Exhibit 10.37
CONFIDENTIAL March 30, 2005
PURCHASE AGREEMENT
BY AND AMONG
INTERNATIONAL DISPLAYWORKS, INC.,
INTERNATIONAL DISPLAYWORKS (HONG KONG) LIMITED,
AND
THREE FIVE SYSTEMS, INC.,
TFS INTERNATIONAL, LTD.,
THREE-FIVE SYSTEMS (BEIJING) CO., LTD.
CONFIDENTIAL March 30, 2005
TABLE OF CONTENTS
1. Definitions...............................................................1
2. Basic Transaction.........................................................5
(a) Purchase and Sale of Assets.....................................5
(b) Purchase Price..................................................5
(c) Additional Payments and Adjustments.............................5
(d) The Closing.....................................................7
(e) Deliverables at the Closing.....................................7
3. Representations and Warranties of TFS.....................................8
(a) Organization , Qualification, and Corporate Power...............8
(b) Capitalization..................................................8
(c) Authorization of Transaction....................................8
(d) Noncontravention................................................8
(e) Filings with the SEC............................................9
(f) Financial Statements............................................9
(g) Events Subsequent to Most Recent Fiscal Quarter End.............9
(h) Undisclosed Liabilities and Litigation.........................10
(i) Brokers' Fees..................................................11
(j) Disclosure.....................................................11
(k) Tax Matters....................................................11
(l) Real Property..................................................11
(m) Intellectual Property..........................................12
(n) Contracts......................................................13
(o) Accounts Receivable............................................13
(p) Insurance......................................................13
(q) Employees......................................................14
(r) Employee Benefits..............................................14
(s) Compliance with Laws...........................................14
(t) Designated Assets..............................................14
(u) Inventory......................................................14
(v) Inter-Company Obligations......................................15
(w) Liens and Encumbrances.........................................15
(x) Loans and Indebtedness.........................................15
(y) Customers......................................................15
(z) Products.......................................................15
(aa) Title to Assets...............................................15
4. Representations and Warranties of IDW....................................15
(a) Organization...................................................15
(b) Authorization of Transaction...................................15
(c) Noncontravention...............................................15
(d) Brokers' Fees..................................................16
(e) Disclosure.....................................................16
(f) Filings with the SEC...........................................16
(g) Financial Statements...........................................16
5. Additional Covenants and Agreements......................................16
(a) All Parties....................................................16
CONFIDENTIAL March 30, 2005
(b) TFS, TFSI and TFSB.............................................16
(c) TFSB...........................................................17
(d) IDW............................................................19
6. Conditions to Obligations to Close.......................................20
(a) Conditions to Obligation of IDW and IDW HK.....................20
(b) Conditions to Obligations of TFS, TFSB and TFSI................21
7. Post-Closing Covenants...................................................21
(a)General.........................................................21
(b) Litigation Support.............................................21
(c) Transition.....................................................22
8. Remedies for Breaches of This Agreement..................................23
(a) Survival of Representations and Warranties.....................23
(b) Indemnification Provisions for Benefit of IDW and IDW HK.......23
(c) Indemnification Provisions for Benefit of TFS, TFSB and TFSI...23
9. Taxes....................................................................23
10. Termination.............................................................24
(a)Termination of Agreement........................................24
(b) Effect of Termination..........................................24
11. Miscellaneous...........................................................24
(a) Press Releases and Public Announcements........................24
(b) No Third Party Beneficiaries...................................25
(c) Entire Agreement...............................................25
(d) Succession and Assignment......................................25
(e) Counterparts...................................................25
(f) Headings.......................................................25
(g) Notices........................................................25
(h) Governing Law..................................................26
(i)Amendments and Waivers..........................................26
(j) Severability...................................................26
(k) Expenses.......................................................26
(l) Construction...................................................26
(m) Incorporation of Exhibits and Schedules........................26
(n) Further Assurances.............................................26
Exhibit A - List of Designated Assets
Exhibit B - Form of Opinion of TFS, TFSI and TFSB Counsel
Schedule 1 - Earn-Out: Identified TFT Business
Schedule 2 - Earn-Out: Identified STN and TFT Business
Disclosure Schedule - Exceptions to Representations and Warranties
CONFIDENTIAL March 30, 2005
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is entered into as of March 30,
2005 (the "Effective Date"), by and among International Displayworks, Inc., a
Delaware corporation ("IDW"); International Displayworks (Hong Kong) Limited, a
Hong Kong corporation and a wholly owned subsidiary of IDW ("IDW HK");
Three-Five Systems, Inc., a Delaware corporation ("TFS"); TFS International,
Ltd., a company formed under the laws of Bermuda and a wholly owned subsidiary
of TFS ("TFSI"); and Three-Five Systems (Beijing) Co., Ltd., a corporate entity
formed under the laws of the People's Republic of China (the "PRC") and a wholly
owned subsidiary of TFSI ("TFSB"). IDW, IDW HK, TFS, TFSB, and TFSI are referred
to individually herein as a "Party" and collectively herein as the "Parties."
RECITALS
WHEREAS, TFSB is a wholly foreign-owned enterprise established and lawfully
existing under the laws of the PRC. It has a registered capital of Six Million
Two Hundred and Ninety-Three Thousand and Three Hundred and Ninety United States
Dollars (US$ 6,293,390). TFSI has contributed one hundred percent (100%) of the
equity interest in TFSB, and is the lawful owner of one hundred percent (100%)
of the registered capital of TFSB.
WHEREAS, this Agreement contemplates a transaction in which IDW through IDW
HK will purchase from TFS and TFSI, and TFS and TFSI will sell and transfer to
IDW and IDW HK, 100% of the registered capital of TFSB and cause or effect the
transfer of certain assets of TFS Manila.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliates" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within Code Section 1504(a)
or any similar group defined under similar provision of state, local or foreign
law.
"Approval Authorities" means the Beijing Municipal Bureau of Commerce,
Changping District being the PRC governmental authority authorized to approve
the transfer of registered capital in a foreign invested enterprise established
in such district.
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CONFIDENTIAL March 30, 2005
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible."Change of Control" means (i) the
direct or indirect sale of or exchange in a single series of related
transactions by the stockholders of TFS of more than fifty percent (50%) of the
voting stock of TFS; (ii) a merger or consolidation in which TFS is a party; or
(iii) the sale, exchange or transfer of all or substantially all of the assets
of TFS, in each case wherein the stockholders of TFS immediately before such
transaction or single series of related transactions do not retain immediately
after such transaction or single series of related transactions, in
substantially the same proportions as their ownership of shares of TFS' voting
stock immediately before such transaction or single series of related
transactions, direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting stock of TFS
or the corporation or corporations to which the assets of TFS were transferred,
as the case may be.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of TFSB that is not already generally available to the public.
"Continuing Business" means, for the purpose of tracking the Earn-Out, the
business of TFSB that was acquired pursuant to this Agreement.
"Control" (including the terms "Controlled by" and "under common Control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Controlled Group" has the meaning set forth in Code Section 1563.
"Designated Assets" means all right, title, and interest in and to all of
the assets of Three-Five Systems, Pacific, Inc. or TFS-Manila as set forth in
Exhibit A, unless owned by TFSB.
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Earn-Out" has the meaning set forth in Section 2(c)(i) below.
