EXHIBIT 10.4
Private and Confidential Execution Copy
T2CN INFORMATION TECHNOLOGY (SHANGHAI) CO., LTD.
SHANGHAI T2 ENTERTAINMENT CO., LTD.
SHANGHAI NEWMARGIN VENTURE CAPITAL CO., LTD
MR. FENG TAO (??)
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OPERATION AGREEMENT
Concerning
SHANGHAI T2 ENTERTAINMENT CO., LTD.
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Dated November 4, 2004
FANGDA PARTNERS
22/F, Kerry Center
1515 Nan Jing West Road
Shanghai 200040, PRC
OPERATION AGREEMENT
This Operation Agreement (hereinafter this "Agreement") is entered into in
Shanghai of the People's Republic of China (hereinafter "PRC") as of 4 November,
2004 by and between the following Parties:
(1) T2CN Information Technology (Shanghai) Co., Ltd. ("WFOE") Registered
address: Suite 22301-526, Pudong Software Park, Guo Shou Jing
Road, Pudong New District, Shanghai, PRC (201203)
Legal representative: TENG Jun-Tse (???)
(2) Shanghai T2 Entertainment Co., Ltd. ("T2 Entertainment") Registered
address: 5th Floor, No.88, Qinjiang Road, Xuhui District,
Shanghai, PRC.
Legal representative: FENG Tao (??)
(3) Shanghai Newmargin Venture Capital Co., Ltd. ("Shanghai Newmargin")
Registered address: No. 99, Yin Qiao Road, Pudong New Area, Shanghai, PRC
Legal representative: DONG Yeshun (???)
(3) FENG Tao
Address: Building 3 Xing Guo Hotel, 78 Xing Guo Road, Shanghai, PRC
ID card no.: 310106670509323
(Shanghai Newmargin and Mr. FENG Tao are hereinafter individually referred to
as a "Shareholder" and collectively "Shareholders".)
Whereas:
1. Shareholders are the only shareholders of T2 Entertainment as of now,
holding the total equity of T2 Entertainment.
2. T2 Entertainment has entered and/or will enter into a series of agreements
with WFOE, including but not limited to Shareholders' Voting Rights Proxy
Agreement (the "Proxy Agreement"), Exclusive Technical Service and
Consultancy Agreement (the "Service Agreement") and an Equity Pledge
Agreement (the "Equity Pledge Agreement") (the 3 abovementioned agreements
shell be known as the "Transaction Agreements"), all dated 4 November 2004;
pursuant to the Transaction Agreements, T2 Entertainment will promote its
business performance relying on such information, technology, personnel and
other supports as provided by WFOE, who has dedicated and will continue to
dedicate considerable labor and resources to the performance of such
Transaction Agreement.
3. WFOE and T2 Entertainment intend to enter into strategic cooperation of
their business operation and, based on the terms and conditions hereof, to
reorganize the daily operation and decision-making mechanism of T2
Entertainment.
The parties hereby have reached the following agreement upon mutual
consultations:
Article 1 Interpretation
1.1 Except as otherwise stated in the context herein:
1.1.1 all references to a person shall refer to a natural person or an
organization;
1.1.2 all references to any person, company, governmental authority or
organization shall be deemed to include its successor;
1.1.3 all references to a contract or agreement shall be deemed to include
its appendices and any amendment, alteration and/or supplement;
1.1.4 all references to a term, condition or appendix shall refer to the
relevant part of this Agreement.
1.2 Titles in this Agreement are for convenience only, and may not be used for
or affect the interpretation of this Agreement under any circumstance.
