election,
and the Indemnifying Party shall not be liable hereunder for any fees or
expenses of the Indemnified Party’s counsel relating to such Third Party Claim
after the date of delivery to the Indemnified Party of such notice of
election.  The Indemnifying Party will
not compromise or settle any such Third Party Claim without the written consent
of the Indemnified Party (which consent shall not be unreasonably withheld or
delayed) if the relief provided is other than monetary damages or such relief
would have a material adverse effect on the Indemnified Party.  Notwithstanding the foregoing, if the

 

32

 

Indemnifying
Party elects to assume the defense with respect to any Third Party Claim, the
Indemnifying Party shall have the right to compromise or settle for solely
monetary damages such Third Party Claim, provided such settlement will not
result in or have a Material Adverse Effect on the Indemnified Party.  Notwithstanding the foregoing, the Party which
defends any Third Party Claim shall, to the extent required by any insurance
policies of the Indemnified Party, share or give control thereof to any insurer
with respect to such Claim.

 

10.4                           Limitations.

 

(a)      The Vendor shall not be required to indemnify the Purchaser under
Section 10.1 unless the aggregate of all amounts for which indemnity would
otherwise be due against them exceeds US$10,000.  Claims may be asserted once the damages
exceed US$10,000, and in no event the indemnification amount shall exceed the
Purchase Price.

 

(b)     The Purchaser shall not be required to indemnify the Vendor under
Section 10.2 unless the aggregate of all amounts for which indemnity would
otherwise be due against the Purchaser exceeds $10,000.  Claims may be asserted once the damages
exceed US$10,000, and in no event the indemnification amount shall exceed the
Purchase Price.

 

(c)      If a Third Party Claim subject to indemnification by the Vendor is
brought against e-Channels and e-Channels prevails in the defense thereof, such
Vendor shall not be required to indemnify e-Channels or the Purchaser with
respect to the costs of such defense, including attorneys’ fees.

 

(d)
In no event shall a claim for indemnification be made after the second anniversary
of the Closing Date.

 

10.5                           Adjustment to Purchase Price; Setoff.

 

(a)      Purchase Price.  Any
indemnification payments made pursuant to Sections 10.1 and 10.2 shall be
deemed to be an adjustment to the Purchase Price.  To the extent that the Vendor is obligated to
indemnify the Purchaser under the provisions of the Article X for Damages
reduced to a monetary amount, the Purchaser shall have the right to adjust any
amount due and owing or to be due and owing under any agreement with the Vendor,
whether under this Agreement or any other agreement between the Vendor and any
of the Purchaser’s affiliates, subsidiaries or controlled persons or entities.  To the extent that the Purchaser is obligated
to indemnify e-Channels or the Vendor after Closing under the provisions of
this Article X for Damages reduced to a monetary amount, e-Channels or the Vendor
after Closing shall have the right to decrease any amount due and owing or to
be due and owing under any agreement with the Purchaser, whether under this
Agreement or any other agreement between the e-Channels or the Vendor and any
of the Purchaser’s affiliates, subsidiaries or controlled persons or entities.

 

33

 

(b)     Holdback Amount.  Notwithstanding
the foregoing, the Purchaser may apply all or a portion of the Holdback Amount
to satisfy any Claim for indemnification pursuant to this Article X.  The Purchaser will hold the Holdback Amount
until final resolution of the Claim or dispute.  The Holdback Amount is security for the
indemnification obligations of the Vendor and is not a limitation on the
Damages recoverable or liquidated damages and such security does not limit any
other right of set off or recovery under this Agreement or at law, whether
pursuant to this Agreement or any other agreement of the Vendor.

