EXHIBIT 10.1
Share Exchange Agreement
This Share Exchange Agreement, dated as of May 25, 2004, is made by and
among TRIDENT ROWAN GROUP, INC., a Maryland corporation (the "Acquiror"), each
of the Persons listed on Exhibit A hereto (collectively, the "Shareholders", and
individually a "Shareholder"), and COMTECH GROUP, INC., a Cayman Islands company
(the "Company").
BACKGROUND
The Shareholders have agreed to transfer to the Acquiror, and the Acquiror
has agreed to acquire from the Shareholders, all of the Shares, which Shares
constitute 100% of the outstanding Common Stock of the Company, in exchange for
42,000,000 shares of the Acquiror's Common Stock, subject to adjustment pursuant
to Section 10.15 (the "Acquiror Shares") on the terms and conditions as set
forth herein.
SECTION I
DEFINITIONS
Unless the context otherwise requires, the terms defined in this Section 1
will have the meanings herein specified for all purposes of this Agreement,
applicable to both the singular and plural forms of any of the terms herein
defined.
1.1 "Accredited Investor" has the meaning set forth in Regulation D under
the Securities Act and set forth on Exhibit B.
1.2 "Acquired Companies" means, collectively, the Company and the Company
Subsidiaries.
1.3 "Acquiror Balance Sheet" means the Acquiror's balance sheet at March
31, 2004.
1.4 "Acquiror Board" means the Board of Directors of the Acquiror.
1.5 "Acquiror Companies" means, collectively, the Acquiror and the
Acquiror Subsidiaries.
1.6 "Acquiror Nominees" means, from and after the Closing Date, the two
members of the Acquiror Board nominated by the Acquiror Stockholders pursuant to
this Agreement and the Stockholders Agreement.
1.7 "Acquiror's Common Stock" means the Acquiror's common stock, par value
$0.01 per share.
1.8 "Acquiror Stockholders" means those stockholders of the Acquiror who
are parties to the Stockholders Agreement.
1.9 "Acquiror Subsidiaries" means all of the direct and indirect
Subsidiaries of the Acquiror.
1.10 "Acquisition Transaction" has the meaning set forth in Section
11.1.7.
1.11 "Additional Shares" has the meaning set forth in Section 12.3.2.
1.12 "Affiliate" means any Person that directly or indirectly controls, is
controlled by or is under common control with the indicated Person.
1.13 "Agreement" means this Share Exchange Agreement, including all
Schedules and Exhibits hereto, as this Share Exchange Agreement may be from time
to time amended, modified or supplemented.
1.14 "Approved Plans" means a stock option or similar plan for the benefit
of employees or others which has been approved by the stockholders of the
Acquiror.
1.15 "Business Day" means a day, other than Saturday or Sunday, on which
banks in New York are open for business.
1.16 "Claims Period" has the meaning set forth in Section 12.2.1.
1.17 "Closing" has the meaning set forth in Section 3.
1.18 "Closing Acquiror Shares" means the aggregate number of Acquiror
Shares issuable to the Shareholders at Closing, less the Escrow Amount.
1.19 "Closing Date" has the meaning set forth in Section 3.
1.20 "Code" means the Internal Revenue Code of 1986, as amended.
1.21 "Common Stock" means the Company's common stock, $0.001 par value,
per share.
1.22 "Commission" means the Securities and Exchange Commission or any
other federal agency then administering the Securities Act.
1.23 "Company Balance Sheet" means the Company's audited balance sheet at
December 31, 2003.
1.24 "Company Benefit Plans" means employee pension benefit plans,
medical, disability, severance pay, educational, life insurance and other
employee welfare benefit plans, and all other bonus, stock option, stock
purchase or other equity-based compensation arrangements, and incentive,
deferred compensation, supplemental retirement, severance, disability, vacation,
cafeteria and other similar employee benefit plans, policies, programs or
contracts (including those which contain change of control provisions or pending
change of control provisions), and any employment, executive compensation or
severance agreements (including those with change of control provisions or
pending change of control provisions), as
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amended, modified or supplemented, in any case that (a) are maintained or
contributed to (or to which there was an obligation to contribute) by any
Acquired Company, or (b) were formerly maintained or contributed to (or to which
there was an obligation to contribute), by any Acquired Company, as well as each
plan with respect to which any Acquired Company has or could have any liability,
whether direct or indirect or actual or contingent (including any liability
arising out of an indemnification, guarantee, hold harmless or similar
agreement).
1.25 "Company Audited Financial Statements" has the meaning set forth in
Section 5.8.
1.26 "Company Board" means the Board of Directors of the Company.
1.27 "Company Indemnified Party" has the meaning set forth in Section
12.3.1.
1.28 "Company Nominees" means, from and after the Closing Date, the five
members of the Acquiror Board nominated by the Shareholders pursuant to this
Agreement and the Stockholders Agreement.
1.29 "Company Subsidiaries" means all of the direct and indirect
Subsidiaries of the Company, including, without limitation, Comtech (China)
Holding Limited, a British Virgin Islands company, Comtech (Hong Kong) Holding
Limited, a British Virgin Islands company, Comtech Communication Technology
(Shenzhen) Company Limited, a People's Republic of China company, Comtech
Software, a Shenzhen company, Comtech International (Hong Kong) Limited, a Hong
Kong company, Shenzhen Comtech International Limited, a People's Republic of
China company and Shanghai Yishite Electronics Ltd., a People's Republic of
China company.
1.30 "Covered Persons" has the meaning set forth in Section 8.6.3.
1.31 "Damages" has the meaning set forth in Section 12.2.1.
1.32 "D&O Insurance" has the meaning set forth in Section 8.6.4.
1.33 "Distributor" means any underwriter, dealer or other Person who
participates, pursuant to a contractual arrangement, in the distribution of the
securities offered or sold in reliance on Regulation S.
1.34 "Environmental Laws" means any Law or other requirement relating to
the environment, natural resources, or public or employee health and safety.
1.35 "Environmental Permit" means all licenses, permits, authorizations,
approvals, franchises and rights required under any applicable Environmental Law
or Order.
1.36 "Equity Security" means any stock or similar security, including,
without limitation, securities containing equity features and securities
containing profit participation features, or any security convertible into or
exchangeable for, with or without consideration, any stock or similar security,
or any security carrying any warrant, right or option to subscribe to or
purchase any shares of capital stock, or any such warrant or right.
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1.37 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.38 "Escrow Agent" has the meaning set forth in Section 3.2.
1.39 "Escrow Agreement" means the Escrow Agreement, dated the Closing
Date, by and among the Acquiror, the Shareholders and the Escrow Agent, in
substantially the form attached hereto as Exhibit F.
1.40 "Escrow Amount" has the meaning set forth in Section 3.2.
1.41 "Exchange Act" means the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same will then be in effect.
1.42 "Exhibits" means the several exhibits referred to and identified in
this Agreement.
1.43 "GAAP" means, with respect to any Person, United States generally
accepted accounting principles applied on a consistent basis with such Person's
past practices.
1.44 "Governmental Authority" means any federal or national, state or
provincial, municipal or local government, governmental authority, regulatory or
administrative agency, governmental commission, department, board, bureau,
agency or instrumentality, political subdivision, commission, court, tribunal,
official, arbitrator or arbitral body, in each case whether U.S. or non-U.S.
1.45 "Indebtedness" means any obligation, contingent or otherwise. Any
obligation secured by a Lien on, or payable out of the proceeds of, or
production from, property of the relevant party will be deemed to be
Indebtedness.
1.46 "Indebtedness for Borrowed Money" means (a) all Indebtedness in
respect of money borrowed; (b) all Indebtedness evidenced by a promissory note,
bond or similar written obligation to pay money; or (c) all such Indebtedness
guaranteed by the relevant party or for which the relevant party is otherwise
contingently liable.
1.47 "Indemnified Persons" has the meaning set forth in Section 8.6.2.
1.48 "Intellectual Property" means all industrial and intellectual
property, including, without limitation, all U.S. and non-U.S. patents, patent
applications, patent rights, trademarks, trademark applications, common law
trademarks, Internet domain names, trade names, service marks, service xxxx
applications, common law service marks, and the goodwill associated therewith,
copyrights, in both published and unpublished works, whether registered or
unregistered, copyright applications, franchises, licenses, know-how, trade
secrets, technical data, designs, customer lists, confidential and proprietary
information, processes and formulae, all computer software programs or
applications, layouts, inventions, development tools and all documentation and
media constituting, describing or relating to the above, including manuals,
memoranda, and records, whether such intellectual property has been created,
applied for or obtained anywhere throughout the world.
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1.49 "Key Employee" means those persons who, in the opinion of the
Company's management, are the most integral to the business operations of the
Company.
1.50 "Laws" means, with respect to any Person, any U.S. or non-U.S.
federal, national, state, provincial, local, municipal, international,
multinational or other law (including common law), constitution, statute, code,
ordinance, rule, regulation or treaty applicable to such Person.
1.51 "Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising by
Law.
1.52 "Material Acquiror Contract" means any and all agreements, contracts,
arrangements, leases, commitments or otherwise, of the Acquiror Companies,
whether or not required to be filed with the Commission, which individually have
an amount or value in excess (euro)10,000.
1.53 "Material Adverse Effect" means, when used with respect to the
Acquiror Companies or the Acquired Companies, as the case may be, any change,
effect or circumstance which, individually or in the aggregate, would reasonably
be expected to (a) have a material adverse effect on the business, assets,
financial condition or results of operations of the Acquiror Companies or the
Acquired Companies, as the case may be, in each case taken as a whole or (b)
materially impair the ability of the Acquiror or the Company, as the case may
be, to perform their obligations under this Agreement, excluding any change,
effect or circumstance resulting from (i) the announcement, pendency or
consummation of the transactions contemplated by this Agreement, (ii) changes in
the United States securities markets generally, or (iii) changes in general
economic, currency exchange rate, political or regulatory conditions in
industries in which the Acquiror Companies or the Acquired Companies, as the
case may be, operate.
1.54 "Material Company Contract" means any and all agreements, contracts,
arrangements, leases, commitments or otherwise, of the Acquired Companies, of
the type and nature that would be required to be filed with the Commission if
the Company was a reporting company.
1.55 "Order" means any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
Governmental Authority.
1.56 "Organizational Documents" means (a) the articles or certificate of
incorporation and the by-laws or code of regulations of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the articles or certificate of formation and
operating agreement of a limited liability company; (e) any other document
performing a similar function to the documents specified in clauses (a), (b),
(c) and (d) adopted or filed in connection with the creation, formation or
organization of a Person; and (f) any and all amendments to any of the
foregoing.
1.57 "Outside Date" has the meaning set forth in Section 11.1.3.
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1.58 "Permitted Liens" means (a) Liens for Taxes not yet payable or in
respect of which the validity thereof is being contested in good faith by
appropriate proceedings and for the payment of which the relevant party has made
adequate reserves; (b) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation, carriers, warehousemen, mechanics,
laborers and materialmen and similar Liens, if the obligations secured by such
Liens are not then delinquent or are being contested in good faith by
appropriate proceedings conducted and for the payment of which the relevant
party has made adequate reserves; (c) statutory Liens incidental to the conduct
of the business of the relevant party which were not incurred in connection with
the borrowing of money or the obtaining of advances or credits and that do not
in the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business; and (d) Liens that
would not have a Material Adverse Effect.
1.59 "Person" means all natural persons, corporations, business trusts,
associations, companies, partnerships, limited liability companies, joint
ventures and other entities, governments, agencies and political subdivisions.
1.60 "PRC" means the People's Republic of China.
1.61 "PRC Acquired Company" means Comtech Communication Technology
(Shenzhen) Company Limited, Comtech International (HK) Ltd., Comtech Software,
Shenzhen Comtech International Limited and Shanghai Yishite Electronics Ltd.
1.62 "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Authority.
1.63 "Regulation S" means Regulation S under the Securities Act, as the
same may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
1.64 "Returned Shares" has the meaning set forth in Section 12.2.2.
1.65 "Rule 144" means Rule 144 under the Securities Act, as the same may
be amended from time to time, or any successor statute.
1.66 "Schedule 14(f) Filing" has the meaning set forth in Section 5.4.
1.67 "Schedules" means the several schedules referred to and identified
herein, setting forth certain disclosures, exceptions and other information,
data and documents referred to at various places throughout this Agreement.
1.68 "SEC Documents" has the meaning set forth in Section 6.26.
1.69 "Section 4(2)" means Section 4(2) under the Securities Act, as the
same may be amended from time to time, or any successor statute.
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1.70 "Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same will be in effect at the time.
1.71 "Shares" means the 10,000,000 shares of Common Stock of the Company
owned by the Shareholders and exchanged pursuant to this Agreement.
1.72 "Stockholders Agreement" means the Stockholders Agreement, dated the
Closing Date, by and among the Acquiror, the Acquiror Stockholders and the
Shareholders, in substantially the form attached hereto as Exhibit G.
1.73 "Subsidiary" means, with respect to any Person, any corporation,
limited liability company, joint venture or partnership of which such Person (a)
beneficially owns, either directly or indirectly, more than 50% of (i) the total
combined voting power of all classes of voting securities of such entity, (ii)
the total combined equity interests, or (iii) the capital or profit interests,
in the case of a partnership; or (b) otherwise has the power to vote or to
direct the voting of sufficient securities to elect a majority of the board of
directors or similar governing body.
1.74 "Survival Period" has the meaning set forth in Section 12.1.
1.75 "Taxes" means all foreign, federal, state or local taxes, charges,
fees, levies, imposts, duties and other assessments, as applicable, including,
but not limited to, any income, alternative minimum or add-on, estimated, gross
income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise, registration, title, license, capital, paid-up
capital, profits, withholding, payroll, employment, unemployment, excise,
severance, stamp, occupation, premium, real property, recording, personal
property, federal highway use, commercial rent, environmental (including, but
not limited to, taxes under Section 59A of the Code) or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest, penalties or additions to
tax with respect to any of the foregoing; and "Tax" means any of the foregoing
Taxes.
1.76 "Tax Group" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Acquiror is
now or was formerly a member.
1.77 "Tax Return" means any return, declaration, report, claim for refund
or credit, information return, statement or other similar document filed with
any Governmental Authority with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
1.78 "Transaction Documents" means, collectively, all agreements,
instruments and other documents to be executed and delivered in connection with
the transactions contemplated hereby, including the Escrow Agreement, the
Stockholders Agreement and the lock up letters to be executed by each of Xxxx
Xxxxxx, Xxxx Xxxxxx, Xxxxxxx Xxxxx and Gianni Bulgari.
1.79 "U.S." means the United States of America.
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1.80 "U.S. person" has the meaning set forth in Regulation S under the
Securities Act and set forth on Exhibit C hereto.
SECTION II
EXCHANGE OF SHARES AND SHARE CONSIDERATION
2.1 Share Exchange. Each of the Shareholders desires to transfer to, and
the Acquiror desires to acquire from each Shareholder, that number of Shares set
out beside the respective names of the Shareholders in Exhibit B for the
consideration and on the terms set forth in this Agreement. Subject to Sections
3.2 and 10.15, the aggregate consideration for the Shares acquired by the
Acquiror pursuant to this Agreement will be 42,000,000 shares of the Acquiror's
Common Stock to be issued on a pro rata basis among the Shareholders based on
the percentage of the Shares owned by such Shareholder as set forth in Exhibit
A.
2.2 Withholding. The Acquiror shall be entitled to deduct and withhold
from the Acquiror Shares otherwise payable pursuant to this Agreement to any
holder of Shares such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code or any provision of state,
local, provincial or foreign Tax Law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Shares in respect of which such
deduction and withholding was made.
2.3 Section 368 Reorganization. For U.S. federal income tax purposes, the
exchange by the Shareholders of the Shares for the Acquiror's Common Stock is
intended to constitute a "reorganization" within the meaning of Section
368(a)(1)(B) of the Code. The parties to this Agreement hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
Notwithstanding the foregoing or anything else to the contrary contained in this
Agreement, the parties acknowledge and agree that no party is making any
representation or warranty as to the qualification of the exchange by the
Shareholders of the Shares for the Acquiror's Common Stock as a reorganization
under Section 368 of the Code or as to the effect, if any, that any transaction
consummated prior to the Closing has or may have on any such reorganization
status. The parties acknowledge and agree that each (i) has had the opportunity
to obtain independent legal and tax advice with respect to the transaction
contemplated by this Agreement, and (ii) is responsible for paying its own Taxes
including without limitation, any adverse Tax consequences that may result if
the transaction contemplated by this Agreement is not determined to qualify as a
reorganization under Section 368 of the Code.
2.4 Directors of Acquiror at Closing. Simultaneously with the Closing of
the transactions contemplated by this Agreement, the current directors of the
Acquiror shall appoint Xx. Xxxxxxx Xxxx and Ms. Xxx Xxxx to fill the current
vacancies on the Acquiror Board. Immediately thereafter, Xx. Xxxxxx Xxxxx, Xx.
Xxxxxxx Xxxxx and Xx. Xxxxxx Bulgari, shall resign as directors of the Acquiror
and the remaining four directors of the Acquiror shall appoint Messrs. Xxx Xx,
Xxxx Xx and Xxxxx Xxx to fill the resulting vacancies on the Acquiror Board.
From and after the Closing Date, the Acquiror Stockholders and the Company shall
have the
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right, pursuant to the terms of the Stockholders Agreement, to designate
Acquiror Nominees and Company Nominees, respectively, to serve on the Acquiror
Board.
SECTION III
CLOSING
3.1 Closing. The closing (the "Closing") of the share exchange will occur
at the offices of Loeb & Loeb, LLP, in New York, New York, on June 23, 2004
(which date shall be thirty (30) days after the date hereof) or at such later
date as all of the closing conditions set forth in Sections 9 and 10 have been
satisfied or waived (the "Closing Date"). Subject to Section 3.2, at the
Closing, each Shareholder will deliver to the Acquiror certificate(s) evidencing
the number of Shares held by such Shareholder (as set forth in Exhibit A), along
with executed stock powers transferring such Shares to the Acquiror, against
delivery to each Shareholder by the Acquiror of a certificate evidencing such
Shareholder's pro rata share of the Acquiror Shares (as set forth in Exhibit A).
3.2 Escrow. Notwithstanding any provision of this Agreement to the
contrary, in lieu of delivering to the Shareholders certificates for the full
number of Acquiror Shares provided for in Section 3.1, the Acquiror shall
deliver or cause to be delivered (A) to each Shareholder, a certificate
registered in the name of such Shareholder evidencing such number of Closing
Acquiror Shares as set forth in Exhibit A; and (B) to Loeb & Loeb LLP, as escrow
agent (the "Escrow Agent") for deposit into escrow pursuant to the Escrow
Agreement, a certificate registered in the name of the Escrow Agent for an
aggregate of 16,651,731 Acquiror Shares (the "Escrow Amount"), which certificate
will be held in the escrow account and disposed of by the Escrow Agent in
accordance with the terms and provisions of the Escrow Agreement.