"Earn-Out Payment" has the meaning set forth in Section 2(c)(i) below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement, (b) qualified defined contribution retirement
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CONFIDENTIAL March 30, 2005
plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit
Plan or material fringe benefit or other retirement, bonus, or incentive plan or
program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium) of TFSB.
"Knowledge" means actual or constructive knowledge after reasonable
investigations. In the case of TFS, "Knowledge" shall be deemed to be the entity
and collective knowledge of the senior officers, managers and directors of TFS,
TFSB and TFSI. In the case of IDW, "Knowledge" shall be deemed to be the entity
and collective knowledge of the senior officers, managers and directors of IDW
and IDW HK.
"Law" means any federal, state, local, foreign, multinational, stock
exchange or securities market statute, law, ordinance, regulation, rule, code,
governmental order, governmental approval, decree, treaty, decision,
constitution or other requirement or rule of law.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due) including
any liability for Taxes.
"Material Adverse Effect" means any effect or change that would be (or
could reasonably be expected to be) materially adverse to the business, assets,
condition (financial or otherwise), operating results, operations, or business
prospects of TFSB, or to the ability of TFS, TFSI and TFSB to consummate timely
the transactions contemplated hereby (regardless of IDW or IDW HK has knowledge
of such effect or change on the date hereof).
"Most Recent Financial Statements" has the meanings set forth in Section
3(f).
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CONFIDENTIAL March 30, 2005
"Most Recent Fiscal Quarter End" has the meanings set forth in Section
3(g).
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Off-Set Date" has the meaning set forth in Section 2(c)(ii) below.
"Off-Set Payment" has the meaning set forth in Section 2(c)(ii) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency) as it relates to the business and operations of TFSB.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"PRC" means the People's Republic of China.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialman's, and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any
corporation, limited liability company, partnership, association, or other
business entity of which a majority of the total voting power of shares of stock
or other similar ownership interest is at the time owned or controlled, directly
or indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. The term "Subsidiary" shall include all Subsidiaries of
such Subsidiary.
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TFSB Transferred Interest" means the TFSI-owned one hundred percent (100%)
of the paid-up registered capital equity interest in TFSB, as well as all rights
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CONFIDENTIAL March 30, 2005
and contracts pertaining to such one hundred percent (100%) interest, legally
obtained by TFSI and to be transferred by TFSI to IDW HK pursuant to this
Agreement.
2. Basic Transaction.
-----------------
(a) The Purchase. On and subject to the terms and conditions of this
Agreement, TFS shall cause to be transferred to IDW HK, and IDW shall cause IDW
HK to acquire the TFSB Transferred Interest and the Designated Assets.
(i) Designated Assets. It shall be the sole responsibility of TFS
(A) to suitably package the Designated Assets for shipping; (B) to
complete and provide all shipping documents for the Designated Assets,
which shall include a list of shipped items corresponding to all the
items set forth in Exhibit A; and (C) to deliver the Designated Assets
with the required shipping documents to a freight forwarder designated
by IDW. IDW shall bear the sole cost and risk of transferring the
Designated Assets from Manila to IDW HK, which includes any taxes
associated with the transfer of the Designated Assets.
(ii) Taxes. Except as set forth above in Section 2(a)(i), TFS
shall be responsible for payment of all taxes relating to the
transactions contemplated in this Agreement, which shall, include but
not be limited to, all sales, transfer and use taxes arising out of
and relating to the transactions contemplated in this Agreement. TFS
shall pay its portion, prorated as of the Closing Date, of all Taxes
of TFSB's business. IDW shall not be responsible for any business,
occupation, withholding, or similar tax, or any Taxes of any kind
related to any period before the Closing Date.
(b) Purchase Price. All money referred to in this Agreement shall be
in US Dollars. Subject to the satisfaction or waiver of all closing conditions
set forth under Section 6, which shall include, but not limited to, the receipt
of confirmation of TFS' submission of applications for increase in registered
capital and transfer of registered capital in a foreign invested enterprise with
the Approval Authorities (the "Transfer"), IDW will initiate wire to deliver to
Xxxxxxxxx Xxxxxxx LLP (the "Escrow Agent") an aggregate of Eight Million Dollars
($8,000,000)(the "Closing Payment"), payable to the Escrow Agent's client escrow
account. Pursuant to the terms and conditions of the escrow agreement entered
into contemporaneously herewith, the Escrow Agent will receive and hold funds
tendered by IDW until the applications for the Transfer are approved by the
Approval Authorities. Upon receipt of the approval of Transfer by the Approval
Authorities, as evidenced by the Approval Authorities' issuance of an amended
Approval certificate confirming the change in ownership of TFSB (the "Approval
Certificate"), the Escrow Agent will immediately disburse the Closing Payment to
TFS. In the event such approval of the Transfer is not obtained, the Escrow
Agent will release and immediately disburse the Closing Payment to IDW.
(c) Additional Payments and Adjustments. Subject to Section 7(e) of
this Agreement:
(i) Earn-Out. IDW shall pay TFS an earn-out amount based on the
revenues received by IDW or IDW HK (the "Earn-Out Amount"), if any,
determined at the time, and in the manner as set forth in this
Agreement.
(A) From April 1, 2005 to March 31, 2006 (the "Earn-Out
Period"), TFS shall be eligible to receive the following Earn-Out
Amount:
(1) If the revenue derived by IDW or one of its
affiliates from the designated customer on the products set
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CONFIDENTIAL March 30, 2005
forth on Schedule 1 (regardless of the originating shipment
point) is at least $50.4 million for the Earn-Out Period,
IDW shall pay TFS an amount equal to the product of (i) 60%
of the gross profits on the products sold to such customer,
with such gross profits to be determined based on the amount
of gross profit to be earned by TFSB in the contracts
between such designated customer and TFSB and (ii) the
revenue received from such customer under such contracts
during the Earn-Out Period. The range is expected to be
between 3.6% and 4.8% of such revenue; and
(2) If the revenue derived by IDW HK or one of its
affiliates from all other business from the STN and TFT
business as set forth in Schedule 2 minus all revenue
defined in Section 2(c)(i)(A)(1), is at least $33.6 million
during the Earn-Out Period, then in such an event, IDW shall
pay TFS an amount equal to 7.2% of the revenue received from
such business during the Earn-Out Period.
(B) The payment of the Earn-Out Amount (the "Earn-Out
Payment"), if any, shall be paid in the form of common stock of
IDW, based on the trailing five day average closing price
preceding March 31, 2006. The Earn-Out Payment shall be due and
payable on May 1, 2006.
(C) IDW agrees to register the shares of common stock that
may be issued to TFS in the future pursuant to Section 2(c)(i)
provisions pursuant to piggy-back registration rights on the next
registration statement on Form S-3 to be filed by IDW, subject to
investment banker or underwriter discretion not to include such
shares. If not included under the foregoing piggy-back
registration statement rights by March 1, 2006, then IDW will
prepare and file a separate registration statement on Form S-3
and make reasonable efforts to cause such registration statement
to be declared effective within 30 days of April 1, 2006, and in
either case shall maintain such registration statement for a
period of a least ninety (90) days following the issuance of any
shares pursuant to the Earn-Out. IDW will notify TFS of the
registration of such shares of common stock and shall provide TFS
with the prospectus following the order declaring such
registration statement effective.
