SHARE PURCHASE AGREEMENT
EXHIBIT
4.14
This
Share Purchase Agreement (the “Agreement”), dated as of September 16, 2006 (the
“Closing Date”), is made by and among
Xxxxxxx
Time (H.K.) Limited, a company organized under the laws of Hong Kong and
having
an office at Xxxxx 000, Xxxxx 0, Xxxxxxxx Xxxxx, 00 Xxxx Xxx Avenue, Sheung
Shui
New Territories, Hong Kong (“Purchaser”), and Highway Holdings Limited, a
company incorporated under the laws of British Virgin Islands (“Highway
Holdings”), on the one hand,
and
Xxxx
Xxx
Chung, Peter, Xxxx Xxx, Xxxx, Xxxx Xxx Yung, Augustine, and Wan Xxx Xxxxxx
on
the other hand (Messrs. Xxxx Xxx Xxxxx, Xxxx Xxx, Xxxx Xxx Yung, and Wan
Xxx
Xxxxxx are herein collectively referred to as the “Sellers”).
RECITALS
A. Golden
Bright Plastic Manufacturing Company Limited, a company organized under the
laws
of Hong Kong (the “Company”) and having an office at Xxxx 0000, 00/X., Xxxx Xxxx
Jewellery Centre, 4 Xxx Xxxx Street East, Xxxx Xxx, Kowloon, Hong Kong, is
primarily engaged in the business of the manufacture and supply of plastic
parts
and products.
X. Xxxxxxx
are together the owners and holders of record of all of the issued share
capital
in the Company.
X. Xxxxxxx
desire to sell to Purchaser, and Purchaser desires to purchase and acquire
from
Sellers, all of the issued share capital in the Company on the terms and
conditions hereinafter set forth.
D. Highway
Holdings is the parent company of Purchaser and a public company whose common
shares are currently listed for trading on the U.S. Nasdaq Capital Markets
trading system.
AGREEMENT
NOW,
THEREFORE, it is agreed as follows:
1. Purchase
and Sale of Shares.
By
their execution and delivery of this Agreement (all references herein to
this
Agreement shall include the schedules and annexes hereto), (a) each of
Sellers is hereby selling, transferring, delivering and assigning to Purchaser,
and (b) Purchaser is hereby purchasing and acquiring from each of Sellers,
all
of the issued share capital in the Company (the “Shares”) owned by such Seller,
free and clear of any and all Encumbrances (as defined below), for the
consideration specified in this Agreement. In connection with the purchase
and
sale of the Shares, the Sellers are hereby delivering to Purchaser the
share
certificates representing all of the Shares and instruments of transfer and
bought and sold notes, duly endorsed for transfer of the Shares from such
Seller.
Furthermore, each of the Sellers hereby agrees to hereafter deliver to Purchaser
any such other endorsements, assignments, documents or instruments executed
by
each of Sellers or any one of them as are necessary to transfer and convey
to
Purchaser all of such Sellers’ right, title and interest in and to the Shares,
as owner, free and clear of all Encumbrances.
2. Consideration.
Concurrently with the execution of this Agreement and the receipt by Purchaser
of the instruments
of transfer and bought and sold notes, and share certificates in respect
of
all
of
the Shares, Purchaser and Highway Holdings are hereby delivering to the Sellers
the following consideration:
2.1 HK $4,000,000
delivered to Mr. Xxxxx Xxxx in immediately available funds. Each Seller
hereby agrees that Mr. Xxxxx Xxxx is acting on behalf of such Seller as the
Seller’s agent and that Mr. Xxxxx Xxxx may receive all payments under this
Agreement on behalf of the Seller as the Seller’s agent.
2.2 In
addition to the cash payment made pursuant to Section 2.1 above, Purchaser
shall
make additional cash, contingent purchase price payments (up to an aggregate
of
HK $4,000,000) to the Sellers based on the compliance by Mr. Xxxxx Xxxx and
Xx. Xxx with the conditions set forth in Sections 3.1 and 3.2 below as follows:
At the end of the 12th
calendar
month, the 24th
calendar
month, and the 36th
calendar
month following the Closing Date, provided that the conditions set forth
in
Sections 3.1 and 3.2 below have been fully satisfied on each such contingent
payment date, Purchaser shall deliver an additional HK $1,333,333 as a cash
payment to the Sellers. All payments will be made to Mr. Xxxxx Xxxx, as agent
for the Sellers. In the event that either Xx. Xxxx or Xx. Xxx have not performed
their obligations as set forth in Sections 3.1 or 3.2 below, Purchaser
shall not be required to make a cash payment on that date or any subsequent
12-month payment date.
2.3 Subject
to the satisfaction of all of the conditions set forth in Sections 3.1 through
3.4 below, Purchaser shall pay the Sellers an additional HK $4,000,000
contingent purchase price payment the end of the 36th
calendar
month following the Closing Date. As security for the obligation of Purchaser
to
make the foregoing contingent HK$ 4,000,000 purchase price payment, Highway
Holdings shall issue 128,534 shares of Highway Holdings common shares to
Mr.