Article 2 Arrangement regarding Operation of T2 Entertainment
2.1 Undertakings of Shareholders
Shareholders hereby jointly and severally undertake that:
2.1.1 In order to guarantee all rights and interests of WFOE under the
Transaction Agreements, Shareholders hereby irrevocably undertake
and warrant that, without prior written consent from WFOE,
Shareholders will not in any manner make or authorize any other
person (including without limitation directors of T2
Entertainment appointed by them) to make any resolution,
instruction, consent or order for the purpose of causing T2
Entertainment to do any trading that will or may substantially
affect the assets, rights, obligations or business of T2
Entertainment (including its branches and/or subsidiaries)
("Prohibited Trading"), or to enter into any contract, agreement,
memorandum or trading document in other manners in respect of
such Prohibited Trading (the "Prohibited Documents"), or to
tolerate the carry-out of any Prohibited Trading or execution of
any Prohibited Document by any omission of acts;
2.1.2 without written consent or instruction of WFOE, Shareholders may
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not appoint or nominate any member of the board of directors of
T2 Entertainment, nor cancel the appointment of any such member;
and
2.1.3 they will cause directors of T2 Entertainment nominated by them
and other management personnel (if any) of T2 Entertainment
recommended by them to strictly comply with the foregoing
undertakings during their performance of duties as directors or
management of the company, and to have no act or omission of act
in any manner in violation of any of the foregoing undertakings.
2.2 Undertakings of T2 Entertainment
T2 Entertainment hereby undertakes to WFOE as follows:
2.2.1 If Shareholders have, or, in the reasonable opinion of T2
Entertainment, Shareholders are likely to have any act in
violation of their undertakings in section 2.1 above, T2
Entertainment will notify WFOE of the same without delay.
2.2.2 It will not enter into any Prohibited Trading or any Prohibited
Document in any manner, nor tolerant the carry-out of any
Prohibited Trading or execution of any Prohibited Document by any
omission of acts.
2.2.3 Without written consent or instruction from WFOE, the board of
directors of T2 Entertainment will not engage or dismiss its
general management or any other management personnel.
2.2.4 During the effective term of this Agreement, its daily operation
activities and financial and personnel management are under the
supervision and direction of WFOE; WFOE is entitled to take all
necessary or proper measures, including without limitation to
appointment of one or two supervisors with good experience of
company operation, supervision and direction the operation,
management, finance, personnel and etc. of T2 Entertainment.
2.2.5 Without prejudice to the generality of the above section 2.2.4,
it will require its general manager to (a) report situations of
its operation, management, finance and personnel and other major
operating activities to WFOE on a monthly basis, and (b) provide
a written report of its operation, management, finance and
personnel and other major operating activities of every quarter
to WFOE on a quarterly basis, which reports shall be acceptable
to WFOE both in content and in form.
2.2.6 In view that it has entered into the Service Agreement with WFOE,
in order to carry out the obligations of payment of service fees
thereunder, T2 Entertainment hereby undertakes that, once
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required by WFOE in writing, it will pledge all of its then
receivable accounts and mortgage all of the assets legally owned
and disposable by it, as security for the aforesaid obligations
of payments.
2.2.7 It will notify WFOE in advance of the decision-making,
implementation and financial arrangement of any major operation
activities of T2 Entertainment not mentioned in this Agreement,
and WFOE shall decide at its own discretion whether such
activities shall be approved in advance by WFOE. With respect to
such decision-making, implementation and financial arrangement of
any major operation activities for which WFOE's prior approval is
necessary as decided by WFOE, WFOE shall issue notice to
Shareholders and T2 Entertainment within reasonable time, and
Shareholders and T2 Entertainment may not make any resolution,
instruction, consent or order regarding such activities before
receipt of formal approval in writing from WFOE. No written
approval given by WFOE within reasonable time shall be deemed as
disapproval. Any resolution, instruction, consent or order
concerning such major operation activities without prior written
approval by WFOE shall be deemed as void.
2.2.8 It will establish and implement an internal control system to
guarantee that all of its directors and other management
personnel strictly comply with the foregoing undertakings when
performing their duties, and commit no act or omission of act in
violation of any of such undertakings in whatever manner.
2.2.9 Except for the transfer of any equity in T2 Entertainment held by
Shareholders to T2CN Holding Limited and/or any third party
designated by it pursuant to an Exclusive Equity Transfer Call
Agreement (the "Call Agreement") entered into by Shareholders and
T2 Entertainment and T2CN Holding Limited dated 4 November 2004,
if either Shareholder intends to transfer all or part of its
holding in T2 Entertainment's equity to others, such Shareholder
shall issue corresponding confirmation letter to WFOE and T2
Entertainment, certifying that the transferee agrees to become a
party hereto according to the terms and conditions hereof, and
only upon WFOE's confirmation in writing of such certification,
will T2 Entertainment acknowledge such equity transfer and go
through relevant registration or filing of such equity transfer,
provided no Transaction Agreement shall be violated.