SECTION IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
4.1 Generally. Each Shareholder, severally and not jointly, hereby
represents and warrants to the Acquiror:
4.1.1 Authority. Such Shareholder has the right, power, authority
and capacity to execute and deliver this Agreement and each of the Transaction
Documents to which such Shareholder is a party, to consummate the transactions
contemplated by this Agreement and each of the Transaction Documents to which
such Shareholder is a party, and to perform such Shareholder's obligations under
this Agreement and each of the Transaction Documents to which such Shareholder
is a party. This Agreement has been, and each of the Transaction Documents to
which such Shareholder is a party will be, duly and validly authorized and
approved, executed and delivered by such Shareholder. Assuming this Agreement
and the Transaction Documents have been duly and validly authorized, executed
and delivered by the parties thereto other than such Shareholder, this Agreement
is, and as of the Closing each of the Transaction Documents to which such
Shareholder is a party will have been, duly authorized, executed and delivered
by such Shareholder and constitute or will constitute the legal, valid and
binding obligation of such Shareholder, enforceable against such Shareholder in
accordance with their respective terms,
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except as such enforcement is limited by general equitable principles, or by
bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors rights generally.
4.1.2 No Conflict. Neither the execution or delivery by such
Shareholder of this Agreement or any Transaction Document to which such
Shareholder is a party, nor the consummation or performance by such Shareholder
of the transactions contemplated hereby or thereby will, directly or indirectly,
(a) contravene, conflict with, or result in a violation of any provision of the
Organizational Documents of such Shareholder (if such Shareholder is not a
natural person); (b) contravene, conflict with, constitute a default (or an
event or condition which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination or acceleration of, any agreement
or instrument to which such Shareholder is a party or by which the properties or
assets of such Shareholder are bound; or (c) contravene, conflict with, or
result in a violation of, any Law or Order to which such Shareholder, or any of
the properties or assets of such Shareholder, may be subject.
4.1.3 Ownership of Shares. Such Shareholder owns, of record and
beneficially, and has good, valid and indefeasible title to and the right to
transfer to the Acquiror pursuant to this Agreement, such Shareholder's Shares
free and clear of any and all Liens. There are no options, rights, voting
trusts, stockholder agreements or any other contracts or understandings to which
such Shareholder is a party or by which such Shareholder or such Shareholder's
Shares are bound with respect to the issuance, sale, transfer, voting or
registration of such Shareholder's Shares. At the Closing, the Acquiror will
acquire good, valid and marketable title to such Shareholder's Shares free and
clear of any and all Liens.
4.1.4 Litigation. There is no pending Proceeding against such
Shareholder that challenges, or may have the effect of preventing, delaying or
making illegal, or otherwise interfering with, any of the transactions
contemplated by this Agreement and, to the knowledge of such Shareholder, no
such Proceeding has been threatened, and no event or circumstance exists that is
reasonably likely to give rise to or serve as a basis for the commencement of
any such Proceeding.
4.1.5 No Brokers or Finders. Except as disclosed in Schedule 4.1.5,
no Person has, or as a result of the transactions contemplated herein will have,
any right or valid claim against such Shareholder for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, and such
Shareholder will indemnify and hold the Acquiror harmless against any liability
or expense arising out of, or in connection with, any such claim.
4.2 Investment Representations. Each Shareholder, severally and not
jointly, hereby represents and warrants to the Acquiror:
4.2.1 Acknowledgment. Each Shareholder understands and agrees that
the Acquiror Shares have not been registered under the Securities Act or the
securities laws of any state of the U.S. and that the issuance of the Acquiror
Shares is being effected in reliance upon an exemption from registration
afforded either under Section 4(2) of the Securities Act for transactions by an
issuer not involving a public offering or Regulation S for offers and sales of
securities outside the U.S.
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4.2.2 Status. By its execution of this Agreement, each Shareholder,
severally and not jointly, represents and warrants to the Acquiror as indicated
on its signature page to this Agreement, either that:
(a) it is an Accredited Investor; or
(b) it is not a U.S. person.
Each Shareholder severally understands that the Acquiror
Shares are being offered and sold to such Shareholder in reliance upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Shareholder set forth in this Agreement, in order that
the Acquiror may determine the applicability and availability of the exemptions
from registration of the Acquiror Shares on which the Acquiror is relying.
4.2.3 Additional Representations and Warranties of Accredited
Investors. Each Shareholder indicating that it is an Accredited Investor on its
signature page to this Agreement, severally and not jointly, further makes the
representations and warranties to the Acquiror set forth on Exhibit D.
4.2.4 Additional Representations and Warranties of Non-U.S. Persons.
Each Shareholder indicating that it is not a U.S. person on its signature page
to this Agreement, severally and not jointly, further makes the representations
and warranties to the Acquiror set forth on Exhibit E.
4.2.5 Stock Legends. Each Shareholder hereby agrees with the
Acquiror as follows:
(a) Securities Act Legend - Accredited Investors. The
certificates evidencing the Acquiror Shares issued to those Shareholders
who are Accredited Investors, and each certificate issued in transfer
thereof, will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE
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EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.
(b) Securities Act Legend - Non-U.S. Persons. The certificates
evidencing the Acquiror Shares issued to those Shareholders who are not
U.S. persons, and each certificate issued in transfer thereof, will bear
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE
SECURITIES ACT, AND BASED ON AN OPINION OF COUNSEL, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THE PROVISIONS OF
REGULATION S HAVE BEEN SATISFIED (2) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR
(3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION
OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT.
(c) Other Legends. The certificates representing such Acquiror
Shares, and each certificate issued in transfer thereof, will also bear
any other legend required under any applicable Law, including, without
limitation, any U.S. state corporate and state securities law, or
contract.
(d) Opinion. No Shareholder will transfer any or all of the
Acquiror Shares pursuant to Regulation S or absent an effective
registration statement under the Securities Act and applicable state
securities law covering the disposition of such Shareholder's Acquiror
Shares, without first providing the Acquiror with an opinion of counsel
(which counsel and opinion are reasonably satisfactory to the Acquiror) to
the effect that such transfer will be made in compliance with Regulation S
or will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable U.S. state securities laws.
12
(e) Consent. Each Shareholder understands and acknowledges
that the Acquiror may refuse to transfer the Acquiror Shares, unless such
Shareholder complies with this Section 4.2.5 and any other restrictions on
transferability set forth in Exhibits D and E. Each Shareholder consents
to the Acquiror making a notation on its records or giving instructions to
any transfer agent of the Acquiror's Common Stock in order to implement
the restrictions on transfer of the Acquiror Shares.
SECTION V
REPRESENTATIONS AND WARRANTIES BY THE COMPANY
The Company represents and warrants to the Acquiror as follows:
5.1 Organization and Qualification. Each of the Acquired Companies is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all requisite authority and power (corporate
and other), governmental licenses, authorizations, consents and approvals to
carry on its business as presently conducted and to own, hold and operate its
properties and assets as now owned, held and operated by it, except where the
failure to be so organized, existing and in good standing or to have such
authority and power, governmental licenses, authorizations, consents or
approvals would not have a Material Adverse Effect. Each of the Acquired
Companies is duly qualified, licensed or domesticated as a foreign corporation
in good standing in each jurisdiction wherein the nature of its activities or
its properties owned, held or operated makes such qualification, licensing or
domestication necessary, except where the failure to be so duly qualified,
licensed or domesticated and in good standing would not have a Material Adverse
Effect. Schedule 5.1 sets forth a true, complete and correct list of each
Acquired Company's jurisdiction of organization and each other jurisdiction in
which such Acquired Company presently conducts its business or owns, holds and
operates its properties and assets.
5.2 Subsidiaries. Except as set forth on Schedule 5.2, no Acquired Company
owns, directly or indirectly, any equity or other ownership interest in any
corporation, partnership, joint venture or other entity or enterprise.
5.3 Organizational Documents. True, correct and complete copies of the
Organizational Documents of each Acquired Company have been delivered to the
Acquiror prior to the execution of this Agreement, and no action has been taken
to amend or repeal such Organizational Documents. No Acquired Company is in
violation or breach of any of the provisions of its Organizational Documents,
except for such violations or breaches as, would not have a Material Adverse
Effect. The Organizational Documents of the PRC Acquired Companies are valid and
subsisting and have been approved by all applicable Governmental Authorities,
including, without limitation, the State Administration of Industry and Commerce
Bureau of the PRC and the Ministry of Foreign Trade and Economic
Corporation/Ministry of Commerce, or their respective delegated local
authorities, which have jurisdiction over the registration of the PRC Acquired
Companies and to the Company's knowledge, there are no circumstances which may
lead to the Organizational Documents of the PRC Acquired Companies being revoked
or terminated prior to the expiration of their respective terms.
13
5.4 Authorization. The Company has all requisite authority and power
(corporate and other), governmental licenses, authorizations, consents and
approvals to enter into this Agreement and each of the Transaction Documents to
which the Company is a party, to consummate the transactions contemplated by
this Agreement and each of the Transaction Documents to which the Company is a
party and to perform its obligations under this Agreement and each of the
Transaction Documents to which the Company is a party. The execution, delivery
and performance by the Company of this Agreement and each of the Transaction
Documents to which the Company is a party and the recording of the transfer of
the Shares have been duly authorized by all necessary corporate action and do
not require from the Company Board or the Shareholders any consent or approval
that has not been validly and lawfully obtained. The execution, delivery and
performance by the Company of this Agreement and each of the Transaction
Documents to which the Company is a party and the recording of the transfer of
the Shares requires no authorization, consent, approval, license, exemption of
or filing or registration with any Governmental Authority or other Person other
than (a) such filings and mailings required by Section 14(f) of the Exchange
Act, Rule 14f-1 promulgated thereunder and any other policy or requirement of
the Commission imposed in connection therewith (including, without limitation,
any requirement arising from any comments of the Commission occasioned by the
filing of the Schedule 14(f) (the "Schedule 14(f) Filing") and (b) such other
customary filings with the Commission for transactions of the type contemplated
by this Agreement.
5.5 No Violation. Neither the execution or delivery by the Company of this
Agreement or any Transaction Document to which the Company is a party, nor the
consummation or performance by the Company of the transactions contemplated
hereby or thereby will, directly or indirectly, (a) contravene, conflict with,
or result in a violation of any provision of the Organizational Documents of any
Acquired Company; (b) contravene, conflict with, constitute a default (or an
event or condition which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination or acceleration of, or result in
the imposition or creation of any Lien under, any agreement or instrument to
which any Acquired Company is a party or by which the properties or assets of
any Acquired Company are bound; (c) contravene, conflict with, or result in a
violation of, any Law or Order to which any Acquired Company, or any of the
properties or assets owned or used by any Acquired Company, may be subject; or
(d) contravene, conflict with, or result in a violation of, the terms or
requirements of, or give any Governmental Authority the right to revoke,
withdraw, suspend, cancel, terminate or modify, any licenses, permits,
authorizations, approvals, franchises or other rights held by any Acquired
Company or that otherwise relate to the business of, or any of the properties or
assets owned or used by, any Acquired Company, except, in the case of clause
(b), (c) or (d), for any such contraventions, conflicts, violations, or other
occurrences as would not have a Material Adverse Effect.
5.6 Binding Obligations. Assuming this Agreement and the Transaction
Documents have been duly and validly authorized, executed and delivered by the
parties thereto other than the Company, this Agreement has been, and as of the
Closing each of the Transaction Documents to which the Company is a party will
be, duly authorized, executed and delivered by the Company and constitutes or
will constitute, as the case may be, the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except as such enforcement is limited by general equitable principles, or
by
14
bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors rights generally.
5.7 Capitalization and Related Matters.
5.7.1 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, of which 10,000,000 shares,
constituting the Shares, are issued and are outstanding. There are no
outstanding or authorized options, warrants, purchase agreements, participation
agreements, subscription rights, conversion rights, exchange rights or other
securities or contracts that could require the Company to issue, sell or
otherwise cause to become outstanding any of its authorized but unissued shares
of capital stock or any Equity Security or to create, authorize, issue, sell or
otherwise cause to become outstanding any new class of capital stock. There are
no outstanding stockholders' agreements, voting trusts or arrangements,
registration rights agreements, rights of first refusal or other contracts
pertaining to the capital stock of the Company. The Shares are duly authorized,
validly issued, fully paid and nonassessable and have not been issued in
violation of any preemptive or similar rights of any Person or in violation of
any Law.
5.7.2 No Redemption Requirements. Except as set forth in Schedule
5.7.2, there are no outstanding contractual obligations (contingent or
otherwise) of the Company to retire, repurchase, redeem or otherwise acquire any
outstanding shares of capital stock of, or other ownership interests in, the
Company or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any other Person.
5.7.3 Subsidiaries. The capitalization of each Company Subsidiary is
as set forth on Schedule 5.7.3. The issued and outstanding shares of capital
stock of each Company Subsidiary set forth on such schedule have been duly
authorized and are validly issued and outstanding, fully paid and
non-assessable, and constitute all of the issued and outstanding capital stock
of such Company Subsidiary. Except as set forth on Schedule 5.7.3, all
registered capital and other capital contributions regarding the PRC Acquired
Companies have been duly paid up in accordance with the relevant PRC regulations
and requirements and all necessary capital verification reports have been duly
issued and not revoked or withdrawn. The owners of the shares of each of the
Company Subsidiaries set forth on Schedule 5.7.3 own, and have good, valid and
marketable title to, all shares of capital stock of such Company Subsidiaries.
There are no outstanding or authorized options, warrants, purchase agreements,
participation agreements, subscription rights, conversion rights, exchange
rights or other securities or contracts that could require any of the Company
Subsidiaries to issue, sell or otherwise cause to become outstanding any of its
respective authorized but unissued shares of capital stock or Equity Security,
or to create, authorize, issue, sell or otherwise cause to become outstanding
any new class of capital stock. There are no outstanding stockholders'
agreements, voting trusts or arrangements, registration rights agreements,
rights of first refusal or other contracts pertaining to the capital stock of
any of the Company Subsidiaries. None of the outstanding shares of capital stock
of any of the Company Subsidiaries has been issued in violation of any rights of
any Person or in violation of any Law.
5.8 Financial Statements. Attached as Schedule 5.8 are the Company's
audited consolidated financial statements for the periods ended December 31,
2001, 2002 and 2003,
15
including, in each case, the notes thereto (the "Company Audited Financial
Statements"). The Company Audited Financial Statements (a) are in accordance
with the books and records of the Acquired Companies; (b) present fairly the
financial condition and the results of operations, changes in stockholder's
equity and cash flow of the Acquired Companies for the periods therein
specified; and (c) have been prepared in accordance with GAAP applied on a
consistent basis during the periods concerned. Specifically, but not by way of
limitation, the Company audited balance sheets included in the Company Audited
Financial Statements disclose all of the debts, liabilities and obligations of
any nature (whether absolute, accrued, contingent or otherwise and whether due
or to become due) of the Acquired Companies for the periods therein specified
which must be disclosed on a balance sheet in accordance with GAAP.
5.9 Shareholders. Exhibit A contains a true and complete list of the names
and addresses of the record and beneficial holders of the Shares. Except as
expressly provided in this Agreement, no Shareholder or Holder of any other
security of the Company or any other Person is entitled to any preemptive right,
right of first refusal or similar right as a result of the exchange of the
Shares or otherwise. There is no voting trust, agreement or arrangement among
any of the Shareholders affecting the exercise of the voting rights of any such
Shares.
5.10 Compliance with Laws. Except as would not have a Material Adverse
Effect, the business and operations of each Acquired Company have been and are
being conducted in accordance with all applicable Laws and Orders. Except as
would not have a Material Adverse Effect, no Acquired Company has received
notice of any violation (or any Proceeding involving an allegation of any
violation) of any applicable Law or Order by or affecting such Acquired Company
and, to the knowledge of the Company, no Proceeding involving an allegation of
violation of any applicable Law or Order is threatened or contemplated. Except
as would not have a Material Adverse Effect, no Acquired Company is subject to
any obligation or restriction of any kind or character, nor is there, to the
knowledge of the Company, any event or circumstance relating to any Acquired
Company that materially and adversely affects in any way its business,
properties, assets or prospects or that prohibits the Company from entering into
this Agreement or would prevent or make burdensome its performance of or
compliance with all or any part of this Agreement or the consummation of the
transactions contemplated hereby.
5.11 Certain Proceedings. There is no pending Proceeding that has been
commenced against the Company and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated by this Agreement. To the knowledge of the Company, no
such Proceeding has been threatened.
5.12 No Brokers or Finders. Except as disclosed in Schedule 5.12, no
Person has, or as a result of the transactions contemplated herein will have,
any right or valid claim against any Acquired Company for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, and the
Company will indemnify and hold the Acquiror harmless against any liability or
expense arising out of, or in connection with, any such claim.
5.13 Employees.
5.13.1 Except as would not have a Material Adverse Effect, each
Acquired Company is in full compliance with all Laws regarding employment,
wages, hours, benefits, the
16
payment of Taxes, occupational safety and health. No Acquired Company is liable
for the payment of any compensation, damages, Taxes, fines, penalties or other
amounts, however designated, for failure to comply with any of the foregoing
Laws.
5.13.2 No director, officer or employee of any Acquired Company is a
party to, or is otherwise bound by, any contract (including any confidentiality,
noncompetition or proprietary rights agreement) with any other Person that in
any way adversely affects or will materially affect (a) the performance of his
or her duties as a director, officer or employee of such Acquired Company or (b)
the ability of such Acquired Company to conduct its business.
5.13.3 Schedule 5.13.3-1 sets forth a true, correct and complete
list of each Key Employee of the Acquired Companies. Each such Key Employee has
executed and delivered to such Acquired Company a confidentiality and
non-competition agreement Each employee and consultant of each Acquired Company
has executed and delivered to such Acquired Company a service contract. No
current employee, officer or consultant of any Acquired Company has excluded
works or inventions made prior to his or her employment with such Acquired
Company from his or her service contract. The Company has delivered to the
Acquiror the form of each of the confidentiality and non-competition agreement
and the service contract. To the knowledge of the Company, no employee, officer
or consultant is in violation of his or her non-competition agreement or service
contract, as the case may be, and the Company will, and will cause each Acquired
Subsidiary to, use its best efforts to prevent any such violation.
