STOCK PURCHASE AGREEMENT
Exhibit
10.1
STOCK
PURCHASE AGREEMENT, dated August 1, 2007, by and among Comtech Group, a company
incorporated in the Cayman Islands, the registered office of which is situated
at XX Xxx 000XX, Xxxxxx Xxxxx, Xxxxx Church Street, Grand Cayman, Cayman
Islands
(the “Purchaser”), on the one hand, and First King
International Limited, a company incorporated in the
British Virgin Islands, the registered office of which is situated at P.O.
Box
957, Offshore Incorporation Center, Road Town, Tortola, British Virgin Islands
(the “Seller”), Keen Awards Limited (奇利光电香港有限公司)
a company organized and existing under the laws of Hong Kong ( the
“Company”) and Shenzhen Xxx Xxxxx Xxx Xxxx Company
Limited (深圳汇诚运通科技有限公司),
a company organized and existing under the laws of the People’s Republic of
China (“SZ”, collectively with the Company, the
“Company Group” ), and the natural
persons listed on
Part I of Schedule I attached hereto (the “Individual
Shareholders”), on the other hand.
W
I T N E
S S E T H:
WHEREAS,
the Company Group is currently engaged in the business of distributing and
trading electronic components and providing design and engineering service
for
solution of integrated display technology (the
“Business”);
WHEREAS,
the Individual Shareholders are beneficial and/or record owners
of all of the outstanding capital stock, share capital and equity
securities of the Seller, the Company and SZ, each shareholding
ratio set forth opposite in Part II of Schedule I;
WHEREAS,
upon consummation of the Pre-Closing Restructuring (as hereinafter defined),
the Seller will own Ten Thousand (10,000) Ordinary Shares, HKD1.00
par
value per share, of the Company, which shares represent all of the outstanding
capital stock, share capital and equity securities of the Company (the
“Shares”);
WHEREAS,
the Purchaser wishes to invest in the Business and, to that end, wishes to
purchase all of the Shares of the Company and take over all employees with
respect to the Business of SZ pursuant to the terms of this
Agreement;
WHEREAS,
the Seller desires to sell to the Purchaser, and the Purchaser desires to
purchase from the Seller, all of the Shares for the consideration and on
the
terms set forth in this Agreement;
WHEREAS,
the Individual Shareholders and SZ desire to transfer to the Purchaser or
its
designee(s), and the Purchaser or its designee(s) desire to acquire from
the
Individual Shareholders and SZ, all employees with respect to the Business
of SZ
upon the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS,
certain capitalized terms used in this Agreement are defined in
Section 11.14 below.
NOW,
THEREFORE, in consideration of the mutual covenants hereinafter set forth,
and
for other good and valuable consideration, the receipt and adequacy of which
are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE
I
Purchase
and Sale of Shares.
Section
1.1 Sale of Shares. Subject to the
terms and conditions of this Agreement, the Seller shall at the Closing sell,
transfer, convey, assign and set over (“Transfer”) to
the Purchaser, and the Purchaser shall at the Closing purchase and acquire
from
the Seller, all of the Seller’ s right, title and interest in and to the
Shares. In furtherance of the foregoing, the Seller shall at the
Closing Transfer beneficial and record ownership of the Shares to the Purchaser,
and execute one or more stock powers, endorsements or assignments as the
Purchaser may reasonably request.
ARTICLE
II
Purchase
Price
Section
2.1. Purchaser Price. In consideration of the
Transfer to the Purchaser of the Shares at the Closing, subsequent Transfer
to
the Purchaser, and/or any designated persons of the Purchaser substantially
all
business, assets and employees relating to the Business of the Company Group
and
of the other representations, warranties and covenants herein:
(a) Subject
to satisfaction of all relevant operating and financial milestones of the
Business of the Company Group agreed upon by the Parties and on the terms
and
conditions contained herein, the Purchaser shall pay to the Seller US$16
million
(the “Purchase Price”), consisting of US$12 million in
cash and US$4 million in shares of the Purchaser (“COGO
Shares”). The schedule of payment and adjustment of the
Purchase Price shall be separately agreed upon by the Parties.
(b) in
addition to the payments described in Section 2.1(a), based on and subject
to
the satisfaction and attainment of all post-Closing operating and financial
milestones of the Business, the Purchaser shall pay additional US$4 million
to
the Seller and the whole amount shall be used immediately to purchase 20%
of the
Company’s shares (the “Trust Shares”) on an a
fully-diluted basis, by the Seller, which will act as a trustee for the Company
(the “Company Trust”) on August 31, 2009 and the
beneficiaries of the Company Trust shall be determined by the
Purchaser.
Section
2.2 Restrictions on Transfer. The Trust
Shares issued to the Seller pursuant to Section 2.1 (b) are restrictive shares,
which shall not be transferred, assigned or subject to any pledge or encumbrance
without the consent of the Purchaser. If any member of the senior
management personnel terminates his/her employment with the Company for whatever
reason, the Company Trust will have a right to repurchase all his/ her interests
in the Company Trust at a nominal price and may resell such interests to
other
members of the senior management personnel of the Company. As a
result, the senior management of the Company as a group will continue to
own
beneficially 20% shares of the Company.
Section
2.3 COGO Shares. Subject to all applicable
conditions and requirements of the US securities law, the COGO Shares granted
to
Seller pursuant to Section 2.1(a) may be traded freely on the
NASDAQ. In the event that COGO Shares is changed into or exchanged
for a different number or kind of shares of the Purchaser or other securities
of
the Purchaser or of any third corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split up, stock
dividend or combination of shares, the Purchaser shall make an appropriate
and
equitable adjustment to the number of COGO Shares to be issued to the Seller
or
any appropriate substitution of a different security for such COGO Shares
as the
case may be. Any such adjustment made by the Purchaser shall be final
and binding upon the Seller.
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Section
2.4 Offset Right. Notwithstanding anything herein to the
contrary, the Purchaser shall be entitled to offset, against any consideration
otherwise payable to the Seller pursuant to Article II, any payment payable
by
the Seller, SZ or any Individual Shareholders to the Purchaser under this
Agreement, including but not limited to any indemnification payment under
Section 11.13 (a) herein pursuant to the terms of this Agreement or any other
Closing Documents (whether before, at or after the
Closing).
ARTICLE
III
Closing.
Section
3.1 Closing Date. The closing of the transactions
contemplated hereby (the “Closing”) shall be held in
Hong Kong or other place mutually agreed by the parties, on the Closing
Date. All matters at the Closing shall be considered to take place
simultaneously. As used herein, the term “Closing
Date” shall mean the date which is two Business Days after all of
the conditions in Article IX have been satisfied (or waived in writing by
the
party entitled to provide such a waiver), provided that the Closing Date
shall
not be later than August 31, 2007,
unless the parties hereto mutually agree otherwise in writing.
Section
3.2 Documents of Conveyance, Etc. The Seller and
the Purchaser shall deliver to each other at the Closing such certificates,
consents, approvals, agreements, and documents relating to the transactions
contemplated by this Agreement (collectively with this Agreement, the
“Closing Documents”). Each party hereto
further agrees that at or subsequent to the Closing, upon the written request
of
the other party, it will promptly execute and deliver or cause to be promptly
executed and delivered any further assignments, instruments of transfer and
bills of sale or conveyances reasonably necessary or desirable to vest fully
in
the Purchaser all of the Seller’ right, title and interest in and to the
Shares.
ARTICLE
IV
Seller’s
Retention and Assumption of Liabilities.
Section
4.1. Approved Liabilities. The parties hereto agree
that it is their mutual intent and desire that the only Liabilities of the
Company Group as of August 1, 2007 be those expressly described and itemized
on
Schedule 4.1 (collectively, the “Approved
Liabilities”). As used herein, the term
“Liabilities” means any and all liabilities,
claims,
obligations, expenses or damages, whether known or unknown, contingent or
absolute, named or unnamed, disputed or undisputed, legal or equitable,
determined or indeterminable, or liquidated or unliquidated.