Xxxxx Xxxx (on behalf of the Sellers). Within five working days of the execution
following the execution of this Agreement, Highway Holdings shall deliver
to
Messrs. Xxxx, Xxxx & Company, a professional legal practice with its
principle place of business at 59th
Floor,
Bank of Xxxxx Xxxxx, 0 Xxxxxx Xxxx, Xxxx Xxxx (the “Escrow Agent”) all of the
foregoing 128,534 shares of Highway Holdings’ common shares (the “Escrowed
Highway Holdings Shares”), which Escrowed Highway Holdings Shares shall be
held/released by the Escrow Agent in accordance with the following provisions
and the terms of the attached Escrow Agreement. The parties to this Agreement
all agree that the Escrow Highway Holdings Shares have a value of U.S. $514,138,
or HK $4,000,000 at the current currency conversion rate in effect on the
Closing Date. The Sellers agree that the Escrowed Highway Holdings Shares
are
restricted and may not be sold or transferred in any manner until the end
of the
36th
calendar
month following the Closing Date. At the end of the 36th
calendar
month following the Closing Date, providing that all of the conditions set
forth
in Sections 3.1 through 3.4 below have been fully satisfied, Highway
Holdings shall repurchase all of the 128,534 Highway Holdings common shares
for
a cash purchase price of HK $4,000,000, and the Escrow Agent shall return
the Escrowed Highway Holdings Shares to Highway Holdings for cancellation.
If
any of the conditions set forth in Sections 3.1 through 3.4 have not been
satisfied, the Escrow Agent shall return to Highway Holdings all of the 128,534
Escrowed Highway Holdings Shares, which shares shall thereupon be cancelled.
In
the event that, at any time during the 36 calendar month period any of the
conditions set forth in Section 3.1 through 3.4 are not satisfied, Purchaser
shall have the right to notify the Escrow Agent of such non-compliance, with
a
copy simultaneously delivered to the Sellers, and the Escrow Agent shall
thereupon promptly return the Escrow Highway Holdings Shares to Highway Holdings
for cancellation. However, if all of the conditions set forth in Section
3.1
through 3.4 have been satisfied but Highway Holdings fails, for any reason
to
repurchase the shares for HK $4,000,000, as set forth in the Escrow Agreement,
the restrictive legend may be removed from the shares, and the Escrow Agent
shall then deliver and transfer the shares to the Sellers, who shall thereafter
have the right to sell all such shares and retain the relevant proceeds of
sale
thereof. If the proceeds of the sale of such shares are less than HK $4,000,000
or its equivalent, the Sellers have the right to claim for a make-up payment
from either Purchaser or Highway Holdings for any deficiency.
3. Payment
Conditions.
The
right of the Sellers to receive the contingent purchase price payments referred
to in Section 2.2 above and the right to receive the HK $4,000,000 contingent
payment by means of the repurchase of the Highway Holdings common shares
under
Section 2.3, are dependent upon the satisfaction of some or all of the
conditions set forth below. As required by Section 6.1 of this Agreement,
Mr.
Xxxxx Xxxx and Mr. Wan are each entering into an employment agreement with
the
Company, which employment agreements are attached to this Agreement as Appendix
A and B. The payment conditions are as follows:
3.1 Mr. Xxxxx
Xxxx shall have been continuously employed by the Company for the entire
three-year period of his employment agreement. Mr. Xxxxx Xxxx shall not be
deemed to have been continuously employed if he voluntarily resigns or if
he is
terminated under Section 7.1 of his employment agreement. However, for the
purposes of determining Xx. Xxxx’x compliance with Section 2.2 only, Xx. Xxxx
will be deemed to have satisfied this condition if his employment agreement
is
terminated due to his death or Disability (as defined in Section 7.1 of the
attached employment agreement). Accordingly, Xx. Xxxx’x death or Disability
shall not affect Purchaser’s obligations to continue to make the payments
required by Section 2.2. However, his death or Disability before the end
of the
third year of his employment agreement will cause the condition of Section
2.3
above not to have been met, and Purchaser will not have to make the payment
required by Section 2.3 if Xx. Xxxx dies or suffers a Disability during the
term
of the employment agreement. Failure to meet the Performance Criteria (as
defined in Section 5.3 of his employment agreement) shall not constitute
a
breach of his employment agreement.
3.2 Mr. Wan
shall have continuously been employed by the Company until the first anniversary
of the Closing Date. Mr. Wan shall not be deemed to have been continuously
employed if he voluntarily resigns or if he is terminated under Section 7.1
of
his employment agreement. However, for the purposes of determining Mr. Wan’s
compliance with Section 2.2 only, Mr. Wan will be deemed to have satisfied
this
condition if his employment agreement is terminated due to his death or
Disability (as defined in Section 7.1 of the attached employment agreement).
Accordingly, Mr. Wan’s death or Disability shall not affect Purchaser’s
obligations to continue to make the payments required by Section 2.2. However,
his death or Disability before the end of his one-year employment agreement
will
cause the condition of Section 2.3 above not to have been met, and Highway
Holdings will not have to make the payment required by Section 2.3 if Mr.
Wan
dies or suffers a Disability during the one-year term of the employment
agreement.
3.3 It
is
expected that the Company will continue its own operations as a wholly-owned
subsidiary of Purchaser for the three year period following the Closing.