5.14 Litigation; Orders. Except as would not have a Material Adverse
Effect, there is no Proceeding (whether federal, state, local or foreign)
pending or, to the knowledge of the Company, threatened against or affecting any
Acquired Company or any Acquired Company's properties, assets, business or
employees. To the knowledge of the Company, there is no fact that might result
in or form the basis for any such Proceeding. No Acquired Company is subject to
any Orders.
5.15 Licenses. Except as would not have a Material Adverse Effect, each
Acquired Company possesses from the appropriate Governmental Authority all
licenses, permits, authorizations, approvals, franchises and rights that are
necessary for such Acquired Company to engage in its business as currently
conducted and to permit such Acquired Company to own and use its properties and
assets in the manner in which it currently owns and uses such properties and
assets (collectively, "Company Permits"). No Acquired Company has received
notice from any Governmental Authority or other Person that there is lacking any
license, permit, authorization, approval, franchise or right necessary for such
Acquired Company to engage in its business as currently conducted and to permit
such Acquired Company to own and use its properties and assets in the manner in
which it currently owns and uses such properties and assets. Except as would not
have a Material Adverse Effect, the Company Permits are valid and in full force
and effect. Except as would not have a Material Adverse Effect, no event has
occurred or, circumstance exists that may (with or without notice or lapse of
time): (a) constitute or result, directly or indirectly, in a violation of or a
failure to comply with any Company Permit; or (b) result, directly or
indirectly, in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Company Permit. No Acquired Company
has received notice from any Governmental Authority or any other Person
regarding: (a) any actual, alleged, possible or potential contravention of any
Company Permit; or (b) any actual, proposed,
17
possible or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to, any Company Permit. All applications
required to have been filed for the renewal of such Company Permits have been
duly filed on a timely basis with the appropriate Persons, and all other filings
required to have been made with respect to such Company Permits have been duly
made on a timely basis with the appropriate Persons. All Company Permits are
renewable by their terms or in the ordinary course of business without the need
to comply with any special qualification procedures or to pay any amounts other
than routine fees or similar charges, all of which, to the extent due, have been
duly paid. In particular,
1. All land premiums, levies, charges, duties, taxes and imposts
payable by the PRC Acquired Companies in respect of the PRC
Permits have been duly paid and no amount is due or payable by
any of PRC Acquired Companies in respect of the PRC Permits;
2. All the necessary licenses, permits, consents and approvals
for the user of the PRC Permits as they are being used by the
PRC Enterprises have been duly obtained and are in full force,
validity and effect; and
3. The PRC Permits are used by the PRC Enterprises for legal
purposes and the PRC Enterprises has not violated any law of
the PRC relating to such PRC Permits.
5.16 Interested Party Transactions. Except as disclosed in Schedule 5.16,
no officer, director, or beneficial holder of 5% or more of the stock of any
Acquired Company or any Affiliate or "associate" (as such term is defined in
Rule 405 of the Commission under the Securities Act) of any such Person has or
has had, either directly or indirectly, (1) an interest in any Person which (a)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by any Acquired Company, or (b) purchases from
or sells or furnishes to, or proposes to purchase from, sell to or furnish any
Acquired Company any goods or services; or (2) a beneficial interest in any
contract or agreement to which any Acquired Company is a party or by which it
may be bound or affected.
5.17 Title to and Condition of Properties. Except as would not have a
Material Adverse Effect, each Acquired Company owns (with good and marketable
title in the case of real property) or holds under valid leases or other rights
to use all real property, plants, machinery, equipment and other personal
property necessary for the conduct of its business as presently conducted, free
and clear of all Liens, except Permitted Liens. The material buildings, plants,
machinery and equipment necessary for the conduct of the business of each
Acquired Company as presently conducted are structurally sound, are in good
operating condition and repair and are adequate for the uses to which they are
being put, and none of such buildings, plants, machinery or equipment is in need
of maintenance or repairs, except for ordinary, routine maintenance and repairs
that are not material in nature or cost. The buildings, plants, machinery,
equipment and other personal property of the Acquired Companies are sufficient
for the continued conduct of the Acquired Companies' businesses after the
Closing in substantially the same manner as conducted prior to the Closing.
18
5.18 Board Recommendation; Shareholder Approval. The Company Board, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted 100% of the directors then in office), determined that this
Agreement and the transactions contemplated by this Agreement, are advisable and
in the best interests of the Company's Shareholders. The Shareholders, by
unanimous written consent, have approved this Agreement and the transactions
contemplated by this Agreement.
5.19 Absence of Undisclosed Liabilities. Except as set forth on Schedule
5.19, no Acquired Company has any debt, obligation or liability (whether
accrued, absolute, contingent, liquidated or otherwise, whether due or to become
due, whether or not known to such Acquired Company) arising out of any
transaction entered into at or prior to the Closing, or any act or omission at
or prior to the Closing, except (a) to the extent set forth on or reserved
against on the Company Balance Sheet; or (b) current liabilities incurred and
obligations under agreements entered into, in the usual and ordinary course of
business since December 31, 2003, none of which would have a Material Adverse
Effect.
5.20 Changes. Except as set forth on Schedule 5.20, no Acquired Company
has, since December 31, 2003:
5.20.1 Ordinary Course of Business. Conducted its business or
entered into any transaction other than in the usual and ordinary course of
business, except for this Agreement.
5.20.2 Adverse Changes. Suffered or experienced any change in, or
affecting, its condition (financial or otherwise), properties, assets,
liabilities, business, operations, results of operations or prospects other than
changes, events or conditions in the usual and ordinary course of its business,
none of which would have a Material Adverse Effect;
5.20.3 Loans. Made any loans or advances to any Person other than
travel advances and reimbursement of expenses made to employees, officers and
directors in the ordinary course of business;
5.20.4 Liens. Created or permitted to exist any Lien on any material
property or asset of the Acquired Companies, other than Permitted Liens;
5.20.5 Capital Stock. Issued, sold, disposed of or encumbered, or
authorized the issuance, sale, disposition or encumbrance of, or granted or
issued any option to acquire any shares of its capital stock or any other of its
securities or any Equity Security, or altered the term of any of its outstanding
securities or made any change in its outstanding shares of capital stock or its
capitalization, whether by reason of reclassification, recapitalization, stock
split, combination, exchange or readjustment of shares, stock dividend or
otherwise;
5.20.6 Dividends. Declared, set aside, made or paid any dividend or
other distribution to any of its stockholders;
5.20.7 Employees. Materially increased the compensation or other
remuneration or benefits payable or to become payable to any of its directors,
executive officers or employees, except for increases in the ordinary course of
business, or entered into any employment, severance or similar contracts with
any of the foregoing;
19
5.20.8 Company Benefit Plans. Adopted, amended or increased the
payments to or benefits under any Company Benefit Plan;
5.20.9 Material Company Contracts. Terminated or modified any
Material Company Contract;
5.20.10 Claims. Released, waived or cancelled any claims or rights
relating to or affecting such Acquired Company in excess of $100,000 in the
aggregate or instituted or settled any Proceeding involving in excess of
$100,000 in the aggregate;
5.20.11 Discharged Liabilities. Paid, discharged or satisfied any
claim, obligation or liability in excess of $100,000 in the aggregate, except
for liabilities incurred prior to the date of this Agreement in the ordinary
course of business;
5.20.12 Indebtedness. Created, incurred, assumed or otherwise become
liable for any Indebtedness in excess of $100,000 in the aggregate;
5.20.13 Guarantees. Guaranteed or endorsed in a material amount any
obligation or net worth of any Person;
5.20.14 Acquisitions. Acquired the capital stock or other securities
or any ownership interest in, or substantially all of the assets of, any other
Person;
5.20.15 Accounting. Changed its method of accounting or the
accounting principles or practices utilized in the preparation of its financial
statements, other than as required by GAAP;
5.20.16 Intellectual Property. Granted any license, sublicense or
other rights of use with respect to any Intellectual Property of the Acquired
Companies.
5.20.17 Agreements. Except as set forth on Schedule 5.20.17, entered
into any agreement, or otherwise obligated itself, to do any of the foregoing.
5.21 Material Company Contracts.
5.21.1 The Company has made available to the Acquiror, prior to the
date of this Agreement, true, correct and complete copies of each written
Material Company Contract, including each amendment, supplement and modification
relating thereto. Each Material Company Contract is a valid and binding
agreement of the Acquired Company that is party thereto, and is in full force
and effect.
5.21.2 Except as would not have a Material Adverse Effect, no
Acquired Company is in breach or default of any Material Company Contract to
which it is a party and, to the knowledge of the Company, no other party to any
Material Company Contract is in breach or default thereof. Except as would not
have a Material Adverse Effect, no event has occurred or circumstance exists
that (with or without notice or lapse of time), would (a) contravene, conflict
with or result in a violation or breach of, or become a default or event of
default under, any provision of any Material Company Contract or (b) permit any
Acquired Company or any other
20
Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate or modify any
Material Company Contract. No Acquired Company has received notice of the
pending or threatened cancellation, revocation or termination of any Material
Company Contract to which it is a party. There are no renegotiations of, or
attempts to renegotiate, or outstanding rights to renegotiate any material terms
of any Material Company Contract.
5.22 Tax Matters.
5.22.1 Except as set forth on Schedule 5.22.1, (a) all material Tax
Returns required to be filed by or on behalf of the Acquired Companies have been
timely filed and all such Tax Returns were (at the time they were filed) and are
true, correct and complete in all material respects; (b) all material Taxes of
each Acquired Company (whether or not reflected on any Tax Return) have been
fully and timely paid, except those Taxes which are presently being contested in
good faith or for which an adequate reserve for the payment of such Taxes has
been established on the Company Balance Sheet; (c) no waivers of statutes of
limitation have been given or requested with respect to any Acquired Company in
connection with any Tax Returns covering such Acquired Company or with respect
to any Taxes payable by it; (d) no Governmental Authority in a jurisdiction
where an Acquired Company does not file Tax Returns has made a claim, assertion
or threat to such Acquired Company that such Acquired Company is or may be
subject to taxation by such jurisdiction; (e) each Acquired Company has duly and
timely collected or withheld, and paid over and reported to the appropriate
Governmental Authority all amounts required to be so collected or withheld and
paid over for all periods under all applicable Laws; (f) there are no Liens with
respect to Taxes on any Acquired Company's property or assets other than
Permitted Liens; (g) there are no Tax rulings, requests for rulings, or closing
agreements relating to any Acquired Company for any period (or portion of a
period) that would affect any period after the date hereof; and (h) any
adjustment of Taxes of an Acquired Company made by a Governmental Authority in
any examination that such Acquired Company is required to report to the
appropriate state, local or foreign taxing authorities has been reported, and
any additional Taxes due with respect thereto have been paid.
5.22.2 Except as set forth on Schedule 5.22.2, each Acquired Company
is treated as a corporation for U.S. federal income tax purposes, and no
Acquired Company has made an election under Treasury Regulation Section
301.7701-3 to be treated as a disregarded entity.
5.22.3 No Acquired Company is, or has ever been, a controlled
foreign corporation, as that term is defined in Section 957 of the Code and the
Treasury Regulations promulgated thereunder.
5.22.4 There is no pending Proceeding with respect to any Taxes of
the Acquired Companies, nor, to the knowledge of the Company, is any such
Proceeding threatened. The Company has made available to the Acquiror, prior to
the date of this Agreement, true, correct and complete copies of all Tax
Returns, examination reports and statements of deficiencies assessed or asserted
against or agreed to by the Acquired Companies since their inception and any and
all correspondence with respect to the foregoing.
21
5.22.5 The Company is not a party to any Tax allocation or sharing
agreement.
5.23 Material Assets. The Company Audited Financial Statements reflect,
the material properties and assets (real and personal) owned or leased by each
Acquired Company and necessary for the conduct of its business as presently
conducted, and include all of the operating assets of the Acquired Companies.
The Acquired Companies have, and will continue to have upon consummation of the
transaction contemplated by this Agreement, good and marketable title to, or a
valid leasehold interest in, such properties and assets, free and clear of all
Liens, other than Permitted Liens. Such properties and assets are sufficient for
the continued conduct of the Acquired Companies' businesses after the Closing in
substantially the same manner as conducted prior to the Closing. No Person other
than the Acquiror has any contract, right or option to purchase or acquire any
of such properties or assets from the Acquired Companies. No Affiliate of any
Acquired Company or the Shareholders owns or otherwise has any interest in or
right to use any properties or assets used or held for use in, or otherwise
arising from or relating to, the business of the Acquired Companies.
5.24 Insurance Coverage. The Company has made available to the Acquiror,
prior to the date of this Agreement, true, correct and complete copies of all
insurance policies maintained by each Acquired Company on its properties and
assets. Except as would not have a Material Adverse Effect, all of such policies
(a) taken together, provide adequate insurance coverage for the properties,
assets and operations of each Acquired Company for all risks normally insured
against by a Person carrying on the same business as such Acquired Company, and
(b) are sufficient for compliance with all applicable Laws and Material Company
Contracts. Except as would not have a Material Adverse Effect, all of such
policies are valid, outstanding and in full force and effect and, by their
express terms, will continue in full force and effect following the consummation
of the transactions contemplated by this Agreement. There are no pending claims
with respect to any Acquired Company or its properties or assets under any such
insurance policies, and there are no claims as to which the insurers have
notified any Acquired Company that they intend to deny liability. There is no
existing default under any such insurance policy.
5.25 Intellectual Property. Each Acquired Company owns, licenses or
otherwise has the legal right to use all Intellectual Property for its business
as currently conducted. Schedule 5.25 sets forth a true, correct and complete
list of all Intellectual Property of the Acquired Companies. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is any Acquired Company bound by or a party to any options,
licenses or agreements of any kind with respect to the Intellectual Property of
any other Person other than licenses or agreements arising from the purchase of
"off the shelf" or standard products. Except as would not have a Material
Adverse Effect, each Acquired Company's Intellectual Property is in compliance
will all applicable legal requirements. No Intellectual Property of any Acquired
Company has been or is now involved in any dispute, opposition, invalidation or
cancellation proceeding, and no such action has been threatened. No Intellectual
Property, wherever situated or registered, of any Acquired Company, to the
knowledge of the Company is infringed, or has been challenged or, to the
knowledge of the Company, threatened in any way, and no Intellectual Property of
any Acquired Company interferes with or is alleged to infringe or interfere with
the Intellectual Property of any other Person. Except as would not have a
Material Adverse Effect, no Acquired Company has taken any action that would
result in the voiding or invalidation of any of its Intellectual Property. No
Acquired Company is aware that any of its employees,
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officers or consultants is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
Order, that would interfere with their duties to the Acquired Companies or that
would conflict with the business of the Acquired Companies as currently
conducted. To the knowledge of the Company, it is not necessary for any Acquired
Company to utilize in its business any inventions, trade secrets or proprietary
information of any of its officers, employees, consultants or persons it
currently intends to hire made prior to their employment with any such Acquired
Company, except for inventions, trade secrets or proprietary information that
have been assigned to such Acquired Company.
5.26 Employee Benefits.
5.26.1 The Company has made available to the Acquiror, prior to the
date of this Agreement, copies of each written Company Benefit Plan and any
related agreements and other contracts.
5.26.2 Except as would not have a Material Adverse Effect, all
Company Benefit Plans have been established, maintained and operated in
accordance with their terms and the requirements of applicable Law, have been
maintained in good standing with applicable Government Authorities, and may by
their terms be amended and/or terminated at any time to the greatest extent
permitted by applicable Law. All PRC Acquired Companies have obtained social
security registration in respect of its employees and have punctually paid all
social security payments and made all social security filings as required by
relevant laws and regulations of the People's Republic of China. No event has
occurred and, to the knowledge of the Company, there does not now exist any
condition or set of circumstances, that could subject any Acquired Company to
any liability arising under any applicable Law, or under any indemnity agreement
to which any Acquired Company is a party, excluding liability for benefit claims
and funding obligations payable in the ordinary course.
5.26.3 There are no outstanding nor unpaid severance or
employee-related obligations or amounts due to employees or former employees of
any Acquired Company.
5.26.4 Neither the consummation of the transactions contemplated
hereby alone, nor in combination with another event, with respect to each
director, officer, employee and consultant of the Acquired Companies, will not
result in (a) any payment (including, without limitation, severance,
unemployment compensation or bonus payments) becoming due from any Acquired
Company or under any Company Benefit Plan, (b) any increase in the amount of
compensation or benefits payable to any such individual or (c) any acceleration
of the vesting or timing of payment of benefits or compensation payable to any
such individual. No Company Benefit Plan provides benefits or payments
contingent upon, triggered by, or increased as a result of a change in the
ownership or effective control of the Company.
5.27 Environmental and Safety Matters.
5.27.1 Each Acquired Company has at all times been and is in
material compliance with all Environmental Laws applicable to such Acquired
Company. Each PRC Acquired Company has obtained the necessary environmental
protection approval from the
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requisite PRC Governmental Authority in respect of any of such PRC Acquired
Company's operations and activities, except where the failure to obtain such
approvals would not have a Material Adverse Effect.
5.27.2 There are no Proceedings pending, or to the knowledge of the
Company, threatened against any Acquired Company alleging the violation of any
Environmental Law or Environmental Permit applicable to such Acquired Company,
or alleging that such Acquired Company is a potentially responsible party for
any environmental site contamination.
5.27.3 Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations to
notify or obtain the consent of any Governmental Authority or third Persons
under any Environmental Laws applicable to any Acquired Company.
5.28 Product Liability and Recalls.
5.28.1 Except as would not have a Material Adverse Effect, there are
no losses, damages, expenses or liabilities (whether absolute, accrued,
contingent or otherwise) against any Acquired Company asserted and arising out
of or based upon incidents occurring on or prior to the date hereof with respect
to: (a) any product liability or any similar claim that relates to any of the
products designed, developed, manufactured, produced, distributed, supplied or
sold by such Acquired Company to others; (b) the delivery of faulty services; or
(c) any claim for the breach of any express or limited product warranty, or any
similar claim that relates to any product designed, developed, manufactured,
produced, distributed, supplied or sold, or any service delivered, by such
Acquired Company, and the Company has no knowledge of any product or service
defects which could give rise to any such losses, claims, damages, expenses or
liabilities.
5.28.2 To the knowledge of the Company, there exists no basis for
the recall, withdrawal or suspension by order of any Governmental Authority of
any product designed, developed, manufactured, produced, distributed, supplied
or sold by any Acquired Company. To the knowledge of the Company, there are no
defects in the designs, specifications, or process with respect to any product
designed, manufactured, sold, supplied or distributed by any Acquired Company
that will give rise to any liability. There has been no recall, withdrawal, or
suspension from the market of any product designed, manufactured, sold, supplied
or distributed by any Acquired Company.