Section
4.2 Unapproved Liabilities. Notwithstanding anything
contained in this Agreement or the Schedules hereto, or any other Closing
Document, to the contrary, the Individual Shareholders and the Seller jointly
and severally covenant to pay, perform and discharge, and guarantee the payment,
performance and discharge of, the Unapproved Liabilities in accordance with
their respective terms. The term “Unapproved
Liabilities”, as used herein, shall mean any and all Liabilities
of the Company Group which are not specifically listed on Schedule 4.1 or
which
exceed the amounts of such Liabilities as listed on Schedule 4.1. In
addition, as to any Liability listed on Schedule 4.1 as an Approved Liability
arising under any Commitment, such Liability shall constitute an Approved
Liability under such Commitment only to the extent arising from and after
Closing in accordance with the terms of such Commitment, and all other
Liabilities of the Company under such Commitment, including without limitation
any Liabilities relating to any breach of such Commitment prior to Closing,
shall constitute Unapproved Liabilities.
ARTICLE
V
Representations
and Warranties by the Warrantors.
Section
5.1 Representations and Warranties. Each of
the Warrantors hereby jointly and severally makes the following representations
and warranties to the Purchaser:
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(a) Corporate
Existence and Qualification of the Company; Due Execution, Etc.
(i) The
Company is private company limited by shares duly organized, validly existing,
in good standing and subsisting under the laws of Hong Kong and has the
requisite corporate power and authority to own, lease or otherwise hold its
assets and to carry on its business as conducted through the Closing
Date.
(ii) The
Company does not own or control, directly or indirectly, any interest in
any
other Person. The Company is not a participant in any joint venture,
partnership, or similar arrangement involving the sharing of profits or
losses.
(iii) Each
of the Individual Shareholders, the Seller and the Company has all requisite
power and authority to execute, deliver and perform this Agreement and the
Closing Documents to which each is a party, and to consummate the transactions
contemplated hereby and thereby. This Agreement and the Closing
Documents to which the Individual Shareholders, the Seller and the Company
are
parties constitute valid and binding obligations of the Individual Shareholders,
the Seller and the Company enforceable in accordance with their respective
terms.
(iv) The
authorized capital stock of the Company consists of One Million (1,000,000)
Ordinary Shares, of which Ten Thousand (10,000) are issued and outstanding
upon
the date hereof.
The
Shares constitute all of the issued and outstanding capital stock, share
capital
and equity securities of the Company. The Shares are duly authorized,
were validly issued and are fully paid and non-assessable, and are not subject
to any preemptive rights. There are no outstanding securities or
share capital of the Company other than the Shares and there are no outstanding
rights or options to acquire securities of the Company, and the Company is
not
subject to any obligation to issue, deliver, redeem, or otherwise acquire
or
retire any shares of capital stock. The Seller is not entitled to the
payment of any dividends or other distributions from the Company after the
date
hereof on account of the Seller’s ownership of the Shares on or before the date
hereof.
(v) As
of the Closing, the Seller is the sole beneficial owner and shareholder of
record of the Shares, free and clear of any Lien and with all rights to vote
and
transfer such Shares without any restrictions. The Seller has sole
and absolute authority to Transfer the Shares to the Purchaser pursuant to
this
Agreement.
(c) Corporate
Existence and Qualification of SZ; Due Execution, Etc.
(i) SZ
is a wholly domestic-owned limited liability company duly established and
validly existing under the laws of the PRC and has the requisite corporate
power
and authority to own, lease or otherwise hold its assets and to carry on
its
business as conducted through the Closing Date. SZ has no
subsidiaries.
(ii) True
and complete copies of the Charter Documents of SZ, as in effect on the date
hereof, have been delivered by the Seller to the Purchaser. Xxxx
Xx is the Legal Representative of SZ.
(iii) As
of the date hereof, the registered capital of SZ is Rmb 1,000,000, all of
which
has been fully paid in accordance with SZ’s Charter Documents. Xxxx
Xx and Xx Xxxxx hold 60% and 40%, respectively, of the equity interests in
SZ.
(iv) SZ
has all requisite power and authority to execute, deliver and perform this
Agreement and the Closing Documents to which SZ is a party, and to consummate
the transactions contemplated hereby and thereby.
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(d) No
Violation.
(i) Neither
the execution and delivery by each of the Warrantors of this Agreement and
the
Closing Documents to be executed by each of the Warrantors, nor the consummation
by each of the Warrantors of the transactions contemplated hereby or thereby:
(1) violates or will violate any Law applicable to any of the Warrantors;
(2)
violates or will violate any order, ruling, writ, judgment, injunction or
decree
of any Governmental Entity (an “Order”) applicable to
any of the Warrantors; (3) conflicts or will conflict with, or results or
will
result in a breach of or default under, the Charter Documents of any of the
Company Group or the Seller; or (4) results or will result in the imposition
of
any Lien on any of the Assets, the Business or the Shares. No
consent, authorization, or approval from, or registration or filing with,
any
Governmental Entity or other third party (not obtained or made as of the
date
hereof) is required to be obtained or made by or with respect to the Seller,
any
of the Company Group or the Business in connection with the execution and
delivery of this Agreement or the Closing Documents or the consummation by
each
of Warrantors of the transactions contemplated hereby or thereby.
As
used
herein, the term “Lien” means any lien, mortgage,
security interest, charge, pledge or encumbrance of any kind.
(ii) The
execution, delivery and performance by each of Warrantors of this Agreement
and
the other Closing Documents, and the consummation of the transactions hereunder
and thereunder, will not create a default by any of the Company Group under,
or
give any Governmental Entity or other third party the right to terminate
or
accelerate any Commitment, any permits, licenses, approvals, consents and
authorizations issued by any Governmental Entity (collectively,
“Licenses”).
(e) Financial
Statements. Attached hereto as Schedule 5.1(e) are pro forma
unaudited consolidate financial statements, balance sheets, statements of
operations and other financial information of the Company Group, the Business
and the Assets (collectively, the “Financial
Statements”) for the period ended on June 30, 2007, which was
provided by the management of the Company Group and prepared in accordance
with
management account, consistently applied throughout the periods involved,
and
all such Financial Statements respectively; all of which present fairly,
in all
material respects, the financial position of the Company Group, and the Business
at the dates indicated in such Financial Statements and the results of the
operations of the Business and the Company Group, for the periods stated
therein.
(f) Absence
of Certain Transactions. Since June 30, 2007: (i) the Business
has been operated by the Company Group only in the ordinary course, consistent
with past historical practice (taking into account seasonal changes consistent
with historical seasonal changes); and (ii) there has been no Material Adverse
Effect. Without limiting the foregoing, but excluding the transactions
contemplated by this Agreement, since such date none of the Company Group
has:
(i) changed
its authorized capital; or sold or issued any of its capital stock or share
capital; or purchased, redeemed or otherwise reacquired any of its capital;
or
granted any stock options or rights to purchase shares of its capital or
other
securities, issued any securities convertible into capital or equity interests,
or granted any registration rights with respect to any securities;
(ii) amended
its Charter Documents;
(iii) paid
any bonuses, or increase in salaries or other compensation to any of its
directors, officers, or employees except for bonus awards and increases in
salaries in the Ordinary Course of Business, as required by applicable Laws
or
pursuant to any Commitment listed on Schedule 5.1(f);
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(iv) mortgaged,
pledged, hypothecated or permitted any of its Assets to be subjected to any
Lien;
(v) sold
or otherwise disposed of any Asset material to the operation of the
Business;
(vi) cancelled
or waived any claims or rights against third Persons or forgiven any debt,
except in the Ordinary Course of Business;
(vii) changed
its accounting methods or principles;
(viii) entered
into, amended, terminated or received notice of termination of any Commitment
requiring annual payments in excess of Rmb 100,000;
(ix) suffered
any damage to or destruction or loss of any Asset of the Company Xxxxx xxxxxxxx
to the operation of the Business or valued at more than Rmb
100,000;
(x) adopted
or increased any payments to or benefits under any employment plans, except
in
the Ordinary Course of Business;
(xi) effected
or been a party to or any merger, consolidation, business combination, share
exchange, reorganization or similar transaction;
(xii) declared,
accrued, set aside or paid any dividends or made any other distribution in
respect of any shares of capital stock or other securities;
(xiii) leased
or licensed any Asset from any third Person except in the Ordinary Course
of
Business;
(xiv) made
any capital expenditure in excess of Rmb 100,000 individually or in
the aggregate;
(xv) written
off as uncollectible, or established any extraordinary reserve with respect
to,
any account receivable or other indebtedness in excess of Rmb
100,000 in the aggregate;
(xvi) made
any loan or advance; or
(xvii) agreed,
orally or in writing, to do any of the foregoing.
