Exhibit 2.1
DATED 6 FEBRUARY 2007
(1) LTK INDUSTRIES LIMITED
(2) XXXXXX FAR EAST HOLDINGS B.V.
(3) LO XXXXX XXX, XXXX
(4) XXXXXX CDT INC.
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AGREEMENT FOR THE SALE AND PURCHASE OF
THE ENTIRE ISSUED SHARE CAPITAL OF EACH OF
LTK WIRING COMPANY LIMITED, LTK CABLE TECHNOLOGY LIMITED,
LTK TECHNOLOGIES CO., LIMITED AND GENUINE CARE LIMITED
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TABLE OF CONTENTS
Clause Page
------ ----
1. Definitions and Interpretation.................................... 4
2. Sale of Sale Shares............................................... 24
3. Consideration..................................................... 24
4. Conditions to Completion.......................................... 29
5. Completion........................................................ 31
6. Pre-Completion Obligations........................................ 36
7. Warranties........................................................ 41
8. Post-Completion Covenants......................................... 42
9. Indemnification and Survival...................................... 45
10. Confidentiality of Information.................................... 49
11. Costs............................................................. 50
12. General........................................................... 50
13. Notices........................................................... 51
14. Governing Law and Submission to Jurisdiction...................... 52
15. Guaranty by Mr. Lo................................................ 52
16. Guaranty by Xxxxxx CDT............................................ 54
17. Escrow Account.................................................... 55
SCHEDULES
Schedule 1 Particulars of the Company
Schedule 2 Particulars of the Subsidiaries and Representative Offices
Schedule 3 Particulars of the Properties
Schedule 4 Particulars of HK Trademarks and Safety Marks
Schedule 5 Warranties of Vendor
Schedule 6 Particulars of LTK Taiwan and LTK Japan
Schedule 7 Disclosure Letter
Schedule 8 Form of Transitional Service Agreement
Schedule 9 Form of Strategic Supply Agreement
Schedule 10 Form of Deed of Taxation Indemnity
Schedule 11 [Intentionally Deleted]
Schedule 12 Form of GPI Deed of Undertaking
Schedule 13 Form of HK Trademarks Assignment
Schedule 14 Form of Safety Marks Assignment
Schedule 15 Cross Guarantees
Schedule 16 Evidence of Bank Debt Payoff
Schedule 17 2006 Initial Working Capital Statement
Schedule 18 Warranties of Purchaser
Schedule 19 Employment Agreement and List of Certain Vendor Employees
Schedule 20 PRC Legal Opinion
Schedule 21 List of Completion Documents for Japan Shares
Schedule 22 Environmental, Health and Safety Schedule
Annexure A Accounts
THIS AGREEMENT is entered into on 6 February 2007
AMONGST:
(1) LTK INDUSTRIES LIMITED, a company incorporated in Hong Kong with limited
liability, whose registered office is at 6/F, Photonics Centre, 2 Science
Park East Avenue, Shatin, Hong Kong (the "VENDOR");
(2) BELDEN FAR EAST HOLDINGS B.V., a company incorporated in The Netherlands
with limited liability, whose registered office is at Xxxxxxxxxxxx 0, 0000
XX Xxxxx, Xxx Xxxxxxxxxxx (the "PURCHASER");
(3) LO XXXXX XXX, XXXX, holder of Hong Kong Identity Card No. X000000(X), x/x
XXX Xxxxxxxxxx Xxxxxxx, 0/X, Xxxxxxxxx Centre, 0 Xxxxxxx Xxxx Xxxx Xxxxxx,
Xxxxxx, Xxxx Xxxx ("MR. LO"); and
(4) XXXXXX CDT INC., a corporation incorporated in Delaware, USA, whose
corporate address is at 0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx Xxxxx,
Xxxxxxxx 00000 ("XXXXXX CDT").
RECITALS:
(A) The Company is a limited liability company incorporated in Hong Kong on 16
February 1993. Further information and particulars concerning the Company
and the Subsidiaries are set out in Schedule 1 and Schedule 2,
respectively.
(B) LTK Japan is a limited liability company incorporated in Japan on 18
November 2002. Further information and particulars concerning LTK Japan are
set out in Part I of Schedule 6.
(C) LTK Taiwan is a limited liability company incorporated in Taiwan on 1
December 1998. Further information and particulars concerning LTK Taiwan
are set out in Part II of Schedule 6.
(D) LTK Newco International is a limited liability company incorporated in Hong
Kong on 30 September 2006. Further information and particulars concerning
LTK Newco International are set out in Part III of Schedule 6.
(E) As at the date of this Agreement, the Company has an authorized share
capital of HK$2,000,000 divided into 2,000,000 shares of HK$1.00 each, all
of which have been issued and are fully paid up. The Vendor is the sole
beneficial and legal owner of the Sale Shares, representing the entire
issued share capital of the Company.
(F) As of the date of this Agreement, LTK Japan has an authorized share capital
of JPY40,000,000 divided into 800 shares of JPY50,000 each, of which 200
shares have been issued and are fully paid up. LTK International will be by
the Completion Date the sole beneficial and legal owner of the Japan
Shares, representing the entire issued share capital of LTK Japan.
(G) As of the date of this Agreement, LTK Taiwan has an authorized share
capital of
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NTD5,000,000 divided into 500,000 shares of NTD10 each, all of which have
been issued and are fully paid up. The shareholders of LTK Taiwan are LTK
International (holds 400,000 shares), Mr. Lo (holds 50,000 shares), Xxxxx
Xxx (holds 20,000 shares), Chen Xxxx Xxxx (holds 10,000 shares), Liu Yuan
Fan (holds 10,000 shares), and Fan Xxxx Xxxx (holds 10,000 shares). LTK
International is entitled to cause the legal and beneficial interest in all
the Taiwan Shares, representing the entire issued share capital of LTK
Taiwan, to be sold and transferred to the Purchaser at Completion.
(H) As of the date of this Agreement, LTK Newco International has an authorized
share capital of HK$10,000 divided into 10,000 shares of HK$1 each, all of
which have been issued and are fully paid up. LTK International is the sole
beneficial and legal owner of the LTK Newco International Shares,
representing the entire issued share capital of LTK Newco International.
(I) The Vendor wishes to sell the Sale Shares to the Purchaser and to procure
(either itself or through its Associates) the sale of the Japan Shares, the
Taiwan Shares and the Newco Shares to the Purchaser, and the Purchaser
wishes to purchase the Sale Shares, the Japan Shares, the Taiwan Shares and
the Newco Shares, subject to and in accordance with the terms and
conditions set out in this Agreement.
(J) LTK International is wholly owned by the Vendor. The Vendor is beneficially
and legally owned as to approximately 46.98% by Mr. Lo and Mr. Lo has
agreed to enter into this Agreement to guarantee the performance by the
Vendor of its obligations in the manner hereinafter appearing.
(K) The Purchaser is indirectly owned by Xxxxxx CDT. Xxxxxx CDT has agreed to
enter into this Agreement to guarantee the performance by the Purchaser of
its obligations in the manner hereinafter appearing.
TERMS AGREED:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement where the context so admits the following words and
expressions shall have the following meanings:
"2006 INITIAL WORKING CAPITAL has the meaning ascribed to it in
STATEMENT" Clause 3A.1.1;
"ACCEPTED CLAIM AMOUNT" has the meaning ascribed to it in
Clause 17.1.3;
"ACCOUNTING DATE" 31 December 2006;
"ACCOUNTS" the combined pro forma financial
statements of the Group, individual
financial statements of each member
of the Group (other than LTK Newco
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International) and the
International/Macao/US Receivables and
International/Macao/US Payables, in
each case, for the 6 month period
ended on June 30, 2006 and for the 12
month period ended on December 31,
2006 respectively (which such
financial statements comprising a
balance sheet and profit and loss
statement) and the audited financial
statements of the Company for the 12
month period ended on June 30, 2005
(which such financial statements
comprising a balance sheet, profit and
loss statement, notes and directors'
and auditors' reports) copies of which
are initialled by Vendor and Purchaser
for identification purposes and
annexed to this Agreement as Annexure
A;
"ADJUDICATED CLAIM AMOUNT" has the meaning ascribed to it in
Clause 17.1.4;
"ADVERSE CONSEQUENCE" any Liability, loss, damage
(including incidental and
consequential damages), claim,
demand, cause of action, judgment,
cost, deficiency, diminution of value
or expense (including costs of
investigation and defence, interest,
penalties and reasonable legal fees
and costs), whether or not involving
a third-party claim; provided,
however, that "Adverse Consequence"
shall exclude damages for loss of
profits or opportunities and punitive
damages with respect to all
provisions of this Agreement other
than (a) the indemnity and other
Vendor obligations with respect to
Clauses 9.1.3, (b) the indemnity and
other Vendor obligations with respect
to Clause 9.1.4 to the extent
concerning Environmental, Health and
Safety Liabilities of LTK Shanghai
and (c) any breach by the Vendor or
the Purchaser of Clauses 2.1 or 4.4;
"AMOUNT CLAIMED" has the meaning ascribed to it in
Clause 17.1.1;
"ARBITRATOR" PricewaterhouseCoopers, as stated in
Clause 3A.1.1;
"ASSOCIATE" in relation to any company, any
company
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which is its holding company or a
subsidiary of its holding company, as
those terms as defined in section 2 of
the Companies Ordinance; or in
relation to any natural person, his
spouse, any child or step-child,
natural or adopted of him or his
spouse or any person cohabiting as a
spouse with, and any child,
step-child, parent, step-parent,
brother, sister, step-brother and
step-sister of him, or a faith-in-law,
mother-in-law, son-in-law,
daughter-in-law, grandparent,
grandchild, uncle, aunt, cousin,
brother-in-law, sister-in-law, nephew
and niece of him;
"AUDITORS" Deloitte Touche Tohmatsu;
"BANK DEBT" all indebtedness and other
obligations owing to any and all
banks, other lenders or third parties
by any member of the Group at the
time of Completion;
"BANK DEBT PAYOFF AMOUNT" the amount of all principal,
interest, fees and other amounts
necessary to pay off and discharge
the Bank Debt in full at the time of
Completion;
"BANK DEBT PAYOFF EVIDENCE" written evidence demonstrating to the
Vendor that all Bank Debt has been
paid off and discharged in full
pursuant to Clause 3.2.2, which
written evidence shall consist of (a)
electronic bank advices verifying
wire transfers (showing beneficiary,
amount paid and date of wire) by the
Vendor to each bank and other Person
to whom Bank Debt is owed by any
member of the Group at the time of
Completion in amounts reflecting
payoff of all Bank Debt owing to such
bank or other Person in full; and (b)
confirmations sent by each such bank
and other Person to the Purchaser via
facsimile in the form set out in
Schedule 16;
"BUSINESS DAY" a day (other than a Saturday or
Sunday) on which banks are open for
business in Hong Kong;
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"CAP" has the meaning ascribed to it in
Clause 9.8;
"CAPITAL COMMITMENT" purchase commitments made by the
Group for the acquisition of
property, plant or equipment which
are not yet paid at the Completion
Date, excluding for the avoidance of
doubt the Capital Expenditure Amount;
"CAPITAL EXPENDITURE AMOUNT" the amount expended and paid by the
Group on capital expenditures for
equipment of the Group between 1
October 2006 and the Completion Date,
but in no event to exceed
US$1,700,000;
"CLEANUP" any investigative, monitoring,
cleanup, removal, containment or
other remedial or response action
required by any Environmental Law or
Occupational Safety and Health Law;
"COMPANY" LTK Wiring Company Limited, a limited
liability company incorporated under
the laws of Hong Kong;
"COMPANIES ORDINANCE" the Companies Ordinance (Chapter 32
of the Laws of Hong Kong);
"COMPLETION" has the meaning ascribed to it in
Clause 5.1;
"COMPLETION DATE" has the meaning ascribed to it in
Clause 5.1;
"CONDITIONS" the conditions specified in Clause
4.1;
"CONSIDERATION" has the meaning ascribed to it in
Clause 3.1;
"CONTINUING DIRECTORS" those directors who have been agreed
between the Vendor and the Purchaser
to remain as Directors of certain
members of the Group after the
Completion Date, namely, Xxxxxx
Xxxxxx Xxxx Xxxx (all members of the
Group); Zico Xxxx Xxx Keung (only
Huizhou 1, Huizhou 2 and Huizhou 3);
Xxxx Xxx Xx Xx (only LTK Shangha,,
Suzhou 1, Suzhou 2 and LTK Taiwan);
Zhang Hai Dong (only LTK
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Dalian); and Xxxxx Xxx (all members of
the Group);
"CONTRAVENTION" an act or omission would "CONTRAVENE"
something if, as the context requires:
(a) the act or omission would
conflict with it, violate it, result
in a breach or violation of or
failure to comply with it, or
constitute a default under it;
(b) the act or omission would give
any governmental body or other Person
the right to challenge, revoke,
withdraw, suspend, cancel, terminate
or modify it, to exercise any remedy
or obtain any relief under it, or to
declare a default or accelerate the
maturity of any obligation under it;
or
(c) the act or omission would result
in the creation of an Encumbrance on
the stock or assets of any member of
the Group;
"CROSS GUARANTEES" the guarantees and/or cross
guarantees given by any member of the
Group in respect of the payment
obligations of any Person(s) other
than members of the Group, which are
set forth in Schedule 15;
"DEED OF TAXATION INDEMNITY" the deed of taxation indemnity to be
signed by the Vendor in favour of the
Company for itself and on behalf of
and as trustee for each other member
of the Group and their successors in
the form set out in Schedule 10;
"DIRECTORS" the persons listed as directors of
the relevant members of the Group in
Schedule 1 or 2;
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"DISCLOSED" expressly disclosed in the Disclosure
Letter, or by the Vendor to the
Purchaser in this Agreement;
"DISCLOSURE LETTER" the letter issued and delivered by
the Vendor to the Purchaser before
signing of this Agreement in the
approved terms containing disclosures
against the Warranties as set out in
Schedule 7;
"DOMAIN NAMES" xxx.xxx.xx, xxx.xxxxx.xxx.xx,
xxx.xxx.xx, xxxxxxxx.xx, xxxxxxxx.xxx,
(Chinese Characters). cn and (Chinese
Characters) registered in the name of
the Vendor;
"DOMAIN NAMES ASSIGNMENT" the deed of assignment in the
approved terms to be entered into
between the Vendor as assignor and
the Company as assignee in relation
to the assignment of the Domain Names;
"EMPLOYMENT AGREEMENTS" the employment agreements in the form
and terms as set out in Schedule 19
to be entered into between each of
those employees of the Vendor listed
on such Schedule 19 who accept
employment with the Group commencing
prior to Completion and the Company
or other members of the Group, in
each case, at or before Completion;
"ENCUMBRANCES" all pledges, charges, claims,
community or other marital property
interest, liens, mortgages, leases,
security interests, attachments,
pre-emption rights, options
restrictions, conditional sale
agreements or other title retention
agreements and any other encumbrances
or similar third party rights or
claims of any kind;
"ENVIRONMENT" soil, land surface or subsurface
strata, surface waters (including
navigable water and ocean waters),
groundwaters, drinking water supply,
stream sediments, ambient air
(including indoor air), plant life,
animal life, noise level and any
other similar medium or natural
resource;
"ENVIRONMENTAL, HEALTH AND SAFETY any Adverse Consequence or other
LIABILITIES" responsibility arising from or under
Environmental Law or Occupational
Safety
9
and Health Law, including those
consisting of or relating to (a) any
environmental, health or safety matter
or condition (including on-site or
off-site contamination, occupational
safety and health, and regulation of
any chemical substance or product),
(b) any fine, penalty, judgment,
award, settlement, Proceeding,
damages, loss, claim, demand and
response, investigative, monitoring,
remedial or inspection cost or expense
arising under Environmental Law or
Occupational Safety and Health Law,
(c) financial responsibility under any
Environmental Law or Occupational
Safety and Health Law for Cleanup
costs or corrective action, (whether
or not such Cleanup has been required
or requested by any governmental body
or other Person) and for any natural
resource damage, or (d) any other
compliance, corrective or remedial
measures required under any
Environmental Law or Occupational
Safety and Health Law;
"ENVIRONMENTAL, HEALTH AND SAFETY Schedule 22, which sets forth certain
SCHEDULE" environmental, health and safety
matters to be performed by the
Vendor, and consisting of Parts A and
B;
"ENVIRONMENTAL LAW" any applicable law, as presently
enacted or as modified or enacted in
the future, that requires or relates
to (a) advising appropriate
governmental bodies, employees or the
public of intended or actual Releases
of pollutants or hazardous substances
or materials, violations of discharge
limits or other prohibitions and the
commencement of activities, such as
resource extraction or construction,
including those that could have
significant impact on the
Environment, (b) preventing or
reducing to acceptable levels the
Release of pollutants or hazardous
substances or materials into the
Environment, (c) reducing the
quantities, preventing the Release or
minimizing the hazardous
characteristics of wastes that are
generated, (d) assuring that products
are designed, formulated, packaged
and used so that they
10
do not present unreasonable risks to
human health or the Environment when
used or disposed of, (e) protecting
resources, species or ecological
amenities, (f) reducing to acceptable
levels the risks inherent in the
transportation of hazardous
substances, pollutants, oil or other
potentially harmful substances, (g)
Cleanup of pollutants that have been
Released, preventing the threat of
Release, or paying the costs of such
Cleanup or prevention, or (h) making
responsible parties pay government
agencies, private parties, or groups
of them, for damages done to their
health or the Environment, or
permitting self-appointed
representatives of the public interest
to recover for injuries done to public
assets;
"ESCROW ACCOUNT" has the meaning ascribed to it in
Clause 3.2.1;
"ESCROW AGENT" has the meaning ascribed to it in
Clause 3.2.1;
"ESCROW AGREEMENT" an agreement in the form as set out
in Schedule 11, to be entered into
amongst the Purchaser, the Vendor and
the Escrow Agent at or prior to
Completion;
"ESCROW TERMINATION DATE" the date which is two (2) years after
the Completion Date, except that if
the Net Worth of the Vendor at any
time prior to such date is less than
30% of the Consideration (being
US$58,410,000), and such shortfall is
not remedied (as the Vendor
demonstrates in writing to the
Purchaser's reasonable satisfaction)
within thirty (30) days after its
initial occurrence, the Escrow
Termination Date shall be the date
which is three years after the
Completion Date;
"FINAL COMPLETION DATE WORKING has the meaning ascribed to it in
CAPITAL AMOUNT" Clause 3A.1.1;
"FINAL WORKING CAPITAL STATEMENT" has the meaning ascribed to it in
Clause 3A.1.1.
