SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE HARTCOURT COMPANIES INC.
(Exact name of Registrant as specified in its charter)
UTAH
(State or other jurisdiction of incorporation or organization)
87-0400541
(IRS Employer Identification No.)
9800 South Sepulveda Blvd., Suite 818, Los Angeles, CA 90045
(Address of Principal Executive Offices, including ZIP Code)
Option Agreements with Tang Wai Leong and Thomas Kwok
(Full title of the plan)
Dr. Alan V. Phan, 9800 South Sepulveda Blvd., Suite 818, Los Angeles, CA 90045
(Name and address of agent for service)
(310) 410-7290
(Telephone number, including area code, of agent for service)
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Amount of Offering Aggregate Amount of
Title of Securities Shares Price Per Offering Registration
to be Registered to be Registered Share(1) Price(1) Fee
- ------------------------ -------------------- --------- -------------- ---------------
<S> <C> <C> <C> <C>
$.01 par value
Common Stock 500,000 $5.50 $ 2,750,000 $ 726.00
$.01 par value
Common Stock 2,000,000 $5.50 $ 11,000,000 $ 2,904.00
TOTALS 2,500,000 N/A $ 13,750,000 $ 3,630.00
</TABLE>
(1) This calculation is made solely for the purposes of determining
the registration fee pursuant to the provisions of Rule 457 under
the Securities Act and is calculated on the basis of the price at
which the securities are to be offered to the public.
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PROSPECTUS
THE HARTCOURT COMPANIES INC.
9800 South Sepulveda Blvd., Suite 818, Los Angeles, CA 90045
(310) 410-7290
2,500,000 SHARES OF COMMON STOCK UNDERLYING STOCK OPTIONS
This Prospectus relates to the offer and sale by The Hartcourt
Companies Inc., a Utah corporation ("Hartcourt"), of shares of its $.01 par
value per share common stock (the "Common Stock") to certain consultants and
advisors (the "Consultants") pursuant to option agreements entered into between
the Company and the Consultants for payment of services to be rendered.
Hartcourt is registering hereunder and then issuing, upon receipt of adequate
consideration therefor, to the Consultants 2,500,000 shares of Common Stock
underlying certain stock options in consideration for services to be performed
under the respective agreements.
The Common Stock is not subject to any restriction on transferability.
Recipients of shares other than persons who are "affiliates" of Hartcourt within
the meaning of the Securities Act of 1933 (the "Act") may sell all or part of
the shares in any way permitted by law, including sales in the over-the-counter
market at prices prevailing at the time of such sale. Of the shares registered
hereunder, no shares are being registered to an affiliate of Hartcourt. An
affiliate is summarily, any director, executive officer or controlling
shareholder of Hartcourt or anyone of its subsidiaries. An "affiliate" of
Hartcourt is subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). If an Consultant who is not now an "affiliate"
becomes an "affiliate" of the Hartcourt in the future, he would then be subject
to Section 16(b) of the Exchange Act.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
The date of this Prospectus is May 5, 2000
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<PAGE>
This Prospectus is part of a Registration Statement which was filed and
became effective under the Securities Act of 1933, as amended (the "Securities
Act"), and does not contain all of the information set forth in the Registration
Statement, certain portions of which have been omitted pursuant to the rules and
regulations promulgated by the U.S. Securities and Exchange Commission (the
"Commission") under the Securities Act. The statements in this Prospectus as to
the contents of any contracts or other documents filed as an exhibit to either
the Registration Statement or other filings by Hartcourt with the Commission are
qualified in their entirety by the reference thereto.
A copy of any document or part thereof incorporated by reference in
this Prospectus but not delivered herewith will be furnished without charge upon
written or oral request. Requests should be addressed to: The Hartcourt
Companies Inc., 9800 South Sepulveda Blvd., Los Angeles, CA 90045 (562)
426-9796.
Hartcourt is subject to the reporting requirements of the Exchange Act
and in accordance therewith files reports and other information with the
Commission. These reports, as well as the proxy statements, information
statements and other information filed by Hartcourt under the Exchange Act may
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W. Washington D.C. 20549. Copies may be
obtained at the prescribed rates. Hartcourt=s stock has been traded on the
over-the-counter market since 1994 and is currently reported by the National
Quotation Bureau Electronic Bulletin Board.
No person has been authorized to give any information or to make any
representation, other than those contained in this Prospectus, and, if given or
made, such other information or representation must not be relied upon as having
been authorized by Hartcourt. This Prospectus does not constitute an offer or a
solicitation by anyone in any state in which such is not authorized or in which
the person making such is not qualified or to any person to whom it is unlawful
to make an offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has not been a
change in the affairs of Hartcourt since the date hereof.
4
<PAGE>
TABLE OF CONTENTS
Information Required in the Section 10(a) Prospectus ......................6
Item 1. Plan Information..................................................6
General Information...............................................6
The Company..............................................6
Purposes.................................................6
Common Stock.............................................6
The Consultants..........................................6
No Restrictions on Transfer..............................6
Tax Treatment to the Consultants.........................7
Tax Treatment to Hartcourt...............................7
Restrictions on Resales..................................7
Documents Incorporated by Reference and Additional Information.............8
Item 2. Registrant Information and Employee Plan Annual Information.......8
Legal Opinion and Experts................................8
Indemnification of Officers and Directors................8
Information Required in the Registration Statement.........................10
Item 3. Incorporation of Documents by Reference...........................10
Item 4. Description of Securities.........................................10
Item 5. Interests of Named Experts and Counsel............................10
Item 6. Indemnification of Directors and Officers.........................10
Item 7. Exemption from Registration Claimed...............................11
Item 8. Exhibits .........................................................11
Item 9. Undertakings......................................................11
Signatures ................................................................13
Exhibit Index .............................................................14
5
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a)
PROSPECTUS
Item 1. Plan Information
GENERAL INFORMATION
The Company
Hartcourt has its principal executive offices at 9800 South Sepulveda
Blvd., Suite 818, Los Angeles, CA 90045, where its telephone number is (310)
410-7290.
Purposes
The Common Stock to be issued by Hartcourt to certain Consultants will
be issued pursuant to option agreements entered into between Consultants and
Hartcourt, which the agreements have been approved by the Board of Directors of
Hartcourt (the "Board of Directors"). The agreements are intended to provide a
method whereby Hartcourt may be stimulated by the personal involvement of the
Consultants in Hartcourt's future prosperity, thereby advancing the interests of
Hartcourt, and all of its shareholders. Subject to the terms of the agreements,
the Consultants will have the right to exercise the option in whole or in part
until December 1, 2002. Copies of the agreements have been filed as exhibits to
this Registration Statement.