(ii) Off-Set.
(1) Accounts Receivable and Account Payable; TFS
Guarantee. On the Closing Date, a schedule listing the
accounts receivable by customer detail (the "Closing
Accounts Receivable"), the accrued liabilities (the "Closing
Accrued Liabilities") and the accounts payable balance (the
"Closing Accounts Payable Balance") shall be delivered by
TFS to IDW. Ninety (90) days from the Closing Date (the
"Off-Set Date"), if the amounts of Closing Accounts
Receivable collected by IDW exceed the Closing Accounts
Payable Balance, Accrued Liabilities and any bad debts, then
there shall be an increase to the Purchase Price equal to
such excess (the "Off-Set Payment"). The Off-Set Payment
shall be paid to TFS within thirty (30) days from the
Off-Set Date. If on the Off-Set Date, the amount of Closing
Accounts Receivable collected by IDW is less than the
Closing Accounts Payable Balance, Accrued Liabilities and
the bad debts (the "Deficiencies"), then TFS shall pay IDW
an amount equal to the Deficiencies within thirty (30) days
from the Off-Set Date. Upon IDW's receipt of the payment for
the Deficiencies, ownership and collectibility of any
Closing Accounts Receivable uncollected on the Off-Set Date
shall be transferred to TFS within thirty (30) days from the
Off-Set Date.
(2) Warranty and RMA. If there are any claims arising
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CONFIDENTIAL March 30, 2005
out of a warranty or return merchandise authorization
("RMA") policy for any products shipped prior to the Closing
Date during the ninety (90) day period following the Closing
Date and such claim exceeds $25,000 per customer, TFS agrees
that IDW and IDW HK may deduct such amounts from the Off-Set
Payment, Inventory Payment or Earn-Out Payment.
(iii) Inventory Payment. All inventory shall be transferred to
IDW at Closing and all transferred inventory shall be tracked by IDW.
Under no circumstances shall IDW be obligated to use any of the
transferred inventory. In the event, IDW uses the transferred
inventory it may use such inventory without any payment to TFS so long
as the value of the used inventory does not exceed $2 million
("Initial Inventory"). The inventory shall be valued at the book value
of the inventory on the Closing Date (the "Book Value"). For any used
inventory in excess of the Initial Inventory, IDW shall pay TFS for
the used inventory at the Book Value. Commencing on the Closing Date
and terminating one (1) year from the Closing Date (the "Anniversary
Date"), IDW shall track the inventory used during each ninety (90) day
period. After each ninety (90) day period, IDW shall identify the
amount of inventory used during such period, if any, and make a
payment to TFS for any used inventory in excess of the Initial
Inventory ("Inventory Payment"). At the end of the one year period, at
the election of TFS, IDW will ship and transfer all unused inventory
to TFS at TFS sole expense.
(d) The Closing. Following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine, the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Xxxxxx Eng & Xxxxxxxx in Sacramento, California, commencing at
9:00 a.m. local time on April 8, 2005 (the "Closing Date").
(e) Deliverables at the Closing. At the Closing:
(i) TFS, TFSB and TFSI will deliver to IDW and IDW HK:
(A) All the various certificates, instruments and documents
referred to in Section 6(a) below;
(B) All the capital contribution verification report
representing all of the TFSB Transferred Interest, endorsed in
blank or accompanied by duly executed assignment documents
evidencing such transfer, if so requested by IDW or IDW HK,
(C) Applications for Transfers dated and filed with the
Approval Xxxxxxxxxxx xx xxxxx xxxx Xxxxx 0, 0000,
(X) All duly executed assignment documents evidencing the
transfer of any and all outstanding inter-company loans or
obligations of TFSB to IDW, satisfactory in form and substance to
IDW; and
(E) An executed Assignment and Xxxx of Sale for the
Designated Assets.
(ii) IDW and IDW HK will deliver to TFS, TFSB and TFSI:
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CONFIDENTIAL March 30, 2005
(A) All the various certificates, instruments and documents
referred to in Section 6(b) below; and
(B) The Closing Payment in the manner set forth in Section
2(b).
3. Representations and Warranties of TFS. TFS as
expressly provided below, represents and warrants to IDW and
IDW HK that the statements contained in this Section 3 are
true, correct and complete as of the date of this Agreement,
except as set forth in the disclosure schedule accompanying
this Agreement and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 3.
(a) Organization, Qualification, and Corporate Power. Each of TFS,
TFSI, and TFSB is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each
of TFS, TFSI and TFSB is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required and where the failure to so qualify would have a Material Adverse
Effect on TFSB considered as a whole. Each of TFS, TFSI and TFSB has the
corporate power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.
(b) Capitalization. TFSI has made its capital contribution to TFSB in
cash in full, and a qualified capital verification institution has issued a
capital contribution verification report thereof. No other share or loan
capital has been issued or allotted. TFSI is the sole legal, rightful and
beneficial owner of the TFSB Transferred Interest and the TFSB Transferred
Interest is not encumbered or subject to any court order or enforcement
action by any authority. TFSI is the sole legal, rightful and beneficial
owner of the TFSB Transferred Interest and the TFSB Transferred Interest is
not and will not be encumbered by any security in the form of guarantees,
pledges, any third party interests or any other Liens; and TFSI can duly
and validly transfer the TFSB Transferred Interest to IDW HK. TFSI's
transfer of the TFSB Transferred Interest is not subject to any third party
consent other than the approval of the Approval Authority. There are no
agreements or arrangements which provide for the present or future issue,
allotment or transfer of or grant to any Person the right to call for the
issue, allotment or transfer of any share, interest or loan capital of
TFSB.
(c) Authorization of Transaction. Each of TFSB, TFSI and TFS has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement and the consummation by
each of TFSB, TFSI and TFS of the transactions contemplated hereby have
been duly authorized by its Board of Directors and by its shareholders to
the extent required by applicable law, and no other corporate proceedings
are necessary by TFSB or TFSI to authorize this Agreement or to consummate
the transactions contemplated. This Agreement has been duly and validly
executed by each of TFSB, TFSI and TFS and constitutes the valid and
legally binding obligation of each of them, enforceable against each of
them in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditor's rights generally and by principles of equity.
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any of TFSB, TFSI and
TFS is subject or any provision of the charter, memorandum of association,
bylaws or by-laws of TFSB, TFSI or TFS or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
that would have a Material Adverse Effect or require any notice where the
failure to provide notice would have such a Material Adverse Effect, under
any agreement, contract, lease, license, instrument, or other arrangement
to which TFSB, TFSI or TFS is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Other than in connection with the
provisions of the Securities Exchange Act and the state securities laws,
TFSB, TFSI or TFS does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
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CONFIDENTIAL March 30, 2005
lease, license, instrument, or other arrangement to which TFSB, TFSI or TFS
is a party or by which it is bound or to which any of its assets is subject
(or result in the imposition of any Security Interest upon any of its
assets). Other than in connection with the provisions of the Securities
Exchange Act and the state securities laws, TFSB, TFSI or TFS does not need
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for
the Parties to consummate the transactions contemplated by this Agreement.