"FORMER PROPERTY" any real estate that was owned by any
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member of the Group prior to the date
hereof;
"GPI DEED OF UNDERTAKING" the GPI deed of undertaking to be
signed at or prior to Completion by
GP Industries Limited (a company
incorporated in Singapore with
limited liability) and Mr. Lo in
favour of the Purchaser, in the form
set out in Schedule 12;
"GROUP" the Company, the Subsidiaries, LTK
Japan, LTK Taiwan and LTK Newco
International, and the expression
"MEMBER(S) OF THE GROUP" shall be
construed accordingly;
"GUARANTEED PURCHASER OBLIGATIONS" has the meaning ascribed to it in
Clause 16;
"GUARANTEED VENDOR OBLIGATIONS" has the meaning ascribed to it in
Clause 15;
"HAZARDOUS ACTIVITY" the distribution, generation,
handling, importing, management,
manufacturing, processing,
production, refinement, Release,
storage, transfer, transportation,
treatment or use (including any
withdrawal or other use of
groundwater) of Hazardous Materials
in, on, under, about or from any of
the Properties or Former Properties
or any part thereof into the
Environment, and any other act,
business, operation or thing that
increases the danger, or risk of
danger, or poses an unreasonable risk
of harm to individuals or property on
or off the Properties or Former
Properties, or that may affect the
value of any of the Properties or
Former Properties;
"HAZARDOUS MATERIAL" any waste or other substance that is
listed, defined, designated or
classified as, or otherwise
determined to be, hazardous,
radioactive or toxic or a pollutant
or a contaminant under any
Environmental Law, including any
admixture or solution thereof, and
specifically including petroleum and
all derivatives thereof or synthetic
substitutes therefor and asbestos,
lead or lead-containing or
asbestos-containing materials;
12
"HK TRADEMARKS" the trademarks registered in Hong
Kong, particulars of which are set
out in Part I of Schedule 4;
"HK TRADEMARKS ASSIGNMENT" the deed of assignment in
substantially the form as set out in
Schedule 13 to be entered into
between the Vendor as assignor and
the Company as assignee in relation
to the assignment of the HK
Trademarks;
"HONG KONG" the Hong Kong Special Administrative
Region of the PRC;
"HUIZHOU 1" LTK Electric Wire (Huizhou) Limited
(Chinese Characters), a WFOE
established in the PRC, particulars
of which are set out in Part I of
Schedule 2;
"HUIZHOU 2" Huizhou LTK Electronic Cable Limited
(Chinese Characters), a WFOE
established in the PRC, particulars
of which are set out in Part II of
Schedule 2;
"HUIZHOU 3" LTK Cable (Huizhou) Limited
(Chinese Characters), a WFOE
established in the PRC, particulars
of which are set out in Part III of
Schedule 2;
"INTELLECTUAL PROPERTY" patents, trademarks, service marks,
trade names, registered designs,
designs, copyrights and other forms
of intellectual or industrial
property (in each case in any part of
the world and whether or not
registered or registrable and for the
full period thereof and all
extensions and renewals thereof and
applications for registration of or
otherwise in connection with the
foregoing), know-how, inventions,
formulae, confidential or secret
processes and information, computer
programs and software, and any other
protected rights and assets, and any
licences and permissions in
connection therewith;
"INTERNATIONAL/MACAO/US PAYABLES" the accounts payable of LTK
International, LTK Macao and LTK US
that are attributable to the business
of the Group;
"INTERNATIONAL/MACAO/US RECEIVABLES" the accounts receivable of LTK
International, LTK Macao and LTK US
13
that are attributable to the business
of the Group;
"JAPAN SHARES" has the meaning ascribed to it in
Clause 2.1;
"LEASES" all the leases, sub-leases, tenancy
agreements, sub-tenancy agreements,
licences or other documents
(including without limitation any
options for extension relating
thereto) granted or agreed to be
granted to any member of the Group or
pursuant to which any member of the
Group holds or occupies any Leased
Property;
"LEASED PROPERTIES" the real properties leased by the
Group, particulars of which are set
out in Part II of Schedule 3;
"LIABILITY" liabilities or obligations of any
nature (including, for the sake of
clarity, violations or alleged
violations of any law, rule or
regulation), whether known or
unknown, whether absolute, accrued,
contingent, xxxxxx, inchoate or
otherwise, whether due or to become
due, and whether or not required to
be reflected on a balance sheet;
"LONG SERVICE EMPLOYEE LIABILITY" Liability for statutory long service
payment and severance payments,
redundancy payments and other similar
payments with respect to (a)
employees of the Group previously
employed by the Vendor and its
Associates whose employment was
transferred to the Group prior to the
Completion Date with the consent of
the Purchaser, and (b) the other
employees of the Group at the
Completion Date, in each of (a) and
(b) to the extent attributable to
employment by the Vendor or its
Associates prior to the Completion
Date;
"LTK DALIAN" Dalian LTK Electric Wire Limited
(Chinese Characters), a company
incorporated in the PRC, particulars
of which are set out in Part V of
Schedule 2;
"LTK INTERNATIONAL" LTK International Limited, a limited
liability company incorporated under
the
14
laws of Hong Kong and a wholly-owned
subsidiary of the Vendor;
"LTK JAPAN" LTK Technologies Co., Limited, a
stock company incorporated in Japan,
particulars of which are set out in
Part I of Schedule 6;
"LTK MACAO" LTK Macao Commercial Offshore
Limited, a limited liability company
incorporated under the laws of Macao
and a wholly-owned subsidiary of LTK
International;
"LTK NEWCO INTERNATIONAL" Genuine Care Limited, a limited
liability company incorporated under
the laws of Hong Kong, particulars of
which are set out in Part III of
Schedule 6, which is proposed to be
renamed Linkz International Limited
before Completion and then renamed
LTK International Limited after
Completion;
"LTK TAIWAN" LTK Cable Technology Limited, a
limited liability company
incorporated in Taiwan, particulars
of which are set out in Part II of
Schedule 6;
"LTK SHANGHAI" Shanghai LTK Electronic Cables
Limited (Chinese Characters),
an enterprise established in the PRC,
particulars of which are set out in
Part IV of Schedule 2;
"LTK SHANGHAI PUT OPTION" has the meaning ascribed to it in
Clause 8.6;
"LTK SHANGHAI PUT EXPIRATION DATE" the earlier of (a) three years after
the Completion Date or (b) two months
after the Group has completed its
relocation out of the LTK Shanghai
facility at 5661 Cao Xx Xxxx, Xxxxxx
Xxxx, Xxxxxxx Xxxxxxxx, Xxxxxxxx;
"LTK US" LTK Cable Technology, Inc., a
corporation incorporated under the
laws of California, United States,
and a wholly-owned subsidiary of LTK
International;
"LTK WIRING TRANSFER AGREEMENT" the transfer agreement to be entered
into between the Company as
transferor and the Vendor, providing
for the transfer at or before
Completion of the accounts
receivable/accounts payable of the
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Company that are not attributable to
the business of the Group, in the
form to be mutually agreed upon
between the Vendor and the Purchaser
before Completion;
"MATERIAL ADVERSE EFFECT" any fact, event or development that,
individually or when taken together
with any other fact, event, or
development, has or could reasonably
be expected to have a material
adverse effect on the business (as
currently conducted or contemplated
to be conducted immediately after
Completion), operations (including
but not limited to results of
operation), financial conditions,
assets or liabilities of (a) any
member of the Group if the impact on
such member of the Group could
reasonably be expected to be not less
than US$2,000,000, or (b) the Group
as a whole;
"MINORITY INTEREST ACQUISITIONS" has the meaning ascribed to it in
Clause 6.4;
"MPFS ORDINANCE" the Mandatory Provident Fund Schemes
Ordinance (Chapter 485 of the Laws of
Hong Kong);
"NEGATIVE WORKING CAPITAL ADJUSTMENT has the meaning ascribed to it in
AMOUNT" Clause 3A.1.1;
"NET WORTH" the excess, on a fair value basis, of
the tangible assets over the
liabilities (including contingent
liabilities) of the Vendor or Mr. Lo,
as the case may be, as measured at
any given date; provided that, in the
case of Mr. Lo, such contingent
liabilities shall exclude, with
respect to his contingent liability
under each personal guaranty he has
provided that guarantees debt of a
company in which he owns an equity
interest that is counted as an asset
in measuring his Net Worth, the
amount of such company debt
multiplied by his percentage equity
interest in such company, up to but
not exceeding the amount of his
contingent liability under such
personal guaranty;
"NEWCO SHARES" has the meaning ascribed to it in
Clause 2.1;
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"OCCUPATIONAL SAFETY AND HEALTH LAW" any applicable law, as presently
enacted or as modified or enacted in
the future, designed to provide safe
and healthful working conditions and
to reduce occupational safety and
health hazards, and any program,
whether governmental or private (such
as those promulgated or sponsored by
industry associations and insurance
companies), designed to provide safe
and healthful working conditions;
"OCCURRENCE" an event, incident, accident or
condition, including without
limitation any which results from an
act or omission (including without
limitation the sale of products and
continuous or repeated exposure to
conditions which result in bodily
injury, death or damage of any kind);
"ORDER" any order, injunction, judgment,
decree, ruling, assessment or
arbitration award of any relevant
governmental body or arbitrator, and
any contract with any relevant
governmental body relating to
compliance with law;
"OWNED PROPERTIES" the real properties owned by the
Group, particulars of which are set
out in Part I of Schedule 3;
"PARTIES" the named parties to this Agreement
and their respective successors and
permitted assigns; each of them a
"PARTY";
"PAYABLES/RECEIVABLES TRANSFER the transfer agreement to be entered
AGREEMENT" into amongst LTK International, LTK
Macao and LTK US as transferors and
LTK Newco International as
transferee, providing for the
transfer of the
International/Macao/US Payables and
the International/Macao/US
Receivables to LTK Newco
International at or before Completion
pursuant to this Agreement in the
form to be mutually agreed upon
between the Vendor and the Purchaser
before Completion;
"PERSON" an individual or an entity, including
a corporation, share company, limited
17
liability company, partnership,
trust, association, governmental body
or any other body with legal
personality separate from its equity
holders or members;
"PERSONAL FINANCIAL STATEMENT" a personal financial statement of Mr.