The
condition of this Section 3.3 will be deemed to have been met if during the
36-month period following the Closing Date the Company shall have generated,
on
a cumulative basis, both
(i) net
revenues (turnover) of HK $150 million or more, and (ii) net income (profits)
of
HK $6.6 million, or more. In determining the Company’s net revenues (turnover)
and net income (profits), the effects of sales made by the Company to buyers
who
on the Closing Date were customers of Highway Holdings (and/or its current
subsidiaries, including Purchaser) will be excluded from the calculations.
The
parties hereto agree to equitably readjust the foregoing net income and net
revenue criteria if (a) the business or operations of the Company change
at the
direction of Highway Holdings in a manner that affects the Company’s net
revenues or net income, and/or (b) if the Company’s operations are materially
affected by an act of god (such as an outbreak of SARS or other national
or
regional occurrences that are beyond the control of the Company).
3.4 The
condition of Section 3.4 will not be deemed to have been met if (i) any of
the
representations in Sections 4.4, 4.7, or 4.15 is untrue or inaccurate in
any
material respect, and (ii) the Company assumes or retains any “material
liabilities or obligations” after the Closing Date (whether or not required to
be disclosed on the financial statements) other than those listed or identified
in this Agreement or included in the Financial Statements or the July 31
Balance
Sheet. Liabilities and obligations that are subject to the foregoing
representation and warranty include unpaid salaries, wages or bonuses of
employees, accrued employee benefits, and all other statutory obligations
(known
or unknown on the Closing Date) owed by the Company to its employees or other
paid workers. In the event that any material liability or obligation of the
Company is discovered at any time during the 36-month period following the
Closing Date, the condition of this Section 3.4 will not be deemed to have
been
satisfied. The parties hereto agree that the Financial Statements and the
July
31 Balance Sheet will not be deemed to be “materially” true and accurate, and a
“material” undisclosed liability or obligation will be deemed to exist if the
amount of actual liabilities or future obligations of the Company at the
Closing
exceeds the amount disclosed at the Closing by HK $778,000, unless any
amount of liabilities in excess of HK $778,000 are fully undertaken, assumed
or
paid by the Sellers.
4. Representations
and Warranties of each of the Sellers.
The
Sellers hereby jointly and severally represent and warrant to Purchaser and
Highway Holdings as follows:
4.1 Organization
and Authority.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of Hong Kong and in each jurisdiction in which the business
transacted by the Company would make such qualification necessary except
where
the failure to be so qualified would not have a Material Adverse Effect (as
defined below). The Company has the requisite corporate power to own its
properties and assets and to carry on its business as now being conducted.
The
Company has full corporate power and authority to enter into any agreements
related hereto and to carry out the transactions contemplated by this Agreement
and any agreements related hereto. For purposes of this Agreement, a “Material
Adverse Effect” or “Material Adverse Change” means any effect or change that is
or would be materially adverse to the business, operations, assets, condition
(financial or otherwise) or results of operations of the Company or the Shares
or the consummation of the transactions contemplated hereby.
4.2 Authorization
and No Conflicts.
The
execution, delivery and performance of this Agreement, the transactions
contemplated hereby and all other documents and agreements delivered or to
be
delivered pursuant hereto will not result in any conflict with, or breach
or violation of any judgment, order, decree, mortgage, agreement, deed of
trust,
indenture or other instrument to which and of the Seller is a party or by
which
it is bound. This Agreement has been duly executed and delivered by or on
behalf
of each Seller and constitutes a legal, valid and binding obligation of each
Seller enforceable in accordance with its terms.
4.3 Consents.
No
consent or approval of any person, regulatory authority, governmental
organization or third party is required as a result of or in connection with
the
execution, delivery and performance of the Sellers’ obligations under this
Agreement.
4.4 Financial
Information.
Attached hereto as Schedule 4.4
are
copies of the audited balance sheets and income statement of the Company
as at
and for the year ended December 31, 2005 (collectively the “Financial
Statements”), the Company’s income statement for the period ended July 31, 2006
(the “Interim Income Statement”), and the unaudited balance sheet of the Company
as at July 31, 2006 (the “July 31 Balance Sheet”). The Financial Statements were
prepared in accordance with auditing standards generally accepted in Hong
Kong
applied on a consistent basis throughout the periods covered thereby. The
Financial Statements, July 31 Balance Sheet and Interim Income Statement
accurately reflect the books, records and accounts of the Company as at the
dates indicated and present fairly the respective financial position and
results
of operations of the Company for the periods indicated. The July 31 Balance
Sheet and Interim Income Statement were prepared in a manner consistent with
Financial Statements (but without footnotes and subject to normal year-end
adjustments) applied on a consistent basis and accurately reflects the books,
records and accounts of the Company as of July 31, 2006 and presents fairly
the
financial position of the Company as at such date.
4.5 Absence
of Changes or Events.