(e) Filings with the SEC. To the Knowledge of TFS, TFS has made all
filings with the SEC that is has been required to make under the Securities
Act and the Securities Exchange Act (collectively, the "TFS Public
Reports"). None of the TFS Public Reports, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
(f) Financial Statements. TFSB has delivered to IDW and IDW HK a
preliminary version of its financial statements as of February 28, 2005 as
they relate to TFSB (the "Most Recent Financial Statements"). Such
preliminary financial statements (including the related notes and
schedules), and all other financial statements provided under this
Agreement have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of TFSB as of the indicated dates and the results of
operations of TFSB for the indicated periods, and are consistent with the
books and records of TFSB, provided, however, that the interim statements
are subject to normal year end adjustments (which will not be material,
individually or in the aggregate).
(g) Events Subsequent to Most Recent Fiscal Quarter End. Since
February 28, 2005 (the "Most Recent Fiscal Quarter End"), there has not
been any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of TFSB. Without
limiting the generality of the foregoing, since that date:
(i) TFSB has not sold, leased, transferred, or assigned any of TFSB's
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
(ii) TFSB has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
outside the Ordinary Course of Business;
(iii) TFSB has not accelerated, terminated, modified, or cancelled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) to which TFSB is a party or by which TFSB
is bound;
(iv) TFSB has not imposed any Security Interest upon any of its
assets, tangible or intangible, and TFS has not imposed any Security
Interest upon any of the Designated Assets;
(v) TFS had not made any capital investment in, any loan to, or any
acquisition of the securities or assets of TFSB (or series of related
capital investments, loans, and acquisitions);
(vi) TFSB has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more than $10,000
singly or $100,000 in the aggregate;
(vii) TFSB has not delayed or postponed the payment of accounts
payable and other Liabilities outside the Ordinary Course of Business;
9
CONFIDENTIAL March 30, 2005
(viii) TFSB has not cancelled, compromised, waived, or released any
right or claim (or series of related rights and claims) that is material to
its business;
(ix) TFSB has not granted any license or sublicense of any rights
under or with respect to any TFSB Intellectual Property;
(x) TFSB has not issued, sold, or otherwise disposed of any of its
capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock, except for the capital stock held by TFSI;
(xi) TFSB has not declared, set aside, or paid any dividend or made
any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital
stock;
(xii) TFSB has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees;
(xiii) TFSB has not entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xiv) TFSB has not adopted, amended, modified, or terminated any
bonus, profit sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees
(or taken any such action with respect to any other Employee Benefit Plan);
(xv) TFSB has not experienced any material damage, destruction or loss
(whether or not covered by insurance ) to its property; and
(xvi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving TFSB.
(h) Undisclosed Liabilities and Litigation. TFSB has no material Liability
except for (i) liabilities set forth in the balance sheet dated as of the Most
Recent Financial Statements and (ii) liabilities that have arisen after the Most
Recent Financial Statements, all of which occurred in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law). TFSB is not the subject of or involved in,
any civil, criminal or administrative actions, suits, claims, hearings,
investigations or proceedings, whether pending or threatened, or that could
result in any claims against, or obligations or liabilities of TFSB. TFSB has no
outstanding judgments, decrees, injunctions or orders of any governmental entity
or arbitrator.
(i) Brokers' Fees. TFSB does not have any liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(j) Disclosure. The schedules, certificates, and any and all other
statements and information, whether furnished in written or electronic form, to
IDW and IDW HK or their representatives by or on behalf of any of TFS, TFSI or
TFSB in connection with the negotiation of this Agreement and the transactions
contemplated hereby do not contain any material misstatement of fact or omit to
state a material fact or any fact necessary to make the statements contained
therein not misleading.
(k) Tax Matters.
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CONFIDENTIAL March 30, 2005
(i) TFSB has filed all Tax Returns that it was required to file. All
such Tax Returns were correct and complete in all material respects. TFSB
has (whether or not shown on any Tax Return) paid all Taxes required to be
paid (except where the failure to pay the same would not have a Material
Adverse Effect). TFSB currently is not the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where TFSB does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. There are no Security
Interests on the Designated Assets or any of the assets of TFSB that arose
in connection with any failure (or alleged failure) to pay any Tax.
(ii) TFSB has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid to any employee,
independent contractor, creditor, stockholder, or other third party as
required under the applicable laws.
(iii) TFS has no Knowledge of any pending or proposed assessment
against TFSB for additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability of
TFSB either (A) claimed or raised by any authority in writing (including
any audit of any Tax Return) or (B) known to TFS based upon personal
contact with any agent of such authority.
(iv) TFSB has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(v) TFSB is not a party to any Tax allocation or sharing agreement.
TFSB (A) has not been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which
was TFS) or (B) has no Liability for the Taxes of any Person under Reg.
Section 1.1502 6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(vi) The Most Recent Financial Statements reflect an adequate reserve
for all current Taxes payable by TFSB.
(l) Real Property.
(i) TFSB is the sole and exclusive holder of the land use rights
approval certificate No. 1998 (032), issued by the Changping Municipal Land
and Natural Resources Administration Bureau in 2001 with respect to the
Site (the "Site Land Use Rights Certificate") and listed on Section 3(l)(i)
of the Disclosure Schedule.
(ii) Except as noted on Section 3(l)(ii) of the Disclosure Schedule,
with respect to each such parcel of real property under lease by TFSB:
(A) the lease or sublease is in full force and effect and TFSB
has a valid leasehold interest in the property subject to such lease;
(B) TFSB is not in breach or default under such lease or
sublease, and no event has occurred that, with notice or lapse of
time, would constitute a breach or default by TFSB or permit
termination, modification, or acceleration thereunder;
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CONFIDENTIAL March 30, 2005
(C) TFS has no Knowledge of any breach or default by any other
party to any such lease or sublease;
(D) no party to the lease or sublease has notified TFSB, TFSI and
TFS that it has repudiated any provision thereof;
(E) TFSB has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(F) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof by TFSB and
have been operated and maintained by TFSB in accordance with
applicable laws, rules and regulations;
(G) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities; and
(H) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms
following the consummation of the transaction contemplated in this
Agreement.
(m) Intellectual Property.
(i) TFSB owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of TFSB as presently
conducted and as presently proposed to be conducted, which includes,
but is not limited to, the software and hardware and other forms of
Intellectual Property used by TFSB' engineers. TFSB has taken all
necessary action to maintain and protect each item of Intellectual
Property that it owns or uses and the consummation of the transactions
contemplated hereby will not materially alter the terms and conditions
of such ownership or use.
(ii) TFSB has not received notice of, nor does TFS have Knowledge
of any facts that would indicate the likelihood of, any interference,
infringement or misappropriation of its Intellectual Property, or any
conflict with the Intellectual Property rights of third parties, and,
TFSB has not received during the past three years any written charge,
complaint, claim, demand or notice alleging any such interference,
infringement or misappropriation (including any claim that TFSB must
license or refrain from using any Intellectual Property rights of any
third party).
(iii) Section 3(m)(iii) of the Disclosure Schedule identifies
each patent or registration which has been issued to TFSB and each
trade name or unregistered trademark used by TFSB in connection with
any of its businesses. With respect to each item of Intellectual
Property required to be identified in Section 3(m)(iii) of the
Disclosure Schedule:
(A) TFSB rightfully possesses all right, title, and interest
in and to the item, free and clear of any Security Interest,
license, or other restriction and has paid for all such rights;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
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CONFIDENTIAL March 30, 2005
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) TFSB does not have any agreement to indemnify any Person
for or against any interference, infringement or misappropriation
with respect to the item.