As
used herein, the
“Ordinary Course of Business” means the ordinary
course of the Business, as operated by the Company Group prior to the Closing
Date, in each case consistent with past practices.
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(g)
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Material
Contracts and Obligations.
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(i) The
Seller and each of the Company Group have made available to the Purchaser
true
and correct copies of all Approved Commitments which are in written form
and any
amendments thereto. No Unapproved Commitment (as defined below) is
material to the operation of the Business, and each Commitment which is material
to the operation of the Business is an Approved Commitment. Each
Approved Commitment is listed on Part I of Schedule 5.1(g), will be in full
force and effect immediately following the Transfer of the Purchased Shares
of
the Company and the employees of SZ at the Closing, and represents the valid
and
binding obligation of the Company and the applicable the Purchaser or its
designee(s).
(ii) With
respect to each Approved Commitment to which any of the Company Group is
a
party, each of the Company Group and, to the knowledge of the Seller, the
other
party or parties thereto, has performed in all material respects all obligations
required to be performed by it thereunder through the Closing Date, and none
of
the Company Group is (with or without the lapse of time or the giving of
notice,
or both) in default under any such Approved Commitment (other than a default
under any Approved Commitment which is not material to the Business and which
default will not result in a Material Adverse Effect) and, as of the date
hereof, none of the Company Group has received any notice of any default
(whether monetary or nonmonetary) or termination of any such Approved Commitment
from any other party thereto.
(iii) Without
limiting the generality of the foregoing, Part I of Schedule 5.1(g) accurately
lists each Approved Commitment, whether written or oral and including all
amendments thereto, to which any Company Group is a party of the types described
below and Part II of Schedule 5.1(g) accurately lists each Commitment which
is
not an Approved Commitment (an “Unapproved
Commitment”), whether written or oral and including all amendments
thereto, in each case to which any Company Group is a
party of the following types:
(a)
any
employment, severance or consulting Commitment with any employee or former
employee; (b) any Commitment relating to acquisition or construction of
fixed assets requiring aggregate future payments or expenditures in excess
of
Rmb 100,000 in total; (c) any Commitment under which any Company Group is a
lessee or lessor of real or personal property (excluding any such Commitment
under which any of the Company Group is a lessee of
personal property and which requires less than Rmb 100,000 in annual payments
and Rmb 100,000 in total payments by any Company Group); (d) any Commitment
pursuant to which any of the Company Group has acquired licensee or other
user
rights in any software or other Intellectual Property; or (e) any other
Commitment which (i) involves aggregate future payments by any Company
Group in excess of Rmb 100,000, (ii) would reasonably be expected to result
in a Material Adverse Effect, (iii) has been entered into with an Affiliate
of any Company Group or (iv) is otherwise material to any Company
Group or the conduct of the Business.
Notwithstanding
anything herein to the contrary, none of the Company Group has any Commitments:
(a) relating to cleanup, abatement or other actions in connection with any
environmental condition; (b) granting to any person a first-refusal,
first-offer or other right to purchase or acquire any Assets and Business;
(c) with respect to Intellectual Property which requires future payments to
or from any of the Company Group, except as routine maintenance;
(d) under which commissions are payable and which is not terminable without
penalty on 30 days’ or less prior notice; (e) under which any of
the Company Group is or has agreed to become a joint venturer or
partner; (f) granting a power of attorney binding upon any of the Company
Group; (g) with respect to letters of credit, surety or other bonds or
pursuant to which any assets or properties of any of the Company Group are,
or
are to be, subjected to a Lien; (h) limiting or restricting the ability of
any of the Company Group to enter into or engage in any market or line of
business; or (i) relating to any borrowing, or any full or partial
guarantee or similar Liability in respect of any Liability of any person
or
entity other than any of the Company Group.
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(iv) No
member of the Company Group has given to or received from any Person any
notice
or other communication (whether oral or written) regarding any actual, alleged,
possible, or potential material violation or material breach of, or material
default under, any Material Contract.
(h) Title
to Assets. Schedule 5.1(h) sets forth substantially all of the fixed assets
owned, leased or held by the Company Group. Except as set forth on
Schedule 5.1(h), each of the Company Group, as appropriate, has good and
marketable title to all fixed assets described in such Schedule as being
owned
by each of the Company Group and all other Assets, free and clear of all
Liens. Each material fixed assets, and all Assets in the aggregate,
are in reasonable operating condition, normal wear and tear
excepted.
(i) Intellectual
Property. Set forth on Schedule 5.1(i) is a list of all
Intellectual Property which is material to the Business. Each of the
Company Group, as appropriate, has all rights to use all such Intellectual
Property in all areas in which such entity conducts business, including without
limitation such names, in the manner used by each of the Company Group in
the
operation of the Business, and such usage does not infringe on the rights
of any
other party. Each of the Company Group has undertaken all commercially
reasonable efforts to protect from unauthorized usage or disclosure all
Intellectual Property.
(j) Litigation. There
are no Legal Proceedings pending or, to the knowledge of each of Warrantors,
threatened against the Company Group, or the Seller, any legal proceeding
that
seeks to enjoin or obtain damages in respect of the consummation of the
transactions contemplated by this Agreement or any other Closing
Document.
(k) Compliance
With Laws. None of the Company Group is in default with respect
to any Order and the Business is operated and has been operated by the Company
Group in all material respects in compliance with all applicable Laws, including
without limitation any and all Laws relating to foreign and/or domestic
ownership of the Assets or the Business and all Licenses relating
thereto.
(l) Conflict
of Interests. Except as set forth on Schedule 5.1(l) and except
for their ownership in the Company Group, none of the Seller and the Individual
Shareholders, and to the knowledge of each of Warrantors, none of the officers
or key employees of any of the Company Group, currently directly or indirectly,
owns, manages, operates, finances, or controls, or participates in the
ownership, management, operation, financing or control of, or is associated
as a
director, partner, lender, investor or representative in connection with,
any
profit or not-for-profit business or enterprise which competes with the
Purchaser and the Company Group.
(m) Employee
Benefits. Schedule 5.1(m) accurately lists all of the employees employed by
the Company Group in connection with the Business and all Benefit Arrangements
(as defined below). All Benefit Arrangements have been operated and
administered in all material respects in accordance with its provisions and
in
compliance with the requirements prescribed by any and all Laws. No
Person is or may become entitled to post-employment or severance benefits
or
payments of any kind, or any other non-pension benefits, other than those
which
are mandated by the applicable Laws, by reason of their employment by any
of the
Company Group in connection with the Business or termination of such employment,
or the consummation of the transactions contemplated
hereby. Each of the Company Group has duly performed all of
their applicable legal obligation to make social security and housing fund
contributions for their employees in full and on time.
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As
used
herein, the term “Benefit Arrangements” means all
material employment policies, practices or other arrangements to provide
employee or executive compensation or benefits with respect to employees
and/or
their spouses or beneficiaries which are or have been provided or offered
to any
Person by any of the Company Group, including without limitation any such
policies or practices relating to life and health insurance, hospitalization,
savings, bonus, deferred compensation, incentive compensation, holiday,
vacation, severance pay, sick pay, sick leave, disability, tuition refunds,
service awards, company cars, scholarships, relocation, patent awards, fringe
benefits, contracts, collective bargaining agreements, individual employment,
consultancy or severance contracts.
(n) Labor
Relations. None of the Company Group is a party to or subject to
any collective bargaining or similar agreements. To the knowledge of
each of Warrantors, there are and have been, no strikes or work slowdowns
pending or threatened against or affecting the Business. None of the
Company Group is currently a party to, and, to the knowledge of each of
Warrantors, none of the Company Group is now threatened with, any Legal
Proceeding by any of its employee or former employee arising out of employment
by any of the Company Group in connection with the Business, including without
limitation any such Legal Proceeding or other proceeding for unlawful employment
practices or discrimination in employment.