 

 

ARTICLE
XI

TERMINATION
AND ABANDONMENT

 

11.1                           Methods of Termination.  The transactions contemplated herein may be
terminated and/or abandoned at any time but not later than the Closing:

 

(a)      by mutual written consent of the Purchaser, e-Channels and the Vendor;

 

(b)     (i) by the Purchaser if e-Channels or the Vendor amends or supplements
any e-Channels or Vendor schedule hereto in accordance with Section 8.4 hereof
and such amendment or supplement reflects a material adverse change in the
condition (financial or other), operations or prospects of e-Channels or the e-Channels
Business, as a whole or in part, after the date hereof, or (ii) by Vendor if the
Purchaser amends or supplements any the Purchaser Schedule hereto in accordance
with Section 8.4 hereof and such amendment or supplement reflects a material
adverse change in the condition (financial or other) or operations of the
Purchaser.

 

(c)      by either the Purchaser or the Vendor, if the Closing or the closing
for the acquisition of e-Channels by e-Channels BVI has not occurred by May 31,
2006 (or such other date as may be extended from time to time by written
agreement of the Purchaser and Vendor); provided, however, that the right to
terminate this Agreement under this Section 11.1(c) shall not be available to
any Party that is then in breach of any of its covenants, representations or
warranties in this Agreement;

 

(d)     by the Vendor, (i) if the Purchaser shall have breached any of its
covenants herein in any respect or (ii) if the representations and warranties
of the Purchaser contained in this Agreement shall not be true and correct in
all material respects, at the time made, or (iii) if such representations and
warranties shall not be true and correct at and as of the Closing Date as
though such representations and warranties were made again at and as of the
Closing Date, except to the extent that such representations are made herein as
of a specific date prior to the Closing Date, and in any such event, if such
breach is subject to cure, the Purchaser has not cured such breach within 10
Business Days of the Vendor’s notice of an intent to terminate;

 

34

 

(e)      by the Purchaser, (i) if e-Channels or the Vendor shall have breached
any of the covenants herein in any respect or (ii) if the representations and
warranties of e-Channels or the Vendor contained in this Agreement shall not be
true and correct in all material respects, at the time made, or (iii) if such
representations and warranties shall not be true and correct at and as of the
Closing Date as though such representations and warranties were made again at
and as of the Closing Date, except to the extent that such representations are
made herein as of a specific date prior to the Closing Date, and in any such
event, if such breach is subject to cure, e-Channels or the Vendor have not
cured such breach within 10 Business Days of the Purchaser’s notice of an
intent to terminate.

 

11.2                           Effect of Termination.

 

(a)      In the event of termination and abandonment by the Purchaser or by Vendor,
or both, pursuant to Section 11.1 hereof, written notice thereof shall
forthwith be given to the other Party, and except as set forth in this Section
11.2, all further obligations of the Parties shall terminate, no Party shall
have any right against the other Party hereto, and each Party shall bear its
own costs and expenses.

 

(b)     Consequence of Termination.  If
the transactions contemplated by this Agreement are terminated and/or abandoned
as provided herein:

 

(i)         each Party hereto will return all documents, work papers and other
material (and all copies thereof) of the other Party relating to the Transfer
contemplated hereby, whether so obtained before or after the execution hereof,
to the Party furnishing the same; and

 

(ii)      all confidential information received by either Party hereto with
respect to the business of the other Party hereto shall be treated in
accordance with Section 8.6 hereof, which shall survive such termination or
abandonment.

 

 

ARTICLE
XII

GENERAL
PROVISIONS

 

12.1                           Expenses.  Except as otherwise
provided herein, all costs and expenses, including, without limitation, fees
and disbursements of Representatives, incurred in connection with the
preparation of this Agreement and the transactions contemplated hereby shall be
paid by the Party incurring such costs and expenses, whether or not the Closing
shall have occurred.

 

12.2                           Notices.  All notices and other
communications given or made pursuant hereto shall be in writing and shall be
deemed to have been duly given or made as of the date delivered or mailed if
delivered personally or by nationally recognized courier or mailed by
registered mail (postage prepaid, return receipt requested) or by telecopy to
the Parties

 

35

 

at the following addresses (or at such other
address for a Party as shall be specified by like notice, except that notices
of changes of address shall be effective upon receipt):

 

	
  The
  Vendor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Beijing e-Channels Coordination
  Technology Co., Ltd.