Lo which shows, on a fair value
basis, all of the assets and
liabilities (including contingent
liabilities) of Mr. Lo and Mr. Lo's
Net Worth as of the stated date,
which Personal Financial Statement
shall be accompanied by a compilation
or review report of an independent
external accounting firm acceptable
to the Purchaser;
"POSITIVE WORKING CAPITAL ADJUSTMENT has the meaning ascribed to it in
AMOUNT" Clause 3A.1.1;
"PRC" the People's Republic of China but
excluding, for the purposes of this
Agreement, Hong Kong, Macau Special
Administrative Region and Taiwan;
"PRE-COMPLETION OBLIGATIONS" has the meaning ascribed to it in
Clause 5.2.1.3;
"PRELIMINARY WORKING CAPITAL has the meaning ascribed to it in
STATEMENT" Clause 3A.1.1;
"PROCEEDING" any action, arbitration, audit,
examination, investigation, hearing,
litigation or suit (whether civil,
criminal, administrative, judicial or
investigative, whether formal or
informal, and whether public or
private) commenced, brought,
conducted or heard by or before, or
otherwise involving, any relevant
governmental body or arbitrator;
"PROPERTIES" the Owned Properties and the Leased
Properties;
"PURCHASER'S LETTER" has the meaning ascribed to it in
Clause 3A.1.1;
"PURCHASER'S SOLICITORS" Xxxxxxxx Xxxxxxx of Suite 3403, Two
Exchange Square, 0 Xxxxxxxxx Xxxxx,
Xxxxxxx, Xxxx Xxxx;
"RELEASE" any release, spill, emission,
leaking,
18
pumping, pouring, dumping, emptying,
injection, deposit, disposal,
discharge, dispersal, leaching or
migration on or into the Environment,
or into or out of any property;
"RELEVANT CLAIM" has the meaning ascribed to it in
Clause 17.1;
"REPRESENTATIVE OFFICES" the representative offices and
branches of members of the Group
which are situate in the PRC,
particulars of which are set out in
Part VIII of Schedule 2;
19
"RESTRICTED PERSONS" has the meaning ascribed to it in
Clause 8.1;
"RETAINED CONSIDERATION" has the meaning ascribed to it in
Clause 3.2.1;
"SAFETY MARKS" the safety marks granted to the
Vendor, particulars of which are set
out in Part II of Schedule 3;
"SAFETY MARKS ASSIGNMENT" the deed of assignment in
substantially the form as set out in
Schedule 14 to be entered into
between the Vendor as assignor and
the Company as assignee in relation
to the assignment of the Safety Marks;
"SALE SHARES" 2,000,000 ordinary shares of HK$1.00
each in the share capital of the
Company, representing the entire
issued share capital of the Company;
"SEGREGATION" has the meaning ascribed to it in
Clause 6.5;
"SHARES" the Sale Shares, the Japan Shares,
the Taiwan Shares and the Newco
Shares;
"STRATEGIC SUPPLY AGREEMENT" the supply contract to be entered
into amongst the Vendor, Time
Interconnect Limited, Huizhou 1 and
the Purchaser [list other parties to
this contract] at Completion pursuant
to this Agreement substantially in
the form set out in Schedule 8;
"SUBSIDIARIES" Xxxxxxx 0, Xxxxxxx 0, Xxxxxxx 0, XXX
Dalian, LTK Shanghai, Suzhou 1 and
Suzhou 2, each of which is a
subsidiary of the Company;
"SUZHOU 1" LTK Industries (Suzhou) Limited
(Chinese Characters), a WFOE
established in the PRC, particulars
of which are set out in Part VI of
Schedule 2;
"SUZHOU 2" LTK Electronic Cables (Suzhou)
Limited (Chinese Characters), a
WFOE established in the PRC,
particulars of which are set out in
Part VII of Schedule 2;
"TAIWAN SHARES" has the meaning ascribed to it in
Clause
20
2.1;
"TAXES" OR "TAX" any form of taxation, levy, duty,
charge, customs, tariff,
contribution, withholding or impost
of whatever nature (including any
related fine, penalty, additional
tax, surcharge or interest) imposed,
collected or assessed by, or payable
to, any government, state or
municipality or any local, state,
federal or other authority, body or
official anywhere in the world
exercising a fiscal, revenue, customs
or excise function;
"TRANSITIONAL SERVICE AGREEMENT" the transitional service agreement to
be entered into between the Vendor
and the Purchaser at Completion
pursuant to this Agreement
substantially in the form set out in
Schedule 7;
"UNITED STATES" the United States of America;
"UNUSED CAPITAL EXPENDITURE AMOUNT" the difference between US$1,700,000
and the Capital Expenditure Amount;
"VENDOR FINANCIAL STATEMENT" a financial statement of the Vendor
which shows, on a fair value basis,
all of the assets and liabilities
(including contingent liabilities)
and the Vendor's Net Worth as of the
stated date, as well as a profit and
loss statement for the period then
ended, which Vendor Financial
Statement is, if the stated date is
June 30 and for a period of 12 months
ended June 30, audited by an
independent external accounting firm
acceptable to the Purchaser and
accompanied by an audit report of
such firm;
"VENDOR'S LETTER" has the meaning ascribed to it in
Clause 3A.1.1;
"VENDOR NON-PAYMENT EVENT" has the meaning ascribed to it in
Clause 15.1;
"VENDOR'S SOLICITORS" Sidley Austin of Level 39, Two
International Finance Centre, 0
Xxxxxxx Xxxxxx, Xxxxxxx, Xxxx Xxxx;
"WFOE" wholly foreign-owned enterprise with
21
limited liability;
"WARRANTIES" the representations, warranties and
undertakings of the Vendor contained
or referred to in Clause 7 and
Schedule 5, respectively, which form
an integral part of and are
incorporated into this Agreement;
"WARRANTY BASKET" has the meaning ascribed to it in
Clause 9.6;
"WORKING CAPITAL PAYMENT" has the meaning ascribed to it in
Clause 3A.1.1;
"HK$" Hong Kong dollars, the lawful
currency of Hong Kong;
"NTD" Taiwan dollars, the lawful currency
of the Republic of China (Taiwan);
"JPY" Japanese yen, the lawful currency of
Japan;
"US$" United States dollars, the lawful
currency of the United States of
America; and
"%" per cent.
1.2 Save as otherwise defined herein or where the context clearly otherwise
requires, words and phrases the definitions of which are contained or
referred to in the Companies Ordinance shall be construed as having the
meaning thereby attributed to them.
1.3 Any references, express or implied, to statutes or statutory provisions
shall be construed as references to those statutes or provisions as
respectively amended or re-enacted or as their application is modified
from time to time by other provisions (whether before or after the date
hereof) and shall include any statutes or provisions of which they are
re-enactments (whether with or without modification) and any orders,
regulations, instruments or other subordinate legislation under the
relevant statute or statutory provision. References to sections of
consolidating legislation shall, wherever necessary or appropriate in
the context, be construed as including references to the sections of the
previous legislation from which the consolidating legislation has been
prepared.
1.4 References in this Agreement to Recitals, Clauses and Schedules are to
recitals, clauses in and schedules to this Agreement. The Recitals and
Schedules to this Agreement shall be deemed to form an integral part of
this Agreement.
1.5 Headings are inserted for convenience only and shall not affect the
construction of this Agreement.
22
1.6 Each of the expressions "the Vendor", "the Purchaser", "Mr. Lo" and
"Xxxxxx CDT" shall, where the context permits, includes their respective
personal representatives, successors, heirs, beneficiaries, sureties and
permitted assigns.
1.7 References to writing shall include any methods of producing or
reproducing words in a legible and non-transitory form.
1.8 The masculine gender shall include the feminine and neuter; words
denoting the singular shall include the plural and vice versa; the word
"or" shall not be interpreted as exclusive.
1.9 A document expressed to be "in the approved terms" means a document the
terms of which have been approved by or on behalf of the Vendor and the
Purchaser respectively and a copy of which has been signed for the
purposes of identification by or on behalf of the Vendor and the
Purchaser respectively.
1.10 In construing this Agreement:
1.10.1 the rule known as the ejusdem generis rule shall not apply and,
accordingly, general words introduced by the word "other" shall not
be given a restrictive meaning by reason of the fact that they are
preceded by words indicating a particular class of acts, matters or
things; and
1.10.2 general words shall not be given a restrictive meaning by reason
of the fact that they are followed by particular examples intended
to be embraced by the general words.
1.11 A reference to "evidence reasonably satisfactory to the Purchaser" means
such reasonable evidence as specifically requested by, and provided to,
the Purchaser prior to Completion and confirmed by the Purchaser not
less than two Business Days prior to Completion (or such other date as
the Parties may agree in writing) to be satisfactory.
1.12 Save as otherwise defined herein or where the context clearly otherwise
requires, "including" shall mean "including without limitation".
23
2. SALE OF SALE SHARES
2.1 Subject to the terms and conditions of this Agreement, at Completion, the
Vendor shall (i) sell, assign, transfer and deliver as legal and beneficial
owner, and the Purchaser shall purchase (by itself or through its
wholly-owned subsidiary or other Associate as it may designate), all of the
Sale Shares, and (ii) procure (either itself or through its Associates or,
with respect to LTK Taiwan, certain individuals) the sale, assignment,
transfer and delivery of, and the Purchaser shall purchase (by itself of
through its wholly-owned subsidiary or other Associate as it may
designate), all of the issued and outstanding share capital of each of LTK
Japan (the "JAPAN SHARES"), LTK Taiwan (the "TAIWAN SHARES") and LTK Newco
International (the "NEWCO SHARES"). The sale, assignment, transfer and
delivery of the Shares shall include all rights now or hereafter attaching
to them, including but not limited to all rights to any dividend or other
distribution declared, made, paid or payable after the Completion Date,
free and clear from any and all Encumbrances.
2.2 The Purchaser and the Vendor shall not be bound to complete the purchase
and sale of any of the Shares unless the purchase and sale of all the Sale
Shares, the Japan Shares, the Taiwan Shares and the Newco Shares are
completed contemporaneously.
3. CONSIDERATION
3.1 The Purchaser agrees to pay to the Vendor, at Completion, an aggregate
purchase price of US$194,700,000 (the "CONSIDERATION") in full
consideration of the purchase of the Sale Shares, the Japan Shares, the
Taiwan Shares and the Newco Shares by the Purchaser. The Parties agree that
the portion of the Consideration allocable to the Japan Shares, the Taiwan
Shares and the Newco Shares shall be based on the net book value of LTK
Japan, LTK Taiwan and LTK Newco International, respectively, on the date of
this Agreement, as such allocation may be subsequently modified by mutual
agreement of the Purchaser and the Vendor prior to Completion.
3.2 At Completion, the Purchaser shall pay the Consideration (and with respect
to Clause 3.2.2 the Vendor shall apply the Consideration) in the following
manner:
3.2.1 an amount equal to the sum of 5% of the Consideration (being
US$9,735,000) (the "RETAINED CONSIDERATION") shall be paid to Citibank
N.A. (Hong Kong Branch) acting as escrow agent (the "ESCROW AGENT"),
by way of a delivery or deposit of bankers' draft or wire transfer of
immediately available funds (as Purchaser may elect) into an escrow
account to be held and administered by the Escrow Agent (the "ESCROW
ACCOUNT"), with the Escrow Agent to retain the Retained Consideration
in escrow in accordance with the terms of the Escrow Agreement;
3.2.2 an amount equal to the Bank Debt Payoff Amount shall be paid by way
of wire transfer of immediately available funds to such bank account
as the Vendor may specify in writing to the Purchaser (such
notification by the Vendor of such bank account to be given at least 2
Business Days prior to the Completion Date), and the Vendor shall
procure that such monies are immediately applied to pay off and
discharge all Bank Debt in full; and
24
3.2.3 upon the presentation of to the Purchaser of the Bank Debt Payoff
Evidence, the remainder of the Consideration (after subtraction of the
Retained Consideration and the Bank Debt Payoff Amount) shall be paid
by way of (i) bankers' drafts drawn on a licensed bank in Hong Kong in
favour of the Vendor or (ii) wire transfer of immediately available
funds to such bank account as the Vendor may specify in writing to the
Purchaser at least 2 Business Days prior to the Completion Date (such
notification by the Vendor of such bank account to be given at least 2
Business Days prior to the Completion Date).
3A. POST-COMPLETION PAYMENTS
3A.1 The Parties agree to the following post-Completion Payments:
3A.1.1 Within five (5) Business Days following the date on which the
Final Completion Date Working Capital Amount (as defined below)
is determined pursuant to this Clause 3A.1.1, the Purchaser shall
pay to the Vendor the Positive Working Capital Adjustment Amount
or the Vendor shall pay to the Purchaser the Negative Working
Capital Adjustment Amount (the "WORKING CAPITAL PAYMENT"). The
Working Capital Payment means the amount by which the Final
Completion Date Working Capital Amount, determined below, is more
(a "POSITIVE WORKING CAPITAL ADJUSTMENT AMOUNT") or less (a
"NEGATIVE WORKING CAPITAL ADJUSTMENT AMOUNT") than US$25,187,000,
being the working capital amount of the Group, the
International/Macao/US Receivables and the International/Macao/US
Payables as shown on the working capital reconciliation statement
which is attached as Schedule 17 ("2006 INITIAL WORKING CAPITAL
STATEMENT"). The Purchaser shall prepare and deliver to the
Vendor within 60 days after the Completion Date, a working
capital statement reflecting the working capital amount of the
Group, the International/Macao/US Receivables and the
International/Macao/US Payables on the Completion Date (the
"PRELIMINARY WORKING CAPITAL STATEMENT").
(a) The Preliminary Working Capital Statement and the Final
Working Capital Statement shall be prepared in accordance
with the Vendor's normal accounting principles, practices
and procedures which are the same as or consistent with
those employed in the preparation of the 2006 Initial
Working Capital Statement and shall also include the
relevant adjustments for the period from 1 July 2006 to the
Completion Date which are prepared the same as or consistent
with the adjustments reflected on the 2006 Initial Working
Capital Statement.
25
(b) Notwithstanding anything to the contrary in paragraph (a)
above, the Preliminary Working Capital Statement and the
Final Working Capital Statement shall be prepared using Hong
Kong generally accepted accounting principles, consistently
applied, but subject to the following specific accounting
rules:
(i) A physical count of all inventories will be taken at or
near the close of business on the Completion Date. Any
shrinkage will reduce the amount of inventory set out
on the Preliminary Working Capital Statement and Final
Working Capital Statement. Similarly, any overage will
increase the amount of inventory set out on such
statement. With respect to the Preliminary Working
Capital Statement and the Final Working Capital
Statement, the valuation of inventory shall be based on
the lower of cost, using the First-In-First-Out (FIFO)
method of accounting, or market value consistent with
the procedures used in preparing the 2006 Initial
Working Capital Statement.
(ii) The Preliminary Working Capital Statement and the Final
Working Capital Statement will not include any (A)
intercompany amounts, (B) Bank Debt (which the Vendor
will pay off and discharged in full out of the
Consideration pursuant to Clause 3.2.2), or (C) any
amounts expended by the Group on capital expenditures
between 1 October 2006 and the Completion Date which
are unpaid (i.e. represented by accounts payable) at
Completion, up to (but not in excess of) the Unused
Capital Expenditure Amount.
(iii) For purposes of this Clause 3A.1.1, "working capital
of the Group" shall mean current assets (excluding
cash) minus current liabilities of the Group.
The Vendor will have 30 days following receipt of the Preliminary
Working Capital Statement from the Purchaser to review the
working capital statement and to determine if in the Vendor's
sole judgment it has been prepared in accordance with this Clause
3A.1.1. If in the Vendor's judgment adjustments are necessary for
the Preliminary Working Capital Statement to be so prepared, the
Vendor, within the 30 day period, shall notify the Purchaser in
writing of its proposed
26
adjustments, including the amount, nature and basis for the
adjustments ("VENDOR'S LETTER"). The Vendor may have the Auditors
assist it in reviewing the Preliminary Working Capital Statement.
Should the Purchaser not receive the Vendor's Letter within the
30 day period, the Preliminary Working Capital Statement prepared
by the Purchaser shall be considered the Final Working Capital
Statement.
The Purchaser will then have 30 days following receipt of the
Vendor's proposed adjustments, if any, to review them. Within the
30-day period, the Purchaser shall notify the Vendor in writing
of the Purchaser's position with respect to each of the Vendor's
proposed adjustments (the "PURCHASER'S LETTER"). Should the
Vendor not receive the Purchaser's Letter within the 30 day
period, the Preliminary Working Capital Statement prepared by the
Purchaser as adjusted by the Vendor's Letter shall be considered
the Final Working Capital Statement. As soon as practicable after
the response from the Vendor, the Parties shall confer and
endeavor to resolve the adjustments, if any, which are in
dispute. If the Parties do not confer or are unable to resolve to
their mutual satisfaction all of the proposed adjustments after a
conference to resolve the Vendor's proposed adjustments, then
within the 30 days following the delivery of the Vendor's Letter
or their conference, whichever is later, the Parties shall
jointly engage PricewaterhouseCoopers to act as the arbitrator
(the "ARBITRATOR"), which shall resolve (and confine itself to)
the unresolved adjustments, in accordance with the procedure set
out in Clause 3A.1.3.