(o) Taxes.
(i) All
Tax Returns (as hereinafter defined) required to be filed on or before the
Closing Date by any member of the Company Group in connection with the Business
have been filed on a timely basis under the Laws of each applicable
jurisdiction. All such Tax Returns were complete and accurate as
filed in all respects. All Taxes shown as owing on each such Tax
Return and all other Taxes owed by each member of the Company Group have
been
paid when due. None of the Company Group has executed or filed with
any taxing authority or other Governmental Entity any agreement extending
the
period for filing any Tax Return relating to or otherwise affecting the Business
or the Assets. No claim for assessment or collection of Taxes
relating to or otherwise affecting any of the Company Group, the Business
or the
Assets is currently pending or, to the knowledge of each of Warrantors, has
been
asserted against any of the Company Group. None of the Company Group
is a party to any pending Legal Proceeding by any Governmental Entity for
the
assessment or collection of Taxes relating to or otherwise affecting any
of the
Company Group, the Business or the Assets, nor do the Warrantors have any
knowledge of any basis for any such Legal Proceeding.
(ii) No
waivers of statutes of limitation in respect of any Tax Returns relating
to or
otherwise affecting the Company Group, the Business or the Assets have been
given or requested by the Company Group, nor has any of the Company Group
agreed
to any extension of time with respect to a Tax assessment or deficiency relating
to or otherwise affecting the Company Group, the Business or the
Assets. No claim has been made at any time by a Governmental Entity
in a jurisdiction where the Company Group do not currently file Tax Returns
that
it is or may be subject to taxation by that jurisdiction relating to or
otherwise affecting the Company Group, the Business or the Assets, nor do
the
Warrantors have knowledge that any such assertion of jurisdiction is
threatened. No Liens have been imposed upon or asserted against any
of the Assets as a result of or in connection with any failure, or alleged
failure, to pay any Tax. No ruling with respect to Taxes has been
requested by or on behalf of any of the Company Group with respect to any
of the
Company Group, the Business or any Assets. There is no claim or
dispute concerning any Tax liability of any of the Company Group either (A)
claimed or raised by any Governmental Entity in writing or (B) as to which
the
Warrantors have any knowledge.
(iii) None
of the Company Group has entered into any agreement, whether or not written,
providing for the payment of Taxes or entitlement to refunds and related
matters
with any other party. The Company Group have withheld and paid all
Taxes required to be withheld or paid in connection with any amounts paid
or
owing to any employee, creditor, independent contractor, stockholder or other
third party. None of the Assets has in the past been held, and none
of the Assets was immediately prior to Closing held, in an arrangement for
which
Tax Returns as a partnership have been or may be filed.
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(p) Assets
Necessary to Conduct Business. The Assets comprise all of the
assets necessary for the Company Group to operate the Business. As of
the date hereof and as of the Closing, no Person except for the Company Group
(a) owns or holds or will own or hold any assets or properties used in the
Business and (b) conducts the Business (or any business competitive with
the
Business). The Business is the only business of the Company Group and
the Assets are the only assets, rights or properties of the Company
Group.
(r) Related-Party
Transactions. No employee, officer, or director of
each Company Group (a “Related Party”) or member of such
Related Party’s immediate family, or any corporation, partnership or other
entity in which such Related Party is an officer, director or partner, or
in
which such Related Party has significant ownership interests or otherwise
controls, is indebted to each Company Group, nor is each Company Group indebted
(or committed to make loans or extend or guarantee credit) to any of
them. None of such persons has any direct or indirect ownership
interest in any firm or corporation with which each Company Group is affiliated
or with which each Company Group has a business relationship, or any firm
or
corporation that competes with each Company Group, except that employees,
officers, or directors of each Company Group and members of such Related
Party’s
immediate families may own securities in publicly traded companies that may
compete with each Company Group. No Related Party or member of their
immediate family is directly or indirectly interested in any material contract
with each Company Group.
(s) Permits. Each
Company Group has all franchises, permits, licenses, and any similar authority
necessary for the conduct of its business as now being conducted by it, the
lack
of which could materially and adversely affect the business, properties,
prospects or financial condition of each Company Group, and each Company
Group
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. Each
Company Group is not in default in any material respect under any of such
franchises, permits, licenses, or other similar authority.
(t) Brokers’
Fees. None of Warrantors has made any agreement or taken any
other action which will cause the Purchaser or any of the Company Group to
become obligated for any broker’s or other fee or commission as a result of any
of the transactions contemplated by this Agreement.
(u) Disclosure. Each
member of the Company Group and each Individual Shareholders has fully provided
the Purchaser with all the information that the Purchaser has requested for
deciding whether to purchase the Shares. No information provided by or on
behalf
of any of Warrantors in any Closing Document furnished or to be furnished
at or
after the Closing contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light
of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
ARTICLE
VI
Representations
and Warranties of the Purchaser.
Section
6.1 Representations and Warranties. The
Purchaser represents and warrants to the Seller that:
(a) Existence
and Qualification of The Purchaser; Due Execution, Etc. The
Purchaser is a company duly organized, validly existing and in good standing
under the Laws of Cayman Islands and has all requisite corporate power and
authority to execute, deliver and perform this Agreement and the Closing
Documents to be executed by it and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and
the Closing Documents to be executed by the Purchaser and the consummation
by
the Purchaser of the transactions contemplated hereby and thereby have been
duly
authorized by all requisite corporate action. This Agreement and the
Closing Documents to be executed by the Purchaser constitute valid and binding
obligations of the Purchaser enforceable against it in accordance with their
respective terms.
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(b) No
Violation. Neither the execution and delivery by the Purchaser of
this Agreement or the Closing Documents to be executed by the Purchaser,
nor the
consummation of the transactions contemplated hereby or thereby: (1) violates
or
will violate any Order applicable to the Purchaser or (2) results or will
result
in a breach of or default under the Charter Documents of the
Purchaser.
ARTICLE
VII
Post
Closing Covenants
Section
7.1 Transfer of Employees and Dissolution of SZ. The
Individual Shareholders shall procure each employee of SZ to terminate his/her
employment with SZ and becomes an employee of the wholly-owned PRC subsidiary
of
the Company to be established after Closing (the “WFOE”) or a PRC designee(s) of
the Purchaser five (5) working days after establishment of the WFOE, or,
with
respect to the PRC designee(s), within five (5) working days after the
Closing. Any compensation and other payments payable to such
transferred employees in connection with such transfer shall be borne by
the
Individual Shareholders. The Individual Shareholders shall procure each of
the
key transferred employees identified by the Purchaser to enter into a 2-year
Non-Competition Agreement and a Non-solicitation and Confidentiality Agreement
in form and substance reasonably satisfactory to the
Purchaser. In addition, the Individual Shareholders shall
procure SZ to cease operation and shall be subsequently dissolved within
6
months after completion of such transfer.
Section
7.2 Non-Competition and Non-Solicitation.
(i) For
a period of four (4) years after the Closing (the “Restricted Period”), the
Seller and the Individual Shareholders, jointly and severally, covenant with
the
Purchaser that neither of the them shall engage, directly or
indirectly, in any business anywhere in the PRC or Hong Kong that manufactures,
produces or supplies products or services of the kind manufactured, produced
or
supplied by the Business as of the Closing Date other than through the Company
and any Affiliates of the Purchaser or, without the prior written consent
of the
Purchaser, directly or indirectly, own an interest in, manage, operate, join,
control, lend money or render financial or other assistance to or participate
in
or be connected with, as an officer, employee, partner, shareholder, consultant
or otherwise, any person that competes with the Company or the
Business in manufacturing, producing or supplying products or services of
the
kind manufactured, produced or supplied by the Business as of the
Closing Date other than through the Company and any Affiliates of the
Purchaser. Notwithstanding the foregoing, in the event that the
Company together with all Affiliates of the Purchaser decide not to conduct
any
Business as of the Closing Date in the future (other than disposing of the
Business through a trade sale or otherwise for a consideration), the Seller
and
the Individual Shareholders shall be released from the non-competition
obligations related to the Business as of the Closing Date contained herein
on
the date the Company and all Affiliates of the Purchaser cease to conduct
any
Business as of the Closing Date; provided that the Individual Shareholders
shall
continue to be bound by the non-competition obligations as an employee of
the
Company or other Affiliates of the Purchaser.