5.29 Receivables and Payables. All accounts and notes receivable of each
Acquired Company as of the date hereof have arisen in the ordinary course of
business, represent valid obligations to such Acquired Company arising from bona
fide transactions in the ordinary course of business and, except as set forth on
Schedule 5.29, are not subject to claims or set-off or other defenses or
counterclaims. All accounts and notes payable by each Acquired Company as of the
date hereof arose in bona fide transactions in the ordinary course of business.
All items which are required by GAAP to be reflected as receivables and payables
in the Company Audited Financial Statements and on the books and records of each
Acquired Company are so reflected and have been recorded in accordance with GAAP
in a manner consistent with past practice.
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5.30 Foreign Corrupt Practices Act. No Acquired Company, nor any director,
officer, agent, employee or other Person associated with or acting on behalf of
any Acquired Company, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any
Governmental Authority from corporate funds; violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977 in connection with the
operations of any Acquired Company; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment in connection with the operations of
any Acquired Company. To the Company's knowledge, no PRC Acquired Company, nor
any director or officer of such PRC Acquired Company has committed any acts or
omissions which would constitute a breach of relevant PRC criminal laws,
including but not limited to corruption laws.
5.31 Money Laundering Laws. The operations of the Acquired Companies are
and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes in
all applicable U.S. and non-U.S. jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any Governmental Authority (collectively, the "Money
Laundering Laws") and no Proceeding involving any Acquired Company with respect
to the Money Laundering Laws is pending or, to the knowledge of the Company,
threatened.
5.32 Customers and Suppliers. Set forth on Schedule 5.32 is a true,
correct and complete list, for each of the three (3) years prior to the date
hereof, of the Company's (i) top 5 customers, based on the percentage of the
Company's revenue generated by such customer during such period and the amount
of the Company's revenue generated from each such customer in each such year,
(ii) top 5 suppliers, based upon the value of goods purchased by the Company
during such period, and the value of the goods purchased by the Company from
each such supplier in each such year, and (iii) top 5 sales people, based upon
the revenue generated by the Company during such period and the amount of
revenue generated by such sales people in each such year. To the knowledge of
the Company, all supplies and services necessary for the conduct of each
Acquired Company's business as presently conducted may be obtained from readily
available alternate sources on terms and conditions comparable to those
presently available to such Acquired Company. There exists no actual or, to the
knowledge of the Company, threatened, termination, cancellation or material
limitation of, or any material change in, the business relationship of any
Acquired Company with any such customer or suppliers. To the knowledge of the
Company, no customer or supplier of any Acquired Company has experienced any
material work stoppage or other material adverse circumstance or condition that
is reasonably likely to jeopardize or adversely affect the applicable Acquired
Company's future relationship with such customer or supplier. There are no
pending material disputes or controversies between any customer or supplier of
any Acquired Company and such Acquired Company. No customer of any Acquired
Company has any right to any credit or refund for products sold or services
rendered or to be rendered by the Company pursuant to any contract or practice
of the applicable Acquired Company other than pursuant to the normal course
return policy of such Acquired Company.
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5.33 Governmental Inquiry. The Company, nor any Acquired Company has
received any material written inspection report, questionnaire, inquiry, demand
or request for information from a Governmental Authority.
SECTION VI
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Shareholders and the Company
as follows:
6.1 Organization and Qualification. Except as set forth on Schedule 6.1,
each of the Acquiror Companies is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has all requisite
authority and power (corporate and other), governmental licenses,
authorizations, consents and approvals to carry on its business as presently
conducted and to own, hold and operate its properties and assets as now owned,
held and operated by it, except where the failure to be so organized, existing
and in good standing, or to have such authority and power, governmental
licenses, authorizations, consents or approvals would not have a Material
Adverse Effect. Each of the Acquiror Companies is duly qualified, licensed or
domesticated as a foreign corporation in good standing in each jurisdiction
wherein the nature of its activities or its properties owned, held or operated
makes such qualification, licensing or domestication necessary, except where the
failure to be so duly qualified, licensed or domesticated and in good standing
would not have a Material Adverse Effect. Schedule 6.1 sets forth a true,
correct and complete list of each Acquiror Company's jurisdiction of
organization and each other jurisdiction in which such Acquiror Company
presently conducts its business or owns, holds and operates its properties and
assets.
6.2 Subsidiaries. Except as set forth on Schedule 6.2, no Acquiror Company
owns, directly or indirectly, any equity or other ownership interest in any
corporation, partnership, joint venture or other entity or enterprise.
6.3 Organizational Documents. True, correct and complete copies of the
Organizational Documents of each Acquiror Company have been delivered to the
Company prior to the execution of this Agreement, and no action has been taken
to amend or repeal such Organizational Documents. No Acquiror Company is in
violation or breach of any of the provisions of its Organizational Documents,
except for such violations or breaches as would not have a Material Adverse
Effect.
6.4 Authorization. The Acquiror has all requisite authority and power
(corporate and other), governmental licenses, authorizations, consents and
approvals to enter into this Agreement and each of the Transaction Documents to
which the Acquiror is a party, to consummate the transactions contemplated by
this Agreement and each of the Transaction Documents to which the Acquiror is a
party and to perform its obligations under this Agreement and each of the
Transaction Documents to which the Acquiror is a party. The execution, delivery
and performance by the Acquiror of this Agreement and each of the Transaction
Documents to which the Acquiror is a party have been duly authorized by all
necessary corporate action and do not require from the Acquiror Board or the
stockholders of the Acquiror any consent or approval that has not been validly
and lawfully obtained. The execution, delivery and
26
performance by the Acquiror of this Agreement and each of the Transaction
Documents to which the Acquiror is a party requires no authorization, consent,
approval, license, exemption of or filing or registration with any Governmental
Authority or other Person other than (a) the filing of the Articles of Share
Exchange with the Secretary of State of the State of Maryland, (b) the Schedule
14(f) Filing, (c) the filing of a Form D with the Commission, and any applicable
state securities law filings, if required, and (d) such other customary filings
with the Commission for transactions of the type contemplated by this Agreement.
6.5 No Violation. Neither the execution or delivery by the Acquiror of
this Agreement or any Transaction Document to which the Acquiror is a party, nor
the consummation or performance by the Acquiror of the transactions contemplated
hereby or thereby will, directly or indirectly, (a) contravene, conflict with,
or result in a violation of any provision of the Organizational Documents of any
Acquiror Company; (b) contravene, conflict with, constitute a default (or an
event or condition which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination or acceleration of, or result in
the imposition or creation of any Lien under, any agreement or instrument to
which any Acquiror Company is a party or by which the properties or assets of
any Acquiror Company are bound; (c) contravene, conflict with, or result in a
violation of, any Law or Order to which any Acquiror Company, or any of the
properties or assets owned or used by any Acquiror Company, may be subject; or
(d) contravene, conflict with, or result in a violation of, the terms or
requirements of, or give any Governmental Authority the right to revoke,
withdraw, suspend, cancel, terminate or modify, any licenses, permits,
authorizations, approvals, franchises or other rights held by any Acquiror
Company or that otherwise relate to the business of, or any of the properties or
assets owned or used by, any Acquiror Company, except, in the case of clause
(b), (c), or (d), for any such contraventions, conflicts, violations, or other
occurrences as would not have a Material Adverse Effect.
6.6 Binding Obligations. Assuming this Agreement and the Transaction
Documents have been duly and validly authorized, executed and delivered by the
parties thereto other than the Acquiror, this Agreement has been, and as of the
Closing each of the Transaction Documents to which the Acquiror is a party will
be, duly authorized, executed and delivered by the Acquiror and constitutes or
will constitute, as the case may be, the legal, valid and binding obligations of
the Acquiror, enforceable against the Acquiror in accordance with their
respective terms, except as such enforcement is limited by general equitable
principles, or by bankruptcy, insolvency and other similar Laws affecting the
enforcement of creditors rights generally.
6.7 Securities Laws. Assuming the accuracy of the representations and
warranties of the Shareholders contained in Section 4 and Exhibits D and E, the
issuance of the Acquiror Shares pursuant to this Agreement are and will be (a)
exempt from the registration and prospectus delivery requirements of the
Securities Act, (b) have been registered or qualified (or are exempt from
registration and qualification) under the registration permit or qualification
requirements of all applicable state securities laws, and (c) accomplished in
conformity with all other applicable federal and state securities laws.
6.8 Capitalization and Related Matters.
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6.8.1 Capitalization. The authorized capital stock of the Acquiror
consists of 50,000,000 shares of the Acquiror's Common Stock, of which (a)
4,064,900 shares are issued and outstanding, subject to any adjustments pursuant
to Section 10.15, and (b) 1,930,000 shares are reserved for issuance upon the
exercise of outstanding options and warrants to purchase the Acquiror's Common
Stock, which do not include warrants to purchase up to 150,000 shares of
Acquiror Common Stock to be issued to Kidron Corporate Advisors LLC in
connection with the consummation of the transactions contemplated by this
Agreement. All issued and outstanding shares of the Acquiror's Common Stock are
duly authorized, validly issued, fully paid and nonassessable, and have not been
issued in violation of any preemptive or similar rights. On the Closing Date,
the Acquiror will have sufficient authorized and unissued Acquiror's Common
Stock to consummate the transactions contemplated hereby, without giving effect
to the issuance of the Additional Shares, if any. Except as disclosed in
Schedule 6.8.1 or the SEC Documents, there are no outstanding or authorized
options, warrants, purchase agreements, participation agreements, subscription
rights, conversion rights, exchange rights or other securities or contracts that
could require the Acquiror to issue, sell or otherwise cause to become
outstanding any of its authorized but unissued shares of capital stock or any
securities convertible into, exchangeable for or carrying a right or option to
purchase shares of capital stock or to create, authorize, issue, sell or
otherwise cause to become outstanding any new class of capital stock. There are
no outstanding stockholders' agreements, voting trusts or arrangements,
registration rights agreements, rights of first refusal or other contracts
pertaining to the capital stock of the Acquiror, with the exception of a certain
voting trust agreement (the "Voting Trust Agreement"), which the Acquiror was
unable to locate and deliver to the Company. The Acquiror hereby represents and
warrants that, pursuant to the terms and conditions of the Voting Trust
Agreement, the Voting Agreement shall terminate immediately upon the
consummation of the transactions contemplated by this Agreement. The issuance of
all of the shares of Acquiror's Common Stock described in this Section 6.8.1
have been in compliance with U.S. federal and state securities laws.
6.8.2 No Redemption Requirements. Except as set forth in Schedule
6.8.2 or in the SEC Documents, there are no outstanding contractual obligations
(contingent or otherwise) of the Acquiror to retire, repurchase, redeem or
otherwise acquire any outstanding shares of capital stock of, or other ownership
interests in, the Acquiror or to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any other Person.
6.8.3 Duly Authorized. The issuance of the Acquiror Shares has been
duly authorized and, upon delivery to the Shareholders of certificates therefor
in accordance with the terms of this Agreement, the Acquiror Shares will have
been validly issued and fully paid, and will be nonassessable, have the rights,
preferences and privileges specified, will be free of preemptive rights and will
be free and clear of all Liens and restrictions, other than Liens created by the
Shareholders and restrictions on transfer imposed by this Agreement , the
Stockholders Agreement, state securities laws and the Securities Act.
6.8.4 Subsidiaries. The capitalization of each Acquiror Subsidiary
is as set forth on Schedule 6.8.4. The issued and outstanding shares of capital
stock of each Acquiror Subsidiary set forth on such schedule have been duly
authorized and are validly issued and outstanding, fully paid and
non-assessable, and constitute all of the issued and outstanding
28
capital stock of such Acquiror Subsidiary. The owners of the shares of each of
the Acquiror Subsidiaries set forth on Schedule 6.8.4 own, and have good, valid
and marketable title to, all shares of capital stock of such Subsidiaries. There
are no outstanding or authorized options, warrants, purchase agreements,
participation agreements, subscription rights, conversion rights, exchange
rights or other securities or contracts that could require any of the Acquiror
Subsidiaries to issue, sell or otherwise cause to become outstanding any of its
respective authorized but unissued shares of capital stock or any securities
convertible into, exchangeable for or carrying a right or option to purchase
shares of capital stock or to create, authorize, issue, sell or otherwise cause
to become outstanding any new class of capital stock. There are no outstanding
stockholders' agreements, voting trusts or arrangements, registration rights
agreements, rights of first refusal or other contracts pertaining to the capital
stock of any of the Acquiror Subsidiaries. None of the outstanding shares of
capital stock of any of the Acquiror Subsidiaries has been issued in violation
of any rights of any Person or in violation of any Law.
6.9 Compliance with Laws. Except as would not have a Material Adverse
Effect, the business and operations of each Acquiror Company have been and are
being conducted in accordance with all applicable Laws and Orders. Except as
would not have a Material Adverse Effect, no Acquiror Company has received
notice of any violation (or any Proceeding involving an allegation of any
violation) of any applicable Law or Order by or affecting such Acquiror Company
and, to the knowledge of the Acquiror, no Proceeding involving an allegation of
violation of any applicable Law or Order is threatened or contemplated. Except
as would not have a Material Adverse Effect, no Acquiror Company is subject to
any obligation or restriction of any kind or character, nor is there, to the
knowledge of the Acquiror, any event or circumstance relating to any Acquiror
Company that materially and adversely affects in any way its business,
properties, assets or prospects or that prohibits the Acquiror from entering
into this Agreement or would prevent or make burdensome its performance of or
compliance with all or any part of this Agreement or the consummation of the
transactions contemplated hereby.
6.10 Certain Proceedings. There is no pending Proceeding that has been
commenced against the Acquiror and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated by this Agreement. To the knowledge of the Acquiror,
no such Proceeding has been threatened.
6.11 No Brokers or Finders. Except as disclosed in Schedule 6.11, no
Person has, or as a result of the transactions contemplated herein will have,
any right or valid claim against any Acquiror Company for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, and the
Acquiror will indemnify and hold the Company harmless against any liability or
expense arising out of, or in connection with, any such claim.
6.12 Absence of Undisclosed Liabilities. Except as set forth on Schedule
6.12 or in the SEC Documents, no Acquiror Company has any debt, obligation or
liability (whether accrued, absolute, contingent, liquidated or otherwise,
whether due or to become due, whether or not known to such Acquiror Company)
arising out of any transaction entered into at or prior to the Closing or any
act or omission at or prior to the Closing, except to the extent set forth on or
reserved against on the Acquiror Balance Sheet. Except as set forth on Schedule
6.12, no Acquiror Company has incurred any liabilities or obligations since
March 31, 2004 in excess of (euro)5000 in the aggregate.
29
6.13 Changes. Except as set forth on Schedule 6.13 or in the SEC
Documents, no Acquiror Company has, since March 31, 2004:
6.13.1 Ordinary Course of Business. Conducted its business or
entered into any transaction other than in the usual and ordinary course of
business, except for this Agreement.
6.13.2 Adverse Changes. Suffered or experienced any change in, or
affecting, its condition (financial or otherwise), properties, assets,
liabilities, business, operations, results of operations or prospects other than
changes, events or conditions in the usual and ordinary course of its business,
none of which would have a Material Adverse Effect;
6.13.3 Loans. Made any loans or advances to any Person other than
travel advances and reimbursement of expenses made to employees, officers and
directors in the ordinary course of business;
6.13.4 Liens. Created or permitted to exist any Lien on any material
property or asset of the Acquiror Companies, other than Permitted Liens;
6.13.5 Capital Stock. Issued, sold, disposed of or encumbered, or
authorized the issuance, sale, disposition or encumbrance of, or granted or
issued any option to acquire any shares of its capital stock or any other of its
securities or any Equity Security, or altered the term of any of its outstanding
securities or made any change in its outstanding shares of capital stock or its
capitalization, whether by reason of reclassification, recapitalization, stock
split, combination, exchange or readjustment of shares, stock dividend or
otherwise;
6.13.6 Dividends. Declared, set aside, made or paid any dividend or
other distribution to any of its stockholders;
6.13.7 Material Acquiror Contracts. Terminated or modified any
Material Acquiror Contract;
6.13.8 Claims. Released, waived or cancelled any claims or rights
relating to or affecting such Acquiror Company in excess of $10,000 in the
aggregate or instituted or settled any Proceeding involving in excess of $10,000
in the aggregate;
6.13.9 Discharged Liabilities. Paid, discharged or satisfied any
claim, obligation or liability in excess of $10,000 in the aggregate, except for
liabilities incurred prior to the date of this Agreement in the ordinary course
of business;
6.13.10 Indebtedness. Created, incurred, assumed or otherwise become
liable for any Indebtedness in excess of $10,000 in the aggregate;
6.13.11 Guarantees. Guaranteed or endorsed in a material amount any
obligation or net worth of any Person;
6.13.12 Acquisitions. Acquired the capital stock or other securities
or any ownership interest in, or substantially all of the assets of, any other
Person;
30
6.13.13 Accounting. Changed its method of accounting or the
accounting principles or practices utilized in the preparation of its financial
statements, other than as required by GAAP;
6.13.14 Agreements. Except as set forth on Schedule 6.13.14 or in
the SEC Documents, entered into any agreement, or otherwise obligated itself, to
do any of the foregoing.
6.14 Material Acquiror Contracts. Except to the extent filed with the SEC
Documents, the Acquiror has made available to the Company, prior to the date of
this Agreement, true, correct and complete copies of each written Material
Acquiror Contract, including each amendment, supplement and modification
thereto.
6.14.1 No Defaults. Each Material Acquiror Contract is a valid and
binding agreement of the Acquiror Company that is party thereto, and is in full
force and effect. Except as would not have a Material Adverse Effect, no
Acquiror Company is in breach or default of any Material Acquiror Contract to
which it is a party and, to the knowledge of the Acquiror, no other party to any
Material Acquiror Contract is in breach or default thereof. Except as would not
have a Material Adverse Effect, no event has occurred or circumstance exists
that (with or without notice or lapse of time) would (a) contravene, conflict
with or result in a violation or breach of, or become a default or event of
default under, any provision of any Material Acquiror Contract or (b) permit any
Acquiror Company or any other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Material Acquiror Contract. No Acquiror Company has
received notice of the pending or threatened cancellation, revocation or
termination of any Material Acquiror Contract to which it is a party. There are
no renegotiations of, or attempts to renegotiate, or outstanding rights to
renegotiate any material terms of any Material Acquiror Contract.