In preparing and reviewing the Preliminary Working Capital
Statement and in conducting the reviews by either the Purchaser
or the Vendor and the Arbitrator, each Party will grant the other
and the Arbitrator all reasonable access to the records of the
Group and any workpapers, including auditor workpapers, prepared
with respect to the Preliminary Working Capital Statement. The
Preliminary Working Capital Statement prepared by the Purchaser
will be modified by any adjustments agreed by the Parties
pursuant to this Clause 3A.1.1 and, if applicable, by the
determination of the Arbitrator. The Preliminary Working Capital
Statement after such adjustments will become the Final Working
Capital Statement. The working capital amount as reflected on
Final Working Capital Statement is the "FINAL COMPLETION DATE
WORKING CAPITAL AMOUNT."
If it is determined that the Vendor owes a Negative Balance Sheet
Adjustment Amount, the Vendor shall pay such amount to the
Purchaser within five (5) Business Days from the date on which
such amount is determined pursuant to this Clause
27
3A.1.1. If it is determined that the Purchaser owes the Vendor a
Positive Balance Sheet Adjustment Amount, the Purchaser shall pay
such amount to the Vendor within five (5) Business Days from the
date on which such amount is determined pursuant to this Clause
3A.1.1.
3A.1.2 In the event the Arbitrator is engaged to resolve the Final
Completion Date Working Capital Amount pursuant to Clause 3A.1.1
above, such Arbitrator shall be furnished with a copy of this
Agreement, the Preliminary Working Capital Statement, the
Vendor's Letter and the Purchaser's Letter. Each Party shall have
the right, at the same time, to submit supporting or explanatory
material to the Arbitrator, and to the other Parties, copies of
which shall be provided to the other Parties. The Arbitrator
shall have forty-five (45) days to review this material and such
other information as it deems appropriate. Within the 45-day
period, the Arbitrator will furnish the Purchaser and the Vendor
with its written determination regarding the dispute submitted
for arbitration. The arbitration shall be conducted in English in
Hong Kong.
The Arbitrator, in reaching a decision, shall provide a written
explanation of its conclusions to each Party, and its
determination shall be conclusive and binding upon the Parties.
The submission of a dispute to the Arbitrator and the rendering
of its decision shall be a condition precedent to either Party's
commencing legal action to pursue any claim arising under this
Clause 3A.1. The award or decision of the Arbitrator shall be
deemed final and binding, and may be entered and enforced in any
court of competent jurisdiction. Notwithstanding any contrary
provisions in this Agreement, the Parties agree to submit to the
jurisdiction of any such court for the enforcement of such award
or decision. The fee and expenses of the Arbitrator shall be
borne equally by the Vendor and the Purchaser.
Clause 13 shall apply to all communications made under this
Clause 3A.1.
3A.1.3 Within thirty (30) days after the Completion Date, the Vendor
shall provide to the Purchaser written evidence of the Capital
Expenditure Amount. If such evidence is reasonably satisfactory
to it, the Purchaser shall pay such amount (but in no event to
exceed US$1,700,000) to the Vendor within five (5) Business Days
from the date of receipt of such evidence.
28
4. CONDITIONS TO COMPLETION
4.1 Subject to Clause 4.2, the obligation of the Purchaser to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, prior to or at Completion, of each of the following
conditions (and the Purchaser shall upon its request have been provided
evidence acceptable to the Purchaser of such satisfaction):
4.1.1 the obtaining of a legal opinion from the Purchaser's PRC counsel, at
the cost and expense of the Vendor up to US$4000 (with any excess cost
and expense to be paid by the Purchaser) in substantially the form as
set out in Schedule 20;
4.1.2 the Warranties remaining true and accurate and not misleading as at
the date of this Agreement and as at the Completion Date in all
material respects (except for those that are already qualified as to a
materiality standard in which case they shall be true and accurate and
not misleading as of such dates);
4.1.3 the Vendor having complied with all pre-Completion obligations
specified in Clauses 6.4 through 6.13 (and in the remainder of Clause
6), and otherwise having performed all of the covenants and agreements
required to be performed by it under this Agreement on or prior to the
Completion Date;
4.1.4 all necessary consents, approvals, permits, licences and waivers
required to be given by third parties to the Vendor for the
consummation by the Vendor of the transactions contemplated under this
Agreement having been granted (including without limitation any
relevant governmental or official authorities), and being in full
force and effect, for the sale and purchase of the Shares;
4.1.5 no statute, suit, proceeding, order or regulation which would or
could reasonably be expected to prohibit or restrict the sale and
purchase of any of the Shares, the consummation of the transactions
contemplated under this Agreement or the operation of the business of
any member of the Group after Completion as presently conducted having
been in effect or taken by, or being threatened or pending before, any
relevant governmental or official authority;
4.1.6 the due execution and delivery by the Vendor, its Associates, Mr. Lo
and/or GP Industries Limited to the Purchaser of each of (a) the
Transitional Service Agreement; (b) the Strategic Supply Agreement;
(c) the Deed of Taxation Indemnity; (d) the HK Trademarks Assignment;
(e) the Safety Marks Assignment; (f) the Domain Names Assignment; (g)
the GPI Deed of Undertaking; (h) the Payables/Receivables Transfer
Agreement; (i) the LTK Wiring Transfer Agreement; and (j) the
Completion certificate referenced in Clause 5.2.1.3;
4.1.7 delivery to the Purchaser of evidence reasonably acceptable to the
Purchaser of (a) the Bank Debt and the Bank Debt Payoff Amount,
29
including without limitation written confirmation from the relevant
lenders that none of such Bank Debt is secured by any Encumbrances on
any assets of the Group or any shares of any member of the Group,
which written confirmation shall be of a date no more than five (5)
Business Days before the Completion Date, (b) payment of the fees of
the Purchaser's Solicitors to the extent required by Clause 4.1.1, (c)
LTK Newco International having no liabilities at Completion beyond the
International/Macao/US Payables, (d) completion of the Segregations
and (e) the landlord of the Leased Property currently leased by LTK
Dalian having entered into a new lease with LTK Dalian for a term of
not less than five years commencing from 1 January 2007 at a rent and
on terms as are reasonably acceptable to the Purchaser (including
registration of such lease with and obtaining building and other
permits from PRC government authorities);
4.1.8 no Material Adverse Effect having occurred between the date of this
Agreement and Completion;
4.1.9 all actions to be taken by the Vendor in connection with consummation
of the transactions contemplated hereunder and all certificates,
opinions, instruments, evidence and other documents required to effect
the transactions contemplated hereunder being satisfactory in form and
substance to the Purchaser;
4.1.10 on the Completion Date, there is not existing any damage to or
destruction of any parts of the business of any member of the Group
that, individually or in the aggregate, would materially impair the
use or occupancy of the assets or operation of the business of any
member of the Group; and
4.1.11 the Purchaser having found acceptable, in its absolute discretion,
(a) any updates to the Disclosure Letter made by the Vendor pursuant
to Clause 6.14 and (b) any breach, non-compliance or untruth of or
regarding the Warranties, obligations, covenants or agreements of the
Vendor that are noted in the Completion certificate delivered to the
Purchaser pursuant to Clause 5.2.1.3.
4.2 The Purchaser may, in its absolute discretion, waive all or any of the
Conditions applicable to it as set out in Clause 4.1 at any time by
specific notice in writing to such effect to the Vendor's Solicitors, in
which event the Vendor shall not be liable to the Purchaser for any breach
of Warranties and/or Pre-Completion Obligations to the extent (and only to
the extent) such breach relates to such specifically waived Conditions
including through the Vendor's associated indemnity obligations with
respect to Clauses 9.1.1 and 9.1.2.
4.3 The obligation of the Vendor to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, prior to or at
Completion, of the conditions that (a) the representations and warranties
set out in Schedule 18 remain true and accurate and not misleading as at
the date of this Agreement and as at the Completion Date in all material
respects (except for those that are already qualified as to a materiality
standard in which case they shall be true and accurate and not
30
misleading as of such dates), and (b) the Purchaser having performed all of
the covenants and agreements required to be performed by it under this
Agreement on or prior to the Completion Date; provided that the Vendor may,
in its absolute discretion, waive either or both such conditions at any
time by specific notice in writing to such effect to the Purchaser's
Solicitors, in which event the Purchaser shall not be liable to the Vendor
for any breach of such representations and warranties and/or covenants and
agreements (as the case may be), including through the Purchaser's
associated indemnity obligations with respect to Clauses 9.3.1 and 9.3.2.
4.4 The Purchaser shall use its best endeavours to procure the fulfilment of
the Conditions set out in Clauses 4.1.1 (unless waived by the Purchaser
pursuant to Clause 4.2) and 4.3 (unless waived by the Vendor pursuant to
Clause 4.3) prior to the date specified in Clause 4.5. The Vendor shall use
its best endeavours to procure the fulfilment of the Conditions set out in
Clauses 4.1.2, 4.1.3, 4.1.4, 4.1.6, 4.1.7, 4.1.9 and 4.1.10 (unless waived
by the Purchaser pursuant to Clause 4.2) prior to the date specified in
Clause 4.5.
4.5 Save as otherwise stated, if the conditions set out in Clauses 4.1 and 4.3
shall not have been fulfilled or waived by 5:00 p.m. (Hong Kong time) on
the date falling three (3) months after the date of this Agreement or such
later date as the Parties may agree in writing, this Agreement and
everything herein contained shall, subject to the Liability of any Party to
the other in respect of any antecedent breaches of this Agreement and
subject to the Vendor's and the Purchaser's respective Liability for any
breach of Clause 4.3, be null and void and of no effect, except Clauses 1,
10,11,12 (other than Clause 12.3), 13 and 14 which shall remain in full
force and effect.
5. COMPLETION
5.1 Subject to the terms and provisions of this Agreement, the sale and
purchase of the Shares shall take place contemporaneously at a completion
(the "COMPLETION") to be held at the offices of the Purchaser's Solicitors
on the 5th Business Day immediately following the day on which all
conditions to the obligations of the Purchaser set forth in Clause 4.1 (the
"COMPLETION DATE") are satisfied or waived, but in any event not later than
7 May 2007, or at such other place or at such other time or on such other
date as the Purchaser and Vendor may mutually agree upon in writing.
5.2 At Completion, the Vendor shall:
5.2.1 deliver or procure to be delivered to the Purchaser:
31
5.2.1.1 evidence or latest respective registers of:
(i) the Company confirming that the Sale Shares represent the
entire issued share capital of the Company; and
(ii) LTK Japan, LTK Taiwan and LTK Newco International confirming
that the Japan Shares, the Taiwan Shares and the Newco
Shares represent the respective entire issued share capital
of LTK Japan, LTK Taiwan and LTK Newco International,
together with (a) the transfer forms comprising instruments of
transfer and bought and sold notes of the Sale Shares duly
executed by the Vendor in favour of the Purchaser or such other
Person(s) as it may direct together with related share
certificates; (b) the transfer forms or other documents to the
same effect of the Japan Shares duly executed by LTK
International in favour of the Purchaser or such other Person(s)
as it may direct together with related share certificates as
specified in Schedule 21; (c) the transfer forms or other
documents to the same effect of the Taiwan Shares duly executed
by the transferors thereof in favour of the Purchaser or such
other Person(s) as it may direct together with related share
certificates duly endorsed by the transferors, the notification
regarding the share transfer to LTK Taiwan, and the required
documents, approvals, and taxes under the relevant laws and
regulations of Taiwan, Republic of China; and (d) the transfer
forms or other documents to the same effect of the Newco Shares
duly executed by LTK International in favour of the Purchaser or
such other Person(s) as it may direct together with related share
certificates;
5.2.1.2 a cheque drawn in favour of the Government of the Hong Kong
Special Administrative Region in such amounts sufficient for the
purpose settling one-half of stamp duties in respect of the
transfer of Sale Shares pursuant to this Agreement;
5.2.1.3 a Completion certificate duly executed by the Vendor, pursuant
to which it certifies to the Purchaser that: (1) the Warranties
remain true and accurate and not misleading as given as of the
date hereof and as of the Completion Date and as if given at all
times between the date of this Agreement and the Completion Date
(or if any such Warranty is untrue in any respect, specifying the
respect in which the same is untrue); and (2) the Vendor has
complied fully with the obligations set out in Clause 6
("PRE-COMPLETION OBLIGATIONS") and otherwise has performed all of
the covenants and agreements required to be performed by it under
this Agreement on or prior to the Completion Date (or if any such
covenant has not been so performed, indicating that such covenant
has not been
32
performed); it being agreed that to the extent such Completion
certificate lists matters or events occurring after the date of
this Agreement and beyond the control of the Vendor and its
Associates, and the Purchaser elects to proceed with Completion,
the Vendor shall not be liable to the Purchaser for any breach of
Warranties and/or Pre-Completion Obligations to the extent (and
only to the extent) such breach relates to such listed matters or
events including through the Vendor's associated indemnity
obligations with respect to Clauses 9.1.1 and 9.1.2;
5.2.1.4 a certified true copy of the resolutions duly passed by the
shareholder(s) of the Vendor approving the execution and
performance of this Agreement by the Vendor;
5.2.1.5 a certified true copy of the resolutions duly passed by the
board of directors of the Vendor approving the execution and
performance of this Agreement by the Vendor;
5.2.1.6 each of the following documents duly executed by the Vendor,
its Associates, Mr. Lo and/or GP Industries Limited (as the case
may be) together with relevant certified copies of the
resolutions passed by the board of directors of the Vendor, its
Associates and/oror GP Industries Limited (as the case may be)
approving its execution and performance thereof:
(a) the Transitional Service Agreement;
(b) the Strategic Supply Agreement;
(c) the Deed of Taxation Indemnity;
(d) the HK Trademarks Assignment;
(e) the Safety Marks Assignment;
(f) the Domain Names Assignment;
(g) the GPI Deed of Undertaking;
(h) the Payables/Receivables Transfer Agreement; and
(i) the LTK Wiring Transfer Agreement.