(ii) As
a separate and independent covenant, the Seller and the Individual
Shareholders agree with the Purchaser that, for a period of four (4) years
following the Closing, neither of them will, directly or indirectly,
interfere with or attempt to interfere with any officers, employees,
representatives or agents of the Company, the Company or the Business, or
induce
or attempt to induce any of them to leave the employ of the Purchaser or
the
Company or hire any officers, employees, representatives, or agents of the
Company, the Purchaser or the Business or induce or
attempt to induce any of them to violate the terms of their
contracts, or any employment arrangements, with the Purchaser.
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Section
7.3 Cut-Off Date and Transfer of Economic
Benefits.The Warrantors hereby covenant to the Purchaser that all activities
related to the Business shall be conducted through the Company or any other
designee of the Purchaser after August 1, 2007 (the “Cut-Off
Date”). All revenue and profits generated by either the Company or SZ
on or after the Cut-Off Date shall belong to the Purchaser. To the
extent that any transaction related to the Business have to be conducted
by any
entity other than the Company on or after the Cut-Off Date, the Warrantors
shall
make their best efforts to transfer all economic benefits of such transactions
to the Company at no additional costs of either the Company or the
Purchaser. In addition, the Individual Shareholders shall make
available all bank and financial information of the Company and SZ to the
Purchaser and shall appoint a person designated by the Purchaser to be the
signatory of the bank accounts of the Company and SZ immediately after the
Cut-Off Date.
Section
7.4 Closing and Post Closing Obligation for Certain
Taxes. Each party shall be responsible for its own sales, use,
transfer, stamp, conveyance, value added or other similar taxes, duties,
excises
or governmental charges imposed by any taxing jurisdiction, domestic or foreign,
and all recording or filing fees, notarial fees and other similar costs of
Closing applicable to the Transfer of the Shares and the employees of
SZ In accordance with the applicable law.
Section
7.5 Maintenance of Management Personnel. The
Individual Shareholders shall procure the senior management personnel of
the
Business to continue working for the Company within 24 months after the Closing
and the directors of the Company appointed pursuant to Section 9.6 remain
the
same for the same period of time. The Purchaser shall not terminate
the employment agreement with any senior management personnel of the Company
without a contractual and statutory cause during such 24-month
period.
Section
7.6 Endeavor to Growth of Business. The Purchaser shall
use commercially reasonable efforts to grow the Business, including leveraging
the Company Group’s customer base and logistic support as well as facilitate
bank credit line of the Company to finance the operation of the Business
as it
reasonably requires, and to assist the Company in achieving the best economic
results and efficiency in operational and financial
administrations.
Section
7.7 Compliance with the Purchaser’s
Practice. The Individual Shareholders shall procure the Company
to conduct business on all aspects, such as L/C policy, customer, supplier,
credit line granting in compliance with normal business standards acceptable
to
the Purchaser. The Purchaser shall have a right to decline any
business that is not conformable to such standards.
Section
7.8 Centralized Control. The Individual
Shareholders shall procure the Company to conduct business in strict compliance
with financial procedures and control policy adopted by the Purchaser, which
include but not limited to the IT system, human resources policy and customer
services of the Purchaser. The Purchaser shall appoint a Financial
Controller for the Business. Bank accounts relating to the Business
shall be consolidated for the Purchaser’s centralized control and authorized
signatories of such bank accounts shall be appointed by the Financial Department
of the Purchaser.
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ARTICLE
VIII
Pre-Closing
Covenants
Section
8.1. Covenants Regarding Closing
Conditions. The parties shall use their respective reasonable
efforts to bring about the satisfaction as soon as practicable of all the
conditions to Closing contained in Article IX. Without limiting the
generality of the foregoing, the parties shall apply for and diligently
prosecute all applications for, and shall use their respective reasonable
efforts promptly to obtain, (1) such consents, waivers, releases, authorizations
and approvals from such Governmental Entities as shall be necessary to permit
the consummation of the Contemplated Transactions (as defined in Section
9.3);
(2) such consents, waivers, valuations, authorizations and approvals as may
be
required under Charter Documents of each of the Company Group; and (3) such
consents, waivers, releases, authorizations and approvals from such third
parties as shall be necessary to permit the consummation of the Contemplated
Transactions.
Section
8.2 Access and Investigation. Prior to
the Closing, upon reasonable notice from the Purchaser to the Seller given
in
accordance with this Agreement, the Seller will afford to the officers,
attorneys, accountants or other authorized representatives of the Purchaser
reasonable access during normal business hours to the facilities, assets,
books
and records, and management personnel of the Company Group, so as to afford
the
Purchaser a reasonable opportunity to make, at its sole cost and expense,
such
additional review, examination and investigation of the Company Group, the
Assets, the Business and the Shares as the Purchaser may reasonably desire
to
make. The Seller shall instruct its accountants and advisers to
reasonably cooperate with the Purchaser and to provide Purchaser with reasonable
access to such accountants (including their work papers to the extent available
to the Seller) and advisers, all at Purchaser’s cost and
expense.
Section
8.3 Operation of the
Businesses. Between the date of this Agreement and the Closing
Date, except as otherwise expressly provided in or contemplated by this
Agreement, or waived or consented to by Purchaser in writing, the Seller
shall
cause the Company Group to:
(a) conduct
the Business only in the Ordinary Course of Business;
(b) keep
available the services of the current officers, employees and agents of each
of
the Company Group, and maintain the relations and good will with suppliers,
customers, landlords, creditors and others having material business
relationships with any of the Company Group;
(c) confer
with the Purchaser concerning operational and financial matters regarding
the
Business which are of a material nature, it being understood that,
notwithstanding anything to the contrary herein, until the Closing the Seller
shall have sole authority to operate the Businesses;
(d) maintain
all leased and owned real property comprising any of the Assets in accordance
with the Ordinary Course of Business;
(e) not
approve any new capital expenditure or other financial commitment in excess
of
Rmb 100,000;
(f) not
dispose of or incur, create or assume any Lien, other than Permitted Liens,
on
any individual capital asset of any of the Company Group or the Businesses
if
the greater of the book value or the fair market value of such capital asset
exceeds Rmb 100,000;
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(g) not
incur any indebtedness for money borrowed (excluding trade payables incurred
in
the Ordinary Course of Business or intercompany borrowings) that constitutes
a
Liability of any of the Company Group in excess of Rmb 100,000;
(h) not
(1) amend their Charter Documents, (2) issue, sell, redeem or otherwise acquire
any capital stock, bonds, debentures, notes or other securities or grant
any
options (including any employee stock options), warrants or other rights
entitling any person to require the issuance or delivery of any capital stock,
bonds, debentures, notes or other securities, or (3) declare, or set aside
for
payment, any dividend to be paid subsequent to the Closing Date;
(i) not
enter into any material transaction with any Affiliate except on commercially
reasonable terms and in the Ordinary Course of Business;
(j) not
grant material salary or wage increases, or change or amend any benefit plan
covering transferred employees in any way that materially changes the amount
such employees are entitled to receive under such plan other than pursuant
to
existing salary and wage plans except in the Ordinary Course of Business;
and
(k) not
take any action or otherwise omit to take any action which would reasonably
be
expected to cause a breach of the Warrantors’ representations, warranties,
covenants and agreements herein set forth.
Section
8.4 Completion of Pre-Closing
Restructuring. Each of Xxxxxxxx Xxxx, Xxxxxx Xxxxx and Xxxx Xx
undertakes, jointly and severally, to the Purchaser that he or she will use
best
efforts to complete the Pre-Closing Restructuring set forth in Schedule II,
which consists of: transfer of all the Shares of the Company from Xxxx Xx
to the
Seller.