6.15 Employees.
6.15.1 Except as set forth on Schedule 6.15.1, the Acquiror
Companies have no employees, independent contractors or other Persons providing
research or other services to them. Except as would not have a Material Adverse
Effect, each Acquiror Company is in full compliance with all Laws regarding
employment, wages, hours, benefits, equal opportunity, collective bargaining,
the payment of Social Security and other taxes, occupational safety and health
and plant closing. No Acquiror Company is liable for the payment of any
compensation, damages, taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing Laws.
6.15.2 No director, officer or employee of any Acquiror Company is a
party to, or is otherwise bound by, any contract (including any confidentiality,
noncompetition or proprietary rights agreement) with any other Person that in
any way adversely affects or will materially affect (a) the performance of his
or her duties as a director, officer or employee of such Acquiror Company or (b)
the ability of such Acquiror Company to conduct its business. Except as set
forth on Schedule 6.15.2, each employee of each Acquiror Company is employed on
an at-will basis and no Acquiror Company has any contract with any of its
employees which would interfere with such Acquiror Company's ability to
discharge its employees, with the exception of certain employment agreements
with Xxxx Xxxxxx and Xxxxxxx Xxxxx (the
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"Employment Agreements"), which the Acquiror was unable to locate and deliver to
the Company. The Acquiror hereby represents and warrants that, pursuant to the
terms and conditions of the Employment Agreements, the Employment Agreements
shall terminate immediately upon the consummation of the transactions
contemplated by this Agreement, and no severance or other payments shall be
required to be paid upon termination of the Employment Agreement.
6.16 Tax Returns and Audits.
6.16.1 Tax Returns. Except as set forth on Schedule 6.16.1, (a) all
material Tax Returns required to be filed by or on behalf of the Acquiror
Companies have been timely filed and all such Tax Returns were (at the time they
were filed) and are true, correct and complete in all material respects; (b) all
material Taxes of each Acquiror Company required to have been paid (whether or
not reflected on any Tax Return) have been fully and timely paid, except those
Taxes which are presently being contested in good faith or for which an adequate
reserve for the payment of such Taxes has been established on the Acquiror
Balance Sheet; (c) no waivers of statutes of limitation have been given or
requested with respect to any Acquiror Company in connection with any Tax
Returns covering such Acquiror Company or with respect to any Taxes payable by
it; (d) no Governmental Authority in a jurisdiction where an Acquiror Company
does not file Tax Returns has made a claim, assertion or threat to such Acquiror
Company that such Acquiror Company is or may be subject to taxation by such
jurisdiction; (e) each Acquiror Company has duly and timely collected or
withheld, paid over and reported to the appropriate Governmental Authority all
amounts required to be so collected or withheld for all periods under all
applicable laws; (f) there are no Liens with respect to Taxes on any Acquiror
Company's property or assets other than Permitted Liens; (g) there are no Tax
rulings, requests for rulings, or closing agreements relating to any Acquiror
Company for any period (or portion of a period) that would affect any period
after the date hereof; and (h) any adjustment of Taxes of an Acquiror Company
made by a Governmental Authority in any examination that such Acquiror Company
is required to report to the appropriate state, local or foreign taxing
authorities has been reported, and any additional Taxes due with respect thereto
have been paid.
6.16.2 No Adjustments, Changes. No Acquiror Company nor any other
Person on behalf of any Acquiror Company (a) has executed or entered into a
closing agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law; or
(b) has agreed to or is required to make any adjustments pursuant to Section
481(a) of the Code or any similar provision of state, local or foreign law.
6.16.3 No Disputes. There is no pending audit, examination,
investigation, dispute, proceeding or claim with respect to any Taxes of the
Acquiror Companies, nor is any such claim or dispute pending or contemplated.
The Acquiror has delivered to the Company true, correct and complete copies of
all Tax Returns, examination reports and statements of deficiencies assessed or
asserted against or agreed to by the Acquiror Companies since their inception
and any and all correspondence with respect to the foregoing.
6.16.4 Not a U.S. Real Property Holding Corporation. The Acquiror is
not and has not been a United States real property holding corporation within
the meaning of Section
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897(c)(2) of the Code at any time during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
6.16.5 No Tax Allocation, Sharing. The Acquiror is not a party to
any Tax allocation or sharing agreement. Other than with respect to the Tax
Group of which the Acquiror is the common parent, no Acquiror Company (a) has
been a member of a Tax Group filing a consolidated income Tax Return under
Section 1501 of the Code (or any similar provision of state, local or foreign
law), and (b) has any liability for Taxes for any Person under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law) as a transferee or successor, by contract or otherwise.
6.16.6 No Other Arrangements. No Acquiror Company is a party to any
agreement, contract or arrangement for services that would result, individually
or in the aggregate, in the payment of any amount that would not be deductible
by reason of Section 162(m), 280G or 404 of the Code. The Acquiror Companies are
not "consenting corporations" within the meaning of Section 341(f) of the Code.
The Acquiror Companies do not have any "tax-exempt bond financed property" or
"tax-exempt use property" within the meaning of Section 168(g) or (h),
respectively of the Code. No Acquiror Company has any outstanding closing
agreement, ruling request, request for consent to change a method of accounting,
subpoena or request for information to or from a Governmental Authority in
connection with any Tax matter. During the last two years, none of the Acquiror
Companies has engaged in any exchange with a related party (within the meaning
of Section 1031(f) of the Code) under which gain realized was not recognized by
reason of Section 1031 of the Code. The Company is not a party to any reportable
transaction within the meaning of Treasury Regulation Section 1.6011-4.
6.17 Material Assets. The financial statements of the Acquiror set forth
in the SEC Documents reflect the material properties and assets (real and
personal) owned or leased by each Acquiror Company.
6.18 Insurance Coverage. The Acquiror has made available to the Company,
prior to the date of this Agreement, true, correct and complete copies of all
insurance policies maintained by each Acquiror Company on its properties and
assets. Except as would not have a Material Adverse Effect, all of such policies
(a) taken together, provide adequate insurance coverage for the properties,
assets and operations of each Acquiror Company for all risks normally insured
against by a Person carrying on the same business as such Acquiror Company, and
(b) are sufficient for compliance with all applicable Laws and Material Acquiror
Contracts. Except as would not have a Material Adverse Effect, all of such
policies are valid, outstanding and in full force and effect and, by their
express terms, will continue in full force and effect following the consummation
of the transactions contemplated by this Agreement. Except as set forth on
Schedule 6.18, no Acquiror Company has received any written (a) refusal of
coverage or notice that a defense will be afforded with reservation of rights,
or (b) notice of cancellation or any other indication that any insurance policy
is no longer in full force or effect or will not be renewed or that the issuer
of any policy is not willing or able to perform its obligations thereunder. All
premiums due on such insurance policies on or prior to the date hereof have been
paid. There are no pending claims with respect to any Acquiror Company or its
properties or assets under any such insurance policies, and there are no claims
as to which the insurers have
33
notified any Acquiror Company that they intend to deny liability. There is no
existing default under any such insurance policies.
6.19 Litigation; Orders. Except as set forth on Schedule 6.19, there is no
Proceeding (whether federal, state, local or foreign) pending or, to the
knowledge of the Acquiror, threatened against or affecting any Acquiror Company
or any Acquiror Company's properties, assets, business or employees. To the
knowledge of the Acquiror, there is no fact that might result in or form the
basis for any such Proceeding. No Acquiror Company is subject to any Orders.
6.20 Licenses. Except as would not have a Material Adverse Effect, each
Acquiror Company possesses from the appropriate Governmental Authority all
licenses, permits, authorizations, approvals, franchises and rights that are
necessary for such Acquiror Company to engage in its business as currently
conducted and to permit such Acquiror Company to own and use its properties and
assets in the manner in which it currently owns and uses such properties and
assets (collectively, "Acquiror Permits"). No Acquiror Company has received
notice from any Governmental Authority or other Person that there is lacking any
license, permit, authorization, approval, franchise or right necessary for such
Acquiror Company to engage in its business as currently conducted and to permit
such Acquiror Company to own and use its properties and assets in the manner in
which it currently owns and uses such properties and assets. Except as would not
have a Material Adverse Effect, the Acquiror Permits are valid and in full force
and effect. Except as would not have a Material Adverse Effect, no event has
occurred or circumstance exists that may (with or without notice or lapse of
time): (a) constitute or result, directly or indirectly, in a violation of or a
failure to comply with any Acquiror Permit; or (b) result, directly or
indirectly, in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Acquiror Permit. No Acquiror Company
has received notice from any Governmental Authority or any other Person
regarding: (a) any actual, alleged, possible or potential contravention of any
Acquiror Permit; or (b) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to, any
Acquiror Permit. All applications required to have been filed for the renewal of
such Company Permits have been duly filed on a timely basis with the appropriate
Persons, and all other filings required to have been made with respect to such
Acquiror Permits have been duly made on a timely basis with the appropriate
Persons. All Acquiror Permits are renewable by their terms or in the ordinary
course of business without the need to comply with any special qualification
procedures or to pay any amounts other than routine fees or similar charges, all
of which have, to the extent due, been duly paid.
6.21 Interested Party Transactions. Except as disclosed in Schedule 6.21,
no officer, director or beneficial holder of 5% or more of the stock of any
Acquiror Company or any Affiliate or "associate" (as such term is defined in
Rule 405 of the Commission under the Securities Act) of any such Person, has or
has had, either directly or indirectly, (1) an interest in any Person which (a)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by any Acquiror Company, or (b) purchases from
or sells or furnishes to, or proposes to purchase from, sell to or furnish any
Acquiror Company any goods or services; or (2) a beneficial interest in any
contract or agreement to which any Acquiror Company is a party or by which it
may be bound or affected.
34
6.22 Governmental Inquiries. The Acquiror has provided to the Company a
copy of each material written inspection report, questionnaire, inquiry, demand
or request for information received by any Acquiror Company from (and the
applicable Acquiror Company's response thereto), and each material written
statement, report or other document filed by any Acquiror Company with, any
Governmental Authority.
6.23 Bank Accounts and Safe Deposit Boxes. Schedule 6.23 discloses the
title and number of each bank or other deposit or financial account, and each
lock box and safety deposit box used by each Acquiror Company, the financial
institution at which that account or box is maintained and the names of the
persons authorized to draw against the account or otherwise have access to the
account or box, as the case may be.
6.24 Intellectual Property. No Acquiror Company owns, uses or licenses any
Intellectual Property in its business as presently conducted.
6.25 Title to and Condition of Properties. Except as would not have a
Material Adverse Effect, each Acquiror Company owns (with good and marketable
title in the case of real property) or holds under valid leases or other rights
to use all real property, plants, machinery, equipment and other personal
property necessary for the conduct of its business as presently conducted, free
and clear of all Liens, except Permitted Liens. The material buildings, plants,
machinery and equipment necessary for the conduct of the business of each
Acquiror Company as presently conducted are structurally sound, are in good
operating condition and repair and are adequate for the uses to which they are
being put, and none of such buildings, plants, machinery or equipment is in need
of maintenance or repairs, except for ordinary, routine maintenance and repairs
that are not material in nature or cost.
6.26 SEC Documents; Financial Statements. Except as set forth on Schedule
6.26, the Acquiror has filed all reports required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
three years preceding the date hereof (or such shorter period as the Acquiror
was required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents") and has filed any such
SEC Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statement therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Acquiror is
a party or to which the property or assets of the Acquiror are subject have been
appropriately filed as exhibits to the SEC Documents as and to the extent
required under the Exchange Act. The financial statements of the Acquiror
included in the SEC Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto, or, in the case of unaudited statements
as permitted by Form 10-Q of the Commission), and fairly present in all material
respects (subject in the case of unaudited statements, to normal, recurring
audit adjustments) the financial position of the Acquiror as at the dates
thereof and the results of its operations and cash flows for
35
the periods then ended. The Acquiror's Common Stock is quoted on the Pink
Sheets' Electronic Quotation Service, and the Acquiror is not aware of any facts
which would make the Acquiror's Common Stock ineligible for quotation on the
Pink Sheets' Electronic Quotation Service.
6.27 Stock Option Plans; Employee Benefits.
6.27.1 Set forth on Schedule 6.27.1 is a complete list of all stock
option plans providing for the grant by the Acquiror of stock options to
directors, officers or employees. Except as disclosed on Schedule 6.27.1, all
such stock option plans are Approved Plans.
6.27.2 None of the Acquiror Companies has any employee benefit plans
or arrangements covering their present and former employees or providing
benefits to such persons in respect of services provided such Acquiror Company.
6.27.3 Neither the consummation of the transactions contemplated
hereby alone, nor in combination with another event, with respect to each
director, officer, employee and consultant of the Acquiror, will result in (a)
any payment (including, without limitation, severance, unemployment compensation
or bonus payments) becoming due from the Acquiror, (b) any increase in the
amount of compensation or benefits payable to any such individual or (c) any
acceleration of the vesting or timing of payment of compensation payable to any
such individual. No agreement, arrangement or other contract of the Acquiror
provides benefits or payments contingent upon, triggered by, or increased as a
result of a change in the ownership or effective control of the Acquiror.
6.28 Environmental and Safety Matters. Except as set forth on Schedule
6.28 or in the SEC Documents and except as would not have a Material Adverse
Effect:
6.28.1 Each Acquiror Company has at all times been and is in
compliance with all Environmental Laws applicable to such Acquiror Company.
6.28.2 There are no Proceedings pending or to the knowledge of the
Acquiror, threatened against any Acquiror Company alleging the violation of any
Environmental Law or Environmental Permit applicable to such Acquiror Company or
alleging that the Acquiror is a potentially responsible party for any
environmental site contamination.
6.28.3 Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations to
notify or obtain the consent of any Governmental Authority or third Persons
under any Environmental Laws applicable to any Acquiror Company.
6.29 Foreign Corrupt Practices Act. No Acquiror Company, nor any director,
officer, agent, employee or other Person associated with or acting on behalf of
any Acquiror Company, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any
Governmental Authority from corporate funds; violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977 in connection with the
operations of any Acquiror Company; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment in connection with the operations of
any Acquiror Company.
36
6.30 Money Laundering Laws. The operations of the Acquiror Companies are
and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all U.S. and non-U.S. jurisdictions, the rules and regulations thereunder and
any related or similar rules, regulations or guidelines, issued, administered or
enforced by any Governmental Authority (collectively, the "Money Laundering
Laws") and no Proceeding involving any Acquiror Company with respect to the
Money Laundering Laws is pending or, to the knowledge of the Acquiror,
threatened.
6.31 Board Recommendation. The Acquiror Board, at a meeting duly called
and held, has determined that this Agreement and the transactions contemplated
by this Agreement are advisable and in the best interests of the Acquiror's
stockholders and has duly authorized this Agreement and the transactions
contemplated by this Agreement.
SECTION VII
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
7.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, the Company will, and will cause each Company Subsidiary to, (a)
afford the Acquiror and its agents, advisors and attorneys during normal
business hours, full and free access to each Acquired Company's personnel,
properties, contracts, books and records, and other documents and data, (b)
furnish the Acquiror and its agents, advisors and attorneys with copies of all
such contracts, books and records, and other existing documents and data as the
Acquiror may reasonably request, and (c) furnish the Acquiror and its agents,
advisors and attorneys with such additional financial, operating, and other data
and information as the Acquiror may reasonably request.
7.2 Operation of the Business of the Company.
7.2.1 Between the date of this Agreement and the Closing Date, the
Company will, and will cause each Company Subsidiary to:
(a) conduct its business only in the ordinary course of
business;
(b) use its best efforts to preserve intact its current
business organization and business relationships, including, without
limitation, relationships with suppliers, customers, landlords, creditors,
officers, employees and agents;
(c) obtain the prior written consent of the Acquiror prior to
taking any action of the type specified in Section 5.20 or entering into
any Material Company Contract;
(d) confer with the Acquiror concerning operational matters of
a material nature; and
(e) otherwise report periodically to the Acquiror concerning
the status of its business, operations, and finances.
37
7.2.2 Notwithstanding the foregoing, between the date of this
Agreement and the Closing Date, the Company will not, and will cause each
Company Subsidiary not to, directly or indirectly, without the prior written
consent of the Acquiror, engage in any transaction with, or enter into any
agreement with, the Company or any Company Subsidiary, any officer, director or
stockholder of the Company or any Company Subsidiary, or any Affiliate or
"associate" (as such term is defined in Rule 405 of the Commission under the
Securities Act) of any such Person.
7.3 No Transfers of Capital Stock.
7.3.1 Between the date of this Agreement and the Closing Date, the
Shareholders shall not assign, transfer, mortgage, pledge or otherwise dispose
of any or all of the Shares (or any interest therein) or grant any Person the
option or right to acquire such Shares (or any interest therein).
7.3.2 Between the date of this Agreement and the Closing Date, the
Company shall not, and shall cause each Company Subsidiary not to, assign,
transfer, mortgage, pledge or otherwise dispose of any or all of the capital
stock of any Acquired Company (or any interest therein) or grant any Person the
option or right to acquire the capital stock of any Acquired Company (or any
interest therein).
7.4 Required Filings and Approvals.
7.4.1 As promptly as practicable after the date of this Agreement,
the Company will, and will cause each Company Subsidiary to, make all filings
required to be made by it in order to consummate the transactions contemplated
by this Agreement, if applicable. Between the date of this Agreement and the
Closing Date, the Company will, and will cause each Company Subsidiary to, (a)
cooperate with the Acquiror with respect to all filings that the Acquiror elects
to make or is required to make in connection with the transactions contemplated
by this Agreement, and (b) cooperate with the Acquiror in obtaining any consents
or approvals required to be obtained by the Acquiror in connection herewith.
7.4.2 Without limiting the foregoing, the Company and the
Shareholders shall promptly furnish to the Acquiror any information reasonably
requested by the Acquiror in connection with the preparation, filing and mailing
of the Schedule 14(f) Filing, including, without limitation, information
concerning the Acquired Companies, the Shareholders and the Company Nominees.
The Company and each Shareholder, severally and not jointly, represent and
warrant to the Acquiror that the information supplied by the Company and each
Shareholder for inclusion in the Schedule 14(f) Filing will not, on the date the
Schedule 14(f) Filing is filed with the Commission or first mailed to the
stockholders of the Acquiror, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or misleading
with respect to any material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
false or misleading. If, at any time prior to the Closing Date, any information
should be discovered by the Company or any Shareholder which should be set forth
in an amendment to the Schedule 14(f) Filing so that such Schedule 14(f) Filing
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which
38
they were made, not misleading, the Company or such Shareholder, as the case may
be, shall promptly notify the Acquiror.