5.2.1.7 the title deeds, Leases and all other relevant deeds,
documents and correspondence relating to the Properties as set
out in Schedule 3;
5.2.1.8 all the statutory and other books and records (including but
not limited to financial records) duly written up to date of
33
incorporation of each member of the Group and their respective
certificates of incorporation, by-laws, current business
registration certificate(s), common seals and any other documents
of such member of the Group or, alternatively, a written
confirmation from the Vendor that the aforesaid items have been
stored at the respective office premises of such member of the
Group or at the offices of their authorised representatives or
company secretarial service providers (whose details have been
notified in writing by the Vendor to the Purchaser prior to
Completion);
5.2.1.9 undated letters of resignation in the approved terms from each
of the directors and the secretary of each member of the Group
(other than the Continuing Directors) to resign from their
respective offices and as employees and acknowledging that they
have no outstanding claim against the relevant member of the
Group for compensation or otherwise;
5.2.1.10 letter of resignation from the Auditors as the auditors of
each member of the Group, such resignation to take effect from
the Completion Date and also to contain a statement that there
are no circumstances connected with their resignation which they
consider should be brought to the attention of the members or
creditors of the Group;
5.2.1.11 evidence to the satisfaction of the Purchaser (in the form of
executed agreements approved in advance by Purchaser) showing
that each of the following matters have been duly completed;
(a) the Segregation;
(b) the Minority Interest Acquisitions;
5.2.1.12 written confirmation from the Vendor that as at the
Completion Date and after taking into account the payoff and
discharge of the Bank Debt by the Vendor pursuant to Clause 3.2.2
above, there are no outstanding loans or other indebtedness due
or owing to (a) any bank, lender or other third party by any
member of the Group, or (b) any member of the Group by the Vendor
(or any of its Associates) or by any directors or other officers
of any member of the Group;
5.2.1.13 all releases in respect of the Cross Guarantees duly signed
(which may be furnished by the Escrow Agent or by the Vendor at
Completion, it being understood and agreed that such releases may
be delivered immediately after the Escrow Agent has received
payment of the Consideration in accordance with Clause 3.2.1)
together with a written confirmation from the
34
Vendor that as at the Completion Date, there is no guarantee
given by any member of the Group in favour of third parties in
respect of the performance of the obligations of the Vendor or
any other Person not being a member of the Group;
5.2.1.14 deeds of release and waiver in form and on terms satisfactory
to the Purchaser duly executed by each of the resigning directors
and officers of members of the Group releasing members of the
Group from any and all claims and liabilities including but not
limited to severance benefits, benefits payable as a result of
"change of control" of member(s) of the Group and so on;
5.2.1.15 Employment Agreements duly executed by the employees listed
in Schedule 19 who accept employment with the Group commencing
prior to Completion; and
5.2.1.16 without limitation by specific enumeration of the foregoing,
all other documents reasonably required from the Vendor to
consummate the transactions contemplated herein and such other
documents as the Purchaser's Solicitors may reasonably request at
least three (3) Business Days before the Completion Date;
5.2.2 cause the board of directors of each relevant member of the Group to
hold a meeting to pass resolutions in the approved terms (inter alia)
to:-
5.2.2.1 approve the registration of the Purchaser (or its Associates
or wholly-owned subsidiaries as the Purchaser may designate) as
shareholder(s) or equity owner of such member of the Group with
effect from the Completion Date (including approval by the board
of directors of LTK Japan concerning the transfer of Japan Shares
contemplated under Clause 2.1);
5.2.2.2 appoint Ernst & Young, LLC as the auditors of such members of
the Group whose term of appointment shall commence on the
Completion Date; and
5.2.2.3 approve the appointment of any Persons as the Purchaser may
nominate to be the director, the secretary and/or the legal
representative of such member of the Group with effect from the
Completion Date;
5.2.3 cause the Directors, secretary and legal representative (for PRC
members) of each relevant member of the Group (other than the
Continuing Directors) to resign from their respective offices and as
employees with effect from the close of business on the Completion
Date, and deliver to the Purchaser certified true copies of the
resignation letters in the approved terms (if applicable, under seal)
of each such Directors, secretary and legal representative (for PRC
members) acknowledging that it has no outstanding claim against the
relevant member of the Group for
35
compensation or otherwise; and
5.2.4 procure revocation of all authorities to the bankers of each member
of the Group relating to bank accounts and procure the giving of
authority to such Persons as the Purchaser may nominate to operate the
same, with effect from the close of business on the Completion Date.
5.3 At Completion, the Purchaser shall:
5.3.1 pay the Consideration in accordance with Clauses 3.2.1 and 3.2.2; and
5.3.2 deliver to the Vendor's Solicitors a certified true copy of
resolutions passed by the board of directors of the Purchaser
approving the execution and performance of this Agreement by the
Purchaser and a certified true copy of resolutions passed by the board
of directors of Xxxxxx CDT approving the execution and performance of
Clause 16 or this Agreement by Xxxxxx CDT.
5.4 Without prejudice to any other remedies available to any Party, if in any
respect the provisions of this Agreement and in particular Clause 5 are not
complied with by the other Party on or before the Completion Date, the
Party not in default may:
5.4.1 defer Completion to a date not more than 28 days after the Completion
Date (and so that the provisions of this Clause 5.4.1 shall apply to
Completion as so deferred);
5.4.2 proceed to Completion so far as practicable (without prejudice to its
rights hereunder); or
5.4.3 rescind this Agreement without prejudice to any of its other rights
in respect of such default.
6. PRE-COMPLETION OBLIGATIONS
6.1 The Vendor shall procure (subject to any contrary express written
instruction from the Purchaser) that the relationships of each member of
the Group with its customers, employees, suppliers and others with whom it
deals in connection with its business are preserved in all material
respects in the ordinary course of business and that the business and
operations of each member of the Group are conducted until Completion in
the ordinary course of business and in substantially the same manner as it
was conducted prior to the date hereof, and in particular, the Vendor shall
procure that, from the date hereof until the Completion Date, without the
prior written consent of the Purchaser (such consent not to be unreasonably
withheld or delayed) or unless Disclosed or otherwise specifically
permitted for the Group in this Agreement, no member of the Group shall:
6.1.1 permit the Sale Shares, the Japan Shares, the Taiwan Shares or the
Newco Shares to become subject to any Encumbrances;
36
6.1.2 enter into or vary any contract nor assume any liability which is
outside the ordinary or proper course of the business of any member of
the Group, including those for a term of more than one (1) year that
cannot be terminated without paying any penalty on 90 days' notice or
those that require payment of more than US$100,000 per year;
6.1.3 make any material change in the nature, scope or organisation of its
business nor dispose of the whole of its business undertaking or
property or a substantial part thereof,
6.1.4 sell, transfer or otherwise dispose of any assets of whatsoever
nature except in the ordinary course of business and for a fair
consideration;
6.1.5 acquire or form any subsidiary nor acquire any shares or make any
capital investment in any Person nor acquire the whole or any
substantial part of the business undertaking, assets or business of
any other Person or enter into any joint venture or partnership with
any other Person;
6.1.6 make any loans or grant any credit (other than trade credit given in
the normal course of business trading and advances made to employees
against expenses incurred by them on its behalf);
6.1.7 transfer or remove any cash to any Person that is not a member of the
Group (by cash dividend, payment or otherwise) if such transfer or
removal would result in the remaining cash of the Group being
insufficient to cover checks that have been written by the Group;
6.1.8 enter into any guarantee, indemnity or surety;
6.1.9 hire any employee (save for the purpose of filling a vacant resulting
from departure of current employee) for annual compensation of
US$50,000 or greater, or make any changes in the terms of employment
of any of its employees whose annual compensation is US$50,000 or
greater (save with the prior consent of the Purchaser which such
consent shall not be unreasonably withheld or delayed) or in any
arrangements with its consultants outside the ordinary course of its
business;
6.1.10 acquire or dispose of or grant any option or right of pre-emption in
respect of any material asset or any interest nor give nor receive any
service otherwise than at market value;
6.1.11 acquire or dispose of any freehold or leasehold property or grant
any lease or third party right in respect of any of the Leased
Properties or Owned Properties;
6.1.12 enter into any leasing, hire purchase agreement or any agreement or
arrangements for payment on deferred terms;
6.1.13 grant or enter into any licence, franchise or other agreement or
arrangement concerning any part of its name, trading names or know-how
37
(if any) save for those which are made in the ordinary or proper
course of its business and with the Purchaser's prior consent;
6.1.14 make any distributions of assets or make or declare any dividends
(other than cash dividends), pay any individual or declare or make any
distribution other than cash dividends (subject to Clause 6.1.8
above);
6.1.15 permit any of its insurances existing and in force as of the date of
this Agreement to lapse or do anything which would make any such
policy of insurance void or voidable or to enter into any new
insurance policy other than those existing and in force as of the date
of this Agreement;
6.1.16 issue, pledge or sell any shares or capital stock or issue or sell
any warrants, options, notes, bonds or other securities, whether or
not exercisable for (or convertible into) shares or capital stock; or
6.1.17 negotiate or agree, conditional or otherwise, to do any of the
foregoing.
6.2 From the date of this Agreement, without prejudice to Clause 10, solely in
connection with the Purchaser's proposed integration of the Group following
Completion, the Vendor shall give and shall procure that the Purchaser or
any Persons authorized by it will be given at the sole expense of the
Purchaser, such access to the premises and all books, title deeds, records
and accounts of each member of the Group as the Purchaser may reasonably
request and be permitted to take copies of any such books, deeds, records
and accounts and that the directors, officers and employees of each member
of the Group shall be instructed to give reasonably promptly all such
information and explanations to any such Persons as aforesaid as may
reasonably be requested by it or them in each case, upon reasonable notice
in advance, during normal business hours of such members of the Group (or,
where necessary, such access to the Vendor or its Associates) and without
any undue disruption to the business of the Group (or, where necessary,
such access to the Vendor or its Associates).
6.3 The Purchaser hereby undertakes that it and its Associates will not, prior
to Completion, save as required by applicable law or by the applicable
rules of any relevant supervisory or regulatory body or securities exchange
to which it or its Associates are subject or unless with the prior consent
of the Vendor in writing has been given (which consent may not be
unreasonably withheld or delayed or conditioned), make any announcement in
connection with this Agreement or divulge any confidential information
relating to any member of the Group obtained by it pursuant to this Clause
6 to any Person other than its own directors, officers, employees or
professional advisers; provided if the Purchaser or its Associates is
required to make such announcement by applicable law or by the applicable
rules of any relevant supervisory or regulatory body or securities exchange
to which it or its Associates is subject, the Purchaser, shall, as soon as
practicable prior to such announcement is made, deliver a draft of such
announcement to the Vendor and, to the extent reasonable in the sole
opinion of the Purchaser and in accordance with such applicable laws and
rules, incorporate any comments which the Vendor may have in respect of the
contents of such draft announcement.
38
6.4 Before Completion, the Vendor shall procure the Company to acquire and
fully pay for (the "MINORITY INTEREST ACQUISITIONS") the equity interest of
LTK Shanghai not already owned by the Company at such considerations and on
such terms (including without limitation releases and waivers of rights and
remedies to claim against the Company and its Associates) as are acceptable
to the Purchaser.
6.5 Before Completion, the Vendor shall use its best endeavours to procure the
Company to dispose (the "SEGREGATION") of the entire issued share capital
(together with shareholders' loan, if any) of each of Xxxxxx Industries
Limited, Shanghai LTK Electric Wire Limited and Shanghai Time Technology
Limited, all of which being subsidiaries of the Company as at the date of
this Agreement.
6.6 Before Completion, the Vendor shall procure the entire issued share capital
of LTK Japan to be solely owned (beneficially and legally) by LTK
International. In order to ensure that LTK International is the sole owner
of the Japan Shares as set forth in the preceding sentence, the Vendor
shall, before Completion, (i) procure LTK Japan to issue to Xx. Xxxxxxxxx
Xxxxx, the sole original shareholder of LTK Japan, share certificates
representing the Japan Shares, and (ii) cause Xx. Xxxxxxxxx Xxxxx to
deliver such share certificates to LTK International.
6.7 At Completion, the Vendor shall (i) procure the International/Macao/US
Receivables and the International/Macao/US Payables to be transferred to
LTK Newco International, as well as all historical data relating thereto
(including prior sales history, payment history, order history, and open
orders), (ii) procure the transfer of assets of the Company that are not
attributable to the business of the Group to be transferred to the Vendor
or its Associates pursuant to the LTK Wiring Transfer Agreement, (iii)
procure the ownership of any other assets that are used or generated by any
member of the Group but are owned by the Vendor or any of its Associates
outside the Group to be transferred and assigned to the appropriate member
of the Group, and (iv) give and procure that the Purchaser or any Persons
authorized by it will be given reasonable access, both before and after the
foregoing transfers occur, to the information technology system of LTK
Newco International.
6.8 Before Completion, the Vendor shall use its best endeavours to procure the
landlord of the Leased Property currently leased by LTK Dalian to enter
into a new lease with LTK Dalian for a term of not less than five years
commencing from 1 January 2007 at a rent and on terms as are reasonably
acceptable to the Purchaser, shall duly and validly register such lease
with relevant PRC government authority in accordance with PRC laws, and
shall obtain all building and other permits that are necessary or advisable
in connection with the Dalian facility, all at such considerations and on
such terms as are acceptable to the Purchaser.
6.9 Before Completion, the Vendor shall provide evidence to the Purchaser that
the Group has (i) a software license directly from TimeLink Technology Ltd
regarding the business software of the Group, at such considerations and on
such terms as are reasonably acceptable to the Purchaser (including that
such software license will remain in full force and effect notwithstanding
the consummation of the transactions contemplated by this Agreement), and
(ii) a service and support agreement with TimeLink Technology Ltd for a
period of at least 24 months from Completion at such considerations and on
such terms as are reasonably acceptable to the Purchaser
39
(including that such service and support agreement will remain in full
force and effect notwithstanding the consummation of the transactions
contemplated by this Agreement).
6.10 Before Completion, the Vendor shall procure the transfer of the parcel of
land held by Suzhou 2 to Suzhou 1, such that Suzhou 1 holds both parcels of
land, and shall also procure obtaining the land use right certificate for
both parcels from the appropriate land authority (including the obtaining
of all necessary PRC government approvals in connection with the
foregoing).
6.11 Before Completion, the Vendor shall procure the Company to validly amend
and duly register its Memorandum and Articles of Association to reduce the
respective minimum number of shareholders and directors from two to one and
the Vendor shall duly acquire the legal ownership of any and all Sale
Share(s) held under Mr. Lo's name, such that it is the sole beneficial and
legal owner of all Sale Shares.
6.12 At or contemporaneously with Completion, the Vendor shall procure all Cross
Guarantees to be fully released at such considerations and on such terms as
are acceptable to the Purchaser, it being understood and agreed that the
Vendor may procure such releases to be delivered immediately after it has
received payment of the portion of the Consideration attributable to the
Bank Debt Payoff Amount in accordance with Clause 3.2.2.
6.13 Before Completion, the Vendor shall procure the performance of all such
acts and the carrying out of all such work as may be required to correct,
rectify, resolve and remedy all matters listed in Part A of the
Environmental, Health and Safety Schedule to the reasonable satisfaction of
the Purchaser.
6.14 From the date hereof up to the Completion Date, the Vendor shall promptly
notify the Purchaser in writing if the Vendor becomes aware of any fact or
condition that at any time causes or constitutes a breach of any of the
Warranties or would otherwise have or be likely to have a Material Adverse
Effect, and during the same period, the Vendor will promptly notify the
Purchaser in writing of the occurrence of any breach of any covenant of the
Vendor in this Agreement or of the occurrence of any event that may make
the satisfaction of the Conditions in Clause 4 impossible, provided that no
disclosure pursuant to this paragraph shall be viewed as a waiver of any of
the Conditions by the Purchaser nor shall affect the Purchaser's rights
arising under the indemnifications or other covenants, agreements or
undertakings of the Vendor herein (without prejudice to Clauses 4.2 and
5.2.1.3).