Common Stock
The Board has authorized the issuance of up to 2,500,000 shares of the
Common Stock to the Consultants and upon effectiveness of this Registration
Statement.
The Consultants
The Consultants have agreed to provide their expertise and advice to
Hartcourt for the purposes set forth in their agreements with Hartcourt.
No Restrictions on Transfer
The Consultants will become the record and beneficial owners of the
shares of Common Stock upon issuance and delivery and are entitled to all of the
rights of ownership, including the right to vote any shares awarded and to
receive ordinary cash dividends on the Common Stock.
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<PAGE>
Tax Treatment to the Consultants
The Common Stock is not qualified under Section 401(a) of the Internal
Revenue Code. The Consultants, therefore, will be required for federal income
tax purposes to recognize ordinary income during the taxable year in which the
first of the following events occurs: (a) the shares become freely transferable,
or (b) the shares cease to be subject to a substantial risk of forfeiture.
Accordingly, absent a specific contractual provision to the contrary the
Consultants will receive compensation taxable at ordinary rates equal to the
fair market value of the shares on the date of receipt since there will be no
substantial risk of forfeiture or other restrictions on transfer. If, however,
the Consultants receive shares of common stock pursuant to the exercise of an
option or options at an exercise price below the fair market value of the shares
on the date of exercise, the difference between the exercise price and the fair
market value of the stock on the date of exercise will be deemed ordinary income
for federal income tax purposes. The Consultants are urged to consult each of
their tax advisors on this matter. Further, if any recipient is an "affiliate,"
Section 16(b) of the Exchange Act is applicable and will affect the issue of
taxation.
Tax Treatment to Hartcourt
The amount of income recognized by any recipient hereunder in
accordance with the foregoing discussion will be an expense deductible by
Hartcourt for federal income tax purposes in the taxable year of Hartcourt
during which the recipient recognizes income.
Restrictions on Resales
In the event that an affiliate of Hartcourt acquires shares of Common
Stock hereunder, the affiliate will be subject to Section 16(b) of the Exchange
Act. Further, in the event that any affiliate acquiring shares hereunder has
sold or sells any shares of Common Stock in the six months preceding or
following the receipt of shares hereunder, any so called "profit", as computed
under Section 16(b) of the Exchange Act, would be required to be disgorged from
the recipient to Hartcourt. Services rendered have been recognized as valid
consideration for the "purchase" of shares in connection with the "profit"
computation under Section 16(b) of the Exchange Act. Hartcourt has agreed that
for the purpose of any "profit" computation under 16(b) the price paid for
Hartcourt's Common Stock issued hereunder to affiliates is equal to the value of
services rendered. Shares of Hartcourt's Common Stock acquired hereunder by
persons other than affiliates are not subject to Section 16(b) of the Exchange
Act.
7
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
AND
ADDITIONAL INFORMATION
Hartcourt hereby incorporates by reference (i) its annual report on
Form 10-KSB for the year ended December 31, 1999, filed pursuant to Section 13
of the Exchange Act, (ii) any and all Quarterly Reports and Current Reports on
Forms 10-Q (or 10-QSB or 8-K) filed under the Securities or Exchange Act
subsequent to the filing of Hartcourt's Annual Report on Form 10-K (or 10-KSB)
for the fiscal year ended December 31, 1999, as well as all other reports filed
under Section 13 of the Exchange Act, and (iii) its annual report, if any, to
shareholders delivered pursuant to Rule 14a-3 of the Exchange Act. In addition,
all further documents filed by Hartcourt pursuant to Section 13, 14, or 15(d) of
the Exchange Act prior to the termination of this offering are deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing. All documents which when together, constitute this Prospectus,
will be sent or given to participants by the Registrant as specified by Rule
428(b)(1) of the Securities Act.
Item 2. Registrant Information and Employee Plan Annual Information
A copy of any document or part thereof incorporated by reference in
this Registration Statement but not delivered with this Prospectus or any
document required to be delivered pursuant to Rule 428(b) under the Securities
Act will be furnished without charge upon written or oral request. Requests
should be addressed to: The Hartcourt Companies Inc., 9800 South Sepulveda
Blvd., Los Angeles, CA 90045, (562) 426-9796.
Legal Opinion and Experts
Richard O. Weed has rendered an opinion on the validity of the
securities being registered. Mr. Weed is not an "affiliate" of Hartcourt. He
does not currently own any shares of Hartcourt's common stock.
The financial statements of The Hartcourt Companies Inc. incorporated
by reference in this Prospectus for the year ended December 31, 1999 have been
audited by BDO International, independent certified public accountants, as set
forth in their report incorporated herein by reference, and are incorporated
herein in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
Indemnification of Officers and Directors
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
registrant pursuant to the foregoing provisions, or otherwise, registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by registrant of expenses
incurred or paid by a director, officer or controlling person of registrant in
the successful defense of any action, suit or proceeding) is asserted by such
8
<PAGE>
director, officer or controlling person in connection with the securities being
registered, registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
9
<PAGE>
PART II
INFORMATION REQUIRED IN
THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Registrant hereby states that (i) all documents set forth in (a)
through (c), below, are incorporated by reference in this registration
statement, and (ii) all documents subsequently filed by registrant pursuant to
Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as
amended, prior to the filing of a post-effective amendment which indicates that
all securities offered have been sold or which de-registers all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be a part hereof from the date of filing of such
documents.
(a) Registrant's latest Annual Report, whether filed pursuant to
Section 13(a) or 15(d) of the Exchange Act;
(b) All other reports filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of the fiscal year covered by annual
report referred to in (a), above; and
(c) The latest prospectus filed pursuant to Rule 424(b) under the
Securities Act.
Item 4. Description of Securities
No description of the class of securities (i.e. the $.01 par value
Common Stock) is required under this item because the Common Stock is registered
under Section 12 of the Exchange Act.
Item 5. Interests of Named Experts and Counsel
Mr. Weed does not presently own any shares of Hartcourt's common stock.