Section
8.5 Notification. Between the date of this
Agreement and the Closing, the Warrantors will promptly notify the Purchaser
in
writing if the Warrantors become aware of any fact or condition that causes
or
constitutes a breach of any of the Warrantors’ representations and warranties as
of the date of this Agreement, or if the Warrantors become aware of the
occurrence after the date of this Agreement of any fact or condition that
would
(except as expressly required by this Agreement) cause or constitute a breach
of
any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition.
Section
8.6 Publicity. No press release or public
announcement related to this Agreement, or the transactions contemplated
hereby
or thereby, shall be issued or made without the joint approval of both parties,
unless required by Law (in the reasonable opinion of outside counsel) or
other
Governmental Entity, rule or regulation, in which case the parties shall
use
reasonable efforts to give the other the opportunity to review such press
release or announcement prior to publication and, where practicable, agree
to
the form and wording of such release or announcement.
ARTICLE
IX
Closing
Conditions
The
Purchaser’s obligation to purchase the Shares and to take the other actions
required to be taken by the Purchaser at the Closing, is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Purchaser, in whole or in part):
Section
9.1 Accuracy of Representations. Each of the
Warrantors’ representations and warranties set forth in this Agreement must have
been true and correct as of the date of this Agreement, and must be true
and
accurate as of the Closing Date as if made on the Closing Date (except for
representations and warranties made as of a certain date, which shall be
true
and correct as of such date).
-14-
Section
9.2 Warrantors’ Performance. Each of the
covenants and obligations that the Warrantors are required to perform or
to
comply with pursuant to this Agreement at or prior to the Closing must have
been
duly performed and complied with, and the Warrantors must have executed and
delivered each of the documents required to be delivered by it hereunder,
including under Section 3.2 and Schedule 3.2.
Section
9.3 No Injunction. Since the date of this
Agreement, there must not be in effect any injunction or other Order issued
by a
court of competent jurisdiction restraining or prohibiting the consummation
of
the transactions contemplated by this Agreement, or in any other Closing
Document, including the Transfer of the Shares and the transfer of the employees
of SZ (collectively, the “Contemplated
Transactions”).
Section
9.4 Non-Competition, Confidentiality and Employment
Agreements Xxxxxxxx Xxxx and Xxxxxx Xxxxx and each of the key
management personnel of the Company as designated by the Purchaser have entered
into a Non-Competition Agreement, Non-solicitation and Confidentiality Agreement
and a 2-year Employment Agreement with the Company in which he or she agrees
to
commit substantially all of his or her working time to the Company and the
Business in form and substance reasonably satisfactory to the
Purchaser.
Section
9.5 Transfer of Employees of the
Company. Each of the employees of SZ shall have terminated
his or her employment with SZ and have signed a standard employment agreement
with a designee of the Purchaser.
Section
9.6 Appointment to and Resignation from the
Board. All corporate and other actions shall have been taken to
(a) appoint at least three (3) persons nominated by the Purchaser as directors
of the Company, and (b) ensure the resignation or removal of Xxxx Xx as a
director of the Company, in each case with effect from and as of the
Closing.
Section
9.7 No Prohibition. The proposed Transfer of
the Shares and the employees of SZ contemplated hereunder will not contravene,
or materially conflict with, or result in a violation of any applicable Law
or
Order.
Section
9.8 No Material Adverse Event. There shall
have been no Material Adverse Events with respect to any member of the Company
Group since the date hereof relating to the Business.
Section
9.9 Due Diligence. The Purchaser shall have
completed its business, legal, financial and other due diligence review on
the
Company Group and their respective conditions and affairs and the results
of
such review are to the Purchaser’s satisfaction.
ARTICLE
X
Termination
Rights
Section
10.1 Termination Events. This Agreement may,
by notice given prior to or at the Closing, be terminated:
(a) by
mutual written consent of the Purchaser, the Seller;
(b) by
the Purchaser, if any of the conditions in Article IX has not been satisfied
as
of the Closing or if satisfaction of any such condition is or becomes impossible
(other than through the failure of the Purchaser to comply with its obligations
under this Agreement) and the Purchaser has not waived such condition at
or
before the Closing;
-15-
(c) by
either the Purchaser, on the one hand, or the Seller, on the other hand,
if the
other party (or parties) has materially breached their obligations hereunder
such that the conditions set forth in Article IX (as appropriate) cannot
be
satisfied within 10 days following receipt of notice of a breach from the
non-breaching party;
(d) by
either the Purchaser, on the one hand, or the Seller, on the other hand,
if the
Closing has not occurred (other than through the failure of any party seeking
to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before August 31, 2007 or such later date as the parties
may
mutually agree upon in writing; or
(e) by
either the Purchaser, on the one hand, or the Seller, on the other hand,
if any
court of competent jurisdiction or any Governmental, Entity shall have issued
an
Order or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Transfer of the Shares or the employees
of SZ.
Section
10.2 Procedures for Termination. In the event
of termination by the Seller, on the one hand or the Purchaser, on the other
hand, pursuant to Section 10.1, written notice thereof shall forthwith be
given to the other parties in accordance with Section 11.8, and the Contemplated
Transactions shall be terminated without further action by any
party.
ARTICLE
XI
Miscellaneous.
Section
11.1 Entire Agreement; Amendment. This
Agreement, its supplementary agreement and the documents referred to herein
constitute the entire agreement among the parties with respect to the subject
matter of this Agreement. Any prior or contemporaneous agreement,
discussion, understanding or correspondence among the parties (including
any
prior representations or warranties given by the parties) regarding the subject
matter of this Agreement is superseded by this Agreement.
Section
11.2 Amendments. Any term of this Agreement
may be amended only with the written consent of the parties hereto.
Section
11.3 Successors and Assigns. This Agreement
shall inure to the benefit of and be binding upon the parties hereto, and
their
respective successors and permitted assigns. This Agreement is freely
assignable by the Purchaser to any of its affiliates after the Closing Date
but
may not be assigned by the Seller without the prior written consent of the
Purchaser; provided, however, that any such assignment by the Purchaser shall
not relieve it of its obligations hereunder.
Section
11.4 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be
an
original for all purposes and all of which together shall constitute one
and the
same instrument.
Section
11.5 Headings and Section References. The
headings of the sections and paragraphs of this Agreement are included for
convenience only and are not intended to be a part of, or to affect the meaning
or interpretation of, this Agreement. All section references herein,
unless otherwise clearly indicated, are to sections within this
Agreement.
Section
11.6 Waiver. No failure or delay by either
the Purchaser, on the one hand or the Seller, on the other hand, in exercising
any right, power or privilege hereunder shall operate as a waiver thereof;
nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and
not exclusive of any rights or remedies otherwise provided by law.
-16-
Section
11.7 Expenses. Except as otherwise
specifically provided for in this Agreement the Seller and the Purchaser
shall
each pay all costs and expenses incurred by it or on its behalf in connection
with this Agreement and the transactions contemplated hereby, including,
without
limitation, fees and expenses of its own financial consultants, accountants
and
counsel.
Section
11.8 Notices. Unless otherwise provided, any
notice required or permitted under this Agreement shall be given in writing
and
shall be deemed effectively given upon personal delivery to the party to
be
notified or on the 10th day after the date mailed, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties, or on the first business day following the date of transmission
by facsimile.