(iv) to the Knowledge of TFS, the consummation of the
transactions contemplated hereby will not result in the termination or
any impairment of the Intellectual Property of TFSB.
(n) Contracts. Section 3(n) of the Disclosure Schedule lists the following
contracts and other agreements to which TFSB is a party:
(i) any agreement (or group of related agreements) for the
purchase or sale of more than $25,000 per annum of raw materials,
commodities, supplies, products, or other personal property, or for
the furnishing or receipt of services, the performance of which will
extend over a period of more than one year, result in a material loss
to TFSB;
(ii) any agreement concerning a partnership or joint venture;
(iii) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, or under which it
has imposed a Security Interest on any of its assets, tangible or
intangible;
(iv) any agreement concerning noncompetition;
(v) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(vi) any collective bargaining agreement;
(vii) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(viii) any agreement providing for payments between or among
TFSB, TFSI and TFS; and
(ix) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the business,
financial condition, operations, results of operations, or future
prospects of TFSB.
(o) Accounts Receivable. [Omitted]
(p) Insurance. The Disclosure Schedule, under the caption referencing this
3(p), lists and briefly describes each insurance policy maintained with respect
to the Designated Assets, and the properties, assets and operations of TFSB. All
of such insurance policies are in full force and effect and are issued by
13
CONFIDENTIAL March 30, 2005
insurers of recognized responsibility. TFSB is not in default with respect to
its obligations under any of such insurance policies. TFSB has been covered
during the past five years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period.
(q) Employees. TFS does not have Knowledge of any executive, key employee,
or group of employees that has plans to terminate employment with TFSB. TFSB is
not a party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, formal claims of unfair labor practices, or
other collective bargaining disputes. TFSB has not committed any unfair labor
practice.
(r) Employee Benefits.
(i) Section 3(r) of the Disclosure Schedule lists each Employee
Benefit Plan that TFSB maintains, to which TFSB contributes, or with
respect to which TFSB has any material Liability or potential Liability.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) has been maintained, funded and
administered in accordance with the terms of such Employee Benefit
Plan and complies in form and in operation in all material respects
with the applicable requirements of ERISA, the Code, and other
applicable laws.
(B) All contributions (including all employer contributions and
employee salary reduction contributions) that are due have been made
within the time period prescribed by ERISA to each such Employee
Benefit Plan that is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date that
are not yet due have been made to each such Employee Pension Benefit
Plan or accrued in accordance with the past custom and practice of
TFSB. All premiums or other payments for all periods ending on or
before the Closing Date have been paid with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(C) Each such Employee Benefit Plan that is intended to meet the
requirements of a "qualified plan" under Code Section 401(a) has
received a determination from the Internal Revenue Service that such
Employee Benefit Plan is so qualified, and nothing has occurred since
the date of such determination that could adversely affect the
qualified status of any such Employee Benefit Plan.
(s) Compliance with Laws. Except as noted in Section 3(l), TFSB is, and has
been, in material compliance with all laws, statutes, ordinances, rules,
regulations, licenses and permits of any governmental entity, including all laws
relating to environment, health and safety, the violation of which would have a
Material Adverse Effect.
(t) Designated Assets. TFS has full authority to cause the transfer of the
Designated Assets to IDW HK pursuant to this Agreement without any further
consent or action being required by any other party. Upon transfer of the
Designated Assets, IDW HK will own and have good and marketable title to the
Designated Assets, free and clean of all debts, Liabilities, obligations,
claims, liens, Security Interest and encumbrances of any kind.
(u) Inventory. The Initial Inventory of TFSB consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth on
14
CONFIDENTIAL March 30, 2005
the face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of TFSB.
(v) Inter-Company Obligations. As of the Closing, there will be no
inter-company obligations, including but not limited to any outstanding loans or
contractual arrangements between or among TFSB, TFSI or TFE, or their
affiliates.
(w) Liens and Encumbrances. Except as set forth in Section 3(w) of the
Disclosure Schedule, there are no Security Interest on any of the Designated
Assets or the assets of TFSB.
(x) Loans and Indebtedness. All loans and debts owed to TFSB are valid and
collectible.
(y) Customers. There are no pending disputes or threatened disputes between
TFSB and its top ten customers.
(z) Products. There are no pending disputes or threatened disputes between
TFSB and any Person or entity relating to its products, operations, business or
otherwise. In addition, there are issues or pending claims relating to TFSB'
warranties or defective products.
(aa) Title to Assets. Except as noted in Section 3(l), TFSB has good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by TFSB, located on its premises, or shown on the Most Recent Financial
Statements or acquired after the date thereof, free and clear of all Security
Interests.
4. Representations and Warranties of IDW. IDW represents and warrants to
TFS that the statements contained in this Section 4 are correct and complete as
of the date of this Agreement, except as set forth in the Disclosure Schedule.
The Disclosure Schedule will be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Section 4.
(a) Organization. Each of IDW and IDW HK is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Authorization of Transaction. Each of IDW and IDW HK has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement by IDW and IDW HK and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on their part are necessary to authorize the execution, delivery and performance
of this Agreement. This Agreement has been duly executed and delivered by IDW
and IDW HK and constitutes their valid and legally binding obligation,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditor's rights generally and by principles of equity.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either IDW or IDW HK is subject or any
provision of the charter or bylaws of either IDW or IDW HK. Other than in
connection with the provisions of the Securities Exchange Act and the state
securities laws, neither XXX nor IDW HK needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
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CONFIDENTIAL March 30, 2005
(d) Brokers' Fees. Neither IDW nor IDW HK has any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which TFS, TFSB, or TFSI
could become liable or obligated.
(e) Disclosure. The schedules, certificates, and any and all other
statements and information furnished to TFS, TFSB or TFSI or their
representatives by or on behalf of IFW or IDW HK in connection with the
negotiation of this Agreement and the transactions contemplated hereby do not
contain any material misstatement of fact or omit to state a material fact or
any fact necessary to make the statements contained therein not misleading.
(f) Filings with the SEC. To the Knowledge of IDW, IDW has made all filings
with the SEC that is has been required to make under the Securities Act and the
Securities Exchange Act (collectively, the "IDW Public Reports"). None of the
IDW Public Reports, as of their respective dates, contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
(g) Financial Statements. IDW has delivered to TFS, TFSB and TFSI a
preliminary version of its Most Recent Financial Statements. Such preliminary
financial statements(including the related notes and schedules), and all other
financial statements provided under this Agreement have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of IDW HK as of the
indicated dates and the results of operations of IDW HK for the indicated
periods, and are consistent with the books and records of IDW HK, provided,
however, that the interim statements are subject to normal year end adjustments
(which will not be material, individually or in the aggregate).
5. Covenants and Agreements. The Parties agree as follows with respect to
the period from and after the execution of this Agreement and the Closing Date.
(a) All Parties.
(i) Each of the Parties will use its reasonable Best Efforts to
take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in Section 6 below).
(ii) Each Party will give prompt written notice to the others of
any material adverse development causing a breach of any of its own
representations and warranties in Section 3 or Section 4 above, as
applicable. No disclosure by any Party pursuant to this Section 5,
however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation or breach of
warranty.