  	 

	
   

  	 

	
  Address:

  	
   

  	
  Room 205, Shunpinda Bus
  Terminal, 8 Chuangxin Road,

  
	
   

  	
   

  	
  Beijing Changping Technology
  Park

  
	
   

  	
   

  	
  Beijing, the PRC

  
	
  Fax:

  	
   

  	
  +86 10 6296 7456

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Beijing e-Channels Century
  Technology Co., Ltd.

  	 

	
   

  	 

	
  Address:

  	
   

  	
  Middle District 4F, De Shi
  Building,

  
	
   

  	
   

  	
  No.9 Shang Di East Road,

  
	
   

  	
   

  	
  Beijing, China.

  
	
  Fax:

  	
   

  	
  +86 10 6296 7456

  
	
  For
  the attention of:

  	
   

  	
  ZENG Shuo

  
	
   

  	
   

  	
   

  
	
  The
  Purchaser:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Port Wing Development
  Company Limited

  	 

	
   

  	 

	
  Address:

  	
   

  	
  TrustNet
  Chambers, P.O. Box 3444, Road Town,

  
	
   

  	
   

  	
  Tortola,
  British Virgin Islands

  
	
  Fax:

  	
   

  	
  +86 21 6113 8580

  
	
  For the attention of:

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  Individual
  Shareholders:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Middle District 4F, De Shi
  Building,

  
	
   

  	
   

  	
  No.9 Shang Di East Road,

  
	
   

  	
   

  	
  Beijing, China.

  
	
  Fax:

  	
   

  	
  +86 10 6296 7456

  
	
  For the attention of:

  	
   

  	
  ZENG Shuo

  
				

 

12.3                           Amendment.  This Agreement may
not be amended or modified except by an instrument in writing signed by the
Parties.

 

12.4                           Waiver.  At any time prior to the
Closing, either Party may (a) extend the time for the performance of any of the
obligations or other acts of the other Party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein.  Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the Party to be bound thereby.

 

36

 

12.5                           Headings.  The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.

 

12.6                           Severability.  If any term or
other provision of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any Party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the Parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.

 

12.7                           Entire Agreement.  This Agreement
and the Schedules and Exhibits hereto constitute the entire agreement and
supersede all prior agreements and undertakings, both written and oral, between
e-Channels, Vendor and the Purchaser with respect to the subject matter hereof
and, except as otherwise expressly provided herein, are not intended to confer
upon any other person any rights or remedies hereunder.

 

12.8                           Benefit.  This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of the
Parties.

 

12.9                           Governing Law.  This Agreement
and the relationship between the Parties shall be governed by, and interpreted
in accordance with, the laws of the PRC.

 

12.10                     Arbitration.  Any dispute,
controversy or claim (a Dispute)
arising out of or in relation to this Agreement, including any question
regarding its existence, validity or termination, shall be resolved through
friendly consultations between the Parties. 
If no resolution is reached within twenty-two (22) Business Days from
the date of notification by the Purchaser to the Vendor or by any of the Vendor
to the Purchaser that a Dispute has arisen, then such Dispute shall be referred
to arbitration.

If a Dispute is referred to arbitration, the
Parties agree that they shall seek to resolve the Dispute in accordance with
this section 12.10 before pursuing any other remedies available to them:

 

(a)                                  The Parties shall submit the Dispute to China
International Trade Arbitration Committee, Shanghai Branch (CIETAC) to be
arbitrated according to its rules and regulations.

 

(b)                                 The arbitral tribunal shall be three (3)
arbitrators.  The Vendor shall jointly appoint
one (1) arbitrator and the Purchaser shall appoint one (1) arbitrator.  The two arbitrators shall be selected within
thirty (30) days after giving or receiving of the request for arbitration.  The
presiding arbitrator of the arbitral tribunal shall be appointed by the two
party-appointed arbitrators.  If the Vendor
or the Purchaser fails to appoint their respective Party-appointed arbitrator within
thirty (30) days after the date
of commencement of the arbitration, the Chairman of CIETAC shall

 

37

 

make the appointment within the aforesaid restrictions.