Section
11.9 Governing Law and
Arbitration. This Agreement and the legal relations among the
parties hereto shall be construed in accordance with, and all disputes,
controversies or claims arising out of or in connection with this Agreement
or
the breach, termination or invalidity thereof (collectively,
“Disputes”) hereunder shall be governed by, the laws
of Hong Kong without regard to conflicts of laws principles thereof. In
the event of a Dispute, the parties shall use their good faith efforts to
resolve the same. If no resolution can be reached through such efforts
within 30 days from the date on which one party first notifies the other
party
in writing of the existence of a Dispute, then any party may submit the Dispute
to the Hong Kong International Arbitration Center for arbitration by three
arbitrators appointed in accordance with the Arbitration Rules (as defined
below, the “Arbitrators”) in accordance with the
UNCITRAL Arbitration Rules in force on the date hereof (the “Arbitration
Rules”). In the event of any discrepancy between such Arbitration Rules and the
provisions of this Section 11.9, the provisions of this Section 11.9 shall
prevail. The arbitration shall be conducted by the Arbitrators in
English and shall be held in Hong Kong. Each party hereby submits to
the jurisdiction of the Arbitrators, and expressly and irrevocably waives
any
claim or defense based on any alleged lack of personal jurisdiction, improper
venue, forum non convenience, or any similar basis with respect to such
arbitration. The arbitration award shall be final and binding upon
the parties, and the parties agree to be bound thereby and to act
accordingly. The costs of arbitration and the costs of enforcing the
arbitration award (including in each case witness expenses and reasonable
attorneys’ fees and disbursements) shall be borne by the losing party, unless
otherwise determined by the arbitration award. In any arbitration
proceeding, any legal proceeding to enforce any arbitration award and in
any
legal action between the parties pursuant to or relating to this Agreement,
each
party expressly waives any defense based on the fact or allegation that it
is an
agency or instrumentality of a sovereign state. When any Dispute occurs
and when any Dispute is under arbitration or any other proceedings, the parties
shall continue to exercise their respective rights, and fulfill their
obligations under this Agreement.
Section
11.10 Severability. If any provisions
hereof shall be held by any court of competent jurisdiction to be illegal,
void,
or unenforceable, such provisions shall be of no force and effect, but the
illegality or unenforceability shall have no effect upon, and shall not impair
the enforceability of, any other provision of this Agreement.
Section
11.11 “Knowledge”. Whenever “to its
knowledge,” “known” or a similar phrase is used to qualify a representation of
the Warrantors, the “knowledge” so referred to shall be deemed to be (a) the
actual knowledge of each of the Warrantors, and (b) the knowledge that any
such
person would reasonably be expected to acquire in the prudent discharge of
his
or her duties with respect to the Company Group.
Section
11.12 Rights of Third Parties. Nothing
expressed or implied in this Agreement is intended or will be construed to
confer upon or give any person or entity other than the parties hereto and
their
respective successors and permitted assigns any rights or remedies under
or by
reason of this Agreement or any transaction contemplated hereby.
-17-
Section
11.13 Indemnification: Survival of Representations
and Warranties.
(a) Indemnification
by Seller and Individual Shareholders. The Seller and the Individual
Shareholders hereby jointly and severally agree to defend, hold harmless
and
indemnify the Purchaser and its Affiliates and their respective employees,
officers, directors, stockholders, partners and representatives from and
against
any losses, assessments, Liabilities, claims, damages, costs and expenses
(including without limitation reasonable attorneys’ fees and disbursements)
which arise out of or relate to:
(i) any
misrepresentation in, breach of or failure to comply with, any of the
representations, warranties, covenants or agreements of any Warrantor contained
in this Agreement, including without limitation in the Disclosure Schedule,
in
the post closing covenants or in any other Closing Document or in any
certificate or other instrument or document furnished or to be furnished
by any
Seller or other Warrantors pursuant to this Agreement or any of the Closing
Documents or in connection with the transactions contemplated hereby or thereby
(including but not limited to any undertaking letter issued by the Seller
and/or
Individual Shareholders in connection with the transactions contemplated
hereby
and any non-compliance with the applicable Hong Kong ordinance in connection
with the sole director arrangement of the Company);
(ii) any
Liabilities of any member of the Company Group other than the Approved
Liabilities; or
(iii) without
limiting the generality of the preceding clauses (i) and (ii), (1) the operation
of the Business prior to the Closing but excluding, for purposes of this
sub-clause (a), the Approved Liabilities; and (2) any Taxes attributable
to or
owing by the Business and the Company Group for all periods prior to Closing,
and all other Taxes of the Seller or their Affiliates; in each case under
the
foregoing sub-clauses (1) and (2), inclusive, regardless of whether such
losses,
assessments, Liabilities, claims, damages, costs and expenses, or the facts
or
circumstances relating thereto, were disclosed hereunder or in the Disclosure
Schedule or otherwise;
and
all
such losses, assessments, Liabilities, claims, damages, costs and expenses
so
arising out of or relating to any of the foregoing clauses (i) through (iii),
inclusive, of this Section 11.13(a), or the matters described therein, are
referred to hereinafter as the “Purchaser’s
Losses.”
(b) Indemnification
by the Purchaser. The Purchaser hereby agrees to defend, hold
harmless and indemnify the Seller and their Affiliates and their respective
employees, officers, directors, stockholders, partners and representatives
from
and against any losses, assessments, Liabilities, claims, damages, costs
and
expenses (including without limitation reasonable attorneys’ fees and
disbursements) which arise out of or relate to any misrepresentation in,
breach
of or failure to comply with, any of the representations, warranties, covenants
or agreements of the Purchaser or its Affiliates contained in this Agreement
or
in any other Closing Document or in any certificate or other instrument or
document furnished or to be furnished by the Purchaser or its Affiliate pursuant
to this Agreement or any of the Closing Documents or in connection with the
transactions contemplated hereby or thereby (collectively, the
“Seller’ Losses”).
(c) Survival
of Representations and Warranties. The Warrantors’ and the Purchaser’s
representations and warranties under this Agreement, and the indemnification
obligations arising solely from such representations and warranties under
Section 11.13(a)(i) and 11.13(b), respectively, shall survive the Closing
and
shall expire and terminate on the date(s) ninety (90) calendar days following
the expiration of the maximum applicable statutes of limitations applicable
to
any claim giving rise to the Purchaser’s Losses or Seller’ Losses, respectively,
to which such representations and warranties relate. Notwithstanding
the foregoing, the termination of the representations and warranties as
aforesaid shall not affect the rights of a party in respect of any claim
made by
such party prior to such termination.
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(d) Procedures.
(i) In
the event that any Legal Proceeding shall be threatened or instituted in
respect
to which indemnification may be sought by one party hereto from another party
under the provisions of this Section 11.13, the party seeking indemnification
(“Indemnitee”) shall, reasonably promptly after
acquiring actual knowledge of such threatened or instituted Legal Proceeding,
cause written notice in reasonable detail of such threatened or instituted
Legal
Proceeding and which is covered by this indemnification, to be forwarded
to the
other party from which indemnification is being sought
(“Indemnitor”), provided, however, that the failure to
provide such notice as of any particular date as aforesaid will not affect
any
rights to indemnification hereunder, except to the extent, and only to such
extent, that such failure to provide such notice actually and materially
prejudices the Indemnitor’s ability to adequately defend such Legal
Proceeding.
(ii) In
the event of the initiation of any Legal Proceeding against an Indemnitee
by a
third party, the Indemnitor shall have the absolute right after the receipt
of
the notice described in Section 11.13(d)(i), at its option and at its own
expense, to be represented by counsel of its choice, and (subject to Section
11.13(d)(iii)) to defend against, negotiate, settle or otherwise deal with
any
Legal Proceeding or demand that relates to any Purchaser’s Losses or Seller’
Losses, as the case may be, indemnified against hereunder, and, in such event,
the Indemnitee will reasonably cooperate with the Indemnitor and its
representatives in connection with such defense, negotiation, settlement
or
dealings (and the Indemnitee’s costs and expenses arising therefrom or relating
thereto shall constitute Purchaser’s Losses, if the Indemnitee is the Purchaser,
or Seller’ Losses, if the Indemnitee is a Seller or a Founder); provided,
however, that the Indemnitee may directly participate in any such Legal
Proceeding so defended with counsel of its choice at its own expense, except
that, if the Indemnitor fails to take reasonable steps necessary to defend
diligently such third party claim within 15 business days after receiving
written notice from the Indemnitee that the Indemnitee reasonably believes
the
Indemnitor has failed to take such steps or if the Indemnitor has not undertaken
fully to indemnify the Indemnitee in respect of all such Purchaser’s or Seller’
Losses, as the case may be, relating to the matter and as required hereunder,
the Indemnitee may assume its own defense, and, in such event (a) the Indemnitor
will be liable for all Purchaser’s or Seller’ Losses, as the case may be,
reasonably paid or incurred in connection therewith, and (b) the Indemnitor
shall, in any case, reasonably cooperate, at its own expense, with the
Indemnitee and its representatives in connection with such defense.