Item 6. Indemnification of Directors and Officers
Article VII, Section 1 of Hartcourt's Bylaws limit the liability of any
officer or Director and permit Hartcourt to indemnify its directors and officers
as follows:
No officer or Director shall be personally liable for any obligations
of the corporation or for any duties or obligations arising out of any
acts or conduct of said officer or director performed for or on behalf
of the corporation. The corporation shall and does hereby indemnify and
hold harmless each person and his heirs and administrators who shall
serve at any time hereafter as a Director or officer of the corporation
from and against any and all claims, judgments and liabilities to which
such persons shall become subject by reason of his having heretofore or
hereafter been a Director or officer of the corporation or by reason of
any action alleged to have been heretofore or hereafter taken or
omitted to have been taken by him as such Director or officer, and
shall reimburse each such person for all legal and all other expenses
10
<PAGE>
reasonably incurred by him in connection with any such claim or
liability, including power to defend such person from all suits or
claims as provided for under the provisions of the Utah Business
corporation Act; provided, however, that no such person shall be
indemnified against, or be reimbursed for, any expense incurred in
connection with any claim or liability arising out of his own
negligence or willful misconduct. The rights accruing to any person
under the foregoing provisions of this section shall not exclude any
right to which he may lawfully be entitled, nor shall anything herein
contained restrict the right of the corporation to indemnify or
reimburse such person in any proper case, even though not specifically
herein provided for. The corporation, its directors, officers,
Consultants and agents shall be fully protected in taking any action or
making any payment, or in refusing so to do in reliance upon the advice
of counsel.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
(a) The following exhibits are filed as part of this registration
statement pursuant to Item 601 of Regulation S-B and are specifically
incorporated herein by this reference:
Exhibit No. Title
----------- ----------------------------------------------------
5. Opinion of Richard O. Weed regarding the legality of
the securities registered.
10.1 Fee Agreement and Option Agreement with Tang Wai Leong
10.2 Fee Agreement and Option Agreement with Thomas Kwok
23.1 Consent of Richard O. Weed, special counsel to
registrant, to the use of his opinion with respect
to the legality of the securities being registered
hereby and to the references to him in the Prospectus
filed as a part hereof.
23.2 Consent of BDO International, independent auditors of
registrant.
Item 9. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement
to:
(i) include any prospectus required by Section 10 (a) (3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represents a fundamental
11
<PAGE>
change in the information set forth in the registration
statement;
(iii)include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, paragraphs (i) and (ii) shall not apply if the
information required to be included in a post-effective amendment
by those paragraphs are incorporated by reference from periodic
reports filed by the registrant small business issuer under the
Exchange Act.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment to the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14e-3 under the Securities
Exchange Act of 1934; and, where interim financial information
require to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to
each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference
in the prospectus to provide such interim financial information.
Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of registrant's annual
report pursuant to Section 13(a) of the Securities Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
12
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized in the City of Los Angeles, State of California on the 5th day of
May, 2000.
The Hartcourt Companies Inc.
(Registrant)
By: /s/ Dr. Alan V. Phan
----------------------------------
Dr. Alan V. Phan, President
Pursuant to the requirements of the 1933 Act, this registration
statement or amendment has been signed by the following persons in the
capacities and on the dates indicated:
Signatures Title Date
- ------------------------ ---------------------- -----------
/s/ Dr. Alan V. Phan Director May 5, 2000
- ------------------------
Dr. Alan V. Pha
/s/ Frederic Cohn Director May 5, 2000
- ------------------------
Frederic Cohn
/s/ Manu Ohri Director and Principal May 5, 2000
- ------------------------ Accounting Officer
Manu Ohri
13
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FORM S-8 REGISTRATION STATEMENT
EXHIBIT INDEX
The following Exhibits are filed as part of this registration statement
pursuant to Item 601 of Regulation S-B and are specifically incorporated herein
by this reference:
<TABLE>
<CAPTION>
Exhibit
Number in
Registration Numbered
Statement Description Page
- --------------- ----------------------------------------------------------------------------- --------
<S> <C> <C>
5. Opinion of Counsel 15
10.1 Fee Agreement and Option Agreement with Tang Wai Leong 18
10.2 Fee Agreement and Option Agreement with Thomas Kwok 29
23.1 Consent of Richard O. Weed to Use of Opinion 40
23.2 Consent of BDO International 41
</TABLE>
14
EXHIBIT 5.
OPINION OF COUNSEL
WEED & CO., L.P.
4695 MacARTHUR COURT, SUITE 530, NEWPORT BEACH, CALIFORNIA 92660-2164
TELEPHONE (949) 475-9086 FACSIMILE (949) 475-9087
WRITER'S DIRECT NUMBER
(949) 475-9086
May 5, 2000
Board of Directors
The Hartcourt Companies Inc.
9800 South Sepulveda Blvd.
Los Angeles, CA 90045
Re: Form S-8 Registration Statement Opinion of Counsel
Gentlemen:
I have acted as a special counsel for The Hartcourt Companies Inc. a
Utah corporation (the "Company") in connection with the preparation and filing
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, (the "Act") of a registration statement on
Form S-8 (the "Registration Statement"), relating to the offer and sale of
2,500,000 shares of Common Stock, $.01 par value (the "Common Stock") to
Consultants of the Company, in consideration for services performed and to be
performed on behalf of the Company under the terms and conditions of certain
agreements (the "Agreements").
As special counsel for the Company, I have examined the Company's
articles of incorporation, bylaws, minute book, and certain other corporate
records. For the purpose of the opinions expressed below, I have also examined
the Registration Statement on Form S-8 to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, covering the
Common Stock in this offering.
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<PAGE>
In arriving at the opinions set forth below, I have examined and relied
upon originals or copies, certified or otherwise identified to my satisfaction,
of corporate records (including the Registration Statement with its exhibits)
provided by the officers of the Company. I have made such investigations of law
as I have considered necessary or appropriate as a basis for my opinions.
My opinions are qualified in all respects by the scope of the document
examination and I make no representation as to the sufficiency of my
investigation for your purpose. I have not made any document examination or
rendered any other advice other than as described herein and I at all times have
assumed and relied upon the truth and completeness of the information,
statements and representations which have been given by the Company to me. I do
not express any opinion with respect to the completeness, adequacy, accuracy or
any other aspect of the financial statements incorporated by reference in the
Registration Statement.
In rendering this opinion, I have assumed, without independently
verifying such assumptions, and this opinion is based and conditioned upon the
following: (i) the genuineness of the signatures on and the enforceability of
all instruments, documents and agreements examined by me and the authenticity of
all documents furnished for my examination as originals and the conformity to
the original documents of all documents furnished to me as copies; (ii) where an
executed document has been presented to me for my review, that such document has
been duly executed on or as of the date stated and that execution and delivery
was duly authorized on the part of the parties thereto; (iii) each of the
foregoing certificates, instruments and documents being duly authorized,
executed and delivered by or on behalf of all the respective parties thereto,
and such instruments and documents being legal, valid binding obligations of
such parties; (iv) the truth and accuracy of representations and statements made
in the documents received from the State of Utah; and (vi) The Hartcourt
Companies Inc. will be operated in accordance with the terms of its charter
documents and the laws of the State of Utah and the terms of the instruments or
documents referred to above.
Based upon the foregoing, I am of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Utah, the
jurisdiction of its incorporation.