Since
July 31, 2006 (the “Financial Date”), the Company has conducted its business
only in the ordinary course consistent with past practice and has
not:
(a) Incurred
any Material Adverse Change;
(b) Suffered
any event, including, without limitation, shortage of materials or supplies,
fire, explosion, accident, requisition or taking of property by any governmental
agency, flood, drought, earthquake, or other natural event, riot, act of
God or
a public enemy, or damage, destruction, or other casualty, whether covered
by
insurance or not, which has had a Material Adverse Effect;
(c) Incurred
any obligation or liability other than in the ordinary and usual course of
business or that has had a Material Adverse Effect;
(d) Made
any
material change in the method of operating the Company’s business or any change
in the accounting practices relating thereto;
(e) Incurred
any indebtedness for borrowed money or forgiven or cancelled any debts or
claims, other than in the ordinary and usual course of business;
(f) Agreed
to
sell, lease, or dispose of the Shares or any of the Assets (as defined below),
except as contemplated in this Agreement and, as to the Assets, except in
the
ordinary and usual course of business;
(g) Modified,
waived, changed, amended, released or terminated any Contract (as hereinafter
defined), other than as expressly contemplated by this Agreement;
or
(h) Declared
or paid any dividend or distribution upon or with respect to the Shares other
than as contemplated in this Agreement.
4.6 No
Subsidiaries.
The
Company does not own, beneficially or of record, any equity interest in any
corporation, limited liability company, partnership, joint venture or other
entity.
4.7 Taxes.
Sellers
and the Company have timely and effectively made all filings of all required
tax
returns that are due on or before the Closing Date, and all such tax returns,
reports and declarations which have been filed by or on behalf of the Company
are complete and accurate in all material respects and all taxes which have
become due pursuant thereto have been paid. As of the Financial Date, the
Company’s liability for unpaid taxes, if any, did not exceed the reserve for
unpaid taxes, if any, set forth on the Financial Statements and the July
31
Balance Sheet. As of the Closing Date, there are no unpaid taxes or potential
liabilities for any Hong Kong profits tax, any Peoples Republic of China
(“PRC”)
enterprise income tax, or any salaries tax that the Company or Purchaser
will
owe or be subject to as a result of the operations of the Company in Hong
Kong,
the PRC, or elsewhere. In addition, neither the Company, Purchaser or Highway
Holdings shall incur any tax liability or obligation as a result of the purchase
contemplated by this Agreement. To the Company’s knowledge, there are no pending
tax examinations affecting the Company, its tax returns, its business, the
Shares or the Assets nor are there any claims for taxes pending.
4.8 Assets;
Bank Accounts.
Subject
to changes in the ordinary course of business since the July 31 Balance Sheet
Date, the Company has title to all of the assets listed on the balance sheet
included in the July 31 Balance Sheet (the “Assets”) free and clear of any and
all liens, encumbrances, security interests, pledges, options, mortgages,
equities or other similar interests (“Encumbrances”). A true and correct list of
all material Assets is set forth on Schedule
4.8A.
The
Assets constitute all of the assets necessary for the operation of the business
of the Company as it is currently conducted and operated. All personal property
included in the Assets is in operating condition, subject only to ordinary
wear
and tear and maintenance, and is adequate for the uses to which such Assets
are
currently being put. Set forth on attached Schedule 4.8B
is a
list of each of savings, checking and/or other similar accounts held with,
at or
by any bank or other similar financial institution, each brokerage account,
and
each lock box and safe deposit box (collectively, the “Accounts”), in each case
held or registered in the name of the Company or controlled by, or held or
open
for the benefit of the Company.
4.9 Inventory.
The
inventories of raw materials, work-in-progress, resale items, finished goods
and
all other items included in the inventory presently owned by the Company
are the
property of the Company and have been acquired, or have arisen, in the ordinary
and usual course of business.
4.10 Account
Receivables.
The
accounts receivable of the Company, including those included in the Assets
as of
the Closing Date and those shown on the balance sheets included in the Financial
Statements and the July 31 Balance Sheet, arose in the ordinary course of
the
Company’s business.
4.11 Title
to Real Property.
The
Company does not own any real property. Attached hereto as Schedule 4.11
is a
list of each lease for real property to which the Company is a party or which
covers any premises at which the Company operates its business or maintains
any
of the Assets.
4.12 Trademarks,
Tradenames, Service Marks and Copyrights.
Other
than the right to use its company name under the prevailing business
registration laws, the Company does not have any logos, trademarks, service
marks, trade names, patents, patent applications, or other similar intellectual
property rights. To the Company’s knowledge, it has not infringed upon any
proprietary rights or intellectual property rights of any other person, firm,
corporation, or other entity.
4.13 Contracts
and Commitments.
(a) Schedule 4.14
attached
hereto contains a list (and where oral, a summary description) of all material
contracts, commitments, agreements, leases, licenses and other arrangements
(the
“Contracts”) relating to the business of the Company to which the Company is a
party, or by which the Company, its business, the Assets or any of the Shares
is
or are bound or which affects the consummation of the transactions contemplated
hereby in effect as of the date hereof.
(b) Each
of
the Contracts is in full force and effect, and all payments and other amounts
required to be paid by the Company under each of such Contracts, which have
become due, have been paid. There exists no default under any of such Contracts,
and no event has happened that would become a default under any of such
Contracts. The sale and transfer of the Shares will not affect the validity
or
enforceability of any Contract or cause any change in the substantive terms
thereof.