2.3 Shareholders and T2 Entertainment acknowledge and undertake to be liable
for any legal consequence of WFOE's exercise of the foregoing rights. In
case of any violation of any undertaking above by Shareholders or T2
Entertainment, Shareholders and T2 Entertainment shall be obliged to take
every possible measure to correct such act of default, and shall minimize
such losses as may be incurred by T2 Entertainment or WFOE thereby.
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2.4 Shareholders and T2 Entertainment are severally and jointly liable under
this Article 2.
Article 3 Information Right
Without limitation to other particular rights of WFOE hereunder, for the purpose
of this Agreement WFOE shall be entitled to know various information about the
operation, business, clients, finance and staff of T2 Entertainment, examine
relevant materials, documents and information of T2 Entertainment (including
without limitation any resolution of the shareholders' meeting, financial
statement and report, auditing report and other materials, documents and
information, that, in WFOE's opinion, WFOE needs to know), and T2 Entertainment
shall fully cooperate and provide all facilities needed in this regard.
Article 4 Exercise of Rights
4.1 Shareholders hereby acknowledge that WFOE need not to consult with
Shareholders in advance when exercising the foregoing rights. However,
after issuing any written notice or instruction, WFOE shall notify
Shareholders in a timely manner.
4.2 WFOE may, when it deems necessary or proper, authorize its internal
personnel (one or more) to act as the representative(s) of WFOE and to
actually exercise any or all of its rights hereunder.
4.3 Shareholders and T2 Entertainment shall provide sufficient assistance to
WFOE's exercise of its rights hereunder, including promptly executing
resolutions of shareholders' meeting, going through formalities of
examination and approval, registration or filing and execution of
particular agreement or other legal document, if so required (e.g.
requirement of submission of documents for examination and approval,
registration and filing from or with the governmental authorities).
4.4 If at any time during the term of this Agreement, any right of WFOE
hereunder is not exercisable due to whatever reason (except for default by
Shareholders or T2 Entertainment), the parties hereto shall promptly seek a
replacing plan with the most similar effect with the right not exercisable,
and shall enter into supplementary agreements to amend or adjust terms
hereunder when necessary, in order to ensure the realization of the purpose
of this Agreement.
Article 5 Exemption and Compensation
5.1 All parties hereto acknowledge that WFOE shall not be required to be liable
to or make any economic or other compensation for other parties hereto or
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any third party, due to its exercise of its rights hereunder.
5.2 Shareholders and T2 Entertainment agree to compensate WFOE for and hold
WFOE harmless against all losses that are incurred or are likely to be
incurred due to WFOE's exercise of its rights hereunder, including without
limitation any loss arising from any action, claim, arbitration, demand
brought by any third party against it or any administrative investigation
or penalty by governmental authorities. However, losses incurred due to
misconduct or gross negligence of WFOE will not be compensated for.
Article 6 Representations and Warranties
6.1 Shareholders' representations and warranties concerning themselves
Shareholders hereby severally and jointly represent and warrant that:
6.1.1 FENG Tao is a PRC citizen with full capacity and with full and
independent legal status and legal capacity to execute, deliver
and perform this Agreement, and may act independently as a
subject of actions;
6.1.2 Shanghai Newmargin is a company with limited liability properly
registered and legally existing under the RPC Law, with an
independent corporate legal person status, and has full and
independent legal status and legal capacity to execute, deliver
and perform this Agreement and may act independently as a subject
of actions;
6.1.3 Shareholders have the full power and authority to execute and
deliver this Agreement and all the other documents to be entered
into by them in relation to the transaction hereunder, and have
the full power and authority to complete the transaction
hereunder;
6.1.4 this Agreement has been legally and properly executed and
delivered by the Shareholders, and constitutes their legal and
binding obligations, which are enforceable against them according
to the provisions hereof;
6.1.5 they are the enrolled legal shareholders of T2 Entertainment as
of the effective date of this Agreement, and except the rights
created by the Equity Pledge Agreement, the Proxy Agreement and
the Call Agreement,, there is no guarantee, lien, pledge, charge,
earnest money or other encumbrances or joint ownership or other
third party rights in whatever manner on the equity shares held
by them respectively; WFOE may fully and sufficiently exercise
its rights hereunder according to the then effective Articles of
Association of T2 Entertainment; and
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6.1.6 Shareholders will cause and warrant T2 Entertainment to comply
with and perform all of its obligations hereunder, and will make
all adequate actions and provide all necessary assistance
(including without limitation the provision of all required
documentation, issuance of necessary undertaking or statement,
adoption of necessary resolution and communication with relevant
governmental authorities), in order to guarantee the full and
effective implementation of all arrangements hereunder and the
realization of the purposes, terms and conditions of this
Agreement.