Vendor shall have the right to deliver to the Purchaser, at least three (3)
business days prior to the Completion Date, updates to the Disclosure
Letter with respect to the Warranties, to reflect any matters which have
occurred after the date of this Agreement, which, if existing on the date
of this Agreement, would have resulted in a disclosure with regard to such
Warranty, but subject to the Purchaser's right to accept or reject such
updates pursuant to Clause 4.1.11. Such updates to the Disclosure Letter
shall provide that they are being delivered pursuant to this Clause 6.13.
It is agreed that to the extent (and only to the extent) such updates
reflect matters which have occurred after the date of this Agreement and
are beyond the control of the Vendor and its Associates, and the Purchaser
elects to proceed with Completion, the
40
Vendor shall not be liable to the Purchaser under the Warranties in respect
of such updated matters including through the Vendor's associated indemnity
obligations with respect to Clause 9.1.1.
7. WARRANTIES
7.1 The Vendor represents, warrants and undertakes to the Purchaser that each
of the statements set out in Schedule 5 is now and will at Completion be
true, accurate and complete.
7.2 The Warranties are given subject to matters fully, fairly and specifically
disclosed in the Disclosure Letter or as specifically provided for as
disclosure items (rather than as covenants to be performed by the Vendor)
in this Agreement. The specific disclosures in the Disclosure Letter will
be arranged in paragraphs corresponding to the numbered paragraphs
contained in Schedule 5. No other information relating to any member of the
Group of which the Purchaser does or does not have any knowledge and no
investigation by or on behalf of the Purchaser shall prejudice any claim
made by the Purchaser under the Warranties or be deemed a disclosure or
operate to reduce any amount recoverable, and liability in respect thereof
shall not be confined to breaches discovered before Completion. No letter,
other communication or document shall be deemed to constitute a disclosure
for the purposes of this Agreement unless the same is expressly
incorporated into in this Agreement or the Disclosure Letter.
7.3 The Vendor acknowledges and agrees that the Purchaser has entered into this
Agreement in reliance upon the Warranties and has been induced by the
Vendor to enter into this Agreement.
7.4 Each of the Warranties shall be separate and independent and, save as
expressly provided to the contrary, shall not be limited by reference to or
inference from any other Warranty or any other term of this Agreement.
7.5 The Vendor hereby agrees with the Purchaser (for itself and as trustee for
each member of the Group) to waive any rights which the Vendor may have in
respect of any misrepresentation or inaccuracy in, or omission from, any
information or advice supplied or given or by the directors, officers or
employees of any members of the Group in connection with the giving of the
Warranties.
7.6 The Vendor shall procure that (save only as may be necessary to give effect
to this Agreement) neither it nor any member of the Group shall do, allow
or procure any act or omission prior to Completion which would constitute a
breach of any of the Warranties if they were given at Completion or which
would make any of the Warranties inaccurate or misleading if they were so
given.
7.7 The Vendor shall give to the Purchaser, the Purchaser's Solicitors, and the
Purchaser's accountants, advisers and employees both before and after
Completion all such reasonable information and documentation relating to
the Group as the Purchaser shall reasonably require to enable it to satisfy
itself as to the accuracy of and due observance of the Warranties.
41
7.8 Where any statement in the Warranties is qualified by the expression "so
far as the Vendor is aware" or any expression "as to the knowledge of the
Vendor" or to such effect, such statement shall have been made with respect
to, and after a due and diligent enquiry by, the Vendor and its directors
and officers as well as its employees and the employees of members of the
Group responsible for the subject matter.
7.9 The Purchaser represents and warrants to the Vendor that each of the
statements set out in Schedule 18 is now and will at Completion be true,
accurate and complete. The Purchaser acknowledges and agrees that the
Vendor has entered into this Agreement in reliance upon such
representations and warranties and has been induced by the Purchaser to
enter into this Agreement. From the date hereof up to the Completion Date,
the Purchaser shall promptly notify the Vendor in writing if the Purchaser
becomes aware of any fact or condition that at any time causes or
constitutes a breach of any of the representations and warranties set out
in Schedule 18, and during the same period, the Purchaser will promptly
notify the Vendor in writing of the occurrence of any breach of any
covenant of the Purchaser in this Agreement.
8. POST-COMPLETION COVENANTS
8.1 The Vendor covenants with the Purchaser, for a period of three years from
the date of this Agreement, that the Vendor shall not, and shall procure
that its direct and indirect subsidiaries, Xxxx X.X. Xx, Xxxxx X.X. Xxx and
Xxxxxxx Y.T. Sy (collectively the "RESTRICTED PERSONS"), not to, directly
or indirectly (individually or on behalf of any other person, firm,
corporation or other entity), solicit, attempt to hire, hire or entice away
any employee of the Group or of any Associate of the Group whom is employed
by the Group on the date of this Agreement, excluding employees whose
employment has been terminated after the Completion Date and prior to the
commencement of employment discussions between such employees and the
Restricted Persons.
8.2 The Vendor further covenants with the Purchaser that, for a period of three
years from the Completion Date, the Vendor shall not, and shall procure the
Restricted Persons not to, directly or indirectly (individually or on
behalf of any other person, firm, corporation or other entity), start up,
acquire, operate or otherwise compete with any member of the Group, the
Purchaser or any Associate of the Purchaser in a business that
manufactures, sells, develops, markets, distributes or services any of the
products or services of any member of the Group at any time within twelve
(12) months preceding the Completion Date or any products having
specifications similar to such products in those countries throughout the
world where the products or services of any member of the Group have been
sold. To insure the greatest likelihood of enforceability of the covenant
set forth in this Clause 8.2 it is agreed that: (i) the duration, products,
services and area for which the covenant is to be effective are reasonable;
(ii) if any court determines that the time period, products, services or
the area, or all of them, are unreasonable and that the covenant is to that
extent unenforceable, then the covenant shall remain in full force and
effect to the greatest extent that would not render it unenforceable; and
(iii) the covenant shall be deemed to be a series of separate covenants,
one for each and every country where the products or services of the Group
have been sold. For the avoidance of doubt, this Clause 8.2 shall not
restrict the Vendor and the Restricted Persons from conducting any (a)
cable assembly business of a nature that is the same as or substantially
similar
42
to the cable assembly business currently being carried on by TIME
Interconnect Limited or Shanghai TIME Technology Ltd., or (b) category,
coax, hybrid and fiber optic cable business for the networking market.
Further, this Clause 8.2 shall not prejudice the terms and conditions of
the Strategic Supply Agreement.
8.3 The Vendor further undertakes to the Purchaser that:
8.3.1 it will not and will procure that its Associates (including, in case
of a company, its directors, officers and employees) will not at any
time hereafter make use of or disclose or divulge to any person, other
than to officers or employees of the Group whose province it is to
know the same, any information relating to any member of the Group
other than any information properly available to the public or
disclosed or divulged pursuant to an order of a court of competent
jurisdiction;
8.3.2 it will and will procure that its Associates (including, in case of a
company, its directors, officers and employees) will observe the
restrictions contained in this Clause 8.3; and
8.3.3 it will not and will procure that its Associates (including, in case
of a company, its directors, officers and employees) will not do
anything which might harm the goodwill of any member of the Group.
8.4 The Vendor further undertakes to the Purchaser that, within ninety (90)
days of the Completion Date, it shall at its sole cost perform all such
acts and carry out all such work as may be required to correct, rectify,
resolve and remedy all matters listed in Part B of the Environmental,
Health and Safety Schedule to the reasonable satisfaction of the Purchaser.
8.5 The Vendor further undertakes to at all times during the period of three
(3) years after the Completion Date to (i) maintain a minimum Net Worth of
at least 30% of the Consideration (being US$58,410,000), and (ii) provide
to the Purchaser on an annual and quarterly basis a Vendor Financial
Statement, within six months after year-end for the annual Vendor Financial
Statement and within 45 days after quarter-end for the quarterly Vendor
Financial Statement.
8.6 The Vendor further undertakes to the Purchaser that the Vendor shall, at
the Purchaser's sole option and election (the "LTK SHANGHAI PUT OPTION"),
purchase from the Group all of the registered capital of LTK Shanghai,
which LTK Shanghai Put Option shall expire and cease to be exercisable
unless the Purchaser gives the Vendor notice of its election to exercise
before the LTK Shanghai Put Expiration Date. The following shall be
conditions to the Vendor's obligation to complete the purchase of the
registered capital of LTK Shanghai following the Purchaser's election to
exercise the LTK Shanghai Put Option:
8.6.1 the Purchaser representing and warranting to the Vendor that LTK
Shanghai has committed no material violations of laws and
regulations in the PRC after Completion (except for any
violations that arise from the operation of LTK Shanghai after
Completion in substantially the same manner as operated by the
Group before Completion), and the
43
Vendor is reasonably satisfied that the foregoing representation
and warranty is materially true and accurate to its actual
knowledge;
8.6.2 the Purchaser providing to the Vendor financial statements of
LTK Shanghai, as of a date within one month prior to completion
of the purchase of the registered capital of LTK Shanghai
pursuant to the LTK Shanghai Put Option, which are audited by an
accounting firm that is reasonably satisfactory to the Vendor and
show that LTK Shanghai has no assets or liabilities other than
(a) cash on deposit at a bank, and (b) any liabilities that are
subject to the Vendor's indemnity obligations with respect to
Clauses 9.1.1- 9.1.4;
8.6.3 the Purchaser representing and warranting to the Vendor that the
audited financial statements referenced in Clause 8.6.2 are true
and accurate in all material respects, and that there has been no
material adverse change to the financial condition of LTK
Shanghai since the date of such financial statements up to
completion of the purchase of the registered capital of LTK
Shanghai pursuant to the LTK Shanghai Put Option; and
8.6.4 the Purchaser providing to the Vendor a reasonably adequate
indemnity with respect to (a) any breach of the representations
and warranties in Clauses 8.6.1 or 8.6.3, and (b) any diminution
in the cash bank balance reflected in the audited financial
statements referenced in Clause 8.6.2 between the date of such
financial statements and the completion of the purchase of the
registered capital of LTK Shanghai pursuant to the LTK Shanghai
Put Option. Notwithstanding any contrary provision in this
Agreement, the Purchaser's aggregate liability arising under such
indemnity shall not exceed US$5,000,000.
The purchase price for the registered capital of LTK Shanghai shall be the
cash balance in LTK Shanghai's bank account as reflected in the audited
financial statements referenced in Clause 8.6.2.
8.7 The Vendor further undertakes to the Purchaser to procure (a) the change of
the corporate names of the Vendor, LTK International, LTK Macao and each of
the Vendor's Associates, other than members of the Group, so as to delete
"LTK" from such names, as soon as practicable and in any event within three
(3) months after the Completion Date, and (b) the cessation of all use (by
the Vendor and its Associates) of any name, phrase or logo incorporating
"LTK" in any manner, except for the use (without prejudice to Clause 8.2)
of any existing stock of products and materials including packages, sales
aids, sales literature, signage and stationery which bear the "LTK" name
for a period not to exceed three (3) months from the Completion Date.
8.8 Each and every obligation under this Clauses 8 shall be treated as a
separate obligation and shall be severally enforceable as such and, in the
event of any obligation or obligations being or becoming unenforceable in
whole or in part, such part or parts as are unenforceable shall be deleted
from this Clause 8 and any such deletion shall not affect the
enforceability of all such parts of this Clause 8 as remain not so deleted.
44
8.9 The restrictions contained in Clauses 8.1-8.3 above are considered
reasonable by the Parties but, in the event that any such restriction shall
be found to be void but would be valid if some part thereof were deleted or
the area of operation or the period of application reduced, such
restriction shall apply with such modification as may be necessary to make
it valid and effective.
9. INDEMNIFICATION AND SURVIVAL
9.1 The Vendor hereby undertakes and agrees to indemnify, defend and hold
harmless the Purchaser, both itself as Purchaser and on behalf of and as
trustee for each member of the Group and their successors, from and against
the entirety of any and all Adverse Consequences that any of the Purchaser
or the Other Indemnified Parties may suffer or incur through and after the
date of the claim for indemnification resulting from, arising out of,
relating to, in the nature of or caused by:
9.1.1 the failure of any of the Warranties, or any other representation or
warranty of the Vendor made in any certificate or other document
delivered or given pursuant to this Agreement, to be true and correct
as of the date of this Agreement and as of the Completion Date;
9.1.2 any breach or violation of any of the agreements, undertakings or
covenants made by the Vendor in this Agreement or in any certificate
or other document delivered or given pursuant to this Agreement;
9.1.3 violations of Environmental Laws or other laws, Environmental, Health
and Safety Liabilities or governmental action, arising from the
operation of LTK Shanghai after Completion in substantially the same
manner as operated by the Group before Completion; or
9.1.4 any other Liability (whenever arising) of any Group member arising
from or relating to any Occurrence or period on or before the
Completion Date with respect to or concerning any of the following
(except in all cases for those Liabilities incurred by the Group in
the ordinary course of business to the extent reflected on the Final
Working Capital Statement): contractual disputes; product sales
including product liability or warranty matters (including those under
tort, strict liability or negligence); infringement or alleged
infringement of Intellectual Property rights (including infringement
of patents, confidential information, trade secrets, trade marks and
copyrights); violations of any law, rule or regulation (including
those involving failure to obtain any license, right or permit);
employees matters (including social insurance obligations and claims
for wages, salary, vacation or sick pay, profits, pension, health, and
other benefits but excluding for the avoidance of doubt Long Service
Employee Liability); discontinued operations, product lines or legal
entities; Environmental, Health and Safety Liabilities; unpaid Bank
Debt; the Minority Interest Acquisitions; the Segregation; or a Group
member's obligation to indemnify any Person by reason of the fact that
such Person was a director, officer or employee or agent of any member
of the Group.
Without limiting this Clause 9.1, the Vendor shall reimburse to the
Purchaser, on demand, the full amount of any and all Adverse Consequences
suffered or incurred by
45
Purchaser (both itself as Purchaser and on behalf of and as trustee for
each member of the Group and their successors), resulting from, arising out
of, relating to, in the nature of or caused by anything in Clauses
9.1.1-9.1.4 above.
For the avoidance of doubt and without prejudice to Clauses 4.2 and
5.2.1.3, no disclosure made by the Vendor (including in the Disclosure
Letter) shall limit, modify or affect the Vendor's indemnity or other
obligations with respect to Clauses 9.1.2 through 9.1.4 above except to the
extent reflected on the Final Working Capital Statement.