 

(c)                                  The
arbitration proceedings shall be conducted in English.

 

(d)                                 The
arbitration tribunal shall apply the arbitration rules of CIETAC in effect on
the date of the signing of this Agreement. However, if such rules are in
conflict with the provisions of the previous paragraph of this section,
including the provisions for appointing arbitrators, the provisions of this section
shall prevail.

 

(e)           The
arbitral award shall be final and binding on the Parties to the arbitration
proceedings.  Such Parties shall execute
and perform the award and each Party to this Agreement hereby irrevocably
waives any right it may have to contest the validity of this Agreement or the
jurisdiction of the arbitrator to hear any reference to arbitration to which
this Agreement applies.  The Parties
further hereby expressly agree to waive any right they may have under
applicable law to any form of appeal against any arbitral award or of recourse
to any court of law or other judicial authority wherever situated.  The Parties expressly confirm that any
arbitral award rendered in proceedings conducted pursuant to this Agreement
shall be rendered in Shanghai and shall be enforceable in any court of
competent jurisdiction, including the courts of the PRC, pursuant to the
provisions of the United Nations Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (New York, 1958).

 

(f)                                    The losing Party or Parties shall bear the
costs of the arbitration, unless the arbitral tribunal determines otherwise.

 

12.11                     Counterparts.  This Agreement may
be executed in one or more counterparts, and by the different Parties in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which when taken together shall constitute one and the same
agreement.

 

12.12                     Language.  This Agreement shall
be written in both English and Chinese. 
Both versions shall be equally valid. 
In case there is any conflict between the two language versions, the
English version shall prevail.

 

38

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed as of the date first written above.

 

	
  BEIJING E-CHANNELS

  COORDINATION TECHNOLOGY

  CO., LTD.

  	
   

  	
  PORT WING
  VENTURE

  COMPANY LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BEIJING E-CHANNELS

  CENTURY TECHNOLOGY CO., LTD.

  	
   

  	
  INDIVIDUAL
  SHAREHOLDERS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
  Authorized
  Representative

  

 

39

 

APPENDIX A

 

INDIVIDUAL
SHAREHOLDERS

 

	
  Shareholders

  	
   

  	
  Equity Ratio

  	
   

  
	
  ZENG, Shuo

  	
   

  	
  43.1208

  	
  %

  
	
  ZHONG, Mingchang

  	
   

  	
  8.9354

  	
  %

  
	
  WANG,Yi

  	
   

  	
  8.9354

  	
  %

  
	
  ZHANG,Yan

  	
   

  	
  2.9785

  	
  %

  
	
  ZHANG,Dongyun

  	
   

  	
  2.9785

  	
  %

  
	
  JIN, Zhiwei

  	
   

  	
  2.9785

  	
  %

  
	
  XU,Guanglin

  	
   

  	
  2.9785

  	
  %

  
	
  FANG,Yong

  	
   

  	
  2.9785

  	
  %

  
	
  QIAN,Jianbo

  	
   

  	
  2.9785

  	
  %

  
	
  PENG,Jizhou

  	
   

  	
  2.9785

  	
  %

  
	
  ZHANG,Rui

  	
   

  	
  1.4892

  	
  %

  
	
  CHANG,Hongxia

  	
   

  	
  1.4892

  	
  %

  
	
  ZHANG,Jiawei

  	
   

  	
  1.1914

  	
  %

  
	
  CAI,Jun

  	
   

  	
  0.2500

  	
  %

  
	
  DING,Yongtao

  	
   

  	
  1.4892

  	
  %

  
	
  HONG,Shenping

  	
   

  	
  6.2500

  	
  %

  
	
  LI,Xiaolong

  	
   

  	
  2.5000

  	
  %

  
	
  CHEN,Hua

  	
   

  	
  0.5000

  	
  %

  
	
  YANG,Guangrun

  	
   

  	
  0.5000

  	
  %

  
	
  LIANG,Qiang

  	
   

  	
  0.5000

  	
  %

  
	