7.5 Notification. Between the date of this Agreement and the Closing Date,
the Company and the Shareholders will promptly notify the Acquiror in writing if
the Company, the Shareholders or any Company Subsidiary becomes aware of any
fact or condition that causes or constitutes a breach of any of the
representations and warranties of the Company or the Shareholders, as the case
may be, as of the date of this Agreement, or if the Company, any Shareholder or
any Company Subsidiary becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly contemplated
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. Should any such fact or
condition require any change in the Schedules to this Agreement if the Schedules
to the Agreement were dated the date of the occurrence or discovery of any such
fact or condition, the Company or the Shareholders, as the case may be, will
promptly deliver to the Acquiror a supplement to the Schedules to the Agreement
specifying such change; provided, however, that such delivery shall not
materially adversely affect any rights of the Acquiror set forth herein,
including the right of the Acquiror to seek a remedy in damages for losses
incurred as a result of such supplemented disclosure. During the same period,
the Company and the Shareholders will, and will cause each Company Subsidiary
to, promptly notify the Acquiror of the occurrence of any breach of any covenant
of the Company or the Shareholders in this Section 7 or of the occurrence of any
event that may make the satisfaction of the conditions in Section 9 impossible
or unlikely.
7.6 Closing Conditions. Between the date of this Agreement and the Closing
Date, each of the Company and the Shareholders will use its commercially
reasonable efforts to cause the conditions in Section 9 to be satisfied.
SECTION VIII
COVENANTS OF THE ACQUIROR
8.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, the Acquiror will, and will cause each of the Acquiror
Subsidiaries to, (a) afford the Company and its agents, advisors and attorneys
during normal business hours full and free access to each Acquiror Company's
personnel, properties, contracts, books and records, and other documents and
data, (b) furnish the Company and its agents, advisors and attorneys with copies
of all such contracts, books and records, and other existing documents and data
as the Company may reasonably request, and (c) furnish the Company and its
agents, advisors and attorneys with such additional financial, operating, and
other data and information as the Company may reasonably request.
8.2 Operation of the Business of the Acquiror. Between the date of this
Agreement and the Closing Date, the Acquiror will, and will cause each of the
Acquiror Subsidiaries to:
8.2.1 conduct its business only in the ordinary course of business,
except in connection with settling the IMI Claim (as hereinafter defined);
39
8.2.2 use its best efforts to preserve intact the current business
organization and business relationships, including, without limitation,
relationships with suppliers, customers, landlords, creditors, officers,
employees and agents;
8.2.3 obtain the prior written consent of the Company prior to
taking any action of the type specified in Section 6.13 or entering into any
Material Acquiror Contract;
8.2.4 confer with the Company concerning operational matters of a
material nature; and
8.2.5 otherwise report periodically to the Company concerning the
status of its business, operations, and finances.
8.3 Required Filings and Approvals.
8.3.1 As promptly as practicable after the date of this Agreement,
the Acquiror will, and will cause each of the Acquiror Subsidiaries to, make all
filings legally required to be made by it to consummate the transactions
contemplated by this Agreement. Between the date of this Agreement and the
Closing Date, the Acquiror will cooperate with the Company with respect to all
filings that the Company is legally required to make in connection with the
transactions contemplated hereby.
8.3.2 Without limiting the foregoing, as promptly as practicable
after the execution of this Agreement, the Acquiror shall prepare and file the
Schedule 14(f) Filing with the Commission. The Acquiror will advise the Company,
promptly after it receives notice thereof, of any request by the Commission for
the amendment of the Schedule 14(f) Filing or comments thereon and responses
thereto or requests by the Commission for additional information. The Acquiror
shall mail the Schedule 14(f) Filing to its stockholders as promptly as
practicable pursuant to the Securities Act, the Exchange Act and the rules and
regulations of the Commission related thereto.
8.4 Notification. Between the date of this Agreement and the Closing Date,
the Acquiror will promptly notify the Company and the Shareholders in writing if
the Acquiror becomes aware of any fact or condition that causes or constitutes a
breach of any of the representations and warranties of the Acquiror, as of the
date of this Agreement, or if the Acquiror becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated 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. Should any
such fact or condition require any change in the Schedules to this Agreement if
the Schedules to the Agreement were dated the date of the occurrence or
discovery of any such fact or condition, the Acquiror will promptly deliver to
the Company and the Shareholders a supplement to the Schedules to the Agreement
specifying such change; provided, however, that such delivery shall not
materially adversely affect any rights of the Shareholders set forth herein,
including the right of the Shareholders to seek a remedy in damages for losses
incurred as a result of such supplemented disclosure. During the same period,
the Acquiror will promptly notify the Company and the Shareholders of the
occurrence of any breach of any covenant of the Acquiror
40
in this Section 8 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 10 impossible or unlikely.
8.5 Closing Conditions. Between the date of this Agreement and the Closing
Date, the Acquiror will use commercially reasonable efforts to cause the
conditions in Section 10 to be satisfied.
8.6 Indemnification and Insurance.
8.6.1 The indemnification provisions set forth in the Organizational
Documents of the Acquiror Companies shall not be amended, modified or otherwise
repealed for a period of six years from the Closing Date in any manner that
would adversely affect the rights thereunder as of the Closing Date of
individuals who at the Closing Date were directors, officers, employees or
agents of the Acquiror Companies, unless such modification is required after the
Closing Date by Law and then only to the minimum extent required by such Law.
8.6.2 The Acquiror shall to the fullest extent permitted under
applicable Law or its Organizational Documents, indemnify and hold harmless,
each present and former director, officer or employee of the Acquiror or any
Acquiror Subsidiary (collectively, the "Indemnified Parties") against any costs
or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
Proceeding (x) arising out of or pertaining to the transactions contemplated by
this Agreement or (y) otherwise with respect to any acts or omissions occurring
at or prior to the Closing Date, to the same extent as provided in the
Acquiror's Organizational Documents or any applicable contract or agreement as
in effect on the date hereof, in each case for a period of six years after the
Closing Date. In the event of any such Proceeding (whether arising before or
after the Closing Date), (i) any counsel retained by the Indemnified Parties for
any period after the Closing Date shall be reasonably satisfactory to the
Acquiror, (ii) after the Closing Date, the Acquiror shall pay the reasonable
fees and expenses of such counsel, promptly after statements therefor are
received, provided that the Indemnified Parties shall be required to reimburse
the Acquiror for such payments in the circumstances and to the extent required
by the Acquiror's Organizational Documents, any applicable contract or agreement
or applicable Law, and (iii) the Acquiror will cooperate in the defense of any
such matter; provided, however, that the Acquiror shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld); and provided, further, that, in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims. The Indemnified
Parties as a group may retain only one law firm to represent them in each
applicable jurisdiction with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties, in which
case each Indemnified Person with respect to whom such a conflict exists (or
group of such Indemnified Persons who among them have no such conflict) may
retain one separate law firm in each applicable jurisdiction.
8.6.3 In addition, the Acquiror will provide, for a period of not
less than six years after the Closing Date, the Acquiror's current directors and
officers with an insurance and indemnification policy that provides coverage for
events occurring at or prior to the Closing Date
41
(the "D&O Insurance") that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; provided, however, the Acquiror shall not be required to pay an annual
premium for the D&O Insurance in excess of 200% of the annual premium currently
paid by the Acquiror for such insurance, but in such case shall purchase as much
such coverage as possible for such amount.
8.6.4 This Section 8.6 shall survive the consummation of the
transactions contemplated by this Agreement at the Closing Date, is intended to
benefit the Indemnified Parties and the Covered Persons, shall be binding on all
successors and assigns of the Acquiror and shall be enforceable by the
Indemnified Parties and the Covered Persons.
8.7 Rule 144 Reporting. With a view to making available to the Acquiror's
stockholders the benefit of certain rules and regulations of the Commission
which may permit the sale of the Acquiror Common Stock to the public without
registration, from and after the Closing Date, the Acquiror agrees to:
8.7.1 Make and keep public information available, as those terms are
understood and defined in Rule 144; and
8.7.2 File with the Commission, in a timely manner, all reports and
other documents required of the Acquiror under the Exchange Act.
8.8 SEC Documents. From and after the Closing Date, in the event the
Commission notifies the Acquiror of its intent to review any SEC Document or the
Acquiror receives any oral or written comments from the Commission with respect
to any SEC Document, the Acquiror shall promptly notify the Acquiror
Stockholders and the Acquiror Stockholders shall be given a reasonable period of
time (but not less than five (5) Business Days) to review and comment on all
correspondence with the Commission related thereto. From and after the Closing
Date, in the event that the Company is required to file any amendment or
supplement to any SEC Document, the Acquiror Stockholders shall be given a
reasonable period of time (but not less than five (5) Business Days) to review
and comment on such amendments or supplements. The Acquiror shall incorporate
all reasonable comments of the Acquiror Stockholders into any such
correspondence, amendment or supplement and the Acquiror shall not submit or
file with the Commission any correspondence, amendment or supplement to which
the Acquiror Stockholders reasonably object.
8.9 Elections Under Treasury Regulations Section 301.7701-3. From and
after the Closing, Acquiror shall execute and/or cause execution of any
elections made with respect to certain of the Acquired Companies under Treasury
Regulations 301.7701-3, as described on Schedule 5.22.2., and shall otherwise
cooperate in making such elections as the Shareholders may direct.
8.10 Satisfactory Due Diligence. Within two (2) weeks of the date of this
Agreement, the Acquiror shall have taken all steps necessary to reasonably
satisfy itself with respect to the further due diligence review of the Acquired
Companies as set forth in Section 9.10 below.
42
8.11 Books and Records. The Acquiror shall maintain all of the books and
records of the Acquiror Companies that are currently in its possession as of the
date hereof, for a period of at least six (6) years after the Closing Date.
SECTION IX
CONDITIONS PRECEDENT TO THE ACQUIROR'S
OBLIGATION TO CLOSE
The Acquiror's obligation to acquire the Shares and to take the other
actions required to be taken by the Acquiror 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 Acquiror, in whole or in part):
9.1 Accuracy of Representations. The representations and warranties of the
Company and the Shareholders set forth in this Agreement or in any Schedule or
certificate delivered pursuant hereto that are not qualified as to materiality
shall be true and correct in all material respects as of the date of this
Agreement, and shall be deemed repeated as of the Closing Date and shall then be
true and correct in all material respects, except to the extent a representation
or warranty is expressly limited by its terms to another date and without giving
effect to any supplemental Schedule. The representations and warranties of the
Company and the Shareholders set forth in this Agreement or in any Schedule or
certificate delivered pursuant hereto that are qualified as to materiality shall
be true and correct in all respects as of the date of this Agreement, and shall
be deemed repeated as of the Closing Date and shall then be true and correct in
all respects, except to the extent a representation or warranty is expressly
limited by its terms to another date and without giving effect to any
supplemental Schedule.
9.2 Performance by the Company and Shareholders.
9.2.1 All of the covenants and obligations that the Company and
Shareholders are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
9.2.2 Each document required to be delivered by the Company and the
Shareholders pursuant to this Agreement at or prior to Closing must have been
delivered.
9.3 No Force Majeur Event. Since December 31, 2003, there shall not have
been any delay, error, failure or interruption in the conduct of the business of
any Acquired Company, or any loss, injury, delay, damage, distress, or other
casualty, due to force majeur including but not limited to (a) acts of God; (b)
fire or explosion; (c) war, acts of terrorism or other civil unrest; or (d)
national emergency.
9.4 Certificate of Officer. The Company will have delivered to the
Acquiror a certificate, dated the Closing Date, executed by an officer of the
Company, certifying the satisfaction of the conditions specified in Sections
9.1, 9.2 and 9.3.
43
9.5 Certificate of Shareholders. Each Shareholder will have delivered to
the Acquiror a certificate, dated the Closing Date, executed by such
Shareholder, if a natural person, or an authorized officer of the Shareholder,
if an entity, certifying the satisfaction of the conditions specified in
Sections 9.1 and 9.2.
9.6 Consents.
9.6.1 All material consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by the
Company and/or the Shareholders for the authorization, execution and delivery of
this Agreement and the consummation by them of the transactions contemplated by
this Agreement, shall have been obtained and made by the Company or the
Shareholders, as the case may be, except where the failure to receive such
consents, waivers, approvals, authorizations or orders or to make such filings
would not have a Material Adverse Effect on the Company or the Acquiror.
9.6.2 Without limiting the foregoing, the Schedule 14(f) Filing
shall have been mailed to the stockholders of the Acquiror not less than 10 days
prior to the Closing Date. No Proceeding occasioned by the Section 14(f) Filing
shall have been initiated or threatened by the Commission (which Proceeding
remains unresolved as of the Closing Date).
9.7 Documents. The Company and the Shareholders must have caused the
following documents to be delivered to the Acquiror and/or the Escrow Agent:
9.7.1 share certificates evidencing the number of Shares held by
each Shareholder (as set forth in Exhibit A), along with executed stock powers
transferring such Shares to the Acquiror;
9.7.2 a Secretary's Certificate of the Company, dated the Closing
Date, certifying attached copies of (A) the Organizational Documents of the
Company and each Company Subsidiary, (B) the resolutions of the Company Board
and the Shareholders approving this Agreement and the transactions contemplated
hereby; and (C) the incumbency of each authorized officer of the Company signing
this Agreement and any other agreement or instrument contemplated hereby to
which the Company is a party;
9.7.3 a certified certificate of good standing, or equivalent
thereof, of the Company;
9.7.4 each of the Transaction Documents to which the Company and/or
the Shareholders is a party, duly executed; and
9.7.5 such other documents as the Acquiror may reasonably request
for the purpose of (i) evidencing the accuracy of any of the representations and
warranties of the Company and the Shareholders pursuant to Section 9.1, (ii)
evidencing the performance of, or compliance by the Company and the Shareholders
with, any covenant or obligation required to be performed or complied with by
the Company or the Shareholders, as the case may be, (iii) evidencing the
satisfaction of any condition referred to in this Section 9, or (iv) otherwise
facilitating the consummation or performance of any of the transactions
contemplated by this Agreement.
44
9.8 No Proceedings. Since the date of this Agreement, there must not have
been commenced or threatened against the Acquiror, the Company or any
Shareholder, or against any Affiliate thereof, any Proceeding (which Proceeding
remains unresolved as of the Closing Date) (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the transactions
contemplated by this Agreement, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the transactions
contemplated by this Agreement.
9.9 No Claim Regarding Stock Ownership or Consideration. There must not
have been made or threatened by any Person any claim asserting that such Person
(a) is the holder of, or has the right to acquire or to obtain beneficial
ownership of the Shares or any other stock, voting, equity, or ownership
interest in, the Company, or (b) is entitled to all or any portion of the
Acquiror Shares.
9.10 Satisfactory Due Diligence. The Acquiror shall have (i) completed and
reasonably satisfied itself with the final results of its due diligence review
of the Acquired Companies' contracts, books, records and other information or
documents reasonably requested by the Acquiror, including, without limitation,
the corporate structure of the Acquired Companies; and (ii) reasonably satisfied
itself with respect to legality and enforcement of the declaration of trusts,
dated December 30, 2003, executed by Xxxxxxx Xxxx and Xxx Ji in respect of their
interests in the registered capital of the Company in favor of Comtech (China)
Holding Limited.
SECTION X
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
AND THE SHAREHOLDERS TO THE CLOSING
The Shareholders' obligation to transfer the Shares and the obligations of
the Company to take the other actions required to be taken by the Company at the
Closing are subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by the Company and the
Shareholders, in whole or in part):
10.1 Accuracy of Representations. The representations and warranties of
the Acquiror set forth in this Agreement or in any Schedule or certificate
delivered pursuant hereto that are not qualified as to materiality shall be true
and correct in all material respects as of the date of this Agreement, and shall
be deemed repeated as of the Closing Date and shall then be true and correct in
all material respects, except to the extent a representation or warranty is
expressly limited by its terms to another date and without giving effect to any
supplemental Schedule. The representations and warranties of the Acquiror set
forth in this Agreement or in any Schedule or certificate delivered pursuant
hereto that are qualified as to materiality shall be true and correct in all
respects as of the date of this Agreement, and shall be deemed repeated as of
the Closing Date and shall then be true and correct in all respects, except to
the extent a representation or warranty is expressly limited by its terms to
another date and without giving effect to any supplemental Schedule.
10.2 Performance by the Acquiror.
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10.2.1 All of the covenants and obligations that the Acquiror is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all respects.
10.2.2 Each document required to be delivered by the Acquiror
pursuant to this Agreement must have been delivered.
10.3 No Force Majeur Event. Since March 31, 2004, there shall not have
been any delay, error, failure or interruption in the conduct of the business of
any Acquiror Company, or any loss, injury, delay, damage, distress, or other
casualty, due to force majeur including but not limited to (a) acts of God; (b)
fire or explosion; (c) war, acts of terrorism or other civil unrest; or (d)
national emergency.
10.4 Quotation on the Over the Counter Bulletin Board. The Acquiror shall
have resumed quotation of the Acquiror Common Stock on the Over the Counter
Bulletin Board on or prior to the Closing Date.
10.5 Certificate of Officer. The Acquiror will have delivered to the
Company a certificate, dated the Closing Date, executed by an officer of the
Acquiror, certifying the satisfaction of the conditions specified in Sections
10.1, 10.2,10.3 and 10.4.
10.6 Consents.
10.6.1 All material consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by the
Acquiror for the authorization, execution and delivery of this Agreement and the
consummation by it of the transactions contemplated by this Agreement, shall
have been obtained and made by the Acquiror, except where the failure to receive
such consents, waivers, approvals, authorizations or orders or to make such
filings would not have a Material Adverse Effect on the Company or the Acquiror.
10.6.2 Without limiting the foregoing, the Schedule 14(f) Filing
shall have been mailed to the stockholders of the Acquiror not less than 10 days
prior to the Closing Date. No Proceeding occasioned by the Section 14(f) Filing
shall have been initiated or threatened by the Commission (which Proceeding
remains unresolved as of the Closing Date).