(c) All
of
the existing agreements between the Company and the Shenzhen Longgang Pinghu
Lisu Manufacturing Factory (“Pinghu Lisu”) are in full force and effect, and
neither the sale of the Shares, nor any provision of this Agreement, will
cause
those agreements to be terminated or to give any party to those agreement
the
right to modify, restructure of terminate any of the agreements.
4.14 Litigation.
As of
the date hereof, there is no claim, legal action, decree, judgment, order,
settlement agreement, arbitration or other proceeding, suit or governmental
investigation pending or, to the Company’s knowledge, threatened against the
Company, any of Sellers (to the extent the same relates to the Company),
the
Assets or the Shares.
4.15 Employees.
To each
Seller’s knowledge, none of the employees (of the Company or Pinghu Lisu),
officers, or directors of the Company (collectively, the “Employees”) nor any of
the consultants, salespersons, or other personnel retained or engaged by
the
Company who are not otherwise Employees (collectively with the Employees,
the
“Service Providers”) is in violation of any term of any employment contract or
any other contract or agreement relating to the relationship of any such
person
with the Company. There are no labor controversies pending or, to the Company’s
knowledge, threatened between the Company and any of its Employees or Service
Providers. After the Closing Date, neither the Company, nor the Purchaser,
nor
Highway Holdings will have any financial responsibility for any salaries,
employment benefits, severance payments, bonuses, commissions or other
compensation that may be owing by the Company to any of the Employees for
periods prior to the Closing Date or arising out of any action taken prior
to
the Closing Date. In addition, after the Closing Date, neither the Company,
the
Purchaser, nor Highway Holdings shall have any financial or other obligation
or
liability for any taxes, contributions and other payments required to be
made by
the Company to any governmental agency relating to employment of the Employees
for periods prior to the Closing Date, save those that have been accrued
but are
not payable or dischargeable prior to these periods and which have been
disclosed to the Purchaser. The Company has paid or otherwise satisfied all
obligations owning to the Employees and to any governmental agencies relating
to
the Employees and their services for periods prior to the Closing Date so
far as
the Company is legally permitted to do so.
4.16 Brokers’
and Finders’ Fees.
The
Company is not obligated to pay any fees or expenses of any broker or finder
in
connection with the origination, negotiation, or execution of this Agreement
or
in connection with any transactions contemplated hereby.
4.17 Interest
in Customers, Competitors or Suppliers.
None of
Sellers, the Company or, to the Company’s knowledge, the Company’s officers,
directors, shareholders or key Employees has, directly or indirectly,
individually or collectively, any financial interest in any competitor or
customer of or supplier to the Company or other person or entity party to
any
agreement with the Company.
4.18 Indebtedness.
Schedule 4.18
attached
hereto sets forth a list of all agreements and other instruments under which
the
Company is indebted for borrowed money or the deferred purchase price for
property or has guaranteed the liability, debt or obligation of any other
person
or entity. The Company is not in default under any of such agreements or
other
instruments, nor is it aware of any event that, with the passage of time,
or
notice, or both, would result in an event of default thereunder except such
defaults that would not, individually or in the aggregate, have a Material
Adverse Effect.
4.19 No
Undisclosed Liabilities.
The
Company does not have any liability, loss, cost, or expense, except for
(a) liabilities accrued or reserved against in the July 31 Balance Sheet,
(b) liabilities which have arisen after the Financial Date in the ordinary
course of business consistent with the Company’s past practices in type and in
amount, and (c) those that would not, individually or in the aggregate,
have a Material Adverse Effect.
4.20 Shares.
The
authorized share capital in the Company consists solely of 200,000 ordinary
shares of HK$ 1 per share, of which all 200,000 shares are issued. All such
outstanding shares have been authorized, are validly issued and outstanding,
and
were offered and sold by the Company in compliance with all laws and
regulations. The Shares being sold to Purchaser under this Agreement constitute
the only issued share capital in the Company. No persons other than Sellers
has
any record or beneficial interest in the Shares. Except as contemplated hereby
and except for the Shares, there are no issued or outstanding securities
convertible into, or any options, warrants, or rights to acquire, any or
all of
the Shares or any capital stock or convertible securities of the Company
and no
person or entity has any call, commitment or other rights to purchase or
acquire
any capital stock of the Company. Seller owns beneficially and of record
the
number of shares of ordinary shares of the Company set forth on Schedule 4.20
attached
hereto and has full and unrestricted power to sell, assign and transfer the
shares set forth opposite his or her name on said Schedule 4.20
to
Purchaser upon the terms and conditions set forth in this Agreement, free
and
clear of any and all Encumbrances, and, upon the closing, Purchaser will
acquire
good and marketable title to all of such shares free and clear of any and
all
Encumbrances.
4.21 U.S.
Securities Laws Representation.
In the
event of acquisition of the Escrowed Highway Holdings Shares by the Sellers
as
contemplated hereunder, each Seller is acquiring the Escrowed Highway Holdings
Shares for investment purposes only and not with a view to or for sale in
connection with any distribution thereof. Each Seller understands that the
Escrowed Highway Holdings Shares have not been registered under the U.S.