9.2 All Warranties, other representations and warranties, agreements,
undertakings and covenants (including indemnities) of the Vendor contained
in this Agreement or in any certificate or other document delivered or
given pursuant to this Agreement shall survive the Completion and continue
in effect for the following periods, and the Purchaser must assert any
claim relating thereto before the expiration of the applicable survival
period:
9.2.1 the Warranties, and the corresponding indemnity and other Vendor
obligations with respect to Clause 9.1.1 above, shall continue in
effect for a period of eighteen (18) months after the Completion Date
and then expire, except that (a) the Warranties (and the corresponding
indemnity and other Vendor obligations with respect to Clause 9.1.1
above) contained in paragraphs 3A.2, 3A.3, 3A.6, 3A.7, 3A.10, 4.1, 4.2
and 14.1-14.2 of Schedule 5 shall continue in effect for a period of
three (3) years after the Completion Date and then expire, and (b) the
Warranties (and the corresponding indemnity and other Vendor
obligations with respect to Clause 9.1.1 above) contained in
paragraphs 2.1 through 2.3 of Schedule 5 shall continue in effect for
the applicable limitation periods imposed by law;
9.2.2 the indemnity and other Vendor obligations with respect to Clauses
9.1.2 and 9.1.4 above shall continue in effect for a period of three
(3) years after the Completion Date and then expire;
9.2.3 the indemnity and other Vendor obligations with respect to Clause
9.1.3 above shall continue in effect for a period ending on the
earlier of (a) three years, (b) the LTK Shanghai Put Expiration Date,
unless the Purchaser has given notice of intent to exercise the LTK
Shanghai Put Option to the Vendor before such date, or (c) the
completion of the Vendor's purchase of the share capital of LTK
Shanghai pursuant to the LTK Shanghai Put Option, and then expire; and
9.2.4 the other agreements, undertakings and covenants of the Vendor shall
continue in effect for a period of three (3) years after the
Completion Date and then expire;
PROVIDED, HOWEVER, THAT NOTWITHSTANDING ANY CONTRARY PROVISION: (a) as long as
any claim is timely asserted before the expiration of the applicable survival
period and legal proceedings are commenced within 12 months of initial assertion
of the claim (if such claim is unresolved at the end of such 12 month period),
the claim will continue to be valid and assertible even though the survival
period may subsequently expire before the claim is resolved; (b) a claim for a
breach involving fraud or fraudulent misrepresentation may be made at any time
subject only to applicable limitation periods imposed by law; and (c) claims
under the Deed of
46
Taxation Indemnity may be asserted at any time subject to the applicable
limitation periods imposed by law.
9.3 The Purchaser hereby undertakes and agrees to indemnify, defend and hold
harmless the Vendor from and against the entirety of any and all Adverse
Consequences that the Vendor may suffer or incur through and after the date
of the claim for indemnification resulting from, arising out of, relating
to, in the nature of or caused by:
9.3.1 the failure of any of the representations and warranties of the
Purchaser made in Schedule 18 or in any certificate or other document
delivered or given pursuant to this Agreement, to be true and correct
as of the date of this Agreement and as of the Completion Date; or
9.3.2 any breach or violation of any of the agreements, undertakings or
covenants made by the Purchaser in this Agreement or in any
certificate or other document delivered or given pursuant to this
Agreement.
Without limiting this Clause 9.3, the Purchaser shall reimburse to the
Vendor, on demand, the full amount of any and all Adverse Consequences
suffered or incurred by the Vendor resulting from, arising out of, relating
to, in the nature of or caused by anything in Clauses 9.3.1 or 9.3.2 above.
9.4 All representations and warranties, agreements, undertakings and covenants
(including indemnities) of the Purchaser contained in this Agreement or in
any certificate or other document delivered or given pursuant to this
Agreement shall survive the Completion and continue in effect for the
following periods, and the Vendor must assert any claim relating thereto
before the expiration of the applicable survival period:
9.4.1 the representations and warranties of the Purchaser made in Schedule
18, and the corresponding indemnity and other Purchaser obligations
with respect to Clause 9.3.1 above, shall continue in effect for a
period of three (3) years after the Completion Date and then expire;
and
9.4.2 the indemnity and other Purchaser obligations with respect to Clause
9.3.2 above and the other agreements, undertakings and covenants of
the Purchaser shall continue in effect for a period of three (3) years
after the Completion Date and then expire;
PROVIDED, HOWEVER, THAT NOTWITHSTANDING ANY CONTRARY PROVISION: (a) as long as
any claim is timely asserted before the expiration of the applicable survival
period and legal proceedings are commenced within 12 months of initial assertion
of the claim (if such claim is unresolvd at the end of such 12 month period),
the claim will continue to be valid and assertible even though the survival
period may subsequently expire before the claim is resolved; and (b) a claim for
a breach involving fraud or fraudulent misrepresentation may be made at any time
subject only to applicable limitation periods imposed by law.
9.5 If any third party shall notify any Party (the "INDEMNIFIED PARTY") with
respect to any matter which may give rise to a claim for indemnification
against any other Party (the "Indemnifying Party") under this Clause 9,
then the Indemnified Party shall notify the Indemnifying Party thereof
promptly after obtaining knowledge thereof; PROVIDED,
47
HOWEVER, that no delay on the part of the Indemnified Party in notifying
the Indemnifying Party shall relieve the Indemnifying Party from any
liability or obligation hereunder unless (and then solely to the extent)
the Indemnifying Party thereby is materially prejudiced. In the event the
Indemnifying Party notifies the Indemnified Party within 15 days after the
Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, (i) the Indemnifying Party will at
its sole cost and expense defend the Indemnified Party against the matter
with counsel of its choice reasonably satisfactory to the Indemnified
Party, (ii) the Indemnified Party may retain separate co-counsel at its
sole cost and expense (except that the Indemnifying Party will be
responsible for the fees and expenses of the separate co-counsel to the
extent the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the matter without the written consent
of the Indemnifying Party (not to be withheld unreasonably), and (iv) the
Indemnifying Party will not consent to the entry of any judgment with
respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the
written consent of the Indemnified Party (not to be withheld unreasonably).
If the Indemnifying Party fails to notify the Indemnified Party within 15
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, the Indemnified Party
may defend against, or enter into any settlement with respect to, the
matter in any manner it reasonably may deem appropriate, all at the risk
and expense of the Vendor, provided that the Indemnified Party has acted in
good faith.
9.6 Notwithstanding any contrary provision in this Clause 9, the Purchaser
shall not make any claim for indemnification with respect to Clause 9.1.1
for any breach by the Vendor of any Warranties until the aggregate amount
of all such claims exceeds two million dollars (US$2,000,000) (the
"WARRANTY BASKET"), in which event such indemnification shall apply to all
amounts, including all amounts forming any part of the Warranty Basket.
Notwithstanding the preceding sentence, the Warranty Basket shall not
apply, and the Purchaser's claims will not be so limited, with respect to
the Warranties contained in paragraphs 3A.2, 3A.3, 3A.6, 3A.7, 3A.10, 4.1,
4.2 and 14.1-14.2 of Schedule 5. For the avoidance of doubt, claims made by
the Purchaser for indemnification with respect to Clause 9.1.4 shall not be
deemed to apply towards or be included in the Warranty Basket even though
such claims may also amount to a breach of any Warranties.
9.7 Notwithstanding any contrary provision in this Clause 9, (a) subject to
subclauses (b) and (c) of this Clause 9.7, the Vendor's aggregate liability
arising under (including from a breach or violation of) all provisions of
this Agreement and the Deed of Taxation Indemnity shall not exceed the sum
of the Consideration and (to the extent payable by the Vendor) the Working
Capital Payment, (b) the Vendor's aggregate liability arising under
(including from a breach or violation of) Clauses 2.1 and 4.4 of this
Agreement shall not exceed twenty percent (20%) of the Consideration, and
(c) the Vendor's aggregate liability arising under (including from a breach
or violation of) the Deed of Taxation Indemnity and all provisions of this
Agreement except for the following (which shall not be so limited) shall
not exceed thirty percent (30%) of the Consideration:
48
9.7.1 Clause 3.2.2;
9.7.2 Clause 8.1;
9.7.3 Clauses 8.2 and 8.3;
9.7.4 Clause 10;
9.7.5 the Warranties contained in paragraphs 3A.2, 3A.3, 3A.6, 3A.7, 3A.10,
4.1, 4.2 and 14.1-14.2 of Schedule 5;
9.7.6 the Working Capital Payment, to the extent payable by the Vendor; and
9.7.7 Clause 9.1.4.
9.8 Notwithstanding any contrary provision in this Clause 9, (a) the
Purchaser's aggregate liability arising under (including from a breach or
violation of) all provisions of this Agreement shall not exceed the sum of
the Consideration, the Working Capital Payment (to the extent payable by
the Purchaser) and the Capital Expenditure Amount, and (b) the Purchaser's
aggregate liability arising under (including from a breach or violation of)
Clauses 2.1 and 4.4 of this Agreement shall not exceed twenty percent (20%)
of the Consideration.
9.9 Any claim of indemnification asserted by the Purchaser or the Vendor will
be reduced by the amount of any insurance proceeds actually recovered by
the claimant which directly relates to such claim.
10. CONFIDENTIALITY OF INFORMATION
10.1 Each Party agrees and undertakes to and with the other Parties that it
shall treat as strictly confidential all information received or obtained
by it or its agents or advisers as a result of entering into or performing
this Agreement including but not limited to information relating to the
provisions of this Agreement, the negotiations leading up to this
Agreement, the subject matter of this Agreement or the business or affairs
of the other Parties, their respective subsidiaries or Associates and
subject to the provisions of Clause 10.2 that they will not at any time
hereafter, without the express written consent of the disclosing Party,
make use of or disclose or divulge to any Person any such information and
shall use their best endeavours to prevent the publication or disclosure of
any such information.
10.2 The restrictions contained in Clause 10.1 shall not apply:
10.2.1 so as to prevent a Party from making any disclosure required by
applicable law, by an order of a court of competent jurisdiction or by
any relevant securities exchange or supervisory or regulatory or
governmental body pursuant to applicable rules to which such Party is
subject;
10.2.2 so as to prevent a Party from making any disclosure to any
professional adviser for the sole purpose of obtaining advice
(provided always that the provisions of this Clause 10 shall apply to
and each Party shall procure that they apply to and are observed in
relation to, the use or disclosure by its
49
professional advisers of the information provided to them); or
10.2.3 to a Party in respect of any information which comes into the public
domain otherwise than by a breach of this Clause 10 by such Party.
11. COSTS
11.1 Save as otherwise contemplated in this Agreement, each Party shall pay its
own costs of and incidental to this Agreement and the sale and purchase
hereby contemplated.
11.2 The Vendor on the one hand and the Purchaser on the other hand shall bear
any stamp duty and share transfer-related tax or duty arising from the
transfer of the Shares in equal shares.
12. GENERAL
12.1 This Agreement shall be binding upon and inure for the benefit of the
estates, personal representatives, heirs, successors and permitted assigns
of the Parties.
12.2 Neither this Agreement nor any of the rights, interests or obligations
hereunder (except for the assignment by the Purchaser of its rights and
obligations under this Agreement to any of its Associates to whom the Sale
Shares are transferred) shall be assigned by any Party to any Person
without the prior written consent of the other Party.
12.3 The Parties acknowledge and agree that time is of the essence.
12.4 This Agreement (together with the Schedules) constitutes the whole
agreement between the Parties and supersedes any previous agreements or
arrangements between them relating to the subject matter hereof. It is also
expressly declared that no variations hereof shall be effective unless made
in writing signed by duly authorized representatives of the Parties.
12.5 Without prejudice to Clauses 9.2 and 9.4, all of the provisions of this
Agreement shall remain in full force and effect notwithstanding Completion
(except insofar as they set out obligations which have been fully performed
at Completion), subject to any other provision which expires or terminates
by its own terms.
12.6 If any provision or part of a provision of this Agreement shall be, or be
found by any authority or court of competent jurisdiction to be, invalid or
unenforceable, such invalidity or unenforceability shall not affect the
other provisions or parts of such provisions of this Agreement, all of
which shall remain in full force and effect.
12.7 Save as otherwise contemplated in this Agreement, any right of rescission
conferred upon any Party hereby shall be in addition to and without
prejudice to all other rights and remedies available to it (and, without
prejudice to the generality of the foregoing, shall not extinguish any
right to damages to which such Party may be entitled in respect of the
breach of this Agreement) and no exercise or failure to exercise such a
right of rescission shall constitute a waiver by such Party of any such
other right or remedy. Each Party reserves its remedy of specific
performance, in addition to and without prejudice to all other rights and
remedies available to it (and, without
50
prejudice to the generality of the foregoing, this shall not extinguish any
right to damages to which such Party may be entitled in respect of the
breach of this Agreement).
12.8 No failure of any Party to exercise, and no delay or forbearance in
exercising, any right or remedy in respect of any provision of this
Agreement shall operate as a waiver of such right or remedy.
12.9 Upon and after Completion, the Vendor shall do and execute or procure to be
done and executed all such further acts, deeds, documents and things as may
be necessary to give effect to the terms of this Agreement and to place
control of each member of the Group in the hands of the Purchaser (or its
Associates or wholly-owned subsidiaries as the Purchaser may designate) and
pending the doing of such acts, deeds, documents and things the Vendor
shall as from Completion hold the legal estate in the respective Shares in
trust for the Purchaser. The Vendor shall bear the costs of and incidental
to any act, deed, document, or thing done or executed in accordance with
this Clause 12.9.
12.10 The Parties agree that delivery of this Agreement duly executed by a Party
to another by facsimile transmission or in electronic format (to be
followed by delivery of the execution page of this Agreement bearing the
original signature of such Party within ten (10) Business Days after the
signing of this Agreement) shall be deemed an effective mode of delivery
and shall be binding on the Parties.
12.11 This Agreement may be executed in one or more counterparts, and by the
Parties on separate counterparts, but shall not be effective until each
Party has executed at least one counterpart and each such counterpart shall
constitute an original of this Agreement but all the counterparts shall
together constitute one and the same instrument.
13. NOTICES
Any notice or other communication to be given under this Agreement shall be
in writing in the English language and be given by personal delivery,
facsimile or courier and shall be deemed to have been given when delivered
(if given by hand), when despatched with confirmed receipt as evidenced by
the transmission report generated at the end of the transmission of such
facsimile by the facsimile machine used for such transmission (if given by
facsimile) or when actually received as evidenced by the courier's written
confirmation to the sender (if given by courier). Each notice or other
communication which is personally delivered or sent by facsimile or by post
shall be delivered or sent to the appropriate address specified below (and,
in the case of any subsequent change of the address or facsimile number, a
Party shall give a notice in accordance with the provisions of this
Agreement, stating in clear terms the intention to change the address or
facsimile number, as the case may be):
To the Vendor: Address: LTK Industries Limited
6/F Photonics Centre
0 Xxxxxxx Xxxx Xxxx Xxxxxx
Xxxxxx, Xxxx Xxxx
51
Attention: Xxxxx Xxx
Fax Number: 000 0000 0000
To the Purchaser: Address: Xxxxxx CDT Inc.
0000 Xxxxxxx Xxxx., Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000 XXX
Attention: Xxxxx Xxxxxxxxxx
Fax Number: 000-000-0000
To Mr. Lo: Address: Xxxx Xx Xxxxx Xxx
c/o LTK Industries Limited
6/F Photonics Centre
0 Xxxxxxx Xxxx Xxxx Xxxxxx
Xxxxxx, Xxxx Xxxx
Fax Number: 000 0000 0000
To Xxxxxx CDT: Address: Xxxxxx CDT Inc.
0000 Xxxxxxx Xxxx., Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000 XXX
Attention: Xxxxx Xxxxxxxxxx
Fax Number: 000-000-0000
14. GOVERNING LAW AND SUBMISSION TO JURISDICTION
14.1 This Agreement shall be governed by and construed in accordance with the
laws of Hong Kong (excluding, to the greatest extent permissible by law,
any rule of law that may cause the application of the laws of any
jurisdiction other than Hong Kong) and the Parties irrevocably submit to
the non-exclusive jurisdiction of the courts of Hong Kong for the purpose
of enforcing any claim arising hereunder.