2. The terms and provisions of the Common Stock conform to the
description thereof contained in the Registration Statement, and the form of the
stock certificates used to evidence the Common Stock are in good and proper form
and no stockholder is entitled to preemptive rights to subscribe for or purchase
any of the Common Stock.
16
<PAGE>
3. Based upon the foregoing, I am of the opinion that the issuance and
the sale of the shares of Common Stock in this offering has been duly and
validly authorized, and subject to compliance with the provisions of the written
agreements, the Common Stock issuable under the Agreements will be duly
authorized and validly issued as fully paid and non-assessable shares of Common
Stock.
Very truly yours,
/s/ Richard O. Weed
---------------------------------------
Richard O. Weed
17
EXHIBIT 10.1
FEE AGREEMENT FOR INTRODUCTION SERVICES
This FEE AGREEMENT FOR INTRODUCTION SERVICES (the "Agreement") is
between The Hartcourt Companies, Inc., a Utah corporation (the "Company") and
Tang Wai Leong, an individual (the "Introducer").
WHEREAS, the Company acknowledges that Introducer's talents and
services are of a special, unique, unusual and extraordinary character and are
of particular and peculiar benefit and importance to the Company; and,
WHEREAS, Introducer has agreed to provide services to he Company with
respect to the Company's desire to identify and acquire Internet-related
businesses; and,
WHEREAS, this Agreement is made to set out the compensation, conditions
and guidelines that will govern the relationship between the parties.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which is expressly acknowledged
by the parties hereto, the parties agree as follows:
The Services
Effective the date below, and for the term of this Agreement,
Introducer will use its best efforts to search for, identify
and make known to the Company, Internet-related businesses and
Assets ("Opportunities") which qualify as potential
acquisitions by the Company. In addition, Introducer will seek
out sources of funding, of whatever nature type and
description as shall be acceptable to the Company and
Intruducer will search for suitable candidates for employment
by the Company in its Chinese operations. Such efforts by
Introducer shall hereinafter be referred to as he "Services".
Term of Agreement
Unless otherwise terminated a provided hereunder, the Services
shall be provided to the Company from the Effective Date (as
defined below) through December 30, 2000.
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Costs and Expenses
The Company understands that, in the course of Introducer's
efforts to identify suitable acquisitions, strategic partners
or assets for the Company to purchase, it may be necessary for
Introducer to incur certain costs or expenses. The Company
will reimburse Introducer for its costs or expenses actually
incurred and reasonably necessary for Introducer to provide
the Services to the Company, as long as Introducer's costs and
expenses are reasonable and elated to evaluations carried out
for the Company's exclusive use. Subject to the foregoing, and
he Company's prior written approval, the Company will
reimburse Introducer for reasonable travel expenses including
lodging and the cost of a rental car, copy and filing fees,
and retrieval costs incurred in researching prospective
Opportunities.
Payment for Services/Stock Option
The Company agrees to satisfy Introducer's time and expense
incurred, up to and including the first acquisition by the
Company of an Opportunity introduced or arranged by Introducer
(the "Initial Acquisition") by way of an Option Agreement. The
Company hereby grants to Introducer he option to purchase up
to Five Hundred Thousand (500,000) shares of the Company's no
par value common stock (the "Option Shares") at a price of
Five Dollars Fifty Cents ($5.50) per share (the "Exercise
Price") pursuant to the Option Agreement, a copy of which is
attached hereto as Exhibit "A." The Option is non-transferable
and will expire unless exercised on or before the third
anniversary of the Effective Date hereof. Introducer has not
been engaged to exclusively perform, nor will Introducer
perform any services in connection with capital raising
transactions. It is mutually understood and agreed that any
fees for services provided by Introducer on behalf of or which
results in some benefit for the Company in connection with a
capital raising transaction shall be negotiated separately
from this Agreement and paid by the Company separately.
Registration of the Company Shares
No later than ten (10) days following the date hereof as to
the Company's shares underlying the Option, the Company will
cause such shares to be registered with the Securities and
Exchange Commission under a Form S-8 or other applicable
registration statement, and it shall cause such registration
statement to remain effective at all times while Introducer
holds the Option. At Introducer's election, the Option Shares
may be issued prior to registration in reliance on exemptions
from registration provided by Section 4(2) of the Securities
Act of 1933 (the Securities Act"), Regulation D of the
Securities Act, and applicable state securities laws.
Involvement of the Company
The Company expects to be kept informed on the progress of
Introducer's services and, in this regard, Introducer agrees
to keep the Company apprised of all material developments in
writing at least monthly.
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<PAGE>
Termination
Either party may terminate this Agreement upon thirty (30)
days notice by registered or certified mail, return receipt
requested, addressed to the other party. If this Agreement is
terminated by either party, the Company shall only be liable
for payment of fees earned by Introducer as a result of work
prior to the effective date of the termination. The thirty
(30) days notice shall be measured from the date the notice is
mailed.
Assignment
Notwithstanding contained herein to the contrary, the rights
to the shares underlying the Option, and the obligation to
provide the Services set forth in this Agreement, may be
assigned or transferred by Introducer to an Affiliate or
subsidiary, or as the result of a corporate reorganization or
recapitalization of Introducer; otherwise, this Agreement and
the rights and obligations hereunder shall not be assigned.
For the purpose of this Agreement the term "Affiliate" shall
be defined as a person or enterprise that directly, or
indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with Introducer.
Counterparts
A facsimile, telecopy or other reproduction of this instrument may be
executed by one or more parties hereto and such executed copy may be
delivered by facsimile or similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such party
can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any party
hereto, all parties agree to execute an original of this instrument as
well as any facsimile, telecopy or other reproduction hereof.
Further Documentation
Each party hereto agrees to execute such additional instruments and
take such action as may be reasonably requested by the other party to
effect the transaction, or otherwise to carry out the intent and
purposes of this Agreement.
Notices
All notices and other communications hereunder shall be in writing and
shall be sent by prepaid first class mail to the parties at the
following addresses, as amended by the parties with written notice to
the other:
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To Introducer: Tang Wai Leong
24A, Block 2
New Jade Garden
Chaiwan, Hongkong
To the Company: The Hartcourt Companies, Inc.
9800 S. Sepulveda Blvd. Suite 818
Los Angeles, California 90045
Telephone: (310) 410-7290
Facsimile: (310) 410-7297
With copy to: Richard Weed
4695 MacArthur Court, Suite 530
Newport Beach, California 92660
Telephone: (949) 475-7739
Facsimile: (949) 475-9087
Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Governing Law
This Agreement was negotiated, and shall be governed by the laws of
Utah notwithstanding any conflict-of-law provision to the contrary.
Entire Agreement
This Agreement sets forth the entire understanding between the parties
hereto and no other prior written or oral statement or agreement shall
be recognized or enforced.