Securities Act of 1933, as amended, or registered or qualified under applicable
state securities laws and thus must be held until the transfer of the shares
is
so registered or qualified or is exempt from such registration and/or
qualification requirements.
4.22 Agreements
with Luxuriance Co., Limited.
The
Sellers are the owners of all of the issued share capital in Luxuriance Co.
Limited (“Luxuriance”) and, as such, have control over Luxuriance. The Sellers
have caused all agreements, contracts, relationships, understandings, and
arrangements that have existed between the Company and Luxuriance prior to
the
Closing Date (including the Master Supply Agreement and the Master Manufacturing
and Distribution Agreement) to be terminated, and there are no existing
agreements between the Company and Luxuriance. The Company has no further
obligation to Luxuriance under any of the prior agreements between Luxuriance
and the Company, and no liability or obligation was created for Purchaser
or
Highway Holdings as a result of the termination of the Luxuriance agreements.
Prior to the Closing Date, Luxuriance has delivered to the Company all assets,
properties, inventory, raw materials, and goods that Luxuriance acquired
or held
on behalf of the Company or that, in any manner directly or indirectly, related
to the business of the Company or its operations with Pinghu Lisu.
4.23 Disclosure.
Neither
this Agreement nor any written instrument, list, exhibit, Schedule or
certificate furnished or to be furnished to Purchaser or by the Company or
any
of Sellers pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the
statements made therein not misleading.
5. Representations
and Warranties of Purchaser.
Purchaser and Highway Holdings jointly and severally represent and warrant
to
each of Sellers as follows:
5.1 Organization
and Authority.
Purchaser and Highway Holdings are companies duly organized, validly existing
and in good standing under the laws of Hong Kong and the British Virgin Islands,
respectively, and each has full power and authority to enter into this
Agreement, and any related agreements and to carry out the transactions
contemplated by this Agreement and any related agreements.
5.2 Authorization
and No Conflicts.
The
execution, delivery and performance of this Agreement, and the transactions
contemplated hereby and thereby, and all other documents and agreements of
Purchaser delivered pursuant hereto and thereto: (a) have been duly
authorized by all necessary corporate action on the part of Purchaser, and
(b) will not result in any conflict with, or breach or violation of, or
default under any agreement or other instrument to which Purchaser is a party
or
by which it is bound, or any statute or regulation applicable to Purchaser.
This
Agreement has been duly executed and delivered on behalf of each of Purchaser
and Highway Holdings and constitutes a legal, valid and binding obligation
of
each of Purchaser and Highway Holdings enforceable in accordance with its
terms.
5.3 Consents.
No
consent or approval of any person, regulatory authority, governmental
organization or third party, and no approval, order, license, permit, franchise,
declaration or filing of any nature, is required as a result of or in connection
with Purchaser’s execution, delivery and performance of its obligations under
this Agreement.
5.4 Issuance
of Escrowed Highway Holdings Shares.
All of
the Escrowed Highway Holdings Shares have been duly authorized and validly
issued and, if and when released to the Sellers by the Escrow Agent, will
be
outstanding shares of capital stock.
5.5 SEC
Filings.
The
Annual Reports on Form 20-F for Highway Holdings’ fiscal year ended March
31, 2006 as filed electronically with the U.S. Securities and Exchange
Commission (“SEC”) and previously delivered to the Sellers did not contain, as
of the filing date of such report, any untrue statements of a material fact
or
omit to state any material fact necessary in order to make the statements
made
therein, in light of the circumstances under which they were made, not
misleading.
5.6 Disclosure.
This
Agreement does not contain any untrue statement of a material fact or omits
or
will omit to state a material fact necessary in order to make the statements
made therein not misleading.
6. Additional
Agreements of the Company, Highway Holdings and Sellers.
6.1 Employment
Agreements.
In
connection with the execution and delivery of this Agreement, and as part
of the
transactions contemplated by this Agreement, Mr. Xxxxx Xxxx and Mr. Wan hereby
agree to, and hereby are each entering into an employment agreement with
the
Company, which employment agreements are attached to this Agreement as Appendix
A and B.
6.2 Transfer
of Certain Luxuriance Assets.
In the
event that, at the Closing Date, Luxuriance continues to retain any assets
or
properties that related to the operations of the Company (in Hong Kong or
the
PRC), the Sellers shall cause Luxuriance to transfer to the Company such
remaining assets without any additional consideration payable by the Company
or
without any additional liability owing by Golden Bright to Luxuriance as
of the
Closing Date.
6.3 Release
of Guarantees.
Promptly, and in no event later than three months after the Closing Date,
Purchaser or Highway Holdings shall cause each of Sellers to be irrevocably
released from any and all guarantees and/or indemnification obligations that
such Seller may have given to Citic Ka Wah Bank and HSBC, and, if necessary
to
secure any such release, Purchaser shall deliver to Citic Ka Wah Bank and
HSBC
their agreement to assume such guarantee and/or indemnification
obligations.