  WANG,Dong

  	
   

  	
  0.5000

  	
  %

  
	
  MIN,Gang

  	
   

  	
  0.5000

  	
  %

  
	
  HAN,Dong

  	
   

  	
  0.5000

  	
  %

  
	
  XU,Yan

  	
   

  	
  0.5000

  	
  %

  

 

40Exhibit 10.4

 

I.B.C. No. 685134

 

TERRITORY OF THE BRITISH VIRGIN ISLANDS

 

THE INTERNATIONAL BUSINESS COMPANIES ACT

(CAP 291)

 

MEMORANDUM OF ASSOCIATION

OF

YUCHENG TECHNOLOGIES LIMITED

 

NAME

 

1.                                       The name of the Company is
Yucheng Technologies Limited.

 

REGISTERED OFFICE

 

2.                                       The Registered Office of the
Company will be located at the offices of Offshore Incorporations Limited,
P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

 

REGISTERED AGENT

 

3.                                       The Registered Agent of the
Company will be Offshore Incorporations Limited of P.O. Box 957, Offshore
Incorporations Centre,  Road Town,
Tortola, British Virgin Islands.

 

GENERAL OBJECTS AND POWERS

 

4.                                       (1)                                  The object of the Company is to
engage in any act or activity that is not prohibited under any law for the time
being in force in the British Virgin Islands.

 

(2)                                  The Company may not:

 

(a)                                  carry on business with persons
resident in the British Virgin Islands;

 

(b)                                 own an interest in real property
situated in the British Virgin Islands, other than a lease referred to in
paragraph (e) of sub clause (3);

 

(c)                                  carry on banking or trust
business unless it is licensed to do so under the Banks and Trust Companies
Act, l990;

 

(d)                                 carry on business as an
insurance or reinsurance company, insurance agent or insurance broker, unless
it is licensed under an enactment authorizing it to carry on that business;

 

(e)                                  carry on the business of company
management, unless it is licensed under the Company Management Act, l990;

 

(f)                                    carry on the business of
providing the registered office or the registered agent for companies
incorporated in the British Virgin Islands.

 

 

(3)                                  For purposes of paragraph (a) of
sub clause (2), the Company shall not be treated as carrying on business with
persons resident in the British Virgin Islands if

 

(a)                                  it makes or maintains deposits
with a person carrying on banking business within the British Virgin Islands;

 

(b)                                 it makes or maintains
professional contact with solicitors, barristers, accountants, book-keepers,
trust companies, administration companies, investment advisers or other similar
persons carrying on business within the British Virgin Islands;

 

(c)                                  it prepares or maintains books
and records within the British Virgin Islands;

 

(d)                                 it holds, within the British
Virgin Islands, meetings of its directors or members;

 

(e)                                  it holds a lease of property for
use as an office from which to communicate with members or where books and
records of the Company are prepared or maintained;

 

(f)                                    it holds shares, debt obligations
or other securities in a company incorporated under the International Business
Companies Act or under the Companies Act; or

 

(g)                                 shares, debt obligations or
other securities in the Company are owned by any person resident in the British
Virgin Islands or by any company incorporated under the International Business
Companies Act or under the Companies Act.

 

(4)                                  The Company shall have all such
powers as are permitted by law for the time being in force in the British
Virgin Islands, irrespective of corporate benefit, to perform all acts and
engage in all activities necessary or conducive to the conduct, promotion or
attainment of the object of the Company.

 

CURRENCY

 

5.                                       Shares in the Company shall be
issued in the currency of the United States of America.

 

AUTHORIZED
CAPITAL

 

6.                                       The Company shall have no
authorized capital but shall be authorized to issue 61,000,000 shares.

 

CLASSES,
NUMBER AND PAR VALUE OF SHARES

 

7.                                       The Company is authorized to
issue two classes of shares as follows:

 

(a)                                  60,000,000 shares in one series
of no par value (“Ordinary Shares”); and

 

2

 

(b)                                 1,000,000 preference shares in
one series of no par value (“Preferred Stock”).