6.2 Representations and warranties of Shareholders and T2 Entertainment
concerning T2 Entertainment
Shareholders and T2 Entertainment hereby severally and jointly represent
and warrant that:
6.2.1 T2 Entertainment is a company with limited liability properly
registered and legally existing under the law of its
incorporation place, with an independent corporate legal person
status;
6.2.2 T2 Entertainment has full and independent legal status and legal
capacity to execute, deliver and perform this Agreement and may
act independently as a subject of actions;
6.2.3 Shareholders are the only enrolled legal shareholders of T2
Entertainment as of the effective date of this Agreement, and
except the rights created by the Equity Pledge Agreement, the
Proxy Agreement and the Call Agreement, there is no guarantee,
lien, pledge, charge, earnest money or other encumbrances or
joint ownership or other third party rights in whatever manner on
the equity shares held by them respectively; WFOE may fully and
sufficiently exercise its rights hereunder according to the then
effective Articles of Association of T2 Entertainment;
6.2.4 T2 Entertainment has the full corporate power and authority to
execute and deliver this Agreement and all the other documents to
be entered into by it in relation to the transaction hereunder,
and has the full power and authority to complete the transaction
hereunder;
6.2.5 this Agreement has been legally and properly executed and
delivered by T2 Entertainment, and constitutes its legal and
binding obligations, which are enforceable against it according
to the provisions hereof;
6.2.6 all documents, materials and information supplied by T2
Entertainment to WFOE before and after the execution hereof are
true, complete and accurate, without any false statement, gross
omission or materially misleading statement;
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6.2.7 information of T2 Entertainment's indebtedness disclosed by
Shareholders and T2 Entertainment to WFOE is true, complete and
accurate, and except for those already disclosed, T2
Entertainment has no other major indebtedness which may affect
its normal business operation; and
6.2.8 the re-arrangement contemplated hereunder by Shareholders or T2
Entertainment of the daily operation and decision-making
mechanism of T2 Entertainment will not violate any law,
regulation, rule or order applicable on it, and has required or
will require all necessary approval, registration and/or filing
(if applicable) from or with governmental authorities; such
reorganization will not violate any contract, agreement or other
document in which a Shareholder or T2 Entertainment is an object
or a party or which is binding on their assets, and has obtained
all necessary third party consents (if applicable).
6.3 WFOE's representations and warraties
WFOE hereby represents and warrants that:
6.3.1 it is a wholly foreign owned enterprise legally incorporated
under the PRC Law, with full legal capacity to enter into this
Agreement, and has all rights, powers and authorizations required
for exercising any right and performing any obligation hereunder;
6.3.2 its performance of the obligations hereunder will not violate any
current and prevailing laws, regulations and rules; and
6.3.3 it will make all effort to actively cooperate other parties
hereto in order to consummate the arrangement to be made by the
parties hereunder in respect of T2 Entertainment's daily
operation and decision-making mechanism.
Article 7 Term of Agreement
7.1 This Agreement shall take effect from the date of formal execution by the
parties hereto, and shall remain effective without time limit as far as
either Shareholder remains to be a shareholder of T2 Entertainment, unless
terminated by written agreement of all parties hereto.