(iii) Without
the prior written consent of the Indemnitee, which shall not be unreasonably
withheld, the Indemnitor will not enter into any settlement of any third
party
claim which would lead to Liability or create any financial or other obligation
on the part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder or which would otherwise adversely affect the Assets
or the Business. If a firm offer is made to settle a third party
claim without leading to Liability or the creation of a financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder and the Indemnitor desires to accept
and
agree to such offer, the Indemnitor will give written notice to the Indemnitee
to that effect. If the Indemnitee notifies the Indemnitor that it
does not consent to such firm offer within 10 calendar days after its receipt
of
such notice from the Indemnitor, the Indemnitee may continue to contest or
defend such third party claim and, in such event, the maximum Liability of
the
Indemnitor as to such third party claim will not exceed the amount of such
settlement offer, plus the Purchaser’s Losses or Seller’s Losses, as the case
may be, reasonably paid or incurred by the Indemnitee through the end of
such
10-calendar day period.
-19-
(iv) After
any final judgment or award shall have been rendered by a Governmental Entity
of
competent jurisdiction and the time in which to appeal therefrom has expired,
or
a settlement shall have been consummated, or the Indemnitee and the Indemnitor
shall have arrived at a mutually binding agreement with respect to each separate
matter alleged to be indemnified by the Indemnitor hereunder, the Indemnitee
shall forward to the Indemnitor notice of any sums due and owing by it with
respect to such matter, and the Indemnitor shall pay all of the sums so owing
to
the Indemnitee by wire transfer or certified or bank cashier’s check within 30
days after the date of such notice. Any and all Purchaser’s Losses or
Seller’ Losses, other than those described in the preceding sentence (including
Purchaser’s Losses or Seller’ Losses incurred in the absence of any threatened
or pending Legal Proceeding, or Purchaser’s Losses or Seller’ Losses incurred
after any such Legal Proceeding has been threatened or instituted but prior
to
the rendering of any final judgment or award in connection therewith), shall
be
paid by the Indemnitor on a current basis, and, without limiting the generality
of the foregoing, the Indemnitee shall have the right to invoice the Indemnitor
for such Purchaser’s Losses or Seller’ Losses, as the case may be, as frequently
as it deems appropriate, and the amount of any such Purchaser’s Losses or
Seller’ Losses, as the case may be, which are described or listed in any such
invoice shall be paid to the Indemnitee, by wire transfer or certified or
bank
cashier’s check, within 30 days after the date of such invoice.
Section
11.14 Certain Definitions and Interpretive
Matters.
(a) Certain
Definitions. The following terms shall have the following
meanings:
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(i)
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“Affiliate”
means, with respect to a Person, any other Person that, directly
or
indirectly, controls, is controlled by or is under common control
with
such Person.
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(ii)
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“Approved
Commitment” means each Commitment of any of the Company
Group listed on Part I of Schedule
5.1(g).
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(iii)
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“Assets”
means all of the properties, rights, claims, contracts and assets
relating
to the Business, tangible or intangible, xxxxxx or inchoate, and
wherever
located, of (a) the Company; and (b)
SZ.
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(iv)
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“Business”
has the meaning set forth in the
recital.
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(v)
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“Charter
Documents” means, with respect to any entity, means the
memorandum and articles of association, corporate charter, certificate
or
articles of incorporation or formation, by-laws, partnership or
operating
agreement, and similar documents of such entity, as
applicable.
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(vi)
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“Commitments”
means all contracts, agreements, other rights of a contractual
nature and
franchises of the Company Group.
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(vii)
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“Company
Group” means each and all of (a) the Company and (b)
SZ.
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(viii)
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“Governmental
Entity” means any domestic or foreign court, government,
governmental agency, authority, entity or instrumentality.
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(ix)
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“Intellectual
Property” means copyrights or trademarks, trademark rights,
service marks, service xxxx rights, trade names, trade name rights
owned
or used by the Company Group.
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(x)
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“Laws”
shall mean any federal, state, county or local statute, law, ordinance,
rule, regulation, order, judgment or
ruling.
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-20-
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(xi)
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“Material
Adverse Effect” means any fact, circumstance, event, change
or effect that is materially adverse to (a) any of the Company
Group, the
Assets or the financial condition of the Business or (b) the ability
to
operate the Business as operated by the Company Group as of the
Closing
Date.
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(xii)
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“Person”
means any person, company, corporation, joint venture,
partnership, legal association, or other entity, including any
Governmental Entity.
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(xiii)
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“PRC”
means the Peoples’ Republic of
China;
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(xiv)
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“Schedule”
or “Disclosure Schedule” shall mean the
Schedules, inclusive, attached hereto, which Schedules are incorporated
herein and made a part hereof, fully as if the same were herein
set forth
in their entirety.
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(xv)
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“Warrantors”
means the Seller, the Company and SZ and the Individual
Shareholders.
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Unless
the context otherwise requires, (i) each accounting term not otherwise defined
in this Agreement has the meaning assigned to it in accordance with the United
States Generally Accepted Accounting Principles, consistently applied
(“US GAAP”), (ii) “or” is disjunctive but not
necessarily exclusive, and (iii) all references to “US$” or dollar amounts mean
lawful currency of the United States of America.
(b) Interpretive
Matters. No provision of this Agreement will be interpreted in
favor of, or against, any of the parties hereto by reason of the extent to
which
any such party or its counsel participated in the drafting thereof or by
reason
of the extent to which any such provision is inconsistent with any prior
draft
hereof or thereof.
[The
remainder of this page has been intentionally left blank.]
-21-
IN
WITNESS WHEREOF the parties have executed and delivered this Agreement as
of the
date first set forth above.
Purchaser
Comtech
Group
/s/ Xxxxxxx Xxxx
Name:
Xxxxxxx Xxxx
Title: CEO
Address:
XX Xxx 000XX, Xxxxxx Xxxxx, Xxxxx Church Street, Grand Cayman,
Cayman Islands
Seller
First
King International Limited
/s/ Xxxxxxxx Xxxx
Name:
Xxxxxxxx Xxxx
Title: Director
Address:
Company
Group
KEEN
AWARDS LIMITED (奇利光电香港有限公司)
/s/ Xxxx Xx
Name:
Xxxx Xx
Title: Director
Address:
Shenzhen
Xxx Xxxxx Xxx Xxxx Company Limited (深圳汇诚运通科技有限公司)
/s/ Xxxx Xx
Name:
Xxxx Xx
Title: Director
Address:
Individual
Shareholders
/s/ Xxxx Xx
Xxxx
Xx
Address:
/s/
Xxxxxxxx Xxxx
Xxxxxxxx
Xxxx
Address:
/s/
Xxxxxx Xxxxx
Xxxxxx
Xxxxx
Address:
/s/
Xx
Xxxxx
Xx
Xxxxx
Address:
Schedule I
Part
I –The Individual Shareholders
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Individual
Shareholders’ Name
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Xxxx
Xx（李红）
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Xxxxxxxx
Xxxx（王晓青）
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Xxxxxx
Xxxxx（张宇锋）
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Xx
Xxxxx（张波）
|
Part
II – Shareholding Ratio of the Company Group
Shareholding
Ratio of the Company
|
Shareholders’
Name
|
Number
of Shares Held
|
Shareholding
Ratio
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Xxxx
Xx
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10,000
|
100%
|
Shareholding
Ratio of SZ
|
Shareholders’
Name
|
Capital
Contribution
|
Shareholding
Ratio
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Xxxx
Xx
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600,000
|
60%
|
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Xx
Xxxxx
|
400,000
|
40%
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Total
|
1,000,000
|
100%
|
Shareholding
Ratio of the Seller
|
Shareholders’
Name
|
Number
of Shares Held
|
Shareholding
Ratio
|
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Xxxxxxxx
Xxxx
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25,000
|
50%
|
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Xxxxxx
Xxxxx
|
25,000
|
50%
|
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Total
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50,000
|
100%
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