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CONFIDENTIAL March 30, 2005
(b) TFS, TFSI and TFSB. In addition to the covenants set forth in
subsection (a),
(i) Cooperation. TFS, TFSB and TFSI shall cooperate with IDW and
IDW HK and provide all additional materials and documents reasonably
requested by IDW and IDW HK in connection with its due diligence.
(ii) Access. TFS, TFSI and TFSB shall permit IDW and IDW HK and
its respective representatives to have reasonable access to, and to
examine and make copies of the books and records of TFSB for purposes
of conducting due diligence. (iii) Engagement Letter. Subject to the
satisfaction of IDW, IDW shall have received a proposed engagement
letter between IDW and the law firm of Xxxxx & XxXxxxxx ("Xxxxx &
XxXxxxxx") pursuant to which Xxxxx & XxXxxxxx shall agree to provide
legal services necessary to rectify the current land use rights
certificate issue to the satisfaction of IDW, such as by obtaining the
issuance of a proper land use rights certificate for the Beijing
facility as disclosed under Section 3(l) (the "Land Use Issue") at
TFS' sole expense as provided in this Agreement. The proposed
engagement letter will be satisfactory in form and substance to IDW.
(iii) Engagement Letter. Subject to the satisfaction of IDW, IDW
shall have received a proposed engagement letter between IDW and the
law firm of Xxxxx & XxXxxxxx ("Xxxxx & XxXxxxxx") pursuant to which
Xxxxx & XxXxxxxx agree to provide legal services for two years with
regard to remedying the current land use rights certificate issue to
the satisfaction of IDW, such as by obtaining the issuance of a proper
land use rights certificate for the Beijing facility as disclosed
under Section 3(l) (the "Land Use Issue"). TFS has agreed to pay up to
$200,000 of Xxxxx & McKenzie's fees as provided in this Agreement. The
proposed engagement letter will be satisfactory in form and substance
to IDW.
(c) TFSB. In addition to the covenants set forth in subsections (a)
and (b), TFSB agrees as follows:
(i) Notices and Consents. TFSB will obtain all required consents
necessary to consummate the transactions contemplated herein, which
shall include, but not be limited to, obtaining the necessary
approvals from the Approval Authorities and amending the incorrect
name of the shareholder in the TFSB articles of association and
business license. TFSB will use its Best Efforts to obtain any other
third-party consents reasonably necessary to consummate the
transactions contemplated herein.
(ii) Preservation of Business. TFSB will use its Best Efforts
keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and
employees.
(iii) Operation of Business. Without the prior written consent of
IDW and IDW HK, TFSB will not engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business.
TFSB will not engage in any activity or take any actions that could
have a Material Adverse Effect on the business of TFSB. Without
limiting the generality of the foregoing:
(A) TFSB will not authorize or effect any change in its
articles of association, excepting those set forth in Section
5(c)(i);
(B) TFSB will not grant any options, warrants, or other
rights to purchase or obtain any of its capital stock or issue,
sell, or otherwise dispose of any of its capital stock (except
upon the conversion or exercise of options, warrants, and other
rights currently outstanding);
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CONFIDENTIAL March 30, 2005
(C) TFSB will not split, combine, subdivide or reclassify
any TFSB's outstanding registered capital stock or registered
capital;
(D) TFSB will not make any acquisition by merger,
consolidation or otherwise, or material disposition of inventory,
supplies and products, of assets or securities, or permit any
assets to become subject to any material lien, encumbrance or
Security Interest outside the Ordinary Course of Business;
(E) TFSB will not pay or agree to pay or accelerate the
payment of any pension, retirement allowance or other employee
benefit not required or contemplated by any of the existing
Employee Benefit Plans;
(F) TFSB will not declare, set aside, or pay any dividend or
distribution with respect to its capital stock or registered
capital (whether in cash or in kind), or redeem, repurchase, or
otherwise acquire any of its capital stock or registered capital;
(G) TFSB will not issue any note, bond, or other debt
security or create, incur, assume, or guarantee any indebtedness
for borrowed money or capitalized lease obligation outside the
Ordinary Course of Business;
(H) TFSB will not impose any Security Interest upon any of
its assets outside the Ordinary Course of Business;
(I) TFSB will not make any capital investment in, make any
loan to, or acquire the securities or assets of any other Person
outside the Ordinary Course of Business;
(J) TFSB will not make any change in employment terms,
including any increases in compensation, for any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(K) TFSB will not make any capital expenditures outside the
Ordinary Course of Business;
(L) TFSB will not hire any employees outside the Ordinary
Course of Business;
(M) TFSB will not make or effect any corporate or
operational changes outside the Ordinary Course of Business;
(N) TFSB will not transfer any of its assets without the
prior written consent of IDW and IDW HK outside the Ordinary
Course of Business;
(O) TFSB will not have incur additional liabilities outside
the Ordinary Course of Business;
(P) TFSB will permit representatives of IDW and IDW HK to
have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of TFSB, to
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CONFIDENTIAL March 30, 2005
all premises, properties, personnel, books, records (including
Tax records), contracts, and documents of or pertaining to each
of TFSB. Each of IDW and IDW HK will treat and hold any such
information it receives from TFSB in the course of the reviews
contemplated by this Section 5(c)(iii)(P) as Confidential
Information; and
(Q) All inter-company loans and debts of TFSB shall have
been paid in full or transferred to IDW at IDW's election.
(R) All inter-company arrangements and agreements between or
among TFS, TFSB and TFSI will be cancelled, terminated or void in
full, without any outstanding obligations remaining.
(S) All outstanding employment offers will have been
rescinded or otherwise withdrawn without any Material Adverse
Effect to the business TFSB without any outstanding obligations
remaining.
(T) Applications for the Transfer will be submitted to the
Approval Authorities and such applications will be approved by
the Approval Authorities.
(d) IDW. In addition to the covenants set forth in subsections (a),
IDW agrees as follows:
(i) Conduct of Business During Earn-Out Period. IDW acknowledges
and agrees that the ability of the Continuing Business to meet the
conditions for the Earn-Out Payment and the ability of the parties to
calculate fairly and measure the performance of the Continuing
Business relative to such Earn-Out during the Earn-Out Period will
depend to a significant degree upon maintaining the Continuing
Business. IDW agrees to act in good faith at all times during the
Earn-Out Period. To the extent such actions and performance of such
covenants shall not have a Material Adverse Effect or be expected to
have a Material Adverse Effect on the Continuing Business, during the
Earn-Out Period IDW agrees to use its reasonable Best Efforts:
(A) To enable the Continuing Business to achieve the earnout
targets as contemplated under this Agreement to the extent that
the demand for the products does not exceed the capacity
purchased under this Agreement. In no event shall, IDW be
required to make any capital expenditures to produce such
additional quantities.
(B) To maintain the employees or to engage employees of
comparable skill and experience to conduct the Continuing
Business in a manner that is consistent with IDW's business
processes.
(C) To encourage and facilitate the growth and development
of the business through corporate synergies, which shall include
(1) promoting and marketing the products and services of the
Continuing Business; (2) encouraging its sales force to promote
and sell the products and services of the Continuing Business;
and (3) permitting reasonable opportunities for employees or
consultants of the Continuing Business to train and communicate
with its staff and that of its affiliates to provide customer and
sales support.