7.2 Subject to section 2.2.9 hereof, in case either Shareholder transfers all
of the equity held by it in T2 Entertainment with prior consent of WFOE,
such Shareholder will no longer be a party to this Agreement, while the
obligations and undertakings hereunder of other parties hereto will not be
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adversely affected thereby.
Article 8 Notice
8.1 Any notice, request, demand and other correspondences made as required by
or in accordance with this Agreement shall be made in writing and delivered
to address or fax number set forth below of the relevant party:
T2CN Information Technology (Shanghai) Co., Ltd.
Attention: TENG Jun-Tse (???)
Address: 5th Floor, No.88, Qinjiang Road, Xuhui District, Shanghai, PRC.
Fax: 54262830
Telephone: 54278388
Shanghai T2 Entertainment Co., Ltd.
Attention: WANG Ji (??)
Address: 5th Floor, No.88, Qinjiang Road, Xuhui District, Shanghai, PRC.
Fax: 54262830
Telephone: 54278388
Shanghai Newmargin Venture Capital Co., Ltd.
Attention: FENG Tao (??)
Address: No. 99, Yin Qiao Road, Pudong New Area, Shanghai, PRC
Fax: 62137000
Telephone: 62138000
FENG Tao (??)
Address: No. 99, Yin Qiao Road, Pudong New Area, Shanghai, PRC
Fax: 62137000
Telephone: 62138000
8.2 The abovementioned notice or other correspondences shall be deemed to have
been delivered when it is transmitted if transmitted by e-mail, facsimile
or telex; or when it is delivered if delivered in person; or when
forty-eight (48) hours (exclusive of public holidays) have elapsed after
posting if sent out by express; or when twenty-four (24) hours (exclusive
of public holidays) have elapsed after sending out if sent out by
telegraph; or when five (5) days have elapsed after posting if posed by
mail.
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Article 9 Confidentiality
9.1 Unless required by laws or governmental or court orders pr approved by all
parties hereto, none of the parties hereto may disclose or leak any content
hereof, any information in connection herewith or any document, material,
information, technical secrets or trade secrets obtained from other
parties, to any individual, enterprise, unit or governmental authority
other than the parties hereto. Any party hereto may, where necessary,
disclose the abovementioned document, material and information without
breaching its obligation of confidentiality hereunder, provided that:
9.1.1 such disclosure has been approved by all parties hereto;
9.1.2 it is to its manager, management personnel, technical personnel
and employees on a need-to-know basis for the purpose of its
performance of the cooperation hereunder;
9.1.3 it is to its lawyer and accountants on a need-to-know basis;
9.1.4 it is to relevant professional institutions and persons for the
purpose of consultation of professional issues, on a need-to-know
basis and upon approval of other parties hereto;
9.1.5 the above disclosure is within a necessary scope, and the disclosing
party shall take measures to cause the persons or institutions to
whom the aforesaid documents, materials and information are disclosed
to keep the same confidential; and
9.1.6 disclosure under this article by any party hereto may not harm the
rights and interests of other parties.
9.2 The obligation of confidentiality under this article shall survive the
termination of this Agreement.
Article 10 Default Liability
10.1 The parties hereto agree and confirm that, if any of the parties (the
"Defaulting Party") breaches substantially any of the provisions herein or
omits substantially to perform any of the obligations hereunder, or fails
substantially to perform any of the obligations under this Agreement, such
a breach or omission shall constitute a default under this Agreement (a
"Default"), then other parties (the "Non-defaulting Parties") shall have
the right to require the Defaulting Party to rectify such Default or take
remedial measures within a reasonable period. If the Defaulting Party fails
to rectify such Default or take remedial measures within such reasonable
period or within ten (10) days of the Non-defaulting Parties' notifying the
Defaulting Party in writing and requiring it to rectify the Default, then:
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(1) if the Defaulting Party is a Shareholder or T2 Entertainment, WFOE is
entitled to terminate this Agreement and require the Defaulting Party
to indemnify it for damages; or
(2) if the Defaulting Party is WFOE, the Shareholders and T2
Entertainment, being Non-defaulting Parties, are entitled to require
the Defaulting Party to indemnify it for damages, but have no right to
terminate or cancel this Agreement under any circumstances.