10.7 Documents. The Acquiror must have caused the following documents to
be delivered to the Company and/or the Shareholders and/or the Escrow Agent:
10.7.1 share certificates evidencing each Shareholder's pro rata
share of the Closing Acquiror Shares (as set forth in Exhibit A);
10.7.2 share certificate, registered in the name of the Escrow
Agent, evidencing the Escrow Amount;
10.7.3 a Secretary's Certificate, dated the Closing Date certifying
attached copies of (A) the Organizational Documents of the Acquiror and each
Acquiror Subsidiary, (B) the resolutions of the Acquiror Board approving this
Agreement and the transactions
46
contemplated hereby; and (C) the incumbency of each authorized officer of the
Acquiror signing this Agreement and any other agreement or instrument
contemplated hereby to which the Acquiror is a party;
10.7.4 a certificate of good standing of the Acquiror;
10.7.5 each of the Transaction Documents to which the Acquiror is a
party, duly executed; and
10.7.6 such other documents as the Company may reasonably request
for the purpose of (i) evidencing the accuracy of any representation or warranty
of the Acquiror pursuant to Section 10.1, (ii) evidencing the performance by the
Acquiror of, or the compliance by the Acquiror with, any covenant or obligation
required to be performed or complied with by the Acquiror, (iii) evidencing the
satisfaction of any condition referred to in this Section 10, or (iv) otherwise
facilitating the consummation of any of the transactions contemplated by this
Agreement.
10.8 No Proceedings. Since the date of this Agreement, there must not have
been commenced or threatened against the Acquiror, the Company or any
Shareholder, or against any Affiliate thereof, any Proceeding (which Proceeding
remains unresolved as of the Closing Date) (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the transactions
contemplated hereby, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with any of the transactions
contemplated hereby.
10.9 Transfer of Funds from OAM, S.p.A. As of the Closing Date, the
Acquiror shall have completed any and all documents necessary to authorize the
transfer to the Company's bank account on the Closing Date of (i) all cash held
in the bank account of OAM, S.p.A. in Italy, except for cash in the amount of
(euro)50,000 and (ii) all cash held in the bank account of OAM, S.p.A. in the
United States, except for cash in the amount of USD$50,000. The Company's wire
transfer instructions are as follows:
Comtech Group
The Bank of East Asia, Limited
Account No. 015-514-25-07939-8
10.10 Delivery of Banca di Intermediazione Mobiliare IMI S.p.A. ("IMI")
Documents. On or prior to the Closing Date, the Acquiror shall deliver to the
Company and the Shareholders a copy of the final settlement and release
agreement regarding the IMI lawsuit (the "IMI Claim").
10.11 Delivery of LITA Documents. On or prior to the Closing Date, the
Acquiror shall deliver to the Company and the Shareholders a copy of each of the
documents relating to (i) the release to the Acquiror of the funds held in
escrow in connection with the previous sale of the Acquiror's subsidiary,
L.I.T.A., S.p.A.; and (ii) the termination and release of the bank guarantee,
which was entered into to secure payout of potential claims by the purchaser of
LITA.
47
10.12 Delivery of Documents Relating to CDS S.r.l Litigation. On or prior
to the Closing Date, the Acquiror Companies shall deliver to the Company copies
of any and all documents in their possession regarding the litigation with CDS
S.r.l.
10.13 Resignation of Officers. On the Closing Date, each officer of the
Acquiror shall execute and deliver to the Company a letter of resignation, which
shall include mutual releases of such officer and the Acquiror.
10.14 D&O Insurance. Between the date hereof and the Closing Date, the
Acquiror shall notify its D&O Insurance carrier of its pending change in
control. The Acquiror, with the cooperation of the Shareholders, will take all
steps necessary to identify and procure a new D&O insurance policy to be
effective as of the Closing Date.
10.15 Adjustment in Acquiror Shares. Between the date hereof and the
Closing Date, Acquiror shall determine the final number of TRG Common Stock that
will be issued and outstanding immediately prior to the closing of the
transactions contemplated by this Agreement (the "Final Number"). Upon making
such determination, Acquiror shall notify the Company and the Shareholders of
the Final Number. In the event the Final Number is different than 4,064,900, the
number of Acquiror Shares issued to the Shareholders shall be adjusted as
follows:
(a) If the Final Number is greater than 4,064,900, then the
Acquiror Shares shall be equal to the sum of (i) an amount equal to the
difference between the Final Number and 4,064,900 multiplied by 10.33, and
(ii) 42,000,000.
(b) If the Final Number is less than 4,064,900, then the
Acquiror Shares shall be equal to the difference between (i) 42,000,000,
and (ii) an amount equal to the difference between 4,064,900 and the Final
Number multiplied by 10.33.
(c) In the event that an adjustment to the Acquiror Shares
shall be made pursuant to this Section 10.15, the amount of the Escrow
Shares and the Additional Shares Cap shall be appropriately adjusted and
set forth on Schedule 10.15, and Exhibit A shall be amended to reflect
such adjustments.
10.16 Satisfactory Due Diligence. The Shareholders shall have completed
and reasonably satisfied themselves with the final results of (1) their due
diligence review of OAM S.p.A., including, without limitation, consulting with
Italian legal counsel to OAM, S.p.A, or any other Italian legal counsel selected
by the Shareholders, with respect to the distribution of the assets of OAM
S.p.A. and any subsequent liquidation of OAM S.p.A.; (2) their due diligence
review with respect to the CDS S.r.l. litigation; (3) a lien search to be
conducted by the Company with respect to the Acquiror; and (4) the personal
background check to be conducted by the Company on each of the current executive
officers of the Acquiror.
10.17 Acquiror in Good Standing. As of the Closing Date, the Acquiror
shall be in good standing under the laws of the State of Maryland and shall
deliver to the Company and the Shareholders evidence of same.
48
10.18 Delivery of Lock Up Letters. Each of Xxxx Xxxxxx, Xxxx Xxxxxx,
Xxxxxxx Xxxxx and Gianni Bulgari shall have delivered to the Shareholders their
respective executed lock up letters.
SECTION XI
TERMINATION
11.1 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
11.1.1 by mutual consent of the Acquiror and the Shareholders
(acting jointly);
11.1.2 by the Acquiror, if any of the conditions in Section 9 have
not been satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of the Acquiror to
comply with its obligations under this Agreement) and the Acquiror has not
waived such condition on or before the Closing Date; or (ii) by the Shareholders
(acting jointly), if any of the conditions in Section 10 have not been satisfied
as of the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of any Shareholder to comply with its
obligations under this Agreement) and the Shareholders (acting jointly) have not
waived such condition on or before the Closing Date;
11.1.3 by the Acquiror or the Shareholders (acting jointly), if the
Closing has not occurred other than due to the failure of the Acquiror (in the
event the Acquiror seeks to terminate this Agreement) or any Shareholder (in the
case the Shareholders (acting jointly) seek to terminate this Agreement) to
comply with their respective obligations under this Agreement, forty-five (45)
days after the final mailing of the Schedule 14(f) Filing to the stockholders of
the Acquiror (which mailing shall occur within two (2) Business Days after the
end of the SEC review period of the Schedule 14(f) Filing),or such later date as
the parties may agree upon ( the "Outside Date");
11.1.4 by either the Acquiror or the Shareholders (acting jointly),
if there shall have been entered a final, nonappealable order or injunction of
any Governmental Authority restraining or prohibiting the consummation of the
transactions contemplated hereby;
11.1.5 by the Acquiror, if, prior to the Closing Date, the Company
or any Shareholder is in material breach of any representation, warranty,
covenant or agreement herein contained and such breach shall not be cured within
10 days of the date of notice of default served by the Acquiror claiming such
breach; provided, however, that the right to terminate this Agreement pursuant
to this Section 11.1.5 shall not be available to the Acquiror if the Acquiror is
in material breach of this Agreement at the time notice of termination is
delivered;
11.1.6 by the Shareholders (acting jointly), if, prior to the
Closing Date, the Acquiror is in material breach of any representation,
warranty, covenant or agreement herein contained and such breach shall not be
cured within 10 days of the date of notice of default served by the Shareholders
claiming such breach or, if such breach is not curable within such 10 day
period, such longer period of time as is necessary to cure such breach;
provided, however,
49
that the right to terminate this Agreement pursuant to this Section 11.1.6 shall
not be available to the Shareholders (acting jointly) if any Shareholder is in
material breach of this Agreement at the time notice of termination is
delivered; or
11.1.7 by the Acquiror, if, prior to the Closing Date, the Acquiror
Board approves any merger, liquidation, recapitalization, consolidation or other
business combination involving the Acquiror or the Acquiror Subsidiaries or any
capital stock or any material portion of the assets of the Acquiror or any
Acquiror Subsidiary, or any combination of the foregoing (an "Acquisition
Transaction"), provided that a majority of the members of the Acquiror Board
have determined in good faith and on reasonable basis, after consultation with
outside counsel and advisors, that (i) such Acquisition Transaction is more
favorable from a financial point of view to the Acquiror's stockholders than the
transactions contemplated by this Agreement and (ii) failure to take such action
would constitute a breach of the fiduciary duties of the Acquiror Board under
applicable Law.
11.2 Effect of Termination.
11.2.1 If the Acquiror terminates this Agreement pursuant to Section
11.1.5 or the Shareholders (acting jointly) terminate this Agreement pursuant to
Section 11.1.6, then the non-terminating party shall immediately pay to the
terminating party a termination fee equal to $500,000 in cash (the "Termination
Fee"). If the Acquiror terminates this Agreement pursuant to Section 11.1.7,
then the Acquiror shall immediately pay to the Company the Termination Fee.
11.2.2 Each party's right of termination under Section 11.1 is in
addition to any other rights it may have under this Agreement or otherwise, and
the exercise of a right of termination will not be an election of remedies. If
this Agreement is terminated pursuant to Section 11.1, all further obligations
of the parties under this Agreement will terminate, except that the obligations
in Sections 5.12, 6.11, 11.2, and 13 will survive; provided, however, that if
this Agreement is terminated by a party because of the breach of the Agreement
by another party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of another
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
SECTION XII
INDEMNIFICATION; REMEDIES
12.1 Survival. All representations, warranties, covenants, and obligations
in this Agreement shall survive the Closing and expire thirty (30) days from the
date on which the audited financial statements of the Acquiror for its fiscal
year ended December 31, 2004 shall have been filed as part of the Acquiror's
Annual Report on Form 10-K, but in no event earlier than April 30, 2005 (the
"Survival Period"). The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance
50
with, any such representation, warranty, covenant, or obligation. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
12.2 Indemnification by the Company.
12.2.1 From and after the Closing until (a) the expiration of the
Survival Period, or (b) with respect to a specific claim made by the Acquiror
against the Company prior to the expiration of the Survival Period, until a
court of competent jurisdiction renders a final unappealable decision (or
appeals of a decision are not taken within the time period permitted for filing
same) (the "Claims Period"), the Company shall indemnify and hold harmless the
Acquiror from and against any liabilities, loss, claims, damages (excluding
consequential, punitive and other similar damages), fines, penalties, expenses
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value (collectively, "Damages") arising, directly or indirectly,
from or in connection with:
(a) any breach of any representation or warranty made by the
Company in this Agreement or in any certificate delivered by the Company
pursuant to this Agreement;
(b) any breach by the Company of its covenants or obligations
in this Agreement; or
(c) any breach by the Acquiror of any covenants or obligations
in this Agreement required to be performed by the Acquiror from and after
the Closing Date, including, without limitation, the covenants set forth
in Sections 8.6, 8.7 and 8.8.
12.2.2 The amount of any and all Damages suffered by the Acquiror
shall be recovered by the return to the Acquiror of a specified number of
Acquiror Shares by the Shareholders (the "Returned Shares"), the amount of which
shall be determined in accordance with Section 12.4 below. All Returned Shares
shall be retired.
12.2.3 All claims of the Acquiror pursuant to this Section 12.2
shall be brought by the Acquiror Stockholders on behalf of the Acquiror and
those Persons who were stockholders of the Acquiror immediately prior to the
Closing.
12.3 Indemnification by the Acquiror.
12.3.1 From and after the Closing until the expiration of the Claims
Period, the Acquiror shall indemnify and hold harmless the Company and the
Shareholders (collectively, the "Company Indemnified Parties"), from and against
any Damages arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by the
Acquiror in this Agreement or in any certificate delivered by the Acquiror
pursuant to this Agreement;
51
(b) any breach by the Acquiror of any covenant or obligation
of the Acquiror in this Agreement required to be performed by the Acquiror
on or prior to the Closing Date; or
(c) any Tax, interest or penalty on the Acquiror, including
without limitation as a result of the untimely filing of any Acquiror Tax
returns relating to any tax period ending prior to Closing, or any portion
of a tax period prior to Closing.
12.3.2 The amount of any and all Damages suffered by a Company
Indemnified Party shall be recovered by the issuance to the Shareholders of a
specified number of additional shares of Acquiror Common Stock (the "Additional
Shares"), the amount of which shall be determined in accordance with Section
12.5 below.
12.4 Returned Shares. The number of Returned Shares to be returned by the
Shareholders to the Acquiror and retired pursuant to Section 12.2 shall be equal
to the aggregate amount of the Damages suffered by the Acquiror, divided by the
market value of the Acquiror Common Stock to be calculated using the average of
the closing bid price as quoted on the Over the Counter Bulletin Board (or such
other public trading market on which the Acquiror's Common Stock may be trading
at such time) for the thirty (30) trading days immediately prior to the date
that such amount of Damages is determined by a court of competent jurisdiction
or pursuant to a binding settlement agreement among the Acquiror and the Company
Indemnified Parties (the "Market Value"). The Returned Shares shall be returned
from the Escrow Amount.
12.5 Issuance of Additional Shares. The number of Additional Shares to be
issued to the Shareholders pursuant to Section 12.3 shall be equal to the
aggregate amount of the Damages suffered by the Company Indemnified Parties,
divided by the Market Value. The Additional Shares shall be issued to each
Shareholder on a pro rata basis, as determined by such Shareholder's pro rata
share of the total number Acquiror Shares issuable at Closing as set forth in
Exhibit A.
12.6 Limitations on Amount - the Shareholders. The Acquiror shall not be
entitled to indemnification pursuant to Section 12.2, unless and until the
aggregate amount of Damages to the Acquiror with respect to such matters under
Section 12.2.1 exceeds $625,000, at which time, subject to the following cap on
the maximum number of Returned Shares to be returned to the Acquiror, the
Acquiror shall be entitled to indemnification for the total amount of such
Damages in excess of $625,000. The aggregate number of Returned Shares to be
returned to the Acquiror shall not exceed 16,651,731 adjusted for any stock
split, reverse stock split, stock dividend, reclassification, recapitalization,
merger or consolidation or like capital adjustment affecting the Acquiror Common
Stock.
12.7 Limitations on Amount - the Acquiror.
12.7.1 No Company Indemnified Party shall be entitled to
indemnification pursuant to Section 12.3, unless and until the aggregate amount
of Damages to all Company Indemnified Parties with respect to such matters under
Section 12.3.1 exceeds $625,000, at which time, subject to the following cap on
the maximum number of Additional Shares issuable, the Company Indemnified
Parties shall be entitled to indemnification for the total amount of such
52
Damages in excess of $625,000. Specifically with respect to CDS S.r.l.
litigation (the "CDS Litigation"), in the event the aggregate amount of Damages
in connection with the CDS Litigation exceeds the reserve in the amount of
$50,000 reflected on the Acquiror Balance Sheet, any and all amounts in excess
of such reserve shall be applied against the amount of the basket set forth in
the immediately preceding sentence The Shareholders shall not be issued more
than 60,346,095 (the "Additional Shares Cap"). Additional Shares in the
aggregate, adjusted for any stock split, reverse stock split, stock dividend,
reclassification, recapitalization, merger or consolidation or like capital
adjustment affecting the Acquiror Common Stock.
12.8 Determining Damages. Materiality qualifications to the
representations and warranties of the Company and the Acquiror shall not be
taken into account in determining the amount of Damages occasioned by a breach
of any such representation and warranty for purposes of determining whether the
baskets set forth in Sections 12.6 and 12.7 have been met.
12.9 Breach by Shareholders. Nothing in this Section 12 shall limit the
Acquiror's right to pursue any appropriate legal or equitable remedy against any
Shareholder with respect to any Damages arising, directly or indirectly, from or
in connection with: (a) any breach by such Shareholder of any representation or
warranty made by such Shareholder in this Agreement or in any certificate
delivered by such Shareholder pursuant to this Agreement or (b) any breach by
such Shareholder of its covenants or obligations in this Agreement. All claims
of the Acquiror pursuant to this Section 12.9 shall be brought by the Acquiror
Stockholders on behalf of the Acquiror and those Persons who were stockholders
of the Acquiror immediately prior to the Closing.
SECTION XIII
GENERAL PROVISIONS
13.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated by this Agreement, including all fees and
expenses of agents, representatives, counsel, and accountants. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
13.2 Public Announcements. The Acquiror shall promptly, but no later than
three days following the effective date of this Agreement, issue a press release
disclosing the transactions contemplated hereby. Between the date of this
Agreement and the Closing Date, the Company and the Acquiror shall consult with
each other in issuing any other press releases or otherwise making public
statements or filings and other communications with the Commission or any
regulatory agency or stock market or trading facility with respect to the
transactions contemplated hereby and neither party shall issue any such press
release or otherwise make any such public statement, filings or other
communications without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law, in which case the
disclosing party shall provide the other party with prior notice of such public
statement, filing or other communication
53
and shall incorporate into such public statement, filing or other communication
the reasonable comments of the other party. After the Closing Date, the Acquiror
shall consult with the Acquiror Nominees in issuing any press releases or
otherwise making public statements or filings and other communications with the
Commission or any regulatory agency or stock market or trading facility with
respect to the transactions contemplated hereby and the Acquiror shall not issue
any such press release or otherwise make any such public statement, filings or
other communications without the prior written consent of the Acquiror Nominees,
which consent shall not be unreasonably withheld or delayed, except that no
prior consent shall be required if such disclosure is required by law, in which
case the Acquiror shall provide the Acquiror Nominees with prior notice of such
public statement, filing or other communication and shall incorporate into such
public statement, filing or other communication the reasonable comments of the
Acquiror Nominees.
13.3 Confidentiality.
13.3.1 Subsequent to the date of this Agreement, the Acquiror, the
Shareholders and the Company will maintain in confidence, and will cause their
respective directors, officers, employees, agents, and advisors to maintain in
confidence, any written, oral, or other information obtained in confidence from
another party in connection with this Agreement or the transactions contemplated
by this Agreement, unless (a) such information is already known to such party or
to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any required filing with the
Commission, or obtaining any consent or approval required for the consummation
of the transactions contemplated by this Agreement, or (c) the furnishing or use
of such information is required by or necessary or appropriate in connection
with legal proceedings.