(D) To maintain separate schedules and records relating to
the Continuing Business in order to allow verification of the
results of the operations of the Continuing Business throughout
the Earn-Out Period for purposes of calculating the Earn-Out.
(E) To not accelerate or delay the recognition of revenue or
expense, or accelerate or delay investment in working or fixed
capital, but shall account of such items in accordance with GAAP.
(F) To not terminate, hinder, obstruct or adversely alter in
any respect any arrangements, written agreements, or business
relationships in effect as of the Closing Date between TFSB and
its suppliers and/or agents, to the extent that to do so would
not have a Material Adverse Effect on the Continuing Business.
19
(ii). No Assignment and Termination. All covenants set forth in
Section 5(d)(i) shall not be assignable and shall automatically
terminate upon the earlier occurrence of any of the following: (A) a
Change of Control of TFS, (B) any assignment of the rights to receive
proceeds from the Earn-Out, or (C) termination of the Earn-Out Period.
(iii). Post-Approval Work. After TFSB has obtained the approval
for the Transfer from the Approval Authorities, IDW will be
responsible for undertaking all post-approval work relating to the
filing of a new charter (articles of association documents),
designating new board members and application for amending the
business license in order to reflect the consummation of the
transactions contemplated herein.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of IDW and IDW HK. The obligation of each
of IDW and IDW HK to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) All material third-party consents specified in Section 5
above shall been obtained;
(ii) The representations and warranties set forth in Section 3
above shall be true and correct in all material respects on the date
of the execution of this Agreement, the period between the execution
of this Agreement to the Closing Date, and at and as of the date of
the Closing Date;
(iii) All covenants set forth in Section 5 shall been performed
in all material respects through the Closing Date;
(iv) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(v) IDW and IDW HK shall have received a certificate from TFS to
the effect that each of the conditions specified above in
Section 6(a)(i)-(iv) is satisfied in all respects;
(vi) IDW and IDW HK shall have received from counsel to TFS, TFSB
and TFSI an opinion substantially in the form as set forth in Exhibit
B attached hereto, and satisfactory in form and substance to IDW and
IDW HK, addressed to IDW and IDW HK, and dated as of the Closing Date;
(vii) IDW and IDW HK shall have received the resignations,
effective as of the Closing, of each director and officer of TFSB,
other than those whom IDW or IDW HK shall have specified in writing
prior to the Closing; and
(viii) all actions to be taken by TFS in connection with
consummation of the transactions contemplated hereby, including, but
not limited to, all necessary actions to transfer the Designated
Assets to IDW, and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to IDW and IDW HK.
20
CONFIDENTIAL March 30, 0000
XXX and IDW HK may waive any condition specified in this Section 6(a) if they
execute a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of TFS, TFSB and TFSI. The obligation of
each of TFS, TFSB and TFI to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the
following conditions:
(i) The representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) All covenants set forth in Section 5 shall been performed in
all material respects through the Closing Date;
(iii) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation;
(iv) TFS shall have received a certificate from IDW to the effect
that each of the conditions specified above in Section 6(b)(i)-(iii)
is satisfied in all respects; and
(v) All actions to be taken by IDW and IDW HK in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonable,
satisfactory in form and substance to TFS, TFSB and TFSI.
TFS, TFSB or TFSI may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
7. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Section 8). TFS, TFSB and TFSI acknowledge and agree that, from and
after the Closing, IDW and IDW HK will be entitled to possession of all
corporate records, documents, books, records (including Tax records),
agreements, and financial data of any sort relating to TFSB, provided that,
21
CONFIDENTIAL March 30, 2005
following the Closing, upon reasonable notice to IDW and coordination, TFS
shall be provided with reasonable access thereto and permitted to make
copies thereof at its expense.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving TFSB, each of the other Parties will
cooperate with it and its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense,
all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
under Section 8).
(c) Transition. TFS, TFSB and TFSI will not take any action that is
designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of TFSB from
maintaining the same business relationships with TFSB after the Closing as
it maintained with TFSB prior to the Closing. TFS, TFSB and TFSI will refer
all customer inquiries relating to the businesses of TFSB to IDW and IDW HK
from and after the Closing.
(d) Legal Expenses. IDW and Xxxxx & XxXxxxxx shall have entered into
the proposed engagement letter as set forth under Section 5(b)(iii) in the
form and substance satisfactory to IDW. In connection therewith, TFS agrees
that it shall undertake all responsibilities to pay for any and all legal
fees associated with the Land Use Issue until such Land Use Issue has been
successfully resolved, so long as such legal fees do not exceed $200,000.
The receipt of a proper permit and a charge of fines not exceeding an
aggregate of $50,000, shall deem the Land Use Issue successfully resolved.
Immediately following the Closing, TFS will deposit an aggregate of
$200,000 with Xxxxx & XxXxxxxx which shall be reserved and used for
prepayment of such legal services.
(e) Hold-Back Amount. IDW shall hold back an aggregate of $50,000 from
any Inventory Payment or Earn-Out Payment (the "Hold-Back Amount"). The
Hold-Back Amount shall be reserved and used solely for the payment of any
fines that IDW or TFSB, after its transfer to IDW, may incur in connection
with the Land Use Issue ("Fine Reserve Account"). In the event that IDW or
TFSB, after its transfer to IDW, is found liable for any fines, such fines
shall be paid from the Fine Reserve Account. To the extent that the fines
are less than the Fine Reserve Amount, the remaining balance shall be paid
to TFS.
(f) Not to Compete. For a period of two (2) years from and after the
Closing Date, TFS or TFSI will not compete with the Continuing Business by
engaging directly or indirectly in any business that TFSB conducted as of
the Closing Date in any of the geographic area in which TFSB conducts that
business as of the Closing Date, provided however, that that no owner of
less than 20% of the outstanding stock of a publicly traded corporation
shall be deemed to engage solely by reason thereof in any of its businesses
For purposes of this Agreement, the phrase "compete with the Continuing
Business," or the substantial equivalent thereof, means that the respective
entity directly or indirectly owns, manages, operates, controls, or
participates in the ownership, management, operation or control of, or
works for or provides consulting services to, or permits the use of its
name by, or lends money to, any business or activity which is or which
becomes, at the time of the acts or conduct in question, engaged in the
assembly of LCD modules less than seven inches on the diagonal ("Small
LCDs"). For purposes of this definition, the purchase of completed Small
LCDs to be further integrated into a larger subsystem or product shall not
be deemed a competitive activity. If the final judgment of the court of
competent jurisdiction declares that any term or provision of this Section
7(e) is invalid or unenforceable, the Parties agree that the court making
the
22
CONFIDENTIAL March 30, 2005
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may
be appealed
(g) Upon receipt of the approval of Transfer by the Approval
Authorities, IDW will direct the Escrow Agent to immediately disburse the
Closing Payment to TFS.
(h) IDW or IDW HK will only use the name "TFS" or "TFSB" in China for
a period of six (6) months or as reasonably necessary to effect existing
commercial requirements, resolve the Land Use Issue and effect a name
change of TFSB.