6.4 Non-Competition.
Each
Seller hereby agrees that during the three-year period following the Closing
Date, he will not directly or indirectly own, manage, operate, join, control,
participate in, perform any services for, invest in, or otherwise be connected
with, in any manner, whether as an officer, director, employee, consultant,
partner, investor or otherwise, any business entity which is engaged in the
design, manufacture, sale, or trading of plastic products or any business
entity
which is engaged in any other business in which either the Company or Highway
Holdings is currently engaged. Nothing herein contained shall be deemed to
prohibit any Seller from investing his funds in securities of a public company
whose securities are listed for trading on a stock exchange if such Seller’s
holdings therein represent less than five percent (5%) of the total number
or
value of shares or principal amount of other securities of such company
outstanding. Sellers, as the owners of all of the issued share capital of
Luxuriance, hereby further agree that they shall cause Luxuriance to comply
with
the foregoing agreements not to compete with either the Company or Highway
Holdings during the three-year period following the Closing Date to the same
extent, and in the same manner as is applicable to each of the Sellers. In
the
event of sale or transfer of any of the shares in Luxuriance by the Sellers
to
third parties within the three-year period following the Closing Date, the
Sellers shall procure an undertaking from the relevant purchasers of such
shares
with the effect that the purchasers shall comply with the foregoing agreements
not to compete with either the Company or Highway Holdings as aforesaid,
whereupon the Sellers shall be deemed to have discharged the obligations
contained in the preceding sentence so far as such shares relate, and shall
not
be held liable for such obligations or any breach by thereof thereafter.
In
addition, to the extent that Luxuriance has, to date, been engaged in the
design, manufacture, sale, or trading of plastic products, the Sellers hereby
agree to cause Luxuriance to cease such activities.
6.5 Affiliated
Party Loans.
The
parties to this Agreement agree and acknowledge that (i) the Sellers have
previously made loans to the Company (the “Seller Loans”), and (ii) that the
Company has previously made loans to each of Golden Bright Precision Company
Limited and to Kyoei Bright (H.K.) Company Limited (the “Company Loans”), which
companies are affiliated with the Sellers. As of Closing Date, and as indicated
on the July 31 Balance Sheet, the aggregate amount of the Seller Loans was
HK$1,794,531, and the aggregate amount of the Company Loans was HK$1,285,555.
The Sellers and the Purchaser hereby agree that the Purchaser shall procure
the
Company to repay the Seller Loans in full, without interest, on September
1,
2009, provided that all of the Company Loans are either repaid in full, without
interest, or otherwise forgiven on or before that date. In the event that
the
Seller Loans and the Company Loans are evidenced by any promissory notes
or
other written instruments, the parties hereto agree that such written
instruments are hereby amended in accordance with this Section 6.5. Furthermore,
the parties hereto agree that the Company shall not be required to repay
any of
the Seller Loans while any of the Company Loans remain unpaid and outstanding,
and further agree that if, as a result of any governmental, judicial, regulatory
or other action the Seller Loans are required to be repaid while any portion
of
the Company Loans are still outstanding, that the principal balance of the
Seller Loans shall be reduced by the then outstanding balance of the Company
Loans.
6.6 Pinghu
Lisu Agreements.
The
Sellers hereby represent and warrant that Mr. Xxxxx Xxxx is the representative
of the Company in connection with the Company’s arrangements and agreements with
Pinghu Lisu. Mr. Xxxxx Xxxx hereby agrees that during the next three years.
As
the representative of the Company, he will use his best efforts and diligence
to
maintain the existence of all arrangements and agreements between the Company
and Pinghu Lisu, and that he will take all actions (including signing all
necessary documents and instruments) requested by the Company or Highway
Holdings to maintain, renew, modify, supplement, assign or transfer the
agreements and arrangements between the Company and Pinghu Lisu.
6.7 Further
Assurances.
From
time to time, at Purchaser’s request, whether on or after the Closing Date and
without further consideration, Sellers and the Company shall execute and
deliver
or cause to be executed and delivered such further instruments of conveyance
and
transfer and take such other action as Purchaser reasonably may require more
effectively to convey and transfer to Purchaser title to the Shares free
and
clear of any Encumbrances and to effectuate the transactions contemplated
hereby.
7. Investigation.
All of
the representations, warranties, covenants and agreements of any of Sellers,
on
the one hand, and Purchaser and/or Highway Holdings, on the other hand,
contained or incorporated herein shall remain effective in accordance with
their
respective terms notwithstanding any investigation at any time made by or
on
behalf of Purchaser and/or Highway Holdings or any of Sellers, as the case
may
be, or of any information or facts discovered by or on behalf of Purchaser
and/or Highway Holdings or any of the Sellers (as the case may be) in connection
with such investigation. Any such investigation shall not constitute a waiver
or
relinquishment on the part of any party of its, his or her rights to rely
on any
of the warranties, representations, covenants and agreements of Sellers or
Purchaser and/or Highway Holdings, as the case may be, in or pursuant to
this
Agreement.
8. Survival
and Indemnification.
8.1 Survival.
The
representations and warranties of Purchaser, Highway Holdings and Sellers
shall
survive the transactions contemplated hereby and continue after the Closing
Date
for a period of three (3) years from and after the Closing Date.