 

DESIGNATIONS, POWERS, PREFERENCES, ETC. OF
SHARES

 

8.                                       (1)                                  Ordinary Shares

 

All Ordinary Shares shall

 

(a)                                  have one vote each;

 

(b)                                 be subject to redemption,
purchase or acquisition by the Company for fair value; and

 

(c)                                  have the same rights with regard
to dividends and distributions upon liquidation of the Company.

 

(2)                                  Preferred Stock

 

The Board of Directors of the Company is
authorized, subject to limitations prescribed by law and the provisions of this
Clause 8, to amend the Company’s Memorandum of Association to provide for the
creation from time to time of one or more classes of shares of Preferred Stock,
and pursuant to such amendment, to establish the number of shares and series to
be included in each such class, and to fix the designation, relative rights,
preferences, qualifications and limitations of the shares of each such class.
The authority of the Board of Directors with respect to each class shall
include, but not be limited to, determination of the following:

 

(a)                                  the number of shares and series
constituting that class and the distinctive designation of that class;

 

(b)                                 the dividend rate on the shares
of that class, whether dividends shall be cumulative, and, if so, from which
date or dates, and whether they shall be payable in preference to, or in
another relation to, the dividends payable on any other class or classes of
stock;

 

(c)                                  whether that class shall have
voting rights, in addition to the voting rights provided by law, and, if so,
the terms of such voting rights;

 

(d)                                 whether that class shall have
conversion or exchange privileges, and, if so, the terms and conditions of such
conversion or exchange, including provision for adjustment of the conversion or
exchange rate in such events as the Board of Directors shall determine;

 

(e)                                  whether or not the shares of
that class shall be redeemable, and, if so, the terms and conditions of such
redemption, including the manner of selecting shares for redemption if less
than all shares are to be redeemed, the date or dates upon or after which they
shall be redeemable, and the

 

3

 

amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates;

 

(f)                                    whether that class shall be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of shares of that class, and, if so, the terms and amounts of such
sinking fund;

 

(g)                                 the right of the shares of that
class to the benefit of conditions and restrictions upon the creation of
indebtedness of the Company or any subsidiary, upon the issue of any additional
stock (including additional shares of such class of any other class) and upon
the payment of dividends or the making of other distributions on, and the
purchase, redemption or other acquisition by the Company or any subsidiary of
any outstanding stock of the Company;

 

(h)                                 the right of the shares of that
class in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and whether such rights shall be in preference to, or
in another relation to, the comparable rights of any other class or classes of
stock; and

 

(i)                                     any other relative,
participating, optional or other special rights, qualifications, limitations or
restrictions of that class.

 

RIGHTS NOT
VARIED BY THE ISSUE OF SHARES PARI PASSU

 

9.                                       The rights conferred upon the
holders of the shares of any class issued with preferred or other rights shall
not, unless otherwise expressly provided by the terms of issue of the shares of
that class, be deemed to be varied by the creation or issue of further shares
ranking pari passu therewith.

 

REGISTERED
SHARES

 

10.                                 Shares in the Company may be
issued as registered shares only.

 

AMENDMENT OF MEMORANDUM AND ARTICLES OF
ASSOCIATION

 

11.                                 The Company may only
amend its Memorandum of Association and Articles of Association by a resolution
of members or by a resolution of directors.

 

DEFINITIONS

 

12.                                 The meanings of words in this
Memorandum of Association are as defined in the Articles of Association.

 

4

 

We, Offshore Incorporations Limited of P. O.
Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin
Islands for the purpose of incorporating an International Business Company
under the laws of the British Virgin Islands hereby subscribe our name to this
Memorandum of Association the 17th day of November, 2005.

 

	
     /s/ Fandy
  Tsoi

  	
   

  	
    /s/ Richard Reese
  Tynes

  	
   

  
	
  Witness:

  	
  Fandy Tsoi

  	
   

  	
  Subscriber:

  	
  Tynes, Richard Reese

  
	
   

  	
   

  	
   

  	
  Authorized Signatory

  
						

 

5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}]]