(i) Pending approval of the applications for Transfer by the Approval
Authorities, IDW will be designated as an operating agent of TFSB. In
connection therewith, TFSB appoints the IDW as its attorney-in-fact, with
full authority in the place and stead of TFSB and in the name of the TFSB
or otherwise, from time to time in IDW's discretion to take any action and
to execute any instrument which IDW may deem necessary or advisable to
accomplish the day to day operations of TFSB commencing on the Closing
Date, including, without limitation, to receive, endorse and collect all
instruments made payable to TFSB, to receive all revenues for activity of
TFSB, to pay all liabilities of TFSB accruing after the Closing Date. All
such revenues shall belong to IDW and all expenses accruing after the
Closing Date shall be the obligations of IDW. Pending such approval IDW
will operate TFSB consistent with Section 5(c)(iii); provided, however,
such other actions may be taken with the consent of TFS which consent shall
not be unreasonably withheld. The foregoing shall terminate and IDW shall
be deemed the owner and operator upon receipt of the approval of the
Transfer from the Approval Authorities.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. Unless expressly
stated otherwise herein, all of the representations and warranties of the
Parties contained in this Agreement shall survive the Clos+ing hereunder
(even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing)
and shall continue in full force and effect for a period of three (3)
months from the Closing Date.
(b) Indemnification Provisions for Benefit of IDW and IDW HK. In the
event TFS, TFSB and TFSI breaches any of its representations, warranties,
then TFS, TFSB and TFSI agree to indemnify IDW and IDW HK from and against
the entirety of any Adverse Consequences IDW or IDW HK may suffer resulting
from the breach (or the alleged breach). In the event of a breach by TFS,
TFSB or TFSI, IDW's sole remedy shall be to offset the amount of such
damages incurred by IDW or IDW HK(as a result of such breach) against the
amount owed and due to TFS and TFSI under the provisions set forth under
Section 2(c)(i) relating to the Earn-Out Payment and Section 2(c)(iii)
relating to the Inventory Payment.
In addition, TFS, TFSB and TFSI agree to indemnify IDW and IDW HK
from and against the entirety of any Adverse Consequences IDW or IDW
HK may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the operations of TFSB prior to the Closing.
(c) Indemnification Provisions for Benefit of TFS, TFSB and TFSI. In
the event IDW or IDW HK breaches any of its representations, warranties,
and covenants contained herein, then IDW and IDW HK agree to indemnify TFS,
TFSB or TFSI from and against the entirety of any Adverse Consequences TFS,
TFSB or TFSI may suffer resulting from the breach (or the alleged breach),
provided, however, IDW or IDW HK shall have no obligation to indemnify TFS,
TFSB or TFSI in excess of Two Million Dollars ($2,000,000), which shall be
the aggregate threshold.
In addition, IDW and IDW HK agrees to indemnify TFS, TFSB and
TFSI from and against the entirety of any Adverse Consequences TFS,
TFSB and TFSI may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the operations of TFSB after the
Closing.
9. Taxes.
(a) TFS shall reimburse IDW for any Taxes of TFSB paid by IDW for any
and all period ending on or prior to the Closing Date to the extent such
Taxes are not reflected in the reserve for Tax Liability shown on balance
sheet as of the Closing Date.
23
CONFIDENTIAL March 30, 2005
(b) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest) incurred
in connection with this Agreement, including but not limited to the
transfer of the Designated Assets, shall be paid by TFS when due, and TFS,
in its sole expense, shall file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees.
(c) To the extent that IDW has paid for any Taxes or is entitled to
any reimbursements under Section 9(a) or (b), such amounts may be deducted
from the Off-Set Payment, Inventory Payment or Earn-Out Payment.
10. Termination.
(a) Termination of Agreement. Any of the Parties may terminate this
Agreement with the prior authorization of its board of directors as
provided below:
(i) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(ii) IDW and IDW HK may terminate this Agreement by giving
written notice to TFS at any time prior to the Closing (A) in the
event TFS has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, IDW or
IDW HK has notified TFS of the breach, and the breach has continued
without cure for a period of three (3) days after the notice of
breach, or (B) if the Closing shall not have occurred, by reason of
the failure of any condition precedent under Section 6(a) hereof
(unless the failure results primarily from IDW or IDW HK breaching any
representation, warranty, or covenant contained in this Agreement); or
(iii) TFS, TFSI and TFSB may terminate this Agreement by giving
written notice to IDW at any time prior to the Closing (A) in the
event IDW or IDW HK has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, TFS, TFSI or TFSB has notified IDW and IDW HK of the breach,
and the breach has continued without cure for a period of three (3)
days after the notice of breach or (B) if the Closing shall not have
occurred by reason of the failure of any condition precedent under
Section 6(b) hereof (unless the failure results primarily from TFS,
TFSI or TFSB breaching any representation, warranty, or covenant
contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party (except for any liability of any Party then in breach), except that
Sections 11(a), 11(h) and 11(k) shall survive such termination.
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
Parties; provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case
the disclosing Party will use its Best Efforts to advise the other Party
prior to making the disclosure).
24
CONFIDENTIAL March 30, 2005
(b) No Third-Party Beneficiaries. Except as otherwise provided in this
Agreement, this Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors and permitted
assigns.
(c) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way
to the subject matter hereof.
(d) Succession and Assignment. Except as otherwise provided in this
Agreement, this Agreement shall be binding upon and inure to the benefit of
the Parties named herein and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of
the other Parties.
(e) Counterparts. This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which will be
deemed an original but all of which together will constitute one and the
same instrument. The signature page of any counterpart may be detached
therefrom without impairing the legal effect of the signature(s) thereon
provided such signature page is attached to any other counterpart identical
thereto having additional signature pages executed by the other Parties.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to TFS, TFSI or TFSB Three-Five Systems, Inc.
0000 X. Xxxxxx Xxxxx
Xxxxx, XX 00000
Attn: Xxxx Xxxxxxx, CEO
Copy to: Xxxxxxxxx Traurig LLP
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxx, Esq.
If to IDW or IDW HK: International Displayworks, Inc.
000 Xxxxx Xx. Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxx Xxxxx, CEO
Copy to: Xxxxxx Eng & Xxxxxxxx
0000 Xxxxxx Xxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxx, Esq.
25
CONFIDENTIAL March 30, 2005
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Delaware.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
all of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the
context otherwise requires. The word "including" shall mean including
without limitation.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
(n) Further Assurances. All parties agree that on and after the
Closing, they shall take all appropriate action and execute any documents
and instruments or conveyances of any kind which may be reasonable
necessary or advisable to carry out the provisions of this agreement.
(Balance of Page Intentionally Left Blank)
26
CONFIDENTIAL March 30, 2005
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
International Displayworks, Inc.
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
------------------------------------------------
Name: Xxxxxx Xxxxx
Title: Chief Executive Officer
International Displayworks (Hong Kong) Limited,
a Hong Kong corporation
By: /s/ Xxxxxx X. Xxxxx
------------------------------------------------
Name: Xxxxxx Xxxxx
Title: Chief Executive Officer
Three-Five Systems, Inc.,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------------
Name: Xxxx X. Xxxxxxx
----------------------------------------------
Title: President and CEO
---------------------------------------------
TFS International, Ltd.
a corporate entity formed under the laws of Bermuda
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------------
Name: Xxxx X. Xxxxxxx
----------------------------------------------
Title: President and CEO
----------------------------------------------
Three-Five Systems (Beijing) Co., Ltd.,
a corporate entity formed under the laws of
the People's Republic of China
By: /s/ Xxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxx X. Xxxxxxx
---------------------------------------------
Title: President and CEO
---------------------------------------------