8.2 Indemnification.
(a) From
and
after the Closing, (i) Sellers shall indemnify, defend and hold harmless
Purchaser and Highway Holdings against all losses, liabilities, costs and
expenses (including reasonable attorneys fees of such attorneys agreed by
the
Sellers and court costs) (collectively, “Losses”) solely
and directly resulting
or arising from or out of any material breach by the Sellers of any
representation, warranty or covenant of the Sellers provided that Purchaser
and
Highway Holdings shall do their utmost endeavours to mitigate the extent of any
of the Losses and shall comply with the requirements imposed by the Sellers
at
their sole and absolute discretion in so doing.
(b) In
the
event that Sellers are required to defend against any action, claim, suit
or
other proceeding arising out of a breach of any representation or warranty
or
any claim pertaining to business or operations of the Company prior to the
Closing Date, Purchaser and the Company shall provide to Sellers such assistance
and cooperation, including without limitation, witnesses and documentary
or
other evidence that Purchaser or the Company may have and as may be reasonably
requested by Sellers.
9. Miscellaneous.
9.1 Brokerage
Fees.
Sellers, jointly and severally, shall be exclusively liable for any brokerage
fees or commission due to any broker, finder or investment banker engaged
by the
Company or any of Sellers. Purchaser and Highway Holdings, jointly and
severally, shall be exclusively liable for any brokerage fees or commissions
due
to any broker, finder or investment banker engaged by either of them. Sellers
(jointly and severally), on the one hand, and Purchaser and Highway Holdings
(jointly and severally), on the other hand, shall indemnify and hold harmless
the other(s) against any claim for brokerage fees or commissions (including
all
expenses and attorneys’ fees) which may be asserted against such party by any
broker, finder or investment broker alleged to have been retained by the
Company
or any of Sellers, on the one hand, or by Purchaser or Highway Holdings,
on the
other hand.
9.2 Waivers.
Any
party may waive any default by any other party or the failure to fulfill
any of
the conditions to its obligations. Any waiver must be in writing.
9.3 Notices.
All
notices and other communications under this Agreement shall be in writing
and
shall be deemed to have been duly given only if done in one or more of the
following ways: (i) on the day of delivery if delivered personally,
(ii) two days after the date of mailing if mailed by registered or
certified first class mail, postage prepaid, (iii) the next business day
following deposit with an overnight air courier service which guarantees
next
day delivery, or (iv) when sent by facsimile (with a copy simultaneously
sent by registered or certified mail return receipt requested), to the other
party at the following address (or to such person or persons or such other
address or addresses as a party may specify by notice pursuant to this
provision):
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(a) If
to Purchaser, to:
Xxxxxxx
Time (H.K.) Limited
Xxxxx
000, Xxxxx 0
Xxxxxxxx
Xxxxx
00
Xxxx Sum Avenue
Sheung
Shui
New
Territories, Hong Kong
Attention: Po
Xxxx
Facsimile: (000)
0000 0000
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(b) If
to Sellers, to:
2/F.,
Xxxxx X, 00 Xxxxxxx Xxxx,
Xxxxxxx,
Xxxx Xxxx
Attention: Xx.
Xxxx Xxx Xxxxx, Xxxxx
Facsimile:
(000) 0000 0000
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9.4 Amendments.
This
Agreement may be amended, supplemented or modified by a writing signed by
the
appropriate officers of Purchaser, on the one hand, and Sellers on the other
hand.
9.5 Expenses.
Purchaser and Highway Holdings, on the one hand, and each of Sellers, on
the
other hand, shall bear its or his own expenses in connection with this Agreement
and the transactions to effectuate this Agreement, including, without
limitation, financial advisors’, attorneys’ and accountants’ fees.
9.6 Entire
Agreement.
This
Agreement contains the entire agreement and understanding of the parties
and may
not be amended except by a written agreement signed by each of the parties
hereto. This Agreement supersedes that certain non-binding letter of intent
dated May 24, 2006, between Highway Holdings and the Sellers and any and
all
other prior or contemporaneous understandings.
9.7 Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the procedural
and substantive laws of Hong Kong applicable to agreements made and to be
performed in Hong Kong.
9.8 Section
and Paragraph Headings.
The
section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
9.9 Counterparts.
This
Agreement may be executed 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.
9.10 Parties
in Interests.
Nothing
contained in this agreement, express or implied, is intended to confer upon
any
person or entity, other than the parties hereto and their permitted assignees,
any rights or remedies under or by reason of this Agreement. No assignment
of
this Agreement or any rights hereunder by any party shall be given any effect
without the prior written consent of the other party. Subject to the preceding
sentences, this Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective successors and assigns.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first above written.
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“PURCHASER”
XXXXXXX
TIME (H.K.) LIMITED.
By:/s/
________________________
Name:
Title:
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“SELLERS”
/s/
___________________________
Xxxx
Xxx Xxxxx, Xxxxx
/s/
___________________________
Xxxx
Xxx, Xxxx
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/s/
___________________________
Xxxx
Xxx Yung, Augustine
/s/
___________________________
Wan
Xxx Xxxxxx
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HIGHWAY
HOLDINGS LIMITED
By:/s/
________________________
Name: Xxxxxx
Xxxx
Title: Chief
Executive Officer
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