Severability
If a court of competent jurisdiction determines that any clause or
provision of this Agreement is invalid, illegal or unenforceable, the
other clauses and provisions of the Agreement shall remain in full
force and effect and the clauses and provisions which are determined to
be void, illegal or unenforceable shall be limited so that they shall
remain in effect to the extent permissible by law.
21
<PAGE>
Amendment or Waiver
Every right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in equity,
and may be enforced concurrently herewith, and no waiver by any party
of the performance of any obligation by the other shall be construed as
a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to a closing of the
Initial Acquisition, this Agreement may be amended by a writing signed
by all parties hereto.
Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the latter
of the dates written below.
The "Company"
The Hartcourt Companies, Inc.
Dated: April 19, 2000 By:
---------------------------------------
Name: Alan V. Phan
Title: Chairman
"Introducer"
Tang Wai Leong
Dated: April 19, 2000
---------------------------------------
Tang Wai Leong
22
<PAGE>
OPTION AGREEMENT WITH TANG WAI LEONG
THIS OPTION AGREEMENT ("Agreement") is entered into effective the 19th
day of April 2000, by and between Tang Wai Leong, an individual ("Leong"), and
the Hartcourt Companies Inc., a Utah corporation (the "Company").
WHEREAS, the Company proposes to issue to Leong options to purchase
shares of its common stock (the ACommon Stock") in connection with the Company's
engagement of Leong pursuant to the Advisory Agreement of even date between the
Company and Leong, incorporated by reference herein (the AAdvisory Agreement");
and,
WHEREAS, to induce Leong to execute the First Amendment to the Advisory
Agreement the Company hereby grants Leong an option to purchase shares of the
Company's Common Stock subject to the terms and conditions set forth below.
NOW, THEREFORE, for and in consideration of the mutual promises herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and subject to the terms and conditions set forth
below, Leong and the Company agree as follows:
1. The Option
The Company hereby grants Leong (hereinafter "Holder") an option (the
"Option") to acquire Five Hundred Thousand (500,000) shares of the
Company's Common Stock, subject to adjustment as set forth herein (such
shares, as adjusted, are hereinafter referred to as the "Option
Shares"), at the closing market price of Friday, April 14th, 2000 which
is Five Dollars and Fifty Cents($5.50) per share ("Option Price").
2. Term and Exercise of Option
A. Term of Option. Subject to the terms of this Agreement,
Holder shall have the right to exercise the Option in whole or
in part, commencing the date hereof through the close of
business on December 1, 2002.
B. Exercise of the Option. The Option may be exercised upon
written notice to the Company at its principal office setting
out the number of Option Shares to be purchased, together
with payment of the Option Price.
23
<PAGE>
C. Issuance of Option Shares. Upon such notice of exercise and
payment of the Option Price, the Company shall issue and cause
to be delivered within five (5) business days following the
written order of Holder, or its successor as provided for
herein, and in such name or names as the Holder may designate,
a certificate or certificates for the number of Option Shares
to be purchased. The rights of purchase represented by the
Option shall be exercisable, at the election of the Holder
thereof, either in full or from time to time in part, and in
the event the Option is exercised in respect of less than all
of the Option Shares purchasable on such exercise at any time
prior to the date of expiration hereof, the remaining Option
Shares shall continue to be subject to adjustment as set forth
in paragraph 4 hereof. The Company irrevocably agrees to
reconstitute the Option Shares as provided herein.
3. Reservation of Option Shares
The Company shall at all times keep reserved and available,
out of its authorized Common Stock, such number of shares of
Common Stock as shall be sufficient to provide for the
exercise of the rights represented by this Agreement. The
transfer agent for the Common Stock and any successor transfer
agent for any shares of the Company's capital stock issuable
upon the exercise of any of such rights of purchase, will be
irrevocably authorized and directed at all times to reserve
such number of shares as shall be requisite for such purpose.
The Company will cause a copy of this Agreement to be kept on
file with the transfer agent or its successors.
4. Adjustment of Option Shares
The number of Option Shares purchasable pursuant to this
Agreement shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
A. Adjustment for Recapitalization. Subject to paragraph 4.B
below, in the event the Company shall (a) subdivide its
outstanding shares of Common Stock, or (b) issue or convert by
a reclassification or recapitalization of its shares of Common
Stock into, for, or with other securities (a
"Recapitalization"), the number of Option Shares purchasable
hereunder immediately following such Recapitalization shall be
adjusted so that the Holder shall be entitled to receive the
kind and number of Option Shares or other securities of the
Company measured as a percentage of the total issued and
outstanding shares of the Company's Common Stock as of the
hereof which it would have entitled to receive immediately
preceding such Recapitalization, had such Option been
exercised immediately prior to the happening of such event or
any record date with respect thereto. An adjustment made
pursuant to this paragraph shall be calculated and effected
taking into account the formula set forth in paragraph 4.B.
below and shall become effective immediately after the
effective date of such event retroactive to the effective
date.
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<PAGE>
B. Adjustment of the Exercise Price and Number of Option
Shares. In the event of any change in the Company's Common
Stock by reason of a reverse stock split, neither the number
nor the Option Price of the shares subject to this Option
shall be changed or be adjusted.
C. Preservation of Purchase Rights Under Consolidation.
Subject to paragraph 4.B above, in case of any
Recapitalization or any other consolidation of the Company
with or merger of the Company into another corporation, or in
case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an
entirety, the Company shall prior to the closing of such
transaction, cause such successor or purchasing corporation,
as the case may be, to acknowledge and accept responsibility
for the Company's obligations hereunder and to grant the
Holder the right thereafter upon payment of the Option Price
to purchase the kind and amount of shares and other securities
and property which he would have owned or have been entitled
to receive after the happening of such consolidation, merger,
sale or conveyance. The provisions of this paragraph shall
similarly apply to successive consolidations, mergers, sales
or conveyances. D. Notice of Adjustment. Whenever the number
of Option Shares purchasable hereunder is Adjusted, as herein
provided, the Company shall mail by first class mail, postage
prepaid, to the Holder notice of such adjustment or
adjustments, and shall deliver to Holder setting forth the
adjusted number of Option Shares purchasable and a brief
statement of the facts requiring such adjustment, including
the computation by which such adjustments was made.
5. Failure to Deliver Option Shares Constitutes Breach Under
Advisory Agreement
Failure by the Company, for any reason, to deliver the
certificates representing any shares purchased pursuant to
this Option within the five (5) business day period set forth
in paragraph 2 above, or the placement of a Stop Transfer
order by the Company on any Option Shares once issued, shall
constitute a "Breach" under the Advisory Agreement and, for
the purpose of determining the terms of this Agreement, shall
automatically toll the expiration of this Agreement for a
period of time equal to the delay in delivering the subject
shares or term of the Stop Transfer order.