14.2 The Purchaser shall within 10 Business Days after the date hereof
irrevocably appoint (and provide notice to the Vendor regarding such
appointment) a receiving agent with a Hong Kong address as its agent to
receive and acknowledge on its behalf service of any writ, summons, order,
judgment or other notice of legal process in Hong Kong. If for any reason
the agent named above (or its successor) no longer serves as agent of the
Purchaser for this purpose, the Purchaser shall promptly appoint a
successor agent satisfactory to the Vendor, notify the Vendor thereof and
deliver to the Vendor a copy of the new process agent's acceptance of
appointment provided that until the Vendor receives such notification, it
shall be entitled to treat the agent named above (or its said successor) as
the agent of the Purchaser for the purposes of this Clause. The Purchaser
agrees that any such legal process shall be sufficiently served on it if
delivered to such agent for service at its address for the time being in
Hong Kong whether or not such agent gives notice thereof to it.
15. GUARANTY BY MR. LO
15.1 Notwithstanding any contrary provisions under any relevant law, Mr. Lo,
after receipt of independent legal advice as to his obligations and
potential liabilities under this
52
Agreement, the Deed of Tax Indemnity and any other related documents before
signing of this Agreement, hereby unconditionally guarantees the due and
punctual payment and performance of all of the Vendor's obligations,
agreements, undertakings and covenants under this Agreement and the Deed of
Taxation Indemnity, provided that Mr. Lo's aggregate liability under this
Clause 15 shall not exceed the Consideration (the "GUARANTEED VENDOR
OBLIGATIONS"). This guaranty is an irrevocable guaranty of payment (and not
just of collection) and shall continue in effect notwithstanding any
extension or modification of the terms of this Agreement or the Deed of
Taxation Indemnity, any assumption of the Guaranteed Vendor Obligations by
any other Person or any other act or event that might otherwise operate as
a legal or equitable discharge of Mr. Lo under this Clause 15. The
Purchaser may not proceed against Mr. Lo under this guaranty until it first
proceeds against the Vendor in the manner set forth in Clause 17.1 with
respect to the Escrow Account (regardless of whether the Purchaser is
seeking any remedies with respect to the Escrow Account or if any monies
remain in the Escrow Account), and in particular not until (a) there arises
an Accepted Claim Amount or an Adjudicated Claim Amount, (b) the Vendor
fails to fully pay such Accepted Claim Amount or Adjudicated Claim Amount
within 30 days after such Accepted Claim Amount or Adjudicated Claim Amount
arises, and (c) if there are monies remaining in the Escrow Account and if
the claim concerns anything other than the Vendor's failure to pay the
Working Capital Payment (to the extent payable by the Vendor) pursuant to
Clause 3A or the Vendor's failure to pay off the Bank Debt pursuant to
Clause 3.2.2, the Purchaser has used commercially reasonable efforts to
collect the Accepted Claim Amount or Adjudicated Claim Amount out of such
monies in the Escrow Account pursuant to Clause 17 but the Accepted Claim
Amount or Adjudicated Claim Amount has not been fully paid out of such
monies within 30 days after the Accepted Claim Amount or Adjudicated Claim
Amount arises (the "VENDOR NON-PAYMENT EVENT"). Other than the Vendor
Non-Payment Event, this guaranty is in no way conditioned upon any
requirement that the Purchaser first attempt to collect or enforce any of
the Guaranteed Vendor Obligations from or against the Vendor or upon any
other event, contingency or circumstance whatsoever. So long as any of the
Guaranteed Vendor Obligations remain unpaid or undischarged, Mr. Lo hereby
waives (but only with respect to the Purchaser and its Associates and not
as to any other Persons) all rights to subrogation arising out of any
payment by Mr. Lo under this Clause 15.
15.2 The obligations of Mr. Lo hereunder shall be absolute and unconditional
irrespective of the validity, legality or enforceability of this Agreement,
the Deed of Taxation Indemnity or any other document related hereto, and
shall not be released, affected or reduced by:
15.2.1 the liquidation or dissolution of, or the merger or consolidation of
the Vendor with or into, any corporation or other Person, or any sale
or transfer by the Vendor of all or any part of its property or
assets;
15.2.2 the bankruptcy, receivership, insolvency, reorganization or similar
proceedings involving or affecting the Vendor;
15.2.3 any modification, alteration, amendment or addition of or to this
Agreement or the Deed of Taxation Indemnity agreed by the parties
thereto; or
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15.2.4 any disability or any other defense of the Vendor or any other
person and any other circumstance whatsoever (with or without notice
to or knowledge of Mr. Lo) which may or might in any manner or to any
extent vary the risks of Mr. Lo or might otherwise constitute a legal
or equitable discharge of a surety or a guarantor or otherwise.
15.3 The obligations of Mr. Lo hereunder are primary and not secondary. Mr. Lo
agrees to pay immediately to the Purchaser and perform immediately for the
Purchaser on demand all of the Guaranteed Vendor Obligations whenever and
however often the Vendor Non-Payment Event occurs. Mr. Lo hereby waives all
special suretyship defenses and protest, notice of protest, demand for
performance, diligence, notice of any other action at any time taken or
omitted by the Purchaser and, generally, all demands and notices of every
kind in connection with this Clause 15 and the Guaranteed Vendor
Obligations, and which Mr. Lo may otherwise assert against the Purchaser.
15.4 Mr. Lo shall at all times during the period of three (3) years after the
Completion Date (i) maintain a minimum Net Worth of at least 30% of the
Consideration (being US$58,410,000), and (ii) provide to the Purchaser on
an annual basis a personal certification that his minimum Net Worth meets
such Net Worth requirement. If the Net Worth of the Vendor at any time
prior to the date that is three (3) years after the Completion Date is less
than 30% of the Consideration, and such shortfall is not remedied (as the
Vendor demonstrates in writing to the Purchaser's reasonable satisfaction)
within thirty (30) days after its initial occurrence, then Mr. Lo shall
thereafter provide to the Purchaser a Personal Financial Statement on an
annual and quarterly basis.
15.5 This Clause 15 shall continue to be effective or shall be reinstated, as
the case may be, if at any time payment or performance of any of the
Guaranteed Vendor Obligations is rescinded or must otherwise be restored or
returned by the Purchaser upon the insolvency, bankruptcy or reorganization
of the Vendor or otherwise. In the event that collection efforts are
required, Mr. Lo agrees to pay to the Purchaser all attorneys' fees and
other costs and expenses the Purchaser incurs in the collection of the
Guaranteed Vendor Obligations from Mr. Lo.
16. GUARANTY BY XXXXXX CDT
16.1 Xxxxxx CDT hereby unconditionally guarantees the due and punctual payment
and performance of all of the Purchaser's obligations, agreements,
undertakings and covenants under this Agreement (the "GUARANTEED PURCHASER
OBLIGATIONS"). This guaranty is an irrevocable guaranty of payment (and not
just of collection) and shall continue in effect notwithstanding any
extension or modification of the terms of this Agreement, any assumption of
the Guaranteed Purchaser Obligations by any other Person or any other act
or event that might otherwise operate as a legal or equitable discharge of
Xxxxxx CDT under this Clause 16. This guaranty is in no way conditioned
upon any requirement that the Vendor first attempt to collect or enforce
any of the Guaranteed Purchaser Obligations from or against the Purchaser
or upon any other event, contingency or circumstance whatsoever. So long as
any of the Guaranteed Purchaser Obligations remain unpaid or undischarged,
Xxxxxx CDT hereby waives (but only with respect to the Vendor and its
Associates and not as to
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any other Persons) all rights to subrogation arising out of any payment by
Xxxxxx CDT under this Clause 16.
16.2 The obligations of Xxxxxx CDT hereunder shall be absolute and unconditional
irrespective of the validity, legality or enforceability of this Agreement
or any other document related hereto, and shall not be released, affected
or reduced by:
16.2.1 the liquidation or dissolution of, or the merger or consolidation of
the Purchaser with or into, any corporation or other Person, or any
sale or transfer by the Purchaser of all or any part of its property
or assets;
16.2.2 the bankruptcy, receivership, insolvency, reorganization or similar
proceedings involving or affecting the Purchaser;
16.2.3 any modification, alteration, amendment or addition of or to this
Agreement; or
16.2.4 any disability or any other defense of the Purchaser or any other
person and any other circumstance whatsoever (with or without notice
to or knowledge of Xxxxxx CDT) which may or might in any manner or to
any extent vary the risks of Xxxxxx CDT or might otherwise constitute
a legal or equitable discharge of a surety or a guarantor or
otherwise.
16.3 The obligations of Xxxxxx CDT hereunder are primary and not secondary.
Xxxxxx CDT agrees to pay immediately to the Vendor and perform immediately
for the Vendor on demand all of the Guaranteed Purchaser Obligations
whenever and to the extent the Purchaser fails to pay and perform them
punctually when due. Xxxxxx CDT hereby waives all special suretyship
defenses and protest, notice of protest, demand for performance, diligence,
notice of any other action at any time taken or omitted by the Vendor and,
generally, all demands and notices of every kind in connection with this
Clause 16 and the Guaranteed Purchaser Obligations, and which Xxxxxx CDT
may otherwise assert against the Vendor.
16.4 This Clause 16 shall continue to be effective or shall be reinstated, as
the case may be, if at any time payment or performance of any of the
Guaranteed Purchaser Obligations is rescinded or must otherwise be restored
or returned by the Vendor upon the insolvency, bankruptcy or reorganization
of the Purchaser or otherwise. In the event that collection efforts are
required, Xxxxxx CDT agrees to pay to the Vendor all attorneys' fees and
other costs and expenses the Vendor incurs in the collection of the
Guaranteed Purchaser Obligations from Xxxxxx CDT.
17. ESCROW ACCOUNT
17.1 If the Purchaser has a claim under this Agreement (including an
indemnification claim under Clause 9) or under the Deed of Taxation
Indemnity (a "RELEVANT CLAIM"), then it may in its discretion, without
limitation of its other rights and remedies, seek monies from the Escrow
Account in partial or full satisfaction of such Relevant Claim, it being
understood and agreed that if there are monies remaining in the Escrow
Account and if the Relevant Claim concerns anything other than the Vendor's
failure to pay the Working Capital Payment (to the extent payable by the
Vendor) pursuant to
55
Clause 3A or the Vendor's failure to pay off the Bank Debt pursuant to
Clause 3.2.2, the Purchaser shall first use commercially reasonable efforts
to seek such monies from the Escrow Account pursuant to the procedures in
this Clause 17 with regard to such Relevant Claim before pursuing its other
rights and remedies. To the extent the Purchaser does seek monies from the
Escrow Account, the following procedures shall be followed:
17.1.1 The Purchaser shall give written notice to the Vendor (with a copy
to Mr. Lo) of the Relevant Claim pursuant to the notice provisions in
Clause 13, stating in reasonable detail the nature of the Relevant
Claim and the amount claimed in respect of the Relevant Claim (the
"AMOUNT CLAIMED"); if confirmation of the Vendor's receipt of such
notice is impossible or impractical due to the Vendor's bankruptcy,
insolvency, liquidation, dissolution or similar event, then
notwithstanding Clause 13 such notice shall be deemed to have been
duly given to the Vendor upon the Purchaser's sending of such notice
(by facsimile or post) to the Vendor's most recent mailing address as
notified to the Purchaser pursuant to Clause 13.
17.1.2 Within 21 days after notice of the Relevant Claim is given or deemed
given to the Vendor, the Vendor shall, by notice to the Purchaser
(with a copy to Mr. Lo), either (i) accept liability for the Amount
Claimed in whole; (ii) deny liability for the Amount Claimed in whole;
or (iii) accept liability in part and deny liability in part with
respect to the Amount Claimed. Any notice reflecting a denial in whole
or in part shall describe, in reasonable detail, the nature or basis
of such denial. If the Vendor does not respond within such 21 days,
the Vendor shall be deemed to have accepted liability for the Amount
Claimed in whole.
17.1.3 If the Vendor accepts liability for the Amount Claimed in whole or
in part (such accepted amount being the "ACCEPTED CLAIM AMOUNT"), the
Purchaser shall be entitled to be paid such Accepted Claim Amount out
of the monies in the Escrow Account.
17.1.4 If the Vendor denies liability for the Amount Claimed in whole or in
part and the Purchaser legally pursues the Vendor in connection with
any such Amount Claimed that is denied, and there is a determination
of the amount payable in respect of such denied amount by a competent
Tax authority or by a court of competent jurisdiction against which no
appeal has been lodged or is capable of being lodged within the
statutory time limit (the amount so determined being the "ADJUDICATED
CLAIM AMOUNT"), then the Purchaser shall be entitled to be paid such
Adjudicated Claim Amount out of the monies in the Escrow Account.
17.2 On the Escrow Termination Date, the monies then remaining in Escrow Account
less the total of the then outstanding Amounts Claimed and in respect of
which payment has not been made to the Purchaser under Clause 17.1 shall be
paid to the Vendor. After that date (but without prejudice to Clause 17.1)
to the extent that the monies in the Escrow Account from time to time
exceed the total of the then outstanding Amounts Claimed and in respect of
which payment has not been made to the Purchaser under Clause 17.1, that
money shall be paid to the Vendor.
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17.3 If the Vendor or the Purchaser is entitled to monies from the Escrow
Account, the Vendor and the Purchaser shall within seven days of the date
on which such entitlement arises jointly instruct the Escrow Agent in
writing to pay the monies to the designated bank account as instructed by
the Vendor or the Purchaser, as the case may be, together with an amount
equal to the interest actually accrued on such sum (accrued daily and
compounded monthly) calculated for the period from the Completion Date to
the date of payment (both dates inclusive).
17.4 Interest accruing from time to time on the balance of money standing to the
credit of the Escrow Account shall be added to the monies standing to the
credit of the Escrow Account and shall form part of it for the purposes of
this Clause 17.
17.5 The Vendor and the Purchaser shall each pay one half of all related costs
in respect of opening, and keeping open, the Escrow Account.
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IN WITNESS WHEREOF the parties hereto have signed this Agreement on the date
first written above.
SIGNED by )
) /s/ Lo Xxxxx Xxx, Xxxx
for and on behalf of ) ----------------------------------------
LTK INDUSTRIES LIMITED )
in the presence of: )
/s/ Xxxxx Xxx
-------------------------------------
SIGNED by )
) /s/ Xxxxxx Xxxx
for and on behalf of ) ----------------------------------------
BELDEN FAR EAST HOLDINGS B.V. )
in the presence of: )
/s/ X. Xxxxxxx
-------------------------------------
SIGNED SEALED and DELIVERED by )
) /s/ Lo Xxxxx Xxx, Xxxx
XX XXXXX XXX, XXXX ) ----------------------------------------
in the presence of: )
/s/ Xxxxx Xxx
-------------------------------------
SIGNED by )
) /s/ Xxxxx X. Xxxxxxxxxx
for and on behalf of ) ----------------------------------------
XXXXXX CDT INC. )
in the presence of: )
/s/ Xxxxxxxxxxx X. Xxxxx
-------------------------------------
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