13.3.2 In the event that any party is required to disclose any
information of another party pursuant to clause (b) or (c) of Section 13.3.1,
the party requested or required to make the disclosure (the "disclosing party")
shall provide the party that provided such information (the "providing party")
with prompt notice of any such requirement so that the providing party may seek
a protective order or other appropriate remedy and/or waive compliance with the
provisions of this Section 13.3. If, in the absence of a protective order or
other remedy or the receipt of a waiver by the providing party, the disclosing
party is nonetheless, in the opinion of counsel, legally compelled to disclose
the information of the providing party, the disclosing party may, without
liability hereunder, disclose only that portion of the providing party's
information which such counsel advises is legally required to be disclosed,
provided that the disclosing party exercises its reasonable efforts to preserve
the confidentiality of the providing party's information, including, without
limitation, by cooperating with the providing party to obtain an appropriate
protective order or other relief assurance that confidential treatment will be
accorded the providing party's information.
13.3.3 If the transactions contemplated by this Agreement are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
54
13.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), or (c) when received
by the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to Acquiror: with a copy to:
Trident Rowan Group, Inc. Xxxxxx, Xxxxx Naftalis & Xxxxxxx LLP
c/o FdG Associates 000 Xxxxx Xxxxxx
000 Xxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000-0000
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Mr. Xxxx Xxxxxx Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telephone No.: 000-000-0000 Telephone No.: (000) 000-0000
Facsimile No.: 000-000-0000 Facsimile No.: (000) 000-0000
If to Company: with a copy to:
Comtech Group, Inc. Loeb & Loeb LLP
Rm. 10001, Tower C, Skyworth Building, 345 Park Avenue
High-tech Industrial Park, Nanshan New York, New York 10154
Xxxxxxxx 0000
Attention: Xx. Xxxxxxx Xxxx Attention: Xxxxxxxx X. Xxxxxxxx, Esq.
Telephone No.: 000.000.000.0000 Telephone No.: (000) 000-0000
Facsimile No.: 011.755.267.43508 Facsimile No.: (000) 000-0000
13.5 Arbitration. Any dispute or controversy under this Agreement shall be
settled exclusively by arbitration in the City of New York, County of New York
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction.
13.6 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
13.7 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given
55
by a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
13.8 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Term Sheet between the Acquiror and the Company, dated December
30, 2003, and subsequently amended on February 27, 2004) and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement
executed by the party against whom the enforcement of such amendment is sought.
13.9 Assignments, Successors, and No Third-Party Rights. No party may
assign any of its rights under this Agreement without the prior consent of the
other parties. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties. Except as set
forth in Section 8.6 and Section 12.3, nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
13.10 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
13.11 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
13.12 Governing Law. This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles.
13.13 Shareholder Representative.
13.13.1 The Acquiror shall be entitled to deal exclusively with
Xxxxxxx Xxxx (the "Shareholder Representative") as the sole and exclusive
representative and agent of all of the Shareholders in respect of all matters
arising under or pertaining to this Agreement, unless and until the Acquiror
receives notice to the contrary as provided in Section 13.13.2 below. Without
limiting the foregoing, (a) any amounts payable under this Agreement by the
Acquiror to any Shareholder may be paid to the Shareholder Representative for
the account of such Shareholder; (b) any notice, communication, demand, claim,
action or proceeding required or permitted
56
hereunder may be delivered by the Acquiror to, or brought by the Acquiror
against, the Shareholder Representative in its capacity as agent and
representative of the Shareholders with the same effect, and which shall be
binding to the same degree, as if delivered to, or brought against, the
Shareholder individually; (c) any settlement or other agreement of the Acquiror
with the Shareholder in its capacity as agent and representative of the
Shareholders in respect of all matters arising under or pertaining to this
Agreement shall have the same effect, and be binding upon, the Shareholders to
the same degree as if made with the Shareholders individually; and (d) except as
provided in Section 13.13.2, the Acquiror shall not be required to recognize or
respond to, and shall not be bound by, any notice, communication, demand, claim,
action or proceeding delivered to or brought against the Acquiror by any
Shareholder in respect of all matters arising under or pertaining to this
Agreement except through the Shareholder Representative in its capacity as agent
and representative of the Shareholders.
13.13.2 The Shareholders by notice in writing to the Acquiror signed
by all the Shareholders or their legal representative may designate another
Person to act as representative and agent of the Shareholders as provided in
Section 13.13.1 above.
13.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
57
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed and delivered this Share
Exchange Agreement as of the date first written above.
Acquiror:
TRIDENT ROWAN GROUP INC.
Signed: /s/ Xxxx X. Xxxxxx
Printed name: Xxxx X. Xxxxxx
Title: President and Joint Chief Executive Officer
Company:
COMTECH GROUP, INC.
Signed: /s/ Xxxxxxx Xxxx
Printed name: Xxxxxxx Xxxx
Title: Director/Chief Executive Officer
58
COUNTERPART SIGNATURE PAGE
(FOR ISSUANCES PURSUANT TO REGULATION S)
IN WITNESS WHEREOF, the parties have executed and delivered this Share
Exchange Agreement as of the date first written above.
COMTECH GLOBAL INVESTMENT
LTD.
By: /s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Director
OFFSHORE DELIVERY INSTRUCTIONS:
COMTECH GLOBAL INVESTMENT
LTD.PRINT EXACT NAME IN WHICH YOU
WANT THE SECURITIES TO BE REGISTERED
Attn: Xxxxxxx Xxxx
Address: Rm 1001, Tower C. Skyworth Xxxx.
Xxxx-Xxxx Xxxxxxxxxx Xxxx, Xxxxxxx
Xxxxxxxx 0000
59
COUNTERPART SIGNATURE PAGE
(FOR ISSUANCES PURSUANT TO REGULATION S)
IN WITNESS WHEREOF, the parties have executed and delivered this Share
Exchange Agreement as of the date first written above.
REN INVESTMENT INTERNATIONAL
LTD.
By: /s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Sole Director
OFFSHORE DELIVERY INSTRUCTIONS:
REN INVESTMENT INTERNATIONAL LTD.
PRINT EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
Attn: Xxxxxxx Xxxx
Address: Rm 1001, Tower C. Skyworth Xxxx.
Xxxx-Xxxx Xxxxxxxxxx Xxxx, Xxxxxxx
Xxxxxxxx 0000
60
COUNTERPART SIGNATURE PAGE
(FOR ISSUANCES PURSUANT TO REGULATION S)
IN WITNESS WHEREOF, the parties have executed and delivered this Share
Exchange Agreement as of the date first written above.
PURPLE MOUNTAIN HOLDING LTD.
By: /s/ Xxx Xxxx
Name: Xxx Xxxx
Title: Director
OFFSHORE DELIVERY INSTRUCTIONS:
PURPLE MOUNTAIN HOLDING LTD.
By: /s/ Xxx Xxxx
Name: Xxx Xxxx
Title: Director
Address: c/o elong, Inc.
Building B, Xing Ke Plaza
10 JinxianQiao Xxxxxx Xxxx
Xxx Xxxx, Xxxxx 00000
61
EXHIBIT A
SHARES AND ACQUIROR SHARES TO BE EXCHANGED
Total Shares to be delivered by the Shareholders to Acquiror: 10,000,000
Total Acquiror Shares to be delivered by the Acquiror to the Shareholders: 42,000,000
Total Closing Acquiror Shares to be delivered by the Acquiror to the
Shareholder 25,348,269
------------------------------------------------------------------------------------------------------------
Number of
Percentage of Closing Acquiror Number of Percentage of
Name and Address Number of Total Shares Shares Issuable Total Acquiror Acquiror Common
of Each Shareholder Shares Owned Owned at Closing Shares Stock
------------------------------------------------------------------------------------------------------------
Comtech Global 6,500,000 65% 16,476,374 27,300,000 59.26%
Investment
------------------------------------------------------------------------------------------------------------
Purple Mountain 800,000 8% 2,027,862 3,360,000 7.29%
Holding Ltd.
------------------------------------------------------------------------------------------------------------
Ren Investment 2,700,000 27% 6,844,033 11,340,000 24.62%
International Ltd.
------------------------------------------------------------------------------------------------------------
62
EXHIBIT B
Definition of "Accredited Investor"
The term "accredited investor" means:
(1) A bank as defined in Section 3(a)(2) of the Securities Act, or a savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act, whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; an insurance company as defined in
Section 2(13) of the Securities Act; an investment company registered
under the Investment Company Act of 1940 (the "Investment Company Act") or
a business development company as defined in Section 2(a)(48) of the
Investment Company Act; a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; a plan established and maintained
by a state, its political subdivisions or any agency or instrumentality of
a state or its political subdivisions for the benefit of its employees, if
such plan has total assets in excess of $5,000,000; an employee benefit
plan within the meaning of the Employee Retirement Income Security Act of
1974 ("ERISA"), if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings and
loan association, insurance company, or registered investment advisor, or
if the employee benefit plan has total assets in excess of $5,000,000 or,
if a self-directed plan, with investment decisions made solely by persons
that are accredited investors.
(2) A private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940.
(3) An organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000.
(4) A director or executive officer of the Acquiror.
(5) A natural person whose individual net worth, or joint net worth with that
person's spouse, at the time of his or her purchase exceeds $1,000,000.
(6) A natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year.
(7) A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii)
(i.e., a person who has such knowledge and experience in
63
financial and business matters that he is capable of evaluating the merits
and risks of the prospective investment).
(8) An entity in which all of the equity owners are accredited investors. (If
this alternative is checked, the Shareholder must identify each equity
owner and provide statements signed by each demonstrating how each is
qualified as an accredited investor.)
64
EXHIBIT C
Definition of "U.S. Person"
(1) "U.S. person" (as defined in Regulation S) means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or incorporated under the
laws of the United States;
(iii) Any estate of which any executor or administrator is a U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in the United
States;
(vi) Any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;
(vii) Any discretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States;
and
(viii) Any partnership or corporation if: (A) organized or incorporated
under the laws of any foreign jurisdiction; and (B) formed by a
U.S. person principally for the purpose of investing in securities
not registered under the Securities Act, unless it is organized or
incorporated, and owned, by accredited investors (as defined in
Rule 501(a)) who are not natural persons, estates or trusts.
(2) Notwithstanding paragraph (1) above, any discretionary account or similar
account (other than an estate or trust) held for the benefit or account of
a non-U.S. person by a dealer or other professional fiduciary organized,
incorporated, or (if an individual) resident in the United States shall
not be deemed a "U.S. person."
(3) Notwithstanding paragraph (1), any estate of which any professional
fiduciary acting as executor or administrator is a U.S. person shall not
be deemed a U.S. person if:
(i) An executor or administrator of the estate who is not a U.S. person
has sole or shared investment discretion with respect to the assets
of the estate; and
(ii) The estate is governed by foreign law.
(4) Notwithstanding paragraph (1), any trust of which any professional
fiduciary acting as trustee is a U.S. person shall not be deemed a U.S.
person if a trustee who is not a U.S. person has sole or shared investment
discretion with respect to the trust assets, and no beneficiary of the
trust (and no settlor if the trust is revocable) is a U.S. person.
65
(5) Notwithstanding paragraph (1), an employee benefit plan established and
administered in accordance with the law of a country other than the United
States and customary practices and documentation of such country shall not
be deemed a U.S. person.
(6) Notwithstanding paragraph (1), any agency or branch of a U.S. person
located outside the United States shall not be deemed a "U.S. person" if:
(i) The agency or branch operates for valid business reasons; and
(ii) The agency or branch is engaged in the business of insurance or
banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located.
(7) The International Monetary Fund, the International Bank for Reconstruction
and Development, the Inter-American Development Bank, the Asian
Development Bank, the African Development Bank, the United Nations, and
their agencies, affiliates and pension plans, and any other similar
international organizations, their agencies, affiliates and pension plans
shall not be deemed "U.S. persons."
66
EXHIBIT D
ACCREDITED INVESTOR REPRESENTATIONS
Each Shareholder indicating that it is an Accredited Investor, severally and not
jointly, further represents and warrants to the Acquiror as follows:
1. Such Shareholder qualifies as an Accredited Investor on the basis set
forth on its signature page to this Agreement.
2. Such Shareholder has sufficient knowledge and experience in finance,
securities, investments and other business matters to be able to protect
such Shareholder's interests in connection with the transactions
contemplated by this Agreement.
3. Such Shareholder has consulted, to the extent that it has deemed
necessary, with its tax, legal, accounting and financial advisors
concerning its investment in the Acquiror Shares.
4. Such Shareholder understands the various risks of an investment in the
Acquiror Shares and can afford to bear such risks for an indefinite period
of time, including, without limitation, the risk of losing its entire
investment in the Acquiror Shares.
5. Such Shareholder has had access to the Acquiror's publicly filed reports
with the SEC.
6. Such Shareholder has been furnished during the course of the transactions
contemplated by this Agreement with all other public information regarding
the Acquiror that such Shareholder has requested and all such public
information is sufficient for such Shareholder to evaluate the risks of
investing in the Acquiror Shares.
7. Such Shareholder has been afforded the opportunity to ask questions of and
receive answers concerning the Acquiror and the terms and conditions of
the issuance of the Acquiror Shares.
8. Such Shareholder is not relying on any representations and warranties
concerning the Acquiror made by the Acquiror or any officer, employee or
agent of the Acquiror, other than those contained in this Agreement.
9. Such Shareholder is acquiring the Acquiror Shares for such Shareholder's
own account, for investment and not for distribution or resale to others.
10. Such Shareholder will not sell or otherwise transfer the Acquiror Shares,
unless either (A) the transfer of such securities is registered under the
Securities Act or (B) an exemption from registration of such securities is
available.
11. Such Shareholder understands and acknowledges that the Acquiror is under
no obligation to register the Acquiror Shares for sale under the
Securities Act.
67
12. Such Shareholder consents to the placement of a legend on any certificate
or other document evidencing the Acquiror Shares substantially in the form
set forth in Section 4.2.5(a).
13. Such Shareholder represents that the address furnished by such Shareholder
on its signature page to this Agreement and in Exhibit A is such
Shareholder's principal residence if he is an individual or its principal
business address if it is a corporation or other entity.
14. Such Shareholder understands and acknowledges that the Acquiror Shares
have not been recommended by any federal or state securities commission or
regulatory authority, that the foregoing authorities have not confirmed
the accuracy or determined the adequacy of any information concerning the
Acquiror that has been supplied to such Shareholder and that any
representation to the contrary is a criminal offense.
15. Such Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution and
delivery of this Agreement and the purchase of the Acquiror Shares.
68
EXHIBIT E
NON U.S. PERSON REPRESENTATIONS
Each Shareholder indicating that it is not a U.S. person, severally and not
jointly, further represents and warrants to the Acquiror as follows:
1. At the time of (a) the offer by the Acquiror and (b) the acceptance of the
offer by such Shareholder, of the Acquiror Shares, such Shareholder was
outside the United States.
2. No offer to acquire the Acquiror Shares or otherwise to participate in the
transactions contemplated by this Agreement was made to such Shareholder
or its representatives inside the United States.
3. Such Shareholder is not purchasing the Acquiror Shares for the account or
benefit of any U.S. person, or with a view towards distribution to any
U.S. person, in violation of the registration requirements of the
Securities Act.
4. Such Shareholder will make all subsequent offers and sales of the Acquiror
Shares either (x) outside of the United States in compliance with
Regulation S; (y) pursuant to a registration under the Securities Act; or
(z) pursuant to an available exemption from registration under the
Securities Act. Specifically, such Shareholder will not resell the
Acquiror Shares to any U.S. person or within the United States prior to
the expiration of a period commencing on the Closing Date and ending on
the date that is one year thereafter (the "Distribution Compliance
Period"), except pursuant to registration under the Securities Act or an
exemption from registration under the Securities Act.
5. Such Shareholder is acquiring the Acquiror Shares for such Shareholder's
own account, for investment and not for distribution or resale to others.
6. Such Shareholder has no present plan or intention to sell the Acquiror
Shares in the United States or to a U.S. person at any predetermined time,
has made no predetermined arrangements to sell the Acquiror Shares and is
not acting as a Distributor of such securities.
7. Neither such Shareholder, its Affiliates nor any Person acting on such
Shareholder's behalf, has entered into, has the intention of entering
into, or will enter into any put option, short position or other similar
instrument or position in the U.S. with respect to the Acquiror Shares at
any time after the Closing Date through the Distribution Compliance Period
except in compliance with the Securities Act.
8. Such Shareholder consents to the placement of a legend on any certificate
or other document evidencing the Acquiror Shares substantially in the form
set forth in Section 4.2.5(b).
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9. Such Shareholder is not acquiring the Acquiror Shares in a transaction (or
an element of a series of transactions) that is part of any plan or scheme
to evade the registration provisions of the Securities Act.
10. Such Shareholder has sufficient knowledge and experience in finance,
securities, investments and other business matters to be able to protect
such Shareholder's interests in connection with the transactions
contemplated by this Agreement.
11. Such Shareholder has consulted, to the extent that it has deemed
necessary, with its tax, legal, accounting and financial advisors
concerning its investment in the Acquiror Shares.
12. Such Shareholder understands the various risks of an investment in the
Acquiror Shares and can afford to bear such risks for an indefinite period
of time, including, without limitation, the risk of losing its entire
investment in the Acquiror Shares.
13. Such Shareholder has had access to the Acquiror's publicly filed reports
with the SEC.
14. Such Shareholder has been furnished during the course of the transactions
contemplated by this Agreement with all other public information regarding
the Acquiror that such Shareholder has requested and all such public
information is sufficient for such Shareholder to evaluate the risks of
investing in the Acquiror Shares.
15. Such Shareholder has been afforded the opportunity to ask questions of and
receive answers concerning the Acquiror and the terms and conditions of
the issuance of the Acquiror Shares.
16. Such Shareholder is not relying on any representations and warranties
concerning the Acquiror made by the Acquiror or any officer, employee or
agent of the Acquiror, other than those contained in this Agreement.
17. Such Shareholder will not sell or otherwise transfer the Acquiror Shares,
unless either (A) the transfer of such securities is registered under the
Securities Act or (B) an exemption from registration of such securities is
available.
18. Such Shareholder understands and acknowledges that the Acquiror is under
no obligation to register the Acquiror Shares for sale under the
Securities Act.
19. Such Shareholder represents that the address furnished by such Shareholder
on its signature page to this Agreement and in Exhibit A is such
Shareholder's principal residence if he is an individual or its principal
business address if it is a corporation or other entity.
20. Such Shareholder understands and acknowledges that the Acquiror Shares
have not been recommended by any federal or state securities commission or
regulatory authority, that the foregoing authorities have not confirmed
the accuracy or determined the adequacy of any information concerning the
Acquiror that has been supplied to such Shareholder and that any
representation to the contrary is a criminal offense.
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21. Such Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution and
delivery of this Agreement and the purchase of the Acquiror Shares.
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