6. Assignment
The Option represented by this Agreement may only be assigned
or transferred by Leong to an affiliate or subsidiary, or as
the result of a corporate reorganization or recapitalization.
For the purpose of this Option the term "Affiliate" shall be
defined as a person or enterprise that directly, or indirectly
through one or more intermediaries, controls, or is controlled
25
<PAGE>
by, or is under common control with the Company otherwise,
this Agreement and the rights hereunder shall not be assigned
by either party hereto.
7. Counterparts
A facsimile, telecopy or other reproduction of this instrument
may be executed by one or more parties hereto and such
executed copy may be delivered by facsimile or similar
instantaneous electronic transmission device pursuant to which
the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding
and effective for all.
8. Further Documentation
Each party hereto agrees to execute such additional
instruments and take such action as may be reasonably
requested by the other party to effect the transaction, or
otherwise to carry out the intent and purposes of this
Agreement.
9. Notices
All notices and other communications hereunder shall be in
writing and shall be sent by prepaid first class mail to the
parties at the following addresses, as amended by the parties
with written notice to the other:
To Company: The Hartcourt Companies, Inc.
9800 S. Sepulveda Blvd., Suite #818
Los Angeles, CA 90045
Telephone: (310) 410-7290
Facsimile: (310)410-7297
To Leong: Tang Wai Leong
24A, Block 2
New Jade Garden
Chaiwan, Hong Kong
26
<PAGE>
With copy to: Archer & Weed
4695 MacArthur Court, Suite 530
Newport Beach, California 92660
Telephone: (949) 475-7739
Facsimile: (949) 475-9087
10. Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
11. Governing Law
This Agreement was negotiated, and shall be governed by the
laws of Utah notwithstanding any conflict-of-law provision to
the contrary.
12. Entire Agreement
This Agreement sets forth the entire understanding between the
parties hereto and no other prior written or oral statement or
agreement shall be recognized or enforced.
Severability
If a court of competent jurisdiction determines that any
clause or provision of this Agreement is invalid, illegal or
unenforceable, the other clauses and provisions of the
Agreement shall remain in full force and effect and the
clauses and provisions which are determined to be void,
illegal or unenforceable shall be limited so that they shall
remain in effect to the extent permissible by law.
Amendment or Waiver
Every right and remedy provided herein shall be cumulative
with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently
herewith, and no waiver by any party of the performance of any
obligation by the other shall be construed as a waiver of the
same or any other default then, theretofore, or thereafter
occurring or existing. At any time prior to Closing, this
Agreement may be amended by a writing signed by all parties
hereto.
27
<PAGE>
Headings
The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first written above.
"Leong"
Tang Wai Leong, an individual
---------------------------------------
Tang Wai Leong
The "Company"
The Hartcourt Companies, Inc.
By:
----------------------------------
Name: Alan V. Phan
Title: Chairman
28
EXHIBIT 10.2
FEE AGREEMENT FOR INTRODUCTION SERVICES
This FEE AGREEMENT FOR INTRODUCTION SERVICES (the "Agreement") is
between The Hartcourt Companies, Inc., a Utah corporation (the "Company") and
Thomas Kwok, an individual (the "Introducer").
WHEREAS, the Company acknowledges that Introducer's talents and
services are of a special, unique, unusual and extraordinary character and are
of particular and peculiar benefit and importance to the Company; and,
WHEREAS, Introducer has agreed to provide services to he Company with
respect to the Company's desire to identify and acquire Internet-related
businesses; and,
WHEREAS, this Agreement is made to set out the compensation, conditions
and guidelines that will govern the relationship between the parties.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which is expressly acknowledged
by the parties hereto, the parties agree as follows:
The Services
Effective the date below, and for the term of this Agreement,
Introducer will use its best efforts to search for, identify
and make known to the Company, Internet-related businesses and
Assets ("Opportunities") which qualify as potential
acquisitions by the Company. In addition, Introducer will seek
out sources of funding, of whatever nature type and
description as shall be acceptable to the Company and
Intruducer will search for suitable candidates for employment
by the Company in its Chinese operations. Such efforts by
Introducer shall hereinafter be referred to as he "Services".
Term of Agreement
Unless otherwise terminated a provided hereunder, the Services
shall be provided to the Company from the Effective Date (as
defined below) through December 30, 2000.
Costs and Expenses
The Company understands that, in the course of Introducer's
efforts to identify suitable acquisitions, strategic partners
or assets for the Company to purchase, it may be necessary for
Introducer to incur certain costs or expenses. The Company
will reimburse Introducer for its costs or expenses actually
incurred and reasonably necessary for Introducer to provide
the Services to the Company, as long as Introducer's costs and
29
<PAGE>
expenses are reasonable and elated to evaluations carried out
for the Company's exclusive use. Subject to the foregoing, and
he Company's prior written approval, the Company will
reimburse Introducer for reasonable travel expenses including
lodging and the cost of a rental car, copy and filing fees,
and retrieval costs incurred in researching prospective
Opportunities.
Payment for Services/Stock Option
The Company agrees to satisfy Introducer's time and expense
incurred, up to and including the first acquisition by the
Company of an Opportunity introduced or arranged by Introducer
(the "Initial Acquisition") by way of an Option Agreement. The
Company hereby grants to Introducer he option to purchase up
to One Million (1,000,000) shares of the Company's no par
value common stock (the "Option Shares") at a price of Five
Dollars Fifty Cents ($5.50) per share (the "Exercise Price")
pursuant to the Option Agreement, a copy of which is attached
hereto as Exhibit "A." The Option is non-transferable and will
expire unless exercised on or before the third anniversary of
the Effective Date hereof. Introducer has not been engaged to
perform, nor will Introducer agree to perform any services in
connection with capital raising transactions. It is mutually
understood and agreed that any fees for services provided by
Introducer on behalf of or which results in some benefit for
the Company in connection with a capital raising transaction
shall be negotiated separately from this Agreement and paid by
the Company separately.
Registration of the Company Shares
No later than ten (10) days following the date hereof as to
the Company's shares underlying the Option, the Company will
cause such shares to be registered with the Securities and
Exchange Commission under a Form S-8 or other applicable
registration statement, and it shall cause such registration
statement to remain effective at all times while Introducer
holds the Option. At Introducer's election, the Option Shares
may be issued prior to registration in reliance on exemptions
from registration provided by Section 4(2) of the Securities
Act of 1933 (the Securities Act"), Regulation D of the
Securities Act, and applicable state securities laws.