10.2Obligations of all parties hereunder are special and specific instead of
general, therefore in case of default by any party, if the indemnification
for damages are not sufficient to cover losses, the Non-defaulting Parties
are entitled to require the Defaulting Party to carry out performance
hereof.
10.3Any waiver of any act of default of the Defaulting Party by the
Non-defaulting Parties will be valid only if made in writing.
10.4Notwithstanding any other provisions herein, the validity of this Article
shall stand disregarding the suspension or termination of this Agreement.
Article 11 Force Majeure
If a party hereto fails to perform or perform as stipulated hereunder, this
Agreement, directly due to earthquake, typhoon, flood, fire, war, computer
virus, leak in design of tool software, hacker attack of internet, change in
policy or law or any other force majeure event that cannot be foreseen or the
results of which cannot be prevented or avoided, the party encountering such
force majeure event shall immediately issue a notice thereof by fax, and submit
certificates issued by relevant governmental authority stating details of such
event and reasons for the failure to perform or delay in performing this
Agreement to other parties for confirmation within fifteen (15) days. If a force
majeure event lasts for more than thirty (30) days, parties hereto shall
determine whether the performance of this Agreement shall be partially exempted
or delayed or otherwise, through friendly negotiations according to the degree
of impact of such event on the performance hereof. The party failing to perform
hereunder is not liable for the economic losses of other parties resulted from
its failure solely due to force majeure.
Article 12 Miscellaneous
12.1 This Agreement shall be prepared in the Chinese language in four (4)
original copies, with each involved party holding one (1) copy hereof.
12.2 The formation, validity, execution, amendment, interpretation and
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termination of this Agreement shall be subject to the PRC Laws.
12.3 Any disputes arising hereunder and in connection herewith shall be settled
through consultations among the parties, and if the parties cannot reach an
agreement regarding such disputes within thirty (30) days of their
occurrence, such disputes shall be submitted to China International
Economic and Trade Arbitration Commission Shanghai Branch for arbitration
in Shanghai in accordance with its arbitration rules, and the arbitration
award shall be final and binding on all parties.
12.4 Any rights, powers and remedies empowered to any party by any provisions
herein shall not preclude any other rights, powers and remedies enjoyed by
such party in accordance with laws and other provisions under this
Agreement, and the exercise of its rights, powers and remedies by a party
shall not preclude its exercise of its other rights, powers and remedies by
such party.
12.5 Any failure or delay by a party in exercising any of its rights, powers and
remedies hereunder or in accordance with laws (hereinafter the "Party's
Rights") shall not lead to a waiver of such rights, and the waiver of any
single or partial exercise of the Party's Rights shall not preclude such
party from exercising such rights in any other way and exercising the
remaining part of the Party's Rights.
12.6 Each provision contained herein shall be severable and independent from
each of other provisions, and if at any time any one or more articles
herein become invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions herein shall not be affected as
a result thereof.
12.7 Any amendments or supplements to this Agreement shall be made in writing
and shall take effect only when properly signed by the parties to this
Agreement.
12.8 None of the parties hereto shall assign any of its rights and/or
obligations hereunder to any third parties without the prior written
consent from other parties.
12.9 This Agreement shall be binding on the legal successors of the parties.
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(Execution Page)
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be executed
as of the date and in the place first here above mentioned.
T2CN INFORMATION TECHNOLOGY (SHANGHAI) CO., LTD.
(Seal)
Signature: /s/ TENG Jun-Tse
------------------------
Name: TENG Jun-Tse (???)
Title: Legal Representative
SHANGHAI T2 ENTERTAINMENT CO., LTD.
(Seal)
Signature: /s/ FENG Tao
------------------------
Name: FENG Tao (??)
Title: Legal Representative
SHANGHAI NEWMARGIN VENTURE CAPITAL CO., LTD.
(Seal)
Signature: /s/ FENG Tao
------------------------
Name: FENG Tao (??)
Title: Legal Representative
MR. FENG TAO (??)
Signature: /s/ FENG Tao
-----------------------