Involvement of the Company
The Company expects to be kept informed on the progress of
Introducer's services and, in this regard, Introducer agrees
to keep the Company apprised of all material developments in
writing at least monthly.
Termination
Either party may terminate this Agreement upon thirty (30)
days notice by registered or certified mail, return receipt
requested, addressed to the other party. If this Agreement is
terminated by either party, the Company shall only be liable
for payment of fees earned by Introducer as a result of work
prior to the effective date of the termination. The thirty
(30) days notice shall be measured from the date the notice is
mailed.
30
<PAGE>
Assignment
Notwithstanding contained herein to the contrary, the rights
to the shares underlying the Option, and the obligation to
provide the Services set forth in this Agreement, may be
assigned or transferred by Introducer to an Affiliate or
subsidiary, or as the result of a corporate reorganization or
recapitalization of Introducer; otherwise, this Agreement and
the rights and obligations hereunder shall not be assigned.
For the purpose of this Agreement the term "Affiliate" shall
be defined as a person or enterprise that directly, or
indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with Introducer.
Counterparts
A facsimile, telecopy or other reproduction of this instrument may be
executed by one or more parties hereto and such executed copy may be
delivered by facsimile or similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such party
can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any party
hereto, all parties agree to execute an original of this instrument as
well as any facsimile, telecopy or other reproduction hereof.
Further Documentation
Each party hereto agrees to execute such additional instruments and
take such action as may be reasonably requested by the other party to
effect the transaction, or otherwise to carry out the intent and
purposes of this Agreement.
Notices
All notices and other communications hereunder shall be in writing and
shall be sent by prepaid first class mail to the parties at the
following addresses, as amended by the parties with written notice to
the other:
To Introducer: Thomas Kwok
KDG International Limited.
#3605 Central Plaza
18 Harbour Road
Wanchai, Hong Kong
Telephone: (852) 28772657
To the Company: The Hartcourt Companies, Inc.
9800 S. Sepulveda Blvd. Suite 818
Los Angeles, California 90045
Telephone: (310) 410-7290
Facsimile: (310) 410-7297
31
<PAGE>
With copy to: Richard Weed
4695 MacArthur Court, Suite 530
Newport Beach, California 92660
Telephone: (949) 475-7739
Facsimile: (949) 475-9087
Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Governing Law
This Agreement was negotiated, and shall be governed by the laws of
Utah notwithstanding any conflict-of-law provision to the contrary.
Entire Agreement
This Agreement sets forth the entire understanding between the parties
hereto and no other prior written or oral statement or agreement shall
be recognized or enforced.
Severability
If a court of competent jurisdiction determines that any clause or
provision of this Agreement is invalid, illegal or unenforceable, the
other clauses and provisions of the Agreement shall remain in full
force and effect and the clauses and provisions which are determined to
be void, illegal or unenforceable shall be limited so that they shall
remain in effect to the extent permissible by law.
Amendment or Waiver
Every right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in equity,
and may be enforced concurrently herewith, and no waiver by any party
of the performance of any obligation by the other shall be construed as
a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to a closing of the
Initial Acquisition, this Agreement may be amended by a writing signed
by all parties hereto.
Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the latter
of the dates written below.
The "Company"
The Hartcourt Companies, Inc.
Dated: April 19, 2000 By:
---------------------------------------
Name: Alan V. Phan
Title: Chairman
"Introducer"
Thomas Kwok
Dated: April 19, 2000
---------------------------------------
Thomas Kwok
33
<PAGE>
OPTION AGREEMENT WITH THOMAS KWOK
THIS OPTION AGREEMENT ("Agreement") is entered into effective the 19th
day of April 2000, by and between Thomas Kwok, an individual ("Kwok"), and the
Hartcourt Companies Inc., a Utah corporation (the "Company").
WHEREAS, the Company proposes to issue to Kwok options to purchase
shares of its common stock (the "Common Stock") in connection with the Company's
engagement of Kwok pursuant to the Advisory Agreement of even date between the
Company and Kwok, incorporated by reference herein (the "Advisory Agreement");
and,
WHEREAS, to induce Kwok to execute the First Amendment to the Advisory
Agreement the Company hereby grants Kwok an option to purchase shares of the
Company's Common Stock subject to the terms and conditions set forth below.
NOW, THEREFORE, for and in consideration of the mutual promises herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and subject to the terms and conditions set forth
below, Kwok and the Company agree as follows:
1. The Option
The Company hereby grants Kwok (hereinafter "Holder") an option (the
"Option") to acquire Two Million (2,000,000) shares of the Company's
Common Stock, subject to adjustment as set forth herein (such shares,
as adjusted, are hereinafter referred to as the AOption Shares"), at
the closing market price of Friday, April 14th, 2000, which is Five
Dollars and Fifty Cents ($5.50) per share (AOption Price").
2. Term and Exercise of Option
A. Term of Option. Subject to the terms of this Agreement, Holder
shall have the right to exercise the Option in whole or in
part, commencing the date hereof through the close of business
on December 1, 2002.
B. Exercise of the Option. The Option may be exercised upon
written notice to the Company at its principal office setting
out the number of Option Shares to be purchased, together with
payment of the Option Price.
C. Issuance of Option Shares. Upon such notice of exercise and
payment of the Option Price, the Company shall issue and cause
to be delivered within five (5) business days following the
written order of Holder, or its successor as provided for
herein, and in such name or names as the Holder may designate,
a certificate or certificates for the number of Option Shares
to be purchased. The rights of purchase represented by the
34
<PAGE>
Option shall be exercisable, at the election of the Holder
thereof, either in full or from time to time in part, and in
the event the Option is exercised in respect of less than all
of the Option Shares purchasable on such exercise at any time
prior to the date of expiration hereof, the remaining Option
Shares shall continue to be subject to adjustment as set forth
in paragraph 4 hereof. The Company irrevocably agrees to
reconstitute the Option Shares as provided herein.
3. Reservation of Option Shares
The Company shall at all times keep reserved and available, out of its
authorized Common Stock, such number of shares of Common Stock as shall
be sufficient to provide for the exercise of the rights represented by
this Agreement. The transfer agent for the Common Stock and any
successor transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of such rights of purchase, will be
irrevocably authorized and directed at all times to reserve such number
of shares as shall be requisite for such purpose. The Company will
cause a copy of this Agreement to be kept on file with the transfer
agent or its successors.
4. Adjustment of Option Shares
The number of Option Shares purchasable pursuant to this Agreement
shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
A. Adjustment for Recapitalization. Subject to paragraph 4.B below,
in the event the Company shall (a) subdivide its outstanding
shares of Common Stock, or (b) issue or convert by a
reclassification or recapitalization of its shares of Common
Stock into, for, or with other securities (a ARecapitalization"),
the number of Option Shares purchasable hereunder immediately
following such Recapitalization shall be adjusted so that the
Holder shall be entitled to receive the kind and number of Option
Shares or other securities of the Company measured as a
percentage of the total issued and outstanding shares of the
Company's Common Stock as of the hereof which it would have
entitled to receive immediately preceding such Recapitalization,
had such Option been exercised immediately prior to the happening
of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph shall be calculated
and effected taking into account the formula set forth in
paragraph 4.B. below and shall become effective immediately after
the effective date of such event retroactive to the effective
date.
B. Adjustment of the Exercise Price and Number of Option Shares. In
the event of any change in the Company's Common Stock by reason
of a reverse stock split, neither the number nor the Option Price
of the shares subject to this Option shall be changed or be
adjusted.
C. Preservation of Purchase Rights Under Consolidation. Subject to
paragraph 4.B above, in case of any Recapitalization or any other
consolidation of the Company with or merger of the Company into
another corporation, or in case of any sale or conveyance to
35
<PAGE>
another corporation of the property of the Company as an entirety
or substantially as an entirety, the Company shall prior to the
closing of such transaction, cause such successor or purchasing
corporation, as the case may be, to acknowledge and accept
responsibility for the Company's obligations hereunder and to
grant the Holder the right thereafter upon payment of the Option
Price to purchase the kind and amount of shares and other
securities and property which he would have owned or have been
entitled to receive after the happening of such consolidation,
merger, sale or conveyance. The provisions of this paragraph
shall similarly apply to successive consolidations, mergers,
sales or conveyances.
D. Notice of Adjustment. Whenever the number of Option Shares
purchasable hereunder is Adjusted, as herein provided, the
Company shall mail by first class mail, postage prepaid, to the
Holder notice of such adjustment or adjustments, and shall
deliver to Holder setting forth the adjusted number of Option
Shares purchasable and a brief statement of the facts requiring
such adjustment, including h such adjustments was made.
5. Failure to Deliver Option Shares Constitutes Breach Under Advisory
Agreement
Failure by the Company, for any reason, to deliver the certificates
representing any shares purchased Pursuant to this Option within the
five (5) business day period set forth in paragraph 2 above, or the
placement of a Stop Transfer order by the Company on any Option Shares
once issued, shall constitute a ABreach" under the Advisory Agreement
and, for the purpose of determining the terms of this Agreement, shall
automatically toll the expiration of this Agreement for a period of
time equal to the delay in delivering the subject shares or term of
the Stop Transfer order.
6. Assignment
The Option represented by this Agreement may only be assigned or
transferred by Kwok to an Affiliate or subsidiary, or as the result of
a corporate reorganization or recapitalization. For the purpose of
this Option the term AAffiliate" shall be defined as a person or
enterprise that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with the Company otherwise, this Agreement and the rights
hereunder shall not be assigned by either party hereto.
7. Counterparts
A facsimile, telecopy or other reproduction of this instrument may be
executed by one or more parties hereto and such executed copy may be
delivered by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of
such party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At the
request of any party hereto, all parties agree to execute an original
of this instrument as well as any facsimile, telecopy or other
reproduction hereof.
36
<PAGE>
8. Further Documentation
Each party hereto agrees to execute such additional instruments and
take such action as may be reasonably requested by the other party to
effect the transaction, or otherwise to carry out the intent and
purposes of this Agreement.
9. Notices
All notices and other communications hereunder shall be in writing and
shall be sent by prepaid first class mail to the parties at the
following addresses, as amended by the parties with written notice to
the other:
To Company The Hartcourt Companies, Inc.
9800 S. Sepulveda Blvd., Suite #818
Los Angeles, CA 90045
Telephone: (310) 410-7290
Facsimile: (310)410-7297
To Kwok: Thomas Kwok
KDG International Limited
#3605 Central Plaza
18 Harbour Road
Wanchai, Hong Kong
Telephone: (852) 28772657
With copy to: Archer & Weed
4695 MacArthur Court, Suite 530
Newport Beach, California 92660
Telephone: (949) 475-7739
Facsimile: (949) 475-9087
7. Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
37
<PAGE>
8. Governing Law
This Agreement was negotiated, and shall be governed by the laws of
Utah notwithstanding any conflict-of-law provision to the contrary.
9. Entire Agreement
This Agreement sets forth the entire understanding between the parties
hereto and no other prior written or oral statement or agreement shall
be recognized or enforced.
10. Severability
If a court of competent jurisdiction determines that any clause or
provision of this Agreement is invalid, illegal or unenforceable, the
other clauses and provisions of the Agreement shall remain in full
force and effect and the clauses and provisions which are determined
to be void, illegal or unenforceable shall be limited so that they
shall remain in effect to the extent permissible by law.
11. Amendment or Waiver
Every right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in
equity, and may be enforced concurrently herewith, and no waiver by
any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then,
theretofore, or thereafter occurring or existing. At any time prior to
Closing, this Agreement may be amended by a writing signed by all
parties hereto.
12. Headings
The section and subsection headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first written above.
"Kwok"
Thomas Kwok, an individual
---------------------------------------
Thomas Kwok
39
<PAGE>
The "Company"
The Hartcourt Companies, Inc.
By:
----------------------------------
Name: Alan V. Phan
Title: Chairman
39
EXHIBIT 23.1
CONSENT OF RICHARD O. WEED TO USE OF OPINION
WEED & CO., L.P.
4695 MacARTHUR COURT, SUITE 530, NEWPORT BEACH, CALIFORNIA 92660-2164
TELEPHONE (949) 475-9086 FACSIMILE (949) 475-9087
WRITER'S DIRECT NUMBER
(949) 475-9086
May 5, 2000
Board of Directors
The Hartcourt Companies Inc.
9800 South Sepulveda Blvd.
Los Angeles, CA 90045
Re: Form S-8
Gentlemen:
I hereby consent to the filing of my opinion dated May 5, 2000 herewith
as an Exhibit to the Form S-8 Registration Statement to be filed by The
Hartcourt Companies Inc.
I further consent to the reference to me and my opinion under the
caption "Legal Opinion and Experts" in the Prospectus.
Very truly yours,
/s/ Richard O. Weed
---------------------------------------
Richard O. Weed
40
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement of
The Hartcourt Companies Inc. Form S-8 of our report dated March 30, 2000,
appearing in the Annual Report on Form 10-KSB of The Hartcourt Companies Inc.
for the year ended December 31, 1999, and to the reference to us under the
heading "Experts" in the Prospectus which is part of this Registration
Statement.
/s/ BDO International
---------------------------------------
BDO International
Hong Kong
May 5, 2000
41
